Golf course files bankruptcy
October 28, 2009 by Aaron Kremer
The Federal Club, a $9 million Arnold Palmer golf course and upscale housing development in Hanover County, has filed for Chapter 11 bankruptcy protection.
The course, which opened three years ago, lists assets of less than $50,000 and liabilities of between $1 million and $10 million, according to the bankruptcy filing. The company owes $4.96 million to unsecured creditors, many in Richmond.
“It is the intention of the owners to financially rehabilitate the company and to continue in business,” said Douglas Scott, an attorney with the firm that bears his name who is representing the Federal Club.
“With any kind of Chapter 11, you tighten up where you can tighten up,” Scott said, adding that the course was popular but the timing was unfortunate.
“I don’t know anything they need to change in their operation. Certainly they will focus on marketing the club and the lots.”
In an RBS story from mid-September, one of the founders, Ray Tate, said the course had sold 170 memberships out of an end goal of 500. Most members were in their mid 30s, he said. BizSense was unable to reach Tate by press time.
Also of note, the course has a new website.
The company owes $4.96 million to unsecured creditors. You can see the filing here.
The Richmond creditors are:
Stanley Construction, Ashland: $1.88 million
Ray Tate: $500,000
Tom Rash Company, Midlothian: $211,800
B.J. Tolley, Ashland: $200,000
Paragon Commercial Bank: $194,232
Southwood Builders: $163,000
Herod Seed, Richmond: $72,275
Carlisle Food Systems, Ashland: $39,300
Depasquale Gentilhomme Group, Richmond: $29,700
Jo Pa Co., Richmond: $11,300
Aaron Kremer is the BizSense editor and a mediocre golfer. Please send news tips to Editor@richmondbizsense.com.
Unfortunate but not uncommon.
Unfortunately, this one’s not surprising. The course is terrific. The location is abysmal. In good economic times this place could make it. But not now. They need to renegotiate all their outstanding debt and come in with a new membership plan that will let those other than the elite join. If they made it feasible I’d join so I could play that golf course.
Country clubs dues are the definition of discretionary spending, so its no surprise that in the greatest eceonmic downturn in 75 years, that The Federal Club is struggling to make their debt payments. It will be very difficult for a number of clubs to continue to operate under the model that they flourished under over the last 30 years. Some clubs recognized this earlier and forged partnerships with neighboring courses (Jefferson Lakeside / Richmond CC / Stonehenge/ etc) as a means of retaining existing members by increasing privileges, and also as a motivational tool to attract new members.
I would like to see The Federal Club and others reorganize under the semi-private umbrella. I may be wrong, but I don’t believe there are that many jimbo’s in Hanover that can afford the 30K initation fees and $350 per month minimums. Any club that took on major debt in the last 5 years could experience this as well, i.e.- Willow Oaks and Salisbury (Although both are much more well capitalized than The Federal Club, the downturn doesn’t make them immune to the local economic problems either.
There is a mistake here. I have never heard of nor conducted business with Mountain Run Golf or The Federal Club. All of my business was applied for, signed for, and conducted with Mountain Run LLC.
Long term the club/course and the development will be fine. This is a case of poor timing for sure. This is not the typical country club/housing development. With only 99 or so lots in the Mountain Run development the club must draw from surrounding areas. This is not a Wyndham or Salisbury type model.
From a real estate location standpoint the development is not in a bad location. It’s 15 minutes or so from Short Pump and the Staples Mill Rd corridor to the east will grow significantly in the next 3-5 years as the new high school comes on line. This will be an area the club will easily draw from as the economy improves.
In the short term the club could go semi-public. Given the course condition I think it could attract players willing to pay $80-$100 a round. Perhaps the model from the start should have been more like Spring Creek to the west of Richmond?
I think the long trem viability for both the course, club and development are good.