Sierra Canyon, Somersett, Villages, The Vue – Your Community Forum

Somersett United

Somersett United

To date the Somersett Owners Association (SOA) Board of Directors (BOD) has declined to provide Somersett Country Club (SGCC) financial data in support of the proposed new agreement with the SGCC. They consider it irrelevant to the decision on how one should vote. Somersett United does not agree with this assessment, believing it important to one’s decision-making process. Therefore, following is a summary of SGCC financial data obtained from IRS Form 990 submittals, except for 2014, which represent projections.

SGCC Table

Notes:

  1. Year the Developer (Somersett Development Company) accomplished early turnover to the SGCC Equity Members. Operating loss (Revenue less Expenses) was $560K.
  2. First year SGCC was run entirely by Equity Members. Operating loss was $628K.
  3. In late 2011, the Developer controlled BOD voted to divert $15/month of homeowner assessments to the SGCC via a “Lease Agreement” in exchange for some SGCC access amenities of questionable value. Agreement was to run for three years starting in January 2012 with optional 3 and 4 year renewal periods. In 2012, the SOA revenue erased SGCC’s operating loss resulting in a +$32K net gain.
  4. Existing agreement stayed in place, which again erased the SGCC’s 2013 operating loss resulting in a +$104K net gain. Equity member monthly dues reduced from $425/month to $395/month.
  5. In mid 2013, a complaint was generated by the Nevada Real Estate Division questioning the legality of the existing agreement. Complaint filing was placed on hold to give parties time to negotiate a new agreement to be voted on by all homeowners. Agreement has not yet been finalized.
  6. Reports are the SGCC has acquired approximately 90 new equity members in 2014. Per the SGCC website, new memberships cost $2,500 and monthly dues are $300 for first year, $350 for second year and $395 for third year. Without any additional equity memberships, this would result in a membership revenue increase of approximately $364K in 2014, $378K in 2015 and $427K in 2016. This does not take into consideration any increase in SGCC revenue derived from their provisional memberships, which purportedly equal the equity memberships (i.e., over 400 total equity and provisional memberships).
  7. 2014 year to date financials are not available and represent projections only. However, given the new member trend for the SGCC, one can easily project a break-even scenario without SOA revenue from the existing Lease Agreement. The new member revenue in addition to the SOA revenue guarantees the SGCC a healthy operating profit.

Editorial Comment:

In 2011 there was a fear that if the SGCC continued to lose money, it could face bankruptcy and close up shop, hence the real purpose of the existing Lease Agreement was simply to subsidize the SGCC’s operating losses (albeit it without a homeowner vote) and assure financial viability. There was also the fear (the go brown syndrome) that closure of the SGCC would have a negative effect on property values. However, given the new membership trend it would appear that the SGCC is now reaching financial stability without the Lease Agreement revenue. That is, the new membership revenues offset the revenue currently being provided by the SOA under the existing agreement. Therefore, what would the primary purpose be for any new agreement?

For the SGCC, under the proposed new agreement, they would get $2.75 M from the SOA, from which they intend to build a clubhouse. Yes, they would give up ownership of the SGCC land, but lease it back for $1000/year, a minor expense. The lease term is for 50 years with two 20 year options Therefore, assuming the SGCC continues to operate successfully under their own venue (the most likely scenario given their current trend), it makes absolutely no financial sense to purchase the SGCC land under these circumstances. The assertion that purchase of the SGCC land is necessary to protect property values by having control over what happens to the land if the SGCC goes under becomes a moot point. Given this, it would appear that the primary benefit would be to the SGCC in that the SOA would provide funding, without any payback, for the SGCC to build a clubhouse, with perhaps a few hundred thousand held in reserves for whatever.

Bottom line, the SOA BOD owes it to their association members to fully disclose SGCC financial and membership data. Additionally, what projected expenses the SOA would incur, and its impact on homeowner assessments, to maintain the SGCC land in the event of a default. Only then, can one make an informed decision regarding risks and benefits (or lack thereof) associated with the proposed new agreement.

Somersett United welcomes any comments on the above data and conclusions.

