Dismissing the stinging rebuke from the Arizona Court of Appeals which upheld a lower-court order to rebuild the Ahwatukee Lakes Golf Course, owner Wilson Gee is doubling down.
He not only reasserted the 101-acre site “will never be a golf course again” but told AFN he is upping his offer to Lakes homeowners.
“If they want a golf course, I’ll give them Ahwatukee Country Club and throw in another million to upgrade it,” Gee said.
“If they finally want to deal, I’m pretty much open,” added Gee.
Gee, earlier this year, offered 20 percent of the proceeds if he could sell the course to homeowners Eileen Breslin, Linda Swain and the Ahwatukee Board of Management.
Gee, who is trying to sell the Ahwatukee Country Club for $3.2 million, said his newest offer is also contingent on changing the Lakes courses’ covenants, conditions and restrictions so he can sell it to a homebuilder.
He also dismissed the impact of the appeals panels’ unanimous ruling.
“It doesn’t really change anything,” Gee said. “Obviously we’re not going to do anything and the next guy’s not going to do anything because it doesn’t make sense to be a golf course. That’s wrong. That’s the reality. Doesn’t matter what the courts rule. It’s not going to happen.”
He called hopes for a restored golf course “a pipe dream” and added, “It’s going to stay that way.”
Referring to the “nuclear option” of just giving the land away he said, “And, guess what? Then what it’s not is a golf course because whoever buys it is not going to spend $6 million to build a golf course there.”
Tim Barnes, who represents Breslin and Swain in their lawsuit to restore the course Gee closed in 2013, has a different idea of what comes next after the appeals panel upheld Superior Court Judge John Hannah’s January 2018 ruling.
He plans to ask the new Superior Court judge on the case – the third to inherit it because of customary judicial rotations – to order Gee to comply with the standing court ruling and restore the course.
“I would be shocked beyond belief if they don’t ask the Supreme Court to review the decision,” Barnes said. “I expect they’re going to file that petition for review and they’re going to explain to the judge they ought not to have to do anything until after Supreme Court rules. And I obviously am going to argue against it because if I wait for the Supreme Court, that could be another 90 or 120 days or even more.”
Gee said he would confer with his lawyer this week on the next steps, but he asserted that while the lawyers prepare for a legal showdown, “the timing is right” for Lakes homeowners to make a deal.
Swain said, “I am thrilled and delighted that the appeals court judges saw our case for what it is – a land grab – and that they went into great detail to explain why they unanimously affirmed Judge Hannah’s ruling.”
She thanked golf course consultants Marvin Galts and Buddie Johnson, Lakes planner Wayne Smith and Barnes “for getting us to where we are today” and “for their friendship and unwavering support.”
Opinion goes deep
The opinion, written by Presiding Judge Randall Howe and joined by Judges Jennifer Perkins and David Weinzweig, offered a deep look at the five-year history of the Lakes case as well as the inviolability of CC&Rs.
Barnes suggested Howe’s “really scholarly” interpretation of the CC&Rs set a tough legal standard in Arizona for any party challenging such land-use regulations.
“That is a piece of legal work that I’m really proud to be associated with,” Barnes added.
Howe noted Gee and his company, Bixby Village Golf Course, Inc., bought the Lakes and Ahwatukee Country Club for $5.6 million in 2006 and leased them to another company he owns called Ahwatukee Golf Properties.
Swain and Breslin sued in 2014, the year after Bixby closed the Lakes.
Then, in 2015, Gee reached an agreement to sell the site to The True Life Companies for $9 million.
True Life put $750,000 down and signed a note for the remainder with the proviso 51 percent of the homeowners would agree to a change in the CC&Rs to pave the way for an “agrihood” with about 160 homes, a five-acre farm, a school and other amenities.
But despite a costly and aggressive two-year campaign, True Life persuaded only 28 percent of the homeowners to allow the change.
