Coral Beach members not impressed by Brickman’s $28m equity plan
Coral Beach’s membership may include some of Bermuda’s wealthiest residents, but in this economy even the rich are being conservative with their cash.
The Paget beach and tennis club’s members appear to be balking at a plan by US developer Brickman to sell them the club facilities (though not the guest rooms) for $28 million with them taking on the company’s $5.5 million in debt.
Sources close to members told
The Royal Gazette many members felt they were being “ripped off” while Brickman was trying to “extricate itself from a deal at the top of the market”.
The stunning proposal to members comes after Brickman scuppered its plan to turn the 26-acre, 32-room oceanfront property into a five-star resort. Unable to make the economics of that plan feasible in Bermuda after the crash of 2007-08, Brickman has turned to the club’s members for $11 million in cash, plus the $11 million estimated cost of major renovations of the club facilities and $3 million more for the upgrade of guest rooms, and to have its $5.5 million mortgage assumed by the membership.
Brickman would retain the guest rooms and most of the property the club is on.
The company wants each of the 1,500 Bermuda and overseas members to make an “ownership contribution” of $20,000 (for non-residents) or $35,000 (for residents).
Brickman said the new owner memberships would be exclusively for use of the club facilities and should not be viewed as an investment from which they can profit.
Furthermore, Brickman said in a letter to the US SEC about its plan, that members would not be entitled to share in any income generated by the operation of the new “equity club” nor could they sell or transfer their memberships other than to the ”equity club” by resigning them and waiting for them to be reissued to a new member, while continuing to pay dues.
Officials from Brickman, which holds a 200-year lease on the property, flew in this week hold the first of more than a dozen town hall meetings here and in the US and UK to pitch their plan.
A brochure briefly detailing the plan and providing several pages of architectural drawings of the proposed upgrades was handed out to members.
Members and sources close to the membership said many of the club’s Bermuda members were ”mad” about the Brickman proposal.
“I have heard that the old guard membership is not renewing in May,” one source said. “I think the biggest problem from what I heard was that it is too much money for the members and that the member doesn’t get enough for this initial investment.”
A member pointed out: “Members will not be permitted by the bylaws to participate in the profits of the club or any dividends or distributions ... however, Brickman, it is clear, will profit.”
A source said members were also complaining about other details in the plan such as upon a member’s death, they or their estate finds itself still liable for dues until their membership is sold by the new equity club.
A member said: “Members will not be able to resign from the club and stop paying membership dues to Brickman, who will have a 10-year embedded management contract and veto power. A seven-person vote requirement for major decisions on nine-person board on which Brickman has a right to four members gives Brickman control until it has sold the residential land.”
There were also concerns at the meeting about the proposal for Premier Club Management Services to take over management of the club. Premier, which began business in 2010, manages clubs in Savannah, the Bahamas, and Florida.
Brickman official Rob Coakley insisted yesterday not all reaction to the plan had been negative. He said well over 100 members had attended the Monday night meeting.
“This was the first of many meetings and we plan to continue the process for explaining the plan to members,” Mr Coakley said. “There were a wide variety of questions and we answered them.”
When asked what would happen if not enough members signed on to the ownership plan, he said: “That’s something we are not dealing with now. The whole goal is to get this plan to work.”
The equity conversion, if implemented, would include renovations to the clubhouse and beach terrace, including new windows and air conditioning, the bar would be expanded, the lower clubhouse would get bathrooms, the buffet room would be upgraded, televisions would be added in the beach terrace, the beach hut would be improved, tennis locker rooms would be renovated, fencing around the courts would be repaired and the squash courts would receive new floors and air conditioning.
Twenty-four rooms would be renovated and receive new furniture, lighting, doors, windows, shutters, air conditioning, TVs, internet and paint plus upgrades to the bathrooms.
The club facilities that would be sold to members include clubhouse, beach terrace, courts, fitness centre, spa, and croquet lawn.