Money-Growing: Golf Invasion

Rapid Advance

The history of golf goes back to ancient days. The game was first mentioned in written sources in the 15th century. The game is believed to have originated in Scotland although similar pastimes existed in other countries, as well.

Over the centuries the popularity of golf grew considerably. By the year 2004, there were approximately 40,000 golf courses worldwide, while the army of golf fans numbered 90 million.

Golf is most popular in the United States which – with over 25 million players and 16,000 golf courses – accounts for 40% of all the golf courses on the planet.

Asian countries, too, are showing great interest in the game. In Japan, there are so many people who want to play golf that some Japanese take out membership in new clubs long before their development is completed.

Koreans have gone even further. Some major firms buy club membership for all their top executives and then oblige them to report on their attendance at tournaments and their achievements.

The popularity of golf can be partially put down to the fact that there is virtually no age limit to the sport. The game is not hard to play and the fresh air has a wholesome effect on the players.

A modern golf course is an environmentally friendly facility. Golf courses in major cities diversify urban landscapes and help prevent pollution of park areas.

Over the past decade golf has stopped being merely a sport. Rather, golf today is part of the lifestyle of business people. With time, golf courses have turned into venues for business negotiations. Rumor has it that over 80% of major deals in the West take shape at golf clubs.

Consequently, investments in golf courses and the accompanying amenities pay off well. Interestingly, some 30% of the members of the world’s leading golf clubs are not active players. For them, a golf club membership is an integral part of their image.

These days, pitch & putt, or mini-golf, is becoming increasingly popular across Europe. The game originated in Ireland in the late 19th–early 20th century.

A pitch or "pitch shot" is a shot played with a club that is designed to hit the ball a short distance with a high trajectory. A pitch shot mostly moves in the air with much less roll once it hits the ground. A putt is a shot played along the ground near the hole using a special club called a putter.

These days, mini-golf or adventure golf courses have become especially popular with residents of posh out-of-town compounds, says Viktor Zimin, head of the Golf Consulting Research project.

Adventure golf courses contain elements of adventure and intrigue the only limit to which is the imagination. There are golf courses featuring pirates, extraterrestrials, stunt men, etc.

Another exciting pastime is crazy golf. Such courses are still limited around Moscow, but adventurous golfers are demanding more and more often that designers, developers and maintenance services provide them with facilities equipped with the most sophisticated, downright crazy obstacles, such as suspension bridges, tunnels, spirals, tracks in the form of a Mobius band, etc.

Inhabitants of out-of-town residential compounds show keen interest in putting greens with natural grass or artificial covering imitating authentic golf course surfaces.

The Green is the culmination of a golf hole, where the flag and the hole itself are located and where a golfer will "putt out" to end the hole. Greens can vary widely in shape and size, but are most commonly oval or oblong in shape. They can sit level with the fairway or be elevated above the fairway. They can be flat, sloped from one side to the other or contoured all around their surface. Greens are covered with special grass, very thick and short – below 1 cm.

The latest survey carried out by Golf Consulting Research shows that recreation facilities catering for the business elite tend to expand towards water. In other words, new golf clubs and residential compounds are being developed in the immediate proximity of lakes and river banks, equipped with berths for motorboats and yachts.

Another hit of the season are golf courses for personal use – within guarded residential compounds, as well as on the premises of private estates. This trend has given rise to the development of new forms of elitist golf – country-house golf and landscape mini-golf.

Golf in and Around Moscow

Golf came to Russia a little over 15 years ago. However, the idea of developing golf facilities in the Soviet Union was first proposed much earlier, by the prominent U.S. entrepreneur Armand Hammer who told Leonid Brezhnev that if he wanted American businesses to come to the USSR, he had better provide comfortable limos and golf courses for American businessmen. The Soviet government ignored the advice. It was not until the Soviet Union ceased to exist that Russians eventually took up golf.

In 2004 the volume of Russia’s golf market reached $192 million, at the average annual growth rate of 80%, according to the Russian Golf Association. Capital investment in the development of golf facilities grew 88% to exceed $109 million. Over 30 golf investment projects have been launched.

Russia’s first-ever quality golf course is run by the Moscow City Golf Club. The project was initiated by its founder and honorary president, Swede Sven Tumba. The architect managed to design a full-fledged golf course on quite a limited area on wasteland in the flood plains of the Setun River, a tributary of the Moscow River.

