MISSING INFORMATION CRITICAL TO INFORMED VOTING: The Quail
Michael Connolly’s incisive reporting in the Oakmont Observer on the June 25 OGC Purchase Townhall has exposed issues critical to informed voting that is available nowhere else. OVA Town Hall on the OGC Purchase.
Perhaps most important, a huge ambiguity in the Board’s presentation regarding the apparently contemplated lease agreement — that not all but “most” of the operating risk would be shifted to a proposed lease partner — was brought into sharp focus in Connolly’s questioning of Ken Arimitsu, the Board’s expert consultant. Arimitsu said that the first $500,000 in projected annual deficits from the purchased OGC — which he expects to continue for up to 10 years — would be the responsibility of OVA, not the leaseholder. Some shift!
But perhaps topping the list of information vacuums left unaddressed by the Board to date is the Quail Inn, and Connolly’s reporting may have squeezed out some important but still entirely speculative detail:
“In terms of operating losses, Arimitsu explained: ‘I will tell you that this golf course needs to gross around $5.1 to $5.2 million to break even on (two) 18 hole courses.’ And: ‘Right now it’s running about $4.3 million in gross (revenues), which is creating a deficit of about $400,000 a year in operating loss.’”
$5.1 to 5.2M gross to break even less $4.3M current golf course gross is more than the asserted $400,000/year operating deficit.
Does revenue from the Quail make up the difference?
Arimitsu also stated without qualification at the meeting that golf is a declining industry. He candidly characterized the proposed purchase as a deal between a cash-strapped seller and a cash-strapped buyer. And he pointedly swept aside a question of how many more paying rounds would need to be played in the future to reach break-even, suggesting that additional rounds was not a significant factor in the financial projections.
That appears to mean that the multi-millions necessary from OVA to front-load into the golf course operation to eliminate deferred maintenance, address substantial operational deficiencies like employee complement and equipment, and bring the courses up to standard are not anticipated to generate sufficiently more paying rounds to make any significant difference in the annual $500,000 deficit that Arimitsu expects from the golf operation for at least 5 and as long as 10 years — all of which would be OVA’s responsibility in the apparently contemplated lease agreement.
the proposed purchase as a deal between a cash-strapped seller and a cash-strapped buyer.
And that seems to suggest that the only significant contributor toward Armitsu’s projected break-even point in 10 years — and toward lessening the continuing dues obligations on OVA members over that time span arising just from an OGC purchase — would be dramatically increasing revenue from the Quail’s food, wedding and meeting business.
Even assuming major capital infusion and significant quality improvement, do we have reason to conclude that the Quail can carry that burden, notwithstanding its great views, in the notoriously fickle and difficult restaurant industry with discerning diners and many dining competitors in easy driving distance? The Board so far has left us guessing, since no information has been provided to date on the Quail’s gross or net revenue currently and in recent years.
The Quail’s operational information and the projections the Board is assuming for its 5-10 year future may be far more than just one more undisclosed financial detail — it appears that the information may be critically necessary for any understanding of the economics of the proposed purchase and therefore minimally required for every member’s consideration of how to vote.