Gateway Sun

The Gateway Golf & Country Club is a pristine, sophisticated golf and tennis club whose members are some of the most financially well-off among us in Gateway. Equity Membership in the club is both a status symbol and networking goldmine.

Recently, the club unveiled the Griffin Grille & Pub, a 150 seat restaurant and bar (which could also be described as a work of art) that cemented the GG&CC’s status as the jewel of Gateway. Most of us will never have the opportunity to dine there, which based on photos I’ve seen and stories I’ve heard, is a true shame for those of us on the outside looking in.

But while the Equity Members of the GG&CC are certainly some of the wealthiest residents of Gateway, the addition of the Griffin Grille earlier this year presented a show of strength that was actually masking a troubling financial situation behind the scenes.

Back in 2005 the GG&CC was riding high. Membership and revenues were soaring, fueled by the growing housing bubble and cheap credit as a result of Federal Reserve policies to juice the economy in an effort to prevent a world-wide deflation crisis.

Since that golden era, membership levels and revenues at the GG&CC have fallen an estimated 25% to 35% at the club.

Of course, the largest drop came as the housing bubble burst. According to figures obtained by the Gateway Sun, the GG&CC went from having 644 Golf and Club Equity Members in 2005 to just 479 in 2010.

Even worse, a source with knowledge of the situation told the Sun that the number of Equity Members could dip below 400 at the end of 2015.

That’s because, for the first time ever, GG&CC Equity Members will be permitted to cancel their memberships and leave the club.

I’ll explain.

Since its founding in 1989, once you joined the Gateway Golf & Country Club the only ways to leave were to either sell your home and membership, or to die.

Nobody was permitted to simply quit the club. Those who did faced lawsuits and shunning from other club members.

The reason is because once you leave then every other member must pick up your share of the tab for operating the club. The more members the club has, the less each member must pay to operate it. Conversely, when people start to leave, the bill for those who stay grows and grows with each person who is no longer a member there to help spread the costs.

By 2013 things were reaching a boiling point as membership levels continued shrinking and assessments continued to rise. The GG&CC’s Board of Directors hired consulting firm ClubSpecialists International to review the club’s operation.

CSI was honest with the Board, to put it mildly.

In November 2013, CSI formally recommended that the Gateway Golf & Country Club should sell itself to a firm that could manage the club professionally.

In the event that the GG&CC refused to sell itself, CSI outlined three other possible paths.

The least preferred path by the consultants – the one thing CSI didn’t think was a good idea — was for the GG&CC members to continue managing the club themselves.

As you might have guessed, the members chose to continue managing the club themselves.

Apparently curious enough to see what the GG&CC might be worth on the open market, the Board brought in a second consultant: National Golf & Resort Properties Group.

Their job was to assess the value of the club from the point of view of a prospective buyer.

NGRPG wasn’t any less blunt than CSI.

They sounded several alarms, first pointing out that there was a staggering amount of competition (golf courses and clubs) within a 30-mile radius of Gateway, but also that the GG&CC’s numbers all pointed toward certain, mathematical failure.

From the January 2014 report by NGRPG: A consistently declining membership count, shrinking dues revenue and net operating income dropping by roughly 50% per year are likely going to be discouraging for potential investors. Unfortunately for current ownership, this is highly indicative of the “downward death spiral” often experienced by private equity clubs. This downward spiral is comparable to a snowball effect. As membership begins to take a turn downward, revenue quickly follows. As revenue begins to decline, expenses must also be reduced. This cutting of expenses typically impacts the quality of the facilities and as a result, membership declines even further. If ownership attempts to maintain the same level of service (and expenses), the only remaining option is to assess members to cover operating losses. Once again, these assessments cause even more member resignations, which leads to greater operating losses and higher assessments for members.

Nevertheless, NGRPG believed the GG&CC could fetch between $4,100,000 and $4,400,000. Not exactly a glowing valuation since they ended up spending about $3,500,000 on the Griffin Grille & Pub.

NGRPG recommended putting the club on the market for $4,500,000.

For some GG&CC members this was an opportunity and a blessing. Some were getting older and were no longer using the club’s amenities and therefore didn’t want to pay yearly dues. Others were no longer able to afford the dues (and that’s not a shot at them – I can’t afford the dues there, either). And some people were just tired of the club and didn’t want to be part of it any more.

Since voluntarily leaving wasn’t an option, the possibility of selling the club and having the ability to relinquish their membership obligations was more than welcome for some. They felt relieved.

When the Directors decided the club would not sell itself, those people who wanted out were understandably angry. To appease those members, according to a source, the club announced that any member could quit the GG&CC on December 31, 2015 as long as they served notice of their intention to do so before June 30, 2015.

So from 2005 to 2015 when nobody could legally leave the club, membership levels still managed to drop by over 25%. Once there’s actually a legal path out, some fear that the floodgates could open and dozens more Equity Members will depart.

Worse still, even if they stay next year, the Equity Members will now be able to leave once per year simply by serving notice, according to our source.

Since, for the past decade, the number of members leaving has vastly outpaced the new members who join the GG&CC, that will leave the Equity Members who remain with an ever-increasing cost to shoulder — which will in-turn force more people to leave. Also, members may just choose to leave for their own reasons in the future. Or … well … you know, they could die.

Hence, the downward spiral described by NGRPG.

The Sun reached out GG&CC General Manager John Costello and Membership Director Justin Bannister to ask them about the potential member exodus on December 31 and what plans they had to handle it, but neither responded.

While I’ve never been to the GG&CC, I know a number of their members. They’re good people. Some of the best I’ve met here in Gateway.

They’ve earned the right to have a nice club and they certainly pay for the right to use it. I hold nothing against them.

Whatever happens to the Gateway Golf & Country Club, I’m sure those people will still be able to be part of it if they choose to be.

Even if the club has to be eventually sold, the incoming owners will want to preserve as many relationships with existing members as possible. Quite frankly, an outside group that manages multiple clubs might bring an advantage long-term since they’ll bring their experience and ideas with them.

On the other hand, it’s also possible the current leadership will prove CSI and NGRPG wrong and turn the club around.

One thing is for certain: the existing management will have some difficult decisions to make going forward. It remains to be seen if they’ll be able to put all egos aside and hand the club over to a company who will professionally manage it, as suggested by CSI and NGRPG.

My hope is that whatever happens, the current members find the solution acceptable and their costs for staying in the club are reasonable and provide value for their money.

Gateway is a better place with the Gateway Golf & Country Club than without it.

About Jeff Kuntz

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Editor of the Gateway Sun and owner of restaurant delivery service Florida Food Runner.

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