The first golf training course in this country was opened on Dovzhenko Street in 1988. Two years later, the first 9-hole course was developed, with a total game distance of 2,343 meters. Professionals say that although it is not very long it is not the easiest course to play on.

The development of the Le Meridien Moscow Country Club, overseen by Ivan Sergeyev, head of the Foreign Ministry’s Main Directorate for Services to the Diplomatic Corps (GlavUpDK), began in 1988, in the village of Nakhabino, the Krasnogorsky District of the Moscow Region.

The club was solemnly opened in 1993. Russia’s first 18-hole championship golf course was designed by Robert Trent Jones Jr., one of the best in the field.

Le Meridien Moscow Country Club is, at the same time, a top class hotel of the deluxe chain Le Meridien that runs 145 hotels across the globe. The club features a restaurant, a golf bar, a library, a cigar lounge, a conference hall, a billiards room, spa and saunas.

The list of club members and active players includes diplomats, and foreign and Russian businessmen. Executives of Shell, BP, Visa-International, Siemens, Coca-Cola, BMW, ROSNO, Alfa Bank, Lukoil and other major companies have all been seen playing golf at Le Meridien.

Russia’s first pitch & putt club was developed by Konti Group at the top end residential estate Pokrovskoye Glebovo. The club occupies a territory of 1.5 hectares.

The Pokrovskoye Glebovo club offers its guests a 9-hole course developed in line with recommendations from the European Pitch and Putt Association, training courses including putting greens, a driving range and a site for practicing bunker shots, a clubhouse built in Russian Classicism style and a lounge bar in the traditional British style, a Russian and French cuisine restaurant, a winter garden with an artificial putting green and golf simulators as well as an 18-hole landscape mini-golf course.

The Krylatskoye golf practice center was developed on a territory adjacent to the Rowing Canal, under the aegis of the Experimental School of Sports Excellence under the Moscow city government’s Sports Committee. The 7-hectare facility has a 350-meter training course including a driving range with six covered and 10 open stalls, two putting greens, and a sand bunker.

In 2002, Europe’s largest indoor golf center – Sinyaya Ptitsa, or Blue Bird – was built in Moscow, in the district of North Butovo, near the residential estate bearing the same name. The course is covered by a gigantic white dome, made of special sun-resistant plastic that keeps heat inside. The Blue Bird center features a 200-square-meter 9-hole putting green for short putts, a golf simulator, 30 stalls used for full swing shots, a fairway sand bunker, and long grass, or rough, for shots in unusual positions.

Investing in Holes and the Surroundings

Development of golf courses requires enormous initial investment. Andrei Vassiliev, head of out-of-town real estate at Paul’s Yard, says that high costs and the fact that golf courses as such practically never pay off prevents golf from becoming a mass game. A payback on investment is only possible where golf facilities are developed alongside other amenities on the premises of golf clubs.

“Developers only benefit where a golf course is built along with other public amenities,” says Svetlana Gunkina, marketing director at the company Protsion. “That is why the golf club projects pending or already launched in the Moscow Region envisage development of a wide spectrum of establishments to make holiday-makers feel comfortable. Those facilities include tennis courts, swimming pools, spa, saunas, billiard rooms, restaurants, and many other things.”

“The experience of the Nakhabino club shows that big money is also made on renting out courses during championships, selling closed membership, and on renting out country houses,” adds Inna Ekhya, head of marketing, advertising and public relations at Vedomstvo.

In addition to companies directly involved in that business, investors specializing in the development of elite out-of-town residential compounds, too, show interest in golf course construction. For example, rumor had it that Inkom-Nedvizhimost (realty) seriously considered a golf project though the company’s press service would not confirm the report saying the matter had not yet been decided.

Developers are particularly interested in constructing golf courses within countryside compounds, but each of them decides for themselves whether such projects will make a profit or not.

“So far, the construction of elite countryside compounds with a golf course for the residents’ own use, in the Moscow Region, is not profitable,” says Sergei Leontiev, general director at Vesco Realty.

“To begin with, golf course construction requires specific experience in earthwork. The process includes modeling the course, building a special landscape, drainage work, an irrigation system and water supply systems, and developing a grass plot. Given the Moscow Region’s weather conditions the development of a course and associated facilities could drag on for years.

