Who is getting fired next year?

It seems as though Donald Trump’s heavily disputed golf development in the Scottish wilderness may now be in some doubt. Despite claims from the Trump camp that financing is not an issue, problems in several other areas of Mr. Trump’s business interests may have an effect.

Trump was finally given permission to build what he described as “The Greatest Golf Course in the World,” after battling environmentalists and the local council for the right to do so. Against the wishes of both these groups, the Scottish government stepped in and declared that any detrimental effects on the local environment was outweighed by “social and economic benefits.” But things have taken a slight turn for the worse financially-speaking since this decision was made, which begs the question as to the likely impact on the Aberdeenshire course’s short term future.

The Trump Hotel and Tower in Dubai has been canceled, or at least “delayed,” for the foreseeable future.

The gaming industry is suffering a far larger downturn that was expected, with visitor levels falling in Las Vegas and Atlantic City, and predictions that this will continue, with a recovery not likely before 2010. Trump Entertainment Resorts defaulted on a $53 million interest payment last week, although this was apparently in the interests of “maintaining sufficient liquidity.” Last time I checked, not paying your bills was not the best way to do this, and I expect to see lawsuits flying soon.

Speaking of lawsuits, Mr. Trump recently fired off one of his own at Deutsche bank, accusing the bank of wrongly refusing to extend the loan on the Trump International Hotel and  Tower in Chicago, which is also in default. The somewhat tenuous basis for this suit is the fact that the economic downturn is an “act of god,” and that Deutsche bank was in some way responsible for the current economic crisis, and should pay damages. Much as I may agree with that sentiment, there is a long list to be added to this bank. Needless to say, Deutsche bank are seeking to have this lawsuit dismissed and are demanding Mr. Trump pays the $40 million personal guarantee related to the construction loan. At least 2009 will offer some entertaining legal battles. Part of me is hoping he wins, if only for the gumption shown.

The legal battles do not end there though - Mr. Trump recently filed suit against the city of Rancho Palos Verdes in California, for forcing him to spend millions of dollars on “unnecessary environmental studies,” for structural developments around his “Trump National Golf Club.”

But wait, there’s more - on the 18th December, Mr. Trump also sued the Philadelphia state Gaming Control Board for unfairly denying him a casino license in that city, after the board decided that he was planning to lure gamblers to Atlantic City in an effort to improve numbers as the Atlantic City casinos emerged from bankrupcy. There are some suggestions that this is a delaying tactic aimed at slowing down the growth of any competition.

On top of all these, it looks as though Mr. Trump is on the verge of having to pay out $4.1 million to former investors in a past settlement filed by seventeen former Trump casino shareholders. An appeal was denied last month and the shareholders have requested a federal bankrupcy court to liquidate the three Trump casinos.

Managing Director of international development with the Trump Organization, George Sorial, says that there is no connection between the various projects, and there is no need for financing for the Scottish development. Mr Trump did manage to sell his Palm Beach Mansion for $100 million earlier this year, so perhaps this is the case? Far be it for me to suggest any connection between these various issues (I have no wish to end up in court),  but I would have thought that there will be no time to build a golf development in Scotland as it appears Mr. Trump will be spending most of 2009 in front of a judge. 

Jack Nicklaus on Isla Viveros

Grupo Viveros announced Tuesday that Jack Nicklaus will create a par-72 Signature Golf Course as the centerpiece of Isla Viveros, located in the Pacific Ocean, 45 miles from the Panamanian coast. It would appear that some golf developments are immune to the current economic climate, which is good to see, albeit one has to wonder how they manage it.

Isla Viveros will be a $300 million development featuring as many as two hotel properties, private runway, luxurious spa, shopping and fine dinning facilities, and a 300-slip yacht club and marina, along with 250 beachfront residential villas.

The development is billed as “eco-friendly,” which I find a little difficult to digest. Grupo Viveros, the consortium developing Isla Viveros, seems one step removed from the mafia. The consortium was recently fined for violating environmental laws and destroying several archaeological sites on Isla Viveros. And one of the principals, a Frenchman named Andre Beladina,  used to be a lawyer until he was convicted of embezzling from the Belgian bank where he worked. The main spokesperson for Grupo Viveros is one Gustavo De La Cruz, a Colombian who stated in La Prensa that if the SUNTRACS construction workers’ union wasn’t removed from the island, that people would be killed.

True to his word, the union’s leader, Osvaldo Lorenzo, was shot and killed at a picket line protesting the labor laws in Panama in 2007, and two others have since been killed by local “security,” firms. The National Police apparently do a “disappearing act,” at these times. There are legal proceedings being taken against a local labor Ministry official. The Panama News

One wouldn’t have thought a golfer of Mr. Nicklaus’ reputation would be prepared to get involved with a company of this ilk, but needs must I suspect. Or perhaps he is unaware of the recent turbulence surrounding the development. Mr. Nicklaus arrived on Monday in Panama and spent close to four hours on site at Viveros with his design team. Following the visit to the island, Mr. Nicklaus returned to the mainland for a press conference and reception.

