Zombie Golf Courses

It seems that the situation is changing, but we can not forget some very extreme circumstances that still affect a considerable part of the of Spanish golf courses. If we go back to the second part of the 90s, it was when the fury started on the part of real estate developers to develop golf courses with the aim of revaluing the many housing developments in all the tourist areas and many, also, of the interior . This maelstrom caused that more than 200 new courses were opened in that period 90s-2008. The formula was perfect, the promoter made a field that cost between 5 and 12 million euros, promoted 1,000 homes which instead of selling them at 200,000 euros, sold them to 250,000 for being part of a golf complex. The calculation a priori was very easy to do, "golf costs me 10 MM and brings value to housing for 50 MM", everything was "champagne and luxury", right ?. Although the example used is a little caricature, the perception was not very different.

Between 90 and 2008 the real estatedevelopers developed almost 200 new golf courses in Spain

But, without knowing how, the friend Lehman Brothers and the gang of 2008 arrived, and we were all paralyzed. Suddenly the houses were no longer sold, but it was not that they sold less, but that nothing was sold, and the Spanish coasts began to fill with unfinished concrete structures, the spectacle quite bleak. And what happened to those beautiful golf courses, so green, that added so much value to those Hollywood-like urbanizations?, the result could not have been worse. The problem of the golf courses was multiple, on the one hand, there were no buyers of houses, there were no golf members who with their contributions would help to finance them, and, what is worse, those courses began to require something to which the promoters had not paid a lot of attention, and it was the maintenance costs, that one million euros per year that cost the "green set". The result? Well, it is not hard to imagine, that many of these golf courses began to be in a situation of practice starvation, what was to be an asset of the promotions, became a real "liability".

When the crisis of 2008 arrived, many of the real estate courses remained in a situation of starvation derived from the total drop in the sale of housing

And what happened next ?, I have nightmares think about it, I suffered more than anyone, but that is already a memory. The reality is that these "golfing corpses" happened to different situations, the most usual ones were:

- Abandoned courses: They were enough, and in many areas. They allowed themselves to be lost when their promoters could no longer afford them and in addition to not selling the houses, they could not pay for maintenance. This is the most dramatic situation. There is nothing worse for a buyer or homeowner than being next to an abandoned field. In this situation there are still about 15-20 fields.

- Foreclosed courses: These are the ones that banks have had to adjudge, and the SAREB, due to non-payment of the financing given to the promoters. Almost all banks have one and several have enough. We calculate that in this situation there are another 25-30.

- "Precarious" courses: In this section we locate those fields that, although they have managed not to close, the owner keeps them but has "low minimum" for lack of market and financial lung. In this category will be another 20-25.

There is still a significant number of golfcourses in the "ICU"

In short, we find a "ICU" quite collapsed golf courses, some in a terminal situation, others very sick and many in the hands of "parents" adopted.

In summary, although the scenario described is not very happy, if it seems that something is changing. The two factors that are contributing most to this aura of optimism are, on the one hand, the extraordinary tourist situation in Spain, which is contributing to the recovery of many of the patients, and, on the other hand, to the fact that they are beginning to recover. appear investors willing to buy some of the golfcourses that had fallen into the portfolios of banks. This situation seems to be picking up speed. I do not forget another factor, that the real estate situation is also recovering, so some of the neighboring neighborhoods that are reviving, are also leaving that ICU.

The extraordinary situation of tourism, the emergence of "opportunistic" investors and the recovery of the real estate will allow recovering many "golf cartridges" and unseating others of the balance sheets of the banks

The summary is diverse, there are still zombies in a corpse situation, the abandoned ones, although some of them will recover them too, and with respect to the "parked" in the portfolios of the banks, they will begin to disappear and pass into more voluntary hands. How long will it take to consolidate salvation? It is not easy to respond, but we are moving forward.

The most important thing in this reflection is not the situation itself, but the learning that this story should bring us. It seems clear that making a golf course is very beautiful and very emotional, but beware, it is a very complex task and requires great professionalism so that it becomes active and not passive, since its viability is very sensitive.

I hope we have all learned, investors, real estate, banks ... and that golf projects are treated with an exquisite professional rigor.

Thank you all.

Francisco Aymerich

CEO

GOLF BUSINESS PARTNERS