Country Club Membership Question; just curious.

[rwest]

So, I've never played golf beyond the mini version, don't really want to and don't have the money anyways, but I'm curios about what happens if a club decides to sell the property for a subdivision or something else.

You've paid your millions in initiation fees, a famous golfer sponsors you and a year later Pebble Beach decides to turn the course into condos, do the members get a cut or vote on the sale?

Like I said, just pure curiosity, the thought just popped into my head while walking the dog around the outside of a local private course.

[id10t]

If it is anything like gun range memberships there is usually a "don't renew past this date" followed by 6 months to a year or more of normal operation, with no new memberships, etc. If lifetime or multi-year memberships are in play, those people are usually reimbursed something, depending on how much time is left on membership, etc.

[MRM]

The membership owns the club. The membership buy-in goes toward buying your share of the club''s assets. The monthly dues are just to pay maintenance and operating expenses. If the club liquidates the members split any money left over pro rata to the membership units they own in the club. Many clubs allow you to buy and sell Memberships in the secondary market if they have sold the number of memberships allocated for the club. Membership values can go up and down and sometimes clubs do decide to sell out to a developer. Usually the club falls on hard times and the members realize the club is no longer sustainable but the real estate is valuable.

[Craig T]

Originally Posted by MRM

The membership owns the club. The membership buy-in goes toward buying your share of the club''s assets. The monthly dues are just to pay maintenance and operating expenses. If the club liquidates the members split any money left over pro rata to the membership units they own in the club. Many clubs allow you to buy and sell Memberships in the secondary market if they have sold the number of memberships allocated for the club. Membership values can go up and down and sometimes clubs do decide to sell out to a developer. Usually the club falls on hard times and the members realize the club is no longer sustainable but the real estate is valuable.

This was the case for most clubs 50 years ago, but not so much anymore. The scenario above describes an "Equity Club". Many of the old or more prestigious country clubs remain "equity clubs", but the vast majority of new private courses are "Non-Equity" clubs.

ClubCorp, a publicly traded company (NASDAQ:MYCC) owns hundreds of private country clubs and is acquiring "equity" clubs from member owned clubs all the time. They convert them to non-equity.

A "non-equity" membership has no resale value. You simply pay an initiation fee and monthly dues under an annual contract (some are mo-to-mo). The initiation fee for a non-equity club is considerably less when you join than the cost of buying a membership in an equity club, and the initiation fee is not refundable.

The good side to a equity club is...if the economy heats up, you can profit when you sell your membership at an increased value. Also, if ClubCorp comes in and makes an offer, you could come out on top. The downside, you can loose your A$$ if you need out in a recession. Plus, you typically have to get in line to sell. Another bad side to equity clubs is the club can assess you for improvements. If the board decides to build a new clubhouse, your $600 monthly dues could have a three or four-year $10,000 per year mandatory assessment. In theory, the new clubhouse could increase the value of the club's assets, but that is rarely experienced.

Many of the equity clubs in Palm Springs saw their membership values peak back in the 90's. Most have not recovered even close, yet new clubs reduce demand. Add that to the fact that many of those clubs are dated now and need substantial course and clubhouse renovations.

I belong to a beautiful newer club with three modern 9's, a sports bar, gym, and restaurant. You pay $1,000 initiation and $385 per months for unlimited play. If you want out, you just walk away. The club is owned by an individual Korean investor. He could sell it any time to build condos. I'm only out $1,000.

[rwest]

Thanks guys,

One of those things that has pretty much no bearing on my life, but for some reason got me wondering.

MRM,

The course I walk around is Hillcrest at the corner of Larpenteuer and McKnight. The Pipe Fitters Union bought it a couple years ago. Seems like it isn't very busy most of the time, but then again it's hard to see most of the holes from the street.

Their driving range net is in bad shape and abuts a wooded drainage slew with a walking path on the other side- see lots of balls near the path and hear tree strikes on occasion- one ball came bouncing down through some tree branches and landed a foot from my dog and then rolled another 50 feet- somebody has an arm!

[MRM]

Rwest, I had not realized you are local to me. I don't golf much but of course know of Hillcrest. My MIL actually lives a few blocks off Larpenter - but near Snelling. Minnesota over built golf courses in the 90s and early 2000s. Fewer people are golphing as demographics change and many courses have closed and been redeveloped. You can read articles about it if you look. Lots of the once-prestigious golf clubs are going wanting for members.