Developing and Implementing an Amenity Strategy. Development / Ownership Options CONSTRUCTED BY:...

Developing and Implementing

an Amenity Strategy

Development / Ownership Options

CONSTRUCTED BY: OWNED/OPERATED BY:Special District Special District

POA

Community Developer Separate Nonprofit Entity

Commercial Operator

Amenity Developer Commercial Operator

Development/Ownership Options

Advantages:

• Ability to issue bonds

• Bonds repaid through special assessments

• Property owners taxed for operating costs

Disadvantages:

• Cost of bond issue

• Lack of long-term control

• “Public” access

Special District


Advantages:

• Shifts development cost, headaches

• Enhances real estate values

• Shifts operating risk

Disadvantages:

• Lack of control over construction, quality

• Lack of control over operations, access for property owners

• Uncertainty as to future ownership / operations

Amenity Developer Commercial Operator


Advantages:

• Maximizes flexibility

• Maximizes control

• Enhances real estate values

Disadvantages:

• Cost

• Risk

• Headaches

Community Developer ???


Community Developer ???

Considerations: Developer’s business and long-term goals

Competition in market area

Capital outlay required; profit potential

Operating cost

# of units to be sold; internal demand

Price/product mix

Depth of the outside market


Community Developer POA

Factors: Capital outlay easily recouped through lot

prices Operating cost affordable for target market Little or no outside market Capacity matched to community size


Community CommercialDeveloper Operator

Factors: Capital investment substantial Strong demand within and/or outside community Amenities do not appeal to all buyers Good potential to operate at a profit


Community NonprofitDeveloper Club

Factors: Capital investment substantial Strong demand within and/or outside community Amenities do not appeal to all buyers Little potential to operate at a profit

Bundling Amenitieswith the Real Estate

All amenities in separate club

Some level of membership mandatory

All memberships optional

All amenities in POA

Non-golf amenities in POA;separate golf club withmemberships optional

Development and Market Considerations

Capacity vs. demand

Exclusivity

Marketing impact

Timing



Creation, administration and enforcement

Avoiding antitrust challenges

Avoiding unreasonable restraints on alienation

Fair housing laws

Controlling use

Establishing financial obligations

Legal and Drafting Considerations

POA owned and operated Community CCRs

Separate clubCommunity CCRsCovenant to share costs

with POASeparate recreational

covenant on each lot


Documenting the Arrangement


Controlling Use

Occupants vs. owners

Co-owners who share use of second home

Vacation rental guests

Age-restricted

communities


Controlling Use

Number of authorized users

Entire household entitled

to all privileges

Entire household entitled

to social privileges;

limited # entitled to golf

Limited # of persons

entitled to all privileges


Establishing the Financial Obligations

Initiation Fee

Included in lot price vs. separate

Nonrefundable vs. refundable

Initial sale only vs. initial sale and resales/transfers

Limitations onunreasonable increases



Periodic Dues - Method

HOA includes in assessment for common expenses

HOA shares costs or makes contribution to separate club

Each owner pays dues directly to club


Establishing the Financial ObligationsPeriodic Dues - Calculation

Based on actual share of designated expenses

May not be desirable if commercial operator

Requires access to budget, books and records

Fixed, subject to limitations on increases

Risk of impairing value of club on future sale

Provides level of certainty to real estate buyers

OR



Collecting Membership Fees Timing of obligation to pay Lien rights Remedies

Keys to Developing an EffectiveAmenity Strategy

Carefully consider development/ownership options in light of

Developer’s goalsEconomic considerationsTarget market

Draft to Maximize

compliance and enforceability

Minimize risk of legal challenge

Balance interests of the parties

• Marketing

• Construction

• Phasing

• Expansion

Timing of Amenities

• Timing

• Post-transfer rights of developer

Transfer of Amenities

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