State of the Community: PBNA’s Financial Perspective

The cost of living in Palmetto Bluff has risen sharply since 2021. Between the Club’s price hikes and the Trust’s shift in assessment responsibility from the developer to the homeowners, homeowners are bearing a significantly larger share of the community's operating costs.

Total Annual Impact per Home

Key Financial Trends Affecting Homeowners

1. Shifting the Financial Burden

●At the Club:  The number of new property owners increased by approximately 18% and annual dues have surged by 89.5% since 2021. The question to be asked is if the membership numbers have increased without the addition of new Club amenities since 2017, what is the need for such a dramatic increase in member dues? The answer is possibly the dramatic increase in payroll costs.  Under Montage management, payroll costs were likely allocated between the hotel and the Club, since Montage managed both.  Why did the Developer dramatically increase payroll costs to the Club when Montage managed the Club for much less?  More on this below.

● At the Trust: At the Trust, assessments rose by 29.2%. In addition, the Developer stopped paying assessments on its unsold lots starting in 2022 (in accordance the 80^th Supplement to the Charter dated November 1, 2021), which shifted 100% of the Trust’s costs directly onto existing property owners. For context, the previous developer paid a total of $2.7 million in assessments for unsold lots and homes over five years, from 2017 to 2021. If the current Developer covered 80% of that $2.7 million over the past four years, it would significantly reduce the financial burden on the current homeowners. It is unclear whether all commercial and non-Club PB entities that benefit from the Trust actually pay Trust dues or assessments.

2. The "Expense Offset" Pattern

● Payroll Surges at the Club: The Club’s payroll doubled to $9.13 million since 2021, an increase of $4.5 million that effectively "consumes" the extra revenue gained from the dues increase. Notably, this occurred after the Developer assumed management of the Club in 2022 and replaced Montage as the Club manager.

● Administration costs spike at the Trust: The administrative costs of the Trust have risen significantly, increasing more than 1.5 times since 2021. These costs went from $767,000 in 2021 to a projected $2.0 million in the 2025 budget. The 2025 budgeted amount of $2.0 million includes over $1.0 million allocated for payroll from the Developer’s other entities and $383,000 dedicated to legal expenses, largely to manage ongoing homeowner disputes.

●Legal Fee Spikes at the Club and Trust: Both entities are seeing massive increases in legal spending. The Club’s 2025 legal budget rose 489% to $433,333, while the Trust budgeted $383,000 for 2025, largely to manage ongoing homeowner disputes. In the first lawsuit, the Developer has spent 4 years litigating whether the dispute should be arbitrated, which clearly only benefits the Developer. The Developer’s justification for allocating legal costs to the Club and Trust is unclear, and the amount of legal expense for these entities is concerning.

3. Concerns Over Long-Term Stability

● Declining Club Revenue: Traditional income streams such as Food & Beverage have decreased by 17.3% when comparing the annualized period from 2022 to 2025 with that of 2021. Additionally, Guest Access revenue has seen a significant decline of 76% during the same time frame The key question: do the Developer’s policies favor the hotel and commercial venues over the Club venues, like Cole’s and the Canoe Club? Additionally, there is concern that Club restaurants do not meet member expectations. The Guest Access revenue is notably lower when the homes open for STR appear to be busy.  It is concerning to see a dramatic reduction in the Club’s Guest Access revenue, raising the question of who collects it.    

● Trust Reserve Pressure: For the first time, the Trust is considering using reserve funds for the South Wilson erosion repair. This raises concerns that current assessment levels may still be insufficient to address the aging infrastructure and increasing maintenance costs.  Similarly, there is an open question as to who will fund the cost of any traffic light or other solution at the May River Road exit – the state or town, the Developer, other users of the road, or the Trust (i.e., the members), or whether there is cost sharing.  It would be hard to understand why the Trust would fund 100% of this cost, given the direct benefits to the developer, the private amenities, and the New Riverside communities and school.

The Developer's Club Subsidy False Narrative

The Developer’s narrative regarding the Club subsidy is a mischaracterization. The Developer describes the Club “subsidy” as a gift to the Club (and thus to its members), when in fact this figure is a byproduct of management practices that prioritize the Developer’s bottom line over the value to the homeowners.

• The "Subsidy" Fiction: Concerns have been raised that the developer's Club subsidies to may be negated by increased allocation of operating charges and overhead costs. This could create a financial cycle that benefits the developer while misusing member funds. If costs are simply inflated or reallocated, the subsidy becomes just an accounting illusion with no real cost to the Developer.
  
  
• Developer Club Contributions are a Real Estate Development Standard: In residential development, it is the industry standard for developers to invest in Club amenities and operations as a necessary strategy to drive real estate sales. 
  
  The Club is not a standalone business: The Club is not an isolated business; any contribution made by the Developer is a calculated investment intended to increase the value and pace of their real estate sales.
  
  Ownership imbalance: The Developer still owns approximately 60% of the total lots to be sold, while existing members own only 40% (i.e., approximately 1,500 of the community's 4,000 lots have been sold).
  
  Obligation to maintain and build Club amenities: Given that the Developer holds a significant portion of the unsold lots, they should be contributing substantially to the Club’s operations and maintenance as a primary carrying cost of their total investment in Palmetto Bluff. In addition, it is standard practice for developers of communities like ours for developers to build new Club amenities as the community membership grows. No new amenities have been built since 2017. At the end of 2017, only 958 properties were sold, of which 544 were developed, according to the Trust's audited financial statements as of December 31, 2017.

The Joining Fee Saga

After imposing a mandatory joining fee on their for-profit club since 2017, the Developer has now announced the elimination of joining fees.  Setting aside for the moment the issue of certain members who have already paid a joining fee, this does not seem to bode well for the club’s financial condition.  These fees are often viewed as an important means to operate, maintain and expand the Club with future amenities, and the concern is that the Developer will, first, raise dues and second, charge higher joining fees to its other non-mandatory, for-profit clubs (e.g., Anson Point). Consequently, money funnels out of the Club to the developer, with the members making up the difference in dues increases and, in all likelihood, fewer new Club amenities.  

The Developer has stated numerous times that its capital investment, and that of its predecessors in the Club since Palmetto Bluff’s founding, are far greater than the joining fees collected, describing a scenario of sunk costs. First, this is a false narrative since the investment in the Club accelerates and induces future real estate sales, the driving profit center for the Developer. Second, as an industry standard, club joining fees are collected for the construction of new amenities (with membership growth) and reserved for future amenity capital and replacement costs, and not to recover the developer’s investment cost.  

PBNA expects more to come on this issue.

Member Action is Needed 

Many members, individually or in small groups, have intermittently asked the Developer questions regarding the Club’s and Trust’s financial information. The silo approach has NOT yielded complete or assuring information for members.

PBNA is asking an important question: Should members fund an external financial audit firm to verify that everything is legitimate and that their interests are being served? Please take a moment to consider whether you would find comfort in knowing if you and your money are being treated properly. If so, we would appreciate your input on how you would like to contribute to this effort. Please email us at pbna2020@gmail.com.