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Residential, Clubhouse and Course Development

Merewether Golf Club has launched plans for a multimillion-dollar redevelopment including seniors-living apartments attached to a new clubhouse.

Merewether Course Draft Design

Merewether Golf Club has launched plans for a multimillion-dollar redevelopment including seniors-living apartments attached to a new clubhouse. As part of the development Merewether are taking the opportunity to adopt a course masterplan to guide course changes and improvements, not only to accommodate the development but also to guide future course developments to improve the course. The PDF of the draft design can be downloaded by clicking on the link below;

Draft Design

Residential, Clubhouse and Course Development

Merewether Golf Club has launched plans for a multimillion-dollar redevelopment including seniors-living apartments attached to a new clubhouse.

General

In mid-2016, a few months after our election, the MGC Board [the Board] asked for members’ views as to what direction MGC should take in terms of how to best use our land and building assets to ensure the sustainability and long term financial stability of the club and improve the course and the golfing experience of both members and visitors. Responses to this survey overwhelmingly supported the investigation into a potential development of the clubhouse and a Seniors Living facility.

Preliminary work was undertaken then presented to members in July 2017, along with the vision of the next stages including prospective course changes and development design. At this point the Board sought confirmation from the members to continue exploring the financial viability and once again received endorsement from the membership.

Following an Expression of Interest and subsequent two-stage selection process of potential development partners, the Board and Development Committee selected Thirdi/ThirdAge to enter into an exclusivity period. As a result of the extensive investigations and negotiations the Board are now seeking the approval of the membership to proceed with the development.

Members are very familiar with the unacceptable financial performance of the Club in recent financial years. Whilst we are yet to finalise the results for 2017/18 the Board anticipates we can look forward to an improvedbut still unacceptable performance. Since the Board’s election in 2016 we have made inroads, in terms of:

  • Scrutinising costs and working within budgets to ensure costs are monitored and controlled
  • Finding efficiencies in course resourcing and machinery leases
  • Actively pursuing functions and corporate golf days
  • Maximising subscription income by introducing new membership categories
  • Leveraging the Board’s existing network to secure sponsors
  • Regular communication with members

However, it is the Board’s view that the Club (in its current form) will continue to struggle to make adequate returns, while maintaining an ageing clubhouse in good working order and also keeping the course in an acceptable playing condition.

Our clubhouse is now over 50 years old and is reaching end of life, with increasing maintenance costs each year ($75,000 last financial year and around $90,000 this year despite our members often providing free labour to effect repairs). The facilities are clearly dated and not attractive for functions, and the larger membership does not appear to be willing to support the current clubhouse facilities in their current form. We believe that, by any measure, it will not meet the needs of a successful golf club and therefore simply maintaining it (even at an increasing cost) is not suitable in the short, medium or longer term. In addition gaming (pokie) revenue is down.

As with all golf clubs, the costs associated with maintaining a quality golf course continue to rise and the cost of some elements (including electricity and water) are rising significantly. The course is well presented but similarly requires significant works over the longer term. We are aware of prospective issues with hole design, and also the need for greater dam efficiency to ensure water security.

Our membership levels and golfing income are relatively strong, which is very beneficial, but the reliance on weather-dependent income can be problematic and is not a sustainable long-term strategy. Cash from the land sale continues to shield us from a more dire situation, but for how long? The underlying challenges remain. The Board believes that this development opportunity will provide the necessary long-term financial security.

The Board has pursued the development as a result of the overwhelming support the membership provided following the information session last year, and through an exhaustive process, have a proposal that meets the requirements that members placed on the Board. Furthermore, the Board has noted that other clubs’ pursuing similar developments, we believe typically have left it far too late to ensure they get the best deal possible. The MGC Board believes that it has secured the best possible result by dealing with proponents from a position of strength.

Therefore, the Board wholeheartedly endorses the development presented and proposed resolutions (and accompanying Notes) and believes that the project will not only secure MGC’s future for the next 100 years but also deliver to a better course, better facilities, and a new clubhouse for members and guests alike.

As this is an important decision, the Board requires member approval to further proceed. As there is a lot of information, we have set up a series of meetings, with a vote at a General Meeting on Thursday 27th September.

Information Session – Sunday 9th September at 2pm

All members are invited to the presentation on Sunday 9th September at 2pm to see the proposed course, clubhouse concept and residential development. Whilst the Clubhouse design is incomplete, the Board have visited and inspected a number of golf clubhouses and are very confident that an outstanding clubhouse and facilities can be constructed within the financial parameters. As the clubhouse design is firming the Board will display design details within the clubhouse for member comment.

