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Oakmont News, Opinion & More

Report: December 10 OVA Town Hall on OGC Acquisition Status

Today at 10 am, OVA held a Town Hall Meeting to report on the status of the Oakmont Golf Course acquisition.  There was a slide show, narrated by Steve Spanier (OVA president), which is available on the OVA web site.

Of particular note in the slide show are the goals of the OGC acquisition, on pp. 6-9, and the Advance Golf Partners (AGP) lease agreement details, several of which have changed within the past few months, on pp. 19-20.  Changes noted:

  • AGP backed away from their commitment to spend $1M within the next two years for property renovation, and the OVA Board has agreed to fund this renovation with $1M, to be funded from loan proceeds and to cost OVA members about $1.50/member/month for 15 years.
  • The funding commitment from OVA to AGP from OVA dues was reduced from $10/member/month to $8.50/member/month, and recharacterized as a golf club social membership for every OVA member.  Thus the monthly commitment remains the same dollar amount (when you include $1.50 for repayment of the additional $1M OVA loan), but the likelihood of it being reduced within five years or so has gone down substantially.
  • AGP also balked at the possibility of having to pay very high insurance costs due to recent fire threats, so OVA has accepted the responsibility for paying insurance premiums over $80k/year.  Steve asserted that the anticipated insurance premiums for the golf courses is $60k to $8ok per year, and if it stays within that range, AGP would pay it all.
  • The length of the AGP lease contract has been reduced from 30 years to 20 years.
  • Profit sharing:  The off-the-top profit to be retained by AGP has been reduced from $200k/year to $100k/year (in exchange for OVA funding the early $1M renovation investment).  After the first $100k, 50% of net income would be retained as AGP profit and 50% would be put into a Capital Reserve Fund for possible golf operation improvements.

Steve also announced that there would be a “Service Reduction” during the transition.  Escrow should close within a few weeks after loan funding comes through.  Loan funding has been delayed by the sale of the company funding the loan, but they hope to get it within the next few weeks.

The service reduction amounts to complete closure of both golf courses from December 16 until they are reopened, hoped for by March, and includes substantial layoffs of OGC and Kemper personnel.  While it was not stated in the meeting, there may be limited food service provided by the Quail Inn during this transition.  In preparation for the grand re-opening, the Quail Inn will likely receive cosmetic renovation (e.g. painting).  The $1M OVA renovation funding is to be spent within about two years, and first priority for that funding will be the Quail Inn.

The west course will be renamed to the Wine Country Golf Club, and the east course will be renamed to the Valley of the Moon Golf Club.

Much more information than was in the slide show was provided in response to member questions.  A sampling:

  • AGP personnel are here and have begun planning the transition.
  • A skeleton crew will ensure maintenance of the golf courses during the transition.
  • OVA has hired a transition expert, to manage the many details, such as transferring the liquor license, etc.
  • OVA/AGP will strongly consider allowing use of golf course paths for biking, hiking, etc during the transition closure, but such use will likely be “structured” in some fashion.
  • Renovations will continue beyond the initial plans, with an expectation of an additional investment of $2.5M within ten years.  The amount will be funded from the Capital Improvement Fund, as it receives the $8.50/member/month (total $484k/year) dues contribution from OVA.
  • One member pointed out that, with AGP no longer putting up $1M of their own money, they no longer have a big stake in making the operation a success — they could exercise their option to withdraw while losing relatively little.  Effectively, the change to OVA providing $1M up front shifts investment risk for that $1M from AGP to OVA; if AGP decides to walk, OVA will have spent the $1M plus $484k/year of our dues, and AGP will have invested $1M less than promised in June.  Steve replied that they could do that, but that OVA would still own the land (OVA’s top priority goal).
  • The Board considers it very unlikely, but if the judge in the Leznik small claims lawsuit were to make an injunction to prevent the sale or the AGP lease from going forward, then the entire complex plan would fall through, with unknown results.  Alternatively, if the judge were to void the August dues increase election, then the Board would struggle to be able to complete the purchase without increasing dues beyond the $90/member/month allowed by law without the vote.  The lawsuit was heard on Nov 27, and the judge promised a decision within about ten days, but may take up to 90 days to render his decision, and the decision had not been released by this morning.

The next regular OVA Board meeting is Tuesday, December 17 at 1 pm in Berger.

Addendum:  Announced by Eblast at around 3 this afternoon, the OVA website now has an article covering this morning’s meeting.  It has some additional information, including the Quail Inn’s days and hours of operation during the reduced services period that begins on December 16.

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11 Comments

  1. Thomas Hall on December 10, 2019 at 8:09 pm

    There is really no way to spin this. It is a negative development from almost every angle. Since AGP has withdrawn its vaunted 1M “investment” in the OGC, primarily the Quail Inn, they now have very little “skin in the game”. The OVA will give the Quail Inn a coat of paint. Wow, that will really change the current equation. In reality, little different from the Kemper managed OGC is on the horizon. Coupled with closure until the “hoped for March” reopening, you have effectively lost a full quarter of revenue. How does this help? Simple, it doesn’t. While I was always in favor of the OVA controlling the fate of the land, I also never supported OVA getting into the business of running the club. Since AGP was the only interested party in allowing ongoing golf operations of both clubs, it seemed too good to be true. As is it now turning out, it was. The future now is most uncertain. Once possible scenario, probable in my view, is that the Quail Inn and the West Course limp along as OVA “assets” and the East Court ultimately is developed into housing and pocket parks. At least the OVA can defer the costs of the enterprise with the proceeds of selling off the East Course. Not exactly what people voted for this past Summer.

  2. Lisa Symonds on December 10, 2019 at 10:33 pm

    What a disappointment to say the least!

