Caves Valley Golf Club's financial woes are a good metaphor for the unrealistic expectations of the 1980s. The club, conceived as part of a regional economic development strategy to attract corporate headquarters to Baltimore, found itself loaded with $27 million of high-priced debt but no way to pay it off during a JTC prolonged recession. The club had sliced its tee shot and landed deep in the rough.
Under the original plan, the debt was to be reduced by selling off 34 exclusive residential building lots abutting the Tom Fazio championship golf course. But high-priced real-estate is in a tailspin, and the club's management can't sell the lots fast enough to reduce the debt. Rather than continue paying high interest costs, the club's managers are taking the road already traveled by many other American corporate executives: lowering costs by restructuring and refinancing.
A number of corporate and individual members are forming a partnership and making low-interest loans to the club. In return for putting up the money, these members are obtaining the remaining housing lots as collateral. As the lots -- whose prices hover around $500,000 each -- are sold, the members will get their money back. While the high-end real estate market is in the doldrums, the partners are taking the long-range view. They are assuming that the economy eventually will improve and expensive lots surrounded by a premier golf course will once again be snapped up.