Presentation on theme: "WELCOME Purpose of our Address: 1. To give a perspective of where the Clubs Debt came from. 2. To present a funding strategy for this debt. 3. To elicit."— Presentation transcript:
WELCOME Purpose of our Address: 1. To give a perspective of where the Clubs Debt came from. 2. To present a funding strategy for this debt. 3. To elicit support of members and outside affected parties for funding.
Quick history of our financial woes Was all good, (8000+ members) until 3 “once-off” occurrences……… 1. Sale of Hawaan land, the “Renaissance Project” spending about R70 Mil 2. 2008 Global Economic Downturn 3. Followed by exodus of members due to, inter alia: (i) continuing debt problems.(about R35 Mil) (ii) a SMALL but badly managed “call” on members. (iii) Many changes to the management team. (iv) Poor Golf Course Condition-greens DEDUCTION: The Clubs present financial woes are mainly due to 3 once-off factors and NOT so much to general apathy towards clubs in general. Once members left, there was little reason for them to return, least of all to our huge debt.
FACTS The Club has ONLY one freehold asset. Beachwood Golf Course. It is mortgaged to R45 Million plus R11 Million accrued interest. R3.3 Million interest & R6.4 Million in capital repayments accrue from 01/04/2015, should we take up our option to extend the loan for 7 years. The Club WILL NOT be able to repay this debt from TRADING. As a result of this inability to repay, we WILL default on our loan. On default, the DCC Trust can, at their discretion, require the sale of the Golf Course, or propose/ suggest any other debt repayment terms. The DCC Trust knew that the Club could never pay back its loan, and obviously, to protect its loan, has embarked on a process of maximizing the value of the Clubs assets. As Beachwood is the only freehold asset which can be sweated, the DCC Trust identified BW as the asset that can ensure their loan gets paid. The DCC Trust believe that the part or complete sale of Beachwood is the ONLY way the loan can be repaid. WE COMPLETELY DISAGREE………..
WE, THE MEMBERS ARE THE CLUBS MAIN ASSET!!! The obvious solution to save Beachwood from conversion into a housing estate is for the Members of this club to acknowledge their indebtedness and become co- contributors. Too long have we kept our heads in the sand, thankful that “someone else” is taking care of the problem that we allowed to be caused! Don’t be fooled. The anticipated R20 to R25 Million for the proposed partial development, ( when/if it comes into our account in about 3 years time) will hardly pay our interest bill, leaving little going towards our outstanding capital. This will then require the DCC Trust (developers) to fully develop the land in order for them to be repaid their capital. It is perfectly reasonable for the DCC Trust to have secured BW as collateral, and if the members do not shoulder the financial burden as well, it is perfectly permissible, for the Trust to do whatever it takes to get their money repaid. Maximizing and developing the value of BW will allow the Trust to gets is loan repaid, and will also increase the amount of money that the Club receives.
The Good News Nobody wants to invest in a bankrupt organization. For the first time in 5 years, the Clubs trading to Sept this year, has turned a surplus, before depreciation, of some R700k !! The results for 2013 and 2012 were R148K deficit and R2 Mil deficit respectively. We have used some of the trust funds on capital projects that have reduced our monthly fixed overheads. A greater improved Beachwood and DCC Course will bring about more golf rounds. The economy, while still sluggish, has improved and non DCC members are utilizing our functions rooms and courses more frequently. BUT,,,NEVER will we be able to trade out of our debt!!! WE HAVE TO PAY OFF OUR HISTORICAL DEBT BY RAISING FUNDS INTERNALLY.
