Revealed: How Dubai got Turnberry
11th October 2008
The how and why of Dubai's Leisureco
rp purchase of Turnberry for £55 million.
If Leisurecorp's tie-up with the European Tour, which includes the $10 million (Dh36.7m) Dubai World Championship and the $10 million Race to Dubai, was the biggest sponsorship announcement of 2007, their purchase of the stunning Turnberry Resort this year certainly ranks as the biggest and shrewdest sports property deal of 2008.
Shrewdest, because Turnberry is ranked by many as the finest golf course in the British Isles and the eighth best course outside the US by Golf Digest. And it is sure to climb up the charts when it unravels its beauty to a worldwide audience of millions again as the host venue of the Open Championship in less than a year's time.
Given its rich heritage – Turnberry has hosted some of the most memorable Open Championships in recent times, including the unforgettable 'Duel in the Sun' between Jack Nicklaus and Tom Watson in 1977 – and the magnanimity with which Mother Nature has bestowed her finest features around this Mackenzie Ross design, the £55 million Leisurecorp paid to Starwood seems like a steal. Along with the world famous Ailsa course, Leisurecorp also procured the equally stunning 18-hole Kintyre course, the James Miller-designed hotel, the Colin Montgomerie Golf Academy, and of course, acres of land alongside the scenic terrain hugging the North Sea.
For the Dubai World company, it was not the easiest of deals to seal.
Apart from the fact that there were several other very interested buyers, various issues needed to be addressed. The biggest, given the recent troubles real estate tycoon Donald Trump faced while buying land for a golf resort development in Scotland, was securing the blessings of the local council.
Then there is the fact that Turnberry is hosting the 2009 Open Championship, which meant satisfying the Royal & Ancient (R&A), the world governing body of golf and organisers of the Open, that they will indeed be good partners and provide a venue fit to host a tournament of such immense prestige.
In an exclusive interview to Emirates Business, David Spencer, Chief Executive Officer – Golf, Leisurecorp, revealed how his company put the Dubai stamp on one of the most iconic golf courses in the world.
When asked why Turnberry, Spencer replied: "Turnberry is one of the top-10 'golf courses to play in the world before you pass away' list of every mad golfer.
"The lighthouse is perhaps the most symbolic piece of golf course architecture in any part of the world, and the Ailsa cropping out of the sea is a sight to behold. It has a stunning James Miller-designed hotel and Miller is one Scotland's key architects.
"We did some extensive market research before bidding for the property, and were extremely encouraged by the results. Almost 100 per cent of respondents had named Turnberry in their choice of three golf courses they would love to play on."
Following their research, and a bit of guidance from the legendary Greg Norman, who won the 1986 Open at Turnberry, and who is involved in the design of three of the four golf courses at Leisurecorp's Jumeirah Golf Estates, Spencer and his team started their negotiations with Starwood in October 2007.
Spencer said: "The Turnberry sale was impaired – and I don't mean 'impaired' in a bad way – by the fact that it came with a long-term management agreement in place. I can't possibly talk on behalf of Starwood, but their business model going forward is to be an operator, and not an asset owner, and Leisurecorp's business model going forward is not to be an operator, but become an asset owner. So, there was a great synergy between us when we first started looking at it.
"There were a lot of people looking at acquiring Turnberry, but Starwood took the approach that they wanted to sell it to the company who could make the best fist of it."
Along with Starwood, Leisurecorp also needed to impress the South Ayrshire Council, and the R&A.
Spencer said: "We are a real estate company, but our heart is in golf. We understand the game, and we have great respect for it. And particularly in a country like Scotland, the fact that we have demonstrated our respect for the game, means a lot.
"I think both South Ayrshire Council, and the R&A saw us as good custodians of the golf course. Turnberry has such a place in the history of the game, we feel that more than ownership, we have a custodial role to play."
On how Leisurecorp won the support of South Ayrshire Council, which is the only area in the UK which has two Open venues – Troon and Turnberry – Spencer said: "Golf forms a very, very important part of the fabric for South Ayrshire Council. They promote golf in the area in a major way, and Turnberry is an icon of that area.
