The New Landings Building Detail and Square Footage Summary
Conceptual Construction Only Budget Summary
Conceptual Overall Budget from KDC Including All Costs
Insurance Claim Summary
As discussed in many of the Q&A sessions and outlined on the website, we must plan for the costliest likely scenario, or as we call it, the "worst-case scenario." In this scenario, we assume we will receive the minimum possible from insurance for the Landings Claim of $3.5M (when all is said and done). The Insurance Company's "lowball opening offer" started the claim process and negotiation in this scenario. A lowball offer is par for the course from insurance, but it is a starting point from which we can work and what we use today as our "worst-case scenario." Know that the club has Replacement Value and Full Blanket Coverage…so we are appropriately insured and well-positioned to get the full value of the replacement cost per our insurance contract.
Please see below for more info on insurance and timing estimates. As stated previously, the club will put 100% of insurance payments towards The New Landings. Due to the sporadic and late timing of the insurance payments, the amount of the payments, as well as the "loss of revenue" calculations (you must lose the revenue and then prove the loss before it is repaid by insurance), we will not know how much the final insurance amount will be until after we open and have an entire season of operating revenue again at The New Landings.
Assuming the "worst-case scenario," we expect the following payment schedule from insurance (subject to change):
~$1M Upfront before construction starts (Note: This is already received)
~$500K in a few installments during construction as milestones are reached (Dec 2024- May 2026)
~$1M in depreciation payments as soon as The Landings is completed (already committed in the opening "offer" from insurance)
~$1M +/- at some point in 2026-2027 for the rest of the claim (final cleanup: landscaping, business interruption, loss of revenue, “tee-to-green” Club blanket coverage, and other insurance line items)
We expect our claim to remain open until the end of 2027. NOTE: Sapphire Valley Country Club settled their claim last month from their Clubhouse fire and explosion in 2017…so it took them seven full years to settle their claim. Seven years is likely the longest it will possibly take for our claim. Three years is the shortest. While we hope our claim proceeds promptly and does not have the issues CCSV did, we have contingency plans if our insurance claim does not go as planned.
FINAL INSURANCE NOTE: We are leveraging the experience of many members and have a team of experts helping us every step of the way. We will likely receive more money than the "worst-case scenario" outlined here, but we do not know if it will be $1 more, $1,000,000 more, or $2,000,000+ more. Further, the Bank requires us to use the costliest possible amount for financing. So, we must plan for the worst and prepare for the best to get going on this project as quickly as possible.
Financing Summary
First, a general note on financing. Thankfully, our club is vibrant and healthy, and we can take on an aspirational project like this one if we choose to. Due to this fact, we already have financing approved by our current Bank, First Citizens, dependent on a YES VOTE from members regarding Capital Dues. We also have two other banks interested in providing financing besides our existing Bank, so we will have some leverage when negotiating the actual loan later this year.
Furthermore, we are fortunate to have insurance money helping us as well. As outlined above and for our estimates below, we used the "worst-case scenario" of insurance reimbursement. As we will not need financing until the end of 2024 at the earliest, we will not know the exact financing details for many months. However, we have many financing options available. Based on information today, we based Capital Dues on the following scenario to lessen Member and overall risk.
WORST-CASE FINANCING SCENARIO**:
We lock in a straight construction loan ASAP. This currently would be a 6.25% APR fixed rate 15-year mortgage with a 5-year balloon for a $9M Loan (typical amortization schedule). Members would pay $3,500 annually for up to 15 years in Capital Dues (or until the loan is repaid, whichever comes sooner). All insurance proceeds would go towards The New Landings, lowering everyone's cost/duration. The Developer/TLV would cover any shortfalls in construction costs.
**Remember, this is the most expensive financing option possible. In this scenario, this Developer/TLV contribution would be roughly $3.5M of the total cost of the rebuild.
In this worst-case forecast, Capital Dues alone are insufficient to cover the total cost of the rebuild. However, if this scenario plays out, the Developer/TLV plans to make up the difference and contribute to help rebuild The New Landings. For some additional detail on our assumptions, as this is a worst-case forecast, we anticipate decreasing from 300 paid member assessments (current) to 260 paid Capital Dues payments in 2025, eventually growing back to 285 paid member assessments during the life of the loan. This is the member stress test that the Bank requires and is much worse than anything we would expect. Therefore, yearly Capital Dues receipts are forecasted to vary between ~$900k and ~$1M annually. The Developer/TLV is comfortable covering the roughly $3.5M in reconstruction cash flow gaps, as they appear, over the next 15 years, as outlined herein. The Bank, Management, and the Advisory Board are all comfortable with the exposure in the bank's "worst-case scenario," as it is much worse than we would assume our worst-case to be, and are excited about what this project is going to do for our club, as well as for property values within Trillium.
A Note from your Advisory Board: As reflected in the bank commitment letter, to obtain the best possible loan terms, in addition to the pledge of the capital assessments of the members, the Bank will require a first lien or security interest in all the assets of the club, as well as other assets owned by TLV not related to the club. This requirement will provide a measure of risk protection from certain entities 100% owned by the Developer, which in the past made substantial loans to the Developer ("legacy debt") and have long-standing security interests in the Club assets. While the Developer considers this legacy debt owed to itself a minimal risk to members as compared to true bank debt, the Bank will require the legacy debt holders to subordinate their security interests to the bank financing during the term of the loan. As a result, any risks associated with the legacy debt will be eliminated until the bank loan is paid in full. For those members interested in learning more about the legacy debt, please contact Jared Zimmer or any members of the Advisory Board.
Capital Dues
Given current membership levels and expectations in the banks "worst-case scenario," a yearly Capital Dues payment of $3,500, for up to but not exceeding the next 15 years, starting in 2025, is required to move forward quickly with the construction of The New Landings. We cannot rebuild The Landings quickly without Capital Dues. 100% of Capital Dues will go towards financing The New Landings and capital improvements of the club. Capital Dues will go into a separate account, and the Advisory Board will oversee the disbursement of 100% of Capital Dues so members can rest assured these funds are used as planned.
Capital Dues Schedule:
January 2025: $3,500 Capital Dues per membership due
January 2026-2039 (or until the note is repaid, whichever is sooner): $3,500 Capital Dues per year per membership due
These Capital Dues will go into a separate bank account and are a line item on our Income Statement and Balance Sheet. They will repay both principal and interest of the financing for the Landings and other mutually agreed upon capital improvements of the club. These Capital Dues payments will be billed when Annual Dues are billed and will be due in January of 2025 and will continue to be due every January for up to the following 15 years, or until The New Landings financing is repaid, whichever comes first.
The club will bill Capital Dues yearly when it bills Annual Dues. All members must pay Capital Dues if they are members when the January billing occurs. These Capital Dues will follow the same rules as other dues and fees of the club. The club will communicate these Capital Dues in all communications and Membership Agreements so existing and incoming members will be appropriately informed.