Lets Dispel Some Myths A question sometimes asked: Can the Club afford two golf courses? The answer is the club CANNOT afford just one Golf Course. At best we can do 50,000 rounds on one golf course. For 2013, 76,000 rounds were played on the two courses, meaning with only one golf course, 26,000 rounds will be lost. This equates to a R3 Million per annum loss to bottom line revenue. This excludes the exponential losses from family members utilizing restaurants! The ongoing revenue loss is HUGE!. Therefore this is NOT a “Save BW “, it is actually a “Save our DCC”! The majority of the clubs profit comes from Golf. If one were to allocate the infrastructural costs appropriately to the various activities of the club, sporting and non- sporting, the accounts would clearly show that banqueting and food and beverage runs at a significant loss. We appreciate that there are maybe hundreds of members who have never been to Beachwood, looked at the mangrove swamps, seen the exotic birdlife, played golf on one of SA’s top 20 courses, and therefore are asking, what is all the fuss about. The loss of BW is the eventual loss of DCC! (think,,,what if the DCC lease is not renewed?)!! It is immoral for the members to allow BW to be sold off for three reasons: 1. BW is a NETT income contributor. 2. It was given by the BW Golf Club to be used in perpetuity for recreational purposes only. 3. We are considering selling it because we are too lethargic to raise funds. In our first meeting with the Members to explain the clubs predicament and ask for members financial commitment, the response was overwhelming! We only managed to spread the word to 80 people. About 65 attended, and there and then we got financial commitment from 55 members, and R940,000 was committed. Over the ensuing 3 weeks, by word of mouth only, a further R480,000 was committed. In addition, we asked members to complete a questionnaire. This indicated that 94% of the members at that meeting felt that it was their responsibility to repay our debt, and not to leave it up to the sale of Beachwood!!
Why are we standing here? We are standing here because : 1.The Club has not approached its greatest asset, the members, to find a solution for its once off debt folly. We believe that the monetary gain of DCC from the sale of BW will be soon spent (Hawaan/ Renaissance) then the reality will sink in that the land is gone forever. 2.We believe that land that was acquired for the enjoyment of the Greater Durban Community, should stay that way. We are standing here in front of you because we feel that the Members are, by their past apathy, allowing their values to be compromised. If you, like us, feel there is a better alternative to the loss of BW, then we are at the 11 th hour in which to rally to get funds to honour our obligations and to save our beautiful Beachwood and DCC. We have two options: 1. Do NOTHING and the Benefactors Sell BW, pay off our loan and use the balance to run the club. 2. Members participate voluntarily by a loan to the DCC Trust.
So This Is How It Can Work Following a number of meetings with the DCC Trust and DCC Board, the DCC Trust have agreed to support this Member Initiative. In a nutshell, they say that the deal that was good for them is also good for the Members and therefore they have asked the members to join them as co-lenders in the DCC Trust. The legal framework is in place, from the “Loan Facility Agreement” to the “Mortgage” to the “Benefactor Loan Agreement” between the Trust and the lenders. The Loan Facility Agreement will require some clauses to be changed, but this will only happen once existing benefactors see that the members are supporting this initiative. The Benefactor Loan Agreement will be over 10 years at prime overdraft rates, with the first 5 years interest free. 1.Should, in the future, it become a dire necessity to sell BW, the “benefactors” will get a return on their loan at prime overdraft rates for the full period of the loan, namely 10 years. The over rider to the agreement is that it is the intention to keep BW as a golf course in perpetuity.
DCC has 4300 members; about 1000 sporting members & about 450 Full Golfing Members OUR GOAL: IF, 1000 members loan R10,000 =R10 Million 250 Members loan R20,000 =R5 Million 100 Members loan R50,000 = R5 Million 50 Members loan R100,000 = R 5 Million 10 Members loan R1,000,000 =R10 Million 5 Members loan R5,000,000 =R25 Million. Totals 1450 members collect R60 Million. IT CAN BE DONE. Once we take ownership and pay off our debt, a new spirit of camaraderie will sweep through this club. Ex members when they see a debt free and happy club will flock back.
Preliminary Steps: Sign letter of Intent to lend money (in multiples of R 10k) to DCCT Deposit funds into Pearce Du Toit & Moodie Trust a/c (interest bearing) Will only take instructions from Depositor. Prior to finalization and acceptance of terms if at any time Depositor wants their money back, PDM to refund, no questions asked. This is necessary to show existing DCCT Lenders that there is support for the Club. Once appropriate amount is raised and all details are finalized and acceptable then: Sign authorization letter instructing PDM to transfer amount to DCCT. Sign Benefactor Loan Agreement with DCCT. For period of 10 years. Interest free for 5 years, thereafter at prime o/d rate. On same basic terms and conditions as existing DCCT Lenders Any distribution amounts made by DCCT to Benefactors to be calculated on ratio of Loan Amt to Total Loan Amt.
Final Step In Making It Happen A questionnaire has been handed out. Please take the time to answer and hand back. But remember,,, we are at the 11 th hour of saving our Club, so make a commitment. This is a true investment in the Clubs future. Thank you for Listening. Are there any questions?