Private club help

[Chief Illiniwek]

I'm considering joining a country club next year but have no idea what I'm getting into. I'm 31 and married with no kids, but probably will try in the next couple years.

 

The club I'm considering is running a special that lowers initiation to $1k and yearly fee would be $4000 or so counting the monthly minimums. I talked to a member and he mentioned paying an assessment of $900 but I didn't have time to ask him more. The membership would be equity.

 

I guess some questions I have are:

 

Should I ask them about their past assessments?

I was going to ask to attend a social event before joining, is this cool?

Can I expect a round to see if I enjoy the layout?

After you become an equity member, can you cancel a membership after a year or two if you find you don't enjoy membership?

 

Any other questions or answers you guys can help me with would be great! Thanks!

[TrevorD13]

Clubs are desperate for new members these days......You can absolutely play a round on the course to see if you like it and they will also let you attend an event as well. I would ask about assessments also. They can be rather annoying. Tell them that you do a lot of client entertaining and you would like a bunch of free guest passes. You'd be suprised at the leverage that you have.

[Chief Illiniwek]

The club is in Springfield Illinois which hasn't been hit too terribly by the economy, but I may have to give that a try. They only offer four passes per year with membership but after that guests can pay for a fee. Would be cool to take my buddies when they're in town though!

I'm guessing negotiating on the monthly dues or clubhouse monthly minimum is a no no?

[rvgolfer]

My guess is there wont be any negotiation regarding minimums or dues. Those revenues are exactly why they have reduced the initiation fee. The club wants a that steady cash flow each and every month.

Assessments usually need a vote of the members, and usually, its for something specific or unexpected that is having a detrimental effect on the course,,or its for major improvements that arent covered in the normal budget. Certainaly you should ask about assessments.

[Fourmyle of Ceres]

Nowadays especially you should most certainly get the assessment history of the club. Some clubs have taken to regular assessments as a repeated way of making up operating shortfalls. Other have eliminated set-asides for capital expenditures and have to levy and assessment every time the roof leaks on the clubhouse or a mower needs replacement.

Ask for the past five years history of every single penny required from the members. Evaluate the rate at which dues+minimums have increased, what's the total five-year assessment number and how many members have they had at the end of each of the last five years. Warning signs are yearly assessments of several hundred dollar or more, increases from year-to-year of more than 5% or so in dues+minimums and an unreasonably small membership base given the annual budget (which you ought to also ascertain).

If an equity club is spreading $2,500,000 a year in total expeditures across 250 members and they tell you the total dues are $4,000 per year then you've got to ask where the other $1.5MM ($6K per member) is coming from. And most importantly...

What is the club's total indebtedness at the current time?

[Huffer]

Definitely ask about past assessments - yearly assessments are a sign that the club is not managed well and/or is operating well beyond it's means.

You can absolutely ask to attend a social event.

I would also ask to eat dinner there, nothing can be more aggravating than having to fork over minimum spending every month for a lousy chef. On the other hand, if the meals are good, you'll have no problem meeting the F&B minimum and in fact, you'll go well over most months (at least I do).

You should also ask about costs that are not monthly and not associated with your bond, initiation, dues and F&B. By this I mean, locker fee, club storage fee, driving range fee, local chapter of the PGA fee, spouse/guest golf fees, etc. These can add up and you don't want to be surprised as the months pass and you see these charges on your bill.

You will not be able to negotiate on any monthly fees, these are set and the same for all members of the same classification. Nothing would fracture a club more quickly than having word get out that so and so is getting a special deal on his dues or F&B minimum.

Good luck!

[Chief Illiniwek]

Thanks very much for the advice guys! Locker fees, range, things like that are all included at the membership level I'm considering. Will definitely get an assessment history. I was told there's about 450 members currently. They were assessed once last year for $150 or so because the considerable drought required buying water from the city. We've been invited to a tour and lunch, and then a social event so that should be a good way to meet some members. About 25% are within ten years of my age so that's good. I haven't been asked to tour the course or play a round so that's a pretty important aspect to me that I want to make sure I like.

