CNL signs new operators after Heritage Golf Group default

CNL Lifestyle Properties Inc. will reassign the lease agreements on two of its golf course properties, Valencia Country Club in Santa Clarita, Calif., and Weston Hills Country Club in Weston, Fla., after being notified by previous leaseholder Heritage Golf Group that Heritage would no longer make scheduled lease payments to CNL for the properties.
Officials said that as of March 1, KemperSports will take over management of Valencia Country Club, while Arnold Palmer Golf Management/Century Golf Partners will operate Weston Hills.
Rudy Anderson, CNL Lifestyle Properties vice president and managing director of its golf portfolio said in a statement that San Diego-based Heritage Golf Group had notified CNL that Heritage was no longer willing to make its lease payments on the two properties.
As a result, Anderson said, Heritage has been placed in default on the two properties that had been purchased by CNL from Heritage in late 2006 and then leased back to Heritage under a 20-year agreement.
“We are disappointed in the decisions made by Heritage Golf Group, in that sale-leasebacks typically imply a long-term relationship between the parties,” Anderson said. “The clubs were fairly valued at the time of their sale to CNL Lifestyle Properties and Heritage strongly sponsored the club’s current performance and future potential. Notwithstanding the pressures caused by the current economic environment, the expectation was that Heritage would honor its obligations under the lease and, if necessary, would continue to temporarily recycle some of the proceeds from the sale and support the clubs during any down cycle. Heritage has chosen not to do this at these two clubs.”
Bob Husband, president and CEO of Heritage, in a statement issued Friday, blamed the deteriorating economic environment for the decision to end the lease deals.
“After subsidizing the cash flow of both clubs in order to meet their respective lease obligations over the past two years, and despite our best efforts, we are no longer able to continue this support,” he said.
Husband said that Heritage will continue to operate the 36-hole Palmetto Hall Plantation Golf Club on Hilton Head Island, S.C., which is also owned by CNL Lifestyle Properties.
That property was CNL’s first golf group purchase in May 2006 when CNL bought it from Heritage for $7.6 million and leased it back to Heritage.
In October of that year, CNL bought Weston Hills Country Club from Heritage for $35 million and several days later bought both Valencia Country Club and Talega Golf Club in Southern California from Heritage for $57 million, leasing Valencia and Weston Hills back to Heritage. Talega has since been sold to a third party.
The deals with KemperSports and Arnold Palmer/Century to operate Valencia and Weston Hills, respectively, are management agreements, as opposed to CNL’s typical leaseback agreements. Anderson said that the two courses would be re-leased at a later date.
Last year, CNL officials agreed to restructure a lease deal with Dallas-based EAGLE Golf involving CNL-owned courses operated by EAGLE.    

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