Saturday, August 04, 2007

Cay Clubs Merger Renegotiated Down

The proposed merger/acquisition of Cay Clubs by Key Hospitality Acqusition Corp has been renegotiated down reflecting the stumbling second home market in South Florida.

According to Securities and Exchanges Commission filings this week, Cay Clubs' owners Dave Clark & David Schwarz will receive 46.7% less shares than previously proposed. This, according to the filing, "makes the proposed transaction fair to Key's stockholders". (Dave Clark owns two-thirds of Cay Clubs and David Schwarz owns one-third.) So, instead of 50 million shares, the two will recieve a total of approximately 26 million shares. "For purposes of satisfying an indemnification claim, shares of New Key common stock will be valued at $7.50 per share" - this equals nearly $200 million dollars in stock value for the two. Dave Clark will have nearly $132 million on paper.

Big Incentives have also been put into the merger which will reward the two if the company reaches certain financial goals:

"the Clark Trust and Mr. Schwarz may receive up to an aggregate of 32,000,000
additional shares in accordance with the following performance criteria: (i) for
2008, 6,000,000 shares will be earned and issued if net income exceeds $42
million and an additional 5,000,000 shares will be earned and issued if net
income exceeds $52 million; (ii) for 2009, 6,000,000 shares will be earned and
issued if net income exceeds $60 million and an additional 5,000,000 shares will
be earned and issued if net income exceeds $70 million; and (iii) for 2010,
5,500,000 shares will be earned and issued if net income exceeds $72 million and
an additional 4,500,000 shares will be earned and issued if net income exceeds
$82 million."

My previous post about Cay Clubs has gotten a lot of comments. One is signed by Dave Clark, and with the sincerity and passion it includes, I'd believe it was written by him. Who knows - maybe just a huge fan. Then again, it does include his phone number.
Anyway, I don't have anything against Dave Clark. However, I do not think it is "better for the Keys and the people who live here to have a company that is located here, loves the community, cares about the environment and takes the time necessary to fully engage the community before moving forward with re-development plans make purchases than an outside company with no long term commitment or local employees?" The wholesale consuming and regurgitating of the Keys is what is wrong. As the old saying goes: "Don't piss on my leg and tell me its raining".

Mr. Clark, I don't doubt that you are a nice guy and care about your community and give to worthy causes. But rabid overdevelopment, rolling the dice with the community, especially by novice companies, is not what I'm a fan of.

If the merger goes through, Cay Clubs will be a public company soon - and questions of their viability will be answered as their balance sheets come to light.

Like this post? Let us know:


Rock said...

Amazing. You and I are on the same wavelength today, Cayo Dave. In fact, I just referenced your older post on Cay Clubs in my blog today.

Here is my latest post . . . prompted about another side of the Cay Clubs story which I've never seen you refer to: lease-back programs for Condos at Cay Clubs now gone awry.

This is not the kind of "investment" I would recommend to anyone, anywhere at this moment in time. And as I mention in my blog, this isn't just a Cay Clubs thing.

Look for local developers to sell their bankrupt condotels or turn them back into less expensive hotels. We shall see.

Anonymous said...

Cay clubs--Im hear so much about Dave Clarks selling tactics. I recomment the bloggers get together and file a claim with the Fla Dept of Real Estate,C/O Attorney Gereral. Let Cay Clubs pass the test of scrunity like any other reputable company. I'm sure there will be some fall out!!

Anonymous said...

Dave Clark doesn't sell. He's not a salesman. He is the CEO/ Presiddent. Barry Graham, Ricky Stokes, and about 500 other realtors (commission- only; a few are under CC brokerage) at other companies sell their stuff. Google Cay Clubs'll find independent realtors, everywhere, selling (even setting up their own websites to sell- on their own dime, mind you) Cay Clubs condos. "I'm hear so much about Dave Clarks selling tactics..." This definitely sounds educated and grammatically correct; I would certainly follow this guy's advice to run to the local authorities...Hurry!!! If that doesn't work, you could always go on a sales tour of one of their developments and slip and fall on the always need a plan B. Wouldn't want to walk away empty-handed, that's for sure.
Take 'em down!!! Take 'em all down, y'all!!! Yeehaw!! Therapy anyone? I'm smelling repressed issues. Let's all sit around and bash someone...anyone!! Let's see...hmm...Elvis? Nah, he needs a break (and I heard he's living in in Key West and dresses in drag) about- you know that one guy who sells all the Cay Club condos...You know...Dave Rego...I mean- what's his name again? Oh yeah, Dave Clark- what a character... with his blonde hair and mustache...what a creeep:) You blog pals need something better to do (just an idea). Or don't...I'm finding this to be quite fun now.

Anonymous said...

Blog owner, why won't you post my opinions? You call this a blog? Wrong. This is a one-sided farce.

Cayo Dave said...

