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FORE! By Rick Null JAPAN'S CRAZE FOR U.S. COURSES IS TURNING HEADS AND CHANGING OLD HABITS...FOR BETTER AND FOR WORSE. All appears serene in the verdant hills of Marin County, just across the Golden Gate Bridge from San Francisco. Deceptively so for Scott Mroz, a four-handicapper attorney who likes to play golf on the Peacock Gap course next to his home in San Rafael. Often he confronts a peculiar new hazard: he can't get on the course because enthusiastic Japanese golfers are crowding out locals like himself. Worse yet for Mroz, the nearby San Geronimo cours, which has always been open to the public will soon be restricted to members only. Rumor has it that a fortune 500 will ante up nearly $30,000 each to tee off on its 18 holes and relax in its planned $3 million clubhouse. Mroz is angry. "Access is the issue," he protests. "When these places start closing up to the public, there's no place to play." Peacock Gap was one of the first golf courses in America to be bought by Japanese interests. San Geronimo was purchased last May for $13 million by a Japanese partnership called C&N Corp. What has happened to them represents the most controversial and fastest-growing trend in golf: the snapping up of desirable courses by Japanese investors. Tokyo golfers are not the only beneficiaries. Many U.S. states, increasingly dependent on service industries, are reaping the windfall of golf-related tourist revenues. In areas such as the Northeast, locals welcome the flurry of activity. As something that brings tourism to the United States, Japanese golf is a good thing," says Phoenix-based golf consultant Christopher Mead, publisher of the Golf Course Investment Report. But these new course owners are bringing with them a distinctly home-grown approach to developing, managing and profiting from golf properties. It is not always welcome, and not always easy to understand, but golf Japan-style is here to stay. Golf as business is increasingly dominated by Japanese companies. The world's largest golf-equipment supplier is Mizuno Golf Co. Japanese corporate-sponsorship flags fly over some of the most prestigious international golf-tour events. All this largess is pin money next to the billions put on the table for expanses of American fairways. In the United States, Japanese investors have bought about 170 courses, concentrated in Hawaii and on the West Coast. This number sounds negligible compared to the 14,000+ courses in the country, but it's causing some American golfers to send up a howl of fury and bringing politicians' tempers to a boil. Last year, on the floor of the U.S. Congress, Maryland Congresswoman Helen Bentley expressed her outrage at the Cosmo World Corp. acquisition of Pebble Beach Co. in California, terming it a "scandal" and declaring that "American golfers will not give up the game to become a nation of checker players." The adding machines at Kenneth Leventhal & Co; a Los Angeles accounting firm that tracks Japanese real estate activity in the United States, can barely keep up with the pace. From less than $10 million a year before 1988, Japanese money spent for U.S. courses ballooned to $400 million in 1989; it topped $1 billion the year after and continues that trend today. "If you look on a map where the Japanese airlines have hubs," an American golf-course broker confides, "that's where golf courses are suddenly rising in value." The most sparkling U.S. acquisitions are:
THE MOST PRESTIGIOUS country club in Japan is Koganei, not because the golf is so special but because it's only 45 minutes from downtown Tokyo. A membership costs about $2.7 million - green fees and caddies not included. Now stung by high interest rates at home, Japanese investors are looking for less expensive properties, analysts say, and are picking up suburban courses in the Northwest and Southeast for under $5 million. The dollar amounts are coming down, but the number of deals is increasing. Outside the United States, they are investing heavily in Southeast Asia and all across Europe. Why are the Japanese shooting for U.S. greens? The answer lies at home: too many golfers, too little land. Experts estimate that 15 million of Japan's 123 million people play golf at least occasionally, a doubling in 10 years. As Japan's wealthy baby-boomers age and enjoy more leisure time, they seek out oversees golf vacations at balmy resorts. But Golf in Japan is more than a sport and more than a business. It's an obsession, an art to be mastered with a Zen-like