The Rayburn Country site has a site visit evaluation and a subsidy program they are trying. That plus the letter gives a picture of their sad financial situation. See below.
Executive Summary for the final visit made on November 11-14th
On the above mentioned dates, I was able to perform a much deeper dive into the operations of the Club. As I stated in my earlier summary, my visit was made as a representative of True Club Solutions, a division of Troon.
I made the site visit at the request of Jasper Country Development District #1. The follow up visit was made for the purpose of further, more detailed evaluations of the operations of the facility.
I was able to spend a meaningful amount of time with many of the staff during the 3-day visit. Mr. Clyde Pederson, the project CEO, was welcoming and very generous with his time during the visit. The time I was able to spend with Clyde was invaluable.
I will now speak to the areas of the club that I mentioned only briefly in my initial summary report.
Facilities and Grounds
The clubhouse facility is welcoming and warm. The bar is not ideally situated, but is not so out of place as to necessarily hinder the experience. For the business that we are trying to capture, the clubhouse is probably overbuilt to a degree. The space is woefully underutilized. Furthermore, the building is beginning to show aesthetic wear with flooring and other items that will need to be replaced sooner than later. Subsequent to that, there will need to be a disciplined commitment to capital enhancements on an ongoing basis throughout all areas of the facility.
The kitchen is vast. There are a number of pieces of equipment that don’t necessarily fit the type of operation we are trying to be. Those could be traded out for 1 or 2 pieces of equipment that would better perform in that space. The M.E.P. portion of the foot print, namely the HVAC system is somewhat ill designed, as is the freezer storage area of the kitchen. There are ventilation issues in the cold food storage areas of the kitchen, and those issues can become problematic in the future if not addressed.
As for the external offerings of food and beverage, I have concerns about the license premise for alcohol service and the beverage cart. The club is in an area of Jasper County that is technically a dry precinct, and that is problematic for alcohol service on one license across the entire property. Additional research is needed to fully understand the implications of this fact.
Additionally, the space that was built as an ‘at-the-turn’ option for golfers in non-functioning and out of the way. Options exist to re-create the space, but investment would be required. To my knowledge the space that was imagined and built for the service is lacking the proper equipment to perform the functions required of the space. It is currently used for storage.
The golf shop is in good shape overall. The merchandise will need to be turned over and refreshed with new product ahead of the spring season. Without historical sales data, I am uncertain of the level of profit emanating from that space. I am of the strong opinion that the HOA office needs to relocated somewhere outside of the clubhouse. Co-mingling customers that are on property for recreational purposes with those residents who might be less than hospitable because of an issue with the HOA is not a good business practice, and every effort should be made to separate the two functions. I would strongly encourage the group to find a more suitable location for the HOA office, segregated from the club.
Additionally, I was able to meet and spend time with Mr. JD Batton, the consulting agronomist on the project. It is glaringly apparent that resources had become tighter for maintenance of the course, and as an operator, I understand the need for that if revenues become an issue. With that said, the golf course will begin to regress in quality if measures are not taken to address the lack of critical cultural practices such as proper chemical and fertilization applications.
With limited resource available to maintain it, the bunkers are overgrown and weed pressure will become greater as the winter progresses. Most importantly, the edges of the property look unkempt and the details that resort guests and members notice become more prevalent. The bunkers that were added and rebuilt are quite frankly too small for mechanical maintenance and most likely need to be maintained by hand and rake.
The greens are coming off a season where little to no cultural practices have been accomplished due to constraints of spending. Timely verti-cutting (removal of thatch) and top-dressing (sanding) of the greens is the single most important process that protects and maintains the long term health and playability of the greens. Over the past season, this process was only accomplished a couple of times. Should this process continue to be done only sporadically, the result will be inconsistent, bumpy and extremely grainy putting surfaces. Disease and drainage issues will occur that will require significant and costly remedial programs.
The building that houses golf course maintenance operation is the original building that was the golf cart storage building. That structure and its’ surroundings are sub-par, and need to be improved. There is an investment there that needs to be considered as part of the long term strategic plan.
The fleet of golf course maintence equipment is an area that needs to be addressed in the coming months. Many pieces of the equipment are nearing end of life, and the amount of repairs and maintenance needed to keep it operational begins to outpace the leasing cost of newer equipment. On the bright side, the irrigation system is modern and in good repair. There should be no surprises as it relates to the irrigation. As for the water supply and well apparatus, I have to assume that it is all in working order, as I was unable to inspect that part of the system.
