Global Edition

Golf property review by Strutt & Parker

12.05am 27th March 2002 - Property

Wettest Winter

The winter of 2000/2001 was the wettest on record and having started early in the autumn of 2000 it continued well into spring 2001. Many courses on heavy soils were closed for weeks on end with a substantial loss of income.

In addition greenkeeping operations were delayed as equipment could not be taken onto the land with the result that the condition of many courses suffered until well into the summer.

Buyers focused on the importance of drainage. Test Valley Golf Club near Basingstoke, constructed on a free draining chalk subsoil, was sold by Strutt & Parker to Leisure Links International for close to the guide price of £1.4 million. The fact that it remained open and dry for most of the winter was a real selling point. Since the year end they have purchased Chesfield Downs Golf Club from Clubhaus for £3.9 million.

Foot and Mouth 

On top of this the Foot and Mouth outbreak resulted in the closure of many courses, mostly in rural areas. Some that did not close came in for criticism for irresponsible behaviour for encouraging unnecessary movement in the area – despite taking all recommended precautions for disinfection.

This was particularly difficult for clubs which rented courses from owners of surrounding agricultural estates who were not keen to encourage additional access.

The problem was not entirely limited to rural areas. Home Park Golf Club, now known as Hampton Court Palace Golf Club, was closed for 8 weeks to protect the deer, just as Strutt & Parker went to the market to offer a new 25 year licence on behalf of Historic Royal Palaces. Despite this the sale process went ahead on a shortened timescale and after strong competition American Golf was selected. In addition to a substantial licence fee they will be investing about £1.4 million in a new clubhouse and other improvements.

Terrorism 

The third event of the year was the terrorist attack in America on 11th September which, combined with the then deteriorating world economy, made everyone reappraise their operation. Despite the shock, we are unaware of any sales which were affected by this event although some buyers expressed greater caution in their outlook.

Low Interest Rates

Against these events, the bank rate fell on 7 occasions during the year from 6% at the start of the year to just 4% at the end of the year. This helped reduce finance charges for those either purchasing courses or able to take advantage of lower rates. However, those with funding at higher fixed rates were unable to take advantage of this.

Operating Profits

2001 was a difficult year for many operators and budgets were often not achieved. This applied equally to private members clubs which are now facing very strong competition. They need to reappraise their operation and take a more active approach to attract green fee players and societies, and to maintain a full membership.

The Market 

The operational difficulties of 2001 failed to noticeably affect the market for sales or lettings. It appears that the market has now reached a level of maturity. In 1990 there were virtually no sales of developed courses. The development of over 700 courses since 1988 has now created much of the tradable stock and the virtual absence of new developments means that the stock is unlikely to change significantly in the foreseeable future.

The number of courses sold in 2001 was 19, just one more than in 2000. Over the last 5 years, sales are averaging around 20 a year. The letting market, which was virtually non existent before 1998, has been running at around 5 a year for the last 4 years.

Major Deals

Dale Hill Golf Club in East Sussex, a 36 hole complex and hotel with an 18 hole course designed by Ian Woosnam, was sold to Leaderboard Golf, owners of Chart Hills and Sandford Springs, for approximately £8 million.

The vendor subsequently purchased Dukes Dene Golf Club in Kent, one of three sales by Clubhaus, for £2.5 million.

Two companies exited from the golf market during the year, Clubcorp and Greene King. Clubcorp, sold their single unit, The Drift in Surrey, to Premier Developments – owners of Badgemore Park Golf Club near Henley.

Greene King also disposed of their four courses, two of which, Wycombe Heights and Abbey Hills, were sold to Burhill. This now takes Burhill to 7 courses which includes the fine new second course at Burhill itself.

Clubhaus sold Stapleford Abbotts and Chelsfield Lakes for £6.6 million to American Golf and purchased Chartham Park for £2.9 million. This continued the policy of Clubhaus to develop health and fitness centres at their courses and to dispose of those properties which did not meet this objective.

It has been a difficult year for Clubhaus. Whilst many of their courses with health and fitness have traded very successfully, their funding structure and problems with mainland European properties need to be resolved. If this is possible their core properties will form a very good business. Some further change in their portfolio appears inevitable.

Harleyford Golf Course near Marlow was marketed by Strutt & Parker. A long lease was acquired by the members for a premium in the region of £3 million. As they held debentures, this was a sensible purchase by the members. They were advised by Property Golf and Finance Group.

Lettings

Three of the six lettings in 2001 were to American Golf. These included Hampton Court Palace Golf Club, referred to earlier, and Cookridge Hall Golf and Country Club in Leeds. This is their first venture in the north of England.

They also took an operating lease of Buckfield Park Golf Course near Basingstoke which is currently under development by a new company involving Roy Horton and Stuart Flynn who were involved with the development of Bearwood Lakes. Strutt & Parker handled the letting of the long lease to the development company.

We expect to see further growth in the American Golf portfolio, mainly by leases, and possibly the very occasional disposal as the overall portfolio builds.

The Cox brothers leased Merrist Wood Golf Club near Guildford to add to their portfolio of Hainault Forest and Essex Golf Centre.

2002 Forecast

We expect the total number of sales and lettings in 2002 to remain at a similar level. We believe that values are now plateauing after a period of steady growth.

We expect the major operators to continue to develop and rationalise their portfolios.

From an operational viewpoint we expect competition to remain strong between courses with growing competition from private members clubs.

Strutt & Parker www.struttandparker.com

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