Ruaraidh Adams-Cairns
Some farmland is no longer being farmed, and woodland, post-Lawson, no longer has the same tax breaks and advantages which it once enjoyed. Leisure and residential schemes in the form of golf courses, hotels, retail and housing are the new “land hungry” crops. With farm incomes decimated and piecemeal development sites no longer finding a ready market, more adventurous, larger-scale schemes are a vital alternative. Mixed schemes are currently being worked up by landowners, developers and agents with a constancy of speed and repetition that would have been the envy of Mr Gatling and other pioneers of the machine gun.
These mixed schemes are based on statistics, such as those from the PGA, which suggest that the growth in demand for golf will far outstrip any possible supply. It is also argued that tomorrow’s “leisure purchaser” will have less time, but will be prepared to spend more on it. Time will be at a premium, and quick access to work and play will therefore be particularly valued. High-quality (and therefore low-hassle), all-embracing management, good security in an increasingly violent world, and pleasing sympathetic architecture in a “green” environment will become standard requirements, rather than ideals.
A typical top-quality scheme and its land requirement might be as follows:
This type of mixed project might be aimed at a domestic market, an international market, or both. Within Britain itself there are historic examples of the theme, such as the Wentworth Estate in Surrey, where access to golf and strict estate covenants have combined to create a controlled environment where premium prices are achieved in relation to the surrounding area and an exclusive ambience has been created.
In Scotland, at Gleneagles, a great success has been made of the combination of hotel with golf courses. A strong image has been developed and promoted, and Guinness now intend to utilise this branding for the development of other schemes elsewhere. The Gleneagles residential element, however, is disappointingly low value, with uninspired housing and blocks of flats which could be mistaken for council-owned property.
Our experience at Savills has provided a clear insight into the likely pattern of tomorrow’s developments through our involvement in existing schemes in southern Europe. There, schemes have been developed on the back of the holiday home market. An ageing but wealthy northern community has exploited an opportunity, offered in the sunshine states of the south, to invest in relatively inexpensive second homes. It is my belief that this trend will continue and, where the current generation is one of owner-occupiers, I believe the majority of our children will own two homes. The reasons for this are:
- Increased wealth generation
- Breakdown of language, national and cultural boundaries
- Improved communications and accessibility
- Increase in inherited wealth
- More flexibility in the location of labour
- Increased value placed on leisure time and pursuits
- Demographic changes in the wealthy northern population.
As a result of this, I foresee an exciting future for major schemes in southern Europe. I also believe that those involved with any scheme in Great Britain should study existing projects abroad to assess the marketing opportunities and inter-relationships of the separate parts of a scheme.
Every project has two major sources of income which change in importance during the development phase. These are the capital sale of property which progressively reduces the developer’s asset value and the recurring cash flow from the individual enterprises, which should gradually gain momentum as the development matures. Clearly the optimum rate of sale has to be achieved as quickly as possible to recoup initial land and infrastructure costs, generating resort income for the individual cash businesses.
The first task for any sales agent is to establish an attractive package in terms of what is being sold. This must include, in addition to the property, membership entitlements and privileges in the case of the golf, country club and other estate facilities. The packaging must also include details of ownership of the asset (ie through a tax-efficient off-shore company), the method of purchase, cost of ownership and details of finance available.
The traditional marketing tools of sales brochures, plans, models, show units, videos and computer-equipped sales office must of course be prepared, but unlike our traditional UK market it is not then sufficient simply to promote the scheme through advertising and utilise public relations companies to generate sufficient applicants to sell the units. Although schemes tend to be multinational in their purchaser profile — and are therefore not so susceptible to a particular country’s economic problems — potential purchasers do not tend to wake up one morning in London, Munich, Geneva or Brussels and decide their purchase for the day is a villa in Portugal, Spain, France, Italy or wherever! The decision to purchase is normally made over a long period, possibly one or two years, and as a result of a firm conclusion being reached that the resort is a desirable holiday destination. It therefore follows that the hotel, rental property and other leisure facilities all have a vital part to play.
The hotel will have a high turnover of potential purchasers. It will probably be marketing itself to the conference and package holiday business. People may visit it specifically to play golf. Trusthouse Forte, for example, markets its hotels through its golf courses, and in some cases desperate golfers book into their hotels simply to gain the complementary round of golf. An expensive way to use a hotel, perhaps, but it enables golf hotels to obtain extraordinary occupation rates, sometimes in excess of 100%.
Hotels can also play an important role in providing an assured standard of management which can be sold to an adjacent “apart hotel” scheme or a time-share development. These types of operation need not lower the tone of the overall scheme if they are properly organised and sold. Indeed, they can provide a useful source of funds from capital sales, as well as increased recurring cash flows, and ensure a further source of potential purchasers for other parts of the project.
Golf is an attraction in its own right, and players are prepared to travel considerable distances to play an alternative quality course. Visiting players need not interfere with membership games, while the full utilisation of playing time at green-fee levels similar to those paid in northern Europe — but with extremely low comparable maintenance costs — provide an extremely profitable cash flow.
The residential element can be utilised as rental accommodation for individual or package holiday trips, with the rental charges aimed at identifying an appropriate target market for residential sales. It follows that the resort management (who may be the developer) must provide the back-up services to “make it happen” in the early stages.
The individual marketing of separate elements of the scheme and the cross-sale opportunities are almost infinite, but unless a developer has a clear understanding of this interrelationship he will not be able to create a scheme where rates of sales — and hence profitability — are maximised.
Any speculative development is an act of faith. In my opinion these vast and complex schemes are the ultimate test of both faith and conviction. There are no half measures if success is to be enjoyed, but the scope for originality and profit is vast.
