Money men


Money men
Sean Dudley

People seek to build golf courses for a wide range of reasons. Nowadays, the majority of new courses come into existence as part of integrated developments, perhaps residential estates or holiday resorts, and the course is only one component of the overall package. For others, a piece of property that is scenic and suited to great golf, plus a designer equipped to get the most out of the land, can yield a return by way of a number of wealthy individuals prepared to lay down big money to join a club. Still others aim at the affordable pay and play market. And a very few do it because they want to and can afford to, without a detailed calculation of the financial implications.

Our panel of developers have a range of different priorities. Gerry Fagan of Oceanico Developments is the co-head of one of the most active golf businesses around. Oceanico has acquired several courses in Portugal, including the Arnold Palmer designed Victoria Clube de Golfe, as well as the established Vilamoura. The group will shortly open the new Amendoeira Golf Resort on the Algarve, with courses designed by Nick Faldo and Christy O’Connor Jr’s practices. And, most spectacularly of all, Oceanico recently spent €500 million buying the Little River golf resort in Pinehurst, North Carolina.

“We started off looking at developments that were close to the beach in the Algarve,” says Fagan. “Research suggested that if there was going to be a downturn, the places that would suffer least would be those close to the beach. But sales of properties over a few years showed us that people were really interested in buying properties on golf courses. We soon concluded two golf courses was not enough – we needed at least seven, to give people the opportunity to buy property and get memberships at all the courses.”

It’s well known that the majority of people who buy property on a golf development don’t actually play golf. Fagan says this is not as surprising as it might at first seem. “The majority of our buyers look to get a return on their investment, either by reselling or letting their properties,” he says. “Golf contributes by extending the traditional holiday rental period and this is appreciated, even by non golfers. It is safe to say that developments in and around golf courses have huge appeal. Anyone looking for properties will see the beauty that the surrounding area has and sees this as an integral part of their investment opportunity. The association of good golf facilities and golf titles, which assure special privileges on the use of those facilities, represent a significant benefit to your property and certainly helps to increase the value of your asset.”

Like many developers whose focus is on residential property, Fagan reckons that name recognition, when it comes to golf courses, is a high priority. Asked what he believes attracts golfers to a particular resort over competitors in the same area, he says: “We determine the overall quality by the quality of the course layout to start with, the course condition and the standard of services associated with the facility. However, what is very important is the quality of the other services available at the resort. Visitors appreciate having a variety of activities to choose from, so if you can have other infrastructures like spas, kids’ clubs, indoor and outdoor sporting facilities, commercial areas, restaurants and bars, these complement the resort’s offering to suit golfers and non golfers alike. This type of setup makes a difference and certainly helps to attract families when not every member of the party may necessarily be a golfer.”

Yet it is important not to overplay the importance of golf. Richard Browning fronts up the Riffa Views development in Bahrain, an integrated resort featuring a golf course with Colin Montgomerie as signature designer. He says that an overemphasis on the golf element of the development had a negative impact on business. “Our local market didn’t understand golf,” he says. “We talked about our Colin Montgomerie golf course and people said ‘I don’t play golf ’ and weren’t interested in hearing any more about what we have to offer. So our approach was, ‘Lose the golf, people don’t understand it.’ It’s only now we are putting the golf back into our communications.”

Professional golf architects may wish to cover their ears now, but the large scale real estate developers are unanimous in their belief that employing a big name ‘signature’ designer is an important part of the marketing mix. “We believe that having a big name as designer of your golf course gives the resort a stamp of quality and credibility,” says Oceanico’s Gerry Fagan. “This makes your marketing activity a bit easier as there is a natural appeal for the celebrity design, the curiosity to play the course and a conscience that this will bring an added value to the properties as well.”

In the Middle East, the news is being made by Leisurecorp, whose four course Jumeirah Golf Estates development will be the home of the Dubai World Championship, the world’s richest golf tournament, as of next year. “For us, it’s simple,” says CEO David Spencer. “Start with the best designers, guys with a global profile who will actually provide really strong input to the course designs – and that will give you a major step towards success. We are very selective as to the golf course architect we choose. Basically there are four categories to fulfill. First is sympathy and understanding of the land they will be working on, and second is a thorough understanding of the client and the client needs. Third is that they must be suitable for the proposed demographic of golf, taking into account both current and future. And perhaps most importantly, they must be passionate passionate, together with the client so that it is not a job, but rather a labour of love.”

“A big name is just that: a name,” he adds. “For us, the key is having someone who plays an active role, and who is known within golf as being a successful developer. The golfers who add real value are the ones that inject that value through the time, the experience and the passion they bring to the project.”

Nick Smith, chief executive of The Wave Muscat, Oman’s first integrated golf and leisure development, agrees. “The first decision we made was to get a signature designer,” he says. “We had a beauty parade and chose Greg Norman, because he fit the market. We felt that an American designer would not be right for the first course in Oman. If you look at our web site you’ll see he’s there on the front page, and we’ve used his vision to underpin our development with credibility. We’ve sold 872 houses, and we haven’t started our golf course yet. But golf was part of the credibility of our development.”