 

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Comments on: "Is a New SGCC Agreement Necessary?" (7)

  1. Someone has to support the rich life style of our SGCC members, even if they can’t afford their chosen life style.

  2. The first thing that stands out to me when I read something like this is the anonymous nature of your post. The second thing is that you claim to be speaking for ALL of Somersett United (whatever All is? — “Somersett United does not agree with this assessment”). Are you the President of Somersett United? Are you the voted in spokesperson for Somersett United? Or is the reality (once again) that you are part of a small minority of disgruntled ex-SGCC members and Somersett Homeowners hell bent on trying to disrupt any potential success of the SGCC, whether or not it’s good for the community and/or supported by the majority of the community or not?

    In your “NOTES” you state in number “3” (In late 2011, the Developer controlled BOD voted to divert $15/month of homeowner assessments to the SGCC via a “Lease Agreement” in exchange for some SGCC access amenities of questionable value.). I’m curious how you came up with the word “divert” and who besides yourself thinks the amenities had “questionable value”? Again, you put your “opinions” out there as though they represent the majority of people, when in fact they only represent a SMALL minority. Also, as usual you left a few minor details out. The SGCC paid almost $200k in the first year of the agreement to improve and install the amenities you refer to as being of questionable value. And BTW, I see more and more homeowners using the Bocce Ball courts, the new driving range, the Sunset Grill and taking advantage of their ability to use the Country Club golf course.

    Lastly, you state in your “Editorial Comment” ==> “Bottom line, the SOA BOD owes it to their association members to fully disclose SGCC financial and membership data.” The reality is that the SGCC is it’s own entity and has no obligation to disclose financial data to the SOA and/or the non equity member homeowners and the agreement stands on its own merit whether or not the SGCC is doing well financially or not. The value to the homeowners regarding the sale of the SGCC to the SOA is that the SOA gains control of and insures the stability of any future unknown economic hardship to the SGCC, such that “if” something were to go wrong financially, it would prevent the sale of the country club to an unfriendly Somersett community buyer, or possibly opening it up as a public course, which would change the complexion of our private community, and/or worse yet the possibility that the golf course went brown. In addition, the SOA acquires valuable water rights that the SGCC currently owns.

    Regarding the clubhouse, “if” one were to be built with the money from the purchase, the Somersett community would have access to yet another restaurant and nice facility within Somersett and again property values would continue to increase, due to our ability to now compete head to head for new golf centric home buyers with Arrowcreek and Red Hawk, who both have first class club house facilities.

    • Barry,

      We can always count on you to support your country club. Glad we can augment your life style.

      Fact is, nothing in Somersett will ever change because Somersett will never get a quorum to vote for or against anything.

      • Joe Bower - Del Webb Owner & Member SOA said:

        Careful. That is why the Board is so desperate to have the CC&R revisions passed. Especially the first one (there are four and we have to vote Yes or No on all four simultaneously), “New Quorum,” which if passed will apply the quorum (20% of all unit owners) majority number (10% +1) to mail-in ballots in addition to the already existing “Old Quorum” for in-person (and by proxy) meetings.

        Don’t be fooled by the Board saying all owners can vote on the New Agreement with the Golf Club. Yes they can, but they know not everyone will so all they need is the “New Quorum” to be in place so that a lesser number of eligible voters (mainly Club members, sympathizers, and builders) can seal the deal.

    • Geoffrey Brooks said:

      Barry

      In response to …Lastly… (above)…I can agree with some of your “realities”…in that

      a) ‘SGCC has no obligation to disclose financial information to anyone’, other than the IRS; which then makes the information available to any one who asks…no reason why our SOA Board can’t get this information and post it on the MySomersett site!

      b) Purchase by the SOA of the CGC is intrinsically a good idea for many of the reasons you outline..

      However, access so non-member residents can pay the SGCC to play, when they are all making this capital investment – gives one pause to think.
      The proposed purchase will add another 30% to our significant (already $8,000,000) HOA asset basis, which we all have to pay for!
      A fair deal would include 4 rounds of golf free of charge, every year, for each dues paying residence – at least we all would have the opportunity to get something for our money!

      c) The golf ambience is of greater importance to the builders with 1200 new houses to build and sell, rather than resellers, especially those who purchased prior to the Great Recession.

      The clubhouse, since we were granted access in 2012 has had tremendous ups and downs, as has Babe Materi’s for food quality and service. Perhaps giving each resident, who is buying the CGC, a voucher worth $25 a year in food and drink, this would help to encourage resident visitors.

      Please remember that it was $100,000 of all the residents money “given” by the developer and his board back in 2012 which facilitated the renovation of the trailer into the SunSett Grille to enhance the golfing experience, facilitating the recruitment of new members.
      A driving range that rarely gets used for another $100,000
      A Bocci Ball Court for $60,000
      A Fishing opportunity for $5,000 – which has only been used by HOA Director (and SGCC member) Ray Lee and his grandkids.