Thanks again and keep any comments or suggestions coming!

[BrianL99]

[quote name='Chief Illiniwek' timestamp='1349452554' post='5754705']

I guess some questions I have are:

Should I ask them about their past assessments?
I was going to ask to attend a social event before joining, is this cool?
Can I expect a round to see if I enjoy the layout?
After you become an equity member, can you cancel a membership after a year or two if you find you don't enjoy membership?

Any other questions or answers you guys can help me with would be great! Thanks!
[/quote]

That's a very inexpensive "equity course" ... is it 18 holes?

I doubt you'd be allowed to attend a social event, unless it was a special event that was open to the public.

Yes you can play a round or 2, no club would expect you to join a course you've never played.

You can cancel anytime, unless it's some odd ball situation where you're signing onto a Note of some sort ... which would be very unusual.

[BrianL99]

[quote name='Huffer' timestamp='1349463626' post='5755563']



Ask for the past five years history of every single penny required from the members. Evaluate the rate at which dues+minimums have increased, what's the total five-year assessment number and how many members have they had at the end of each of the last five years. Warning signs are yearly assessments of several hundred dollar or more, increases from year-to-year of more than 5% or so in dues+minimums and an unreasonably small membership base given the annual budget (which you ought to also ascertain).

If an equity club is spreading $2,500,000 a year in total expeditures across 250 members and they tell you the total dues are $4,000 per year then you've got to ask where the other $1.5MM ($6K per member) is coming from. And most importantly...

What is the club's total indebtedness at the current time?
[/quote]

He's talking about joining a club with a $1000 Initiation Fee, not buying the golf course. I've been on the Board of Directors of 3 clubs & if I prospective member asked me those questions, I'd tell him he was in the wrong place and should be looking at his local muni.

[HackerDave]

[quote name='BrianL99' timestamp='1349480439' post='5756581']
[quote name='Huffer' timestamp='1349463626' post='5755563']
Ask for the past five years history of every single penny required from the members. Evaluate the rate at which dues+minimums have increased, what's the total five-year assessment number and how many members have they had at the end of each of the last five years. Warning signs are yearly assessments of several hundred dollar or more, increases from year-to-year of more than 5% or so in dues+minimums and an unreasonably small membership base given the annual budget (which you ought to also ascertain).

If an equity club is spreading $2,500,000 a year in total expeditures across 250 members and they tell you the total dues are $4,000 per year then you've got to ask where the other $1.5MM ($6K per member) is coming from. And most importantly...

What is the club's total indebtedness at the current time?
[/quote]

He's talking about joining a club with a $1000 Initiation Fee, not buying the golf course. I've been on the Board of Directors of 3 clubs & if I prospective member asked me those questions, I'd tell him he was in the wrong place and should be looking at his local muni.
[/quote]

WTF? If he hears an answer like that, he should run out the door and never look back. Who cares about the initiation fee! That's nothing money. But the real expense can come if he buys in and can only get out by selling his membership and the sell list is long. He could be stuck paying dues for years until he is able to sell his membership. There are a LOT of reasons to ask the questions he is asking. I know of several clubs that charge monthly dues and always have an assessment at the end of the year to cover shortfalls. I'd want to know that. I'd want to know what kind of debt the club has, after all the new member is about to own some of it.

The idea that asking questions about the financial health of a club means you should be playing muni's is just silly. There is a reason they are only charging a grand to get in. Maybe it's the board ;-)

[BrianL99]

[quote name='HackerDave' timestamp='1349481801' post='5756663']
[But the real expense can come if he buys in and can only get out by selling his membership and the sell list is long. He could be stuck paying dues for years until he is able to sell his membership.
[/quote]

Who would join a club like that? The only clubs I've ever heard of with a situation even approaching that, is a few courses in the South that were part of Real Estate development scams. There may some other out there somewhere, but I've never heard of a true equity club that a Member can't leave whenever he wants ... that wouldn't really be a club would it? Wouldn't that be a limited partnership of some sort?