Fagan and his colleagues at Oceanico are almost ready to open their 36-hole Amendoeira resort. “We were looking for designers that could take advantage of two great pieces of land with completely different landscape characteristics, as we wanted to achieve two very different layouts on the same resort” he says. “When hiring an architect I look at three factors,” says MG Orender, president of US developer Hampton Golf. “First the land itself: who I think will do the best job with that piece of ground. Second is the project. If it’s a development, what is the level of housing and the best match of architect to the project (high-end, midmarket), and is the architect flexible enough to help us make the project work. Third, does the architect have other courses in the area, if so how many and how close?”

Nick Smith explains that the signature design approach is as much about marketing as it is about quality of golf. “The Greg Norman name is used prominently throughout our advertising and was heavily used at the outset,” he says. “Unfortunately we have had a delay in our water delivery and as a consequence we haven’t been able to start the course. This will happen in 2009, so we have played down the golf message in our branding strategy for the last year or so. This will be ramped up again next year. The high profile designer brings a brand to the development, and strong brands are very much in favour in the Middle East, in all types of business. I believe buyers do link the name with quality, it allows us the possibility of branding some residential property too, and some of the environmental work that high profile designers require fits with our ethos as developers.”

The golf and real estate model has been a successful business proposition for developers around the world for many years. Yet there are still golf courses built on different models. Jerry Sarvadi, managing director of the Renaissance Club at Archerfield, a new course right next to Muirfield in Scotland, designed by hotshot architect Tom Doak, says that it’s not necessary to have a large-scale housing component to make a profit. “There were two factors in our selection of an architect: the property and the business model,” he says. “In our case we never seriously considered any other architect than Tom Doak, mainly because of the historical location of the land we have and because our business model is to create a special golf course for the purest of players. We engaged Tom at the very beginning of the project. At times I felt that this early engagement might have hurt us because planning and local authority approval can take quite a long time and at one point Tom lost interest. The problem is that you need the architect’s input during this process. This is difficult and risky because you are never sure you will get approval.” So, he says, if one has the opportunity to build a ‘pure golf ’ development, it’s possible to make money without real estate. But the golf must be tip-top.

For those developers – the majority – that are dependent on real estate sales to deliver a return on their investment, the challenge is more complex. Golfers, for example, are known to dislike the presence of overweening housing on their courses; yet property buyers will pay a premium for golf course views. MG Orender, for one, reckons that golf is taking a higher priority. “I believe that good development golf courses are trending back to more core routings and certainly no or very few double loaded fairways,” he says. “This trend obviously reduces some profit in the development but that can be mitigated.”

Spencer agrees. “People, golfers and non-golfers alike, choose to live on residential golf developments because of the beautiful natural environment that surrounds them,” he says. “So if you pack too many houses in to too small a space, you kill the very reason for being there. There is definitely a trend towards core golf. The quality of a golf course must be the hero if you want to leave a legacy for future generations. Core golf is the way of the future and increases the entry-level price of real estate. In our instance we want to be seen as a serious golf course development, one of the best golf courses in the world with the best facilities and lifestyle experience. We have never considered corridor golf, in fact we are very anti corridor golf.”

Nick Smith of The Wave says there is another option, at least for those projects fortunate enough to have ocean frontage. “There’s a solution to density and frontage, and that’s to put a marina with it,” he says. “The best place to put high density is around the marina. The low density is around the golf course. We never set out to cram residential around the golf course: our belief is that, as much as possible, the golf should stand alone. We are only putting a few houses, which are top of our range, on part of the golf course. Our marina gives us the opportunity for high density apartments, where the sense of space, and density, are completely appropriate. If developments don’t have a marina, other uses where high density is more appropriate would be near shopping or restaurant areas, public squares and spaces, or around tennis, beach or sporting uses. The developer will always want some houses on or near the golf course because purchasers like these locations, so it’s a question of balance.”

“Purchasers see the green spaces of golf to be a quiet and relaxing environment, which a lot of people in retirement like,” says Smith. “They also see that golf brings activity and therefore the community will have life within it which will help guarantee their investment. All buyers like to make a sound investment even if this is not their primary driver, so golf (providing it works) is a solid bet. I also believe that golf is seen as middle class, a good neighbourhood!” With property markets around the world in decline, and the global economy struggling to keep up, Jerry Sarvadi of the Renaissance Club says he is concerned about the prospects for the golf business, in the short term at least. “I am not really optimistic or pessimistic about the near term future of golf development,” he says. “In my opinion it really depends on the location of the course and the product being developed and offered.”

David Spencer, though, is rather more optimistic. “There is massive unsatisfied demand for golf, both here in the Middle East and internationally,” he says. “There are massive markets around the globe which are just opening up to golf. Go tell me how many courses you can find in Russia, in India, in China and then tell me there are limits on this sector. And even in the so-called mature markets of Western Europe, there is great demand for quality golf. I’m a passionate believer in the value that golf brings to a city or destination. It is a massive driver of high-value tourism and a great course really puts you on the world map. I think golf will continue to be the powerhouse in the market.”

This article first appeared in issue 13 of Golf Course Architecture, published in July 2008