All about the MCA/TMCC lease

At the May 9, 2024 MCA Board meeting there was a number of questions and comments regarding the lease of MCA Homeowner recreational assets to TMCC (3 golf courses, tennis facility, pool, dining facilities and more). For starters, here is a link to a copy of the lease: LINK. The current lease ran from July 2021 to June 30 2024. Here are our most important observations.

As always, if there is anything here that is inaccurate, let us know and we’ll fix it.

The June 30 deadline is ARTIFICIAL

It is true that the current lease expires June 30, 2024. But 22. LEASE EXTENSION states that the parties can agree to allow the lease to continue on a month-to-month basis. So (as long as the parties agree), if there is no new lease as of June 30, things just continue as they have for the last 3 years. As you’ll note below there are lots of problems with the current lease, but the important takeaway is that THERE DOESN’T HAVE TO BE A NEW LEASE BY JUNE 30.

TMCC can’t afford a fair market rate

There was a number of speakers demanding TMCC pay fair market value for the lease. That is very sensible but TMCC cannot afford it. In 2023, at a time when demand for golf is at an all-time high, TMCC reported a loss for 2023 of $20,000 at their recent annual meeting. Remember that includes a $600,000 subsidy from MCA (the Renaissance Access Plan), and leasing $10 million of MCA Homeowner assets for $10 per year. 2024 isn’t looking any better for TMCC as their first quarter report says they are ALREADY BEHIND BUDGET by $70,000 and that is their most important quarter of the year. The only reason they don’t go bankrupt every single year is the two MCA Homeowner subsidies.

What could the $10 million of assets be leased for? Very difficult to know without the help of an expert consultant or surveying the market, but even just to cover MCA Homeowners’ interest @ 4.25% would be $425,000. If TMCC is already losing $20,000 and isn’t keeping up maintenance on the facilities, they can’t afford lease payments of $425,000.

So suggesting that TMCC pay a fair market lease payment makes sense on the surface, but it isn’t productive because they can’t pay it, and that isn’t going to change.  If MCA Homeowners are going to be paid anything for the use of their assets it is going to be from some other approach than leasing to TMCC.

MCA has never enforced the terms of the lease

Section 9. MAINTENANCE of the lease details TMCC’s maintenance obligations under the lease. They can be summarized as saying that TMCC has to do normal/reasonable maintenance to keep the assets in good repair. They haven’t done that.

All have acknowledged that the Highlands is in serious disrepair. The Groves isn’t great either. At the April 11 MCA Board meeting we heard complaints about the pool and hot tub not being maintained properly. At the May 9 MCA Board meeting we heard complaints that the tennis facilities aren’t being maintained properly.

Although our post on How golf courses make (or lose) money was focused on golf, one of the main points is the same for all the facilities: If the operator of the assets is losing money the first thing they will do is cut back on maintenance. The results of that don’t show up right away, but eventually they do show up, and it becomes a BIG bill to replace assets rather than smaller maintenance bills along the way.

Both the MCA President and TMCC President have stated that the Highlands course needs major repairs. That is only because TMCC has neglected that course maintenance and the MCA Board stood idly by while it happened. TMCC does not, and will not, have the financial resources to maintain MCA Homeowners’ assets. All their resources go into the Meadows/Members course. This problem is just going to get worse and worse the longer MCA Homeowners lease the assets to TMCC.

A related section, 16. CONDITION OF PREMISES UPON TERMINATION, requires that at June 30, 2024 all the leased facilities to be in “…as good a condition as at the date of the execution of this Lease, except for the effects of reasonable wear and tear…” To be clear, the facilities should be in good repair on June 30 2024 regardless of whether a new lease is entered into. The MCA should complete a full examination of the leased assets prior to June 30 to articulate all the areas of disrepair and demand that TMCC repair them immediately. SPOILER ALERT: MCA won’t do that and TMCC doesn’t have the funds to do the repairs anyways. One more indicator of the absurdity of our situation.

If you are aware of any maintenance deficiencies, let the MCA know and it is up to them to ensure our assets are maintained by TMCC. It may seem like a waste of time but it is important that MCA knows what maintenance TMCC isn’t doing, and that we have a record of MCA being aware of it (no more “ignorance is bliss”).

