Moon Valley decides on bankruptcy
Over the last five years, the depressed economy has played havoc with private golf in Arizona, especially with the latest episode involving members of a long-time Phoenix country club voting to give up ownership through a bankruptcy court.
Call it crazy, and we’ve seen a bunch of that since things went south, but that’s basically the fate that has been decided for Moon Valley Country Club. As soon as a bankruptcy court judge fills in the details later this month, Borders Golf, a management group based in Colorado will take over the club’s restructuring and ultimately its ownership without restriction.
How could it have come to this for Moon Valley, once home to the LPGA back in the days when it was owned by PING founder Karsten Solheim? In a lot of ways, Moon Valley is a victim of the times, especially in the private world of golf where the numbers continue to trend downward. Of Arizona’s approximately 100 private clubs, about 15 to 20 have experienced BK or other financial troubles to varying degrees.
Amazingly, no private club in Arizona has gone under -- yet. That’s quite a bit better than the national numbers, where about 100 of the 4,400 private clubs have gone belly up, according to the National Golf Foundation. However, the fact that 400-plus – 10 percent -- have opened their doors to the public in some capacity is a more telltale sign of their woes. In other words, change your playing policy and take in the public or go under. Certainly, there will be more blood considering private golf is in trouble in every region of the country except the Southeast.
In Moon Valley’s case it was a double-whammy that led its members to opt for BK. Which came first is up for debate, but a water bill that climbed to nearly $1 million annually was compounded by a major exodus, as membership fell from a high of 440 full-time members a few years ago to 267 today. The combination kept Moon Valley from paying off a $6 million debt tied to sale of the club and improvements made over the years.
It gets worse. When the members missed a few payments and fell into arrears, the bank tried to call in the $6 million note. When the members balked at a settlement for 50 cents on the dollar, an outside investment company, Dimension Financial-REL of Phoenix, swept in and bought the note for $3 million. Suddenly, members weren’t dealing with the bank; they were dealing with Dimension Financial, a buyer of distressed properties that ultimately wanted to build four-story condos on the course.
Bill Doyle, a lawyer who doubles as president of the Moon Valley board, put it this way: “The water bill went up, the membership went down, and we were stuck in the middle holding a pretty large debt.’’
At that point, the Moon Valley membership hired MCA, a consulting firm that specializes in restructuring and reorganization. And along those lines, the membership raised an additional $300,000, which is what the bankruptcy will cost when all is said and done in court. But just to make sure everybody had “options,’’ four were put forth and offered up to the 267 remaining members.
The first was to file bankruptcy and turn the club over to Borders, a golf management company that does business in Colorado at clubs like Catamount and Cordillera, as well as international retreats like Punta Lobos and TPC Cancun in Mexico, Las Olas in Panama, and Placencia in Belize. Borders also has managed dozens of clubs in the past, including SaddleBrooke in Tucson and Mt. Graham Golf Course in Safford. But the key, for Option One, was that Borders agreed to let the members keep their memberships. A call to Borders Golf, however, was not returned.
The second option was sell Moon Valley to the M Club, the new private club concept being put together by PGA Tour star Phil Mickelson and his agent, Steve Loy. The hang-up with the M Club, according to several members of Moon Valley, was the M Club would then turn over about 15 acres of land at Moon Valley to Dimension Financial-REL to settle the $6 million debt. Again, members would keep their memberships and continue to pay the monthly, but the possibility of condos cluttering the course made this choice far less appealing.
The third option was let Dimension Financial-REL take over the club for the $6 million note. But the members as well as the 1,200 residents in the Moon Valley neighborhood, didn’t like the idea of the 300-plus condos, which would have been built where Moon Valley’s maintenance facility sets in the middle of the golf course. Also taking a hit would have been the ninth and 10th fairways at Moon Valley, which border that facility. Chances are the re-zoning never would have survived the battle with the club and its neighbors, especially the “high-rise’’ factor of four stories.
The last option was to close the doors on the club entirely, thus erasing the traditional tree-lined track founded by Bob Goldwater and built by noted architect Dick Wilson in 1960. According to several members, this never was going to happen, although these days nothing should surprise us.