“Viveros is honored to have Jack Nicklaus, a distinguished golf legend and the world’s preeminent course designer, on board to create and offer our residents and visitors a premier course that matches the uniqueness of the island,” said Maxime Navarre, CEO of Grupo Viveros.

“We’re excited about our first design visit to Viveros,” Nicklaus said. “The site has a lot of wonderful natural features. There are elevation changes up to 65 meters, lush vegetation, and with 35 kilometers of coastline, we have the opportunity for some spectacular oceanfront golf.

“We have been fortunate to have had a great deal of success designing throughout the Caribbean, and I hope we are able to create a golf experience that will only enhance what Viveros is trying to accomplish, and serve as a welcome addition to Panama’s fast-growing reputation as a global tourist destination.”

Seal Island Gold Resort lays off 500 staff

Residential golf communities and golf courses are feeling the financial crisis, particularly in some states. We have reported on several stalled devlopments recently, including  The Laurel Cove development in Tennessee. Georgia is another state facing issues.  Lieutenant Governer of Georgia, Casey Cagle told a group of local mayors this week, “the state of Georgia isn’t going to be in the golf business and the hotel business much longer,” as he announced plans to start selling off state-owned golf developments and courses.

This September, Georgia’s exclusive Sea Island, once called the best golf resort in the nation by Golf Digest, laid off 500 employees, and industry experts are warning that If the economy gets worse, some courses will close permanently. During the depression of the 1930s, 30% of golf courses closed in the USA.

Cherokee Run Country Club in Conyers, GA filed for bankruptcy this week, and according to federal court documents, the club owes more than $2.9 million. Gold Creek, a 354-acre golf and tennis facility in Dawsonville, shut down in August after the company that owned it went bankrupt.

Residential golf communities are facing similar issues, and Golfside Development Group, the company that developed Covington Place, a residential community wrapped around Indian Creek Golf Course in Covington. had 34 tax liens filed against it by the local county in May.

Indian Creek general manager, Bryan Raines, said “It’s been pretty ugly in the golf business. There’s no serious trouble, but we’re definitely down.” Overall revenues for the golf club and related housing construction has dropped roughly 20% since July.

Realistically, the problem is also one of over-building over the last 20 years. In Atlanta alone, there have been 150 golf courses built since 1990.

Stephens said sales of new golf memberships at the club have flat-lined since September, when the current Wall Street crisis started. Smoke Rise, a member-owned club of roughly 400 people, is down between 20 to 30 members since the start of the year.

“We’ve got people whose businesses are failing,” Stephens said. “The next step for them would be to cut an extra expenditure or two. You start getting people who play two times a week switching to two times a month.

“You multiply that across the board, and it can really hurt,” Stephens said.

Anticipating a prolonged economic downturn, some private clubs have taken steps to protect themselves.

Earlier this month, Joe Guerra, president of the holding company that owns Canongate Golf Clubs, wrote members about the foundering economy’s affect on its 19 courses as well as on the golf industry as a whole.

“Many members have been forced to resign or reduce their use of the clubs due to job loss or other financial hardships,” Guerra wrote. “We don’t expect to see a recovery in the near future and in the meantime must react in order to protect your ongoing membership value.”

That includes closing 11 of Canongate’s course for one day each week and continuing membership rates at their current levels through 2009.

While Guerra assured members that said the Canongate courses are relatively good financial health, “we know of multiple clubs that may be forced to close permanently as a result of the difficult times,” he wrote.

Older, more established golf clubs will likely survive the downturn, and Rick Burton, the director of golf at East Lake Golf Club in Atlanta, said there’s been no noticeable decline in the number of rounds played at the course. Sales in the golf shop and restaurant have declined though, and a major corporate Christmas party booked at the club was canceled recently, Burton said. All in all, not the best time for golf developers, but for the player, a far more affordable range of options are presenting themselves and some clubs that once cost $20,000 to join cost a tenth of that.

It is not all doom and gloom though - At the high end of the market, the economic outlook looks a little brighter, with recent announcements of a new golf community in Mexico, with course designed by Tiger Woods, Abu Dhabi’s Saayit Island golf development, course by Robert Trent Jones, and an Arthur Hills designed course on a new residential golf development in Mexico.

Golf or Wildlife?

Much to the disappointment of local environmental groups , the Scottish government has finally given Donald Trump permission to build what he describes as “The greatest golf course in the world,” in a remote part of Aberdeenshire, along with 1500 homes. Originally rejected by Aberdeenshire Council, the Scottish government decided to over-rule the local council’s decision in favor of “economic and social benefits.”

