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Update October 28, 2010

On Thursday, October 28, 2010, the Creditors Committee, Prudential and Ford’s Colony Country Club (FCCC)  participated in judicial mediation. The purpose of the mediation was to resolve the various matters in dispute among the parties. As most of you know, the Creditors Committee’s has focused on the:

1. Possibility of some return to unsecured creditors, most of whom are members or former members.

2. Objective that the Country Club which emerges from this process is well run and financially sound.

After many hours Thursday, it appears than an agreement has been reached capable of achieving both results.

Counsels for each party are scheduled to provide a status report to the court on November 4. The objective is to move as quickly as possible to work out the details of the framework resulting from the mediation. Once the final terms of the agreement have been reached, they will be circulated to you as well. In the interim, we wanted the membership to know that FCCC bankruptcy once again appears to be moving forward.

UPDATE September 2010
Ford’s Colony Country Club is entering into judicial mediation following a bankruptcy court hearing last week. The club, major creditor Prudential, and a committee formed to represent lesser creditors have all filed a number of pleadings about when or if the club can emerge from bankruptcy. At a hearing in Norfolk VA Bankruptcy Court, a judge suggested mediation to reach a compromise, and all sides agreed.

Agreement is expected in early November. The requirement for a reorganization plan has also been been extended. The creditors committee has filed a motion asking permission to retain a golf consultant to review the club’s finances.

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Developers of golf communities that are well established and with all amenities in place have fared pretty well amidst the carnage of the last few years.  Despite a 20-year track record, three golf courses and plenty of built homes, the Ford’s Colony Country Club in Williamsburg, VA, is in enough trouble to seek court protection. 

The announcement that the club had filed for Chapter 11 bankruptcy and is seeking to reorganize is a stark reminder to anyone in the market for a golf club membership — ask to see the club’s financial statements, especially the amount held in reserve

Update August 2010
Ford’s Colony Country Club is seeking a two month extension on the reorganization plan, but Prudential , the main creditor is objecting.
The bulk of the debt is owed to the lender Prudential on an $18 million note issued in 2007. Another $8 million is owed to insiders or affiliates, $400,000 in unsecured debt and $335,000 in equipment leases. About $400,000 was obligated immediately to members through refund agreements, with a potential obligation of up to $4 million. The club. The club has to sort creditors into a number of classes and then develop plans for each class, seeking approval from the creditors themselves for the plans. 
A Bankruptcy Court judge will make the final decision on how to handle the various classes of debts. The club continues to work with Prudential, although the bank did not want to delay the plans further and recently filed a motion to let them collect, according to a blast e-mail to members. “Prudential informed us at the outset… that they would pursue this,” wrote general manager Steve Dreybus. A portion of what is owed Prudential is unsecured debt, putting that last in line to get paid along with the member refunds. Dreybus said that talks are ongoing with both Prudential and a creditor committee that was formed to represent unsecured creditors. The debt classifications are scheduled to be reviewed in court next month and the club has until Sept. 30 to file its final reorganization plan.

April 2010
Ford’s Colony Country Club filed for bankruptcy protection Thursday, with debts of at least $10 million.
A confluence of negative factors drove the club into Chapter 11 (see box).
The filing will restructure the club’s debt by spreading it out and allowing the club to shed much of it. A top executive said the club will continue to operate and the bankruptcy will not affect homeowners in the gated community.
The company lists assets worth somewhere between $10 million and $50 million. It lists its debt within the same range, according to paperwork filed in U.S. Bankruptcy Court. The bulk of the debt is owed to Prudential on a $18 million note issued in 2007 When the club first filed for Chapter 11 protection, Richard Ford explained that new memberships were down, tied to the crash in the real estate market. Discretionary spending among existing members also declined, as had tournaments and special events.

He said memberships will continue to be honored, planned events and tee times will continue, and the 100 or so employees will keep clocking in.
Within 30 days, management will have to submit a long-term financial plan to the court. “We regard this opportunity as a new beginning for the club, its members and employees,” Ford said.
The filing notes that the club’s cash flow or profit has been down in the past year because of the crash in the real estate market and subsequent membership sales.
In late 2008 and early 2009, the club fell behind to Prudential by several payments but negotiated through the end of the year. In December, the company fell behind again. This time Prudential was unwilling to defer payments and moved to have a receiver appointed.
Ultimately the company hopes to “emerge from bankruptcy with a healthier golf club operation,” according to the filing.
Homeowner association president Jim Taverna said Friday that the news wasn’t totally unanticipated. The board knew the club was struggling and had been trying to increase exposure through non-member resident tournaments and the like.
“The HOA is trying to take a pro-active stance in working with the club in helping improve their financial performance, [but] there has been no HOA money put into the club,” he emphasized.
Resident concern isn’t directly centered on financial entanglement, Taverna said. “We’re concerned about the perception in the greater community and the impact on the values of the houses in Ford’s Colony,” he said. “Our concern would be how this would be presented by a real estate agent to a prospective buyer.”

Taverna said that there is little concern that the club will ultimately prove so unsuccessful that the courses will be converted to housing. HOA members have researched the issue and found that zoning and other land use designations are close to airtight.
While more golf courses are closing than opening, Realtec’s Drew Mulhare said that many courses, like Ford’s Colony’s, are integrated into residential communities, reliant on real estate sales and development. In this case, the developer arm, Realtec, subsidizes the country club when business is down in the winter. Real estate sales also fuel the club’s growth.
Asked if golf is losing its primacy long-term or whether the area is overbuilt in courses, Mulhare said, “It’s way too early to answer those questions, because the golf business is not an isolated situation that can be analyzed like that.”

Residents in Ford’s Colony, which was one of the earliest golf communities in the historic Williamsburg area, are not directly affected by the golf club’s problems.  However, if the club does not successfully re-organize or gains a reputation for poor playing conditions, residents are likely to feel the effects in their home values.

Read more about Ford’s Colony Williamsburg here

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