ACHOA Responds to Resident’s HOA Purchase of Club Question
Posted on January 24, 2015 on ACHOA Associa website as Member_Letters_and_HOA_Responses
The question is restated with the response below.
Sent: Tuesday, January 13, 2015 6:05 PM
Subject: Re: ArrowCreek HOA FAQs about the HOA Purchase of the Club at ArrowCreek
What is the format for asking a question?
I was wondering if any consideration has been given to paying cash for the facility to avoid a long term debt and interest?
How about paying cash and leasing the golf facility “triple Net” to APG?
The ACHOA Board thanks you for your question. The ACHOA Board and the ArrowCreek Community Club Committee (ACCC) are conducting their due diligence and vetting of the potential acquisition of “The Club At ArrowCreek”. The ACHOA Board and ACCC are examining numerous options to fund the acquisition as part of the business deal that the ACHOA members will be able to vote upon in the future. Your questions are very timely and appropriate.
The ACHOA Board and ACCC have been reviewing the Nevada Revised Statutes and the ArrowCreek Declarations of Covenants, Conditions and Restrictions, Section III – Assessments – Section 5 Special Assessments with Board legal counsel. The question being pursued is whether a “Special Assessment” approved by the ACHOA members for the acquisition of “The Club At ArrowCreek” would be allowed. If we estimate that the purchase price is between $1,600,000 to $2,000,000, that would require a one-time assessment per lot owner of $1,473.30 to $1,841.62. [1,086 ACHOA lot owners] However, there is still the need to fund the past due water bill of almost $900,000 and that would increase the special assessment by $828.73. With these types of numbers, there may be a need for some type of a payment plan and a need for short term capital to make such a purchase.
In addition, the ACHOA Board believes that it is unfair that current ACHOA members pay 100% when future ACHOA members will receive the benefit without participating in the funding. The ACHOA Board is more inclined to spread the payments over time so that all current and future ACHOA members pay the loan costs out of the ACHOA operating monthly assessments.
An estimated loan amount of $2.5 million includes the $900 thousand water bill stretches out the principal and interest payments and it can be absorbed within the ACHOA monthly assessments to ACHOA members. The $2.5 million loan amount at this time is speculative and being used as a talking point with lending institutions. There are many variables in determining the loan terms including the following:
· Actual Purchase Price Range
· Period of repayment 15 to 20 years with banks preferring 15 years
· Interest Rate 5% to 6%
· Adjustment periods if any
· Loan fees
The best deal for the ACHOA members will be negotiated by the ACHOA Board and the ACCC
concerning the acquisition if approved by the ACHOA members ballot initiative.
The ACHOA Board and ACCC agree if the ACHOA members agree that the ACHOA acquire the 544.6 acres of land with improvements and to operate “The Club At ArrowCreek” that the ACHOA lease the golf property and the residents center to the Joint Venture that would operate both properties. The terms of the lease have not been negotiated at this time but your thought of a “Triple Net Lease” have been discussed. This sounds like a very solid business decision to protect the assets of the ACHOA if the members approve the purchase and operation of the golf course.
If you have any further questions, please let the ACHOA Board know and we will be glad to
respond as quickly as possible. As more information develops during the due diligence process, it will be forwarded for your review.
ACHOA Board of Directors.