devotion. The game was introduced to the islands by Arthur Groom, an English merchant who founded the Kobe Golf Club in 1903, but it caught on in Japan only after World War II. Japanese executives took up the game in the 1960's as a symbol of newly gained wealth. In the 1980's, when the yen rose to world-beating value, golf became an affordable aspiration, if only on $3,000 Hawaiian package deals. The ultrapowerful Keidanren (Federation of Economic Organizations) estimates that more than 80% of its members play regularly. The game is so much a part of doing business in Japan that salarymen play golf whether they like it or not. "I hate golf, but the boss ordered me to play," a dutiful Japanese duffer confided to a golf-loving American associate from Kodak. Many Japanese golfers have never set spiked brogan on a golf course, and probably never will. There are only about 2,000 courses and less than 10% are public. Waiting for the commuter train, dream golfers swing their umbrellas, menacing unwary bystanders. The Tokyo skyline is laced with hundreds of 24-hour practice-range nets known as "birdcages." Much has been said about $2 million club memberships, which are traded like commodities by Tokyo brokers, for these are the dazzling extremes. Yet even the average individual memberships and green fees cost up to 10 times the prices charged at all but the most exclusive American courses. Little wonder, then, that Japanese golfers pack their clubs and vacation at an American resort where they can slice and hook for a lot less than at home. Japanese corporations are purchasing courses near major U.S. cities for their employees. A traveling executive will have reason to join a stateside club. "U.S. golf memberships are a tremendous deal," says golf consultant Mead. "If they can get one here for $30,000, that's just as good as $300,000 in Japan." Given the recent bogeys in commercial real estate, Americans may wonder about this latest Japanese buying binge. But Tokyo-based Jun Tanaka, Nitto Kogyo Co.'s overseas golf-development chief, says: "Acquiring and developing overseas golf courses is still seen as quite fashionable." Why? Japan's golf fever is a marketing dream. When he bought La Costa, Sports Shinko Chairman Toshio Kinoshita boasted, "I got the jewel in my crown for a bargain." By home standards, he was right. The Japanese are investing overseas in the opportunity to sell golf in Japan: golf tours, golf-community condos and golf merchandise. "Through their affiliation with travel bureaus and associations, Japanese owners can take a money loser and turn it into a cash cow," says John Lisanti of American International Golf Resorts in San Francisco. Last year Pebble Beach Co. trademarked its "Lone Cypress" logo. James Hands, Kenneth Leventhal & Co.'s expert on golf-course properties, believes that Pebble Beach's name in Japan will generate licensing income the equivalent of the Teenage Mutant Ninja Turtles. "Just think of the audience - wealthy adults," he says. Much of the revenue stream will come from new memberships. "Overseas membership is where they can make hundreds of millions of dollars," says Lisanti. But Donald Wizeman, president and CEO of golf course-development firm Dai-Ichi Corp. in Myrtle Beach, South Carolina, says his clients prefer "pay-per-play" courses, where return on investment can top 12%. In his experience, "overseas memberships have been a dismal failure" since many Japanese executives opt to sample a variety of courses. In their quest beyond the seas for cheaper pastures to reshape into links, some Japanese golf investors have driven their bulldozers into a mire of ill will. In Hawaii, where Honolulu has become a Tokyo beneath the palms, Japanese companies have 40 golf courses under construction, and resentment is building. NO CAN EAT GOLF BALLS! Is the Japanese golf boom helping or hurting Hawaii? What then Secretary of the Treasury James Baker had in mind with the G-5 Plaza Accord in 1985 was to make it cheap for Japanese to buy American trade staples like semiconductors, supercomputers, beef and rice. But Japanese investors had their own shopping list. Among the things they bought with their 60-cent dollars were golf courses - 38 of them in the tiny state of Hawaii. Walt Menching's golf game went to hell along with the dollar. "I used to be able to play the Mauna Kea Beach course for $45," the Hawaiian local recalls ruefully. "Now it's $125 a round, and green fees at all the Japanese-owned courses are over $100." Golf-course owners became aware that they were on to a