Japanese corporations are gobbling up U.S. courses at a fast rate

THE BALTIMORE SUN

ORLANDO, Fla. -- In the 16th century, the Scots taught the world how to play it. In the 20th century, the Americans taught the world how to commercialize it. In the 21st century, will the Japanese tell the world how to buy it?

Golf is for sale at a price, at least the fields where the sport is played. The yen men of Japan have the money. America has the golf courses. Fifty years ago the two nations came at each other with bullets. Today they meet over bullion.

Since 1988, Japanese corporations have signed checks totaling $1.3 billion in golf shopping sprees in the United States. That's on golf courses alone. In addition, they've made whopper deals on resorts such as paying $835 million for the Pebble Beach resort and courses, $250 million in California for La Costa Hotel and courses, and, in Orlando, $234 million for Grand Cypress Resort and its 45 golf holes.

Perhaps no other region has been carpeted with Japanese money as has Central Florida. In the last two years Japanese corporations have bought seven courses, and there are strong indications that more such sales will follow.

It's a phenomenon that has alarmed some, perplexed some and pleased some.

The golfer himself probably will never be greeted in the pro shop by a Japanese national recruited from the Tokyo want ads. American companies continue to operate most properties. But out on the golf course, there will be some dramatic differences. Courses that were fraying at the edges like a well-worn shirt will be spiffed up, greened up and quite likely filled up as they get in better and better condition.

What provoked this buying frenzy from the Orient? Some suggest its genesis came back in 1946, when the United States almost single-handedly rebuilt Japan's economy after World War Not until the 1970s, though, did the Japanese begin to stretch financial fingers toward our coast, and only then because of the changing currents in the world money markets.

It was then that decades of soaring national debt began forcing the value of the American dollar downward, at the same time the Japanese yen was getting stronger and stronger. Three years ago, the yen began another upward surge, tripling its value against the dollar. A golf course priced at $3 million suddenly cost $1 million in terms of Japanese purchasing power.

Golf courses represent only about 2 percent of the total Japanese investment in the United States (estimated at $70.7 billion in 1990).

Orlando lawyer Rulon Munns says economics don't begin to tell the whole story, though. He knows the Japanese culture firsthand, having lived there for several years, and he deals extensively with Japanese investors doing business in America.

"I think you start with the premise that the Japanese are just inherently fascinated and intrigued by anything that's American," Munns said. "The people I met in the nearly five years I lived there, they'd do nearly anything to come to America and know more about us.

"And secondly, they have only begun to understand what 'leisure' means. They were total workaholics; there was no time for leisure in the past. Now that's changed, partly because they have the financial resources, and partly because the government is pushing them to engage in more leisure time. Golf has always been considered an upper-end activity, and the people there have fallen in love with the sport."

Californian J. Michael Poellot has been designing golf courses in Japan for 20 years. He adds yet another reason there is very little land in Japan to construct their own.

The terrain is mountainous, and what level land there is is planted with rice. It doesn't matter that a golf course could bring in much more income to the land owner than rice the Japanese landowner won't sell for any price.

"The rice industry is particularly powerful, and it's almost a cultural heritage to grow rice," Poellot said.

"And there is a centuries-old attachment to land. The sale of land, if the land has been in the family any length of time, brings great shame to the person who sells it."

That is the real bottom line: American golf courses are outstanding business investments for the Japanese.

And as Munns said, there is a priceless intangible about owning something American. Poellot agrees. "It's almost like buying a bunch of Van Goghs," he says. "It's something that brings prestige to that company in Japan 'Oh, yes, I own Pebble Beach; I own Riviera.' There is much status involved in it."

The Orlando area has become a focus for the Japanese golf investor. It began less than two years ago with the purchase of Grenelefe and Sun-Air in Haines City, continued last year with the sale of Grand Cypress, and in less than six months the clubs of Sweetwater, Sabal Point, Windermere and Deer Run.

Bay Hill would have been the eighth property. Arnold Palmer and his business partners had agreed to sell for $48 million, $45 million more than they paid. The deal ran into complications when the Japanese waffled on the sale, however, and the case is now in court.

