Ballyneal in foreclosure

[Mike Benham]

Throughout all this, looking at photos, reading the descriptions, I still have a hard time remembering the 12th hole ...

[Sven Nilsen]

Mike:

I have a different memory process when it comes to Ballyneal.  It seems like every time I play it I pick up something new on just about every hole.  For that reason, I have multiple memorable yet almost distinct images of each hole out there, including 12.  I attribute this to the scale of the course, the varied possible pin placements and the way the wind can have a huge impact on how a hole is played. 

[Keith OHalloran]

Sven,
That is correct, and normally where a bank is the lender, they will set an upset price that represents the amount below the debt they are willing to sell the property for. The banks can do this because thy have a limited interest in becoming realtors. If you owned the property yourself, and you intended on taking possession, i.e. you wanted it back, and you were the only bidder, what is the need to bid so close to the value?

[Will MacEwen]

Sven,
That is correct, and normally where a bank is the lender, they will set an upset price that represents the amount below the debt they are willing to sell the property for. The banks can do this because thy have a limited interest in becoming realtors. If you owned the property yourself, and you intended on taking possession, i.e. you wanted it back, and you were the only bidder, what is the need to bid so close to the value?

As a secured creditor, isn't offering the full amount of the debt the same thing as offering $1, if you want the property?  In my jurisdiction, the lender doesn't put in a bid, but seeks an "order absolute", vesting title to them, in the event that there are no satisfactory bidders.

I do some foreclosure work, but for most lenders, private or institutional, owning the property is the last thing they want.

[Keith OHalloran]

Will, the difference would be whether or not the debtor is liable for the deficiency.

[George Freeman]

Sven,
That is correct, and normally where a bank is the lender, they will set an upset price that represents the amount below the debt they are willing to sell the property for. The banks can do this because thy have a limited interest in becoming realtors. If you owned the property yourself, and you intended on taking possession, i.e. you wanted it back, and you were the only bidder, what is the need to bid so close to the value?

Keith - from what I understand there was no bank involved.  The gentleman who ended up "buying" the property was the main lender on the project.  He bid the minimum amount he could to get the property free and clear of any liens, including his own.  A big portion of that balance he essentially paid to himself.  Had someone come in and bid more than him, the vast majority of the proceeds would have gone to him to pay back the principal and interest he was owed by the club.  

He didn't write a check to the county for $2.5MM to get control of the property.  It's more semantics than anything.

[Will MacEwen]

Will, the difference would be whether or not the debtor is liable for the deficiency.

I see.  I am quite sure that in BC, when someone takes title, they forego any shortfall.  They can only pursue a shortfall if a third party buys.  Perhaps it is the same in Colorado, but I am speculating here.

[Sven Nilsen]

Keith:

My guess is the price bid was the price necessary to remove the property from the deed of trust it was being held under until all of the existing debt was paid.  Clear title is worth a lot in the RE world.  

What is interesting to me is that the original note was quoted as being $4mil, yet the auction value was significantly lower.  At some point folks (Rupert, the original lender, etc.) thought the property had a value equal to or more than the amount of the original loan.  Even with the improvements that have taken place, no one was willing to make a bid for an amount over the existing debt level.  It seems like the fair market value of BN, like a lot of other development properties (not necessarily implying housing) around the country, took a severe hit over the last couple of years.  

I know just enough of the story to surmise that this story might have had a different ending if someone else was driving the model.  But then again, we wouldn't even be discussing Ballyneal at all if Jim and Rupert hadn't undertaken this project.  

We can take this discussion down a series of roads, such as:

1.  Timing is everything;
2.  What models work;
3.  Why the best land for golf may not always be in the best spot to start a golf club; and
4.  Without deep pockets its a crapshoot.

There are a bunch of valid lessons to learn from what has happened at Ballyneal.  The real lesson to me is that golf club ownership is a business.  No matter how wonderful the dream, it needs to make sense from a dollars perspective.  You can build a world class course, hire top notch folks to run the place and recruit a group of members that are second to none and willing to invest their own golf $$ into the place, but there's no guarantee things will work out.  

[Sven Nilsen]

George:

It was my understanding that Curlander bought the note from the original bank lender, but I may be wrong on that.

Sven

[Brad Isaacs]

Throughout all this, looking at photos, reading the descriptions, I still have a hard time remembering the 12th hole ...

Hole twelve is a relatively short par 4 that tempts the long hitter to try and drive it with a green comprised of three bowls that challenges you to two put if your not in the correct bowel. This is definitely a hole that grows on you. I didn't use to like the green but I find it more brilliant as time goes on. A lot of ways to turn this hole into a big number and I think I have done most of them. I love this hole. Precision counts tremendously!

[Mark Johnson]

At my job, we are often looking at making product investments multiple times.

At every time, we do, we ask one simple questions, "what's changed?"   Too often, people want to arrive at a different decision when none of the key facts have changed.

In the case of Ballyneal, here is what has changed

- A high profile bankruptcy

- alienation of some key members



here is what hasn't changed

- location

- amount of overnight lodging

- the fundamental business model


While I would love to see the club succeed, I am not sure how this happens.   If anything, prospective members will be less willing to plop down mid five figures to join given the recent bankruptcy.

Unless the new owner is willing to run the club at a loss, or create some new revenue stream which hasnt been discussed here.  I am not sure how the long-term business proposition changes.

