Rees Jones' Royal Oaks in Moncton: Financial quagmire
While I was away in Nova Scotia, I received a call from a CBC producer wondering whether I’d come on a couple of shows to talk about the state of the golf course industry. The producer was in Moncton and wanted me to talk about Royal Oaks, a Rees Jones-designed course on the outskirts of the city. The course had been pushed into receivership by its lenders, seen its owners/founders given the boot, and was the beneficiary of a reported previous $4.3-million in government funds to keep it afloat. The province of New Brunswick now gets 50% of the profits, according to reports, to pay back the cash it put into the project.
On top of this, I just received a call from someone involved with Wildstone Resort in British Columbia, a high-profile Gary Player design, saying the project appeared completely stalled. I’ll have to get to the bottom of this one — since there were at least nine holes finished and plans to fully open this summer. It appears financing issues may have finished this project — though they haven’t filed for receivership. Apparently Shayne Dysart, the club’s vice-president (and former head of the Board of Trade) was let go and the holes that are complete are being barely maintained. Sounds like a mess.
Why did the two projects fail? Interestingly both were based on real estate — or the notion that the golf courses would attract buyers for the surrounding homes. I have no idea what kind of course the Gary Player track would have been — but he doesn’t exactly have a reputation for building great designs. Similarly the Rees Jones course at Royal Oaks was very average, built on lousy land with all the typical Rees Jones features — lots of water, big bunkers, raised greens and over-shaped.
It turns out that Royal Oaks had a long history of government involvement, leading one to wonder why it was built in the first place:
The province’s dealings with the club began in 1998 with a $3.3-million guaranteed loan from the previous Liberal government. The idea was that government would cover the loan if it couldn’t be repaid to the bank.
In 2002, the Conservative government of Bernard Lord paid off that loan and the resulting interest. So, instead of owing a bank, the club was in debt to the province.
Including interest, the original sum has grown to the current $4.8 million.
Back in 2002, then-Business New Brunswick Minister Norm Betts said refinancing was the only way to preserve a return for taxpayers.
But now it’s unclear if there will be any return for taxpayers.
In 2008, Byrne said the debt restructuring would allow the club to expand and employ more people.
The plan then was to build a new clubhouse and hold year-round events. (source)
Truth be told, Royal Oaks was flawed from the start. Nearby Fox Creek, in Dieppe, demonstrated a golf project could be successful in the area. But Royal Oaks was built on lousy land, by a builder that seemed to have little understanding of what would make either a strong real estate project or a good golf course. In this case, Royal Oaks isn’t shut — it remains open as the receiver searches for a buyer.
The CBC wanted to know if golf courses could be a good investment. I told them they certainly could be a strong long-term investment, but a lot of care and diligence had to be taken by the owner. In this case the owners spent a reported $18-million on the project, and real estate sales were never strong. The course was average and dull, on lousy land. The owner seemed to think hiring Rees Jones would fix his location problem, but the truth is that it really doesnt matter whose name is on the design if it isnt very inspired or interesting.
One last point about Rees Jones in Canada, since Royal Oaks was his first design here. American designers in Canada add to competition and make the situation better. However, Jones has not exactly demonstrated much when it comes to designs in this country. Royal Oaks was average, and cracked the Top 100 in Canada on Scores list only briefly. Grand Niagara, another Jones design, this one in Ontario, has been badly received and garners almost no attention. Then theres the reno work to Royal Montreal, which most of the pros (and club members alike) think is poor and one-dimensional. Despite this, Lambton Golf and Country Club in Toronto is going ahead with a Jones re-do. Cant imagine what they are thinking. Oh, right “ lets get another average course. Of course, thats what they already have, but I guess they can spend a boatload on a renovation and end up at square one.
In essence the designer doesnt really matter “ it is the design that is significant. And in the case of Royal Oaks, the design wasnt up to snuff, and couldnt compensate for a flawed business plan. Itll be interesting to see what happens with this course over the long run.
Careful, you’re going to bring back that staunch Grand Niagara defender.
Played the course once and didn’t go back.You said it all.
I find it funny that a reporter would call another so-called expert such as yourself to comment on whether a golf course is a good investment or not. What would a guy like you know about due diligence. When have you ever run a golf course? What makes you think you know anything about the business side of running a golf course. You remind me of the famouse line about consultants–A consultant is somebody who knows everything about sex but has never tried it. You should really stick to what you know, whatever that is.
It would take a fool to think they could invest 18 Million dollars to build a golf course and then hope not to go broke.
To be a feasible investment, they would have to charge $200.00 per round and put 25,000 rounds over it.
They were lucky to survive this long with that debt load, no banker would have touched that business plan with a ten foot pole.
Their saviour was the Province of N.B. and now it seems they want out.
The receiver will be lucky if he gets a bid for $. 030 on the dollar.
As a member of a private course in GTA, its no surprise to hear rumers of public and private courses in $ trouble.
Recently had the chance to play Bond Head in CLUBLINK “Test Drive” promo. Offered a very low int fee with low annual due PLUS no cart fees for 2009.
Played courses on lastminutegolfer.com for less then $40/ round cart inc. Courses in Niagara Falls that I have played seem to be offering some great deals just to attract people to play. Whrilpool for $49 including lunch, Legends for $38 and finally today I booked Thundering Waters for two green fees for less then $80.
Some great golfing deals going on, lets support our fellow golf courses!
Grumpy, and you believe the 18 mil? There is not a golf course in Canada of late that has spent that much.
Really? Let’s start listing them .. Bond Head, Coppinwood, Eagles Nest, Tobiano, Tower Ranch, etc….
