I 100% agree it’s a terrible option. But I’m pretty sure it is an option (assuming the certain requirements mentioned are met).
You are correct, The Buck Club could be structured as a REIT (which is a type of company, not a type of security, and there are a few ways to do it that would involve at least a couple of entities structured certain ways) if it met the following requirements, however, especially if there was a crowdfunded, Reg. A+, or Reg. D offering with wide distribution it wouldn’t really be The Buck Club as we understand it to be any longer so it wouldn’t seem to be a practical option:
- Pay out at least 90 percent of its taxable income annually in the form of shareholder dividends;
- Be an entity that would be taxable as a corporation but for its REIT status;
- Be managed by a board of directors or trustees;
- Have shares that are fully transferable;
- Have a minimum of 100 shareholders after its first year as a REIT;
- Have no more than 50 percent of its shares held by five or fewer individuals during the last half of the taxable year;
- Invest at least 75 percent of its total assets in real estate assets and cash;
- Derive at least 75 percent of its gross income from real estate related sources, including rents from real property and interest on mortgages financing real property;
- Derive at least 95 percent of its gross income from such real estate sources and dividends or interest from any source; and
- Have no more than 25 percent of its assets consist of non-qualifying securities or stock in taxable REIT subsidiaries.
This was my initial read. This doesn’t even get into the costs of establishing the instrument and the compliance costs of reporting it. Non starter
Good clarification there on it being a company, not a security. That’s a significant difference and @cnasty regrets the error.
Great chatter! Interesting to watch someone go through the process of developing a golf course in such a public manner. Enjoyed following ZB as well as the Sweetens story on Twitter.
I haven’t seen anybody bring up the Pasatiempo model, which is rather interesting
(Edit: I guess this is similar to Sand Hills and Ballyneal, as GRWhitehead described above)
Personally I think the Pasa model could work perfectly. People aren’t trekking out to Utah if they aren’t serious about golf. Likewise, even members won’t always be there so I doubt they’ll be struggling with full tee sheets.
This is fascinating. Seems to be beneficial to everyone, including the general playing public.
For some reason your link doesn’t work for me, so if that’s the case for anyone else here’s a link to the membership guide on their website. Very interesting and cool.
Played Pasa with a member this summer. He explained how he saved up the $100k for a few years and finally joined. After the initial expensive, it’s totally affordable for his lifestyle. I wish more clubs had that option.
That is very interesting and not unlike the U.K. member owned models, albeit members traditionally paid a joining fee when there were memberships available and would forfeit this when they ceased to be a member.
Ultimately I would like to think that is a model that other areas of America could adopt if a few like minded people with enough community spirit were prepared to put in the time and set up a business plan and invite others to join them for an initial share purchase.
500 people at $50,000 gets you $25M of capital to build or buy a course. Appreciate there are taxes and professional fees involved, but it must be possible give the fees people are paying to CC’s and even to play a couple times a week on a decent public course.
the difference with TBC would be access to the Salt Lake metro population of 1.1M people. He won’t NEED the public play option. Maybe they’ll have 1-2 tee times a day or something, but i doubt it make sense in the current form. Joining Pasa for 100k is cool, but since you can play for $170, not sure why people would unless they LIVED there. TBC will be a lot about destination golf, like Sand Hills, Ballyneal, Sand Valley etc…
National memberships should be avail for 10-25k, depending on how many he does.
I’m genuinely confused by this. Can you clarify? Pasa is closer to San Jose than TBC is to SLC.
Completely agree. No doubt this is not the perfect model for TBC. I don’t have a clue on God’s green earth what is! Just think the Pasa model is fascinating in how it differs from the rest of Private/Semi Private US golf.
Joining for the cost of a share seems like something of a status symbol in the area than anything else.
Population differences alone make the case here. But also year-round-playability and percentage of nearby residents who play golf.
Yep, and Pasatiempo is one of 6 world class golf course within an hour or two of there. Salt Lake doesnt have them, and the airport is closer in SLC. Plus, my point is that it WILL be expensive because of the population. Sorry if it seemed like inmeant the other way.
I think that’s where I was hung up. Thanks!
It’s weird (yet also makes perfect sense) how cleanly some bar napkin math works out for Pasatiempo’s model. They say about 20% of the rounds played are public. If you assume 30,000 annual rounds total, which I’d peg as reasonable/conservative for a year-round golf course with perfect weather, that results in 6,000 public rounds. At $350 total spent for each of those rounds (it’s $292 for a public tee tee time with cart) you get $2.1M for estimated public revenue. The course says there are about 300 golfing members, which works out to $7,000/year per member that doesn’t have to come from the membership thanks to being semi-private. Without those dollars you can reasonably assume member dues would need to be around $13-$14k per year which would put it right in line with comparable places.
A couple of things come to mind in regard to why more high end clubs don’t do something similar. 1) Membership egos - they want their place to be exclusive, their own cost be damned. 2) You need an incredible golf course that will draw in the public dollars with ease. 3) Don’t think it’s possible to start from scratch with this model while only getting $10,000 from each member upfront that actually goes to the course (barring some extreme examples for courses built in ideal, cheap places that have none of the typical trimmings of such a high end place like luxurious clubhouses, tennis courts, pools, etc.).
[looks across the hall at the gardening start up that just got $5M seed money.]
It’s a hell of a good time to be raising $$ in many industries, but golf isn’t like just any other industry. The big big question I’d have (and it would be slide #3 of my investor deck) is water. Who has rights? How long are those rights good for? If you don’t have a sound water plan none of the rest matters.
With the water consideration, it’s honestly befuddling that California (considering the state’s position on environmental matters) even allows golf courses to exist.