This proposal to bring the operation of the Shenandoah Riding Center (SRC) in-house is being submitted by management for consideration. The operation of the facility would be a department within the Galena Trading Corporation (GTC). For the remainder of this proposal, the in-house option shall be referred to as SRC DEPT. Management s proposal is to hire an on-site manager to run the operation. That person will be a working manager that will not only organize events and activities, but will also give trail rides, care for the horses and deal with the boarders and guests. As a department of the GTC, the administrative work will be absorbed by administrative staff, including accounts receivable and accounts payable. In addition, some marketing and promotional work would be absorbed by expanded work scopes of the communication staff. There will be an allocated expenditure to pay for that work. This will free up the manager to perform the duties noted above. Management would negotiate with the current operators to vacate the facility no later than early spring 2018. It is likely that the current Lessee will want to maintain the rights for operation of the rodeo for 2018 if such an agreement is negotiated. Bringing this operation in-house would require an initial cash outlay to purchase assets such as horses, saddles, tack and miscellaneous equipment. Management estimates that cost at approximately $100,000. As you review the financial pro-forma, you will notice that depreciation to offset this cash outlay is included. Management would work with the current lessee to negotiate the purchase of some of the lessee s assets, but might need to purchase these assets from other sources if negotiations are unsuccessful. A financial pro-forma is attached. While the facility will operate at a loss initially, management is convinced that can be corrected within the first few years as: new events are developed; additional boarding opportunities are maximized; property owner volunteer and boarder participation is increased within the SRC operations culture; regional and local horse community presence is further built upon through: o tri-sate trail ride groups, o horse clubs/groups (equestrian {english and western disciplines}, para and driving) o youth/young rider horse programs through the United States Equestrian Federation and 4-H. In the first few years, GTC would need to absorb (a likely) SRC DEPT operating loss which would reduce its net income and income tax liability. If GTC s overall operation results in a net loss, this loss will be carried forward for income taxes. The loss will eventually be consumed at which point the income taxes become payable and profits returned to GTA as a dividend.
Management would ask that, in the event it is determined to bring the operation back inhouse, both the Strategic Plan and Operating Plan be reviewed to establish long-term goals for the facility. Keeping in mind that the current mind-set of operating SRC differently than any other common property amenity must be evaluated; for example, why is the Riding Center expected to break even when all other amenities are cost centers (Greenspace, Owners Club, Lake, etc.)? General Definitions: 1) The contract for lease shall be between the Galena Trading Corporation (a subsidiary of The Galena Territory Association) and the Lessee of the facility. The Galena Trading Corporation will be referenced as GTC throughout this document. 2) The Galena Territory Association, owned by the property owners of The Galena Territory, owns the Shenandoah Riding Center which is a common property of said Association. The Galena Territory Association (when applicable) will be referenced as GTA throughout this document. 3) For the purpose of this document, Shenandoah Riding Center may also be referenced as Riding Center. 4) For the purpose of this document, the term Lessee shall refer to the prospective lease candidate. Lease Cost: These definitions are accepted. 5) The Lessee shall pay at least 15% of the annual gross revenues received by the facility operations to the GTC for lease of the facility. Payments shall be made monthly. Regular financial audits and payment terms will apply. Higher competitive percentages may be offered for the lease of the facility in answering this RFP. SRC DEPT will not pay any lease income to GTC. The SRC DEPT will operate as a department within GTC. Any profits earned will be included on the GTC financial statements. Those total profits are returned to GTA as a dividend. Revenue Generation: 6) Approximate gross revenues from 2016 were: trail rides $230,000; boarding and boarding services $90,000, camps, lessons and events $60,000, and miscellaneous income $20,000, equaling approximately $400,000.
This information is accepted. Management believes that the trail ride revenue is near maximum capacity, boarding revenue opportunities are close to 80% capacity, and that growth needs to be centered on the development of events at the facility (large and small scale). GTA Commitments: 7) The GTC agrees to budget up to $10K for general expenses beyond Major Repair and Replacement items primarily for arena and paddock footing needs, road surface, pasture fence brush clearing, parking lot maintenance, and other high cost maintenance items. 8) The GTC shall pay the cost of all electricity, snow removal, lawn maintenance and landscaping. The Lessee shall be responsible for the cost of all water utilities and propane gas for heating. 9) Equipment belonging to the GTC that may be used by the Lessee during the terms of this lease includes a New Holland skid steer, New Holland tractor (including miscellaneous attachments), a Meyer box manure spreader and a Reveal 4 N 1 arena groomer. All GTC equipment will be maintained by the GTC at the Lessee s expense. If the Lessee does not need the equipment, it may be turned over to the GTC at the inception of this lease. This equipment will be utilized by SRC DEPT to operate the facility. Some additional equipment will likely need to be purchased by GTC in the short term, i.e. a large bat-wing mower for the pastures, utility vehicle, etc. 10) Miscellaneous personal property such as furniture and fixtures, bleachers, ice machine, two door refrigerator, etc. shall remain on site during the term of this lease. This equipment will be utilized by SRC DEPT to operate the facility. 11) The GTA/GTC will provide positive oversight that will encourage growth of the business for the betterment of property owners of the GTA and the surrounding horse community. Joe Mattingley, General Manager of the GTA, is an equestrian enthusiast and has been part of the horse industry for 30+ years. He is a current member of The United States Equestrian Federation Board of Directors and is a past United States Equestrian Team Athlete.
General Manager Joe Mattingley will provide general oversight for the operation. His contacts will help grow the operation within the equestrian community. However, GM Mattingley will not run the facility; a working manager will be hired to handle the operation of the facility. Programs and Events: 12) At a minimum, the Lessee shall provide pasture boarding, stall boarding, trail rides (at least from May through October) and a rider lesson program. 13) The Lessee shall provide a general equine health management program for all boarded horses and said program shall be articulated in the Lessee s Boarder Agreement. 14) All Lessee trail and lesson horses shall have a healthy look to them and general equine health measures (grooming, hoof trimming, vaccinations, etc.) shall be completed by Lessee or Lessee s designee. 15) Quarantine facilitation practices are strongly encouraged for new horses that come to the premises. For horses in transit, the Lessee must comply with all state and federal laws in regards to equine interstate health papers, negative coggins tests, etc. 16) The Lessee shall be granted access to the designated 26-mile nature trail system located on GTA Greenspace for patrons of the riding center. 17) Lessee shall, at least on an annual basis, contract with a Pro Rodeo Cowboy Association (PRCA) vendor (or other stock contractor approved by the GTC), to hold an annual 4 th of July Rodeo at the Riding Center on two consecutive evenings. A fireworks show will be required each evening of the Rodeo festivities. 18) The GTA shall reserve the right to hold property owner events (guests included) within the complex grounds; however, said events shall not have a detrimental effect on the Lessee s daily operations. The Lessee shall not withhold reasonable access for GTA events. Any excess costs generated by such an event will be reimbursed to the Lessee.
Any general net revenues generated by such an event would be split by the GTA and Lessee as negotiated prior to the event. SRC DEPT s plan is to host many events at the facility. The goal is to involve as many property owners and their guests as possible in events held at the facility. As noted earlier, the greatest potential for growth lies in additional events and property owner participation is vital. 19) Horse trailer storage for Lessee and/or boarders of horses may be allowed in a Lessee designated area. This information is accepted. 20) Overnight RV camping will be permitted, no open fires will be allowed unless authorized by GTA Security. This information is accepted. 21) The Lessee shall have the sole responsibility of marketing the Riding Center operations and the GTA/GTC will review content as necessary to assure proper messaging about The Galena Territory is being conveyed. SRC DEPT will rely heavily on the GTA communication department staff for assistance in marketing the facility which will ensure proper messaging is conveyed. Facility Maintenance: 22) Cleanliness of the facility must match the decorum of other GTA amenities. The office, sales, restrooms, and multi-purpose areas must be maintained at a temperature of 60-78 utilizing existing HVAC systems. In addition, hot water must be supplied to the restrooms. 23) Infrastructure maintenance will be the responsibility of the GTC. Infrastructure maintenance is defined as replacement and major repairs of roofing, siding, ingress and egress doorways, arena and paddock and pasture fence, septic field, stable stalls, indoor arena riding rail, hot walker, water systems, electrical systems and furnace and air conditioning systems. These systems may be replaced or repaired at the sole discretion of GTC/GTA. This information is accepted. 24) The Lessee will be responsible for all costs of repairs and maintenance to all other systems at the premises during the term of the lease. The facility must remain in good
general maintenance conditions throughout the term of the lease. General wear and tear will be accepted; however direct damage caused to facilities by the Lessee will be the responsibility of the Lessee to repair. This information is accepted. 25) Storing of excess material/debris on the grounds outside the buildings of the complex for extended periods of time for future use shall not be allowed. 26) The Lessee shall work with the GTC to define a Pasture Maintenance Program to control noxious and invasive plant species and to assure a pasture rotation program is utilized. Legal Items: 27) The contract lease shall include the entire Shenandoah Riding Center Complex including 108+/- acres of the designated pasture areas and facilities within the complex. A separate lease will not be required to bring the operation in-house as SRC DEPT. 28) The Lease shall be for the period of August 26, 2018 through March 31, 2022. Extensions of the lease may be granted if terms can be agreed upon by both parties. SRC DEPT would like control of the facility as soon as possible; ideally April 1, 2018. 29) The Lessee shall pay a $5,000 security deposit and it will be held by the GTA until termination of the lease. The GTA shall not unreasonably withhold the security deposit at the end of the lease unless there are excessive damages that require repair beyond general wear and tear from daily operations. Lessee s exposure shall not be limited to the balance of the security deposit. No security deposit will be paid by SRC DEPT. 30) Lessee may only use the premises for lawful purposes related to the operation of the Riding Center. 31) The GTA will reserve the right to make alterations to the Riding Center or surrounding environs. If said alterations occur, no adjustments to the current lease payment terms will occur during the terms of the lease.
This information is accepted. 32) Lessee shall take all actions to assure the facility stays safe and secure for the use of patrons and employees of the Lessee. 33) Lessee shall comply with all laws, ordinances; requirements and regulations required for operations of the facility and include any necessary postings. The GTA shall be indemnified from all losses due to negligence of the lessee. 34) Prior to May 1, 2018 the Lessee shall draft and submit a draft Boarders Agreement related to the boarding of horses at the facility for GTC consideration and approval. The legal documents required to operate the facility, including a trail ride waiver, lesson waiver and boarder contract will be developed by GTA management and legal counsel immediately upon being awarded the operating rights for the facility. 35) Any dispute between the Lessee and a GTA property owner/member that cannot be settled amicably shall be submitted to the GTA Dispute Resolution and Arbitration Procedures. A copy of the procedures are attached. Insurance Requirements: 36) Lessee shall be responsible for a portion of the hazard and property insurance for the Riding Center buildings and environs. This insurance is purchased through the GTA and currently costs $375 monthly. This rate could change subject to annual insurance premium adjustments for the facility by the GTA s insurance company. 37) Lessee shall be responsible to insure all of Lessee s assets located on the premises. The GTA will not carry any insurance to cover the Lessee s assets.
Taxes: Shenandoah Riding Center 38) Lessee shall purchase and maintain liability insurance with personal liability of at least $2M for injury to any one person and $4M for any one accident with at least a limit of $500K for damage to property. The Lessee shall additionally insure the GTA. Management is in the process of obtaining a quote for the operation of the facility from GTA s insurance broker. 39) Lessee shall insure the aforementioned equipment of the GTC (if they choose to use that equipment during the term of this lease). The GTC must be listed as a loss payee on the Lessee s property / inland marine policy. 40) Lessee shall be responsible for all real estate taxes; estimated annual expense is $2500 annually. 41) General federal, state, local, income and sales taxes generated from business operations shall be the responsibility of the Lessee. Direct Point of Contact from the GTA/GTC Organization: 42) The General Manager of the GTA/GTC is the direct point of contact for managing this contractual relationship with the Lessee. 43) The GTA shall be notified if the Lessee is going to be gone for an extended period of time (defined as more than 7 days). As an employee of the GTC, management will be aware of any absences from the facility.
Additional Information: Shenandoah Riding Center 44) Explain the expertise and strengths that you/your company can provide to produce a positive equestrian/horse culture for the Galena Territory and the local surrounding community if you were awarded the lease of the facility. Until such time as the SRC DEPT is awarded the operation of the facility, we cannot introduce the on-site manager. However, GM Joe Mattingley has extensive experience in the equestrian industry which will be used to enhance the facility and its standing within the community. The first lessee of the facility (from 2005 to 2013) caused a great deal of damage to both the reputation of the facility within the local area as well as with the boarders and guests visiting the facility. While the current lessee has made great strides in repairing the damage, it has not been forgotten and will be a consideration when hiring a new manager. 45) Please introduce to us the key members of your team. Include short bios and years of experience in the horse industry. All candidates and key team members are subject to a criminal background check. Until such time as the SRC DEPT is awarded the operation of the facility, we cannot introduce the on-site manager. Four of the RFP respondents have offered their services as on-site manager. GTC would also advertise for the position both locally and nationally. 46) Describe how you/your company can work with event organizers to help the GTA meet a strategic goal of expanded utilization of the facility for events for property owners, their guests and the surrounding communities to enjoy. We anticipate one equestrian or nonequestrian event in the first year of the lease and up to five events annually by the third year. The GTC sees event planning and execution as a cooperative effort between the two organizations. As noted earlier, revenue growth needs to be centered on the development of events. As an in-house operation, SRC DEPT will have the inside track when it comes to dealing with GTA management and property owners. For example, property owners representing the Social Committee will be a great source of ideas and Board members can be utilized to encourage participation in events at the facility. 47) Describe how you/your company will be able to be fully prepared to lease/operate this $2.4M facility and meet the requirements of this RFP by the takeover date of August 26, 2018 i.e. event planning, labor needs, horse needs for trail rides, etc. SRC DEPT would like possession of the facility as soon as possible, but no later than April 1, 2018. Management would propose hiring the on-site manager immediately upon being awarded the operating rights for the facility to begin planning for the operation. Management s plan calls for one on-site working manager, one full-time
employee, and four part-time, seasonal staff members. Once an on-site manager is hired they will be responsible for hiring additional staff. 48) What do you see as opportunities for expansion and increased revenue generation for the next three years? In the preliminary financial pro-forma, the operation shows an operating loss of $56,000 in the first year. Management s plan is to bring the operation to break-even within three years. A primary driver to achieve this is by increasing the number of events to bring in additional revenue. The plan is to have 4-5 significant events (equestrian and non-equestrian) annually to generate the additional revenue necessary to bring the operation to break-even. As the events are developed, all of the events would be operated and owned by the GTA (SRC DEPT). This is a significant advantage to brining the operation in house versus leasing to other third party operators. Third party operators could develop events and then if they have an opportunity to move to a new venue, they could take the events with them All significant event ownership rights should be registered to the GTA (SRC DEPT). 49) Please provide three professional equine industry references. The GTA/GTC will conduct equine industry background checks. This background check will be conducted during the hiring process for the on-site manager.
Operations Three-year Financial Pro Forma Year 1 Year 2 Year 3 Income Rent Merchandise sales $ 5,500 $ 5,610 $ 5,722 Horse Boarding $ 79,200 $ 84,480 $ 89,760 Trail rides $ 225,000 $ 229,500 $ 234,090 Riding lessons $ 10,000 $ 10,200 $ 10,404 Rodeo $ 40,000 $ 50,000 $ 60,000 Others Events, camps and clinics $ 25,000 $ 37,500 $ 56,250 Hay/Sleigh rides $ 10,000 $ 10,200 $ 10,404 Services for boarded horses $ 25,000 $ 27,500 $ 30,000 TOTAL INCOME $ 419,700 $ 454,990 $ 496,630 Expenses Cost of Goods Sold - Merchandise $ 3,500 $ 3,570 $ 3,641 Event equipment and supplies $ 7,000 $ 7,350 $ 7,718 Event food and beverage $ 7,500 $ 7,875 $ 8,269 Other event expenses $ 37,500 $ 39,375 $ 41,344 Horses expenses Feed (Trail and boarded horses) $ 18,000 $ 18,360 $ 18,727 Hay (Trail and boarded horses) $ 12,000 $ 12,240 $ 12,485 Horseshoeing (Trail horses only) $ 14,000 $ 14,280 $ 14,566 Tack and horse equipment (Trail horses only) $ 7,500 $ 7,650 $ 7,803 Veterinary & Medicine (Trail horses only) $ 5,200 $ 5,304 $ 5,410 Bedding (Trail and boarded horse - limited) $ 1,500 $ 1,530 $ 1,561 Salaries and Benefits 2 FT, 4 PT $ 226,500 $ 231,030 $ 235,651 Accounting/Admin/Billing/Marketing $ 7,500 $ 7,650 $ 7,803 Admin expense Advertising $ 10,000 $ 10,200 $ 10,404 Credit card fees $ 3,000 $ 3,060 $ 3,121 Dues & subscriptions $ 250 $ 255 $ 260 Education/Training/Travel $ 1,500 $ 1,530 $ 1,561 Telephone $ 2,000 $ 2,040 $ 2,081 Office supplies $ 1,000 $ 1,020 $ 1,040 Postage $ 200 $ 204 $ 208 Permits & Licenses $ 500 $ 510 $ 520 Uniform $ 500 $ 510 $ 520 Maintenance expense Fuel & Oil $ 7,500 $ 7,650 $ 7,803 Repairs and Maintenance $ 20,000 $ 20,400 $ 20,808 DRAFT
Supplies, small tools $ 5,000 $ 5,100 $ 5,202 Others Utilities $ 8,200 $ 8,364 $ 8,531 Association Insurance $ 17,600 $ 17,952 $ 18,311 Depreciation (Current equipment) $ 13,300 $ 13,300 $ 13,300 Depreciation (Additional) - Trailer $ 750 $ 750 $ 750 Depreciation - Add'l CapEx $100k (Horses) $ 14,500 $ 14,500 $ 14,500 Property tax $ 2,000 $ 2,040 $ 2,081 Contingency expense $ 20,000 $ 20,400 $ 20,808 TOTAL EXPENSES $ 475,500 $ 485,999 $ 496,786 NET INCOME ($55,800) ($31,009) ($156) DRAFT