Maybe it's different in some other parts of the country, but joining an equity club in the Northeast isn't a business transaction, it's joining a "club".

Then again ... I can't think of an equity club anyone could join for $1000 initiation fee, it simply wouldn't make any sense.

& to the original poster, 450 Members is a huge membership, unless it's in a resort area where most of the members don't live for the entire golf season. 350 Members is normally the maximum for a private club, under usual circumstances.

[2bGood]

To the OP - other than the most general advice you are getting here, ignore what you are hearing. The structure of 'private' clubs differ so much from club to club that specific info is not much use to you. There really is no standard 'private club' structure. The best thing you can do is talk to a member you already know and trust to get a good sense of what you are getting in to.

[Truman]

I've never heard of an "equity" club that you could just quit. When you join an equity club, you become a partner. This is why if is important to understand the current and historical financial solvency.

[HackerDave]

[quote name='Truman' timestamp='1349488240' post='5757019']
I've never heard of an "equity" club that you could just quit. When you join an equity club, you become a partner. This is why if is important to understand the current and historical financial solvency.
[/quote]

I belong to a full equity club that you can "quit". You essentially forfeit any equity you might have in the club. I like it that way. If you are transferred for work etc you aren't forced to pay dues for what can be a very long time in this economy. The other club in town requires you to pay until you actually sell the membership. Since you are paying dues, they feel no need to adjust the initiation fee so you can be handcuffed for a very long time.

As the other poster said, there are a LOT of different ways to structure a private club. There are just as many reasons why a club might drop the initiation fee to a grand. You need to know what is going on before you sign on. NEVER be afraid to ask questions. If the board doesn't like that, be very cautious.

[Chief Illiniwek]

The club I'm looking at has multiple membership levels but only the equity members have voting privileges. There's also pool memberships, golf memberships, dining, tennis, etc.

There's definitely 440 members but has never looked crowded anytime I've driven by. Talked to some guys at the local shop who get to play there and they like it alot. Kind of has a young professional vibe vs the more traditional "old money" vibe of other clubs.

I also made sure if circumstances changed and I wanted out that the only thing I lose is initiation. Just have to give 30 days notice.

I guess my impression is it's the younger persons club in town, and thus has a higher turnover rate than other clubs. They've structured membership to encourage people to join and not feel like if they have to move to a new area they won't have a financial burden to take care of. Am I being naive or do you think this is correct?

I'm definitely going to ask for an assessment history and I think debt situation too. If they don't want me because of that I guess no big deal. Back to my muni's :-).

[Chief Illiniwek]

Forgot to mention that yes it's 18 holes and always in pristine condition.

[Chief Illiniwek]

Brian, you mention that it wouldn't make sense for an equity membership's initiation fee to only be $1k. Can you elaborate on that?

One thing I find interesting is the full junior equity membership, which is the fall special price, is the same as the golf membership (any age) but that membership lacks equity and many other priveleges and you have to pay to golf. Why would they want young members so much?

[2bGood]

My club has around 700 members and is not 'full' as we could still take another 50. Of that 420ish are 'full play' members (they can play on the weekend). We have no issue with tee times, but I admit lots of our members travel a fair bit.

[2bGood]

[quote name='Chief Illiniwek' timestamp='1349491475' post='5757249']
Brian, you mention that it wouldn't make sense for an equity membership's initiation fee to only be $1k. Can you elaborate on that?

One thing I find interesting is the full junior equity membership, which is the fall special price, is the same as the golf membership (any age) but that membership lacks equity and many other priveleges and you have to pay to golf. Why would they want young members so much?
[/quote]

they take longer to die and spend more on F & B. Every club wants some young blood for the long term health of the club.

[BrianL99]

[quote name='Chief Illiniwek' timestamp='1349491475' post='5757249']
Brian, you mention that it wouldn't make sense for an equity membership's initiation fee to only be $1k. Can you elaborate on that?

