OGC And The Best Interests of Oakmont
The process that the OVA Board should be undertaking, in order to do perform their fiduciary duty, exercise due diligence and serve the best interests of Oakmont, would include a careful analysis of the consequences of purchasing OGC, as well as of not purchasing OGC. Exploration of the negative consequences of purchasing OGC does not appear to be taking place. Rather it seems clear that some directors have concluded, without appropriate and thorough analysis, that the best interests of Oakmont are served simply by purchasing OGC.
Since attending the Town Hall last Tuesday, my thoughts about the process have clarified. I believe that:
- Given where we are today, having a thriving golf club within Oakmont is the most desirable future use of the property for all OVA members, even those who are not golfers and who don’t live on the golf course.
- OVA purchase of the OGC is not the best way to keep active golf within Oakmont. The best way, as the OGC Board has concluded, is to sell the club to a competent and motivated outside buyer who knows how to improve the property and attract more golfers.
- Because OVA had made it known that we are interested in buying OGC, it may already have discouraged the type of buyer that Oakmont golf needs for future success.
- If OGC and their broker, Marcus & Millichap, are unable to find a suitable buyer, then OVA may have no reasonable choice but to purchase the property in order to prevent it falling into the hands of an unsuitable buyer, but OVA should be the buyer of last resort, and should not compete with qualified outside buyers.
So what should OVA do?
- Study all options, as the OVA Board recently indicated they are doing, but focus on ways that OVA might provide incentives to a suitable OGC buyer.
- Make it known to OGC and to their broker that OVA wants them to find a suitable outside buyer and will support the sale, but also that we would be willing to buy OGC for a minimal selling price (which can only be determined with access to the secret OGC offering papers), if they are unable to find a suitable buyer after diligent marketing for several months.
- Allow the sales process to play out, meanwhile making preparations to buy OGC if (and only if) it becomes necessary.
- If OVA ends up buying the property as a whole, try to lease the entire property, even at a very low lease rate, to someone who will run it as a golf club, invest in it and stand a good chance of making it successful. This must be a professional golf entity other than OGC.
- If OVA is not able to accomplish 4, then develop a zero-based design for the future of the property, i.e. a design focused on what is best for Oakmont rather than on maintaining a golf operation that looks like the current OGC.
There are some risks to not purchasing OGC, but there are also significant risks to purchasing OGC that have not been adequately considered. Among the risks should OVA purchase OGC are:
- Ever increasing costs to maintain the property, including rapidly increasing costs for electricity, water (as water use becomes more regulated), labor (running a golf operation is quite labor-intensive), and insurance.
- A large special assessment for initial purchase, followed by dramatic increases in dues to pay for maintenance of the property.
- Loss of affordability of Oakmont’s numerous smaller homes, as costs go up.
- Lowering of property values, as competitive properties become relatively more attractive because of lower total dues burden (Oakmont’s total dues burden for a couple is already as high as $480/month).
The negative scenarios painted by those who would like OVA to be the first and highest bidder in the OGC sale are largely unrealistic, especially if OVA follows the road-map suggested above, and there is a serious danger that they might lead to OVA paying far more than the property is worth. Steve Spanier, in his recent President’s Message, quoted a real estate broker who stated “The cheapest way to buy land in California is to buy a golf course.” While this may be technically true, it is absolutely not true that such land is a bargain for a developer! Per acre prices are low precisely because of the multiple and significant hurdles a developer must face before being allowed to break ground, and it is hard to imagine those hurdles being higher than they are for the OGC property: environmental challenges, lack of road capacity and other infrastructure to support further development, conflict with Santa Rosa’s General Plan (map), and a surrounding community of almost 5,000 residents who would aggressively resist the necessary zoning changes. Indeed, the first hurdle any potential developer would have to overcome is to get the approval of OGC members for a sale, an unlikely event considering that OGC members have the most to lose from a developer taking over the property. In the face of all this, no developer is likely to even submit a bid, because it would be a waste of time.
In order to attract a suitable buyer, and to demonstrate that OVA will be a good partner in helping them to succeed, steps 1 and 2, above, should focus on incentives that might encourage a desirable buyer to purchase OGC, including sharing the cost of the purchase in exchange for contractual obligations and/or acreage desired for future OVA expansion. Ideally, contractual obligations will ensure either that adverse development will be impossible in the future, or at least that OVA would have a first right of refusal should the buyer throw in the towel and need to sell the property. Desirable acreage might be a few acres adjacent to OVA’s bowling green.
Step 3, above, should include searching for a golf-related corporation that is willing to lease the OGC property from OVA and run it as a golf club. If OVA purchases OGC (step 4), this alternative would have some of the advantages of finding a suitable buyer, but would shift significant risks and costs to OVA and, on the plus side, would give OVA ultimate control over the property.
If anyone reading this would like to make their opinions, concerning how the OGC issue should be handled, known to the OVA Board, you may send your comments to email@example.com or to directors, whose Email addresses you can find on https://oakmontvillage.com/article/category/board/ . Alternatively, you can speak at board meeting open forum, or show up at meetings of the Golf Club Committee, the next meeting of which is Tuesday April 23 at 1:30 pm in the OVA large conference room.
On the topic of membership voting: It is unethical for the OVA Board to transform Oakmont into a different type of community without seeking the permission of those who will pay for the change for the indefinite future. At this point, the Board has made it clear that they will avoid such a vote if at all possible. There is no point in further discussion of that topic unless there is some chance of making progress on it, which will not be the case while the Board is engrossed in OGC purchase planning.
Final note, if anyone is interested in reading through my rather tedious guesswork analysis of six possible Oakmont Golf Club Futures, you may find it at https://drive.google.com/open?id=11XWFCWsM0xf2ldtiZkSky2Q6BQK483eRjNaeb9PsxTA . You might find it useful as a starting point for your own speculative analysis.