Global Edition

Championship golf club on the market

12.00pm 29th April 2002 - Property

Alan Lovett and Alan Bloom of Ernst & Young, Joint Administrators of Nitto Albion Plc and Nitto (Oxfordshire) Limited, have instructed HLL Humberts Leisure to offer The Oxfordshire Golf Club for sale.

Alan Lovett stated that “the purpose of the administration order is to seek a sale of the assets of The Oxfordshire and that offers in excess of £6 million are being invited by 5.00 pm on Monday 27th May 2002”.

The business has been in difficulty since the completion of the audit of the accounts to June 2001. Up to that time the value of the golf course and club house had been shown in the balance sheet as £20 million – a figure which reflected the actual costs of developing the golf course and club house in the early 1990’s. As soon as it became clear that such a valuation could no longer be sustained the directors sought the advice of independent financial experts.

The financial structure of The Oxfordshire was based on the concept of memberships being obtainable only through a debenture scheme. The original quota for the club was 650 7-day members and 250 5-day members. This included a limited number of corporate debentures. In 1993 the first offer was priced at £25,000 for 7-day membership debentures, £12,500 for 5-day membership debentures and £75,000 for the corporate debentures, which entitled several nominees to join from each company. There are currently approximately 750 members. The annual subscriptions currently stand at £1,450 for a 7-day membership and £900 for a 5-day membership, with corporates paying per nominated member.

The Oxfordshire was the first greenfield development in Britain by the Nitto Kogyo Group, established in Japan in the early 1960’s and owners at the time of more than 30 golf clubs worldwide, including the Turnberry Hotel and Golf Course which it had bought in 1987 (and subsequently sold to Starwood Hotels at a large loss in 1998). By the early 1990’s the membership-only-through-debenture system was already well established in Japan. Indeed golf club memberships were traded through independent brokers and had proved to be profitable investments in their own right.

This financial model was unfamiliar in the United Kingdom. Although many of the corporate debentures were quickly snapped up by the British subsidiaries of Japanese businesses it was recognised that most prospective members would need to have some sort of re-assurance about the value of their investment. Accordingly the company wrote into the debenture contract a promise that on the tenth anniversary of the debenture’s purchase the debenture holder had the right to surrender the debenture back to the company and in return would receive cash to the value of 90% of the original investment.

It is the consequences of making this promise that have brought about the company’s demise. The original quota of debentures was never more than 70% sold. Therefore the possibility that the value of the debentures might actually increase has not occurred.

In a worst case scenario the directors realised that over the next three years, should all debenture holders wish to trade in their paper, they could be faced with the need to pay out well in excess of £15 million. Although the business was trading on a break-even basis there were insufficient cash reserves to meet such claims.

Since the debenture repayment liability makes it impossible to find a buyer of the company as a going concern the directors had no option but to put the company into administration. This was done on 27th March and the effect of the decision was to turn all the debenture holders into the company’s principal creditors. In effect The Oxfordshire Golf Club now owes its debenture holders £20 million

The Oxfordshire Golf Club opened in 1993. It was the first European venture of Rees Jones, the younger son of Robert Trent Jones who was regarded by many as the father of modern golf course architecture.

This was an important commission for Rees Jones and he set out to produce a design which would not only test the world’s top golf professionals but one which would also be a comfortable experience for the club member. “There is no need to use unnecessary gimmicks to combat 21st century equipment. This will only discourage the average golfer,” said Rees Jones, “but there is a need to ensure that each hole is distinctive and set up so well that a player can always visualise a shot.”

The length of the course varies from over 7,100 yards from the championship tees to under 5,500 yards from the most forward tees. Where water hazards are involved players are offered a choice of routes towards the green. Bunkering varies from tiny pot bunkers to huge American-style ‘Sahara’ bunkers. Many holes are what Rees Jones describes as ‘cathedral’ style – there are plenty of spectator vantage points along the sides.

The clubhouse extends to around 3,720 square metres (40,000 square feet). It has three floors and is built on the highest part of the estate. The main bar, restaurant and function rooms are on the upper floor with a balcony on two sides. There are outstanding views over the golf course and surrounding Oxfordshire countryside.

The club is located some 46 miles from Central London, off Junction 7 of the M40 motorway near Thame. It has already staged several important tournaments, most notably the Benson & Hedges International Open from 1996 to 1999 inclusive, The Wilkinson Sword Ladies’ English Open and the Anderson Consulting match-play event. Within the complex there is a first-class practice ground, offering a choice of grass and artificial tees, and ample space for all that goes with hosting a major professional tour event: tented village, car parking, television compound, media centre and hospitality pavilions.

The Club employs up to 55 staff including operations manager Richard Moan, golf professional Neil Pike and course manager David Gower. All these staff are still in place, giving their full support to Peter Cooper of Ernst & Young’s Hospitality and Leisure Team who is running the day-to-day operations.

“The club is being run on a business as usual basis,” said Peter Cooper. “Annual subscriptions fell due for payment on 1 April 2002 and we decided to invoice the members, of whom there are nearly 600, on a quarterly basis. Over 50% of them have already paid.

“This is a unique business,” he continued. “This sale offers a one-off chance of a lifetime to obtain a magnificent trophy asset.”

“We have received a huge raft of interest in The Oxfordshire to date,” said Ben Allen from Humberts Leisure. “That includes interest from overseas. We anticipate that the level of enquiries will grow over the coming month

“Expressions of interest are being received from a wide range of potential purchasers from corporate golf operators who have identified the Club’s true trading potential, to high net worth individuals seeking a trophy asset of this quality. This will be a fascinating marketing exercise and we expect intense competition to secure what must be one of the finest golf clubs in the country.”

Further information from Ben Allen, Humberts Leisure, 01962 835960

Humberts Leisure

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