A bankruptcy filing has left Rim Golf Club members and employees in limbo as negotiations take place on the continued operation of the facility, which is complicated by not one, but two bankruptcy filings.
The developer of the Rim Golf Club filed a Chapter 11 bankruptcy in a Texas court along with its parent company Crescent Resources, which has left lot owners and homeowners wondering what will happen to the private golf course.
Homeowners have continued to pay their monthly $1,000 membership fee while the developer, Rim Golf Investors (RGI), quit paying its share three months ago, leaving a $450,000 deficit in the club’s operation.
Before filing for bankruptcy, RGI had launched an all-out effort to sell lots and memberships without paying off its half a million in debt to the club, said the Rim Golf Members Association (RGMA).
Frustrated that RGI was selling memberships without paying off its debt, members launched a lawsuit in May to stop the sales until an agreement could be reached with RGI.
However, on June 10, Rim Golf Investors filed for bankruptcy, stalling the lawsuit.
Until the bankruptcy is completed, members are left wondering who will fund the club’s operations and what, if any, value their memberships have left.
Membership dues go toward monthly operation of the club’s golf course, locker facilities, pro shop and health club.
According to court documents filed in the Maricopa County Superior Court by lawyers for the RGMA, a nonprofit organization formed to represent Rim Golf Club members, financial trouble started brewing several months ago when RGI defaulted on its payment obligations.
Under the agreement, RGI is required to pay monthly dues for all un-issued club memberships and unsold lots until January 2010.
“Until sufficient memberships have been sold to allow the club to meet its operation expenses through monthly dues payment, RGI is obligated to fund the shortfall,” said attorney Jeffrey J. Goulder in a Superior Court filing seeking the injunction.
Currently, RGI has 150 un-issued club memberships, with each club membership costing $995 monthly, meaning RGI pays approximately $150,000 per month in dues.
“The club has a total of 295 regular club memberships, but RGI has had great difficulty selling memberships,” Goulder said. “Not only have sales been dormant for the past several years, but sales had significantly slowed even before the current recession began.”
Because of the troubled real estate market and RGI’s parent company Crescent Resources, Inc.’s struggles with mounting debt, RGI said it is unable to pay its monthly dues.
In a May 4 e-mail, RGI said it does not dispute the fact that they are obligated to make monthly payments to the club, but it cannot meet its obligations at the current time.
Crescent Resources, a Charlotte, N.C., based developer, also has filed a Chapter 11 bankruptcy petitions as it tries to reduce its debt. Crescent Resources is a joint venture of Duke Energy and Morgan Stanley Real Estate Funds.
At a May 23 board meeting, RGI representative Tom Jacobson said RGI was unable to pay monthly dues because Crescent Resources could not provide them with payment.
“RGI has already cut back on many club services, fired staff and told the club’s golf pro, head chef, head agronomist and several of the security personnel that their jobs are in jeopardy because of the lack of funds, which was caused by RGI’s failure to pay monthly dues,” Goulder said.
Goulder said RGI tried to sell the remaining residential lots at The Rim Club and pocket the money without putting sale proceeds toward the club’s operations.
Worried that RGI was liquidating its assets and pocketing the proceeds, RGMA requested a preliminary injunction to prevent RGI from selling its assets.
“Without the requested restating order and injunction, therefore, the developer will be permitted to stuff its bags with cash from lot sales as it exits the project and saddles the members with ownership of an insolvent club,” Goulder argued in court documents.
A hearing on the preliminary injunction request is scheduled for Aug. 7.
In the meantime, RGI cannot close escrow, dispose of any residential lots or sell club memberships to non-lot owners. On May 28, both parties agreed to these stipulations and said they will attempt to negotiate a settlement during the next month.
However, with RGI filing for bankruptcy last week, Goulder said they would now have to pursue all claims through the bankruptcy court, which will slow the process down.
When a company files for bankruptcy, a freeze is put on all claims until the bankruptcy is resolved, said RGI attorney John Balitis.
“We are trying to protect the interests of the members of the club,” Goulder said, “and preserve their assets.”
Homeowners hope $3.6M bid to buy golf course goes forward
After years of hard work, the homeowners at Chaparral Pines may lose a bid to buy the golf course after the developer filed for Chapter 11 bankruptcy earlier this month.
The ink was nearly dry on a deal to purchase the $8.1 million golf course for $3.5 million. However, a bankruptcy judge may decide to reject the homeowners’ offer and send the golf club to public auction where it may fetch more for its creditors.
An acquisition committee, made up of Steve Drury and two others, has been working for nearly eight months on a purchase structure.
In late October, the team offered the developer, Crescent Resources, $3.5 million for the golf club and any unsold memberships. Crescent accepted the offer and on Nov. 10, the acquisition team began the long and arduous process of working the deal though layers of lawyers.
Drury said the deal was to close on Sept. 10.
However, two weeks ago, Chaparral Pines Investors filed for bankruptcy in a Texas court along with its parent company, Crescent Resources, which also owns The Rim Club.
The homeowners association met on Saturday night and decided to mail out ballots to all 810-club members for approval of the purchase.
The team needs to get 406 approval votes from members before it can officially close the deal. This is necessary because members have to give $6,000 each to a special assessment fund to cover the cost of the deal, Drury said. Most households in Chaparral Pines own one membership.
Drury said they had planned to send the ballots out this week regardless of what else happens.
“Nothing has changed except (the bankruptcy) has added another layer,” he said. “We are continuing to move forward with a purchase.”
Crescent began exploring the idea of selling off the club four years ago, said Drury, when the company got close to selling all the memberships.
Crescent’s principal business is building and selling real estate, but not maintaining the club afterward, Drury said.
An election was held four years ago at Chaparral Pines to evaluate if the members would want to buy the club.
Homeowners selected a six-member committee to explore the idea. That committee decided it was a good idea and created an acquisition team.
Today, the majority of the club is sold, with only 13 available lots owned by Crescent.
“If the members are able to own the club, we are taking control of our own destiny,” he said.
During the last two years, little or no money has been invested in the club by Crescent, he said.
“The members would like to have a dog park, shade near the pool and a barbecue area.”
Drury said they also plan to open up membership to outside homeowners to increase revenue if they take over the club.
Crescent had reportedly lost $4 million during the last five years operating the club. This happened, said Drury, because Crescent operated the club not like a business, but as a way to sell lots. Agents would wine and dine perspective buyers at the club, but would not figure in the cost, which added up over the years, he said.
An appraiser told the acquisition team if the club was operated as a proper business it would be worth at least $8.1 million with all assets, which include the golf course, restaurant and club house.
Another reason members want to take over the club is to regulate who can use it. In April, homeowners learned Crescent had made a deal with the Mazatzal Casino to open the golf course to hotel guests.
“I said, see this is what happens when you don’t control your own club,” Drury said. “No buyer, except for the members, has incentive to improve this community.”
However, until a bankruptcy judge decides what to do with Crescent’s assets, members will have to wait.
“It is very difficult to continue business with the bankruptcy,” he said. “ We are in limbo.