End of the line for St Andrews Beach

[Chris Kane]

Fin Review article

It was bound to happen eventually.  Interested to see what the receivers do with it.

[Mark_F]

Dear oh Dear,

The quality of financial journalism in Australia would appear to be little better than that of TGF.

[Shane Gurnett]

Mark, are you suggesting that GCPL is NOT in receivership? What is going on down there?

[Mark_F]

Shane,

I am suggesting that GCPL is comprised of a labyrinthine maze of companies, and that several of those companies were placed in administration last Friday. 

But none of those companies are the ones who have title over the Gunnamatta Course and Clubhouse. 

The property owned by the companies placed in administration is that of the apartments, the entrance road, and, I would assume, 9 and 10 of Fingal, as well as the apartments at Bass Coast.

[Shane Gurnett]

Mark, administration or receivership?

[Mark_F]

Shane,

Sorry, receivership.

[Shane Gurnett]

The property owned by the companies placed in administration is that of the apartments, the entrance road, and, I would assume, 9 and 10 of Fingal, as well as the apartments at Bass Coast.

Mark the papers were quoting the assets at a value of $100 million and debt at $60million - this doesn't seem quite right 

[Philippe Binette]

I don't understand exactly how the financial work but:

the golf course didn't cost a fortune to built (maybe a fortune to buy the land) and you need a lot of infrastructure cost on the surrounding development to reach 100 millions$...

I don't understand, can somebody explain

thanks.

It would be a great course to lose if it happens... (on the other side, if you have a map of course, you could built it back at low cost after 20 years of farming)...

[Mark_F]

Mark the papers were quoting the assets at a value of $100 million and debt at $60million - this doesn't seem quite right 

Shane,

You would know more than anyone else about asset value, but I would surmise that the $100 million includes the potential value of property sales on the three properties for which they have permits in hand?

I asked a director last week if the figure of $50-60 million in debt I had been hearing was true, and he told me it was less than $50 million, so you can take that as you wish.  I don't see how they could have built up that level of debt, especially as they got Doak when he was cheap.

[Tom_Doak]

And especially as they never finished paying us the fee we agreed to way back when ...

[Bill_McBride]

And especially as they never finished paying us the fee we agreed to way back when ...

You're in good company then, apparently Augusta National never finished paying the Good Doctor!

[ed_getka]

Mark,
   Sorry to hear about the ongoing saga down there. I hadn't heard anything in a while so I assumed things were working out.  I hope you are enjoying the golf season since your injury healed.

[Matthew Hunt]

And especially as they never finished paying us the fee we agreed to way back when ...

I don't know Aussie laws but I asume they are based on the British system which puts you in betweened 'secured' loans and bonds.

What happens the Members?

[Mark_F]

And especially as they never finished paying us the fee we agreed to way back when ...

The course still isn't open yet, Tom, they owe you NUTHIN'. 

Don't worry, I am sure Renaissance come under the heading of Unsecured Creditors, which the directors assured us would be paid out if their current plans all fall into place. 

They really should be acting now,though.  With the Aussie dollar at  0.94c to the US dollar, it is unlikely you are going to be this cheap again...

Sorry to hear about the ongoing saga down there. I hadn't heard anything in a while so I assumed things were working out.  I hope you enjoying the golf season since your injury healed.

Ed,

Thanks for your sentiments.  Hopefully you and David can make it back down here one day and there is still a course I can take you around...

How's the planning for you UK/Ireland trip coming along?

Hope your kids did well in school last year. 

[Norbert P]

. . .  less than $50 million. . .   I don't see how they could have built up that level of debt . . .

 Those numbers are incomprehensible to me.  Are houses being built or has that side of the income speculation equation just dropped off the ledger sheet?

  Aside from the heavy debt load, are golfers not coming to play it?   It was one of my favorite courses that I played while there.  It's great golf.
I wonder if the bank could auction the existing course discreetly from the rest of the property. Would that be an economically viable solution to save the Gunnamatta course?

 I can't imagine that it's not an appreciated course, even to the high standards of Mornington golfers.    Best of luck.

[Ash Towe]

I really hope a rescue package can be found.  I walked this course prior to it being available for play and it is way to good to be allowed to go under.

One also has to feel for the members who made the initial financial commitment.

[Matthew Hunt]

Does anyone think the Bussiness Model did not add up for the project.

[Chris Kane]

Matthew, I'm still waiting to meet someone who thinks the business model DID add up for this project.

[Mark_F]

Matthew, I'm still waiting to meet someone who thinks the business model DID add up for this project.

Pray tell, with your infinite wisdom and Monash education, which parts of which business model didn't add up?

[Chris Kane]

Mark, here are some reasons why it failed:

1. Members were offered a playing right rather than equity in the underlying asset.  Not a problem if the project worked, but if the place closes who knows what you'll end up with?  Contrast this with club next door, where members actually own their club, which makes it a more attractive purchase.

2. Nothing had been built when the shares went on the market, and there was never indication that the project was proceeding as planned.  As each "deadline" was missed, potential members would have become more skeptical about its viability.

3. They were competing with The National for new members.  A potential member could go to The National, walk around the completed clubhouse, have lunch then play on one of three completed courses.  There was never any doubt that the place would still be there in thirty years.  At St Andrews Beach, there was a temporary clubhouse, one course complete (but not opened!) and no certainty that the Fingal or the clubhouse would ever be built.  Despite having to share fairways with Brian Walshe, The National was always the prudent option.