“Then, building a golf course requires a large plot of land – over 100 hectares – which is quite difficult considering soaring land prices. The costs of developing a standard 18-hole course range from $2.5 million to $4 million, with the cost of land excluded. In addition to the actual construction, maintaining a golf course is also quite expensive. The equipment alone would cost about $700,000. All in all, the price of property at countryside compounds with their own golf course would significantly exceed the prices in the most expensive complexes.”

However, Viktor Zimin, head of the Golf Consulting Research project, believes that investors interested in promoting the real estate market in the Moscow Region, are in a hurry to secure a foothold there by resorting to all sorts of intricate novelties. “And, as the rivalry for the tight-filled purse of well-off consumers grows stronger, golf becomes the main image-enhancing bait,” he says.

Investment company Vash Finansovy Popechitel agrees that luxury sports facilities are likely to attract well-to-do buyers. The grand project Ruzian Switzerland which the company has launched in the Ruza District of the Moscow Region will feature comfortable residential facilities and public amenities, as well as golf courses.

Vassily Boiko, board chairman at Vash Finansovy Popechitel, sets the projected cost of development of the first golf course in the village of Bunino at $7 million, the second course at $4 million, and a golf course in Akatovo at $5 million. The projected payback period is 7-10 years, adds Boiko.

Inna Ekhya says the projected investment in the golf course development project near Pyatnitskoye Shosse exceeds $50 million. “We were offered $30 million for the plot alone – a little over 100 hectares, but we are not yet ready to give up the project,” she says.

Investors are also taking an interest in developing golf courses within the city limits, though such projects do not involve construction of vast courses stretching out for dozens of hectares, rather, facilities requiring less space and accordingly, less money. For example, Konti has spent a little over $2 million on the construction of a pitch & putt club at the Pokrovskoye Glebovo residential estate.

Although the golf industry market in Moscow is far from being filled, local investors are considering moving their projects to the provinces. Sergei Bagayev, general director of Vavilon realty, has reported that his company is about to launch the development of a golf village in Krasnodar Region, 25 kilometers from Gelendzhik. The construction is to begin in late 2005.

The 60-hectare village will feature a 9-hole course and other golf facilities, a hotel and residential properties (33,000 square meters). The total projected cost of development is $45 million, of which $3-4 million will be spent on golf facilities. Payback is expected in five years. It is no coincidence that the company has chosen Krasnodrar Region as a venue for its project, Bagayev says. “In Moscow, the golf season is limited to five months only, while in Gelendzhik it continues almost all year round.”

Building a Golf Course

Before launching the development of a golf course it is necessary to carry out comprehensive marketing research, according to Golf Consulting Research. The survey will help to cut costs by excluding unjustified spending and to receive payback on an investment by offering a wide range of associated goods and services.

Viktor Zimin says that investors who take up golf projects have to remember that the key criteria for assessing the plot of land to be used for construction are its relief map, water regime, the ground characteristics, and the options for providing water and energy supplies.

Also, it is necessary to stipulate the development of any associated facilities such as a club-house, a business center (either to be built or redeveloped), golf stores, service clubs, mini hotels, restaurants, bars, cafes, sports facilities and/or playgrounds, gyms, massage and beauty parlors, swimming pools and saunas, etc.

Sergei Baranchukov, project manager at Zelyony Gorod, notes that the natural landscape is no obstacle to golf course construction. “It is possible to build a golf course anywhere, be it a bog, a wasteland, or a desert. But a favorable landscape allows an architect to design a beautiful course, appealing to players,” he adds.

New Projects

The best venues for golf course construction are still to be found largely in western and southwestern parts of the Moscow Region, says Sergei Leontiev.

Over 66% of all countryside residential compounds are concentrated along the Volokolamskoye, Novorizhskoye, Rublyovskoye, Kievskoye and Kaluzhskoye motorways. In those areas, therefore, the demand for golf facilities is quite high.

Favorable conditions also exist in remote western parts of the region, for example, on the shores of the Ruza and Ozerninskoye water reservoirs where countryside development is in full swing.

