This is not the proverbial good news, bad news story. There is no good news here. This is dreadful news.

By buying-in entirely to the vision sold by AGP – a vision of being able to continue to operate two golf courses and a restaurant (maybe two) with such a significant revenue increase from the food and beverage business that the golf courses might ultimately break even in 5-7 or at worst 10 years – OVA made itself completely dependent on AGP going into the lease negotiations. Other potential vendors, including apparently the current two prospects, were already rejected. That gave AGP an enormous bargaining advantage in the lease negotiation and they took it – nothing personal, strictly business – and jilted us at the altar, walking away from the deal.

OVA then returned to the other vendors, rejected them a second time, and signed a less favorable deal with AGP, believing AGP a better lease partner than the competing vendors could be. It appears that the security of that deal was quite weak. Whatever its internal measures and payoffs were, the strength of any deal depends on the degree of commitment to it by each party. The core measurement of that commitment is the ease or difficulty of either party’s terminating the lease. It appears that we signed a deal for a 20 year lease instead of the original 30 years that had an easy exit at least for AGP, that is, a deal to which the party on which OVA had made itself completely dependent had, ultimately, a very weak commitment. Obviously this was done knowingly. To be fair, at that point, what choice did we have? Still, nothing personal, strictly business for AGP, they have jilted us again just months in.

OVA now intends to return a third time to the twice-rejected other vendors and, if continuing with them to pursue the vision AGP sold, stands before them, too, totally dependent. Naked. To find good news in this state of affairs because two twice-rejected suitors are willing to compete for our hand a third time, knowing that we are in desperate need of one or the other, is magical thinking.

But put aside whether you agree or disagree with that analysis of how we got here and where we actually are. If ever there was a time to look at the whole concept afresh, that moment is now, instead of barreling forward to engage another vendor in the vision of “success” that AGP sold us, a vision which its abrupt pullout demonstrates, at least to some degree if not fundamentally, is economically flawed.

I’ll suggest one reason why it’s flawed and further suggest that the reason is obvious. Although the Board has never fully explicated publicly the economic assumptions of the AGP deal, from the outset there were skeptics, conceptually, about whether the food and beverage operations could advance so spectacularly that the golf courses operation could break even – or even the entire operation become profitable – in some period like 5-7 years. And others honestly and fervently have believed that they could.

But now Covid19. Yes, nobody anticipated it, not AGP, not OVA, not Oakmont residents.

Nevertheless, the fact is that the world has changed.

Is it now rational to go forward trying to engage another vendor to buy into the AGP vision of sustainably operating two golf courses on the back of dramatically increased revenue from a restaurant?

I suggest that the Board needs to take advantage of this situation not by barreling forward into another long-term lease commitment in the next 30-60 days but instead by re-examining objectively whether the vision is achievable.

This is not about a binary choice of having golf or not having golf in Oakmont. A number of times now, most recently today, President Spanier has asserted that the primary reason for buying the Oakmont Golf Club was not to guarantee the operation of two golf courses but to secure the land from hostile interests:

“. . .it’s important to remember that the main reason we purchased the golf club was to keep the land in our own hands for all time. Owning this land offers Oakmont infinite land use choices . . ..”

I would propose that the Board NOT in the next few days enter into a 30-60 day management contract with CourseCo, as announced, but that it negotiate with CourseCo a longer term management contract – a year, a year and a half, two years. The Board should use that time objectively and freshly to assess our situation, figure out what the membership of OVA wants, and then reach a reasoned economic assessment and conclusion about what is the optimal of the infinite land use choices for Oakmont in these times and looking toward future times as best it can be discerned.

Only then will it be the right time to articulate a vision, search for the best vendor(s) or lease partner(s) to carry it out, and negotiate a strong, secure long-term arrangement in Oakmont’s best interests.

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2 Comments

  1. Lyn Cramer on July 15, 2020 at 11:13 am

    Thanks for the accurate summary of our situation. “Naked” . . . . “exposed” . . . and I might add apparently desperate. You outline a prudent course of action to take under these circumstances. Refurbishing two neighborhood-ranked golf courses and restaurant(s) was always going to be expensive and outcome uncertain. But no reason not to buy into the vision of those experienced in restoring golf properties, providing they were sufficiently confident of the outcome to put serious skin on the table. But they weren’t. The remedies for early termination of the lease without cause favored one side. If heads, they win; if tails, they walk away. The gamble was all ours. Good idea for a retirement community?

  2. Joan Pererson on July 16, 2020 at 6:09 pm

    It was under false pretenses that Spinnier and OVA convinced Oakmont residents to vote for raising dues used to buy the golf courses. OVA did not have a good contract with AGP as OVA claimed to have. AGP backed out and had no skin in the deal. That was not what was presented at the OVA golf meetings.

    Now, if AGP was the best, as OVA claimed, and AGP cannot see profit without having any skin in the game, then how can any golf business see profit here? Don McPherson is correct – it is a bad new worse news story.

    Why did Spinnier wait so long to tell us? Did he feel it is not important to us?

    Why did Spinnier neglect to tell us why AGP walked away? Did OVA and APG commit to nondisclosure? I wish I could hear Larry Galloway’s explanation. Read his letter below, there is much more to this story that OVA board is not telling us.

    Here is the letter from Larry Galloway:

    To Our Valued Members,

    I write to you today deeply saddened. After spending the past months trying to problem solve insurmountable obstacles, we are forced to make a truly heart breaking decision. Due to circumstances that are beyond our reach and control, we are withdrawing from all operations at the golf courses in the Oakmont community effective today. The OVA Board was notified last week.

    I promised you I would be honest with you and I have been. I also promised you transparency, but sadly that is a promise I cannot fulfill. I wish I could provide the details and answers you deserve, but I am not at liberty to do so. I sincerely apologize.

    I thank each of you for the chance to pursue our dream and vision for the golf courses and restaurants. I thank you for placing your trust in us. I know while we are mourning the loss of this dream, so are you. I hope the courses will soon flourish and the restaurant will be a lively place that you all enjoy. I am sorry we will not be able to be a part of it.

    For Members that prepaid dues and carts you can expect to receive a check in the mail for a pro-rated refund within the next 14 days.

    With sincere respect and regards,

    Larry Galloway
    7025 Oakmont Drive
    Santa Rosa, CA 95409 | (707) 539-0415

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