Bonita Bay Group, club members return to negotiations to hammer out a deal

By Laura Layden Naples Daily News August 31, 2009

BONITA SPRINGS — Talks are back on.

A committee trying to reach a deal to buy the Bonita Bay Club for members is at work again.
The developer, Bonita Bay Group, has returned to the table after talks appeared to break down more than a week ago.

“Negotiations appear to be back on as lawsuits continue,” said Art Herman, a Bonita Bay club member, in an e-mail to the Daily News. “There is growing sentiment that, while we may have to write a check eventually, it will be more acceptable if (Bonita Bay Group) was in bankruptcy.”
One of the major disagreements has been over the developer’s asking price of $20 million. It’s not clear whether Bonita Bay Group is considering budging on that price, but company representatives have talked to the Turnover Committee at least three times since Aug. 24. A face-to-face meeting was planned for this week, according to the committee’s latest report sent to members on Friday.

“Your committee would like to assure the members that it has always been and remains willing to conduct serious negotiations to acquire the club from (Bonita Bay) Group,” it wrote.
“We believe that we have a duty to the members to try to negotiate a purchase on terms which are fair to the members, not just to do any deal to resolve the current problems as quickly as possible.”

The committee went on to say that it’s not willing to overpay for the club, which would only cause problems in the long-term. It noted that to do a deal at least 85 percent of the golf members would have to approve it and support the new club.

“It takes two sides to negotiate and we are not willing to negotiate against ourselves,” the committee said. “To date, (Bonita Bay) Group has appeared to be in no hurry to conclude a deal since they have been enjoying a positive cash flow from the club. We are optimistic that this will change in the coming weeks.”

The committee warned that members might not hear from it again for “some time” if “meaningful negotiations” take place.

“We ask for your patience,” the committee said.

In the meantime, it is continuing to move ahead with a legal strategy it has undertaken as a back up in case a deal can’t be reached. The committee is supporting several lawsuits, including a class-action with claims of fraud and breaches of the Florida Deceptive and Unfair Practices Act.
Last year, the cash-strapped developer stopped honoring its policy of refunding deposits to resigning members, despite giving them promissory notes. Since then some members at various clubs have filed a flurry of lawsuits. The members say they want their money back.

In a letter to members of the Bonita Bay Club last week, Tim Boates, Bonita Bay Group’s restructuring officer, said that starting today there would be a new policy for refunding deposits. It’s not clear whether the policy is just for Bonita Bay Club members.

According to Boates’ e-mail, the developer will refund one membership deposit for every three new members who join Bonita Bay Club. Members would get refunds in the order they were placed on the resign list, he explained.

The committee estimates that $8 million in refunds is currently owed. It doesn’t expect much to change with the new policy. The club is not attracting many new members because of a bad market and the bad publicity generated by the developer’s financial woes.

“It is a joke,” Herman said of the new refund policy.

In his letter, Boates told members that the asking price for the club was “substantially lower” than the price the developer is entitled to under terms spelled out in membership documents. Those terms, he said, would require members to pay an additional $17,000 each and surrender their promissory notes to become equity members, or owners. That would equate to $25 million.
The turnover committee said the analysis by Boates is unfair because the membership documents allow for people who don’t want an equity membership to get a refund. It appears the developer is unwilling or unable to do that.

In his e-mail to Bonita Bay Club members last week, Boates said as long as they continue paying their dues the developer will continue to operate their club. He said Bonita Bay Group remains committed to the sale of the club to members, but there are others waiting in the wings that it will pursue if it appears members don’t want to acquire their club.

“These remain challenging times,” Boates said. “Nevertheless, (Bonita Bay Group) continues to pursue rational and appropriate terms as to the sale of its various clubs to the members of those clubs. We are fortunate that we have made some progress in this area, but much remains to be accomplished.” The developer is looking to sell all of its recreational clubs in a fight to avoid bankruptcy. It owes more than $70 million to a group of lenders, led by Key Bank.

So far, Bonita Bay Group has only been able to strike a deal with members in The Brooks, who have agreed to pay $8.3 million for the Shadow Wood Country Club and The Commons Club and waive the developer’s responsibility for refunding membership deposits.

Over the weekend, Mediterra members and other residents met to consider a proposal by their advisory committee to purchase their golf and beach clubs. Hundreds attended in person or by phone.

Mediterra member Michael Lissack said there’s still a lot of disagreement over the plan. While it’s widely supported by golf members, nonmembers and sports members aren’t so happy with it.

The cost of sports memberships in the new club would be expensive at $8,000, Lissack said. Access to the beach club would be more restricted for residents who aren’t golf members, he said.

Under the advisory board’s plan, members could buy their beach club for $6.8 million in cash or $8 million if it’s financed through Key Bank. A “zero value” has been put on the golf club, which operates at a deficit.

Members would assume $15 million in debt for a community development district, created to build the community’s roads and provide other basic services.

Mediterra has about 360 golf members, including some on the resignation list. About 200 golf members have shown support for the advisory board’s plan and have actually written a check, Lissack said.

“They need a lot more than that,” he said. “It’s like early returns in an election. It doesn’t tell you much of anything.”