“The vote was unanimous for (option one): to give up the club to Borders with members keeping their memberships,’’ Doyle said of the vote that took place May 23.
“The agreement is not complete until we get the particulars (from the bankruptcy judge) but we anticipate that Borders will take over when it’s done. Considering the alternative(s), we’re very happy.’’
Still, the bankruptcy court’s decision won’t fix the water issue, which could cause a further retreat among the members. Doyle said to resolve that issue, a pipeline to carry canal water will eventually be built at a cost of several million dollars from a source near 19th Avenue and Dunlap. At the moment, Moon Valley remains on Phoenix city water, or very expensive “drinking water.’’
That million-dollar water bill wasn’t always the case, noted Doyle. When members purchased Moon Valley from Solheim back in 1994, it seemed to be a bargain at $6 million – and the water bill was less than half what it is today! Plus, some of that debt was accrued when the club built a state-of-the-art Aquatic Center, tennis courts, a full gymnasium and fitness club along with remodeling the clubhouse.
In every way, Moon Valley just kept getting better – or so it seemed. But the water bill just kept going up, up, up, and members kept leaving. It was a situation that hardly seemed fair when compared with other private clubs in the Valley. Even though Moon Valley irrigates 150 acres of grass, or about 60 acres more than is permitted today, they pay significantly more because of their location in northwest Phoenix and the year the club originated (1960). By comparison, Phoenix Country Club, which traces its roots to 1899 and uses canal water, is grandfathered into its water rights at a fraction of the cost. And Mesa Country Club, which was built in 1950 and also uses canal water, gets an even better deal with the city of Mesa due to grandfathered rights and the fact they pump their own water.
Jim Frazier, a long-time member at Moon Valley, freely admits that his club uses more water than any other course in Arizona, “but we also conserve every drop of it.’’ Frazier added that the club would already have tied in to a cheaper source of water had the opportunity not fallen through due to money woes. Now, he said, the best hope is that Borders will be the club’s “white knight, and ride to the rescue.’’
“It’s too bad it’s come to this, but as far as I’m concerned, I have no equity left in my membership,’’ said Frazier, who was one of those who originally paid $15,000 to $30,000 to belong to Moon Valley.
“I guess you could say that there are times in life when things are just not fair, and this is one of them. The economy and the water bill have got us by the tail and their swinging us around and around.’’
Yes, these are the worst of times for Moon Valley, which still looks in great shape despite the inner turmoil. A tragedy, really, for a club that once experienced the best of times, such as Laura Davies winning a record four LPGA titles there and Annika Sorenstam carding the one-and-only 59 in women’s golf. And Moon Valley had lots of proud traditions, like the annual MV3 Invitational, one of the better amateur events that are held throughout the Southwest.
In fact, the recent MV3 just took place at Moon Valley with Arizona Golf Association standouts Michael Wog, Trey Martin and Adam Walicki beating a team led by Cameron Howell, the 2011 AGA player of the year. And Wog’s team did it in record fashion (24under par), something that was not lost on Wog, a junior member at Moon Valley.
“I love the golf course, and I’m really concerned about the direction the club is going to take. It’s not a good situation, although keeping the club as much intact as possible and not building condos is the way to go,’’ Wog said. “Seriously, it makes me sad as hell.’’
Frazier also feels the pain.
“It was kind of like the perfect storm,’’ Frazier noted. “We got a great deal on the club from Karsten, tried to make it better by adding some wonderful amenities, got caught in a recession, and then the water bill finally took us down.
“Last year, we thought we had it all figured out when Century Golf, which is owned by the Arnold Palmer Company, agreed to buy it and let us keep our memberships. Then the financing (for Century Golf) fell through and (Dimension Financial-REL) bought the note. So I guess (the bankruptcy) and the deal with Borders Golf is about as good as we can do in the end.’’
Interestingly, this isn’t the first time the club has its collective backs to the wall. In 1984, a time when the economy was again on the brink, the members fell into a deep financial hole. But that was when Solheim came riding to the rescue. Whether Borders Golf can save Moon Valley Country Club remains to be seen.
If not, there could be a fifth option that wasn’t in play the last time around: Open Moon Valley to the public and get rid of its private status. There already is precedent in Arizona, just ask the guys at Southern Dunes.