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By Kyle Darbyson
Many private clubs are sitting on a ticking time bomb of impending deposit refunds, but Florida attorney Michelle Tanzer and the Hero Program are coming to their rescue
If you watch enough summer blockbusters, you begin to think heroes only come in spandex tights. For private golf clubs, the biggest hero actually wears stylish powersuits.
Michelle Tanzer is a lawyer based in Boca Raton, Florida, who has helped dozens of clubs with everything from employment law to personal injury insurance. Since she passed the bar in 1988, the mother of one has built a remarkably successful career specializing in the golf business.
Now, as many clubs face a potentially catastrophic burden of refundable deposit liabilities, she has once again come to the rescue by developing an aptly named framework to ease the burden—the Hero Program.
The daughter of a real estate developer, Tanzer says she knew she wanted to be a lawyer from a very young age. “I was in grade 2,” she remembers.
After graduating from Emory University law, Tanzer instantly gravitated toward hospitality law. “It’s something I’ve always been drawn to.” While others focused on lucrative positions in corporate law or government, Tanzer instead asked to be part of transactional and hospitality law in the beginning of her career.
Those early years were spent primarily helping establish clubs across the globe, negotiating, structuring and amending the governance documents. “I have a footprint all over the United States, the Caribbean, even India,” Tanzer says.
Like so many in the golf industry, her professional world was turned upside down by the recession of 2008. “Almost overnight, I went from creating clubs to helping existing clubs adjust to this new market.”
Tanzer says the biggest problem driving clubs into court was the tug-of-war with deposit money. “I was getting calls from many clubs telling me every time they sold a membership, they were losing money.”
This unsustainable situation is thanks to a perfect storm of demographics, declining demand and devilish full-refund deposits. Older members were retiring their memberships faster than new ones were being added, and those new members who were added were paying far lower initiation fees.
Clubs were scrambling to come up with ad hoc solutions that tried to appease retiring members and allow the club to stay afloat. “More often than not, they were ending up in court,” she says.
Tanzer’s unofficial motto is ‘keep clubs out of court,’ so she viewed the situation as an opportunity. “A lot of members want privacy, and lawsuits can focus a lot of unwanted attention on clubs,” she says.
Originally, Tanzer was dealing with each case on a one-off basis, but slowly developed a framework of best practices that became known as the Hero Program. So named because, “every hero needs to make a sacrifice.” In this case, it’s the retiring member and the club who both need to make heroic compromises to ensure a viable outcome.
Tanzer and her team take a close look at the situation through a number of different lenses. “No. 1 is a legal analysis,” she explains. The lawyers look at the original language of the deposit contract to see if there is any room for leverage there.
Next, they review the financials. “We need to understand what the deposit liability really is.” Once the whole picture is clear, they look to see if there are other ways to remedy the situation. “Negotiating with retiring members isn’t always the only solution,” she says.
Lastly, Tanzer looks at the demographics of the membership, both existing and retiring. This gives her an idea of when the club can expect to be saddled with the most serious refund liability. “We need to know how pressing of an issue it is.” Her team will also interview current club members to gain insight into what kinds of amenities are wanted. Then, the severity of the discrepancy between refund liabilities and the need for capital can be fully assessed and the parameters of compromise established.
With all this information in mind, Tanzer—a Supreme Court of Florida-qualified arbitrator—will begin negotiations with members waiting for their deposit refunds.
“Imagine a club where it’s going to take 75 years for some members to get their deposits back,” she posits. “We’ll go in to the last 100 people on that list and propose a settlement with them.”
She’ll share a summary of her research to show the ramifications of a full deposit “Basically, my pitch is, ‘You can leave this situation being hailed as a hero,’” she says.
For many, that’s enough. “I’ve had clubs donate plaques or benches to recognize their sacrifice.” Other members will negotiate for 50 cents on the dollar, while some even arrive at what Tanzer classifies as a huge win/win. “If they aren’t interested in continuing their membership, but someone else in their family is, they’ll often accept what we call a legacy membership.” In these cases, the membership is transferred to a relative with no or deeply discounted initiation fees. “Suddenly, they’re a hero to their club, and they’re a hero to their family,” Tanzer says.
In the year she’s been running the Hero Program, Tanzer has worked with just under 10 clubs. One saved an astounding $6.6 million, while others all claim savings in the millions. Tanzer says it is far from a case of greed. “These clubs need this money to make capital improvements.” Changing appetites for family-friendly amenities put considerable financial strain on clubs, and the Hero Program is freeing up money to help make the improvements needed to transition into the next generation of private club.
For all the good she’s done for the industry, Tanzer herself has never really taken to golf. “I chose family and business instead,” she explains. With the Hero Program poised to become the savior for countless clubs across the country, many clubs will be glad she did.
Kyle Darbyson is a Vancouver-based freelance writer.