good thing, and prices shot up accordingly. While a course on the mainland typically sells in the $3 million to $5 million range, an ordinary municipal course in Ewa on Oahu was offered for a 65-year lease to a Japanese buyer for just over $100 million. In order to recapture costs, Japanese owners are privatizing their properties and selling memberships back home. The sale of as many as 3,000 new memberships to a single golf club at $100,000 to $150,000 each is conceivable. None of this is out of step with prices in Japan, where land is precious and the golfing experience is highly treasured. Put that kind of pent-up demand against the life-long habits of Hawaiian residents like Walt Menching, who look on cheap golf as a basic human right, and something has to give. Environmentalists, farmers and guardians of traditional Hawaiian culture oppose the development of golf courses in Hawaii, claiming they consume scarce water resources, displace affordable housing, create toxic-waste dumps for pesticides, and cost jobs in agriculture. Nonsense, the developers say: golf courses reduce water runoff; they have little or no effect on the availability of land for housing; scientific studies do not support the contention that properly managed golf courses are an environmental danger; and golf courses employ more workers than do farms of similar size. That golf and economic growth go hand in hand seems apparent (see chart above). Honolulu Mayor Frank Fasi says Japanese developers are free to build courses if investors will fork over $100 million each in impact fees to be spent on affordable housing for low-income groups. The visitor industry notes with alarm that such gouging will kill the goose that lays the golden tourism egg. Others call it an extortion fee. All things being equal, the yen investment habit may be too strong to break. Look for a rash of new golf courses once the recession fever has broken in Japan. Not, however, before the average wage earner has had his say from the depths of Hawaii's worst ever affordable-housing shortage. As a bumper sticker seen recently on a battered pick-up pointed out with perfect pidgin and unassailable logic: "No Can Eat Golf Balls." This tropical storm is beginning to hit the mainland. The new owners of Pebble Beach want to sell memberships to wealthy Japanese and U.S. residents, although they insist that public access would be guaranteed. Price? As high as $750,000. "The local players and the town fathers are mad," one source says. Now Cosmo World wants to On the course, relationships are made but deals are never cut. As in America, the client always wins. build 353 units of housing and another course on the undeveloped acreage in the hilly Pescadero area. To answer one of many objections, the company proposes to sponsor a $20 million water-reclamation plant, financed by municipal bonds. La Costa's attraction for the glittery set has waned. "It was a movie-star type of place," says an executive associated with the previous owners, "but it's a real turnoff for that clientele to sit in the restaurant with a bunch of trade-show types." Japanization is all but complete at Uniden Corp.'s Valencia Country Club near Los Angeles. In 1987, it was made private with memberships costing $200,000. The members, now 60% Japanese, may play mah-jongg, soak in a traditional furo, or croon My Way in a Karaoke room near the lockers. More changes are taking place behind the scenes. American club pros have long enjoyed socializing with members, giving lessons and operating the pro shop for a percentage of the profits. "The Japanese aren't used to that," explains David Stefan Jr; a Pennsylvania consultant specializing in golf course searches. At some resorts acquired by Japanese, pro-shop customers may be greeted by the unfamiliar face of a low-paid sales clerk who knows next to nothing about golf. "IT USED TO BE a man's world, but now Japanese women are nuts about golf," says housewife Ritsuko Yoshida. Nearly 3 million women play golf in Japan. Most popular female golfing destinations: Hawaii and Guam. As the new owners clean house, other holdovers find their roles reduced. "I get calls from managers who say they are being told to sweep the driveway," Stefan says. Out on the course, superintendents complain of "white-glove inspections" and demands that every weed and imperfection be eradicated. Americans who grouse over a drink at the 19th hole about the Japanese "invasion" must also admit that the course they have just played is much improved and the clubhouse they are