Chesterton Tribune

NiSource set to sell Sand Creek Club; LEL lands next?

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Lake Erie Land Company (LEL) is getting out of the country club business.

And NiSource Inc., its parent company, appears poised to ease itself out of the land development business entirely.

In its first quarter 2005 report, filed on Thursday with the U.S. Securities and Exchange Commission, NiSource noted that on March 31 it had begun accounting for the assets of the Sand Creek Country Club (SCCC) as discontinued operations.

“By definition,” NiSource spokesperson Kris Falzone told the Chesterton Tribune on Thursday, “‘discontinued operations‚ are any businesses the corporation plans to exit.’”

The SEC filing does not specify when SCCC might be sold, to whom, or at what price, but apparently NiSource expects to take a loss on the club—which has a book value of $12.1 million—as it has recognized a pre-tax impairment charge of $2.9 million related to the property. NiSource spokesperson Carol Churchill told the Tribune today that, under the Generally Accepted Accounting Principles, an impairment charge must be taken when the book value of an asset—defined as the amount originally paid for that asset plus the amount subsequently spent on improvements less depreciation—exceeds the fair-market value.

In fact the anticipated sale of SCCC is hardly a surprise. In October 2003 LEL President Jerry Mobley proposed the conversion of the club to an equity basis, under which the membership itself would take ownership from LEL and begin to operate it on a not-for-profit basis. Indeed, in the December 2003 SCCC newsletter, General Manager Bob Jacobs indicated that it had always been the “long-term plan for the parent company of Sand Creek Country Club . . . to give the membership the opportunity to take ownership of the club.” But last fall LEL rejected an offer for the club tendered by a committee of members and so was left with a property which it had no desire to keep.

Of greater moment, however, is another note in the SEC filing: NiSource is expecting LEL to sell an estimated $5.6 million of land during the next 12 months, and is reflecting that land “as assets held for sale.”

Again, the SEC filing is short on details. It does not specify when exactly the land might be sold or to whom, how much acreage $5.6 million would buy, what percentage of LEL’s total holdings that acreage would represent, where that acreage is located, whether that acreage is raw or has been infrastructured, and even whether all of that acreage is located in Coffee Creek Center.

Churchill would only say that NiSource is anticipating the sale of some but not all of LEL’s holdings. “It’s not the entire lot of land,” she said. “It is a portion.”

Of course, Mobley has always said that LEL was established solely for the purpose of selling land to other developers who wanted to build on it. But NiSource itself appears to be treating this particular sale—whenever and to whomever—as a first step in a strategic withdrawal from its sideline in land development in favor of its core natural-gas and electric businesses. “NiSource has long said it does not plan to be in the land development business over the long term,” Falzone said. “We invested in Lake Erie Land and the development of properties in Porter County to boost economic development in Northwest Indiana. We feel we have accomplished that goal. Our plan has always been to eventually get out of the business of managing land development.”

Mobley himself, when contacted Thursday at his home in Arizona, referred all questions to NiSource.


Posted 5/6/2005