BELLEAIR – As expected the Belleair commissioners voted unanimously to approve the specifics of a long-term lease agreement with Green Golf Partners to operate the town-owned golf course for the next 10 years. The agreement came at a special Commission meeting on Jan. 15.
The 25-page document outlines everything both sides need to operate right down to who pays what insurance and the lease of the fleet of the golf carts. Highlights of the agreement were listed separately and included in that summary was the outline of the financial arrangement between the town and Green Golf.
Green Golf will pay the town rent of $40,000 quarterly or $160,000 annually. They also will pay the town a percentage rent of 6.5 percent of annual gross revenue in excess of $1.6 million. If, for example, the gross revenue meets the expected $2.6 million, it will mean the town will get $220,000 consisting of the $160,000 base rent and the $60,000 percentage rent.
Green Golf will be responsible for the management, operation and maintenance of the golf course while the town will be responsible for any structural repairs to the property. Green Golf must maintain the property in a condition of comparable golf courses; the Bardmoor Country Club is identified in the lease as the example of that.
Green Golf agreed to spend $500,000 over the 10-year term in capital improvements. Much of that work is laid out in the agreement and includes leveling and re-sodding numerous tees and renovations to the clubhouse. The single largest expenditure will come in 2015 when Green Golf will spend $300,000 to install cart paths all over the course; they call it “wall to wall cart paths.”
As for insurance the town will continue to provide fire and casualty insurance while Green Golf will be responsible for general liability insurance, auto insurance, workers comp insurance and casualty insurance.
The item that garnered most attention and discussion was the early termination clause in the agreement. In fact the specifics in that clause were changed since the lease proposal was first brought before the commission two weeks ago.
The town would have paid Green Golf $480,000 if the lease were terminated in the first three years of the deal, $320,000 between years four and six, and $160,000 in the last four years of the agreement.
Under the final agreement that penalty changed to $160,000 paid to Green Golf if the town terminated the deal in the first year. After that the penalty would be a fee equal to 1.5 times the average annual net operating revenues for the two years prior to termination.
Finance Board member Tom Kurey, who has been involved in the lease discussions, told the commission that the town’s golf consultant, Henry Delozier of Global Golf Advisers, recommended against it and wondered why there was no penalty set out if Green Golf terminated the deal early.
Town Attorney David Ottinger replied that the early termination penalty was included because Green Golf was investing a lot in the long-term plan of the golf course.
“They are investing money in a long term marketing plan and in capital improvements,” he said. “The fee is based on a percentage because if the revenue goes up then the value of the course goes up, value goes up all around which is a good thing.”
It was estimated if the revenues hit $2.6 million dollars, and net profit is 10 percent of that, that the opt out penalty to the town would be $390,000, less than the $480,000 under the original plan.
As for the idea that Green Golf should be subject to some sort of penalty if they opted out early, Ottinger said they would be responsible for whatever damages their departure caused.
“For example if we had to close the course for six months because we wouldn’t find somebody else to operate it, then they would be liable for whatever revenue was lost and the costs associated with that,” he said.
Matt McIntee, the president of Green Golf Partners, said this termination clause is something the company does not have with any of its other municipal clients. Two weeks ago he said it stems from Belleair officials making it clear that they might move at any time to sell the course leaving his company out in the cold.
Mayor Gary Katica said at the meeting it was not automatic that a sale of the golf course would mean Green Golf was out of the picture.
“If we sold the course they would go with it. They would still be operating, which means they were not terminated by us,” he said. “Their lease would be part of the deal, and if the new owners decide to keep them on then there would be no penalty.”
McIntee said the whole issue of the early termination is an awkward one for his company.
“We don’t have that clause anywhere else,” he said. “But here we have to be mindful of people, the people we have working for us. We invest in them when we invest in this lease. And if we’re terminated then we’re responsible for severance pay and the like.”
Just moments before Mayor Katica called for a vote on the ordinance approving the lease Commissioner Kevin Piccarreto asked to speak.
“I thought we’d have more time for comments before the vote,” he said. “I’m disturbed about a number of issues. It has been a year since we bought the course with the intention of removing the developing rights from the property. We haven’t done anything about that, and I would urge staff to move on it.”
“When we asked for proposals about operating the club we should have better identified our goals. Perhaps we should have marketed the property to sell. I’m concerned that at some point the value of the property will max out. We are running the risk of boxing ourselves in, but we didn’t consider that. I’m disappointed in that,” he said.
Then Piccarreto, along with the rest of the commission, unanimously approved the 10-year lease agreement with Green Golf Partners.
The facility, which has been operating under the name of the Belleview Biltmore Golf Club, also can legally use the name Pelican Golf Club. It will be up to Green Golf what they want to call it.