The fleet of golf cars is nearing the end of the existing lease. The fleet is in generally good condition having been stored in the elements.
The lodging component of the facility is acceptable, but underwhelming. I understand that significant investment was made when RCR purchased the amenity. However, key improvements such as removing the popcorn ceiling while raising it at the same time, were not accomplished. Now that the improvements are nearing 10 years old, it is going to be time to enhance the amenity again. In the world or Troon’s resort properties, we try not to go outside the 7-year window for significant improvements.
The tennis courts need to be resurfaced. At a minimum, they need to be treated for mildew and pressure washed by a company versed in court maintenance, so as not to harm the surface. Given their location at the entrance to the facility, the entire area around the courts need to be maintained at a higher level. The same goes for the aquatic center. At a minimum, the deck, plaster, and coping are in need of attention. The underground mechanical filtering system is aging. I would surmise that the plumbing infrastructure is of the same quality of the exposed part of the system. This should be a cause for concern, as repairs of these types can run in the tens of thousands of dollars.
Overall, the physical plant is in acceptable condition. With that said, there needs to be an extensive, well thought through plan of what capital improvements are needed or imagined. An accepted industry benchmark for capital replacement is 3-4% of gross annual revenue. In a revenue scenario comparable to Rayburn, that equates to a range from $45-60K annually. Given the age and conditions of certain amenities inside the footprint, that number is probably a little short, certainly in the near term of the next 2-3 years.
In general, the entire facility is underutilized. The idea of making any significant improvements to the green nine at this time is not feasible or practical. Given the fact that rounds have trended down for the past 6 years gives me pause to want to make any recommendation to the contrary. The impetus for the re-start of that conversation should only be if rounds grow to the point where compaction on the gold/blue nines becomes an issue. The good news is the bones of the green nine are there. The scope of work will be the same in 4 years as it is today. Factoring out inflation, the costs would not be vastly different at either point in time.
By the Numbers (Through 2018)
Since 2013, golf rounds have decreased approximately 20%. From the peak of 19,474 rounds in 2013, rounds decreased to 16,173 in 2018. Rounds of golf is the key driver of every revenue category of the operation. As a result in the decline of rounds, the volume of covers in the restaurant has forced a reduction in the number of operating hours. Unfortunately, each begets the other.
Year over year performance has from a revenue perspective has declined during that same period. Membership has declined to fewer than 100 full golf membership. Monthly dues revenue has diminished to less than $25,000 monthly. Total facility revenue has declined by nearly 30%. Cutting expenses to achieve profit in the club industry is not the preferred strategy. Deferred capital improvements don’t go away, they stack up. Using capital to fund operating shortfalls is a fast track to decline.
The bottom line is that without any operating subsidy, the club is currently not in a position to remain financially viable. That being said, with the proper operating discipline and a renewed focus on marketing, the club can be returned to self-sufficiency, and ultimately, profitability.
The club needs to generate at a minimum of $1.75M to sustain the operation. Growth in membership and increased use of the club by that membership is critical. Another key growth area is in lodging, golf packages and food and beverage.
Every key stakeholder in Rayburn Country need to do their part in protecting the long term viability of this project. Losing this amenity would wield a devastating blow to the overall livability of the community, while at the same time negatively impacting property values. The following is a link to view one of many case studies done over the last several years as it relates to closures of courses and the subsequent impact on affected communities and property values. This was included in the first part of the study.
Homeowners living in so-called golfing communities are seeing the premium they paid disappearing as an increasing number of golf courses in the U.S. are
realtybiznews.com
Objective Recommendations
Both RCA and RCR reach an agreement that allows for the continued operation of the club and its’ associated amenities.
Engage professional management to operate both the club and the Homeowner’s Association
Develop an operating budget for 2020.
As part of the 2020 budget process, separate out the operational processes that pertain to the HOA and create a budget unique to the HOA.
Create a marketing plan with accompanying plan for spending.
Create a comprehensive capital improvement and replacement plan to encompass the next 60 months.
Bring the food and beverage operation back in house.
Agree to a mechanism that allows the HOA to purchase the club amenities sometime in the future at an agreed upon price fair to all parties.