“TTLC’s expert asserted that restoring the golf course on the subject property would cost at least $14 million, with no certainty of ever making a profit,” Howe wrote, noting:
“Swain and Breslin’s expert, Buddie Johnson, disagreed. He testified restoration would cost between $4 million and $6 million and that, based on the area’s demographics, a shorter, less difficult ‘executive’ golf course was highly likely to prosper.”
“Johnson added that the golf course ‘should not have failed’ under Bixby’s control; it failed only because it was ‘very poorly operated’ and ‘not appropriately marketed,” Howe wrote, citing testimony “at least five ‘substantial and capable’ buyers had expressed ‘strong interest’” in buying it.
Howe also detailed the closing’s impact on Swain and Breslin.
“Swain testified that she had bought her home because it ‘overlooked a lush green fairway and had a view of the Superstition Mountains and Four Peaks,’” Howe wrote, noting Swain paid a $26,000 premium on the lot for her “dream retirement home.”
He also cited Breslin’s testimony she bought her home because she felt an additional measure of security with the CC&Rs and closing the course was “ ’a very sad day because they put up these horrible chain link fences and it felt like we were in prison.’”
Although Gee foreclosed on True Life’s note last year and True Life told AFN it is no longer involved in the case, Howe’s opinion targeted both Gee and True Life.
Howe particularly took True Life to task over its assertion the CC&Rs should be overturned because they left the company with only two alternatives – run an unprofitable course or simply let the site stay undeveloped.
“Practically speaking,” Howe said of the latter option, “this would mean that the property may be left barren and overgrown with weeds, omitting what Swain and Breslin characterize as an ‘overwhelming stench,’ yet comply with the” CC&Rs.
But Howe said True Life’s argument “runs counter to the principles governing the interpretation of restrictive covenants in Arizona.”
“The circumstances surrounding the covenant’s creation and the covenant’s language show that the covenant was intended to require the continuous operation of a golf course on the property,” Howe wrote.
Besides qualifying for land tax breaks the county gives golf course owners, the CC&Rs also exist to “protect the benefitted persons’ interest in living next to, or having views of, a golf course.”
Stating Lakes homeowners “have the right to ensure that they have a golf course next to, or within view of, their homes,” Howe said, “interpreting the covenant to allow the current owner to leave the property ‘idle’ completely frustrates this purpose.
“The option of no golf course does not leave the property merely without a golf course,” he continued, “but – as Breslin and Swain testified – a dead, desolate ‘wasteland’ with overgrown weeds, ringed by a chain-link fence. The choice of such an alternative destroys the covenant’s purpose and could not be within the original owners’ intention in creating the covenant.”
Howe said he and his two colleagues found Swain and Breslin’s expert witnesses were “more credible” than True Life’s on the potential profitability of a restored course.
He also rejected True Life’s claim that it would be a hardship to rebuild and operate a golf course, declaring “mere economic struggles, however, cannot serve as a basis for abrogating a restrictive covenant and rendering its enforcement inequitable.”
“Whatever hardship will come from requiring the rebuilding of the golf course, TTLC brought upon itself,” Howe wrote, noting True Life bought it “with the sole intent to redevelop it into a lucrative residential development.”
Calling True Life a “perpetrator of a wrong,” Howe said they “took a calculated risk” when it bought the property.
“Arizona’s public policy is to protect those who purchased property relying on the restrictions from the invasion of those who attempt to break down the guarantees of home enjoyment under the guise of business necessities,” he declared, also rejecting True Life’s assertion that ordering it to restore the course violated the U.S. Constitution’s prohibition against slavery and involuntary servitude.
Next steps somewhat murky
Within hours of the decision’s release, Jeff Hall, president of Save the Lakes, posted on social media: “Next Step: Enforcement.”
Although Hall declined to comment on the appellate court ruling, Barnes said he is will be filing a motion in Superior Court asking it to order Gee to show cause why he shouldn’t be forced to comply with the restoration order.
The court would then have a number of options at its disposal – including holding Gee in contempt if he refuses to budge, at least while the appeal is still in play.
For his part, Gee has about two weeks to ask the Court of Appeals to reconsider the ruling and about a month to ask the Supreme Court to step in.
