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The Community That Saved Itself

Part One

PUD #1

A Historical Perspective

The Vietnam War and Richard Nixon were gradually fading into the history books. Iran was holding 66 Americans hostage, as Jimmy Carter and Ronald Reagan went head to head for the Presidency of the United States. Interest rates on home mortgages were approaching 13%, gas prices were spiking, and the national economy was stagnant.

It was the end of the decade of the 1970s, and the Bonita Springs area of Southwest Florida was populated with nearly as many cattle as people. Interstate 75 ended in Tampa, leaving a narrow US 41 (The Tamiami Trail) as the final leg of a demanding driving journey to reach Fort Myers, Naples, or Miami. Page Field in Fort Myers was the main airport for travelers who flew into Southwest Florida. Bonita Springs was an unincorporated area of Lee County, and Bonita Beach Road was 2 lanes wide. The Naples/Fort Myers Dog Track and The Wonder Gardens were the featured attractions in Bonita. Joe Nicola had the only liquor store in the vicinity.

Before Bonita Bay, Mediterra, Audubon, Pelican Landing, The Brooks, or Quail West existed, a real estate developer from Chicago, Ed McArdle, saw a bright future for Southwest Florida. He bought up thousands of desolate acres in South Lee County for future development, while temporarily letting cattle graze on the land to qualify as a farming operation for real property tax purposes. As an early visionary, he was able to acquire many of the best locations near the Gulf Coast.

Spanish Wells was Ed’s first big Southwest Florida venture. The nearest competition in the area at the time was Imperial Golf Estates, several miles South in North Naples. Ed filed and received approval for Planned Unit Development (PUD) #1 in Lee County for his 600 acre plot on the South side of Bonita Beach Road between US 41 and Old 41, just 3 miles from Bonita Beach and the Gulf of Mexico. Spanish Wells, which abuts the North edge of Collier County, was the very first Planned Unit Development in all of Lee County.

Ed seemed to be in no hurry to fully develop Spanish Wells. The first clubhouse, the East 9 holes, and the South 9 holes of golf were built around 1979 and 1980, along with lot sales for single family homes in Units #1 and #2. Homes with golf course views gradually began to fill many of the empty lots. Twenty townhouses were built behind the clubhouse near the aqua driving range, and 3 casitas were available to rent to people checking out the new community. Spanish Wells was off and trotting.

Unit #3 as well as the Golf Condos (60 homes) and Lake Club Villas (104 homes) proceeded to be developed later in the 1980s and into the 1990s, while lot sales and construction of new homes continued at a leisurely pace in Units #1 and #2. The three Units would eventually be home to 495 single family houses.

A third nine (the North Course) was added in the mid 1990s, bringing the Spanish Wells golf course to 27 holes. Las Brisas, a condominium and twin villa section with 210 homes, was built around holes #1 and #2 of the North Course. Development of Las Brisas stretched over about a decade beginning in the early 1990s and into the twenty first century.

A large tract of land on the Northeast side of the 600 acre tract was sold to Engle Homes, a national home builder, to develop the rest of the area surrounding the North 9 of the golf course. A second entrance on Bonita Beach Road provided gated access to this new development. The Marbella neighborhood of 342 homes was completed in the 2004 to 2007 era, bringing total finished homes in Spanish Wells to about 1200. Ed kept a 52 acre plot on the Southeast edge of the community for future development.

By the early 2000s home buyers were flocking to Southwest Florida, including Spanish Wells. Interstate 75 had been completed from Tampa to Miami, offering a better driving experience than US 41. The new Southwest Florida International Airport was easily accessible, less than 20 miles North of Bonita Springs along the Interstate.

An influx of residents and members to Spanish Wells necessitated building a new 35,000 square foot clubhouse at a cost in excess of $6,000,000. Ownership of the Club with new clubhouse was turned over from the developer to the members of Spanish Wells Country Club in the early stages of a national housing boom. Spanish Wells was truly a “happening place”.

The final 52 acres of Spanish Wells was developed by Toll Brothers as Cordova, a section with 128 single family homes, in the 2014 to 2017 time period. A third entrance gate was built to Old 41, across from the Mediterra community. Today, all that remains for development within Spanish Wells are about a dozen vacant lots sprinkled among Units #1, #2, and #3.

