Ballyneal in foreclosure

[PCCraig]

I'm only talking about buying it at or below today's fair market price, not eating an above market portion of the note.  Without a huge debt, there's no reason the club, run properly, shouldn't be successful IMO.

I don't mean to hurt anyone's feelings with my comments, only that I'm interested as to the financial risk associated with purchasing this from auction.

Let's assume you buy the mortgage for $3MM (I think I remember the note is for ~$4MM). Assuming you somehow find a bank willing to give you a 25 year $2.5MM note @ 5.00% (little cushion built in)= (-$235M in annual P&I payments)
It costs you $1.5MM a year to keep the facilities running, all in. (-$1.5MM)
You have ~150 members paying ~$5,000 a year in dues. (+$500M)
Significant guest play fees, lodging, pro shop, etc.. (+$250M), F&B breaks even.

That's a $985M loss.

Would you still buy it?

Granted the math above is hardly a detailed financial model, nor does it take into account any actual information from Ballyneal's books. However, my guess is that either Ballyneal needs about 100 more members paying similar or higher dues, or whomever buys the course would have to have deep pockets and no mortgage.

[Eric Smith]

I've been saving this picture for Mark's awesome Ballyneal thread, but with the circumstances of uncertainty lingering, it is my hope that posting it here serves as a reminder to everyone who's been out that it truly is a special place and I trust that many more fortunate souls will have an opportunity to experience it again this season and beyond.



I wish a bright and prosperous future for Ballyneal.

[Jud_T]

Pat,

That doesn't sound too exciting.  Clearly you're going to need to get some more members.  I don't see why they couldn't follow the same model as Dismal however.  If anything it's a better location given the weekenders from Denver.

[Tim Pitner]

Pat,

That doesn't sound too exciting.  Clearly you're going to need to get some more members.  I don't see why they couldn't follow the same model as Dismal however.  If anything it's a better location given the weekenders from Denver.

Of course there are some hardcore golfers that would be an exception, but people in Denver generally look west for their entertainment and activities, not east.

[Jud_T]

Tim,

There's 2.4mm people in the metro area.  Getting 50-100 members at one of the best courses in the world at a reasonable price isn't much of a stretch IMO...

[Mac Plumart]

Okay...one piece of advice...and I'll shut up...

Don't pay $3mm on a $4mm dollar note for a piece of property on the court house steps. 

[Michael George]

Jim:

Good luck with the auction.  I hope that the course obtains the right owners.

If there is karma in this world, your good deeds of 2011 deserve this to work out for you.

[PCCraig]

Okay...one piece of advice...and I'll shut up...

Don't pay $3mm on a $4mm dollar note for a piece of property on the court house steps. 

Just an assumption Mac. Even with no debt and current membership levels it's hard to imagine it running a profit. In reality, they need about 400-500 members (paying comparable dues to other Sand Hills clubs), or the same number of members paying much more than they are now.

I hope Ballyneal survives and prospers as by all accounts is a great place, but it most likely needs an owner with a huge checkbook.

[Jim Colton]

Pat,

  I'm not going to go into assumptions, but I'm closer to BN's actual numbers and I can tell you in reality that it doesn't need 400-500 members to make it. If that's the case, then they should just let it go to pasture.

[PCCraig]

Best of luck.

[Chris Johnston]

Sounds like things are happening and that is a good thing.  Too good a place, and too many good people, for any other outcome.  

Who knows, maybe two or more great places can work together.  Sounds fun to me, and fun is the name of the game.

[Tony Weiler]

How long before this thread turns ugly??

12 pages isn't enough?

[Anthony Gray]

Sounds like things are happening and that is a good thing.  Too good a place, and too many good people, for any other outcome.  

Who knows, maybe two or more great places can work together.  Sounds fun to me, and fun is the name of the game.

.                                                                    How would that happen?

[Mark Johnson]

A couple questions. 

1) how much land is part of ballyneal which is not part of the course?

2) what are the zoning options for the area?

From an investment perspective, the property is worth $1 than its next best use.  If there is no possible for any development, then the price will probably be 40% on the dollar.

[Dan Byrnes]

A few points to consider the owner doesn't have to sell the note.  They can outbid other bidders and prevent a fire sale.  This is a necessary step in perhaps the note holder taking control of the property?  I obviously don't know any particulars but I went through this at my club last Spring.  My assumption based on what little I know the note holder isn't going to let the note go cheap.  Otherwise they would just sell the note prior and not have the foreclosure costs and time delay that a foreclosure takes.  Banks prefer to sell the note as then they aren't dealing with the costs of maintaining or shutting down the place.  Let alone the balane sheet issues of an oreo. Assuming they are looking to get recap as much money as possible they would have to maintain the golf course and perhaps commit to opening it for members or public.  Otherwise it gets very expensive to bring back at a later date.

What little I have read on this saga is the debt holder is a private individual not a bank?

Lastly assuming the note is 4 million as mentioned in the thread and what actually is the security for the note; land, equipment, furnishing or everything based on what I read here about how wonderful the place is that seems cheap.  Not necessarily cheap as profitable to operate but cheap relative to replacement costs.  There are plenty of folks who can write a few million dollar check and operate it purely for their own enjoyment and that of their invited guests without worry all that much about the operating costs.  I have no idea if the place is "special" enough to be that type of purchase.  There is an much larger population that can write the check with the thoughts of breaking even on it but holding the asset.  Of course if it is a wonderful as I read about here what about a Mike Keiser type of buyer the experience and money to make it a true destination?

