The following statement was sent out over the weekend to “members” who had paid for a membership in the new golf club that AGP was creating at the former Oakmont Golf Club.  

Former Members,

We hope our update today answers some of your questions. To do that, we’d like to be more transparent about some background information. When we took over operations of the Club in early February we had approximately $250,000 in cash earmarked for “startup” and contingency. At the time it seemed like enough. The golf course had been closed since early December and we knew it would take time and money to get ready to open early March. But we felt we were well financed. 

As we all know, COVID hit and we did not open as planned.  We could not get any County permits nor many contractors to execute our clubhouse plans. Restaurants remain closed to this day. As Members, you all knew our plan relied on linking great golf course conditions with membership programs and amazing food/beverage. But we never had the chance to get going. We plowed through our start-up money quickly. The County shut down our maintenance restoration efforts and we had to restart all that again once things loosened up. We took out a $250,000 PPP loan that really helped for a while but we exhausted all of that money quickly on payroll. Near the end, all we had left was your Member prepaid money. It seemed wrong to burn through that money only to still have to walk away. With no end to our financial hardships and negative cash flow in sight, we decided to terminate the lease.

Two days after vacating the property we were hit with a formal complaint and hearing date from the NLRB. I don’t intend to share any information on any of that other than to say we disagree in the strongest terms with their accusations and financials demands. However, we won’t learn until October how their internal Administrative Judge rules on this case and if there may be a financial obligation attached to AGP 2. We also don’t know what the status of our $250,000 PPP loan liability is, nor what other parties will do or pursue against AGP 2.

Our attorneys (plural) have all advised that we file for bankruptcy and turn over our remaining cash to a court to then determine who gets what. We have been advised that the one thing we cannot do is pay some obligations ahead or in favor over others. We have to freeze our cash. The role of a Bankruptcy Court is to sort through financial obligations and impartially decide who gets paid what.

Unfortunately, I am updating you today to let you know the decisions related to satisfying any prepaid membership obligation related to AGP 2 will be handled by the Bankruptcy Court. Once I have more information for you on timeline and process I will let you know. We have good records of what we billed and what members paid, all of which will be turned over for the court to review. Any communication from the court will be forward to you as it becomes available.

This is all new for us and have no experience with any of it. We will continue to keep you informed as we ourselves learn what to expect.

 Advance Golf Partners Two LLC

It may be news to many in Oakmont that AGP created a sub-entity entitled “AGP 2 LLC” (Limited Liability Company) in their relationship with OVA/OVPC.  From this statement that is the entity that is filing for bankruptcy.  And though they are addressing their golf club membership with this statement, little information has been provided to OVA members who contributed $193,146 through their $8.50 per member per month social membership dues payment.

AGP claims they arrived with $250,000 cash and later procured a $250,000 PPP loan.  They also received the social membership amount above as well as the unspecified golf “membership program” fees and the green fees and other revenues they collected once the golf courses opened in May.  Altogether these funds would total over $700,000.  They further claim that “near the end, all we had left was your Member prepaid money.”

A final point:  the statement says, “two days after vacating the property (in July) we were hit with a formal complaint and hearing date from the NLRB.”  While this seems to imply that this was their first notice of the NLRB action in the two cases pending, an Initial Letter of a potential labor issue with NLRB was dated 2/28/20.

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5 Comments

  1. Bruce Bon on August 10, 2020 at 9:19 am

    Thanks, Michael, for making this communication available to the Oakmont community. OVA has published a brief article about this at https://oakmontvillage.com/article/agp-two-to-declare-bankruptcy-ovpc-will-respond/. One of the statements in that article is “OVPC is considering all potential options to make its golfing residents whole and will keep you informed as the process moves forward. ” Would that OVPC were considering making ALL Oakmont residents whole, e.g. by returning all “social membership” dues to the members, but it is all too clear to whom OVPC owes allegiance.

    AGP’s description makes perfect sense to me. From a business perspective, they created AGP 2 LLC to protect the rest of their enterprise from possible losses here in Oakmont, and they are one of many casualties of the COVID pandemic. How OVPC expects some future operator to make a go of it is beyond me, except for the obvious and likely tactic of taxing Oakmont residents even more to support a losing operation.