relaxing in has a fresh, modern look. Many of the courses bought by the Japanese interests were tired, if not neglected, when they took over. In Northern California, members at Silverado Country Club and Resort will gain a new clubhouse, and Sonoma National, which was bought by Fuji Country U.S.A. for $7.7 million, has been completely overhauled. A two-part harmony is heard at the Hilldale Golf Course in suburban Chicago, which was bought by Kosaido Corp. Kosaido kept Hilldale open to the public and built a new clubhouse, where the old one had burned down. Waitresses in kimonos serve some of the best Japanese cuisine in the area. Out on the renovated course, signs are international to accommodate the 20% of players from Japan. But the locals don't seem to mind. "The Japanese groups tend to schedule outings on Sunday," says Wanda Miller, a staff holdover who was promoted to general manager, "whereas our American players favor Saturday." Sports Shinko's Florida property, Grenelefe, was a failing enterprise outside Orlando when the company bought it. The new management has improved and expanded its conference facilities and is sprucing up its 960 rooms. Says 29-year-old Takeshi Kinoshita, son of the company chairman and head of U.S. operations: "We're going to gradually develop the resort without changing it completely." In Pinehurst, North Carolina, the Foxfire Golf Course was in bankruptcy when Rabex Japan Ltd. purchased the property for $3.7 million. Club pro Tom Graber enthuses: "They've made extensive improvements to the clubhouse and both courses and bought a new fleet of golf carts, and they plan to do more." Rabex has begun selling $100,000 memberships in Japan, but is holding the initiation fee in the United States to a mere $1,000. In the off-season, the 36-hole facility is still open to the public. JAPANESE SAY: "Nice on" for a good shot; "patto shinai" when your game is off; "sokketo suru" when the ball goes in an unexpected direction; "tempura" when you sky the ball. (Tempura is fried at a high temperature). Nor is every Japanese-financed new course builder shooting for the yen-spending crowd. Just outside Portland, Oregon, Sho Dozono, CEO of the Azumano Group travel company, and the Kobe-based Daioh Corp. are partners in a new $80 million country club designed by pro Peter Jacobson. Of 400 memberships, just 25 are held by non-U.S. corporate members; women and minorities are being courted openly. Dozono says he will fight discrimination head-on: "At the Oregon Golf Club, there will be no ethnic barriers." That will be another welcome change. In Japan, golf rules are interpreted loosely. Out-of-bounds shots are forgiven. To make the game easier, Japanese often tee it closer to the hole. Everyone always stops after nine holes to eat lunch. The anxiety golfers express at the arrival of Japanese in their midst extends beyond the practical: the crowds, the high fees, the strange menu in the grill room. Despite the boon to local communities, this tension involves the loss of control of sanctified real estate, stirring xenophobia or racism in some. In most regions of the country, course access is not the major issue: less than 20% of Japanese-owned courses are off-limits to American players. But Tokyo investors, eager to earn goodwill, are guaranteeing tee-off times to locals. They are at last seeing the need to avoid over development in California and Hawaii, where Japan's golf-resort boom has stirred resentment. Individually, Japanese and American golfers are slowly making an effort to mix with each other. The process will no doubt take time. "Both countries are moving toward leisure societies," says Mead. "We've learned how to work with the Japanese; now we have to learn how to play with them." After a century of Anglo domination, golf is becoming truly international, no longer reserved for a sunburned, English-speaking, male elite. Wherever Japanese invest in the game, there may be moments of friction. But ultimately, new intercultural golf links are formed. At the British open a few years ago, held on the Old Course at St. Andrews, Scotland, the birthplace of the game, golfers from every continent crossed a Roman footbridge on a fairway approaching a Japanese-owned hotel. Among the gallery was Tom Witt, a Texas architect who directed the complete renovation of the structure. "The management threw a reopening party," he recalls. "My wife and I were on the rooftop, drinking French champagne with some British and Japanese golfers, watching the fireworks. It was the Fourth of July." |
