Let’s revisit that $20 million credit facility . . .

It’s been awhile since the last post on this site. During that interval, a January board decision destined to shape the future of Big Canoe for many years to come has now been etched in stone with the May 4^th, 2022 closing of the Wells Fargo credit facility. It is done. It is closed. It is real. And our board now has unfettered access to $20 million in loan commitments while remarkably still seeking and wanting even more.

But first, let’s break it down . . .

For those who have missed that now distant January board presentation, the six property owner directors voted unanimously to refinance the association’s existing $4.6 million amortizing debt with a $15 million line of credit to be converted to a fifteen year term loan after three years. According to the presentation, this loan would be collateralized by approximately 320 acres constituting the POA amenities.

In addition, the association also secured the following commitments:

• • $3 million revolving line of credit, and

  • $2 million in future lease commitments.

Request for access to loan documentation denied . . .

Interested in any additional details that might pertain to the loan offer, this writer contacted the full board in February requesting a copy of the “term sheet” only to be told by the POA President that the term sheet was “not an accounting record that falls under purview of the Georgia Nonprofit Code requiring release.”

Again, upon learning that the loan had finally closed, this writer contacted the full board in late May requesting a copy of the “loan agreement” and was once again denied. The POA President responded with, “We don’t provide copies of contracts or loan documents. The essential terms are outlined in the presentation during the January Board meeting”. When asked why, this writer was told “The POA is not required to provide copies of contracts under Georgia Law or our own Policies and Procedures . . .”

To be honest, it is quite alarming that six individuals on the board could actually obligate our community to such an extraordinary level of debt without any vote or consideration of the property owners and while simultaneously refusing any property owner access to the loan documents.

But wait . . . isn’t collateral considered an “essential term”?. . .

Lacking any access to the actual loan documentation, it is learned through a review of public records that the debt is not only secured by the common property constituting the POA amenities  (Ballfield, Tennis Center, Canoe Lodge, Wellness Center, golf courses, McDaniel Meadows, Wildcat Pool and recreation center, Clubhouse and Swim Center) (1) but also quite a bit more.

Specifically, virtually every other non-titled asset owned or hereafter acquired by the association such as accounts, contract rights, equipment and fixtures (goods, tools, machinery, furnishings, furniture), inventory, warehouse receipts, and all of the proceeds of any of the foregoing have been pledged to collateralize the debt by virtue of the May 2022 UCC Filing (2)  and additional  UCC included with the deed  (3).   Now to be fair (albeit a surprise to this writer), it appears that similar collateral was also pledged at the time of the 2016 land loan. 

For whatever reason, the association’s accountants also failed to mention this additional collateral under the “Subsequent Events” heading of the recently audited 2021 Financial Statement as they referenced “real property” only. (4) However, given the recorded documents, it appears undeniable that all of the above assets do indeed collateralize the debt.

And wait . . . there’s more . . .

Although clearly not classified as an amenity, it also appears that the Post Office and the main Fire Station now secure the debt as the fire station was constructed in 2018 on a tract of land (5) included on the original deed described as the Tennis Courts.

Keep in mind that without access to the loan agreement and other documentation, it is impossible for a property owner to understand all the terms of the loan or know precisely what other/if any additional collateral might actually secure this new debt.

Perhaps leadership might want to reconsider it’s stance on denying property owner access to the loan documents.

Seeking and wanting even more . . .

And now, at last, the long awaited, custom built fire engine has arrived. However, the association’s cash flow and cash position have obviously changed since the board approval of that purchase as the board would now like to recoup the $543k in cash paid in advance to the vendor approximately eighteen months ago. (6) Therefore, leadership is now pursuing a five year term loan to be secured by the vehicle with the proceeds of that loan being used to replenish the capital replacement fund. (7) (Note: Without current financial information, it can not be determined if that transaction has taken place as of the date of this writing.)

This is frankly outrageous. It is beyond comprehension that our Board would insist on driving the community even deeper in debt by securing other financing in addition to the recently closed $20 million credit facility.

What an untenable situation . . .

Needless to say, the airing of issues such as these would not be necessary if our community were truly governed by a transparent board. That said neighbors, remain informed, stay vigilant and continue to express your concern and opposition to leadership when necessary. This madness must stop. Enough said.

. . . . .

As always, please feel free to post comments or contact me at thepcrosses@gmail.com for questions or further discussion. Likewise, should you wish to see additional articles posted in the future, please subscribe for an email notification or check back frequently.

Meanwhile, take care and stay safe.

Patricia Cross (10438 Big Canoe)

References:

1)POA amenities as shown on Exhibit A to Modification of Deed to Secure Debt and Assignment of Rents, dated May 4^th, 2022, and recorded in Pickens County Records, Book 01328, Pg. 981-982

2)  UCC Filing #112-2022-000196, dated May 2022

3)  UCC included with the deed, Deed Book 01328, Pages 978-980

4) 2021 Audited Financial Statement, dated June 23^rd, 2022, by Mauldin and Jenkins, Pg. 26, Note 16. Subsequent Events. (POAwebsite>login>POA>financials>AuditedFinancialStatements>2021)

5) Plat of tract of land shown as Ballfield and Tennis Courts, dated December 20^th, 1985, recorded in Pickens County, GA records, Plat Book N, Pg. 68.

6) POA Finance Committee Minutes, dated May 19^th, 2022 (POAwebsite>login>Committees>Finance>Minutes>May2022)

7) POA Board of Directors Meeting Minutes, dated May 26^th, 2022 (POAwebsite>login>Meetings>BoardDocuments>MeetingNotes>May262022)