Q&A Session Tuesday 11th September at 6:30pm

A follow-up presentation is set for Tuesday 11th September to address questions submitted to the MGC Board and Management that have either not been considered in the Q&A or that require further detail. Please email questions to development@merewethergolf.com.au

General Meeting (the Voting Meeting) Thursday 27th September at 6pm

A General Meeting has been set for Thursday 27th September at 6pm in the clubhouse which will be the actual vote on the proposal. Due to the requirements of the MGC Constitution as well as The Registered Clubs Act, members are required to vote on two resolutions.

The Resolutions

There are two resolutions on which members are asked to vote. The two resolutions are the same: to lease the land to allow construction of residential dwellings on terms set out in the Notice of General Meeting sent to members (please refer to the exact wording on the Notice).

  • Resolution 1 satisfies The Registered Clubs Act; all ordinary members can vote on this resolution, which requires a simple majority (50% + 1 attendees at this General Meeting)
  • Resolution 2 satisfies the MGC Constitution: only eligible members (as stated in the Constitution and Point 9 of the Notice of General Meeting) can vote on this resolution which requires a majority of 75% of eligible attendees at the General Meeting.

The General Meeting (Thursday 27th September)

At the General Meeting a summary of the previous presentation will be given and members will have the opportunity to speak for or against the resolutions prior to the vote being called. Additionally, any last minute questions that may have arisen since the earlier Q&A session will be addressed by the Board (preferably submitted to MGC’s secretary manager by close of business on Wednesday 26th September). As noted above

  • All members can vote on Resolution 1
  • Only eligible members can vote on Resolution 2. Eligible members are 7 Day (including Senior & Veteran), 6 Day (including Senior & Veteran), Youth, Young Adult, & Life members ((as stated in the Constitution and Point 9 of the Notice of General Meeting)

In other words, what will prevent MGC ending up in the same dire situation as at other local clubs? There are a number of points of difference that will ensure that MGC does not follow the same detrimental path as other clubs or end up in a similar dire position:

  • Firstly, the process undertaken by MGC to reach this stage is significantly different to other clubs. The Board initiated discussions on a prospective development soon after forming in April 2016.
  • Our Development Committee consists of industry experts from a range of relevant disciplines, many of whom are Club members and who generously offered their time thus saving the club thousands of dollars. The Committee covered all aspects of potential impact to the club, including building architects, Quantity Surveyors, course architects to advise on course works, a registered Property Valuer to provide independent advice on land and apartment valuations and legal advice on contractual issues and areas of concern relating to the Registered Clubs Act and the MGC Constitution.
  • The process included a comprehensive EOI phase – many proponents approached MGC with a view to take part in the development and MGC’s Development Committee operated from a position of strength in the negotiation phase. In comparison, similar projects for other clubs do not appear to have had the same financial rigour or capacity to engage members to minimise costs.
  • Extensive financial modelling has been conducted into scenario analysis and cash flow evaluation to ensure the Board has full confidence in the prospective results
  • MGC will maintain full control over the course development works including the timing, scope of works, parties contracted and the enforcing the completion of the course works to precede the development commencement
  • We are negotiating from a position of strength – not a situation of desperation – so are in a position to secure favourable terms, ensuring adequate cash reserves during the construction phase and ongoing income streams going forward
  • And finally, we have taken note of issues experienced by other clubs, not just in the Hunter but also further afield, to ensure we understand what has been successful and, equally, learn from the apparent mistakes or oversights of others.

The Course

In order for the development to be financially viable there is a requirement for a specific ‘footprint’ of land to be made available for a Seniors Living development. This is the surplus or “non core” land as referenced in the Notice of General Meeting. For the course to be able to accommodate this footprint and remain an 18 hole course we will need to make some changes to the course design. Specifically, as the current 18th hole will be occupied by the development, we will need to change the course to create a replacement.

Additionally, the members have advised that there is a preference for;

  • The course to become a 9 + 9 hole split in place of the current 8 + 10 configuration
  • A desire to have the current 17th hole become the new finishing hole so members and guests can watch players as they finish their last hole
  • Minimal disruption to the course playability during construction

The Board has commissioned James Wilcher, founder of Golf by Design, to provide course design assistance. James Wilcher is a highly regarded Course Architect, formerly working with Greg Norman and now working closely with the Ian Baker-Finch course design team. Golf by Design were also selected by the previous Board to develop some course design outlines to accommodate the sale of the horse paddock and changes to other areas of the course. Wilcher has considerable knowledge not only of Merewether but also with the Newcastle region’s courses generally, having designed Pacific Dunes and also being commissioned for various levels of work for Waratah and Belmont GC.