"Of course, they wanted to be very sure about the company – who we are, what future plans we have for Turnberry, and things like that.
"I think we have demonstrated to them that we are a very strong company, and that we intend to expand golf in that area by opening new markets for tourism as well.
"I think one of the problems for Turnberry in the past is that they have been so reliant on the US market for tourism.
"We want to expand the market into the GCC area, Africa and do more in Europe. They understand what we want to do and we want to do everything with the permission and guidance of the South Ayrshire Council."
With R&A, it was a little easier, especially after their historic tie-up with the European Tour.
"We had to convince the R&A that we will be delivering the golf course in premium condition.
"We will be re-doing the public spaces and the hotel before the Open. We will be representing a revitalised Turnberry," said Spencer.
"We can all sit back and pontificate on which has been the best Open venue, but one thing which everyone agrees is that Turnberry is the most spectacular of all venues, certainly from a television audience point of view and in projecting the image of Scotland, and the image of the Open.
"We had to demonstrate to the R&A that we will do our best to provide them with every tool which can help them make this the best possible Open."
On the role played by Greg Norman, Spencer said: "He did have a role to play, but it was more of encouragement. He was kind enough to fly us down to Turnberry in November last year and he wanted to show us certain things that he thought could be improved.
"Greg was the one who said 'C'mon guys! If the numbers make sense, this would be the crown jewel of your international portfolio'.
"He was very encouraging and he stayed in touch throughout the process."
And on the cost of the final deal, Spencer said: "I am unaware of what the other bids were, and quite frankly, in the entire process of buying Turnberry, it is irrelevant how much we paid for it.
"If you look at it, people will say 'Wow! That was an amazing good buy at £55 million!'. The general feeling was that Turnberry would sell for close to a £100 million. And if you look at the price at which Wentworth was brought for, or the price that was paid for The Belfry, Turnberry is almost 50 per cent less.
"Having said that, I don't think any one person or company can own Turnberry… it is such a magical place. It really belongs to the world."
Factors that influenced Leisurecorp's purchase by David Spencer.
Our aspiration is to become a very high-end, bespoke, luxury golf developer based in the world's most dynamic city, Dubai, but with a global footprint. When we look to acquire a new property, first of all we have a pretty strong check list and, secondly, we stick to that, although we do have a certain amount of flexibility.
By Joy Chakravarty - Business24-7.ae
'WORLD'S BEST' POTENTIAL: We only focus on investments in assets that have the potential to stand out on a world stage. For example, our residential golf communities are based around courses which host major international tournaments. We are not interested in second-level assets – they have to have that top-grade potential.
REAL ESTATE OPPORTUNITIES: The increasingly competitive international real estate market has long since recognised the 'added value' to be obtained from real estate developments with integral golf course facilities. International experience proves that real estate and tourism development centred on leisure facilities, especially golf courses, offer exciting investment opportunities and without doubt provide the highest rate of return on capital investment. There is massive unsatisfied demand for golf courses and facilities. Today, a new course means a new residential development, because that's the proven model.
GEOGRAPHICAL LOCATION: Geographically, we like Europe, the Middle East and Africa for several reasons, but that's not to say we might not look elsewhere. There are some land bank opportunities in the United States, where it's good buying at the moment. But from a golf developer's point of view, Europe, the Middle East and Africa is where our focus is at the moment. The shift of focus in golf has moved from America, not just because of economic circumstances, but through a lot of hard work. I think Europe, and the Middle East and Africa should be very proud of what they have achieved to date in the golf industry. It's been an exciting few years.
INCOME STREAM OPPORTUNITIES: We differentiate ourselves from most other golf developers in that we are very, very keen to keep the amenities. We don't want to sell off the amenities, and we want to keep as many possible income streams that we can at each of the developments. So, you'll find that we like a mix of properties under construction and ones with development potential. In all our potential acquisitions, we are looking for income stream opportunities.