The Week That Was, november 10, 2013

     Mike Keiser is one step closer to securing approval for the Gil Hanse-designed golf complex he plans to build in Bandon, Oregon. Bandon Western World reports that the state’s parks and recreation department has recommended approval of the land swap Keiser needs to before he can break ground on what’s become the most talked-about municipal golf property in history. If the state’s parks and recreation commission likewise blesses the project -- it’s scheduled to vote on the matter later this month -- then Keiser will be good to go.

     Edwin Watts Golf Shops LLC, which sells golf merchandise in 90 U.S. stores and online, is broke and searching for a buyer. The company filed for bankruptcy protection last week, blaming its financial distress on what Reuters described as “increased competition and waning enthusiasm for the sport.” Sun Capital Partners, the private equity firm that acquired the chain from another private equity firm in 2007, hopes to sell it before the end of the year. Edwin Watts, the Florida golf pro who founded the company in 1968, is said to be among the prospective buyers. “I think the company is going to survive,” he told the Northwestern Florida Daily News, “and we hope to potentially figure out a way to get it back.” Edwin Watts calls itself “the most trusted retailer in the industry.”

     Proposals are officially being sought from private-sector groups wishing to build a “world-class” golf resort in a western suburb of Liverpool, England. Only the truly elite need apply, however. Wirral Council, which owns 285 acres in Hoylake, has master-planned the property to include a luxury hotel, meeting space, a spa, some houses, and a golf resort that will lure golfers from around the world. Phil Davies, the council’s leader, expects the resort to become “a landmark destination for golf tourism.” The site buts up to Royal Liverpool Golf Club, and the council expects to select its development partner by July 2014, when Royal Liverpool hosts the 143rd Open Championship. Responses from interested parties are due on November 13, 2013.

     The original version of this post first appeared in the November 2013 issue of the World Edition of the Golf Course Report.

     For months, Chinese investors have been buying golf properties on coastal Queensland, Australia. Now they’ve made what the Malaysian Insider calls “the first significant Chinese investment in New Zealand’s tourism sector.” A Shanghai-based group, Shanghai CRED Real Estate, has purchased the 2,790-acre Peppers Carrington resort on the North Island’s Karikari Peninsula. The resort’s amenities include villas, a lodge, vineyards, and an 18-hole golf course that was, in 2003, redesigned by the late Matt Dye. (He was one of Pete Dye’s nephews.) Shanghai CRED plans to market Peppers Carrington to Chinese vacationers looking to lounge on beaches they’ve not yet visited. “Affluent Chinese tourists tend to use Chinese tourist agencies, which in turn prefer to recommend Chinese-owned resorts internationally,” said Guo Gui, Shanghai CRED's general manager. Shanghai CRED describes itself as “China’s largest real estate group.” It bought Peppers Carrington from Paul Kelly, a U.S. investment banker.

     A decade or so ago, Russia’s over-excited golf promoters predicted that the nation would open 500 golf facilities -- nine- and 18-hole courses, driving ranges, practice centers -- by 2018. In light of new economic data, however, the federation’s golf dreams may need to be deferred. Russia’s oil boom has ended, and the Putin government now expects to record average annual growth in the neighborhood of just 2.5 percent through 2030. “The factors behind the sharp economic growth in the pre-2008 crisis years are exhausted,” the nation’s economic minister said in a comment published by the Wall Street Journal. As a result of the contracting economy, the newspaper says, “salaries and pensions will rise more slowly,” and consumer spending “will crimp.” If you’re keeping score, KPMG’s Golf Advisory Practice has determined that Russia nowadays has just 16 golf properties -- among them, just seven 18-hole courses -- and a measly 4,500 registered golfers.