Wilcher’s approach considered the contours of the land, the requirements of the course in terms of the members’ stated desires (including the necessity that golfers of all levels and capabilities should be able to enjoy playing MGC) and the existing issues and faults that the layout currently exhibits.

This has been one of the most critical issues faced by other courses. The proposed contract with ThirdAge is such that clubhouse and residential development cannot proceed until the course works (immediately relevant to the development) are complete. This includes a requirement that the course continues as a men’s par 70 /women’s par 72 course without temporary greens. Supporting this will be clauses in the contracts that specify completion dates for course works as well as penalties should the selected Contractors not have works completed to the required quality standards by the specified time.

Also, the course re-design is such that the required course works can be undertaken in several future stages to minimise impact on member’s enjoyment of the course, and a time when funds are available.

Stage 1 is budgeted for $1.5M, with a further $750k for stages 2 and 3 respectively. The amount actually spent on each stage will be dependent on the progress of specific works compared to the development start dates.

The majority of the works will be contracted out to professionals specialising in the various aspects of course build including; green and bunker shaping, drainage, irrigation and turfing. It is certainly important that our team are involved in the build process. Apart from the experience our more junior greens staff members will gain from the process, it will allow the course team to be more familiar with the new works. However, in order to maintain the course in the condition we expect it will be important that sufficient staff are available for the regular maintenance.

Not only does the Board consider this to be the most prudent approach, it is also the approach recommended by the course architect.

Retention of rain water on the course is of paramount importance to the club as it reduces our reliance on town water. This is vital for two reasons;

  1. It reduces costs associated with buying water which has averaged between $25,000 and $30,000 per year over the past decade
  2. It minimises the risks of Hunter Water, at some time in the future, potentially deciding that we can no longer buy town water

The placement of the current dams is not necessarily aligned to the watershed on MGC’s landholdings nor does it capture all available water. For instance, the entire section of the course east of the 9th dam is not currently flowing into any dams on the course and flows into the storm water system. This equates to approx. a quarter of our surface area.

Additionally, from a course design perspective, the dams are not best placed in terms of the flow of the golf course and therefore do not complement the design. Sizeable embankments such as exist on the 9th, 13th, 14th, 15th and 16th dams have a clearly artificial look and do not add to the aspect of the holes.

Importantly, while some dams are being adjusted, the overall storage capacity on the course is being increased and the ability for the course to maximise the retention of rainfall is similarly being enhanced by the changes.

Although the Course Masterplan shows several holes in a redefined future state the hole routing will remain similar. In short though, we will adopt a new ‘split 9’ arrangement with the current 9th becoming the 1st hole, this continues as present with the 10th becoming the 2nd, the 11th being split into the 3rd and 4th, we then play the existing 4th as the 5th and continue with the current route from there; 5th becomes 6th, 6th becomes 7th, 8th becomes 9th.

On the back 9 holes; the 1st becomes the 10th, 2nd becomes the 11th, 3rd becomes the 12th and then straight onto the existing 12th which becomes the 13th. From there it also continues on the current route with the 13th becoming the 14th, the 14th becoming the 15th, the 15th becoming the 16th, the 16th becoming the 17th and the current 17th becoming the new finishing hole.

Membership

As part of the development proposal the MGC Board are proposing that the annual subscription fees paid by members will be frozen at their current rates in perpetuity. This will apply to all members who are financial at the end of the calendar year (to be specific, by close of business Monday 31/12/18) and remain continuously financial.

Although the Board initially considered this as an appropriate model to thank members for their commitment to Merewether Golf Club during the course works, we also see it as a pragmatic tool to ensure the longevity of the club. We believe that by freezing the subscription fees for existing members (as above) we will encourage members not to move to another course while works are undertaken and then seek to resume membership when we have a fabulous course and clubhouse.

It is also important to note that, as detailed in the last Annual General Meeting, the Membership Committee has set a target percentage fee for each membership category, the target is based on the relative value against the 7 Day membership. The fees outlined in the Appendix provide a guidance of the future expectations for annual fees to allow members to make decisions on the most cost effective membership. The use of CPI is indicative only and may not reflect the actual increases over time.

