Changes sought in Glen Erin lease
Rob Vega, Glen Erin’s general manager and managing partner, last month approached the Rock County Board Public Works Committee with a request to change payment provisions in the lease.
The golf course adjacent to the airport opened in 2003 and leases its land from the county. Each year until 2015, the lease calls for payments of $20,000 or 2 percent of gross revenues, whichever is greater.
Glen Erin each month pays $1,667—one-twelfth of $20,000. At the end of the year, if the lease payments do not equal 2 percent of Glen Erin’s gross revenues, the owners write a check to make up the difference.
In a letter to the committee chairman, Vega said the payment structure was drafted in 1999, but several variables have changed that make the agreement unrealistic, including the premise that revenues will grow 5 percent each year for 99 consecutive years.
Vega said the local economic slowdown has coupled with increases in operating expenses.
The course’s eight-year revenue history, he said, “shows the inability of the business to continue to honor the lease payments in the current form.”
Vega proposes that Glen Erin be allowed to make monthly payments based on a percentage of each month’s revenues, rather than flat payments. That, he said, would improve the operation’s cash flow and better align seasonal revenues and expenses.
Between lease years 2012 and 2020, Vega proposes Glen Erin pay 1.5 percent of monthly gross revenue plus a year-end payment of 2 percent of any additional revenue over the previous year.
“If revenues decline, no payment will be due,” he wrote in the letter.
The current lease calls for a minimum annual payment of $20,000 through 2015. The minimum payment would then increase about 21 percent every five years.
“In order for Glen Erin to honor and be able to support this minimum, revenues would have to increase about 50 percent in the next eight years to honor the 2021 minimum payment figure ($29,604), or approximately 6.5 percent year after year,” Vega said. “This is unrealistic and unattainable in our current market climate.”
According to revenue figures provided by Vega, Glen Erin had gross revenue of $951,376 in 2011, down nearly 9 percent from the previous year. Last year’s gross revenue was Glen Erin’s lowest in the last five seasons.
Applying Vega’s proposal to 2011 revenues, the county would have received a total lease payment of $14,270 instead of the $20,000 Glen Erin paid.
Glen Erin’s majority owners are David Nadler and Karen Baumgartner, who also own Nadler Golf Car Sales in Aurora, Ill. Vega and David Braasch, the course’s superintendent, are minority owners.
For a while in 2011, the course was for sale, but the owners decided to refinance Glen Erin to position it better for what has become the reality of golf course management: increased competition in a struggling economy.
Vega said an adjustment in the lease agreement would “ensure a long-term and prosperous relationship between the Southern Wisconsin Regional Airport and Glen Erin Golf Club.”
Ron Burdick, the airport director, said he is reviewing Vega’s proposal and will make a recommendation to the committee in the near future.
Last updated: 7:56 pm Thursday, December 13, 2012