Successful transitions to member ownership call for early, consistent and congenial coordination between developers, members and management staff. Here are the keys to effective turnovers-and the valuable lessons all properties can learn.
There are many “dos and don’ts” involved with the turnover of clubs to member ownership. But the biggest “don’t” will always be this one: Don’t let negotiations begin as they did for one Florida club, when the membership’s newly designated President made this opening remark as he met with the developer for the first time: “You know, you really built us a crappy club.”
Dos and Don’ts of Successful Turnovers
DRAWN FROM THEIR OWN EXPERIENCES and what they learned from studying what succeeded and failed in other club turnovers, here are some of the guiding principles used by the members, developers and management staff involved with the recent transition of The Country Club of Mirasol to member ownership. For an expanded list, see the online version of this article at clubandresortbusiness.com• Do designate someone from the management staff to be the point person for all of the additional communication and administrative tasks that will be part of the turnover process. But don’t let turnover details consume much, if any, of most department managers’ time—keep them clear of the process so they can concentrate on continuing to provide top-quality service and efficient operations. • To help curtail skepticism among the membership and to provide assurances that what’s good about the club will remain that way, don’t go into “scrimp and save” mode as soon as the final stages of transition begin, and do try to avoid the temptation to institute any dues increases. • Do be prepared for recruiters and competitive properties to descend on your management staff and try to lure them away with tales of impending doom, based on the horror stories of failed turnovers. Take steps, well before the process begins, to try to secure as much upfront contractual and financial security for your key managers as possible. • Do set up the initial Board so that everyone begins with one-year terms, then go into a staggered term system. This will provide the best opportunity for new Board members to stay in or move on, depending on how well they take to the task. • Do expect an uptick in club activity after the turnover among members who want to use it more once it’s “theirs.” Emphasize to staff that this is a critical time to ensure great service. |
Hard as it may be to believe, in this case there was actually room for things to go further downhill from there, sending the process into a contentious hole that took the members years to dig out from. The club has since recovered and is actually thriving today—but only after considerable, and unnecessary, effort, expense and pain was incurred to correct costly and wasteful mistakes made during the turnover process and the first years of its member-owned existence.
Many other clubs that have been part of recent efforts to transfer ownership from developers to members haven’t even been that “lucky,” though. The flattened state of the club world, the poor general economy, and the especially sharp declines of the real estate markets in states like Florida, Nevada and Arizona, where developer clubs abound, have combined to bring about a rash of recent club failures, often because owner-member relations grew adversarial during frantic attempts to transfer control under mounting financial duress. Last year’s ugly tug-of-war between banks, members and other creditors for the club-related assets of Bonita Bay Group, after the developer filed for bankruptcy protection, drew national attention from the flurry of lawsuits—including accusations of fraud and Ponzi schemes involving member deposits—that characterized the chaos. Some of Bonita Bay’s portfolio of clubs in the Naples, Fla. area, which included prominent names like Mediterra, Shadow Wood, Verandah and TwinEagles, didn’t survive the situation, while others that are now finally under member control are saddled with extra financial burdens, and facility and operational woes, that can be traced directly to how the transfer to member control diminished values and detracted from efficient operations.
The trend to accelerate transfers of developer clubs to member ownership is only likely to continue, as real estate companies that include club components as amenities to help attract property sales look to be released from their club-related obligations more frequently, and much sooner, in the development life cycle of a community. When these transitions are poorly planned (if planned at all), or conducted under chaotic, contentious or stressful circumstances, little that’s good can come of it all. As Richard Singer, Director of Consulting Services for the National Golf Foundation, was quoted in news reports about the Bonita Bay fiasco, “They are trying to do a quick turnover, and that is when mistakes are made, when people are rushed into something.”
Fortunately, amid a club landscape now littered with the casualties of poorly handled turnovers, some shining examples also stand out. Perhaps the best is one for which the ink is barely dry, and to which descriptions like “seamless,” “near-perfect” and “storybook” are being applied: the turnover at The Country Club at Mirasol in Palm Beach Gardens, Fla., where papers to transfer ownership from the developer, Taylor Morrison, to the club’s membership of over 1,170 (all but about 40 of whom have equity stakes) were signed at the end of June.
