[Jud_T]

Terry,

When you find a bond trader or salesman who's doing anywhere near as well as he was 5 years ago let me know.  Nothing like making 1/3 of what you were making and being the whipping boy of the politicians who failed to enforce the regulations they already had in place in order to win another election for "the good guys"... oh, the same politicians who MADE $20BB on the bank bailout before pissing it away in a nanosecond.  End of rant...

[Mike Hendren]

   Stone Eagle was built for $75 million and sold for $10.5 million.  I'm not familiar with the others on that list, but I'll bet those are not the only ones.

Congnoscenti or no, you've got to hit the market at the right time to succeed.  And you've got to be managed well.  And it's a lot easier if you're in the right location.  

I question whether there's ever a right time for a course/club that costs $75,000,000 (it begins to look like a lot of money when we actually include the zero's).  What we had, plain and simple was a bubble that reached its apex in the third quarter of 2007.   The bubble made it appear such projects were feasible - but there's never been a bubble that didn't burst.  Not even a Tom Doak design can mitigate that fact of nature.   At a $175,000 initiation fee it would take 429 members to recoup $75,000,000.   Sure, hindsight's 20/20, but in the best of times it's difficult to find 429 people who think it's great to be great and feel like they're playing with house money that was magically deposited into their account).   Besides, the hedge-fund managers can be on Long Island in less than an hour - why travel to Palm Springs, Holyoke or Mullen.  

Developers rarely develop in anticipation of demand or a favorable economy.  Rather they develop in response to demand in a favorable economy.  That would work but for the fact that the delivery cycle is lengthy.  As I explain to my students, bad loans are made in good times.  The same holds true for golf course/club development. .

Another principle I believe in is that you don't do anybody's first deal.  This speaks to the management issue Tom refers to above.  To take on such a project requires a rare combination of romance, hubris, savy, experience and a pinch of luck.  Unfortunately, only hubris and romance are available in abundance, as the Asian purchasers of Pebble Beach learned years ago. Perhaps the Ballyneal members bet on the right horse but the wrong jockey.  I don't know.

As for location, it's important, but there are more than three rules (location, location, location) for successful projects regardless of what we've been told.     Sponsorship and capitalization make the top five.

Bottom line:  fundamentals matter.  They always have and they always will.  Fundamentally, many of these projects were economically flawed.    The smart guys with long memories knew it.  Those of us who tend to fall in love with golf courses and their architecture?  Not so much.  

Bogey

  

[Tom_Doak]

Another principle I believe in is that you don't do anybody's first deal.  

Michael:

I understand the principle behind that.  However, the Stone Eagle developers had made $40 million or more on their previous project [The Reserve] by getting the timing spectacularly right.  That experience only convinced them they could not fail.  It was all timing, rather than genius [in 1999] or stupidity [in 2007].

[Mike Hendren]

Good insight Tom.  A great first project has likely ruined as many developers as a first failure. 

Regardless, a  .500 batting average works well if you're using OPM - Other People's Money.

I believe it was Lee Buck Trevino who said "I'd rather be lucky than good."

[Mac Plumart]

Another principle I believe in is that you don't do anybody's first deal.  

Michael:

I understand the principle behind that.  However, the Stone Eagle developers had made $40 million or more on their previous project [The Reserve] by getting the timing spectacularly right.  That experience only convinced them they could not fail.  It was all timing, rather than genius [in 1999] or stupidity [in 2007].

In my business, I like the phrase..."Don't confuse a bull market with genius."

[mike_beene]

The outcome of the rain dance is largely dependent upon timing.

[Tim Nugent]

Josh, I'm sure that is an ALL-IN number.  How and why these numbers get published always baffles me.  Perhaps some marketing guy thinks it is a good way to justify high initiation fees. or portrays an aura of exclusivity.  From personal experience, I do the accounting gets fuzzy when real estate gets involved.  In that case, the cost of golf course construction goes way down and some of the costs are shifted to the cost of the housing development.  That way the basis in the housing goes up and the profit goes down (hence, the tax bite goes down).

Quick litnus test - "Did the Clubhouse cost more than the golf course?"

[Carl Nichols]

   Stone Eagle was built for $75 million and sold for $10.5 million.  I'm not familiar with the others on that list, but I'll bet those are not the only ones.

Congnoscenti or no, you've got to hit the market at the right time to succeed.  And you've got to be managed well.  And it's a lot easier if you're in the right location.  

I question whether there's ever a right time for a course/club that costs $75,000,000 (it begins to look like a lot of money when we actually include the zero's).  
  

Like Tim, I doubt $75 million was the cost of just the golf and golf-related stuff (like clubhouse).  I bet it includes a lot of non-golf-related expenses, like general improvements and maybe even the acquisition costs for the entire parcel of land (i.e., residential as well). 

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