“Today, there are just a handful of golf courses in the region,” says Vassily Boiko. “But marketing research has revealed a rapid increase in demand for golf facilities. That is why we have moved to build three 18-hole courses within the Ruzian Switzerland project, two at the Bunino resort and one in Akatovo. The 40,000-hectare area of the Ruzian Switzerland project was examined to allocate plots suitable for the goal. For example, Bunino’s golf courses will be especially interesting due to the different heights and a view of the Ozerninskoye reservoir. The Akatovo course is peculiar for its hills. The area of each golf course will be 70 hectares.”

The company plans to launch the development of golf courses in Bunino and Akatovo in 2006 and to commission them in 2007-2008. Construction of the second Bunino course is slated to begin in 2007 and to be commissioned in 2009. Vash Finansovy Popechitel says that the championship course at Bunino will be used as a venue for professional tournaments.

Unlike the two other courses, that facility will cater for club members only – Ruzian Swiss residents. “Ruzian Switzerland’s most expensive mansions will be built next to the golf courses, filling the area with even more harmony,” Vassily Boiko says.

Construction of the golf club Nick Faldo International, owned by Golf Stroi Service, is being managed by the Moscow Golf Development Federation. The 27-hole championship course is to be built between Moscow and the Sheremetievo II international airport. The project, designed by famous British golfer Nick Faldo, is by far the most widely publicized golf project in the country.

The 244-hectare complex will feature tennis courts, restaurants, bars, fitness facilities, an indoor golf center, a volleyball court, beauty parlors, swimming pools, saunas, as well as country houses for long-term lease and a top class hotel.

Rublyovskoye Shosse has been chosen as the site for the construction of the 86-hectare Rublyovka Golf Club, with 200 hectares of adjacent territories. The club will feature world class golf courses (18 holes, 6,800 meters), a 3-hole children’s course, a pro-shop and golf simulators. Rublyovka Golf Club plans to commission the property in 2007.

The 25-hectare Pirogovo golf club, under development at the Klyazma Water Reservoir resort (20 kilometers from the Moscow outer ring road, or MKAD, on Ostashkovskoye Shosse), is slated to be commissioned in the spring of 2006. The 9-hole course over a distance of 3,800 meters was designed by Yevgeny Ass.

The Protsion management company has begun construction of a 200-hectare golf and yacht club called Pestovo (25 kilometers from the MKAD, Dmitrovskoye Shosse). The designers are Dave and Paul Thomas of Dave Thomas Ltd. The complex will feature a golf course (18 holes, 6,640 meters).

The new club will offer its members a full range of services that match PGA standards. Pestovo will feature a golf club, a yacht club, an equestrian sports club, a club house, a spa, residential properties, tennis courts, a swimming pool, and several restaurants. Construction work has already been completed, Protsion reports. The commissioning is scheduled for July 2006. The sports and entertainment complex will be run by CCA Hospitality Management, a subsidiary of CCA International Ltd., one of the world’s leading hotel management companies. The golf course is to be opened next year.

Another project worthy of attention is the golf club and country hotel chain that Vedomstvo plans to build on a 100-hectare plot 14 kilometers from the MKAD on Pyatnitskoye Shosse. The company has already secured all the necessary permission, Inna Ekhya says.

The property will include a 9-hole golf course, a number of chalet-type hotels, fitness and catering facilities, etc. “We are not pressed for time, which is why we will not rush, but rather wait and see what happens to the golf clubs that open in 2006. Our course is to be completed sometime in 2008,” she says.

Several golf courses are to be built in the capital, too. A Moscow government decree to the effect was signed by Mayor Yuri Luzhkov back in July 2003. The decree authorizes the company Golf Development to build several year-round hi-tech driving ranges across Moscow

A TopGolf range only requires a territory of 3-4 hectares. The balls at TopGolf are equipped with tiny microchips, with reading devices planted near the holes. After each shot, a computer displays the player’s results – the distance of the shot and the distance from where the ball landed to the hole.

Several sites have been allocated for the project – in the Ochakovka River valley between 22nd Communist Party Congress Street and Troparyovskaya Street, in Cherepkovo (Moskvoretsky nature reserve), on the Krylatskoye and Mnevniki flood plains and on the territory of the Luzhniki sports center. Admittedly, Golf Development refused to comment on the project in the absence of the company founder and chairman of the Russian Golf Association, Konstantin Kozhevnikov.