[Jonathan Cummings]

A friend of mine owns a very successful fertilizer company.  He does business all over the country selling his product to many golf courses.

He and I were playing golf in Palm Springs in Jan and he told me, "you would not believe the number of clubs out there who can't pay their bills.  Roughly half of my golf course clients are chronically in arrears - many with prominant names you'd be shocked over."

I kept on pressing him but he refused to name specific clubs.  

A couple of weeks ago I was playing a very nice new club in Scottsdale - top 200 material.  They have been open for 3 years and have a target membership of 350.  So far they have 81 members,

Like real estate, golf may well be primed for a bubble burst.

JC

[Kelly Blake Moran]

Of course most of this happens because everyone involved is mainly interested in covering their own asses and when something fails you can't point the finger at me if I specified all the right materials.

Great point Don, this just about says it all.

[Mike_Sweeney]

Can anyone name a private golf only no housing club built in the last 10-15 years that is not looking for members? Here is the list as far as I know:

1. Sand Hills Golf Club

While I really like the old club architecture, I also really like their old land cost or lack of cost structure for the old clubs!

[Mike_Young]

Of course most of this happens because everyone involved is mainly interested in covering their own asses and when something fails you can't point the finger at me if I specified all the right materials.

Great point Don, this just about says it all.

DITTO
And then we have statements such as this on the last page  
"Modern maintenance practices on golf courses are a disgrace environmentally, there is way too much water being used and way too many chemicals, and the equipment pollutes much worse than modern road going vehicles do.  If golf wants to be looked on as more of a friend to the environment it ought to take a leadership role in changing these things. "  I am assuming this gentleman doesn't wear cotton or eat corn since they both use about 5 times more pesticide per acre than golf.
BUT...
The big thing is still the perception of the industry to the courses, employees and owners of the "2.5 million"(for lack of a better word) courses.  Since these courses don't necessarily have the budget to participate in these industry associations they have virtually no say...and young people trying to enter the industry strive to work at such clubs as ANGC etc.  It is a great experience ...I am not slamming that....it's just hard to go back.....99% of us can play golf on a fairway cut a 1/2 inch with an 11 bladed ground driven reel pulled by a tractor that cost 1/2 of a lightweight fairway unt and last 4 times longer BUT this is not SOLD to the industry.....same for triplex green mowers...
And my biggest complaint.....a $500,000 cart path....how many rain days does one need to lose to justify such?  And how many rounds per year does a course need to receive cart damage???   and it just keeps going.....

[Andy Doyle]

With my comment about "municipal Bandon model", I was trying in my typically pithy way to suggest a municipally owned resort course.

Isn't this model essentially what Alabama has done with the RTJ Trail?  

Anybody have any idea how they are doing financially?  I know they are still building and opening courses, lodges, etc.  And it's still very affordable.  A couple of my buds are going over to Grand National this week - playing 2 top 100 courses (Links and Lake) for a total of $80.

Andy

[Mike_Young]

With my comment about "municipal Bandon model", I was trying in my typically pithy way to suggest a municipally owned resort course.

Isn't this model essentially what Alabama has done with the RTJ Trail?  

Anybody have any idea how they are doing financially?  I know they are still building and opening courses, lodges, etc.  And it's still very affordable.  A couple of my buds are going over to Grand National this week - playing 2 top 100 courses (Links and Lake) for a total of $80.

Andy

Nice places but do you think the golf itself makes money?  Noway.... These projects were to enhance the development ofthe areas where they were built.  

[Andy Doyle]

Mike:

That might be true, but wasn't this whole project an investment of state retirement funds?  Wouldn't they have to show a reasonable rate of return - something more direct than an improvement in the businesses in the surrounding area(s)?

Andy

[Dan_Callahan]

I'm looking at my recently-arrived copy of a Massachusetts-specific golf magazine. It contains a feature titled "Private and Possible." The focus is on private Boston-area courses that are currently looking for members—something that simply didn't happen seven years ago.

The "Possible" part of the title seems like a stretch and ties into Mr. Doak's point about affordability. Of the courses listed, I am looking at initiation fees of $120,000, $125,000, $100,000, $50,000 (and the most interesting of the lot—Silva's Renaissance Club), $5,000 (located north of Worcester, so not really an everyday club for a Bostonian), $75,000-$117,000, $35,000.

