Welcome And What We’re Addressing

Speaker 3 0:00

Welcome, Benita Bay Club members. Today we are continuing our Clubhouse series and focusing on one of the most talked-about aspects of the West Clubhouse assessment, the refundability. I'm joined once again by board president David Treadwell and board members David Weatherbie and Jay Belwoar. Let's begin with the first question. When they say this assessment is refundable, what does that actually mean for the members?

Speaker 2 0:25

Well, what that means is the assessment will be paid back in the form of either a dues credit or a cash refund on a best efforts basis at the discretion of the board.

Speaker 3 0:37

So it's not a one-time repayment. They are actually different ways members receive that money back.

Speaker 2 0:43

Well, that's correct. So in the case of a dues credit, you would receive 20% a year over a five-year period at the later of fiscal year 2031 or when you turn 80 years old.

Speaker 1 0:58

So for example, on that, if you paid the $15,000 assessment and you turn 80 in 1931 and the new clubhouse is open, and the board decide 2031. I'm sorry, 2031. I said 1931. In 2031. And the clubhouse is open, and the board in their discretion determines that they have the ability to do this, your dues would be reduced by $3,000 per year for each of the next five years until the assessment was paid back in full. The $15,000 was paid back in full. So pro rata with whatever you've paid in that time period.

Speaker 3 1:32

So for some members, especially those certain age groups, does that mean that they could see most or even all of their assessment returned just through those credits?

Speaker 1 1:40

Yes. That's correct. If you're a member until you're 85 years old, that would be the the way you'd most likely get it back.

Speaker 3 1:47

Okay. So I was going to ask when do they start seeing those credits? And that wouldn't be till 2031.

Speaker 1 1:53

The clubhouse is opened, which we expect to be 2031, and the board determines that we have the funding ability to do that.

Refundability List And Past Precedent

Speaker 2 2:00

And the member is 80 or older. Right. And that's just the dues credits. The refundability list is a separate item, and we would expect those to begin in fiscal year 2033, again, on a best efforts basis at the discretion of the board.

Speaker 2:18

I think it's important to understand that this structure, this refundability structure, is modeled after the conversion fee refundability. So back in 2010, when the club bought the existing club from the developer, the members who joined at that point paid a $10,000 conversion fee. And almost exactly like we're talking about here, the club at that time promised the members who paid the conversion fee on a best efforts basis at the discretion of future boards to pay back that conversion fee in one of two ways. When that member turned 80, for the next five years, they would get a dues credit of 20% of the $10,000. Or if the member left before they turned 80 or before they received all five of their dues credits, then they would go on the refundability list, and anybody who left the club would receive whatever balance they had of the conversion fee at that time. Again, best efforts basis based on the discretion of future boards. That's the way the conversion fee refundability was structured, and that's the way the refundable assessment refundability is structured. It's very important to emphasize that everybody who's qualified for a refund of the conversion fee since turnover, that is, they've either reached the age 80 or they left the club, has received 100% of their conversion fee according to the commitment, the best efforts commitment of the board back in 2010. Moreover, by the time this new clubhouse is constructed and open in 2031, and the best efforts 20% refundability of the refundable assessment kicks in, we will have paid back almost 100% of the conversion fee to members who paid it back in 2010. So that cash flow is going to be freed up to allow us to be able to pay back, again, best efforts basis at discretion of the board, but the funds are expected to be there to pay back this refundable assessment according to the exact same schedule.

Speaker 1 4:40

And the conversion fee initially was $13 million, which is not that much less than the total raise from the assessment. So it's to Jay's point, I mean it it's a similar cash flow replacing what the conversion fee was.

Speaker 3 4:53

So the commitment is real. The exact timing depends on how the funds become available over time.

Speaker 1 4:59

Yes. Based on history with our initiation fees, we expect that the money will be there to do that. Now you never know what you know what the future holds, but our initiation fee influx is between $10 and $15 million a year. So uh there should be the funding available to do that.

Priority Rules Death Leaving Downgrades

Speaker 3 5:14

Okay. And is there a priority system involved?

Speaker 5:19

Well, the priority system is based, first of all, on reaching the age 80 after you know 2031 or later. That's the first priority. And the second priority is the second mechanism to qualify to get paid back is if you leave the club. And it doesn't matter what age, if you leave the club, then you go on the refundability list and everybody's treated the same as on the refundability list.

Speaker 3 5:44

Another question that a member asked is if they pass away, do their children get the hundred percent.

Speaker 5:53

First of all, if the member passes away, their 01 gets the assessment refunded. And if the member and the 01 passes away, then their estate gets it. This is not based on staying alive for a certain amount of time. This is a commitment, best efforts, or discretion commitment that applies to the member, their spouse, or the estate as appropriate or as applicable.

Speaker 3 6:22

All right. That's a great question that a member asked, and I'm glad that you were able to answer it. What if a member decides to leave the club after everything is up and running? Do they go on the list?

Speaker 2 6:32

They go on the refundability list.

Speaker 3 6:34

Okay.

Speaker 1 6:34

Yeah. Assuming they paid the assessment in full. However much the assessment they paid at that point. Right. But it would be in full at that time. Okay.

Speaker 6:41

That's right. There's no obligation to stay for any period of time in order to qualify for a refunding of the assessment that was paid.

Speaker 3 6:50

And how about if a member downgrades their membership?

Speaker 6:54

If a member downgrades their membership, what happens is the difference between the amount that they paid and the amount applicable to their downgraded membership category goes on the refundability list and gets refunded similar to someone who left. They're grouped into that category. The amount that applies to their downgraded membership category would be paid back to them on the 20% per year over five years when they reach 80, the later of age 80 or 2031. Right. So the balance goes to the dues credit.

Confidence Fairness And Final Takeaway

Speaker 3 7:28

To the dues credit. Okay. So for members who are still unsure, how should they think about this from a confidence standpoint?

Speaker 7:35

Well, that's an interesting question. I am very confident that I'll get my money back. But it's a personal decision. This is best efforts, board discretion, but every nickel of the conversion fee has been paid back. I see no reason why the club will not have the funds to pay this back and according to the schedules that we've discussed. So I personally am confident, but I think each member needs to make that determination themselves.

Speaker 3 8:02

Yeah. And to reiterate that you have a great track record from the conversion fees. So okay. At the end of the day, this is about investing in the future of the club while also creating a structured path for members to get that investment back over time. Would you agree?

Speaker 8:20

Yes, agreed. I also think it's about fairness and everything is designed around being fair to all the members.

Speaker 3 8:30

Okay. Thank you once again.

Speaker 8:32

Thank you. Thank you. Thank you.