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Wednesday, January 18, 2012

Class Warfare? Potential Cliffs member rift could affect proposed Reed deal

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     About the time on Thursday that the Republican Presidential candidates will be squaring off at a debate in Charleston, SC, a town hall meeting upstate in Greenville to which all members of The Cliffs Communities have been invited could be every bit as contentious, if the dozens of comments sent to the Cliffs Member Advisory Group (CMAG) are any indication. CMAG was formed to provide information to all members as events in the financially troubled group of communities unfold.

        GolfCommunityReviews received a copy of CMAG’s January 17 newsletter that detailed 50 questions and comments submitted by members.

        Much of the input to CMAG centered on the differences in status

Some members in touch with us saw the potential clash of member interests coming from a few months off.

of those who loaned $64 million to developer Jim Anthony and those who didn’t. In an attempt to protect The Cliffs’ vaunted amenities from falling into outsider hands, 500 Cliffs members pooled their resources. They were to be repaid over a seven-year period; they received only the first year’s payment. Anthony defaulted on the second payment, due this month.

        Cliffs residents in touch with us over the last couple of months saw this potential for conflict among members. The proposal by Bluffton, SC, developer John Reed to purchase the undeveloped land and amenities at The Cliffs, including six completed golf courses and one near completion, indicates the members who loaned the money would be repaid their initiation deposits on a faster schedule than those who did not join the group of member lenders, known as ClubCo.

        “I am not in favor of having the Noteholders benefit from an accelerated vesting schedule,” wrote one member. “This was an investment risk [lending the money to Anthony] they chose to take, and any exposure should not be mitigated at the expense of non-Noteholder dues paying members.”

        “How is it that the representatives of the Noteholders have acted like gatekeepers throughout the process?” asked another member, presumably not a Noteholder. “For any plan to succeed, it needs approval of 50% of the Noteholders, but more like 90% of all members, given the need for them to rejoin the club.” The Reed proposal calls for Troon Golf to manage the existing golf clubs as well as the Gary Player designed golf course at Mountain Park, which the Reed group expects to finish next year if the deal goes through, after being blessed by a bankruptcy court.

        Another member summed up the potential fallout from the schism between the two classes of members.

        “ From an equity standpoint,” he wrote, “all members should be treated the same, regardless of note or non-Noteholder status. If this does not occur, I suspect a significant number of non Noteholders may be so upset that they will not rejoin.”

        John Reed, who built three upscale communities just off Hilton Head, has a reputation as a savvy businessman and politician. And like a good politician, he will surely have a solid count of the “votes” before he commits million of dollars to The Cliffs.

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Larry Gavrich

This blog was conceived and is published by me, Larry Gavrich, a former corporate communications executive who founded HomeOnTheCourse, LLC, in 2005.  Our firm advises baby boomers and others seeking a lifestyle in which golf is a major component.  My wife Connie and I own a home in Connecticut (not on a golf course) and a condo at Pawleys Plantation in Pawleys Island, SC, on a Jack Nicklaus layout.  We began our search for our home on the course more than 15 years ago, and the challenges of the search inspired me to research golf communities and write objective reviews of them.


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