I understand that Boston has had a golden last 10 years, but are there that many people around who can afford to part ways with $100,000? I think there's a good reason why each of these newish clubs is still looking for members.

I must admit that the Renaissance Club is intriguing. Silva continues to import classic features like the Redan and Punchbowl. Walking is encouraged at the course and there is a huge practice facility. Even so, a $50,000 initiation fee and $6,500 annual dues is a lot for someone to spend when also thinking about cost of living in the area (outrageous) and the skyrocketing costs of education (I have three boys, and by the time they are ready for college, four years of tuition will be about $300,000 per kid!).

[Mike_Young]

Mike:

That might be true, but wasn't this whole project an investment of state retirement funds?  Wouldn't they have to show a reasonable rate of return - something more direct than an improvement in the businesses in the surrounding area(s)?

Andy

yep it was and it is a very small percentage....check into how much was lost the same year on an asbestos building in NYC....it made the golf deal look small and both are just a small part of the fund

[John Goodman]

The CEO of the RSA, David Bronner, believes that the Trail has helped bring jobs to the state, especially in the aerospace and automotive industries.  You can see a fair amount of development in areas like Greenville and Gadsden that are at least in part a result of the Trail courses.  It's hard to say if the golf is making money or not - the talk you hear around here is that the Birmingham and perhaps Auburn courses are financially self-sustaining, but that the rest of the Trail isn't.  Given that they're working with a total fund of close to $30 billion, and that real estate investment (including a lot of stuff that's not the Trail) doesn't comprise more than 10% of the aggregate investment portfolio, I think it's safe to conclude that the Trail "works" economically for Alabama.  There is some civic pride associated with it too I believe.

[Brent Hutto]

There is some civic pride associated with it too I believe.

Yeah, and you can't put a price on that  

[Bruce Katona]

From our business model perspective, the business of golf has been out of kilter for several years.  We've been looking for properties to acquire which have overspent for the project, are located where we believe the demographics to work and where we can acquire a good asset at a discount.  We won't (and haven't) overpaid for any asset as there is no reason to.  Price for properties continue to decline as existing facilities are plowed under for real estate development.

The key to the industry is financing.  Where is anyone locating the lenders to actually get new projects built?  Renovations of existing facilities can be finaced through net present value of future cash flow or having another mortgage placed on the undelying land.  How can someone leverage a to-be-built course on future cah flow or membership sales.  That is not the business model any longer.

[Paul Jones]

Can anyone name a private golf only no housing club built in the last 10-15 years that is not looking for members? Here is the list as far as I know:

1. Sand Hills Golf Club

While I really like the old club architecture, I also really like their old land cost or lack of cost structure for the old clubs!

The Honors Course?

[Jon Wiggett]

Answer to Brents question on how much it costs to build a course with no frills etc.

On the right piece of land and mild climate, 18 holes is possible to build and grow in for about $750'000 including grow-in but excluding irrigation.

[Jay Flemma]

Luckily, the very best of our architects...including those here and those who lurk...do an excellent job of coming in on-time and under budget.

I thinnk alot of the problem is developers who'll "spare no expense" trying to build a monument to themselves rather than a great course.

Bravo whoever brought up Black Mesa.  Eddie Peck should be the model for course developers everywhere.

[Dan_Callahan]

Can anyone name a private golf only no housing club built in the last 10-15 years that is not looking for members? Here is the list as far as I know:

1. Sand Hills Golf Club

Although I don't know for sure, I would guess that Nantucket Golf Club isn't looking for members.

[Mike_Sweeney]

Can anyone name a private golf only no housing club built in the last 10-15 years that is not looking for members? Here is the list as far as I know:

1. Sand Hills Golf Club

Although I don't know for sure, I would guess that Nantucket Golf Club isn't looking for members.

Add Atlantic too.

Two for Rees, one for C&C. Others?

I think The Vineyard Club may also be on this list.

