Oro Valley residents could get the community recreation center they’ve been wanting for a bargain price — but it will cost everyone a little more in sales taxes.
The town could buy a country club and turn it into a community center as part of a bigger deal involving the sale of the Hilton El Conquistador, which Tucson-based HSL Properties wants to buy for an undisclosed sum.
HSL would sell the country club and golf side of the business to the town for $1 million. That’s well below market value, Town Manager Greg Caton said. The town would run the community center and contract with Troon Golf to operate the golf courses and restaurants. HSL would run the resort.
The deal, which has been in the works for months, was presented to the public for the first time at a Town Council meeting Wednesday night. The council previously had three executive sessions to talk about the deal.
Town leaders propose raising the sales tax by a half-cent per dollar to pay for the project. It would go from 2 percent, or $2 on a $100 purchase, to $2.50 on a $100 purchase.
With other buyers interested in the country club property, the council is expected to make a quick decision. Authorization for both the property purchase and the tax increase are on the Dec. 17 meeting agenda.
“Iconic piece of real estate”
The Hilton El Conquistador is owned by Met Life, which took control of the property when the previous owner, Dallas-based Ashford Hospitality Trust, defaulted on its loan in 2012.
HSL CEO Omar Mireles declined to disclose the purchase price. HSL has been interested in the property for a while and tried to put together a deal several months ago with another business partner, Mireles said. So the company decided to go it alone and put together a new offer.
The resort would remain a Hilton-branded hotel. As part of its agreement with Hilton, HSL would spend $16 million to upgrade the hotel rooms, pools, lobby and spa, among other projects, Mireles said. It also would like to reopen the old horse stables and equestrian facilities, he said.
“We’re very excited to be able to buy this really iconic piece of real estate for the town and the region and bring it back to its potential,” Mireles said.
The resort has long held a four-diamond, rating and it’s exciting that it could have a local owner who will renovate it and continue its reputation, said Brent DeRaad, CEO of Visit Tucson, the area’s tourism agency. “It’s really one of our top-performing resorts in Pima County.”
The resort employed 394 full-time-equivalent employees last year.
IS GOLF VIABLE?
Despite doom-and-gloom assessments of the golf industry’s profitability, local brokers say Oro Valley’s purchase of El Conquistador’s country club and three golf courses would be a smart move.
“For a million bucks, it makes sense,” said Mike Carlier, who has been a commercial land broker in Oro Valley for 35 years.
But golf’s popularity is on the wane, National Golf Foundation statistics show. The number of rounds played annually has fallen from 518 million in 2000 to 465 million in 2013. And the number of golfers — age 6 and up — declined from 28.8 million in 2000 to 25.3 million in 2012.
A 2013 article in the Business Perspectives journal identified dismal financial results at Florida municipal golf courses, finding they had an average loss of more than $370,000 in 2010. In that year, 90 percent of municipal golf courses in Florida reported a loss.
And a 2012 Urban Land Institute paper exploring ideas for master-planned communities warned developers that “golf is dead.”
“Amenity packages in the future should be well thought out to be sure the maintenance costs are relatively inexpensive. Stay away from golf courses,” said the discussion paper, co-authored by Tucson developer Bob Sharpe.
Making golf courses profitable is a challenge, Carlier said. That’s despite the fact that “in Arizona, golf is king,” he said. “Everybody loves to play golf. But what they’re willing to pay for tee times doesn’t support the cost of the water.”
But the $1 million price tag is a steal, he said. El Conquistador’s clubhouse alone cost more than three times that to build, he said.
The town would be making a smart move to ensure the continuation of a beautiful asset in the heart of Oro Valley, Carlier said.
“I don’t think they want to see one of the last golf courses they’ve got, and one of the most central golf courses, fall to somebody else,” he said. “It’s probably in the best interest of the town just to maintain the vision and the integrity of the community. They don’t want to see a dried-out hayfield in the middle of town.”
Coming under public ownership, the success of El Conquistador’s golf courses will depend on how well they are managed, said local developer David Mehl, president of Cottonwood Properties. DeRaad said Troon is an excellent golf management and marketing company, and that the company could package the El Conquistador courses with its other courses at the Westin La Paloma and Casino del Sol Sewailo golf clubs in the Tucson area at a special rate. That “could really breathe new life into golf out there,” DeRaad said.
The town would have to subsidize the golf courses for a few years, Caton said, but investments in the courses would pay off in increased tourism and a more active community. Caton said he thinks the golf industry has hit bottom and is poised to grow.
TOWN WOULD raise TAXES
Oro Valley has identified $2.5 million in renovation projects in the community center and $3 million in projects on the golf courses over five to six years. Those costs include a $1.55 million project to replace irrigation systems on one golf course.
And the town doesn’t have a way to pay for those projects.
Town leaders are proposing a dedicated half-cent sales tax to help pay for the community center project, in addition to using some bed tax income.
The Greater Oro Valley Chamber of Commerce board will hear a presentation about the proposal next week and will take a position on the tax increase then, said President and CEO Dave Perry. But the deal may be too good to pass up.
“As a community, we’ve long sought a community center, … and this is a tremendous opportunity, an asset you can’t replace for anywhere near the price where it’s offered,” Perry said.
In a recent survey of nearly 500 town residents, a recreation center and tennis courts were among the most common requests.
“So we really feel this project addresses the needs we’ve heard from the community,” Caton told the council Wednesday.
Mayor Satish Hiremath and three other council members named a recreation center as an emerging town priority during election season earlier this year.
It’s cost prohibitive to build a community center from the ground up, Hiremath told the council Wednesday, “and I don’t think we’re ever going to get this kind of deal again.”
Caton said a community center built recently in the town of Maricopa cost $22 million.