Great post; thank you.
My club (member owned) went through a very lengthy and very careful process in 2022 and 2023 to determine the next steps for both facilities upgrades and improvements. The determination was made that there would be a bunker renovation, a new pool and pool house to replace the original ones from 1966, and 4 dedicated pickleball courts. (The pool/pool house and bunkers were much more deferred maintenance than just capital improvements.)
There was a $4k per membership unit assessment, and the bunker work, which required no permitting, proceeded last winter. The financing of the project also included a $50/month dues increase that would take effect when the demo on the existing pool began.
By the time we closed the pool for the season and had all the permits in place to begin that work, costs had gone up so much that the club had to borrow an extra $1 million and change above the projections from just a year earlier.
All of this has happened at an extremely well-run and financially healthy member-owned club.
As a %, how much was the $1,000,000 overage vs. the original estimate?
The additional $1m was a 20% increase on the entire project, including the bunkers. The original projection was made in early 2023.
Thanks A.G..
If $1M constitutes a 20% overage it implies $5,000,000 for the entire project.
IMO the bunker costs should be put aside when evaluating how large the "overage" really is -- I'd bet the estimate there was right on the money and bunkers did not add to the overage. In fact, I'd take the pickle-ball courts out too, those are simple to build.
For this exercise let's assume the combined bunker/paddle expenditure was $850K, this leaves $4.15M for the balance of the project (all unrelated to golf course).
$1M over would then imply a 24% whiff.
My construction/architect friends tell me budgeting in a 15-20% "contingency" is customary for commercial projects and given the times 25% probably isn't a bad idea.
If your management/board had a contingency of 20% budgeted that would have covered $830K of the overage and while the $1M extra wouldn't be a pleasant development, it really would not have been a surprise (but it does sound like they were caught off-guard).
If they only had a 5% contingency budgeted in, or none at all, they are probably due for a long look in the mirror as well as a critical discussion about the "consultants" who are/were advising them.
A $4M pool-facility kind of sounds like a 2nd clubhouse, will be interesting to see how the carrying/staffing costs develop over time vs. the increased revenues the consultants have surely promised. If your place offers "pool-only" type memberships it might just work out!
Chris,
Some of your assumptions are spot on, others might not be. The initial number on the total project was in fact $5m, and I think separating the bunker project from the overage is likely correct; that piece came in slightly ahead of schedule. I can’t really speak to the involvement of the pickleball courts in the overage, but you may well be right there as well. There is, however, an unusual amount of site work involved for the pickleball courts because they are partially on the site of the existing pool area.
Without question, the pool and pool house make up not only the majority of the total cost, but also, of course, the overage. But it’s not so much that the project is overly grandiose; it’s just a complicated process. The old pool and pool house have to be completely demoed, plus the new facilities are somewhat west of the current site, so there is extensive site work on both spots. That involves a LOT of subcontractors, and they are working in as competitive a market as anywhere in the country, so premium prices have become the order of the day here.
(I should add that a new pool and pool house were OVERWHELMING the highest priority item in a member survey that preceded the project itself; I’ve never even been to the pool, and don’t anticipate going. But I DO understand the role of a top quality pool facility in the profile and life of a country club.)
There were two major issues involved in the overage; the unexpected discovery of asbestos in the existing pool house, and inflation and supply chain issues here in the Triangle along with significantly higher interest rates. The Triangle, and perhaps especially Durham, has continued to experience rapid growth and heavy construction demand, and our contractor got much higher estimates from subcontractors than we had anticipated a year earlier when we priced out the conceptual plans with a top shelf consulting firm. We aren’t the only club in the area that has found all of this to be an issue, fwiw.
The good news here is that both our Master Planning Committee and the Building Committee are comprised largely of individuals who have done all of this sort of thing professionally, so they aren’t just winging it on cost estimates. We have bankers, builders, developers, and ven the guy who oversaw the “renaissance” of downtown Durham. At every step, they’ve been completely transparent with the membership, and I don’t think there’s any significant portion of the membership that questions their work.