[Mike_Young]

The CEO of the RSA, David Bronner, believes that the Trail has helped bring jobs to the state, especially in the aerospace and automotive industries.  You can see a fair amount of development in areas like Greenville and Gadsden that are at least in part a result of the Trail courses.  It's hard to say if the golf is making money or not - the talk you hear around here is that the Birmingham and perhaps Auburn courses are financially self-sustaining, but that the rest of the Trail isn't.  Given that they're working with a total fund of close to $30 billion, and that real estate investment (including a lot of stuff that's not the Trail) doesn't comprise more than 10% of the aggregate investment portfolio, I think it's safe to conclude that the Trail "works" economically for Alabama.  There is some civic pride associated with it too I believe.

I think what you say is probably true but I am not sure that any of the golf is maikng money if they have to service the true debt they had while building them...But i do think they can sustain their expense

[Tom_Doak]

Stonewall's membership is full, although it took them a while to add on 75 members when we built the second 18 holes.

I don't think the membership-sales stats are quite as dire as Mike suggests, but I do know of a few courses that have garnered a lot of press and good reviews but their waiting lists are for members who want OUT because of the expense, and can't get out because the membership is not full.

[Craig_Rokke]

How financially vulnerable can a member of a failing private club be? I know there are different types of meberships, but
how possible is it for a member to lose his shirt? What is a worst case scenario?

[Joel_Stewart]

Can anyone name a private golf only no housing club built in the last 10-15 years that is not looking for members? Here is the list as far as I know:

1. Sand Hills Golf Club

Nanea on the Big Island was oversold for memberships before it opened.

[Steve_ Shaffer]

Craig

It depends on the structure of the club. Locally, Stonewall, Applebrook and Lookaway are set up as limited partnerships. The price of a membership fluctuates depending on the market. High demand=high membershp fees;low demand=falling membership fees. If there is no demand, in a worst case scenario, a member could lose his initial equity plus any capital assessments if the annual dues are not paid.

[Anthony Butler]

Dan Callahan
I'm looking at my recently-arrived copy of a Massachusetts-specific golf magazine. It contains a feature titled "Private and Possible." The focus is on private Boston-area courses that are currently looking for members—something that simply didn't happen seven years ago.

A reliable source told me you can get into Essex County Club with the requisite 8 references immediately. If true, that is shocking.

Tom Doak
The economics of golf course construction in America NO LONGER WORK.  New courses depend on people willing to pay a premium for elitist memberships, OR on a housing development to subsidize the costs of construction.

Tom, this 'satori' of yours reminds me of similar predictions that have been made about my industry, advertising. Every couple of months there has been another development that drives another nail into the coffin of big budget TV advertising. (The internet, TiVO, mobile phones with big screens... )

So far, there has always been someone out there lured by the high profile and production values of this form of promotion who's convinced they can do it better than anyone else. This sounds a lot like your current customer base. Perhaps they are doing a better job than the P&Gs of this world. If you watch how your kids consume media and use new communications tools, it's hard to see the current economics working for too long after advertisers no longer care  what baby-boomers want to buy...

... blame GW Bush for the disappearance of Jimmy Hoffa.

No. I'm going to stick with blaming him for the diappearance of the federal surplus. Given all the US debt China now owns, if they build any fancy private clubs in the next few years, it's likely our kids will be caddying there for elite members of the Chinese Communist Party.

[Jim Nugent]

Mike:

That might be true, but wasn't this whole project an investment of state retirement funds?  Wouldn't they have to show a reasonable rate of return - something more direct than an improvement in the businesses in the surrounding area(s)?

Andy

I find it pretty unsettling to learn a state retirement plan is investing in golf courses.  Talk about speculative.  If the courses go NLE, as many seem to be doing, the retirement plan takes a huge loss.  

[Mike_Young]

Mike:

That might be true, but wasn't this whole project an investment of state retirement funds?  Wouldn't they have to show a reasonable rate of return - something more direct than an improvement in the businesses in the surrounding area(s)?

Andy

I find it pretty unsettling to learn a state retirement plan is investing in golf courses.  Talk about speculative.  If the courses go NLE, as many seem to be doing, the retirement plan takes a huge loss.  

It was the teacher retirement system for Alabama and the head guy, Dr. Bronner had been a fraternity brother or some connection witht the head of the initial group that (Sunshine or something like that) had the idea.  And yes, it probably does work for development of the community unless you were a small mom and pop golf course in the area.

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