Shelby to Defer $1.3M in Cherry Creek Rent in Return for Renovations, Lease Extension
Cherry Creek, though operated by Golf Facilities, Inc., is owned by Shelby Township, which receives rent from GFI as a tenant.
Shelby Township has agreed to defer $1.3 million in rent from Cherry Creek Golf Club in exchange for Cherry Creek’s commitment to make a minimum of $1.6 million in capital improvements to the property over the next eight years and extend its current lease until 2062.
The township board voted 5-1 Tuesday to approve these lease amendments, with Trustee Nick Nightingale casting an opposing vote and Trustee Doug Wozniak absent.
Under the amended lease terms, Shelby Township will defer Cherry Creek’s rent for eight years and eliminate the guaranteed monthly rent payments in favor of a quarterly pay schedule. In return, Cherry Creek will invest the monies that would have otherwise been used for rent in a series of renovations. The company has also agreed to extend its lease term to 2062, guaranteeing an additional 17 years of rent for the township.
“It is not an abatement. It is a deferral,” said Mike Bylen, a representative of Cherry Creek. “This is an investment in the property to keep it relevant.”
Proposed renovations include additional outdoor dining options, expansion of the white tees and construction of a new building that will make the existing clubhouse "banquets only."
Although Golf Facilities, Inc. operates Cherry Creek, the property and all associated buildings are owned by Shelby Township.
“This is our asset,” said Treasurer Mike Flynn. “They are making an investment in our asset which the taxpayers will own at the end of the day.”
While the rent deferral will mean a $1.3 million loss in township revenue for the next eight years, increased rents throughout the existing lease period are expected to return $1.47 million more than that earned had the deferral not taken place. Taking into account the extended lease, Cherry Creek operators say Shelby can expect an additional $17 million in revenue, too.
Supervisor Richard Stathakis stressed that “not one penny” of the township’s general fund is being used for this project. While the rent deferral will mean a loss in revenue, Shelby is not adding any expense to its budget.
In lieu of paying rent for eight years, Cherry Creek will reinvest the $1.3 million into capital improvements to the property and, per the terms of the lease, pay higher rents in the years following the deferral.
However, because Shelby has already built the revenue from Cherry Creek’s rent into its 2013 budget, Stathakis said the township will have to divert $125,000 from its capital improvement fund to cover the revenue loss this year. This will not be the case in future as the township will not take revenue from Cherry Creek into account when compiling the next seven years of budgets.
“In the future, we’re not going to realize (those rents) as revenue,” Stathakis said. “It’s going to be deferred and we’ll get the money in eight years.”