Golf Club Merger Sparks Lawsuit

Chaparral Pines, Rim Club property owners at odds with developers

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One of the largest real estate firms in the Southeastern United States has merged with the developer of Chaparral Pines and the Rim Club and their plans for the two properties have motivated a number of angry residents to respond with a lawsuit.

In the meantime, a new picture of Payson's two highest-priced communities is developing, and it's revealing an image of financial woes and lackluster sales.

Causing the uproar is a plan set to be put into action today (Tuesday) to merge Chaparral Pines and the Rim Club into a single community sharing both golf courses, as well as the creation of a new golf club membership plan allowing Rim Club members to play on the Chaparral Pines course, and vice versa.

Protesting Rim Club member-homeowners, however, say their membership purchases came with the promise that the Rim Club course and club facilities would eventually be turned over to them, as equity members who paid a membership fee of $75,000 as well as monthly dues of $750.

Most of the principals involved including the directors of the Payson Rim Golf Club Members Association and the Chaparral Members Association, as well as representatives of Westroc, the Scottsdale-based owner-developer of both communities did not return calls by press time.

But according to correspondence exchanged by the arguing parties and confirmed by representatives of both sides who declined to speak on the record the disagreement started to turn litigious in mid-June when the $22 billion, North Carolina-based Duke Energy made an undisclosed financial investment in Chaparral Pines. The deal gives Duke's real estate division, Crescent Resources, 50-50 ownership of the property with Westroc.

Almost 700 of the two developments' 1,000-plus home sites have been bought since April 1996, generating more than $95 million in revenue.

In a July 11 letter addressing the community/golf course merger, directors of the Rim Golf Club Members Association wrote, " ... We were promised that the course and club facilities would be turned over to us, as equity members, no later than the date when the maximum of 295 memberships were issued ... Now, with the back of a hand and the swipe of a pen, Scott Lyon (head of Westroc and managing governor of the Rim Club) and his associates ... are attempting to take away from us, without even the courtesy of advance notice or discussion, the very things we paid for golf course access and eventual ownership."

To fight that possibility, the group has retained attorney Mike Manning of the Phoenix law firm Morrison & Hecker, who July 7 filed suit in Superior Court of Arizona against Crescent Resources, Westroc, and Rim Golf Investors LLC.

Financial philosophy

In a July 16 response to the Rim Club, Lyon writing in behalf of Rim Golf Investors LLC outlined the reasons for the merger while attempting to calm some of the fears it has generated.

"Simply put, (the merger) is the single best way to deal with the financial issues at Chaparral Pines and The Rim," Lyon wrote. "... We have concluded that the need to reposition the community as a whole is critical in order to remain competitive in today's marketplace."

As itemized by Lyon, the merger decision was based on a number of factors, including:

"Unacceptable sales performance at The Rim made it necessary to accept the fact that the original club concept program for The Rim failed."

"The Rim Golf Club is in default with the lender FINOVA."

"The bankruptcy filing by The Baptist Foundation of Arizona, an owner of Chaparral Pines, threatened completion of the Chaparral clubhouse construction. In addition, the bankruptcy situation also caused concerns for potential buyers hampering Chaparral Pines and The Rim sales efforts."

That last item refers to the December Chapter 11 bankruptcy filing of the BFA, which nearly caused ownership of Chaparral Pines to be yanked from Westroc. The bankruptcy set off a bidding war between Westroc and the National Land Co. of Scottsdale, whose fight for the BFA's ownership share ended only when National Land could not finance its own higher bid.

Westroc's communications director, Gina Canzonetta, presented a different version of those events in January, when she maintained that the BFA was "just one of the investors, a very small portion of the project. Their bankruptcy has zip, zero, nada to do with us. We're not even listed as an asset."

In the beginning

Chaparral Pines and the Rim Golf Club were hammered out of a complex land swap between the developers and the U.S. Forest Service that took six years to finalize. Since they were first offered in April 1996, almost 700 of the two developments' 1,000-plus home sites have been sold for a revenue total in excess of $95 million.

In Chaparral Pines, lots are priced from $50,000 to $400,000, while development home sites in the Rim Golf Club are tagged with a price range of $125,000 to $750,000.

At the heart of the 1,200-acre Chaparral Pines subdivision is a 7,019-yard, par-72 world-class golf course designed by former US Open and USPGA Champion David Graham and noted golf architect Gary Pranks. In 1998, it was deemed one of the "Top 10 new private golf courses in the U.S." by Golf Digest magazine.

The Rim Golf Club features one of the last collaborations of the Tom Weiskopf-Jay Morrish golf course design team.

Trouble in paradise

Losing the right to own those golf courses, and opening them up to outsiders, is not all that has the property owners and golf club members worried. According to their correspondence, they are also nervous about Crescent's reputation for aggressively managing its existing golf communities including The Peninsula, Ballantyne and The Point in North Carolina; Sugarloaf Country Club near Atlanta, Georgia; and two semi-private golf courses in Florida.

In a July 14 letter, the Chaparral Members Association expresses concern that Crescent may attempt to reduce or eliminate current operating losses by maximizing use of the Chaparral Pines and Rim Club courses by opening them to the public.

"In our view, we were sold our property with the understanding that our club was private and that outside play would be limited to 'tournaments, charitable events and other such activities' as provided in the membership plan."

The same letter adds that "Unspecified, but rumored developer plans to build resort-type facilities to accommodate the outside public are a real concern to us."

Lyon, however, denies both possibilities, saying, "There are no plans to build a hotel or resort ... (and) per the existing and new membership plan, public play is prohibited on the golf courses."

Lyon does concede, however, that, "In the past there have been various proposals regarding the 40 acres of commercial property located to the east of the Chaparral Pines entry. These have ranged from a proposed bed and breakfast to constructing small cabins for sale, and allowing the cabin owners to purchase a Chaparral Pines membership.

"We are considering building 10 golf casitas at The Rim, which will include, as do all real estate offerings at The Rim, the option of buying a Rim membership."

Bottom line

Without the community/golf course merger, Lyon writes, "We would not have the financing or financial assurances to complete the Chaparral Pines and Rim clubhouses, additional planned amenities, ensure a viable club structure and to complete Rim Phase Two home site improvements. And, since The Rim Golf Club is in default with its lender ... default remedies could be exercised."

He further states that the new membership plan will indeed allow members to buy the clubs, and even "provides for (that purchase) at a predetermined and set price, as of Dec. 31, 2004."

According to Lyon, the merger has already boosted sales at The Rim Golf Club, which saw no year-2000 sales prior to the membership-restructuring announcement. But in anticipation of combining the clubs and communities, he writes, there are 11 pending contracts and five home sites on hold in the Rim Club while Chaparral Pines has 12 pending sales and three home sites on hold in "direct response to the new membership plan.

"I am convinced that by combining both clubs and communities," his letter concludes, "we will achieve our ultimate goal of creating the highest quality, year-round, 36-hole mountain golf and family retreat."

Determining whether or not that goal is shared by anyone who lives in Chaparral Pines or the Rim Club and if they have indeed purchased the right to stop it is now the job of two lawyers and, perhaps, one judge.

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