I guess it depends on what you include in the figure — but if it is land, constuction and clubhouse, I know there are plenty.
Wildstone down.
Faldo suing for his fee, DMK no longer listing Fernie on his site. Crash time in the interior of BC.
Too bad The Rise didn’t have shit timing – maybe it wouldn’t have been built.
RT, land is such a subjective thing. Actual costs are too. I know properties that were purchased for $500,000, appraised at $5-8 mil and thats the number you keep hearing.
Think about actual construction costs with club house.
You, writing business columns for so long know the various methods of appraisals.
Grumpy,
It’s funny that you come off so all-knowing and condemning of the parties involved in the project, yet you either didn’t take the time to properly read the piece or you chose to ignore the facts or you don’t have the intellectual capacity to understand what you read.
As Robert clearly says there was real-estate (home sales) involved in the project. What you (and to be fair others as well) don’t seem to realize is that very few golf courses are being developed these days without a real-estate component. So the “business plan” you speak of would not have been solely for the golf course but would have included the real estate development. To many of these real estate developers the golf course is nothing but a carrot that they offer to the home buyers, a little incentive, similar to upgrading the stove and fridge to attract buyers. So for you to dismiss them as “fools”, when many of them have made fortunes beyond your imagination, and also when they are the ones who often are trying to bring prosperity to certain regions that you don’t care about, really just shows your ignorance. This isn’t the type of golf development that is done in someone’s farm field with a tractor with a business plan that “Grumpy” can work out on the back of a napkin, this is the big leagues: creating housing for people with associated amenities. The fact that the Province wanted to support the endeavor is to be commended, but unfortunately the economy collapsed and the project seems to be struggling. If only they had “Grumpy” on the development team to show them how to properly build communities for hundreds of millions of dollars in the face of a staggering economic downturn. LOL you make me sick.
Well said, In The Know 2
Respectfully, In the know about everything, you are full of hot air and your ego is such that they probably don’t even make a hat large enough to fit your swelled head.
By the way you pound your keyboard, you must have been on the front line financing and helping to plan these projects that are built on undesirable land and locations, otherwise, why would you defend the assinine decisions these people have made.
We don’t need any more proof about their bad business plan, whether or not the change in the economy caused the lack of real estate sales, because they are in RECEIVERSHIP.
With that, I close my case.
BTW, I just might have a little more experience in these matters than you do, even if I do it on a napkin.
Whatever “experience” you may or may not have, it hasn’t served you very well because you are obviously clueless.
I read your intelligent reply, Mr. I know nothing, and I can decifer from your verbage that you are mentally handicapped.
Maybe not clueless like me, but very stupid.
I would really like to meet you some day because I really do miss the three stooges, and I would like to figure out which one you are.
I don’t think Royal Oaks is that bad a course RT. Better than the 3 McBroom courses I have played in the maritimes. I just don’t like the openness and visuals (houses). Fox Creek (hosting Ames & Casey 7/28/09 btw) over in Dieppe did a much better job keeping the real estate hidden behind the trees.
In the 3.5 years I lived in Moncton, I always heard rumours/stories/comments about the ex-owner, none good and often with links to the crime world. Probably unrelated was a major drug raid at one of the homes there a few years ago. Sound like a place you would like to move your family? You have to wonder how much that all played a factor in the lack of success there.
I am confused as my name suggests.
As we all know there are many business situations that fail because of various reasons.
Why is it that golf courses always fail because we all know better than the one taking the risk?
AND
To the previous comment about the “unrelated “major” drug raid a few years ago”, if you live in any major center this could be a situation that you might have to deal with.
I am a firm believer that, if you create a golf course enjoyable to play, the golfer will come. Of course it must be reasonably close to a population source.
Gentlemen, boys and girls – please take the time to re-read your postings on this topic and ask yourselves if you are proud to be associated with your remarks. I can’t imagine you would be but, then again, a little internet and an ounce of anonymity can lead to strange musings….!
I am glad not to be the lender! Royal Oaks is going for the “Big Flush” rapidly. Employees are dropping off like flies, management decisions to fire or layoff are being emailed to the general public, and there is NO ounce of respect amooung the employees nor the management. I have never seen such a poluted environment.
I have 1st hand knowledge of the activities over there and the whole project lacks wisdom and integrity from the very outset. The original owner made his fortune in the aggregate drilling business and thought the money would never run out. He created this “recreational haven” as a business for his son who likely moved from a lawntractor to the manager’s office in 1 hour. He staffed the place with his “buddies” until dad saw the ship sinking and his foresight was too short!
Now you have the original owner’s best friend who was the “mastermind” behind the Royal oaks realestate project, trying to manage the club and he has little or no idea what he is doing either. He is trying to re-staff the place with people who have completely failed at previous opportunities and for some reason he thinks they will be the life preservers.
In recent days and hours, quality people have walked out the door wishing NOT to be attached with the past, current and continueing reputation of “Royal Oaks”!!!
I forgot to mention that the Premier’s father “Alan Graham” is a director on the board for the former owner’s business.
Could THAT have anything to do with the government’s “conflict of interest” in this case?
http://www.landdrill.com/index.php?option=com_content&task=view&id=21&Itemid=43
Hello,
I’m a memeber at Tower Ranch in Kelowna. I was wondering if you know that the rumours are true. Is Tower Ranch in Receivership?
Hi George
Tower went under are you still a member and can you tell me if it is a good course.I would like to get a list of all members and have a meeting.Thanks Brad
Are there any updates to this story on the Royal Oaks golf course in Moncton? I noticed that nine of the 20 or so condos in one building alone at 163 Royal Oaks are for sale. Just wondering if the financial position of the course has improved since you wrote this piece.