Part Two

The Perfect Storm

The period from 2004 to 2007 provided an unprecedented housing boom in Florida and in much of the United States. Spanish Wells was at the epicenter of the boom. Mortgages were readily available to anyone with a pulse. Home prices skyrocketed and “flippers” rode the wave of rising values. Investors would buy a home and re-sell it a week or a month later for large profits. Investors from all over the world were bidding on homes that were on the market for sale at inflated prices. Relatively modest single family homes were selling for over $600,000. Some condos brought in excess of $400,000. It was not unusual for homeowners to hire fresh appraisals of their homes, and proceed to re-finance their home based on the new appraisal for much more than they paid for the home in the first place. Mortgage companies were only too happy to lend the additional amounts.

There was “buyer hysteria” all over Florida, with many home purchases made sight unseen. Home prices in Southwest Florida were beginning to rival California and New York housing markets. The boom lasted from 2004 until sometime in 2007, when storm clouds began to gather. Talk of a housing bubble was everywhere in the news. It quickly became a self-fulfilling prophecy.

By the summer of 2007 home sales were slowing dramatically. Sellers stubbornly held on to their asking prices for awhile, but buyers weren’t buying. Eventually, flippers became desperate to unload their highly leveraged investments and that began the downward movement of home prices. Mortgage companies which had lent 100% financing on inflated values were in danger of failing due to inadequately secured loans that were in default. Obtaining new mortgages became difficult, if not impossible. The Federal Government was trying to manage the financial crisis, which included the stock market crash.

Not surprisingly in hindsight, the housing bubble burst and beginning in 2008 for about a 5 year period, an unusually high number of the home sales in Spanish Wells and much of the nation were the result of bank foreclosures, or “short sales”. A short sale is one in which the sale price nets less than the amount owing on the mortgage. In most cases the shortfall was forgiven by the bank. American taxpayers bailed out the banks that were deemed “too big to fail”.

A side effect of the housing bust was the exodus of members from private country clubs. Members who walked away from their homes also walked away from their membership dues obligations. Spanish Wells Country Club dropped precipitously from a high of over 420 dues-paying golf members in 2006 to less than 200 such members a few years later. With a mortgage approaching $4,000,000, and 27 holes of golf to maintain, it became economically unfeasible for the remaining members to sustain the Club. The Club was still making mortgage payments, but was in technical violation of the terms of the mortgage because of the reduced number of members. Wells Fargo foreclosed on their mortgage and became the reluctant owner of Spanish Wells Country Club.

With the housing bust in full bloom, and the country club in foreclosure, home values plummeted in Spanish Wells. Some homes were bringing less than half their earlier purchase price—if they could be sold at all. More than 10% of all the homes in the community were on the market for sale at any given time during this difficult period, compared to less than 3% in the summer of 2019. There were way too many sellers and very few buyers. The economic principle of excess supply and limited demand drove prices down.

Many Realtors in Southwest Florida found it necessary to transition from their established customer base to become specialists in “distressed properties”. They represented financial institutions that needed to sell their foreclosed homes, or handled short sales for “underwater” homeowners. More than half of the Realtors in Naples, Bonita, and Estero simply went out of business. It was a challenging time to be a Realtor in Southwest Florida.

One silver lining to the housing storm clouds was that many of the distressed homes had been neglected by their financially-strapped owners or investors. When new buyers purchased the homes through foreclosures or short sales, it was often for their own use and not simply an investment. They tended to update and rehab the homes inside and out. Gradually, Spanish Wells took on a new and improved look.

By 2012 and 2013 the housing market was in a gradual but consistent recovery pattern, with home prices rebounding at a healthy 5% to 7% clip on an annual basis. The gradual recovery has continued for most of the decade, resulting in a currently balanced housing market. Even after nearly a decade of recovery, though, home values remain well below the peak prices of the 2004-2007 housing boom.

