While discussions of an agreement to merge the golf course into the Country Club (CCC) are ongoing, the Country Club Board commissioned a due diligence study of the proposed merger. The Due Diligence Committee (DDC) is studying the risks and costs from legal and environmental standpoints, the impact on reserves, the future of the business model and the financial impact upon homeowners. This Due Diligence Committee consists of Gary Newbore (chair), Jim Gibbons, and John McClain.
Summary of findings:
- CCC can own a for-profit golf course without losing the CCC 528 tax exempt status.
- No environmental risks were found at either the water company or golf club.
- There appear to be adequate golf course reserves.
- OB Sports management services have had a positive impact on business operations.
- Recent changes in operations and a trend of increasing golf rounds has resulted in increased business activity, lower costs, and higher merchandise sale profits.
- The Turn has shown a profit the last two years.
- New revenue sources that will come on line in the next two years will help boost profitability.
The Association attorney verified that the reverse triangular legal method of completing the merger, which is the proposed plan, is a proper method of effecting the transfer and will allow the nonprofit CCC to own the for-profit golf course without losing the CCC 528 tax exempt status.
No environmental risks were found for either the water company or golf club. The DDC found that with the reserves the golf course will be providing to CCC, there will be sufficient reserves in the combined operations. Golf rounds have been trending up at Charbonneau in the past few years and outside experts agree that the combined operation is a good business model. Although the golf course has historically had difficulty making a profit, the DDC found that recent changes will turn that around. The hiring of OB Sports has given the golf club a knowledgeable business approach as well as access to their buying power resulting in lower purchasing costs in equipment and merchandise. All this has resulted in increased business, lower costs and higher merchandise sale profits. The Turn restaurant has shown a profit the last two years and the new Pavilion will add profit in 2020 and beyond. Usage of the clubhouse will allow the golf course to increase profit from outside events as well as CCC events.
The bottom line is that with sufficient reserves and new revenue sources that will come on line in the next two years, it is expected that the merger will have no impact on resident dues in the foreseeable future.
Source: CCC Updare. 2.28.20