Why Orlando? To begin with, the area is an extremely popular tourist destination for the Japanese. Orlando is known virtually to everyone in that country, and both the population and the economy are booming. Plus the price was right on several very good golf courses.

The courses that were sold were vulnerable to buyouts. Central Florida appears to be overbuilt in golf courses, but Munns doesn't think Central Florida is alone in that respect.

"All over the country, some pretty reliable studies indicate the entire nation is overbuilt, big time. Florida is, but Florida isn't more so than anywhere else in the U.S.," Munns said. "The reasons we're seeing more purchases here than anyplace else are the same things driving everyone else to Florida climate, good growth opportunities, cheap land. We look awfully attractive to the outside world."

It's highly likely that Orlando will see more Japanese investment. Rumors persist that they are greatly interested in financially troubled Isleworth, that Bay Hill may yet be sold to a Japanese company, that the new Lake Nona complex is a most inviting target.

Munns certainly foresees the possibility of more Japanese buys here. "Without question, that could happen," he said. "I don't know of any definite sales that are pending, but I do know there are a number of rumblings going on.

"No, I don't think we've seen the end. I think there are going to be more purchases made."

What, then, does all this mean to you the golfer? Will your golf course be overrun by Japanese tourists arriving on 747s, making it difficult for you to get a tee time? Will your course be managed by a cold, impersonal foreigner who cares not a whit about you? Will greens fees and memberships soar as the Japanese attempt to recoup their investments?

Paul Celano, director of golf at Grand Cypress, has been working for the Japanese Kyo-Ya Corp. for a year. He says everyone can relax.

"I can say that business has gone on as usual here. But they (the Japanese) have indeed made changes that are 100 percent positive.

"First and foremost, they are very meticulous. Their No. 1 goal is ++ service for the guests and the welfare of their employees. They really realize that the thing that makes a property successful is the people that work there," Celano said.

"They have tried to establish as many programs for the employees as they can. Because they realize that in the long run, that is going to translate into good service for the guests."

Kyo-Ya has been a very "hands-on" ownership company, involving itself intimately in the day-to-day operations of Grand Cypress. "The one word that is not in their vocabulary is 'complacency,'" Celano says.

"When a property gets complacent, then you've got problems. These owners are constantly trying to improve our programs from within.

"And they are constantly reinvesting any profits. They are constantly trying to upgrade the property."

Reports are that the new Sabal Point owner, Kamori International, already is making major purchases of maintenance equipment. "Almost without fail, the Japanese who come in here are prepared to upgrade the courses," Munns said. "They are very anxious to establish a good image, a good reputation."

A prime example is Pebble Beach, where the U.S. Open was held in 1972 and '82 and will be held again next year. In recent years its former ownership American ownership had allowed it to slide into deplorable condition, causing the United States Golf Association considerable alarm about whether it could be polished up for the '92 Open.

Jack Nicklaus recently visited and pronounced that the course is in better shape now than he has ever seen it.

"I know personally of the company that bought Pebble Beach, and I know that, in order to enhance their own reputation, they will get in there and do it right," Poellot said.

"The Japanese are throwing money at these courses to get them in mint condition. That's partially because of the pride factor, but also because dollars are easier to come by for them. They can throw a half million or a million a year at a course, where that would be a strain for an American owner."

Almost without exception, the Japanese owners have retained American firms to manage the properties. In fact, Windermere and Deer Run both are still being run by their old managers, United States Golf Services and Development Co., based in Orlando.

So what are the downsides? Is there some credence to the doomsday prophets who warn that golf for American golfers will change radically as the courses change ownership?

"A downside, I guess, is the fears of some sense of exclusivity," Poellot said. "Because of the money that is going into the courses, there is a fear that maybe the cost of playing the courses might escalate, be less available to American players.

"There is a fear that some of the public courses might become private. I would venture to say that if a course like Spyglass (a Pebble Beach course), for example, were to go private, there would be a lot of Japanese members in that course. Because they're the only ones who would be able to afford it."

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