We wrote yesterday that Cliffs members who opted to lend a minimum $100,000 to the developer would achieve a return of around 14% annually. That calculation included a waiver of dues for Cliffs club members.
Without getting into the complicated details, the true annual return is actually 12% for the seven years of the loan
To make the loan offer, The Cliffs split into two parts -– a real estate development company and another legal entity that owns and runs the amenities, including the current six golf clubs and the yet to be built designs by Gary Player and Tiger Woods. It is the latter entity that has floated the bond. The Cliffs and developer Jim Anthony have pledged the amenities as collateral for the loan in case of default. The investors will be represented on the board of the second entity, and according to our correspondent, there are strong provisions for slowing spending if cash flow in the clubs drops below certain levels.
“All in all,” our Cliffs member wrote, “I like this arrangement as it
“It [the loan arrangement] provides professional management, with strong owner representation -- something that a typical developer owned club does not offer.”
We especially appreciate one final point our correspondent makes, that developer-owned and managed clubs might look to the situation at The Cliffs and take away a hard-earned, but important lesson -- that “providing some info on ownership structure, transparency, financial strength, etc. would be a valuable part of any real estate and golf development decision.”