MCA pays for all the capital improvements and TMCC gets all the benefits

Section 4. REVENUES, RENT, FEES, CHARGES, AND REPORTS states that all the revenues from use of the facilities accrues to TMCC. This makes sense by itself, and TMCC pays all the operating costs of the facilities (except for appropriate maintenance of course). The MCA President loves to talk about all the normal operating costs TMCC pays, but never acknowledges all the revenues TMCC receives, which is a completely dishonest presentation of the facts. But we digress.

Section 10. MCA’S RESPONSIBILITIES, states that the MCA must “provide reasonably adequate funds for capital programs or projects as agreed upon by the MCA and the Club.”  So far, the capital improvements we are aware of that MCA has paid for are the 2021 work on the Meadows/Members golf course ($1.6 million), renovation of the Regency dining room ($0.4 million), and the fitness center (we assume half of the $4 million spent on the entire building). Paying for major repairs to the Highlands is on the horizon for MCA Homeowners.

So the MCA is responsible for all capital improvements, but TMCC gets all the increased revenues from those improvements. That is CRAZY (or crazy great if you are a TMCC member). At the March 14 2024 MCA Board meeting the MCA President stated that renovations of the Highlands would be paid for by funding from TMCC but that is an absurdly unrealistic comment.

MCA Homeowners are “represented” by TMCC members

In case you are wondering how MCA Homeowners got into this mess……

In 2018 when the original 3-year lease was signed, and EIGHT (of nine) MCA Directors were TMCC Members (or a spouse of a TMCC member).

In 2021 when the second 3-year lease was signed, of SIX (of nine) MCA Directors were TMCC Members (or a spouse of a TMCC member).

At the April 11 2024 MCA Board meeting the President proudly stated that “only 25% of the MCA’s lease negotiators are TMCC members”. Why are any TMCC members representing MCA Homeowners? TMCC will be very well represented on their side of the table and don’t need to be represented on the MCA side of the table too. On April 11 the President also committed to communicating the MCA lease negotiator names and qualifications to MCA residents. But as with so many of their promises, that has not happened.

One other interesting fact: in 2020 and 2021, two former MCA Directors quickly became TMCC Directors after their MCA terms ended. Relationships don’t get much more “cozy” than that.

Long list of other problems

Without distracting from the main issues described above, here is a laundry list of other issues.

1. The section regarding the operation of the fitness facilities (1. PREMISES) is difficult to decipher, but it appears that (you’ll need to read this slowly)

• The new fitness facilities fall into the lease, so they are controlled by TMCC
• MCA will actually pay for the operation of the fitness facilities
• TMCC will reimburse MCA a fixed amount (regardless of the actual operating cost) equal to what the operation used to cost TMCC when it ran the Dickens fitness facility.
• So MCA Homeowners are on the hook for all increases in operating costs since the Dickens fitness facility closed. How does that make any sense?

2. TMCC pays all taxes, fees and license charges (Section 5. TAXES, FEES AND LICENSE CHARGES). As MCA announced in Nov 2023, MCA will be paying the property taxes. This violates the lease for now, but is probably planned to be changed in a new lease. MCA paying this is probably better to avoid a situation of TMCC non-payment of property taxes, but the ulterior motive of MCA is to obscure the $600,000 subsidy paid to TMCC. They did as we predicted when they claim MCA Homeowners are now only paying a Renaissance Access subsidy of $185,000.

3. MCA does not receive reasonable financial reporting from TMCC. It is very common for a lessor (MCA) with one key tenant (TMCC) to receive regular financial reporting to ensure their tenant is a viable entity. Under section 4. REVENUES, RENT, FEES, CHARGES, AND REPORTS the MCA received TMCC’s budgets but no actual financial results which is useless from a governance standpoint.  Under section 13. ACCESS TO BOOKS AND RECORDS the MCA may examine TMCC’s records, but not make or take copies. At the MCA Annual Meeting it was made clear that the MCA Treasurer does view the financial reports of TMCC, but that is the entire extent of MCA oversight of TMCC’s financial condition. As previously reported, the MCA Board have said they were aware that TMCC’s results are publicly available but decline to obtain them.

4. Under section 17. INSURANCE, TMCC has to maintain insurance on the facilities, BUT MCA is to be the Named Insured on TMCC’s insurance policies. This means that MCA is to receive the proceeds from any claims, which makes sense since it will be up to MCA to repair damage from an incident that would require insurance coverage. Yet somehow, in its 2022 financial results, TMCC reported insurance proceeds of $213,000. We don’t know what is going on here but it looks inconsistent with the lease terms.

Comment below or email us at ForTheMeadows@SarasotaMeadows.com