When transitions are poorly planned (if planned at all), or conducted under chaotic or contentious circumstances, little that’s good can come of it all. |
Staying the Course
As described in a C&RB feature in February 2008 (“The Country Club at Mirasol Moves Smoothly to Member-Owned), the turnover of the club, which opened in 2002, was always an integral part of the initial master plan for the community. At the time of that report, things were progressing well enough that the transition was expected to be completed by the middle of 2009.
But Mirasol was not immune to the turbulent forces that then emerged to send the economy in general, and the Florida real estate market in particular, into freefall. At the same time, its developer (originally Taylor Woodrow) underwent a merger with Morrison Homes.
The fact that those unforeseen developments only resulted in a one-year delay in the turnover plan, however, speaks volumes about how solid and steady the long-range planning for the transition had been to that point, and also to how committed all three of the parties that are essential components of a smooth turnover—developer, membership and club management staff—remained to seeing things through to a successful conclusion.
By November of last year, at a time when many other Florida developments, and their developer-owned clubs, were thrashing about frantically just to stay above water, The Country Club at Mirasol’s General Manager, Matt Lambert, set into motion the timeline for the final stages of his club’s turnover to member ownership.
The fact that Lambert served as chief orchestrator of the process is also highly significant. Too often, a club’s management staff is shunted to the sidelines as transitions to member ownership begin, able only to watch the action nervously and hope that after the outcome is decided, they’ll still be asked to be part of the team. In fact, as word circulated throughout the industry that Mirasol was entering the final stages to member transition, Lambert says he received several calls from colleagues (as well as from executive recruiters) who were sure that the history of turnovers meant he was doomed and implored him to “get out of there, now.”
Reflecting confidence in the operating abilities of the professional management staff, the initial Board of Directors for the Country Club of Mirasol will oversee just five committees: Finance, Membership, Grievance, Audit and Nominating. |
But in this case, the building wasn’t about to blow up. To the contrary, Mirasol stood solidly as the most profitable community development in Taylor Woodrow’s history, and The Country Club at Mirasol was a big reason why.
Jeff Mickle, Vice President of Home Building for Taylor Morrison of Florida’s Southeast Florida Division, and the chief representative of the developer for the final stages of the club turnover, says he has “no doubt” that the club has made a significant contribution in helping to sell almost all of the community’s 1,170 homesites (which include mandatory club memberships) in such a competitive market (less than 40 lots now remain).
Much of the credit for that, Lambert says, goes to how the developer “spent the resources needed from day one to provide a top-notch club facility and keep the members happy.” This was critical, he feels, to laying a solid foundation, from the time the first piling was driven, for the eventual turnover to member ownership.
“[Taylor Woodrow] never hid behind the fact that there eventually was going to be a turnover,” says Lambert, Mirasol’s GM since 2005. “Even during the final years leading up to the transition, which is usually when all you hear about is how developers will cut [club] maintenance and operations budgets to the bone, and certainly not do anything in the way of capital improvements, our developer deserves credit for continuing to invest in the property. They funded bunker restorations, redid the pool and irrigated the tennis courts, all out of profits and without capital assessments.
“When we had engineering inspections conducted over the entire property as part of the due diligence for the turnover, they found virtually nothing,” Lambert adds. “Everything was in great shape, attesting to how they’ve always given us what’s needed to properly serve the membership. And I have to believe that if they hadn’t done all of that from the start, there would have been harder feelings among the membership that would have adversely affected the turnover negotiations.”
The membership’s satisfaction with the club facilities has been reflected in annual surveys that have consistently produced overall approval ratings above 95%. Another factor earning equally high marks—satisfaction with the service and operational performance provided by Lambert and his staff—should be given equal credit for the club’s appeal and reputation, and is why both the developer, and the club’s membership, felt comfortable in letting Lambert take the leading role to direct the move to the next phase of The Country Club at Mirasol’s life.
