Association considers golf loan restructuring

RANCHO SANTA FE — One of the loans taken out for the remodeling and refurbishing of the Rancho Santa Fe Golf Club could be restructured, it was decided at the March 15 Association meeting.The smaller of two loans taken out for the project, at $1.65 million, could be financed by the Association’s investment pool. It would be a 10-year amortization with a 2 percent interest rate with a minimum payment of $15,182 per month.

“In reality, we are loaning this to ourselves,” said Pete Smith, Association manager.

The original $6 million loan for the project will not be considered at this time. It could be refinanced through conventional lending institutions, Smith said.

Beginning in 2005, two loans were taken out to update and remodel the golf club. The $6 million loan provided the bulk of the renovation funds. The terms were two years of interest-only followed by a 25-year amortization.

It carries a variable interest rate of 4 percent floor and a ceiling of 7.75 percent in years 11 through 25. The payment is $31,757 per month.

The second loan was taken out to cover the balance of the project in May 2009 in the amount of $2.15 million. It carries a variable interest rate with a 5.75 percent floor and a 9.75 percent ceiling.

As of February the balance on the two loans were $5.46 million and $1.65 million, respectively, for a total of $7.11 million.

It was projected the entire debt could be retired in six or seven years after the completion of the project.

Then came the recession.

“As we are all painfully aware, in 2008 the bottom fell out of the economy and the housing market, which has resulted in a large reduction in home sales in the Covenant and therefore much lower numbers of new enrollments in our golf club,” said Mike Irvine, former golf club president. “New enrollments for the 10 years prior to the economic meltdown averaged 45 a year. The last three years has averaged about 15 new members a year.”

Irvine said the membership base is also declining, so the number of members paying a $1,100 assessment per year toward the loans has declined.

“No one is to blame for this,” Smith said.

Still, Irvine said, the golf club is in good shape financially.

“We are currently generating more than sufficient revenue from the debt assessment to meet the loan requirements,” he said.

The Association began to explore options with the golf club because the original lender had been taken over by regulators and both loans carried variable interest rates. Also, the golf club hoped to purchase the notes from the regulators at a discount.

“Due to the economic condition at the time, the Association was only able to identify a few lenders willing to consider the loan request,” Smith said. “The terms that were offered were actually more expensive than the current loans.”

In 2011, the Association decided to concentrate on the smaller loan and the possibility of paying off the note with Association reserves.

“Based on the recommendations from the Association Finance Committee and members of the Association board, the proposal is to finance the $1,650,000 loan from the investment pool,” Smith said.

The matter was to be discussed at an executive session following the regular meeting.

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