Anyhow I have a bit of experience with golf course forclosures and if I can be helpful to any one feel free to PM me.

BTW my club, nothing special and BofA sold the note in auction for 1.575 million on a 4 million note and a 5 million appraisal.  I had struck a deal with the bank prior to buy it for 1.1 million and have the membership all put up 5k but the members wouldn't do it.  I didn't do it myself as the return on my investment didn't seem good enough and there were lots of risks that I couldn't afford.

Dan

[Mike_Young]

If you pay 1.5 mill for a 5 mill foreclosure today.  you paid too much.  I'm seeing 4.5 mill foreclosures go for $650000.  And some of those are not good deals...

[Lou_Duran]

If you pay 1.5 mill for a 5 mill foreclosure today.  you paid too much.  I'm seeing 4.5 mill foreclosures go for $650000.  And some of those are not good deals...

Not necessarily, and certainly not in all markets.  In good markets with prospects for gowth, replacement cost of quality real estate has relevance.  As long as there is demand, the key is a sound capital structure behind a superior product, providing a competitive advantage despite the cycles of the economy.

It is my understanding that the note in question posted for foreclosure is one of several.  I also hear that there are other title/ownership issues that will require some work to resolve them.  An advantage of completing the foreclosure is that junior liens and other title defects can be wiped-out.  The hope here is that the lienholder understands the alternative value of his collateral and the likelihood that there is not a white knight with plenty of cash and love for the club to make him whole.  He, being much closer to the situation than most of us, might have better information (e.g. there could be a few members who can easily write a check to save the club) to guide his decision.  However, if he has deep pockets and no one steps up soon, I hope that he will support the maintenance of the club until someone does.  Dry, wind-swept sandy soil erodes quickly; nature will reclaim the site in short order if unabated.

[Tim Pitner]

Tim,

There's 2.4mm people in the metro area.  Getting 50-100 members at one of the best courses in the world at a reasonable price isn't much of a stretch IMO...

Jud,

The "reasonable price" bit is the trick--to some, around $50,000 is more than reasonable for a course of the quality of Ballyneal; for others, not so much.  I could be out of the loop on this--that's certainly possible--but I continue to be surprised, in my experience, by how few golfers in Denver know much about Ballyneal.  I don't know the reason for this. 

[John Kavanaugh]

Tim,

There's 2.4mm people in the metro area.  Getting 50-100 members at one of the best courses in the world at a reasonable price isn't much of a stretch IMO...

Jud,

The "reasonable price" bit is the trick--to some, around $50,000 is more than reasonable for a course of the quality of Ballyneal; for others, not so much.  I could be out of the loop on this--that's certainly possible--but I continue to be surprised, in my experience, by how few golfers in Denver know much about Ballyneal.  I don't know the reason for this. 

Tim,

I believe Ballyneal suffers in the Denver market because it is not far enough away to be a true destination course.  It's a tweener. 

[Tim Pitner]

Tim,

There's 2.4mm people in the metro area.  Getting 50-100 members at one of the best courses in the world at a reasonable price isn't much of a stretch IMO...

Jud,

The "reasonable price" bit is the trick--to some, around $50,000 is more than reasonable for a course of the quality of Ballyneal; for others, not so much.  I could be out of the loop on this--that's certainly possible--but I continue to be surprised, in my experience, by how few golfers in Denver know much about Ballyneal.  I don't know the reason for this. 

Tim,

I believe Ballyneal suffers in the Denver market because it is not far enough away to be a true destination course.  It's a tweener. 

John,

I think that's true.  A corollary to that is, for about the same or less time, you can be in the mountains enjoying some okay golf and other activities with your family at cooler temperatures rather than playing links golf on the parched fairways of eastern Colorado.  We here sometimes forget that links golf is not everyone's cup of tea--some people, even hardcore golfers, don't like the lack of trees, shade, water hazards, etc. 

[Jud_T]

Tim,

I have no inside knowledge but I'm guessing the downstroke may be somewhat different under the new regime.  Perhaps you hit on a key point.  If you live in Denver you might say "Why should I pay the same downstroke for a club X hours away when I can join a local club for the same $$'s?"  Change the cost structure and Denver golf nuts might be coming out of the woodwork...

[Sven Nilsen]

The amount of speculation and misinformation on this thread serves no purpose other than to muddy the waters.  As stated before, the folks who really know what is going on with Ballyneal 2.0 are keeping things pretty close to the chest, for good reasons.  Its a trickier situation than most realize, and involves more than just figuring out the numbers.

I find this type of talk akin to a neighbor openly discussing how much he'd pay to buy the house out from under the family of four that can't make their mortgage payment because both parents lost their jobs.  If it was your club facing a reorg, would you want to log on here and read a bunch of uninformed posts from uninvolved parties about what should be done?

Please let this be the last post on this thread.

[Tim Pitner]

Tim,

I have no inside knowledge but I'm guessing the downstroke may be somewhat different under the new regime.  Perhaps you hit on a key point.  If you live in Denver you might say "Why should I pay the same downstroke for a club X hours away when I can join a local club for the same $$'s?"  Change the cost structure and Denver golf nuts might be coming out of the woodwork...

Jud,

I absolutely believe that to be the case.  

[Mike Benham]

If there is value in the Ballyneal asset, I am confident that a smart businessman (or group of) will make a play for it on the steps of the courthouse, at a price that will allow them to meet or exceed their financial objective for this investment.

[John Kavanaugh]

People still buy boats.