A solid foundation was laid, from the time the first piling was driven, for Mirasol’s eventual turnover seven years later to member ownership. |
Carry On
Just as he recognized how it was important for Taylor Morrison to maintain club facilities as a key to a smooth turnover, Lambert also didn’t want to risk any dropoff in service to the membership that could jeopardize the final steps of the process. So as the official turnover timeline was set into motion—during which candidates for Mirasol’s initial Board of Directors would be screened and selected, and the club’s new operating structure would be shaped—Lambert gathered his staff to deliver a single message: Keep on keeping on.
“Turnovers are emotional enough and complicated enough that I didn’t want to give [the club staff] any other reasons to be concerned in a way that would affect their performance, and therefore the operation of the club and the satisfaction of the membership,” Lambert says. “I told them I was determined not to have the turnover process affect the daily operations of any department except mine. I reminded them that from day one our attitude has always been that we work for the members, and that’s what they needed to keep doing. And the staff did an amazing job of staying focused and providing great service through it all.”
Lambert then plunged himself into directing the many specific tasks involved with the turnover, with a huge assist from his Executive Assistant/Communications Manager, Meredith Emond, who facilitated all required communications to the membership through creation of a special Club Turnover section on the Mirasol website.
Lambert assembled a Selection Committee to direct the creation of a Nominating Committee that would oversee the election process for the club’s first Board of Directors. At the same time, he set into motion a series of communication events designed to ensure an open and candid process that would give all members ample opportunities to participate and have their specific questions and concerns addressed. These included presentations by guests who could share their experiences about what had gone right—and wrong—with previous turnovers at other clubs, and outline best practices for Mirasol to follow. “The success of Mirasol’s transition process started with insisting on total transparency from all sides,” says one of the presenters, industry consultant Kurt Kuebler.
Another guest presenter was Michael McCarthy, GM/COO of Addison Reserve Country Club, a community in nearby Delray Beach, Fla. that had also been developed by Taylor Woodrow and had experienced a rocky transition to member ownership earlier in the decade. McCarthy, who was brought in a few years after the turnover to help fix the resulting problems (and has had enough success already that his membership recently approved a $15 million clubhouse expansion/renovation, to be completed by the end of next year), came with his current Board President, Fernando Leal.
In their presentation, they urged the Mirasol membership not to repeat Addison Reserve’s mistake of setting up an initial Board structure that tried to oversee operations as well as club governance. “A turnover is the first and best opportunity to set up the right model,” says McCarthy. “It was chaos when I got [to Addison Reserve], because too many committees and members were trying to micromanage everything. Staff members were afraid to make any decisions and couldn’t do their jobs because of all of the member interference.
“My message [to Mirasol],” McCarthy says, “was clear: If you like how things have been with your club so far, set things up so it will run the same way after you own it, and leave it to the professional staff to do what they do best.”
This message clearly resonated well among the Mirasol membership, because the first Board created under member ownership will mirror Addison Reserve’s structure of just five committees: Finance, Nominating, Grievance, Audit and Membership. The streamlined committee system that Mirasol will begin to operate under as a member-owned club is a “true testament to the members’ faith in our staff,” Lambert says—as is the makeup of the first Board, as the election results strongly reflected a pervasive desire among the membership to choose those who campaigned primarily on a platform to “keep Mirasol as it is.”
“With a strong General Manager and the Chief Operating Officer approach, you really don’t need operating committees per se,” says one of the new Board members, Don Snider. “We’re going to try this approach and see how it works. And we’ll continue to have open town-hall meetings, so the members can tell us if it is working—or isn’t.”
So You Want to Be a Board Member…
The process of identifying candidates for the initial Board of Directors at The Country Club at Mirasol went well beyond finding the first nine people who said “I have the time” or “Sounds like it would be fun.” Here’s the formal list of questions that all candidates had to respond to as part of an initial Interview Questionnaire:
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