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Fact or Fiction? You can have a new clubhouse at no cost to the club

There are many clubs that have tired, dated and even obsolete facilities, but they just don’t have the budget to update the buildings. With the increased operating costs and slumping memberships clubs’ are finding it harder and harder to provide members with the types of facilities that they would like to.

Many club managers see other clubs getting new facilities when they partner with developers or industry providers like retirement living operators or hotel chains, but how exactly do they get to that point if they don’t have any spare money to kick start the process, get the DA, engage consultants, work with solicitors and so forth.

We spoke to Anna Porter, founder of Suburbanite Asset Advisory to give us some industry insight into how these deals come about and what the real cost is to the club.

“We have many organisations come to us asking how can they start the process with no money. Not just clubs, but NFP’s and community organisations as well,” says Porter.

“There are many deals going around that are structured in a way that the club or organisation doesn’t pay for any of the project costs. Not the planners, architects, DA’s, legal team and more. It takes a fairly sophisticated commercial negotiation to get this right, but it is possible,” says Anna.

She explained that the club gets all the costs covered in the commercial deal, gets a new club and for that the developer or JV partner gets to develop the surplus land without having to buy the land upfront. So, they save money, usually, there is a profit split at the end and it really can be a win-win.

“Having said this though, there are a few things that need to be considered in going into the deal, and risk mitigation that needs to be put in place,” noted Porter.

“Firstly, there has to be a due diligence budget established from the outset that the client (club/organisation) can use at their discretion for their own risk mitigation processes like legal advice, tax strategists, property experts, quantity surveyors and more. These costs can easily run into the hundreds of thousands before a major project even gets off the ground and $1Mil-$2Mil range throughout the whole project for a large development, so this needs to be negotiated in. If the client is purely relying on the developer to guide them and do all the due diligence for all parties the client/club can get misled, lose money and will not be in step with their own governance.,” says Porter.

The client/club will still have some initial costs they need to be able to cover to start the process but they can limit this says Porter. These costs will include;

  • Cost 1: for a specialist property firm to develop the strategy, navigate the commercial deal and analyse the economics of the proposal. This needs to be done before even engaging a JV partner and this will be the clubs cos
  • Cost 2: legal fees to review the proposed options before anything is signed off.
  • Cost 3: Architect/planners fees to do a preliminary report on what can be achieved with the property/site. This, however, can be very high level and preliminary to just give the board an idea of what will be possible to offer to the market for a ‘request for proposal’/EOI process

These preliminary costs will typically come in under $50,000 and of the right commercial terms are struck in the deal a lot of this, if not all of it can be reimbursed back to the club/client early into the agreement. So having a property partner that has seen a lot of these types of deals is critical to being able to negotiate robust commercial terms for the clubs’ benefit. Many firms will even do the negotiations for the club if they have experience in this type of JV.

The process to get to the point of signing off on a JV is actually more straight forward than most managers would think, according to Porter. She said it can be simplified into three easy steps, which she shares with us below;

  1. Set up a strategy for the property assets that encompasses surplus land available for repurposing into the market, which will make up the ‘offer’ and what the operational needs are.
  2. Develop the framework of the commercial deal and what the club wants to achieve and identify suitable JV partners, ie: an aged care provider, over 55’s operator, developer, accommodation provider, etc
  3. Do a robust EOI/request for proposal process to attract the right offers and proposals, review them and then select the most appropriate one.

Then next steps are to formalise the agreement with a solicitor but this can be done in stages to alleviate the costs and also have the JV partner start to cover the costs for the club.

Whilst this sounds simple, Anna is aware that many club managers don’t have experience in this type of thing and wouldn’t want to drive the commercial terms or strategy, nor have access to the JV partners. The good news is, says Porter that a club can engage firms like Suburbanite Asset Advisory to do this whole three-step process for them, or simply provide guidance at key stages to get them on track and it isn’t going to break the bank. “Some clients do most of the execution themselves and simply get a firm in to do a few strategy sessions to flesh out the best direction and identify the risks that the club needs to mitigate, and that is enough to set the GM or CEO to drive it with confidence. Others get our firm to do the whole process end to end so they know it is being done correctly and they can focus on running their club,” finishes Porter.