[BCowan]

Ben: My host at Engineers asked me to keep things anonymous, but basically a young man who had made some serious money on Wall Street had a proposal in front of the club to fill in the pool, get rid of the tennis courts, expand the driving range, and lower annual dues by $5000 per member, and turn Engineers into a GOLF CLUB.


Big $$$ won out.

Cob,


Thanks for your info, it's nice to know that some get it, unfortunately we are in the minority and more Golden age tracks will NLE or turn into development eyesores.  Id help you fund a DVD movie on how to save Golden Age courses from NLE.  What else can we do to stop the carnage...

[PCCraig]

Carl,


This is New York City. I would think that 20K/year is not unrealistic so a drop of 5K would be nice but not a deal maker for an equity member who wants to cash out.

$20thd a year in dues? Or $1,600/mo without usage? Geez, no wonder the place sold. Even in New York City, that seems like a crazy monthly figure for all but the "best" clubs (Winged Foot, et. al.)


I think there are still a number of clubs in "urban" areas which are just buying time before they sell. The overriding trend in real estate is density in urban cores, and eventually the land will become so valuable that memberships will give in and sell. Especially if the club itself is on even remotely sketchy footing financially. The days of a few wealthy members writing a check to prop up a club is long gone.

[PCCraig]

I just looked through Joe's photos of the course. Looks like a really fun golf course and it appears to have a terrific set of greens.


But boy those power lines and surrounding housing stock looks really terrible.

[Chris Mavros]

Just played it a couple days ago for the first time.  The terrain is used remarkably and there are certainly lots of wild contours on the fairways, with the greens being great fun.  The power lines and surrounding housing were a little much in spots but overall I thought it was a great play.  I don't really understand the development plan, as they want to buy an entire row of houses from one side of the course and that hasn't been done yet.  I don't know enough about these things but it seems like even if one owner doesn't want to sell, that could ruin the entire plan. 


Either way, I was glad to get there before anything changed yet a little depressed it will be changed at some point soon.

[corey miller]

Anyone know the history of the power lines?   

[B.Ross]

can anyone answer why a club like engineers wouldn't change its status to a semi-private like that of knoll west in NJ? knoll west is open to limited public play during the week. do clubs refrain from doing this because of a change in tax status?

[SL_Solow]

Most of the negative analysis, particular the comments focused on the membership, result from a perspective based on an idealistic view of club ownership which differs from reality. We look at this very differently than the members who own the club and have invested in the property.  Our focus is on the architecture.  The members balance their love of the club and the pleasure they derive from belonging against the ongoing cost and the money they will receive from a sale.  The architectural interest of outsiders with no financial stake is irrelevant.

I have some experience in these matters.  In my case, which was discussed at the time in this forum, we were approached in 2006 or 2007 (I apologize, I cannot remember the exact date and I am not inclined to consult my files) by a real estate developer seeking to acquire our club and its 160 acres in a desirable Chicago suburb which contains a 1921 Colt & Allison course.  After paying off our debts, each member would have received a payment in the high 6 figure range.  That number would have more than paid the initiation at another club and left a lot of money in one's pocket.  There were many members who were very interested  in selling.

Those of us opposed focused on 2 arguments.  First, we emphasized the pleasure that we received from our membership, not only from the course but from the camaraderie and friendships that accompany belonging to our second home.  But we also stressed that the particular offer was flawed.  It had numerous contingencies with insufficient penalties.  We suggested that it was really illusory.

Finally our by-laws required a super majority vote to approve a sale.  Thus while we convinced a majority to say "no", we had some runway.  As it turned out the economic events of 2008 made us look prescient and any hard feelings dissipated.  We weathered the tough economic times and remain healthy with a full membership.  We have been approached several times by potential purchasers, some of whom are management companies and we have turned them down.

But we were lucky and at the time many people questioned our sanity.  It is difficult to turn down a large payment, particularly if you are not independently wealthy.  I confess that independent wealth was not the reason that I opposed our sale.

But you should understand that at no time did the architectural pedigree of our course play a significant role in the discussions.  Perhaps  a few special clubs with very sophisticated and wealthy memberships might consider such issues to be very important but I doubt that there are more than a few.  So we can complain all we want and I will join each of you in mourning the loss of a good course.  But we shouldn't kid ourselves in analyzing the real considerations that drive these decisions.

[BCowan]

Boy do we have a dismissive tone on here. People thinking that golf courses are stocks and overlooking the sacrifices past generations made to put them in a place to cash out on another housing bubble created by the fed res.  Idealistic is far from it, more common sense and respect for things one inherets.  No architecture pedigree is required.  99% of club members could care less about the architecture.  Assuming folks on here are looking through the architecture lens with their heart isn't the case for me.  Bs, the opinion of non stake holders is irrelevant.  This is a website for opinions.  Critisizing continued poor Stewart's of what one inherets is noble. From the posts of others more familiar with the club it seems as though the financial issues could have been avoided and that they wouldn't be in a position to have to go this route. 