  2. Yvonne Frauenfelder on August 10, 2020 at 11:16 am

    “Ultimately due to the strength AGP brings to the table, the board chose to remain with AGP as our operating partner,” (Steve Spanier)

    It may be news to many in Oakmont that AGP created a sub-entity entitled “AGP 2 LLC” (Limited Liability Company) in their relationship with OVA/OVPC. (Michael Connolly)

    What did the board know and when did they know about the AGP 2 LLC?

  3. Lyn Cramer on August 10, 2020 at 11:25 am

    Thanks again, Michael. For me the sin here is not the amount of members’ money this fiasco burned though, however appalling. It’s that AGP was ill-prepared or capitalized to meet almost any unanticipated obstacle. Leaving aside the issue of whether golf is the best choice for the property, signing a 20-year lease with a company unwilling to commit more than $250k of its own money is a stunner.

    Apparently, no specific commitment was expected by our board. As Steve Spanier said more than once, he was attracted by AGP’s “vision” for the property. Yet, everyone knew–as was acknowledged in early discussion documents on the question of “who”–that AGP was thinly capitalized. Wishful thinking appears to have swayed the board. What is a retirement community doing taking these kinds of risks? No doubt, Covid added to AGP’s problems, but it’s also clear from the very beginning that events did not proceed as AGP anticipated and that they needed to if this endeavor was not to suffer a financial collapse.

    It’s time to retire the “board knows best” mantra once and for all. This was just plain a risky venture and should have been seen as such without the benefit of hindsight.

  4. Joan Peterson on August 10, 2020 at 2:36 pm

    I must agree that it was a huge risk for a retirement community to purchase the golf courses. Ken Arimitsu said that it would take up to 10 years and $3.5 Million to achieve break even. Huge risk, I may never see break even. I remember at the golf club meetings, we were assured that OVA board had an expert in “Risk Management” on the board (Kendrick) and the risks were nominal. It appears that the risks were much greater than presented at the Golf Course Town Hall.

  5. Don McPherson on August 10, 2020 at 5:12 pm

    According to its “Letter to Former Members” of its short-lived Valley of the Moon Golf Club, the cause of AGP’s abrupt departure was not unfair labor practice charges now pending before the NLRB: “Two days after vacating the property we were hit with a formal complaint and hearing date from the NLRB.” (https://oakmontobserver.com/agp-declares-bankruptcy/)

    This assertion probably should not be taken at face value, since the NLRB case record shows that AGP, Advance Golf Partners Two LLC, and OVA were all aware of initial charges against AGP as of February 27, 2020. (https://www.nlrb.gov/case/20-CA-257146).

    Nevertheless, what AGP does claim as the cause of its failure and, now, bankruptcy – something it rushes to advise “you all knew” – is not at all mysterious and is cause for deep concern: “Restaurants remain closed to this day. As Members, you all knew our plan relied on linking great golf course conditions with membership programs and amazing food/beverage.” (https://oakmontobserver.com/agp-declares-bankruptcy/)

    Should the Board really attempt over the next 4-5 weeks to negotiate a new long-term commitment to what AGP identifies as “our plan” – dependent on “amazing food/beverage” – with a new operator given what has happened and the enormous uncertainties of Covid-19 effects on restaurants, events and tourism/travel?

    According to President Spanier, “[u]ltimately due to the strength AGP brings to the table, the board chose to remain with AGP as our operating partner,” What incentive do CourseCo or Billy Casper Golf, whose improved proposals were yet again rejected in favor of a long-term lease to which AGP’s commitment was exceptionally weak, have to offer or agree to a better 20 or 30 year deal?

    According to the July 23 Press Democrat, President Spanier said: “Despite COVID, despite what happened with AGP,” Spanier said, “we’re still an attractive date. A lot of companies want to work with us.” (https://www.pressdemocrat.com/article/news/oakmont-golf-club-jilted-a-second-time-by-same-management-company/ )

    Surely dating is not a desirable long-term arrangement objective – especially not speed dating. The Board needs to completely re-think what to do with the OGC assets and how it may need or want other parties “to work with us.” AGP’s departure should be regarded as an unanticipated gift allowing that opportunity.

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