  3. SSimon on December 11, 2019 at 12:04 pm

    Golf social club membership dues? Please just call the HOA dues increase what it is – an HOA dues increase to cover broken promises by the OVA Board. Many more to follow.

  4. James Foreman on December 11, 2019 at 4:38 pm

    Is this really a surprise? Most of the people who opposed this had directly pointed to the fact that with no AGP agreement in place, and proponents giving all kinds of perks and guarantees, this was not a risk worth taking without more details in place. So I wonder if this is giving supporters pause, or is it still looking good to them?

    This reminds me a lot of the Tech world when a company makes an acquisition of a start-up without having the ability or knowledge in how to manage everything. They then end up with increased costs, hiring outside consultants and the responsibility of establishing complex contractual agreements.

    I guess only time will tell…

  5. Lyn Cramer on December 12, 2019 at 6:10 am

    The original OVA-AGP agreement contained one believable reason for thinking our two golf courses and Quail Inn might be turned into a viable business despite 25 years of disappointing returns under three separate managements. It was AGP’s $1 million commitment to remodel the Quail Inn in the first year. AGP made it clear that hospitality, not golf, is where the money would be made.

    Nothing speaks louder about one’s commitment and belief in a proposal than the amount of skin one is willing to put into the game. AGP may have done us a favor. They’ve sent a strong message if we care to listen.

  6. Sanford Dole on December 12, 2019 at 7:34 am

    I’ve lived in Oakmont 16 years. This is the worst financial situation any board has got us into. A real estate agent salesman President sold us on a raw deal that his OGC friends put together. The board is filled with OGC members who scammed us.

  7. Bruce Bon on December 12, 2019 at 4:07 pm

    I am sorry to say that I have to agree with those commenting above. There has been a $2M worsening of the financial picture for OVA — loss of $1M promised by AGP in start-up investment, and $1M additional debt required of OVA, to be paid (over 15 years) from our dues. Oh for the days when a potential half million dollar investment in pickle ball courts was enough to have Oakmonters outraged!!

    This seems to be a serious bait-and-switch tactic on the part of AGP. I hope I am wrong, but I am seriously worried that golf operations will not be profitable, even with almost $500k/year from OVA “social membership” funding, and that in two to five years, AGP will exercise their option to drop out, leaving us with the burden of the $1M debt (plus $3.6M for the purchase) as well as the quandary of how to manage the property. Without the promised AGP commitment, AGP will be both less motivated to invest additional funds to make/keep the operational profitable, and more likely to skip town.

    The fact that other golf management companies were not interested in making a better deal than the current AGP deal is a pretty good indication that those who know the market and the challenges are not optimistic of success, as is the fact that AGP decided it wasn’t a good enough bet for them to be willing to live up to their $1M verbal commitment.

    And the fact that the OVA Board accepted the revision of terms is a pretty good indication that they are desperate to keep the AGP vision of golf in Oakmont alive, no matter the risk and cost to OVA. Steve said that they had solicited competitive bids after AGP backed off from their earlier commitment, but he made no indication that they gave any thought to some other plan for the property once escrow has closed.

    As usual, all of the developments since the August election have been behind a cloak of secrecy. For competitive bids to have been solicited, bid and rejected must have required some significant period of time. I wonder when AGP let the Board know that they were no longer willing to meet their $1M investment commitment. Could it even have been before the election? We’ll probably never know, since the Board is unwilling to allow us to debate anything controversial and important until after they have made decisions and it is too late to hope to impact their decisions.

  8. Don McPherson on December 12, 2019 at 4:40 pm

    Aside: does the impending departure from the scene of Kemper as the employer, its termination of its employees, OGC’s termination of its golf operations, and the impending appearance of AGP on the scene as a brand new employer-operator of a new entity conveniently dispose of any arguable pension and/or fringe benefit liabilities to the fired former employees? That’s an interesting, technical labor law question. Since the asserted financing problem forcing the delay in escrow, the golf course closures, and the employee terminations is reportedly AGP’s, inquiring minds may want to know.

  9. jim sannar on December 12, 2019 at 8:50 pm

    I did not attend the December 10th town hall meeting on the status of the golf course purchase but what I have read tonight saddens me. As a Real Estate Broker with over 40 years of experience, I cannot understand how AGP could have proposed a long term lease agreement with Oakmont without making it perfectly clear that they did not have a solid commitment for the one million dollars that they originally proposed in the agreement. Perhaps they did but I am unaware of it. Usually in a purchase agreement supported by a lease, all parties are notified in writing what contingencies must be satisfied before the transaction can proceed. I find it hard to believe that AGP did not disclose this condition. Without a significant capital investment AGP has little to lose if the project sours.
    On a positive note readers might google these articles.
    1.) DEVELOPERS TEE OFF AMID MASS CLOSURE OF US GOLF COURSES 2.) ARE BIG HOLE CUPS THE FUTURE OF GOLF? 3.) OCEAN SHORES GOLF COURSE LEASE AGREEMENT.

  10. Lyn Cramer on December 13, 2019 at 9:11 am

    In the “for what it’s worth department,” in response to my question of why AGP reneged on its $1 million commitment I received the following answer from one board member: when it inquired about terms to borrow the money AGP discovered it would cost more than expected. Follow up questions didn’t get very far. Someone is blowing smoke here.

  11. Thomas Hall on December 13, 2019 at 5:09 pm

    I attended the OGC meeting and vote in July where the AGP presented “their vision” of the proposal. It was never mentioned that their 1M investment would come from borrowed funds. Rather, it seemed to be clearly implied that it was their own money that wold be invested. In addition, when has it been less expensive to borrow money than it has been in the last year or two?

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