The Board are very keen to retain all current members and, as always, encourage members to make a decision based on individual circumstances. What future Boards decide is clearly unknown, but this Board suggests that key considerations might be:

  • potential for future increases (well) in excess of CPI. Following construction of a new, high quality clubhouse, together with substantial course improvements, the prospects of higher membership fees would appear to be strong
  • potential for membership growth, leading to waiting list(s) or joining fees.

The membership freeze is only for the annual membership subscription fees so does not include any other services such as the green fees or cart shed fees. The Board, and presumably future Boards will, recognise that green fees must remain competitive in the golf market. Similarly, the membership component for sponsorships will be frozen however the sponsorship value in total will still vary based on demand and value delivered.

If you maintain or change to Flexi membership this year, your subscription fees will be frozen (in line with above). However, if you decide you want to upgrade to 6 or 7 Day membership at any time after the end of this year, you will pay whatever the current rate is (i.e. you won’t qualify for the frozen membership fee). As well as this, it is possible that 6 and 7 Day membership may be capped and you might not be able to upgrade when you want. Additionally as 6 and 7 Day membership numbers increase, it is possible that 6 and 7 Day members will have preferential access to timesheets leaving Flexi members unable to find a tee time.

From this point of view, current Flexi members would do well to consider which category has the playing privileges they seek in the long term and move to that as their new playing category before the cut-off date.

7 Day members who qualify for the frozen fees can downgrade from 7 Day to 6 Day and still pay the frozen 6 Day rate.

After the December 2018 cut-off date, members will be entitled to progress to their relevant age category without penalty. For instance, 7 Day members qualifying for 7 Day Senior will do so at the frozen rate at that point in the future. Similarly, Youth will be required to progress to Young Adult and Young Adult will be required to progress to 7 Day, all based on the frozen rates schema.

Ideally nothing, but it is entirely up to you. It would make sense to consider what membership level you want to be on in the future and, should it be a higher level category than you are on now, move to that category as soon as possible. For instance, if you expect to be able to play more in about 5 years’ time (kids move out, retirement etc) and you are currently a Flexi-Golfer it would be worth considering the long term savings and benefits by locking in a 7 Day membership now instead of upgrading to the 7 Day category at the current day subscription fees when that time arrives.

It is also worth noting that if the relevant membership categories are at capacity at the time you wish to upgrade in the future you may need to go on a waiting list until a space becomes available.

We have modelled several membership scenarios and found that even with conservative estimations we can freeze membership fees for existing members and still maintain very acceptable profitability projections, even assuming standard CPI-type increases and enduring normal membership churn. This is a result of several factors;

Members who have dropped back to lower categories while unable to play as much as they would like (e.g. kids sports) will see the long term benefit of locking in the preferred higher category now rather than pay (significantly) more in a few years.

  • Existing members hesitant to stay at Merewether during course works, despite assurances of minimal disruption, will be further encouraged to stay
  • Members of other clubs may find the offer attractive and take the ‘long term view’ and join our club, further bolstering our membership base
  • Those who are not currently members of any club will also take the ‘long term view’ and join Merewether in anticipation of being able to play again in the future
  • Seniors Living residents may become golf club/playing members

We did consider this however it would only be a short term gesture and does not provide a lasting model that suits the club and its financial requirements. We are seeking to reward loyal members who want to be part of the Merewether golfing community and that is not something we consider to be a short term engagement.

Clearly one objective for the Board has been and remains to increase MGC members. The playing membership at Merewether is strong but there are still plenty of spaces on the timesheets on all days. The Match Committee will continue to monitor the membership levels and review the membership ratios of the different categories to ensure a fair balance.

The Flexi-Golfer membership has been very successful and we still envisage it being popular into the future. However, as outlined when we initially brought the category in, the plan is for 6 and 7 Day (as well as Youth and Young Adult) to be provided preferential access to the timesheet. As the demand for timeslots increases the full (7 and 6 Day) membership categories will be provided with earlier opportunities to access the timesheet.

This means that the cheaper membership categories, such as Flexi-Golfer members will be more likely to be impacted as the fields begin to fill however the intent remains to enable all members to get fair access to timeslots and as such we may need to cap membership categories in the future.

While the Board is focussed on promoting golf generally and would like to see all golf clubs in Newcastle operating strongly, we recognise that club closures are a very real possibility and we are already fielding many enquiries from other courses. This is a combination of concern about other club’s directions and futures and recognition of the positive direction and future of Merewether Golf Club.