     Just when you start to believe that the divorce between golf and residential real estate is final, along comes Henry DeLozier to broker a reconciliation.
     “As housing continues its recovery,” DeLozier contends in a story for Golf Course Industry, “more golf communities and clubs will be developed because golf courses remain extremely attractive amenities.”
     Extremely attractive to whom? The number of U.S. golfers continues to shrink, and evidence suggests that most home buyers nowadays would prefer to live in communities with amenities such as lakes, organic gardens, and hiking paths. Does anyone believe that millions of prospective home buyers who’ve been reading ad nauseam in recent years about golf communities going bankrupt are now itching to buy into one? Today, anyone who really wants to live in a house along a golf course fairway can have his pick of them, from coast to coast.
     Taylor Morrison currently has a pair of golf communities under construction in Florida, but are other major home builders planning to build any? Toll Brothers? Del Webb? And if the opportunity would happen to materialize, how many lenders would be willing to finance them?
     DeLozier knows the golf and housing industries well, because he used to help develop golf communities for Pulte Homes. In fact, he’s likely had a hand in the development of more golf communities than anyone on earth.
     So he knows that precious few U.S. golf communities sold even half of their houses to golfers. The majority of the residents in these communities bought for the views, not the golf, foolishly believing that their sight lines would be forever protected. They learned the hard way. But the next wave of buyers already knows the score. What sort of premium will they be willing to pay for a lot next to an expensive, hardly used amenity that can close on a whim and, under the right conditions, be replaced by rows of townhouses?
     “No one wants to see a return to the poor decision-making that led to too many overbuilt markets and under-financed properties,” De Lozier writes.
     Agreed. But the problem isn’t simply that golf courses built primarily to sell real estate contributed to overbuilding. The problem is that they were, by and large, lousy layouts -- needlessly difficult, with fairways choked by houses and routings that could only be negotiated with carts. They took the fun out of golf, caused millions to flee the game, and ruined the business for everybody.
     DeLozier is right on target when he writes that the housing industry has a crucial impact on “unemployment, consumer confidence, and discretionary spending.” In this general sense, the health of the housing market most certainly affects the golf industry. But in this general sense, it also affects sales at restaurants, movie theaters, sports events, and everything else in our lives.
     No matter what the experts may say, the golf industry doesn’t have a special connection to the housing industry. For a few decades in every century, when houses are selling like hotcakes, home builders simply make it seem as if there is.

     Billy Casper Golf has secured a contract to operate its second golf property in Florida. The firm has signed a five-year contract to manage Colony West Country Club, a 36-hole municipal facility that’s been closed since August. BCG aims to reopen the complex before the end of the year. “Billy Casper Golf is the best choice to move Colony West forward,” said Michael Cernech, the city manager for the city of Tamarac. “Its extensive experience with these types of projects and powerful marketing platform will re-establish Colony West as a favorite among residents and visitors.” Over the life of the contract, the Fort Lauderdale Sun-Sentinel reports, BCG will be paid $497,000 to manage the complex and receive $250,000 for start-up expenses. BCG also operates Eastpoint Country Club in Palm Beach Gardens.

     Sequoia Golf’s national expansion plans have reached the Pacific Northwest. The company has been hired to operate Mill Creek Country Club, a financially troubled facility in suburban Seattle, Washington. “They showed a clear understanding of our situation and presented a realistic vision for how they could help the club deal with its issues and move forward,” the club’s treasurer said in a press release. Mill Creek, owned by its members since 2007, has what it’s described as “a financial obligation we will not be able to deal with” -- it involves $100,000 payments due to some of its members -- and has discussed a sale with interested suitors. However, earlier this year it told the News of Mill Creek that it had restructured its debt and now has “at least five more years to build membership.” Sequoia hasn’t announced its strategy for rebuilding the club’s membership, but the press release suggests that it’ll involve its PlayAway program, which will give Mill Creek’s members access to a network of 450 private clubs and resorts in North America.

     The pickings were slim, but Golf Digest has managed to find 15 courses worthy of being called the best new tracks of 2013. “Quantity is still down,” writes Ron Whitten, “but quality has never been better.” Whitten’s favorites appear to be the Red and Blue courses at Streamsong in Florida (“the golf destination of the year, maybe the decade”), but he also had nice things to say about Sewailo Golf Club in Arizona (“a fantasyland carved from flat desert”), the Grove in Tennessee (“probably Greg Norman's best American design in years”), and the Resurrection Course at Mystic Creek in Arkansas (“Best course in Arkansas? Someday, maybe”). To supplement the new courses, the magazine also identified 14 noteworthy renovations and redesigns.