One thing I find interesting is the full junior equity membership, which is the fall special price, is the same as the golf membership (any age) but that membership lacks equity and many other priveleges and you have to pay to golf. Why would they want young members so much?
[/quote]

As someone else said, clubs can be structured differently, but in the usual equity club structure, the members actual own the golf course & the land it's on. A typical 18 hole golf course is between 130 acres & 200 acres ... even at only $10,000/acre, the land alone is worth at least $1.3M. Add in a clubhouse, a functioning golf course & whatever else & you're generally talking a value over $2,000,000 (in most cases, significantly more). You're buying $5000 of equity, for $1000.

Membership structures can be all over the place & in some cases, the land isn't owned by the club. It could be leased or owned by another affiliated entity.

& clubs want younger members, because they hope their families will spend time & money there. I assume there's a pool, tennis or other amenities?

As I've mentioned & someone else too, there are very few clubs in the US that you can't leave the club at your discretion.

Many clubs that call themselves "equity clubs", aren't exactly that. The "club" may own the land, but the members may not. There could be "bond holders" that own the property & the club could own only the improvements.

As for the number of members, it's simply math. With a "long day" (summer), an 18 hole golf course can do about a maximum of 200 rounds of golf, significantly less in the Spring & Fall ... more like 120-150. Assuming some members also bring guests to play, if there are 450 Members, weekends must be damn busy.

[2bGood]

A max of 200 rounds? In the summer tee time start at 6:30am and you can still get 18 in as late as 7:30ish. Not sure what you think the time between groups should be but we go with 8 min and have 3.5hr avrg round. 200 I would say is on the low end. But even with that number you are talking about 40% of your membership playing every day to fill those up. Our average rounds played is way under that and the times people want to play seem to sort itself out, retired guys play during the week, working guys play evening and weekends.

[BrianL99]

[quote name='2bGood' timestamp='1349495911' post='5757501']
A max of 200 rounds? In the summer tee time start at 6:30am and you can still get 18 in as late as 7:30ish. Not sure what you think the time between groups should be but we go with 8 min and have 3.5hr avrg round. 200 I would say is on the low end. But even with that number you are talking about 40% of your membership playing every day to fill those up. Our average rounds played is way under that and the times people want to play seem to sort itself out, retired guys play during the week, working guys play evening and weekends.
[/quote]

Not to be argumentative, but I think your math is fuzzy.

There is virtually no way to play a golf course in less than 4.5, with 8 minute Tee Times. Tee Time spread should be 9 minutes at a minimum, more likely 10 minutes. http://www.popeofslope.com/paceofplay/index.html. Even then, the average round time at a private golf course in the USA is 4:06: http://golftodaynw.com/tag/national-golf-foundation/.

The vast majority of Private Golf course have only minimal play prior to 7 a.m. There has to be time for fairway & greens mowing in the morning and most private club golfers aren't interested in waking up at 5 a.m. to play golf ... that's one of the reasons they join private clubs. Not only that, but the hardly anyone plays golf at a Private Club, after 1 or 2 pm. Private club members typical have other recreational & family pursuits they wish to involve themselves in on weekends ... hence the reason most private courses have "Senior Memberships" which prohibit play at peak times, which is usually prior to 11 or noon on weekends.

The "longest day" of the year in Springfield, IL is about 15 hours of daylight ([url="http://www.timeanddate.com/worldclock/astronomy.html?n=893&month=6&year=2012&obj=sun&afl=-11&day=1"]http://www.timeandda...n&afl=-11&day=1[/url]). That means at a maximum there are about 11 hours of Tee Times X 24 players = 264 rounds. Today, there is about 11.5 hours of daylight available in Springfield, IL ([url="http://www.timeanddate.com/worldclock/astronomy.html?n=893&month=6&year=2012&obj=sun&afl=-11&day=1"]http://www.timeandda...n&afl=-11&day=1[/url]). Which means there are about 7 hours of Tee Times available, which means the availability of about 165 Tee Times for Members and their Guests.