It is reasonable to assume that this trend will continue and that the membership base at MGC will continue to rise. Combine this with the increasing population density in the City of Newcastle’s region, Merewether Golf Club’s proximity to the higher density population and it is apparent that the demand for memberships will continue to increase over time. This will ultimately put pressure on the membership levels and at that point the Board will have several options;

  • Introduce joining fees for new members
  • Increase annual subscription fees for new members joining after the December 2018 cut off beyond CPI
  • Cap membership numbers for certain categories
  • Create waiting lists for specific categories
  • Create entry points for categories that permit progression to higher level categories when positions become available

The Seniors Living facility is likely to include a Wellness Centre (with gym and pool). As part of our overall agreement with ThirdAge, the Board is negotiating a Wellness Centre membership for MGC members. Details are yet to be determined but membership prices will be competitive.

Operations

The Gear Shed will need to move from its current location to accommodate the development. It would not be cost-effective to have the gear shed underground as part of the development. Other locations around the course have been considered with a final location being next to the existing 7th tee.

Moving the Gear Shed prior to the commencement of the development also ensures we will not require temporary facilities for the green staff and machinery and negates any costs associated with double handling of the Gear Shed facilities in multiple locations.

The development was initially planned to take place in stages however both parties came to the view that it would be less disruptive, safer, and financially beneficial to complete all development works as soon as practicable. This means that the clubhouse works will take place at the same time as the residential development works, closing off the development footprint to golfers. This means that we will have temporary Pro-Shop and Clubhouse facilities during the demolition and construction of the new clubhouse. This will be in place from the time of the Clubhouse demolition to the opening of the new Clubhouse.

The temporary facilities will be focussed on golf operations and as such will include the Pro-Shop and golf operations such as the carts.

During the period that we will be utilising a temporary clubhouse the club will not be providing for functions, gaming, bar services outside of golfing hours or room hire. The food service is anticipated to be limited to basic food preparation, likely a BBQ and pre-prepared food items such as may be expected at the bar or as currently served in the “Grab & Go” café downstairs.

Temporary parking facilities are currently expected to be located on the 1st fairway for all golfers.

While it is intended that there will be minimal impact to the Pro-Shop and Pete’s staff it is recognised that as the impact to golf traffic is unknown we can only model potential impact and work with the Pro-Shop as to what may happen.

We expect that the current cart shed can remain until the new clubhouse is completed. The club is still considering the phasing out of current member-owned carts and their ability to be stored and accessed on Merewether Golf Club property. Merewether Golf Club has moved to take ownership of the golf carts in consultation with the Head Professional Peter Johnston.

Clubhouse and Car Parking

The new clubhouse will be primarily built in the same location of existing clubhouse however it will be centred slightly more to the north with views of the new 18th green and fairway (existing 17th). This means that it will incorporate the practice green and therefore a new practice green will be built as part of the course works.

As mentioned previously, the Clubhouse design is not yet finalised. The Board have visited and inspected a number of golf clubhouses and are very confident that an outstanding clubhouse and facilities can be constructed within the financial parameters. As the clubhouse design is firming the Board will display design details within the clubhouse for member comment.

The Board is considering the prospect of leasing out the bar and bistro. At this stage no decision has been made either way however we have adopted market leasing rates to assist in forming the business case for the overall development and cash flow projections. This enabled us to determine a sizing that presents a return on investment and risk profile in line with the Board’s requirements. The Board has spoken informally with external parties and has engaged industry experts to ensure the plans are in line with expectations and the pricing models.

With the proposed new clubhouse and surrounds we aim to have golfer parking for more than current spaces available and believe there will certainly be adequate parking for members.

It is anticipated that very adequate parking will be provided for residents and their visitors, with resident parking to be via restricted access. As for all such facilities, local by-laws will enable both the Club and ThirdAge to ensure parking is used only for its intended purpose.

Seniors Living Development

The Board chose a Seniors Living development for a number of reasons.

  • There is a relatively large population of the target market (65 and 70 year olds) within the area and expected to increase
  • At present not many of this age group lives in a Seniors Living facility, possibly because there is nowhere that suits them.
  • There aren’t many Seniors Living facilities in the area, with existing ones being older and not offering a suitable village atmosphere with suitable social and recreational amenities.
  • The approval process for Seniors Living works easily with our current zoning and takes less time than rezoning for conventional apartments
  • The Seniors Living concept and negotiated financial position (including ongoing share of DMF) will provide the Club with a new clubhouse and facilities and non-golf income effectively ‘forever’.

Not a discount on purchase price, but 6 and 7 Day members will get first options in a special pre-market VIP release (details to be provided at a later date).

For details about the apartments, please refer to the ThirdAge booklet. Visit themerewether.com.au for details and to register your interest .

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