LOI: ACHOA Members Are Simply a Bank – Shouldering All the Risk

by Robb Smith

I missed the Tuesday night board meeting but just read the LOI that was sent out, and after reading it I have to imagine the Tuesday meeting was full of fireworks.

I’ve probably been one of the more moderate voices in this conversation, and after we were informed that the board had dropped the discussion I assumed that it was a dead issue (and if it were to be resurrected we’d be informed that discussions had recommenced, which I had not heard).

Upon reading the LOI, my judgment is that this seems like a fairly terrible deal for ACHOA. I hope that I am missing some details or color in some way that will make me wrong, and if so please advise. Here is my take:

As proposed, the agreement seems to return all of FOA’s capital, plus what looks to be a 50% gain (though I recall the basis might be higher than the $2.2 million purchase price because of taxes?), without securing the essential benefit that was proposed the entire time: complete and unmitigated control of our community’s destiny. Rather it creates a hybrid structure whereby our ownership of the golf course land is divorced from ownership of the “intelligent” assets in the club and community parcels, and compounds that by providing for a very long-term land lease that essentially keeps us in the golf course business (all the risk) without retaining any control of being in the golf course business (and none of the upside).

It’s debatable as to whether we should be in the golf business, but if we’re going to be at the very least we need to have complete control over all the assets that can influence that destiny.

As structured, this is simply a recapitalization where we (ACHOA) act as the underwriter; FOA has retained not only the capital gain upside on critical assets essential to the whole operation of the deal, they have also retained effective control over the entire asset base in all forms of its highest and best uses. This was a very smart deal for them to strike, but I’m not sure how they got it done. Whoever negotiated on behalf of ACHOA got rolled.

To make matters worse, FOA can still decide that a portion of the course is not economically viable and let it go brown. Not only was avoiding this boogey man the entire basis of ACHOA doing the deal to begin with, ACHOA has to help pay for such a shutdown.

Then there are details that are left uncertain in the LOI: for example, once I have signed up for $3.3 million of debt service as a member of ACHOA, do I have complete access to all golf and social club amenities? The LOI explicitly allows for current golf club members having access to the club, but it does not say the inverse, whether the new land owners will have access to the club.

For what it’s worth, if I was negotiating on behalf of FOA, I’d call a spade a spade on this point: “of course you’re not allowed access to the golf club, you’re simply a bank who has underwritten a large piece of land on our overall balance sheet.” And that’s the crux of the matter by my reading: as this deal is proposed, not a single objective that was outlined as a theoretical basis for doing a deal like does this structure achieve. We’re simply a bank that is financing one of the many assets of FOA’s business, and it is the largest and “dumbest” of the assets at that.

Either sell the course and all assets in total to FOA, or don’t.

Again, I do hope that I’m reading this wrong or that there are details that advocate for a better interpretation. If so, please let me know.

Warm regards,

Robb Smith

This entry was posted in ACHOA, ACHOA BOD, ArrowCreek, ArrowCreek HOA, ArrowCreek411, Bail Out Golf Course, Control Destiny, Control Our Destiny, FOA, Friends of ArrowCreek, Golf at ArrowCreek, Golf Course Purchase, Golf Purchase, HOA, Investment Opportunity, LOI, Opportunity to Invest and tagged , , , , , , , , , , , , , . Bookmark the permalink.

6 Responses to LOI: ACHOA Members Are Simply a Bank – Shouldering All the Risk

  1. Wayne Krachun says:

    One positive thing that has emerged from this agenda to save The Club is that many owners have been awakened to mismanagement and arrogance by Associa, the Board, several of its Committees, and employees who fail to understand their responsibility is to the best interest of the people, not 36 investors in The Club.
    Now the community is demanding change, and I’m eager to see how the Board responds.


  2. How do we vote says:

    Does anyone know the procedure for voting no? We need to get our act together because we know the FOA and their cronies are working behind the scenes to shove this down our throat.


    • Ronald Duncan says:

      Dear How do we vote,
      The procedure is defined in our CC&Rs, By-Laws and NRS . It will be a paper Ballot with the propositions to implement the agreements of the “Negotiating Team.” There will be a yes/No vote for each of the propositions put forward by the ACHOA Board of Directors. Currently, in order to prevail the propositions will require 547 yes votes. Anything less and the measures fail. If 547 NO votes are received, the measures also fail. This is not a matter of a ‘plurality’ ( where the majority of ballots received is judged as success) it’s a ‘majority’ of ALL lot owners and equivalent lot owners.
      The process will be transparent.
      Ron Duncan


  3. ellie says:

    Sadly, your comments and observations are all too true for the vast majority of Arrowcreek residents, including golf club members. With this deal only the FOA wins, and none of the essential limits or objectives set by the HOA board for our community were met with the current golf course proposal. There is open ended financial commitment. Being financially and legally liable as owners of the golf course, will impact home values in a negative way. Instead of forced social membership, we will be forced to become golf course owners, without any rights.

    As to conflict of interest: Mr. Burkett is a former golf club member, and I know he currently serves on several board committees simultaneously. He is chairman of the HOA budget committee. The names that need to be added to the potential conflict of interest list are: Joyce Seelen, a self-declared golf club member. She has been off and on physically absent from her job on the board for about five months this year, but voted via phone or other media. Robin Rakusin is also a golf club member. She is up for reelection. Hal Albright, is FOA member, and is on the communications committee.

    To my knowledge, there is no collective list of names of the volunteers that sit on all of our board committees. While I appreciate them volunteering, I think we ought to know who they are, and what their connection is to the golf course, so we can determine if there might be bias, or possible conflict of interest, at least in the ethical sense.



  4. Conflict of Interest says:

    Two out of the four negotiators for the ACHOA (Burkett and Reeder) are long time golf club members and most likely have close ties to the FOA. It was a conflict of interest by having these two negotiate in behalf of the ACHOA.


  5. John Ryan says:

    Rob Smith’s observations and conclusions are parallel with ours. Bad deals are just that! I wish the FOA would find another buyer and structure their business plan so as to benefit both their members and guests.
    An adversarial arrangement will poison the Community.


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