Mr. Swinny, Finance Secretary, who made the decision after a lengthy public inquiry, said,

This is a development which has been a long time in the planning and, from all of the indications, we know has been something to which the Trump Organisation has been seriously committed for many years. We are now in a position where we can see that development taking its course and what’s important is that the decision I have arrived at today gives a clear signal to the international community that in these difficult economic times, Scotland is open for business.

A spokesman for SNH said,

The inquiry report clearly accepts the extent of the adverse impacts the development will have on the fragile dune system, but has concluded that in this particular case this is outweighed by social and economic benefits.

This is good news for those developers who felt in some way constrained by any environmental concerns. The Scottish government has now made it clear that these concerns will not prevent them from changing the laws to suit developers as needed. The area in question was previously protected by law from any development of this type, but it seems economic considerations are more important than protecting the environment to the Scottish government. After a lengthy battle between local councilors, environmental groups and Mr. Trump and other business leaders, the decision to allow the development to proceed was announced on Monday. The plan includes two golf courses; 950 vacation condominiums; 26 “golf villas;” a 450 bedroom, ten storey Gothic hotel; a spa and conference center and 500 homes, some 100 of which must be “affordable.”

Mr. Trump was clearly pleased with the decision, and insisted that the current financial crisis would not prevent him from moving ahead as fast as possible, although he still has some hurdles to overcome. Outline planning permission has been given, but detailed plans must now be submitted to Aberdeenshire Council before work can begin on the project. Environmental impact will have to be “assessed and monitored.”

Another hurdle to overcome is Michael Forbes. Mr. Forbes owns a small farm in the middle of the proposed development which sits adjacent to the front nine and directly between the links and the proposed hotel. When asked if Trump came to him with an open checkbook, would he ever sell? Mr.Forbes replied,

Never. Never to Trump. Someone else, I might consider. In the beginning, I never minded about a golf course. As long as they don’t damage the dunes, it doesn’t bother me. But I don’t agree with the hotel and houses. They should be building houses young folk who’ve just been married can afford, not for the rich.

The decision is a clear turn around by the SNP government, who were elected on a commitment to sustainable development and environmental protection, although it would seem to have been a foregone conclusion that this is the decision that would be reached. Due process has been seen to be observed, laws have been changed to suit and Scotland gets another golf course at the expense of the local habitat. No surprises there then. Helen McDade of the John Muir Trust said,

The government’s reasoning seems to be that it is OK to ignore any number of protections that are in place to safeguard Scotland’s environment, provided there is a big enough buck to be made at the end of it.

The real question now remains as to whether there will still be enough demand for this type of property in the short to medium term. Mr. Trump may be confident that he has the financing and political clout to get the development approved and built, (as am I) but the economic downturn will likely have some impact on the demand for a luxury development of this scale. This is a huge development, not a small boutique development such as the one recently announced by Tiger Woods in Mexico. From the environmental standpoint, the financial crisis would seem to be a blessing in disguise.

Construction has been stopped on a high-end golfing community development in Tennessee after payments to contractors were defaulted upon by Lehman Brothers

Work Stopped at Laurel Cove After Lehman Brothers Collapse

Laurel Cove was one of the largest active residential projects in Tennessee, but work has now stopped completely and is “on hold” indefinitely.  Lehman is/was the lender and had been doling out the loan in the form of direct payments to contractors on a monthly basis, but no payments have been made for the last two months. The developers, “Tentara Partners” and “Legacy properties,” have made assurances that they can fund the project without outside input, but there will be a delay while the loan is transferred. Philip Jones, president of Tentara Partners, said in a statement to the Nashville Business Journal,

“We want to assure the public that Lehman Brothers Holdings Inc. has no ownership in the project. We anticipate a four to five month complicated negotiating process with the Lehman Bankruptcy Trustee.”

The developers attorney, Will Cheek said,

“When Lehman filed for bankruptcy, they had approved paying the contractors but didn’t fund those payments. We’re working to fund those payments and purchase the loan. They haven’t paid our people for the work they’ve done for the past two months. Two years ago, it never crossed anyone’s mind that our lender would file for bankruptcy.”

The development will have a Greg Norman-designed golf course, which it was hoped would eventually host the PGA tournament; and 800 luxury homes. 500 of the plots have already been sold to builders. In an unusually sensible move for a government body, the local county had insisted that all the amenities, infrastructure and golf course were completed before allowing construction to start on the homes. The first nine holes are already finished and all amenities are over half completed.

“Legacy Properties and Tentara Partners strongly believe in the continued viability of the Laurel Cove golf and residential development and are anxious to get the Lehman issues resolved and construction moving again,” said Mr. Jones.