Unlike the Appeals Court, the Supreme Court is not obligated to take the case.
But as with the Appeals Court’s initial ruling, judges at both appeal levels are under no time limits for making their decisions.
Barnes said he wants to break the logjam by asking the Superior Court to pressure Gee.
But Gee is taking the legal maneuvering in stride, stating “Whatever the legal process involves, we’ll go through that.”
He said no matter who owns the site, homeowners “will just go through the same process again” and still see no golf course.
He reiterated his offer to settle the case if Swain and Breslin drop their suit and the homeowners permit homes on the site is “a logical way out” of the legal morass.
Rebuilding the course
During the argument before the panel, Howe at one point noted the CC&Rs did not specifically say what kind of golf course must be operating.
Barnes said appellate judges often ask questions and make surprising comments because they enjoy the legal banter.
Pointing to Howe’s opinion, Barnes said:
“He said it’s got to be an operating golf course, so you can’t have a couple of sticks... I suppose somebody could do that and they might but I truly believe, based on that ruling, that it’s got to be enough that you can qualify under the statute and the tax statute.”
In return for its county real estate tax break, golf courses must file regular reports showing rounds played and other data, Barnes noted – suggesting Gee would lose the tax break by running the site in a way that no one would play it.
Gee insisted the golf industry has again hit on hard times and no one will pony up $6 million or more to restore the Lakes.
“If you want to compare apples to apples this year, I’m selling Ahwatukee Country Club for $3.2 million,” Gee said. “It’s much bigger. It’s in good shape now that we’re fixing everything. It makes a little money because the water’s free. And guess what? No one wants to buy it.” Adding:
“That’s how tough it is right now in the golf industry. So yes, they can file whatever they want but then from a legal aspect, our attorney will file whatever they need to do to counter to that. And then, another two years in court.”
Kevin Norby, a golf course architect for 30 years in Minnesota, disputed Gee’s assessment of the state of the golf industry as well as True Life’s assertion that restoring the Lakes would cost at least $14 million.
“We’re kind of all over the country and I would tell you that as I travel around the country and I look at what’s going on, this reminds me a lot of what was going on in 2006, 2007, before the crash. It was a frenzy. The private clubs have waiting lists again. The courses are spending again,” he said.
Citing the strength of the housing market – which includes many new communities whose builders add a golf course to make them more attractive – and the strength of the economy, Norby said:
“There are courses that are struggling, but I would tell you that generally, the courses that are struggling are those that are either burdened by a lot of debt…or are poorly managed.”
“The golf market right now is very strong and although there are golf courses that are going away, that are being closed, most of those that are closing are closing because they’re being purchased by developers and the land is much more valuable as residential development.”
Norby said that entities building golf courses have a months-long wait to get a contractor to build them.
As for the Lakes, Norby said, “There’s a way for this course to actually be profitable.”
Norby said he has toured the Lakes course at Swain’s request but has no financial interest in it.
Noting most golf courses in the Valley charge high fees and “sort of make their living off snowbirds,” Norby said the Lakes course’s location in the middle of the community “has the sort of demographics and the wherewithal to make a good run. I mean, it should be a profitable business.”
He estimated that it would take between $4 million and $6 million to restore the Lakes.
The two biggest costs would be the irrigation system if it has deteriorated from the lack of maintenance since the course was closed six years ago and a new clubhouse. That would cost between $1.5 million and $2 million.
He said the cost of a clubhouse – which is a necessity – could be as low as $500,000 “if you put up a nice double-wide trailer.”
As for the course itself, Norby said, “You’re not building this because we want people to get on a plane and come down here and play it.” He went on to say:
“We want people to play this every day. This is their home course. We want them to have a membership. And so, you know, there’s things, like the driving range, that we might have to make some modifications on and that that might affect a couple of golf holes. But basically, the course is as good as it is.”
Still, Norby said that while “the ruling is obviously wonderful news for Linda, the real question is ‘What’s Wilson going to do at this point?’
“I guess that the legal battle will continue."