Estates of Play

Since the advent of the first golf estate in South Africa, Selborne Parkin KwaZulu-Natal, which opened for play in 1987, the golf estate phenomenon has been characterised by often unforeseen change. The developments at Selborne were unusual, as they moved the estate away from its original function as a working dairy farm into Denis Barker’s dream of a residential golf estate.

I use the word ‘unusual’ in that any land earmarked for a golf estate development is generally considered to be largely ‘useless’ for any other purpose. However, in the majority of cases this argument, usually from the ‘green lobby’, is mainly redundant. Selborne has evolved into a pristine coastal utopia with world-class facilities. Another example is Eagle Canyon in Johannesburg, where a disused quarry was turned from an eyesore into a successful and vibrant residential golf estate.

For many of the original pioneers in these developments, the expectation was that golfers would be a very significant interest group when it came both to purchasing properties and using the facility. With the benefits of hindsight, certainly in South Africa, therein lay the seeds of problems, with the lack of provision for the maintenance and the upkeep of the golf course coming home to roost a few years down the line. From the mid-1980s there was something of a boom in golf-related developments, and one of the key financial problems that characterise many estate golf courses lies in the structure of the ‘business’ relationship between the property developer and the golf facility. To many developers, whose focus is, not unnaturally, on property sales, a golf course is seen as a very attractive package through which to market and sell the development itself.

In the past, little thought was given to the legacy aspects of how to sustain the golf course, as an integral part of the estate, once the stands had been sold out and the developer’s involvement concluded. There are too many examples where the balance between the needs of the developer in the sales stages of a project, either through greed, unrealistic expectations and/or poor financial modelling, have not been in step with the longer-term needs of the golf course and its related facilities.

This problem was then aggravated by overoptimistic projections about the number of golfers who would purchase and take up residence at the new estates. What transpired was that a significant majority of the residents and homeowners at golf estates did not in fact play golf. This unexpected statistic was subsequently borne out by the international average on this ratio, which put the numbers at about 75:25 in favour of the non-golfers as residents at estates with a golf course as the centrepiece.

Added to this generic factor are regional considerations in addition to the desire to have a ‘fairway view’ (well, who wouldn’t want to look at a golf course from their lounge windows?) in this phenomenon, such as the need for secure suburban fortresses in South Africa. Whatever these may have been, the net result was that the majority of golf estate residents and property owners were non-golfers.

Fortunately, lessons have been learned from these miscalculations, and expectations rethought to a point where some of the much newer and larger mixed-use estates – Steyn City north of Johannesburg would be an excellent example of this – are forecasting that as little as 10% of their residents will become golf members, and the golf revenue expectations from residents’ activities have also been revised accordingly. This change in thinking brings to the fore the parallel need for an entrepreneurial and innovative approach to managing the golf facility, in an industry where management skills up to this point have been, quite naturally, largely custodial.

Golf at club level now more than ever needs to be seen as a real business, one in which flair and innovation are encouraged and coupled with the requisite custodial skills, and then embedded in a culture in which experimentation is encouraged, and where the real fear should not be in the failure of a particular plan or initiative, but rather in the consequences of not being willing to try something new. We now understand clearly that the relationship between the developer and the golf facility needs to be managed carefully from the outset. This must include a completely objective and dispassionate view of the downstream, post property sales phase needs of the golf facility, because otherwise it can turn out to be a recipe for future disaster. Equally, the investors or buyers must see the golf course as an essential part of their property’s investment value, whether they are a golfer or not.

History clearly shows that where the relationship is not carefully structured, promoted clearly and honestly and then managed realistically, the most likely outcome will be one in which the golf course, due to a lack of provision for adequate funding, will become a significant liability in the overall context of an estate’s financial activities.

Jeff Gilmour, President of ARC (Association of Residential Communties) comments: “Even if it has already been fully integrated into the estate, unless the golf course can be managed effectively to at least a breakeven point as the first-phase goal, it will continue to be a bone of contention among homeowners (especially the non-golfers) and a recurring and unwanted item for discussion under ‘general’ at every AGM.”

As Jeff comments, the golf course must be seen as a core and integral element of the complete facility and must not be allowed to be sheared off as a separate entity. No matter how imaginative this process might be, it will be unlikely to change the fundamental interrelationship between the golf course and the estate itself.

Gilmour’s example underlined the concern that with the sale of too many developments, and the use of creative golf membership options in the form of debentures, founder categories, shares, etc., the golf course amounted to little more than a cosmetic wrapping, which masked the real downstream needs.

The newer estates, where a golf course is part of the ‘package’, have learnt from these marketing and presentation errors. Steyn City sees golf as only one of the many lifestyle features it offers its residents, all of which must be supported by every homeowner. The fact that the golf course is presented as an integral part of the facilities from the outset gives the prospective buyer or investor a clear understanding of their responsibility in community terms, both to it and any other facilities that might be part of the package.

Pecanwood Estate is a mature facility that has effected retrospective action to address this same issue along the theme of total ownership by every homeowner of every aspect of the estate’s facilities, irrespective of personal recreational preferences or interests. This approach will ensure that the golf course is securely anchored at the core of the development along with the roads, gardens, security fences, etc., and reinforce the premise that the value in any property investment is inextricably linked to the maintenance and wellbeing of ALL the facilities that the estate offers, and not just the ones that individual homeowners choose to use personally.

Jeff comments further: “This issue, it must be said, is not limited to the golf course, but would also need to be applied to other leisure facilities that might be developed as part of the estate. However, due to the sheer size of its footprint, the course’s share as a percentage of the overall maintenance costs will stand out in any budget.”

Now many estates are faced with the task of unpicking the original structure and reintegrating the course back into the day-to-day financial core of the estate. This reintegration can be a divisive period in a community sense, but it is an essential bridge that must be crossed for the overall long-term benefit of the estate. Those embarking on this process should draw comfort from the achievements that Pecanwood has made to date in this tricky process.

This transition process also makes it essential to revise the management architecture and streamline processes so as to be more efficient and be able to effectively monetise activities around the course.

Mindful of this need, ARC now has a consultancy partnership with John Cockayne of The Business of Golf to provide support services to its member golf estates’ HOA boards, estate and golf management teams.

For more information, contact John Cockayne on cathco@mweb.co.za