[John Kirk]

Courtesy of Larry Lambrecht, www.golfstock.net

[Brian Potash]

At my job, we are often looking at making product investments multiple times.

At every time, we do, we ask one simple questions, "what's changed?"   Too often, people want to arrive at a different decision when none of the key facts have changed.

In the case of Ballyneal, here is what has changed

- A high profile bankruptcy

- alienation of some key members



here is what hasn't changed

- location

- amount of overnight lodging

- the fundamental business model


While I would love to see the club succeed, I am not sure how this happens.   If anything, prospective members will be less willing to plop down mid five figures to join given the recent bankruptcy.

Unless the new owner is willing to run the club at a loss, or create some new revenue stream which hasnt been discussed here.  I am not sure how the long-term business proposition changes.

Nobody is going to put down mid 5 figures.  The question is whether they will put down $10,000

[Sven Nilsen]

At my job, we are often looking at making product investments multiple times.

At every time, we do, we ask one simple questions, "what's changed?"   Too often, people want to arrive at a different decision when none of the key facts have changed.

In the case of Ballyneal, here is what has changed

- A high profile bankruptcy

- alienation of some key members



here is what hasn't changed

- location

- amount of overnight lodging

- the fundamental business model


While I would love to see the club succeed, I am not sure how this happens.   If anything, prospective members will be less willing to plop down mid five figures to join given the recent bankruptcy.

Unless the new owner is willing to run the club at a loss, or create some new revenue stream which hasnt been discussed here.  I am not sure how the long-term business proposition changes.

Mark:

The big change is that the new owner does not have any debt service, disregarding any working capital lines that may be arranged.  That greatly reduces the amount of income that is needed to keep the place afloat.  

There's the possibility that Curlander will be looking to recoup some of his "investment."  But without the pressure of a payment schedule, the club should have a much easier time operating on the positive side of the ledger, in theory.

[Jud_T]

In the case of Ballyneal, here is what has changed

- A high profile bankruptcy

- alienation of some key members



here is what hasn't changed

- location

- amount of overnight lodging

- the fundamental business model


While I would love to see the club succeed, I am not sure how this happens.   If anything, prospective members will be less willing to plop down mid five figures to join given the recent bankruptcy.

Unless the new owner is willing to run the club at a loss, or create some new revenue stream which hasnt been discussed here.  I am not sure how the long-term business proposition changes.

Mark,

The main thing that needed to change was that the initiation and dues were apparently not in line with other very good to great destination clubs post-boom.  The assumption is that writing off this debt frees them up to adjust to where the market is now.  

[Adrian_Stiff]

If I was the new owner I would want the old members if there was plenty of space. I would probably offer them a deal, lets say they paid 50,000 originally and my new scheme for initiation was 10,000. I think I'd let the originals in zero and just pay their dues. If I thought I could fill every space with new players I would be very greedy but keeping the originals that stumped up 50K are better kept sweet, they are likely to be a great advertising tool for the new scheme with a lighter price and maybe they know someone that can afford the low rate but could not afford the origonal rate. The new model should allow open play at a reasonable rate.

[Ross Harmon]

If I was the new owner I would want the old members if there was plenty of space. I would probably offer them a deal, lets say they paid 50,000 originally and my new scheme for initiation was 10,000. I think I'd let the originals in zero and just pay their dues. If I thought I could fill every space with new players I would be very greedy but keeping the originals that stumped up 50K are better kept sweet, they are likely to be a great advertising tool for the new scheme with a lighter price and maybe they know someone that can afford the low rate but could not afford the origonal rate. The new model should allow open play at a reasonable rate.

Sounds like a fair deal for everyone...

[JESII]

Ross,

Why would anyone pay 10K plus whatever in dues if it's open for a "reasonable rate"? Even if $250 is reasonable...

[Steve Salmen]

Mark Johnson,

Are you 100% sure about this point:

here is what hasn't changed

- amount of overnight lodging

[Mark Johnson]

Mark Johnson,

Are you 100% sure about this point:

here is what hasn't changed

- amount of overnight lodging

I hope it has.   If so, then it changes the economics of the club significantly.

[Carl Nichols]

Ross,

Why would anyone pay 10K plus whatever in dues if it's open for a "reasonable rate"? Even if $250 is reasonable...

This is what I always wondered about the Prairie Club -- does it make sense to join when I can play it as a resort guest?  I suppose if you live close enough to play a lot then it does, but not for 2-4 trips a year. 

Of course, there's the non-monetary benefit of belonging to a club, which does have some value. 

[Daryl David]

Sorry,  I can't hold back any longer.    

Only a handful that have posted on this thread have a clue as to what has really happened in this situation.   Your speculation is pointless unless you have all the facts.  That said, I won't be the one to enlighten everyone as to the exact details in this case.  It would not be proper to air them in a public forum and definitely not in the spirit of what Ran had in mind with this discussion group.

Now if you want to talk about the 12th hole, I am down with that.   

[Mike_Young]

Again, I know nothing of BN but if I was the owner I would say "screw the membership route" and follow the Bandon model.   

[Brad Isaacs]

Again, I know nothing of BN but if I was the owner I would say "screw the membership route" and follow the Bandon model.   

Certainly part of this statement is correct. Perhaps more parts than one.

[John_Cullum]

In the case of Ballyneal, here is what has changed

- A high profile bankruptcy

There was no bankruptcy.

Perhaps if there had been, some of the "members who supported the club financially" would have gotten something; although it's doubtful