In the Rough

>>A home in a golf-course community, with the promise of easy access to play, the beauty of rolling greens and built-in camaraderie of like-minded residents, is a tremendous lure for thousands of people to Southwest Florida.

Developers of planned communities moved to fill those demands, and one of the biggest players in the game was the Bonita Bay Group. Attracted by the developer’s strong reputation and the variety of developments and courses, buyers streamed in, and for years things went very well.

Now plagued with financial problems, Bonita Bay Group has tried for months to sell clubs in its communities to the residents, long before most of the home-owners envisioned taking over ownership. At least one course, Twin Eagles, has been closed. The company threatened to shut down others, where hours and services are already reduced, unless the communities’ residents reached a deal by Sept. 30 to take over the golf clubs’ operations.

Tempers were high; residents weren’t ready to assume that responsibility or the additional cost. In mid-August, Bonita Bay Group Chairman David Lucas said he won’t close down Bonita Bay’s club if the members continue paying their dues. It’s unclear what may happen at the other clubs.

The uncertainty about the golf amenities seriously hampers residents’ ability to sell their homes in those developments, experts say. “It’s a mess,” says Fort Myers real estate consultant Ed Bonkowski. “They’re in a real no-man’s land. They can’t sell the houses. No one will buy when you don’t know about the golf situation.”

In a written statement, Lucas acknowledged a decline in sales, which he attributed largely to the slow economy. “It is difficult to quantify the effect the membership deposit issue may have had on potential sales, but it has definitely created uncertainty and we are anxious to resolve it as quickly as possible,” he says.

For years, the popularity of golf course developments was a given for Southwest Florida. But the arrangements for residents to play on some of those courses became complicated.

Golfing privileges usually come in either bundled memberships or equity memberships. In general, bundled membership allows all residents to play, and they pay regular fees for ownership, upkeep and other related expenses. If there are 500 homes, then each owner has 1/500th share of ownership, connected to the property title and transferred when the property is sold. The down side is that everyone has equal rights for tee times, so the competition for preferred times can be fierce.

Equity membership may be more prevalent. Arrangements vary widely from one development to the next, but generally each member is an equity owner after the developer turns it over to the private membership, and memberships are usually capped at between 300 and 400 per 18 holes. Residents may choose whether to pay to participate in the club, and they may have different levels of membership and amenities. That allows golfing members to play more often and get better tee times, but the costs can be higher, often including initial fees of $25,000 to $325,000 plus annual dues up to $40,000.

Part of the problem for Bonita Bay Group is that the developer continued to run clubs where residents had memberships but not ownership, says Al Hoffman Jr., who developed several successful Southwest Florida golf course communities for WCI Communities before leaving the company several years ago. (WCI has had its own problems and filed for bankruptcy protection in 2008.)

Bonita Bay Group’s residents are being required to take over the clubs before there are enough residents/owners to make each member’s payment reasonable.

“Usually, when you hit a certain sales number, the members take it over,” Hoffman says. “The members then buy and sell memberships to create funds. But these clubs are in limbo. They’re being turned over to the members sooner than the members want.”

“I wouldn’t want to buy a house there,” he adds. “Who wants to move into a community where the main amenity is in doubt?  It doesn’t diminish the value of a home, but it certainly makes it more difficult to sell the home.”

At WCI’s Gulf Harbour development in south Fort Myers—cited by several experts as a prime example of a successful member-owned golf club—Hoffman says a key detail was designing a golf course that’s attractive yet still easily maintained. “So many places build a Taj Mahal course that’s very expensive to keep up later,” he says. Gulf Harbour was making money and registering large sales when the transfer took place, “so it was easy for the members to take it over and maintain a positive cash flow.”

Although Bonita Bay Group had a sterling reputation, no one expected the real estate market to collapse as it did. “Bonita Bay has been one of the best developers,” Hoffman says. “It apparently never occurred to them the economy would turn to the point where people could not afford to belong. Now they’ve told the members they have to subsidize the golf courses, and the questions are: a) Do they have the money to pay for that and b) Do they have the knowledge?”

Bonita Bay’s problems may be severe for those owners, but the buying situation is still “good for golf course communities that are solvent, and there are plenty of those,” says Bonkowski, citing Gulf Harbour and Lexington Country Club as examples. “I tell people, ‘If you like golf, buy into a community where the owners have already taken over the club,’” as opposed to one where the developer still operates the golf course.

Hoffman advises residents who take over the clubs to hire professional management to handle operations as well as marketing and other club activities, such as a fitness center and dining facilities.

“Golfing is on a decline,” he says. “A successful club must offer more for people, but too often the golfers take it over and they don’t prioritize the other amenities that can attract more members. Member-run clubs have to watch out for that.”

The best thing Bonita Bay Group has going for it now, Hoffman says, are the residents. “A lot of smart, capable people live there, and they have money. They can put together a group and buy the clubs, and with the right management, have a very attractive amenity.”

Lucas promises to restore the company’s image. “We have been committed for the past 25 years to delivering the best possible experience to our real estate customers and club members, and it is our hope to achieve mutually beneficial solutions to our current issues so buyers will not be deterred when the market returns,” he says.