Nashville Business Journal

Laurel Cove

Tiger Woods presents his plans for an Ultra-luxury golf development in Mexico

If you had said to me last week, “I am planning a new residential golf course development,” I would probably have laughed and suggested that it was poor timing on your part.

With golf course developments around the world struggling for memberships and some pretty high-end developments being canceled, it is probably not the best time to start a new one.

Unless (and this is a big unless) - It is being designed by Tiger Woods, will limit availability to only 40 homes and 80 condos; is within a short drive of San Diego and the entire course will be oceanfront.

Tiger Woods announced his involvement in a new venture this month – Punta Brava in Mexico, just 65 miles from San Diego. I imagine long and hard sessions went into deciding just how many people were likely to be able to afford the $3 million, one-acre plots, and this particular development is most likely immune to the current financial disaster. This may now be the most expensive real estate in Mexico. These are a few photographs of the environment, pre-development.

Mr. Woods is involved in two other developments at the moment, both of which are still in the construction phase. The Tiger Woods Dubai will eventually feature some staggering obstacles such as waterfalls and dramatic elevation changes, and thousands of trees and shrubs are being transplanted out in the Dubai desert. The other course is on The Cliffs in North Carolina.

Video Courtesy - Fairway Properties

The story is a little different further down the food chain, and several up-market developments have either been delayed or put up for sale recently. The 300-acre Beechtree course in Maryland closes it’s doors at the end of the year, a mid-luxury fractional ownership development on the edge of St. Andrews in Scotland was canceled recently, and the St Andrews Beach Golf Club in Melbourne, Australia is closed and currently up for sale along with a sister course The Golf Club at Kennedy Bay.

Although, according to the previous owners – the weather was to blame. What I hear is there was a drought on a third course near Phillip Island which caused the other two to fail also. Nothing to do with over-building. I guess that is a little better than the Spanish property developer that is suing Greenpeace for scaring the Spanish property market into a collapse when they produced a photo-book showing the likely effects of global warming on the Spanish coastline.

Punta Brava

Robert Trent Jones II

Robert Trent Jones II has been commissioned to create a unique golf course on Abu Dhabi’s Saadiyat Island.  RTJ’s award-winning portfolio spans more than two hundred courses in thirty-five countries courses in 35 countries. Mr Jones’ courses are acknowledged to be some of the finest in the world.

“Robert Trent Jones’ credentials are second-to-none and are compelling when selecting a designer who can deliver a championship course which is informed by its natural environment and which also makes keen financial sense,” said Lee Tabler, CEO of the Tousism and Investment Company, resposible for the development. “Robert Trent Jones’ extraordinary designs have a proven history of creating courses of enormous real estate value for developers worldwide.”

The PGA Tour, The Senior PGA Tour, the LPGA Tour, The Asian Tour, The European Tour, The Australian Tour, the World Cup and the World Match Play Championships - have all been staged on RTJ courses. and the 2010 staging of the Ryder Cup is planned on the Celtic Manor’s Wentwood Hills Championship Course in Wales.

The Saadiyat Island RTJ course - the first to be undertaken by the American master course architect in Abu Dhabi - will be in the destination’s Saadiyat Reserve District.

“Robert Trent Jones is renowned for his innovative design concepts that integrate course with coastal wetlands and other sensitive environments,” said Tabler. “His courses are acknowledged for enhancing habitats while creating playable courses rich with strategic variety. These design traits fit extremely well with our plans for Saadiyat Reserve and also with TDIC’s own corporate ethos of strong and tangible environmental stewardship.”

Robert Trent Jones II, former President of the American Society of Golf Course Architects and son of a course design dynasty launched by his father and which has since built, or refurbished 570 courses worldwide, has been commissioned to produce a ‘unique’ course which will flood in accordance with tidal movements around Saadiyat Island.

“The distinctive terrain of Saadiyat Reserve presents us with a challenge and an opportunity to deliver a course like no other in the region, if not the world,” said Robert Trent Jones II. “The wetlands allows us to give full rein to our vision of creating golf courses where nature works in harmony with the values of the royal and ancient game.”

Spread over an area of 130 hectares, the Saadiyat Reserve golf destination will feature the 71 hectare Robert Trent Jones II course, the design of which is due for completion this year with groundbreaking scheduled for early 2009.

Meanwhile, TDICis progressing well with the championship Saadiyat Beach Golf Course - the UAE’s first signature Gary Player course and the Arabian Gulf’s only ‘ocean’ course with several beachfront holes. The course is due to open in the third quarter of next year.

“The two courses will offer distinctly varied playing experiences and will compliment each other with differing shot values and landscape settings,” explained Tabler.

The Robert Trent Jones II course will be the third championship course in TDICT’s expanding golf portfolio. The company also owns the Abu Dhabi Golf Club - home to the annual PGA European Tour-backed Abu Dhabi Golf Championship.