4. The market for expensive second-club memberships was arguably saturated by the time St Andrews Beach arrived in mid-2002.  Had the project commenced five years earlier, perhaps things might have panned out differently.

5. The corporate memberships, and later turning it into a public course at $80 a game, suggested that things weren't proceeding as planned.

6. Once word got out that GCPL was in serious financial difficulty, no-one would touch them with a forty-foot pole.  The adverse publicity in the national media late last year was the final straw - their own fault for not paying staff.

[Mark_F]

Mark, here are some reasons why it failed:

1. Members were offered a playing right rather than equity in the underlying asset.  Not a problem if the project worked, but if the place closes who knows what you'll end up with?  Contrast this with club next door, where members actually own their club, which makes it a more attractive purchase.

Not sure this had much to do with it.  Not all transferable memberships have been of the equity model, and the others have succeeded.

2. Nothing had been built when the shares went on the market, and there was never indication that the project was proceeding as planned.  As each "deadline" was missed, potential members would have become more skeptical about its viability.

The first part of the first sentence is incorrect - they had sold over 200 shares by the time I joined in July 2004, when the course was still growing in - it was afterwards, particularly during 2005, when they missed the boat.  The rest of the first sentence and the second sentence are correct.

3. They were competing with The National for new members.  A potential member could go to The National, walk around the completed clubhouse, have lunch then play on one of three completed courses.  There was never any doubt that the place would still be there in thirty years.  At St Andrews Beach, there was a temporary clubhouse, one course complete (but not opened!) and no certainty that the Fingal or the clubhouse would ever be built.  Despite having to share fairways with Brian Walshe, The National was always the prudent option.

 

I am not entirely sure they were competing with The National.  I don't think too many, if any,of the prospective members myself and several other members took around joined The National.  Having to share fairways with Brian or me... that's a much more difficult decision to make.  Given that the share price of both has fallen significantly, it's a matter of conjecture as to which prospect is more worrisome.

4. The market for expensive second-club memberships was arguably saturated by the time St Andrews Beach arrived in mid-2002.  Had the project commenced five years earlier, perhaps things might have panned out differently.

Perhaps.  But The National has probably transferred 400-500 shares since 2002, and Sandhurst has been quite successful.

5. The corporate memberships, and later turning it into a public course at $80 a game, suggested that things weren't proceeding as planned.

The corporate memberships didn't do that, but allowing the public did.  The corporate membership was a good idea not fully thought through and marketed incorrectly.

6. Once word got out that GCPL was in serious financial difficulty, no-one would touch them with a forty-foot pole.  The adverse publicity in the national media late last year was the final straw - their own fault for not paying staff.

Yes - but it was 2005, when they only sold 18 memberships with a completed golf course that did the damage.

Those may or may not be reasons.  By business model I was assuming you were critiquing the underlying financials of how much it would cost to run the place, and the number of rounds necessary to achieve that.

[Chris Kane]

Those may or may not be reasons.  By business model I was assuming you were critiquing the underlying financials of how much it would cost to run the place, and the number of rounds necessary to achieve that.

Mark, while the numbers have have added up, they proved unrealistic.  Do we agree on that?

What reasons do you give for the failure?

[George Pazin]

No matter how sound your plan, you will likely not succeed if those placed in positions of responsibility act in a fashion that is at best questionable, at worse criminal, which is how most of the stories read.

I feel for you, Mark, and I hope the situation is resolved in some sort of reasonable fashion.

[Mark_F]

Mark, while the numbers have have added up, they proved unrealistic.  Do we agree on that?

What reasons do you give for the failure?

Chris,

I am not sure that the numbers were unrealistic.  I would imagine that they were spending somewhere around $600,000 perhaps to maintain the golf course, which is a lot less than other clubs, but given that it was in terrific condition when John Geary and his boys were the operators, it is not that different from the figure quoted in the prospectus. 

Obviously it was a stress to work on that budget, but even allowing for a couple of hundred thousand extra, that was still around the GCPL figures.

The administration figure was quite low compared to the breakdown I have seen in annual reports from Sandbelt clubs, but then a lot of the back room administration was done at head office, who would have done it all - payroll, accounts etc - for all three clubs, who each contributed to that cost.

There are many reasons, all with some degree of validity for things not working out.  George touches on one below. 

I suppose the basic problem was that they promised a no fees model reliant on income from a second course and hotel , and by the time Gunnamatta was ready for play in Feb 2005, there had to be signs of both being under construction by then or soon after, which there wasn't. 

As I said before, they had sold around 200 shares when the place was a pile of dirt, and less than 20 in the year it was a complete golf course.

There was also a bust up, for reasons unknown, with Inform, who designed and were to build the first lot of apartments starting at the beginning of 2005.  This delayed the start of construction on that aspect of the development until 2006, with a new, mostly unsatisfactory in house design that did nothing to encourage people to purchase them. 

Since a lot of finance was tied in with the purchase of apartments, delaying for a year or more was a crucial and critical happenstance.

George:

Thanks for your sentiments.  When you make it down to Barnbougle, first round's on me. 

[Shane Gurnett]

Any update on this? Some suggestion of a creditors/shareholders meeting held this week to determine the path forward. What happened?