Blog owner, why won't you post my opinions? You call this a blog? Wrong. This is a one-sided farce.
I do post nearly every comment submitted to this blog. If I did not publish your comment it may have been deemed libelous, advocating violence, or comment spam.
Otherwise, it will be published.
Please resubmit your comment - I am curious to know what you claim I did not publish. I don't recall anything significant lately.

Anonymous said...

People just don't like Winners and People in general don't like change.
The two things that come to mind when thinking of Cay Clubs. Too bad for the greedy folks who wanted to "Filp and Run" Do they really have an intention to stay in Marathon and build it up? Nah. Just a bunch of cry babies.
Clark has $150,000,000 that's why you don't like him. He's seems to be agreesive and he's done wonderful things. Tranquility Bay is the finest resort condhotel anywhere. KUDOS to Clark and Singh.
That property is just going thru the roof!

Anonymous said...

Tranquility Bay is tops!!!! 1st Class all the way. I hear floating piers are coming soon... Service is best anywhere. Food is awesome. Prices are high, but you get what you pay for. Furniture in the houses could be better.Loved it. Be back real soon.

Anonymous said...

Not sure if the net-worth is correct, but they do have great abilities, both Clark and Singh. They should truly join forces.

Anonymous said...

Anomymous said kudos to Clark and Singh. I think not!! Kudos to Singh for taking a terrific project he bulit back from Clark. Seems like everything Clark touches thes days spirels down,down,down. He owes the team owners of the BXRL lots of money for not following through on the tournament series. Another black eye for Cay Clubs and Dave Clark

Anonymous said...

Clark championed the rentals there to 95%+ occupancy and marketed it to become one of the most sought out properties in the Keys to stay/ get married/ etc...obviously the company is facing huge challenges in this market as most are. The fishing will have to wait. Your slamming will help all the fisherman continue the series? If you're one of them, stop shooting yourself in the foot.

Anonymous said...

I believe any company dealing in secondary homes and real estate right now is facing the same battles. Every one I know in the industry has pretty much the same story. Between the years of 2002 and 2006, everything was red hot. Everyone (the buyers) could get financing, easily, and did so, whether or not they could really afford it. I think this is because everyone wants a chance to to make money. It is hard to get ahead on an average salary and this seemed to be the perfect time for people of any means to get the financing to buy properties that had potential to increase in value or be rented out. Many of my friends and family members tried to do the same thing. They all took out financing on their homes to invest into something that could make them better off down the road.

As long as the economic conditions stayed strong, I believe it would have really worked out for everyone. They hired me because it is obvious that Europeans and people in other growing economies want real estate in Florida and many countries currency is much stronger than the US Dollar. People throughout the world love Florida and there is only so much of it that can be had, especially in places like the Keys. The IMG Academy situation also had a lot of potential and if the company had the ability to go public, they probably would have had the funds necessary to keep it together even in the downturn. Cay Clubs is a privately held company so the money needed to move forward is compromised greatly when the market sours and people stop buying. I think these guys were all pretty much on the same team with the last development company they had or worked together in called Earthmark. They developed, managed and sold thousands of properties for about 20 years, I think. I know my manager worked with Mr. Clark for at least 15 years as a salesperson and he did really well for himself. So I don't think that these guys are a bunch of clowns with no abilities. I think they just got into bad timing and luck with todays downward market spiraling and mortgage and economic slumps. If they were the only ones hurting, I would say that it is all their fault, but they're really not the only ones. Even billion dollar companies are going down and fast. I pretty much research everything for my career knowledge.

They were doubly hurt from the negative press, in my opinion. When people research a company online when they are thinking of buying, they always go to the internet. 10 years ago, their short term lease back problems would probably not have been a huge deal but because everything gets blown up and recorded forever on the internet, I don't think anyone could get past that. I think that any company with as much growth as they had would be scrambling to keep up with it all. They had to hire more and more people to take care of all the things necessary for the strong real estate demand. I think the executives were overall good family guys as I am. They all have kids, some have grand kids and it seemed that they were trying to do what was necessary for the future sustainability and growth of the company. They all put all their money into it and I think they are all pretty much broke now since the sales have stopped but the bills keep coming.

I think it is a sad situation because a lot of people loved their jobs and the company but are now out of luck. If you want to hear that I think everything was due to poor management, I am sorry, but I think that is incorrect. They sold thousands of units and handled the paperwork and flow of information as best as they could and everything worked out while the market was good. I think thousands of people did get their lease backs so it was a good plan or so it seems. The business plan was good but I think that the ability to keep the ball rolling when people stop buying, the banks take more than they promised and the press had a way to make more sales from their struggles, are what really hurt them overall.

Cayo Dave said...

To the previous commenter:
Your comment was heartfelt.
But a "good" business plan is one that expects cycles, not just good times, and has the cash reserves and plan to sustain the bad times.
The press really is not to blame for their demise. If anything, blame should rest on the lenders - who created an unheard of bubble in real estate through their lax (and often predatory) lending methods.