By Peter J. Nanula
The Boston Business Journal recently completed an April 2016 study of the private club industry in New England, and published a listing of clubs with high levels of debt. The article was titled "The Bay State's community of country clubs is deep in the rough." Some of the leading clubs in Boston appeared on the list, and debt at these clubs totaled some $168 million. Many club members were shocked at the revelations; in response, one prestigious club sent an email to all its members, arguing that its Board has managed its finances prudently and that its debt load would be paid down in due course over the next decade. This story of heavy club debt loads and the challenges for member-owned clubs trying to self-fund and self-manage these fabled institutions is playing itself out in major cities across the country.
The BBJ tells the story of Framingham Country Club, which is typical of many high-end private clubs. Its debts grew to $7.4 million through borrowing to fund capital improvement projects, but instead of steady growth in membership dues income to pay off the bank, the club lost members during and after the recession. This led to discounting of dues rates and no entry fees to join the club, which in turn adds to a club's attrition - members are more likely leave the club when they have little invested.
But the journalists also describe how an increasing number of upscale private clubs - many of which have been member-owned and self-funded for 50 or 100 years or more - are turning to a relatively unknown source of golf course financing to preserve and enhance their clubs. Blue Hill Country Club in nearby Canton, Massachusetts faced similar debt and capital project funding issues, and partnered with Concert Golf Partners to solve its capital issues permanently. Concert Golf, based in Newport Beach, California, invests equity capital into member-owned clubs to pay off their bank debt and fund their capital projects.
"This partnership with Concert Golf ends our debt challenges, and ends our long-standing internal debates about funding capital projects with member assessments," said Blue Hill club president Jim Marano, who along with Tim Nelson led the Board's 2015 effort to recapitalize. "Just since announcing this deal, we have seen a significant uptick in membership applications at Blue Hill."
Debt-free private clubs have the flexibility to invest in capital improvement projects, and these improvements create real buzz around a club - and prospective new members want to join a club with new facilities and financial stability. Conversely, when rumors spread that a club is heavily indebted and there are signs of deferred maintenance - that is, capital projects have not been done for years - then the flow of new members slows to a trickle.
The BBJ investigation reveals that many private clubs have high levels of debt, and explains that there is a proven path to recapitalizing with equity and making exciting capital improvements at the club.
The original articles are listed below: