[OhioBuckeye]

Originally Posted by Villages Kahuna

I’ve thought about why this latest generation of the Morses has purposely and callously begin to change the character The Villages, and the relationship with residents it has taken decades to develop. The construction of densely-sited apartments at Brownwood were first. Then the destruction of Hacienda Hills CC and announcement of another large high-rise building, and recently plans to build apartments in the recently-closed resident’s club, Katie Belles. I believe this is just the beginning. I think I know why.

These actions are what is necessary if the Morse family has plans to sell their ownership interests in The Villages or take the business public. The Villages is profitable, no doubt. But it doesn’t have enough consistent, repeatable earnings to maximize it’s value in such a sale. Repeatable less risky earning flows are what financial buyers and the capital markets use to value businesses.

Businesses are valued as a multiple of earnings, whether sold to a single financial buyer, sale to a public company, or as an IPO on the stock market. Yes, The Villages has some repeatable, consistent and growing sources of earnings—rent from all the shopping centers and the town squares retail, the bank, the championship golf clubs. But just not enough repeatable income to optimize it’s value, which is how the capital markets will value The Villages.

Without a stronger source of repeatable, growing income The Villages as a business will be valued as just another home builder. Profits are great so long as the owners keep buying land, building houses, and selling them to new residents. But if they ever stop that cycle, earnings drop dramatically. The capital markets are forward-looking and will ascribe a much lower multiple to the home-building part of the business than to the parts that will be ongoing if the three Morse siblings who currently own The Villages leave or retire. To increase the value of the Morse ownership more retail, apartments, or somehow monetizing their ownership of everything in The Villages not owned by residents will be necessary.

The three Morse siblings are each billionaires individually, according to Forbes magazine. But it’s all “paper wealth”. If they sold their ownership of The Villages, it would be worth nowhere near that amount. They’ve reached an age when they are almost certainly considering retirement. And among the dozens of Morse-Schwartz grandchildren and great grandchildren, there are only a few as talented as the siblings who want to work as hard as they did, or work for The Villages at all.

Selling the business is the only way the siblings can monetize their long, successful careers and retire. And to increase it’s value the business needs more repeatable, less risky sources of earnings. Unfortunately, achieving those objectives will probably require a change in the relationship and trust that tens of thousands of people who have “bought the dream” have placed in them.

I don’t have any inside information, but I did retire after a long career as an investment banker. I don’t want to be a Debby Downer, but what I see are owners that are preparing to “cash out”. It won’t happen overnight, it might take a few years, but don’t think we’ve seen the end of efforts to monetize their ownership by the Morse siblings. There will certainly be more apartments, such as in the new “non-resident” section adjacent to the new school complex and who knows what in the recently-announced 400 acre medical business section in the southern part of The Villages. I think that some of the amenities that have been free until now, will carry a cost in the future.

If you see something differently, post your feelings here. All I’m saying is that we should all remain aware of what’s happening that might change “Florida’s Friendliest Hometown”.

Since the Morse’s are in the business to make money, I’m making a big guess but Katie Belle’s probably isn’t making money for them. So renting or selling apartments is money always coming in. Kahuna, I know TOTV doesn’t want me to talk about anybody or bad mouth a political party. Maybe TV sees the writing on the wall & thinks if a certain political party wins the election & they do get away with what they say they are going to do. It could lose a lot of profit for TV or even bankrupt them. So who know why Morse’s are doing something else with Katie Belle’s but all most of us know it has to have something to do with money! If Katie Belle’s was making a profit Morse’s wouldn’t be doing what they are doing. Believe me Morse’s have made more money than you or me in 4 life times. They built & sold 120,000 plus home & pretty much own TV. They probably see the writing on the wall about where our country is headed. Good post, Kahuna!