      What about something for the rest of the $750,000 of our money which has been sent so far to the golfing aficionados by the HOA Board?

      d) The NY Times on 7/7/14 had an excellent article on Golf Courses and what was working (and not)
      “Investors Are Buying Troubled Golf Courses and Giving Them Makeovers”
      – one of the telling points is that Golf is too time consuming for the 21st Century world. Even retirees such as myself (projected to become golfers when they retired), are so busy that we just don’t have the time!

      The SF Chronicle 7/8/14, has an article on how the drought will affect the operation and economics of Private and Public Golf Courses
      “Gleneagles Golf Course is facing its biggest hazard – the water bill”

      e) It seems from the “parsed reports” that we have been given that most of the preview members and “members for a day specials” do not live in Somersett – hence us buying a golf course to benefit the community, seems to include all of Reno.

      I have been told that most of the Arrowcreek players do not live in Arrowcreek – and the course and clubhouse are up for sale – check the comps presented by the SOA Board on the MySomersett website.

      Please tell us all how to further enhance the value of the CGC so that all the residents believe that it is a “deal worth doing”.

      It is certainly a better deal than the “lease” which over three years will cost us $1,500,000 and we the community has nothing!

  3. Jim Haar said:

    What is the big deal here in disclosing the Country Club’s (SGCC) financial and membership status? If Somersett homeowners are being asked to fork out $2.75M to the SGCC for land & water right purchase along with some use amenities, what is wrong with wanting information on the SGCC’s financial sustainability and the downstream impact it could have on the Somersett community? For example:

    1. If the SGCC ceases to operate, the SOA now has the burden of absorbing whatever costs are necessary to maintain the SGCC land and water rights infrastructure it has purchased. To date no determination has been put forth by the SOA Board of Directors (BOD) as to what these potential costs might be, as no plan for this eventuality has been developed.

    2. If the SGCC remains solvent, what the SOA essentially gets for their $2.75M investment is homeowner access to some SGCC facilities/amenities (much the same as the SOA now enjoys under the current lease agreement) and a $1000/year lease fee.

    In the event the SGCC ceases to operate, the BOD has characterized that the purchase of the SGCC land and water rights constitutes an “insurance policy” for protecting Somersett property values, as the BOD could then take the necessary steps to protect the “green” space. In this regard many feel the purchase agreement is warranted. Others (on this website) have debated whether or not there will be a significant negative impact on property values.

    If the SGCC remains solvent, many may feel that the SGCC amenities available under the proposed purchase agreement are worth the $2.75M investment. However, based on a homeowner survey by the SOA Strategic Planning Committee, it is clear that provision of golf amenities is not the highest priority among Somersett homeowners. For example: improvement of aquatic (pool), fitness, trail system adult programs and other amenities all took preference over golf amenities. Therefore, some may feel SOA monies might be better used elsewhere.

    Bottom line – The proposed SGCC Purchase Agreement represents a significant endeavor on the part of the SOA with many downstream ramifications and should not to be taken lightly. Whether or not the SGCC succeeds or fails becomes the primary factor in assessing these ramifications. Given this, I do not understand the objections against SGCC financial and membership disclosures to assist in one’s decision making process.

    • Geoffrey Brooks said:

      Jim

      The SOA Board have answered the question on how much will it cost the homeowners a month to run, water and maintain the CGC

      Our monthly dues would go up at least $60 a month!!

      Another aspect which I don’t believe that many Somersett dues paying members are actually aware of are:

      1) All 2500 unit owners are buying a $2,000,000 golf course already – the Canyon 9 – paying for it over the next 15 years

      2) All but the Sierra Canyon residents, 1600 total are buying the $6,000,000 Club Center for the next 15 years

      Somersett Homeowners Association, unlike many other homeowner managed communities already has a very high “debt” – or asset basis. Now there is talk of adding $2.75 million to this…

      I cannot understand why the current board believe that they need the authority to spend $500,000 each year of our monies without asking for a community wide approval vote.

      We already have an extremely high debt for the size of our association.
      ($4.5 million billings a year)

      Surely the Board believes that it has to seek the approval of the residents to spend, invest, buy any consequential “thing” by having a vote?

      Apparently NOT!

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