A report from FPDSavills
The UK Golf market got off to a steady start at the beginning of 2003 with FPDSavills being involved in a series of golf range related transactions during the first nine months of the year. Both sales and lettings have arisen for the usual reasons including retirement, financial pressure, partnership split or the need to hand over to a specialist golf operator.
Some examples of these properties either being sold or let by FPDSavills during this period include:
- Open Golf Centres, Christchurch in Bournemouth was offered for sale in April with a guide of £2.25m. It included a 60 bay, 2 tier, floodlit driving range together with 27 holes of golf and comprehensive clubhouse facilities. The guide price reflected the fact that the property is leased from Bournemouth Borough Council under a 99-year agreement. The sale arose as a result of financial pressure following high levels of initial development investment.
- In conjunction with Christchurch, Open Golf Centres‘ other site in Leicester has been offered to the market at a guide of £395k for a 9 hole golf course with planning permission for a 2 tier, floodlit driving range, also on a leasehold basis.
- Another golf facility offered to the market by FPDSavills this year is Four Marks Golf Course at Alton, Hampshire. This comprises a compact 9 hole facility with a purpose-built clubhouse, also on leasehold land.
It is unusual for so many leasehold properties to become available in one year for sale, the majority of transactions being on a freehold basis.
There have been roughly 10 transactions so far this year, mostly of 18 hole golf courses without floodlit range facilities, and we expect the number of sales to fall within the region of 15-20 transactions per year, for the year 2003.
Whilst we regularly receive requests for land to be developed as a golf range, and for developed ranges, the number of opportunities is limited, partly due to strict UK planning and development laws.
Leasing – a popular alternative?
In the last five years leasing of either land or built golf facilities has become a popular option for landowners/golf range/course operators.
Ground leases are popular with landowners; they can provide an enhanced income when compared to agricultural use, whilst retaining long-term ownership and control. They also enable golf operators to limit outlay on the land, leaving funds for building the facility itself. Care is needed on the part of the golf operator to ensure that the money spent on the development provides a sufficiently good return on capital. This depends not only on the length of the lease, but also its detailed rent and other provisions.
We are also finding that leasing is a popular alternative for landowners/developers who have built a golf facility but wish to hand over day to-day management to a specialist golf operator.
A recent example of this is the letting of Stonebridge Golf Centre, near Birmingham comprising a 21 bay, floodlit golf range, which unusually drives into a lake with floating targets. The facility also includes an 18-hole golf course and modern clubhouse that was developed in 1996 and subsequently operated by the landowner’s estate company. FPDSavills offered the property privately to the letting market in June 2003 and have recently concluded a lease.
Predictions for 2004
- A steady market backed by a stable UK/European economy and low interest rates;
- Fewer ‘Forced Sales‘, due to new Receivership guidelines and a good summer trading period in 2003;
- More lifestyle buyers, primarily on a commercial basis;
More interest from corporate buyers, following a period of consolidation in 2002/3;
- A stable supply/demand with limited numbers of new golfers but few new golf developments.
Developments in Europe
In the EU, because of past experience with developers going bust halfway through developments, or selling house plots but failing to properly service them or build the leisure facilities, most regions require all the infrastructure and leisure facilities to be built before the houses are commenced. Added to the land acquisition and planning costs, this amounts to a very substantial financial investment before the first income from house sales or facilities operations commence – and of course the driving range, golf course, pool, etc isn‘t going to be profitable until the houses adjoining it are built and occupied.
That said, if the development is high quality, fully freehold, in the right location, has a well-researched design and development mix, is soundly serviced, funded and project managed, and is well marketed, the returns to investors prepared to wait until the project matures can be extremely good – 20% to 30% plus is not uncommon. Golf course and other leisure facilities may be very expensive to build abroad, but the better ones trade sustainably at levels that would be regarded as exceptionally good in the UK.
FPDSavills is advising on schemes in France, Spain and Portugal, and are valuing large undeveloped leisure/residential schemes. On a smaller scale we are also selling Golf de Rimaison in Brittany, which is a 9-hole golf course and clubhouse, with 3 holiday homes and a farmhouse in need of renovation – ideal for the lifestyle buyer/investor.
The Benefits of International Golf Investment
The UK stock market has lost 40% in the last three years, paper based pension plans look ropey, and now so many people are piling into the UK property market that returns are beginning to look decidedly slim.
Glossy magazines suggest you look at property or business abroad – perhaps Portugal, or France. The prospect looks attractive…. lovely weather, a huge market from all those countries in the Euro, everyone speaks English, lots of ex-pats, loads of potential. But what about all those nightmare stories of dodgy land deals, poor design and construction, impossible business conditions…. and taxes?
Of course, most UK residents investing abroad will buy a house or apartment – “villa” sounds so much more the thing somehow! And generally speaking, in most cases there’s no problem. Buy into an established, reputable development, use a sound lawyer and accountant, and there’s little more risk than you‘d have buying in the UK. Capital growth prospects are good, as in most of the Euro zone owner occupation has very rapidly increased – to around 80% in Spain, Greece, Italy and Ireland, while the UK remains under 70%. Euro interest rates are low and stable and many second homes can become self-financing by letting out when not needed.
The soundest, and most popular, development schemes are typically those with extensive quality ancillary leisure facilities, where the skiing, golf, beach resort, leisure club and so on serve residential developments of houses and apartments. These appeal not only to the local market, but are attractive to buyers and holidaymakers from throughout Europe, and wealthy individuals worldwide. Les Arcs, Quinta do Lago, La Manga…. the best among many first class developments with successful and outstanding facilities.
So, what about getting in on the ground floor? How risky is it to invest in a scheme pre construction, or build out and operate the golf course, driving range, health and leisure club, etc? Well, frankly it’s not easy to get the chance…. FPDSavills is in the business and we know of only a handful of realistic possibilities in Europe. Each has taken over 10 years of site assembly by buying out small landowners, then gaining outline planning permission. Over this period costs escalated to accommodate ever more complicated legal and EU requirements and only now are they poised to commence construction.