Par for the Course

By Diana Milne, Editor

Golf and real estate have proved a lucrative combination for Leisurecorp, which is developing a multi-million dollar residential golfing community in Dubai. Diana Milne meets the company’s CEO for golf, David Spencer to find out why homes on the Jumeirah Golf Estates are selling like hot cakes.

“What we have in Dubai is a situation where the demand for golf far outstrips the supply. We do not have enough golf courses to fulfil the current demand let alone the future demand”
-David Spencer, Leisurecorp

With demand for golf facilities soaring in the Middle East and the likes of Greg Norman and Sergio Garcia designing its courses, Leisurecorp is on a winning streak. So much so in fact that earlier this year the company achieved the ultimate coup when it acquired the historic Turnberry golf course and resort in Scotland, one of the world’s leading golfing destinations and host to the 2009 Open Championship. That’s a pretty impressive achievement for a company that was set up just two years ago.

Part of Dubai World, Leisurecorp is regarded as a serious player in the world golf tourism market which is estimated to be worth US$17.5billion. As well as acquiring Turnberry it also owns South Africa’s prestigious Pearl Valley Golf Estates and is months away from the completion of the Jumeirah Golf Estates development, which includes luxury residential properties and courses in four different neighbourhoods: Fire and Earth designed by Greg Norman, Water by Vijay Singh and Wind by Sergio Garcia, Pete Dye and Greg Norman.

Describing the demand for golf facilities in the Middle East, Leisurecorp’s CEO for golf, David Spencer, says: “What we have in Dubai is a situation where the demand for golf far outstrips the supply. We do not have enough golf courses to fulfil the current demand let alone the future demand.” Furthermore, he says, demand for golf-related real estate is even greater, meaning that the luxury properties on the Jumeirah Golf Estates have sold out before the development has even been completed.

“The demand for golf property, particularly quality golf real estate, is intense,” says Spencer. “If you took a one million dollar house in a non golf development you could probably get 1.2 to 1.3 million dollars for the same house in a gated residential golf community. In the Middle East region though, I think the premiums are ranging from between 30% and 50%.”

But Spencer says that it is not just golf enthusiasts that are willing to pay a premium to live alongside the fairway. Around 70% of those that buy properties in gated residential golf communities do not in fact play golf, according to Spencer. “Only 30% of the buyers play golf,” he says. “But these sorts of developments provide a very nice lifestyle. Obviously I’m biased when I speak about the development I’m involved in. But with the green spaces, parks, indigenous flora and fauna and the birdlife, it’s a very pleasant place to live in and these developments are very sustainable from an environmental point of view.”

Spencer admits that building golf communities in the Dubai desert poses unique challenges because of the region’s climatic conditions. “Building golf courses in this region is actually quite expensive and that is because of the amount of water required to keep those golf courses in pristine condition,” explains Spencer. “It’s about having to get the right amount of water in what we call a watering window. So we have to put out, say, 7mm of water over 130 plus acres of green space in a four-hour watering window.”

Leisurecorp has counterbalanced these costs and boosted the ROI of the Jumeirah Golf Estates development by including prime real estate properties in themed neighbourhoods. Fire is built with a Tuscan Italian theme, Earth in a European and North American parkland style, Water in the style of the Pacific Islands, Florida with a waterfall centrepiece and Wind, which follows the course of the Arabian Canal: “What’s happened here is that we’ve used golf courses to help us in assisting to drive real estate sales and that has worked very well,” says Spencer.

While acknowledging the appeal of Leisurecorp’s developments to the non-golfer, Spencer is keen to emphasise how serious the company is about the game, particularly when it comes to holding international tournaments. On its golfing calendar the company will be hosting the Dubai World Championship at the Jumeirah Golf Estates, the South African Open Championship at the Pearl Valley Golf Estates and now the 2009 Open Championship at Turnberry.

Having its name associated with such major events will make Leisurecorp a major player in the global golfing world, according to Spencer: “I think the fact that Leisurecorp was able to acquire the Turnberry project was absolutely mind-blowing. It’s one of the greatest venues in the world and it helps us to create this unusual trilogy where we have the world’s oldest golf tournament being played at Turnberry in 2009, the second oldest golf tournament in the world at Pearl Valley Golf Estates and the newest, Dubai World Championship, being played at the Jumeirah Golf Estates.”

Spencer goes on to say that he believes further international golf events will eventually take place in other parts of the Middle East, where the sport is growing in popularity: “There are plenty of events for our company to handle. But I think the focus on golf in Europe, the Middle and Africa is firmly on the Middle East. I wouldn’t be surprised if a tour event came to Bahrain, Morocco or Oman because there is room for growth in the region.

The golfing champions Leisurecorp has enlisted to design courses have added considerable kudos to the Jumeirah Golf Estates development leading to increased interest from buyers.“ The fact that you can buy a house and have someone like Greg Norman landscape your backyard has been very well accepted by the real estate buying public in this region,” says Spencer. But he adds that the company must now work to attract the world’s most up and coming players in order to appeal to a younger generation of potential buyers. “There are some fantastic new names in golf such as young fellows like Justin Rose. That’s great because golf to a certain degree has been fuelled by baby boomers and the baby boomer generation when it comes to golf hasn’t really moved on and it’s become a bit vanilla. To make our industry relevant to the next generations we need vibrancy, colour and we certainly have that coming through.”

As well as signing partnerships with coming golf stars of the future, Spencer says the company is eyeing possible other acquisitions and that there are several potential new purchases in the pipeline. “Part of our business plan is acquisitions. We are absolutely looking at a lot of different properties. We’re not particularly close to announcing any. But we are 50% down the track of due diligence with a lot of acquisitions.”

His words follow the announcement at the start of this year by Leisurecorp’s Group Chief Executive Alan Rogers that the company plans to broaden its portfolio over the next two years. Speaking at the time of the announcement in January, Rogers said: “Over the next two years, we will consolidate and develop existing investments – and look to broaden and deepen our portfolio into other leisure-related business sectors. You will see further investments in golf, which is the powerhouse sector within the leisure industry, but you will also see us reaching into other target sectors.”

But while Leisurecorp is continuing its expansion, Spencer says he is well aware of the potential impact of the turmoil in Western financial markets on the leisure industry in particular. “I think anyone who is not aware and somewhat concerned about what’s going on in the world at the moment would be a very cool customer. What one has to do at times like this is go back to your business plan, always review your business plan and make sure it has enough elasticity in it to go through strong times and weaker times. We have a very strong business plan that we work to. We review that business plan when things are going great. And we also review that business plan when various things happen.”

As well as its golf estates, Leisurecorp has stakes in several major businesses, including: Island Global Yachting, a manager and owner of luxury marinas; Troon Golf, the world’s leading luxury brand golf management company; GPS Industries, a provider of WiFi enabled GPS systems for golf communities; and Snowmass Colorado, a 2.8million square foot redevelopment of one of North America’s premier ski resorts. But with the company’s CEO Alan Rogers having described golf as the “powerhouse” sector of the leisure industry, Spencer is at the forefront of driving the company’s most lucrative business forward and ensuring that it both serves and fuels demand in the Middle East.