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