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MIPIM 2011
The best meet at MIPIM (www.mipim.com/) in Cannes.
A yearly conference held in Cannes is a place where 'everyone who counts' in real estate world comes to meet, chat, exchange opinions and in most cases seed a business deal.
What might be overlooked is the fact that the golfing community of developers gather as well in the French Riviera. Unlike the golfing expo Munich at MIPIM its the development which is at the core of the presenting companies and although as passionate golfers we might feel our pride is being put into the shadow, after all every green keeper needs the green bills to keep the grass growing.
It was an amazing experience to meet so many business minded, passionate golfers. I had a pleasure to speak to: Hills & Forrest (http://www.arthurhills.com/), Hurdzan/Fry (http://www.hfegd.com/Translation_English/index.html), Niklaus Design (http://www.nicklaus.com/design/overview.php), Greg Norman (http://www.gngcd.com/), Golfplan (http://www.golfplan.com/) representing the elite of golf designers. Some were present alongside the best master-plan developers such as DTJ Design (http://www.dtjdesign.com/) in the world with impressive portfolios of the most stunning developments behind them.
Not being aware of the very detail of a golf development the experts were shining some light on the critical issues and describing to me the step by step approach to a development process.The whole art after the initial contact begins in the restaurants of the Mediterranean shores where the designers will try and understand the needs and wants of a client. In order to be able to conceptualize and make the developer happy they want to know exactly what is it that he has in mind. Critical questions which one should know range from: what kind of land is it that we want to build on? Who owns the land? What are the local regulations governing the building and development of a course in the area? How does the local demand look like, as this will determine what type of courses one wants to build. Will it be a first class signature course which will require $100-$150 green fee and full capacity usage, or will it be a $25 green fee course for a local population, no frills, just golf or maybe the course is there to simply serve the purpose of selling residential plots?
These decisions are much harder than they seem, as with every choice the financial consequences have to follow and that does not just end on the marketing of the project, but from the very start as a budget for just the design of a signature course needs to be set at $1mm plus and if we want to go full out the $1.8-$2m is more like the range we should be prepared to set aside.
Having got excited about developing the course, it is important to make sure enough land is available, for example a full 18 hole course requires at least 70-90h in addition to the land required for the residential development and the safety zones, but of course all these little aspects will be made clear over the first meeting with the experts.
Now having had the first meeting and learned 'roughly' what one needs to bear in mind, we can invest in services of KPMG Golfing advisory practice based in Budapest who for a fee between $40k and $80k will provide us with a thorough market analysis, a business plan which we can use to evaluate if we want to go ahead with the project. If their services are purely aimed at a corporate buyer who is minimizing his risk by the means of a safety net if something goes wrong or at every developer I don't know as surely I was not persuaded to go out and spend this amount of money to the gentlemen who has only worked at the firm for less than 3 months. In the end they would need to work very hard to persuade me to invest into their product unless of course I wanted to purchase the blue logo for my investment proposal, which in London is extremely well respected.
With the decision in hand one can actually start sketching some plans. Typically the master plan is the egg which comes before the chicken, but some may believe that it is the golf course design which should lead the way and finally the idealists would say that the two should be done simultaneously that is why it is best to pick firms which have worked together before. Anyhow, the basic concept which will include a few guidelines, a rough visualization of the project and maybe a sketch or two of some houses. This will also involve a visit to the site and a bill of $50k-$150k depending on the detail and the brand we are paying for.
Equipped with this very basic guideline an investor can start thinking about approaching investors. Until this point the master-planning can be done without the help of the golfing designers, however at any point further as the detail gets more precise and one is starting to sketch the exact positions of the houses the golfing architects need to kick in for the best house location placement with the nicest views. With similar costs for the first stage of the plan we should be pretty certain that we want to invest further into the project at this point as if we want to work with Nicklaus Design (www.nicklaus.com/) we would need to sign an agreement which says that provided that financing has been granted for the project we need to finalize the golfing development with them and no one else. It is a hurdle to overcome for investors from Poland as $1.2m is an amount sometimes double the costs of construction for some courses in our country. Niklaus' team though assures that if we are aiming at a prime market segment such a label no only will facilitate the search for investors but also adds a premium of around 20% to the real estate prices. Is one the cause of the other, this is for the developers to answer, however the courses they have in their portfolio are nothing to be ashamed of. However this also must be said about other developers, such as Golf plan which although sitting with a less known brand-name over their heads really have some strong projects behind them.
If you are reading this and already calculating that at these ticker prices no golf course in Poland will ever be built for decades, please do not despair as a great design although might look like a beginning of a massive list of expenditures it will help you save a great amount of costs in the construction of the course. As one of the founders representing Hills & Forrest tells me that the most important is to get the thing right in the first place' as it so much more costly to try and correct errors in design. Mistakes made in construction can not only cause the game to be unpleasant but can greatly increase maintenance cost significantly explains to me one of the partners of Golfplan. Hurdzan fry was telling me that already at the point of construction, cost savings can be visible. From financial perspective the fact that the experience of these experts is so wide it also means that investors backing up the developer can be more certain with regards to the risk of exceeding the budget, the timing of the project etc all which significantly adds to the lower cost of financing and enhance profitability.
In the end you will need to be prepared to spend at least triple to tenfold the amount the design costs you to develop the project and that only limits itself to the golfing aspect of the development. It might sounds like a great amount of money, but real estate at locations in the proximity of jewels like the ones we speak of are seen as prime, question is only if the market can afford it? The wave of investment has passed through locations such as Spain, Portugal, Japan now is passing through China as if it leapfrogged Poland. But has it? The difficult catch 22 is being solved slowly by golfing fanatics willing to loose money in order to propagate the sport, however will this be enough?
In order not to spoil the best of fun, I would invite you to come to the conference for yourself to speak to the experts themselves as probably I have learned more about golfing development in the 4 days there than I have done reading articles like this one. Good luck and if you do get your ticket earlier make sure you set up your online profile on the MIPIM website, as it is a great way to communicate with other participants.
