After entering receivership earlier this year, Gaillardia Golf and Country Club avoided the threat of its golf carts being repossessed, although the future of the club is still uncertain.
At least two groups are vying to purchase the country club property, which despite its luxurious facade, was saddled with heavy debt under its previous owners and needs an injection of cash.
A California-based company with deep pockets that has been scooping up distressed country clubs around the country now has its eyes on Gaillardia. A small group of members also want to buy the club, in hopes of bringing the property under local ownership.
Newport Beach, Calif.-based Concert Golf Partners, which buys luxurious but financially troubled golf properties across the country, has purchased the first mortgage on Gaillardia from Bank of the Ozarks and also has expressed interest in owning the country club. Concert Golf buys performing and nonperforming loans on golf properties from lenders, and also purchases private golf courses to own and operate.
Bank of the Ozarks elected to sell its mortgage on Gaillardia to Concert Golf in August after beginning foreclosure proceedings against Gaillardia owner Phil Herrington and his Little Rock, Ark.-based private equity firm Herrington Inc. Herrington Inc. had owned and operated Gaillardia since 2003 before the property fell into receivership.
Concert Golf is led by former Arnold Palmer Golf Management CEO and private equity maven Peter Nanula. In 2011, Concert Golf announced plans to buy up to $50 million in golf course assets, taking advantage of steep discounts on struggling country club properties after the Great Recession.
The company, which describes itself on its website as “well capitalized,” has not taken on any debt for its golf course acquisitions. Concert Golf pays cash for all of the courses it purchases. So far, the company has acquired four private golf courses in Florida and one in Washington DC.
Reached by phone at his Newport Beach office, Nanula confirmed that Concert Golf had purchased the note on the property, but would say little else.
“We're clearly interested,” said Nanula, who didn't want to talk more about Concert Golf's plans while Gaillardia is still tied up in foreclosure proceedings.
Oilman Jeff McDougall is leading a group of Gaillardia members who also want to purchase the club in hopes of keeping it in local hands. McDougall is president and owner of the Oklahoma City-based driller JMA Energy.
He also owns the largest house in Gaillardia, a more than 17,500 square-foot gabled mansion with multiple chimneys on three acres that looks like an English manor house.
“We're interested in the club as homeowners and members of the community,” McDougall said.
The group has been monitoring the foreclosure process with great interest in hopes of keeping the ownership of the club in Oklahoma City, McDougall said.
“We're just kind of waiting and trying to stay up on what is going on with the court,” McDougall said. “We're just a group in the club that would like to see it locally owned. We think it's the best thing for the community.”
Oklahoma City oilman Art Swanson, one of the founding members of Gaillardia, moved to hire a lawyer to intervene in the foreclosure proceedings on behalf of country club members earlier this year.
He worries that club members won't have a say in the future of the club and that more than $2 million in membership deposits held in a club account will be erased through the foreclosure process. The Gaillardia membership plan also gives the members the right of first refusal to purchase the club if it goes up for sale, Swanson believes.
“I've been surprised that all of the parties have been dismissive of the rights of members as a whole,” Swanson said.
Ford Price, managing partner of Price Edwards & Co., who took over as receiver for Gaillardia in June, said he could not talk about any potential buyers for the country club. In receivership reports that Price must file with the court every month, Price noted that the number of club members interested in buying the club dwindled after Concert Golf purchased Bank of the Ozark's mortgage on the property.
“It is worth noting that once prospective purchasers were made aware of the sale of the Bank of Ozarks note and mortgage to an affiliate of Concert Golf, a large percentage of those prospective purchasers made the decision not to pursue a purchase of the club,” Price said in his August report to the court. “However, the local group continues to pursue an acquisition.”
In a subsequent report, Price wrote that the group of Gaillardia members submitted a letter of intent to purchase Gaillardia along with a draft purchase agreement in September.
“The receiver has met with the group to identify and discuss critical issues associated with a potential purchase,” Price said in his September report to the court. “Those discussions are ongoing and the receiver will continue to work to craft an offer which is acceptable to the court and the various parties involved in the litigation.”
Receivership stabilized club
Proverbial cracks began to show in Gaillardia's veneer over the past year of Herrington's ownership of the club.
Food and beverage vendors threatened to halt service for nonpayment, Gaillardia's lenders claimed in court documents. Hail damage to Gaillardia's 55,000 square-foot clubhouse after a bad storm was never repaired and the turreted roof has leaked for the past few years. Golf carts and fitness equipment were in danger of being repossessed by creditors. Property taxes went unpaid.
Gaillardia's primary problem under Herrington was that it was burdened with heavy debt, Price said.
“There's not anything inherently wrong with Gaillardia. The ownership just found itself in a tough position financially,” Price said. “The situation was not that members left or stopped paying. The club could just not support the kind of debt that was on it.”
Membership numbers are up at Gaillardia and the club even turned a profit in September, Price said.
Since entering receivership, members have noticed that conditions at the club have steadily improved, Swanson said.
“The golf course is in phenomenal shape and the club is operating on a level that it hasn't been able to for the past four or five years,” he said.
However, it's no secret that the country club needs new capital, Price said.
In the rough
Gaillardia has about $500,000 in unpaid ad-valorem and property taxes from 2010 to 2012, plus interest, court documents show.
Unrepaired hail damage that likely will require replacement of the roof has caused Gaillardia's insurer to elect not to renew its policy next year. The club also owes about $277,000 to the Oklahoma City Water Utilities Trust to secure a water agreement so that the club can continue to water its greens.
Price has been able to work things out with most of the country club's vendors in order to keep service going, he said.
“Since the receivership, we have managed to keep all the vendors current and everyone is getting paid,” Price said. “People can take comfort in knowing that Gaillardia is paying its bills. The golf course is in terrific shape — we've not been cutting any expenses there.”