Part Three

A Slum Landlord Appears

During the low point of the economic recovery period, there was a limited market for financially distressed country clubs. Wells Fargo itself was in financial jeopardy, requiring bail out assistance from the Federal Government to survive. They were eager to “unload” the problem of Spanish Wells Country Club. In 2011 Wells Fargo entered into a “sales” agreement with a Limited Liability Company (LLC) formed by a Texas corporation that will remain nameless in this article. It is rumored that the agreement required the LLC to take title to the property in exchange for assuming the mortgage balance (believed to be in the vicinity of $4,000,000) while paying interest only for 5 years. At the end of 5 years it was expected that the LLC would either get a new mortgage or begin paying down the principal owed on Wells Fargo’s debt.

Following the “purchase”, representatives of the LLC enthusiastically proclaimed to the small remaining cadre of loyal members that Spanish Wells Country Club would be restored to its former glory, with golf course improvements making it “better than Augusta”. Promises were made and then promptly broken. The LLC proceeded to generate golfing income from outside play to supplement the meager membership dues. In other words, it became a semi-private club with members, but was also open to the general public. Anyone could pay to play golf at Spanish Wells. Golf members felt disrespected.

During the 5 years the LLC was in control of Spanish Wells Country Club, the golf course went from green grass to weeds to bare ground. The relatively new $6,000,000 clubhouse took on an “unkept” look. Food and beverage services at the Club went from bad to worse. Landscaping of Club grounds was neglected, reflecting poorly on the entire neighborhood. Cash squeezed from greens fees of outside players was quickly diverted to the Texas-based parent company, with no money left for maintaining or improving the golf course. The LLC and its parent company took on all of the attributes of a slum landlord.

Eventually, the golfing public went away due to the deteriorating condition of the golf course, and Spanish Wells greens fees dried up. The golfing public wasn’t willing to pay to play a crummy golf course. It was a downward death spiral, designed by a company focused on their own cash flow rather than the quality of service.

As conditions continued to worsen, more and more loyal members reluctantly left their friends and moved on to other golf clubs. Some of them sold their homes and settled in nearby communities. When the 5 year period expired in 2016, the LLC simply walked away from Wells Fargo’s mortgage leaving the Bank and the remaining members holding the bag.

This was a potentially devastating situation for all homeowners in Spanish Wells—both member and non-member residents. After surviving the housing crash a few years earlier, the future of the Club was once again up for grabs. The wide open golf course acreage which makes up about 25% of the 600 acres of the community was now available to the highest bidder. Expansive golf course views could be turned into back yard views of high density condominiums, assisted living centers, or memory care units. Home values were at stake.

Developers seemed to be the only prospective buyers for the Club’s property to satisfy the Wells Fargo debt. It was time for the Spanish Wells homeowners to take control of their future.

Part Four

The Residents Step Up to the Plate

When the LLC snuck away in the night, Wells Fargo woke up. In order to protect their investment, the Bank began to spend money for much needed maintenance and repairs of the golf course and clubhouse even as they searched for a buyer to take the Club off their hands. They hired a professional golf management group to operate and maintain the Country Club while they conducted their search for a buyer. The Bank was smart enough to realize that it had to rehabilitate the assets before a reasonable buyer would come forward.

As the search for a buyer went on, it became clear to the Bank that selling the property to a developer was not a viable option. There were too many legal issues and financial issues to tempt most developers. The preferable buyer for all concerned would be someone who would continue to operate Spanish Wells Country Club as a golf club. However, no one wanted another slum landlord.

Early in 2017 Dr. Don Meek, president of the Spanish Wells Community Association (SWCA), suggested to a representative of Wells Fargo that perhaps SWCA could buy the Club. The Bank was definitely interested in this solution to their problem, but many legal and financial obstacles remained on this particular path.

For the most part, Spanish Wells has been an “unbundled” community in which membership to the Club is entirely optional. Historically, there were hard feelings between some of the members and non-member residents. Some of the non-member residents viewed the golf members as an elite clique within the community; and some members viewed the non-member residents as enjoying the expansive golf course views at their expense. Many residents wanted nothing to do with Spanish Wells Country Club. It would be a divide that would have to be bridged if the community association made a bid for the Club.

