Ivan Fleischmann, a Toronto lawyer, developer and avid golfer, says that the deal was irresistible. In 1987, he was among the 550 members of the National Club—a golf course 15 km north of Toronto regarded as the toughest in Canada—who joined together to buy the club for $15.4 million from its then sole owner, Gil Bleckman. For $28,500 each, the members become proprietors. But, instead of maintaining the National as a traditional private club, where a membership reverts to the organization when a member fails to renew, the investors chose to turn it into one of Canada’s first equity clubs, which permit members to sell their memberships if they wish. Since then, because of the demand from affluent golfers in the Toronto area, the 550 memberships have increased in value to $65,000 apiece. Still, Fleischmann says that he has no plans to sell. He says that he is satisfied with the value of his investment—and he values his access to the quality course even more. Declared Fleischmann, who plays twice a week: “It’s the difference between ownership and renting. As an owner, you take better care of a property and care more about long-term plans.” Across Canada, as the popularity of the sport continues to soar, the links between the business of golf and the game itself are intensifying.
More than 2.2 million Canadians played golf at least once in 1989, compared with about one million in 1972, and many of the postwar baby
boomers will soon be approaching their 40s— the prime golfing years. Many analysts predict that one in seven Canadians, or four million people, will play golf in Canada by the year 2000. At the same time, the high cost of land, especially around major cities such as Toronto and Vancouver, is making it prohibitively expensive for developers to build modest courses that they can open to the public. Instead, in order to generate the millions of dollars that they need to finance course construction, more and more developers are promoting their memberships as lucrative investment vehicles.
Indeed, late last month, Fairway Capital Partners, a consortium based in Vancouver and Toronto, launched a $216-million limited partnership to finance a chain of up to 10-, 18-, 27and 36-hole courses from the West Coast to Montreal. For an $18,000 payment, each investor is entitled to a single equity unit and a golf membership in one of the clubs. After six months, investors will be free to sell either the equity unit, the membership, or both.
Fairway plans three courses for the Toronto area, two in Vancouver and one each in Edmonton, Calgary, Winnipeg, London and Montreal. Barrie Bradshaw, president of Toronto-based Golfcorp Ventures Inc., the leading partner in the consortium, says that, in order for the plan to succeed, Fairway will have to sell enough investment units by June 11 to finance the construction of 54 holes of golf on two or three different sites.
Fairway’s plan is by far the biggest equity course proposed so far in Canada. And Fairway has asked Canadian Clubs Management Inc., a wholly owned subsidiary of Dallas-based Club Corporation of America (CCA), to manage its 10 clubs. CCA currently manages more than 227 affiliated recreational facilities around the world, including 55 golf and country clubs. Bradshaw says that Fairway members will be entitled to use all the Canadian clubs as well as
all the CCA clubs, ranging from the Heritage Club in Bangkok to the renowned Pinehurst Country Club in North Carolina.
But, in contrast to most of the equity courses that so far have opened in Canada, and which developers have marketed primarily to golf enthusiasts, Fairway and its underwriters say that they are hoping to sell investment units to non-players as well. Other equity-course developers, however, say that they feel uneasy about the idea of selling memberships purely for investment purposes. Bill MacWilliam, for one, who owned the St. Andrew’s East course in Stouffville, Ont., 45 km northeast of Toronto, said that he made certain that 350 equityownership members “were keen players.” Recently, however, after an advertisement for St. Andrew’s Valley, a sister golf course that MacWilliam is now building nearby, appeared by mistake in the national edition instead of the local edition of The Globe and Mail, he said that he had to turn down at least one speculator. Shares in the course are selling for $40,000 to $60,000 each, and MacWilliam says that “one guy in Vancouver wanted 50 shares.” MacWilliam added: “I don’t think memberships
should be seen as an investment. We’re really looking for good, active members.”
But Golfcorp’s Bradshaw claims that the cost of constructing new courses is so high that all developers will eventually be forced to search out new sources of outside investment. Still, most analysts say that equity courses will have little impact on the vast majority of Canadian golfers who have to line up to play on public courses. According to the Oakville, Ont.based Canadian Golf Foundation, fully 95 per cent of golfers now play on public courses. But, despite an unprecedented course-construction
boom, the choices available to those golfers are shrinking. Even Toronto-based course architect Thomas McBroom, who has quadrupled his business in the past five years, largely because of the rapid proliferation of equity courses, says that the greatest need is for more public golf courses. He adds that, in future, those public courses will have to be built farther away from big centres, where land is cheaper. Added McBroom: “People will drive up to two hours to play golf. They will treat it like a one-day ski excursion.”
In British Columbia, a course-construction boom and a rise in membership prices are accelerated by the growing presence of visiting Japanese golfers, for whom the sport has become prohibitively expensive at home. In Japan, where all land is at a premium, club memberships cost anywhere from a few hundred thousand dollars to several million dollars. For many Japanese players, it is cheaper—and often more satisfying—to take a golfing holiday abroad. But, as the traditionally popular destination of Hawaii has become more and more crowded, many Japanese are playing courses on North America’s West Coast. The
result is a course-building boom. Michael Geller, a Vancouver-based real estate and development consultant, says that he knows of 80 course proposals in the lower B.C. mainland alone, compared with 19 in 1989.
Many Canadian real estate developers have also discovered that a first-class course can attract affluent buyers to their residential projects. James Island, for one, a 764-acre development on the island of the same name just off Sidney, B.C., 70 km south of Vancouver, includes an 18-hole course. Thomas Loney, vicepresident of planning for Pacific Parkland Properties Inc., which started the development two years ago, said that, when all seven phases are complete, the project will include 210 single-family homes. Loney says that 66 lots in the first two phases, which cost about $260,000 each, have already been sold. Despite all the island’s other amenities, Loney adds that the course “was a big selling point.”
At least one new equity course opening this year was started for the sheer love of the game, but even it has proven to be an astonishingly lucrative investment. Chris Haney, one of the millionaire inventors of the popular Trivial Pursuit board game, says that he was so frustrated one day in 1984 when he could not get onto a public course near his home in Toronto that he decided to build his own. He formed a nonprofit organization, the Devil’s Pulpit Golf Association, and set about creating the Devil’s Pulpit course on land whose development was controlled by the Niagara Escarpment Commission, about 55 km northwest of Toronto. The 315-acre course is scheduled to open in July, and a second course five kilometres away, the Devil’s Links, is scheduled to open in 1991.
Together, the courses will cost $32 million. Still, Haney says that he plans to limit the membership to 750, who can play on both courses. So far, he has sold about 400 memberships, which started at $17,025 but now cost $55,200. While the memberships are transferable, members do not have a voting stake in the two courses. Said Haney: “I plan a benevolent dictatorship. I didn’t want 57 guys telling me how to run the place.”
But, according to Golfcorp’s Bradshaw, the love of the game is not the only reason to invest $18,000 or more in a course. Said Bradshaw: “We’ve taken the emotion out of the golf. You should be able to justify the purchase on a purely mathematical basis.” Clearly, now more than ever, golf is a game of numbers not just on the fairways, but also on the bottom line.
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