Country Club says sale is done – for $4 million
The Country Club board held its 2016 annual meeting – likely its last – and outlined details of the purchase of the club for $4 million.
See the Country Club presentation (3.8-MB PDF)
About 175 Rancho Murieta Country Club members gathered for the club’s annual meeting Tuesday night and heard details of the nearly completed sale of the facility to outside investors for $4 million. Plans for club improvements were shared too.
Before addressing the sale, Vince Lepera, board president, introduced the club’s board of directors, who spoke about the club’s 2016 performance. But the audience was there to hear about the sale, a possibility that surfaced publicly 10 months ago.
The club has been in sale talks with James A. (Bob) Husband, a veteran course operator who heads up Bellagio Road LLC, a small company based in Southern California, where he lives. The other part of the negotiation was the North developers, who bought the club’s land, but not the club, in 2013.
“It was a process,” Lepera told the audience, “but we do have an agreement in writing. ... It’s a three-party agreement between Rancho Murieta Country Club, Bellagio Road and, obviously, the developers.”
In that three-sided deal, signed Nov. 28, Husband advanced the club $4 million to buy out its lease from the developers. Lepera said the club had just reached agreement Tuesday evening on a two-party transaction, between the club and Bellagio Road, selling the club to Bellagio for $1,000.
Escrow on the sale will close “as quickly as possible,” Lepera said.
Extending the commitment he made when the sale plans first became public, Lepera said Husband will spend a minimum of $3.5 million on capital improvements at the club – $1 million more than first discussed.
“It didn’t take a rocket scientist to figure out that wasn’t enough money,” Lepera said, “so we actually got Bob to up it by another million dollars.”
The $3.5 million for improvements will have to be spent before dues can be increased more than 5 percent, he said.
Echoing the first part of the meeting, about 2016 club operations, Lepera said, “Personally, I’m ecstatic that this (sale) happened, because ... we’re going to lose money in 2016. It’s not getting any prettier.” He listed pending negotiations with the Culinary Workers Union and the Operating Engineers and large increases in health care costs – up 8 percent this year and maybe as much as 30 percent next year.
Lepera said the final sale documents number more than 400 pages, and he had to deal with four sets of attorneys to get the deal done. An abbreviated version of the lengthy agreements will be available on the club website soon, he said.
There were a handful of questions and comments from the audience. Virgil Flores Sr. drew sustained applause when he lauded Lepera’s handling of the sale.
“I’m here to tell you that I am in such admiration for what you have done for this country club and this community,” he said. “In the 22 years we’ve lived here, we have been looking for this day. You have brought us a true professional that is going to improve our country club, going to improve our community. ... And you did it under very, very difficult circumstances.”
Lepera, the longtime board president, said he appreciated the support he has enjoyed over the years. Drawing laughs, he added, “Hopefully, this is the last annual meeting I will ever do. I will never volunteer for another board. I’ve learned my lesson.”
Here are some of the specifics:
Board President Vince Lepera addresses the audience.
Changes in membership structure
When the deal closes, every membership will be terminated, and each member will reapply under the new bylaws, Lepera said, adding that Husband will honor most current classes of membership in the new club.
One exception is members under the “Recruit and Reward Program,” launched in 2013, which encouraged current members to recruit new members by offering each party a dues reduction of more than $100 a month. The new club ownership will phase out that program after 24 months, Lepera said, and then those members will move up to undiscounted golf memberships.
Membership figures the club released Tuesday night show 272 “Recruit and Reward” members. That’s 48 percent of the total for the club’s 10 different classes of golf membership. The 10 classes total 571 golf members, which is off 5.8 percent in the last year. The club also has 458 social members, up 3.4 percent in the last year.
Lepera said another class of golf membership that will be phased out is Legacy, longtime members who are at least 75 years old. This class of membership – with 22 current members – will also have a 24-month grace period before moving to full golf membership.
He said the new owners are discussing a new class of membership, oriented to people interested in swimming and wellness.
The new bylaws should be available on the club’s website in the next week, Lepera said.
The price: “Some people are saying, ‘Well, did you screw the developers over? Because this place is worth $10 million.’ Not to the expert, it’s not worth $10 million,” Lepera said. Speaking of the developers, who have been the club’s landlord, he added, “Carol Anderson, she’s got a vision for her side of the road, and it’s a good one. But I definitely believe that Bob Husband has the vision for the Country Club that’s better suited for the members at this point.”
The investment: “By the time this thing closes, (Husband) will have $8.8 million into this deal, right off the bat,” Lepera said. His math: $4 million for the purchase, $3.5 million for improvements, $1.1 million to cover all existing club leases, $140,000 for the broker’s fee on the sale and escrow, survey and legal costs. “He’s close to $9 million right now,” Lepera said. “He honestly believes within a three- to five-year period he’s going to have to put in another $3 million into the club to get it where he feels comfortable.”
Personnel: Lepera said Bellagio will bring in two of its execs – Gary Dee, a Husband business associate who spoke at member meetings during the first public sale activity late last winter, and Norm Goodmanson, a longtime PGA expert on agronomy and course construction. Bill Armstrong, the present general manager, has agreed to stay on through 2017, Lepera said. Armstrong said one of Bellagio’s design experts will tour the club facilities in the next couple of weeks with an eye on redesign.
Clubhouse refurbishing: Lepera said Husband wants to focus on the Terrace Lounge – opening its windows and using the outdoor space in warm weather, making it the primary clubhouse entry point for players coming off the course. They’re developing plans for a cart-parking area there, Lepera said. General improvements around the clubhouse will target carpet, paint, signage, furniture and minor kitchen enhancements, the club’s presentation said. Women in the audience laughed and cheered when Lepera said Husband’s wife is “not a fan of the ‘Brady Bunch’ women’s restroom.” The building was designed and decorated in the early 1970s.
Course improvements: Lepera said Husband’s No. 1 issue is the bunkers. “Bob’s got something about bunkers,” Lepera said. “He’s not a big fan of our bunkers.”
Alameda Drive: The new club ownership and the developers will split the cost of sprucing up Alameda Drive from Murieta Parkway to the clubhouse, Lepera said. The improvements include landscaping, irrigation, lighting and signage.
Building plans: Husband will hold focus groups with members and prospective members once the deal closes, Lepera said. “He knows pretty much where the 3.5 million (dollars) is going to go,” Lepera said. “Obviously, we know we have to build a swimming pool and wellness center. Sometimes you hear the word ‘fitness center.’ I want to be careful there. ... I don’t really want to hurt (the businesses) across the street, and I think there’s a way we can all do this together.”
New facility location: The fitness/wellness facility could be built at one of two locations being considered, Lepera said – near the Yellow Bridge or near the lower parking lot. There could be a third site on the table, he said. Lepera said Husband has already held meetings on the project and wants to get going on permits and hiring contractors.
Guarantees: Lepera said there are enforcement clauses in both agreements: “I do trust Bob; we’ve done a lot of due diligence on him; we’ve verified the money, where it’s coming from; it’s his money, everything of this nature. He does have a bank to fall back on if he needs additional funds – credit line up to $10 million. So things are available to him that I feel good about. But until that $3.5 million is spent, I want to make sure ... that these funds are spent on this Country Club. Obviously, the developers feel the same way.”
Committees: Lepera said the club will continue to have committees, but they’ll be “advisory committees.”
Sub-organizations like the Niners: “(Husband) loves the concept of all the different clubs we have. He wants more member participation,” Lepera said. “He wants to get people more involved in the club. That’s one of his main goals.”