In addition to these ongoing tensions, attorneys for the community association (SWCA) advised that governing documents would have to be amended, and even then it would be legally necessary for at least 80% of the residents to vote in favor of such a purchase. A non-vote would be considered a negative vote. It would be a steep mountain to climb to get 80% of the residents to vote to increase their own homeowners’ association dues in order to buy the Club.

SWCA began to do its homework on a possible purchase. With Wells Fargo continuing to pour money into improving the physical conditions of the Club, a tentative agreement was negotiated between the Bank and SWCA subject to approval by at least 80% of all residents.

In the early summer of 2017 literally hundreds of residents activated both for and against the proposed purchase. There were threats of legal action by the “antis” if the deal was approved. It did not look promising. The essence of the tentative agreement between the Bank and SWCA was that:

  • The purchase price would be $3,200,000;
  • SWCA got pre-approval for a mortgage with another bank for $3,800,000, which would cover 100% of the purchase price plus expenses of the transaction and initial operating funds;
  • SWCA would own Spanish Wells Country Club and hire a professional golf management group (Billy Casper Golf) to operate the Club;
  • The 15 year, 4% mortgage would be paid through SWCA by raising monthly homeowners association dues on all 1300+ homes in Spanish Wells by $22.50 per month, which sum would completely pay off the mortgage in 15 years;
  • Spanish Wells Country Club would operate as a separate, debt-free entity, expected to make a profit from operations adequate to fund needed maintenance and improvements to the golf course and clubhouse in the future;
  • The business model included projected greens fees from non-member play that would supplement dues paid by the loyal members who had stuck with the Club through all of the difficult years;
  • All residents would be encouraged to join the Club, with various levels of membership that were both attractive and affordable. As the “owners”, they would also have some regular access to certain events even if they chose to remain non-members; and
  • Residents were encouraged to think of the $22.50 HOA monthly increase as an insurance premium to protect the integrity of the neighborhood and maintain home values.

With this tentative agreement in hand, multiple “town hall” meetings were held, giving everyone opportunities to voice their concerns. Endless questions were patiently answered by members of the Board of Directors of SWCA. Convincing reasons were communicated for the importance of a “yes” vote, and the potential negative scenario if the vote failed.

Following the meetings, there was a full court press of nearly 100 volunteers who contacted neighbors and snowbirds soliciting a positive vote. It was a ruthless campaign that lasted well into the summer of 2017. Some groups were formed to oppose the purchase, and they generated fears and anxieties about the proposed plan.

To nearly everyone’s surprise, the final vote was 82% in favor of the purchase, even though close to 10% of residents failed to vote and were therefore considered votes against the purchase. Of the residents who voted, more than 90% were in favor of raising their own dues to purchase the Club.

The transaction was scheduled to close on September 10, 2017. Hurricane Irma had other plans, as this massive hurricane arrived in Bonita Springs about mid-day of September 10. Irma hovered over Spanish Wells for what seemed like hours, battering homes, trees, and landscaping. The golf course was flooded and Club properties received significant damage, as did many of the homes in the neighborhood. Once again uncertainty reigned in Spanish Wells—this time from a different kind of perfect storm.

Through continuing negotiations, insurance settlement agreements allowed the transaction to finally close nearly 4 months later. Since Irma, SWCA has received in excess of $1,000,000 in insurance recoveries, some of which has been used for hurricane-related expenses. Some of the insurance recoveries have been placed in interest-bearing accounts, a part of which is intended as a reserve for future improvements to the golf course.

Initial operating results for the first year and a half of ownership are extremely promising. Significant improvements have already transformed the golf course, and the clubhouse no longer looks neglected. Membership is growing, and activities at the Club are well attended. The seasonal golf greens fees are growing, and feedback from the golfing public is positive. Some non-member residents are taking advantage of their new access to the Club.

The excitement is back at Spanish Wells Country Club, and home values in the entire community reflect this new excitement and stability. Sometimes the struggle makes us stronger and closer. The old resentments between members and non-members seem to have abated.

Spanish Wells residents have many involved people to thank, including the dedicated directors of SWCA, the active volunteers who secured the positive vote, representatives of Wells Fargo, and most of all, the residents themselves.