None of the above accounts for days with some inclement weather or frost delays or a myriad of other issues. The simple fact of the matter is, the average "busy & well run golf course" can service between 150 and 225 players per day, depending on available daylight and course layout ([url="http://archive.ite.journal.informs.org/Vol4No2/TigerSalzer/"]http://archive.ite.j...o2/TigerSalzer/[/url]).

A typical, local private golf course, in a non-resort area, non-transient area, can service a membership of about 350 active golfers.

[2bGood]

I am a member of am upscale private club ($25K to join) and our first tee time is 6:45am when the sun allows and tee times are 8min apart. rounds before 9am must be played in 3.5hrs and no one has an issue doing this. Later in the day rounds are rarely longer than 4hrs. I am not sure how you figure there is no way to play in under 4.5hrs. If the group in front plays there round in 3.5hrs, and I start 8min later and keep the same pace I will finish 8min after them. We pride ourselves on being a 'golfers club' and the guys going out on weekend mornings are mostly single digit players and guys that know they can not keep the pace go off in the afternoons or late morning on weekdays. The article you reference says this - "[i]Though it may sound harsh, golf courses should not let a group of four beginners play in a morning tee time -- their times should be held to 2:30 p.m. and later. I recently had a company run four focus groups with people who hit golf balls at driving ranges but have never played on a golf course."[/i] We don't have a rule about this but the culture of our club makes it clear that if you can't keep up, do not play at prime time.

At any rate I did accept your number of 200 and to fill the spots you still need 40%+ of your membership to play every day. The average golfer in the US play 21 rounds per year. I am not sure what the average member of a private club plays, but it is not the 150+ rounds it would take to fill a years worth of tee times.

But back to what I said above, most of this information is only useful in a very general way. Each club is very different and 450 members might seem allot to one club well it too few for another.

[Chief Illiniwek]

Thanks for the input guys. The pro assured me rounds are kept under four hours even in peak times, and in off times it's wide open. I would guess this is true because I've noticed how open it looks everytime I've ever driven passed.

My first thought at the idea of out of town members was Springfield Illinois is no resort town. But then I got thinking that being a state Capitol perhaps there are quite a few out of town members, especially from the Chicago area.

You're right about the equity membership not making sense if the club owns the ground. Perhaps the development owns the ground or it's stipulated in a contract that the ground goes back to the developer if the club folds? I don't know. Would it be appropriate to ask about that? Thanks again for your input guys!

[2bGood]

Out of town members, may not mean the live out of town, but rather are out of town. For some of us we join a private club and intend to use it allot, but some people just join to have a golfing option that they may or may not use. We have lots of members that are worth big money and though there primary home is local they are gone 6-8months a year, but when they are in town they want the option to play at nice club.

[goplutus]

the only other due diligence you may be able to do, outside of asking, is to look up the tax filing. This will give you general guidance to the operating expenses and income and assets vs. liabilities. Assuming it's a non-profit, you'd be able to find it here:

[url="http://dynamodata.fdncenter.org/990s/990search/esearch.php"]http://dynamodata.fdncenter.org/990s/990search/esearch.php[/url]

[rockinar]

Lots of politics and nonsense involved in equity memberships. They are a headache. I'd get a non equity. You know exactly what you're getting, no surprise bills, and you just walk away if you can't afford it or lose interest. With Equity, you have to keep paying till you find some other sucker to fill your spot. They call it "transfer". That could be years.


Equity membership is like leasing a car. Lot of fine print, red tape, politics, rules, terms, and conditions. If you don't like the car anymore, too bad. You can turn it in, but there will be penalties. You can't just walk away from you membership. You have to transfer (sell) it. If there's no buyers, you are stuck and have to keep paying till one comes along.

Non equity is like buying a car. You know exactly what your getting up front and know what your costs are. When you don't like the car, you can just sell it and walk away. You will most likely lose you initiation or most of it.

Lots of clubs have a non equity membership that give you most (80% or so) of your initiation fee back if you quit. So you don't lose everything and don't have to deal with equity membership headaches.