We have a few clubs in Metro detroit that could be sold for housing. Golfers need a place to tee it.  I guess we have to look at everything like a stock in the modern day boom and bust reality of toliet paper currency. 

[PCCraig]

Shelly,


Thank you for the thoughtful response and analysis. Very well said and a very good real word case study.


We are in a hot real estate market right now, approaching levels of 2006 and 2007. Offers like those your club received will start up again, but with what contingencies?

[Kalen Braley]

I dont think anyone is casting judgement whatever the outcome may be here


The reality is, in this world everything has a price....its only a matter of finding it as its higher for some people than others..

[Carl Nichols]

Carl,


This is New York City. I would think that 20K/year is not unrealistic so a drop of 5K would be nice but not a deal maker for an equity member who wants to cash out.

Steve:
Is that 20k/year just to cover costs, or because there is enough demand that they can charge that amount?   

[Rory Connaughton]

If you are a member of a traditional club (not an equity club) that operates as a not for profit, what are your rights to revenue from a sale? What are the tax implications? I suspect in my jurisdiction that the Attorney General's office might have something to say about the disposition of the proceeds. Is there anyone here who has faced this scenario?

[Kevin_Reilly]

Rory, every golf course is owned by someone or some thing (entity).   A "traditional" country club is an organization exempt from tax under Section 501(c) (7) of the Code.  That organization owns the golf course.  Its members may have an equity ownership in the organization.  When the organization decides to sell the underlying course and property, the organization itself does not pay corporate-level tax on the sale, but the ultimate recipients of the proceeds (the members) will pay tax (should be long term capital gain) on the proceeds in excess of their tax basis.


If the course is owned by an individual or corporation, and the "members" have no equity claim to the proceeds (the typical non-equity membership), then the ultimate owner pays tax on the sale (or finds a way to defer it using 1031, etc,).


In neither case would a state attorney general have any reason to make a claim for anything related to the sale.

[Mike Sweeney]

If you are a member of a traditional club (not an equity club) that operates as a not for profit, what are your rights to revenue from a sale? What are the tax implications? I suspect in my jurisdiction that the Attorney General's office might have something to say about the disposition of the proceeds. Is there anyone here who has faced this scenario?

My wife was the "beneficiary" of $5000 that my father-in-law put up for a swim and tennis (no golf) club in Connecticut There was literally no interest, it was a "bond". He put up $5000, and his Estate (daughters) got back $5000 roughly 50 years later. Obviously he did not do it for money, and that is why the clubs of that era thrived...

[Mike_Trenham]

If you are a member of a traditional club (not an equity club) that operates as a not for profit, what are your rights to revenue from a sale? What are the tax implications? I suspect in my jurisdiction that the Attorney General's office might have something to say about the disposition of the proceeds. Is there anyone here who has faced this scenario?

Rory:


My understanding is that in Pennsylvania an entity developing a property previously benefiting from a reduced real estate tax rate, like most private golf clubs, is subject to a ten year look back on the real estate taxes owed on the new higher improved value. 


Not sure if it is on the unimproved or improved value.  But let's say in a desirable location with minimal available land and each unimproved lot is worth $400,000 and each improved lot is worth $1,200,00 and a course can be developed into 100 new homes.


Unimproved:


100 lots x
$400,000 per lot =
$40,000,000 unimproved value
1% of value tax rate x unimproved value of $40,000,000 = $400,000
Less tax rate as open space say $100,00
$300,000 x 10 = $3,000,000 taxes owed


Or if on the improved value:



100 lots x
$1,200,000 per lot =
$120,000,000 improved value
1% of value tax rate x improved value of $120,000,000 = $1,200,000
Less tax rate as open space say $100,00
$1,000,000 x 10 = $11,000,000 taxes owed


Not sure how it's calculated but the difference is real and significant.

[Rory Connaughton]

Mike,


Are you talking about the look back for the Clean and Green real estate tax preference? I hadn't thought about that.


I was thinking about the treatment of the entity and how the proceeds of a dissolution are distributed (assuming there are proceeds on excess of liabilities) I'm note sure it's as simple as settling debt and paying out net equity to members as though they are shareholders because the nature of the organization differs from a corporation or pass through entity. Of course, the guy who probably knows the answer is in the office down the hall!

[Kevin_Reilly]

The corporate entity that owns the golf course (aka the country club) will have a charter or bylaws that stipulates the manner of any payments to equity holders upon any sale or liquidation. 


Like any other corporate M&A transaction, the deal will be structured so that two levels of tax (at the entity level and the shareholder level) will be avoided.


The equity holders (as stipulated by the bylaws or charter or similar) will ultimately pay any tax on the sale due upon their receipt of the net proceeds.  There will be no "tax shelter" on the gain for the club members in the sale of a garden variety country club....it is a "Not for profit entity" for its annual operations, but its sale (or probably the sale of stock in the country club entity) will be taxable to its equity holders. 

[B.Ross]

there's a rumor floating around long island that RXR will open the course up to the public for a few years until they can get the land re-zoned. has anyone else on here heard something similar?

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