What's par for a golf club membership

What's par for a golf club membership
PHOTO: What's par for a golf club membership

SINGAPORE - Club memberships have long been regarded as one of the five "Cs" - more so with the growing number of golfers in Singapore. About 30,000 golfers here collectively hold some $3 billion worth of this asset. And for many, it is as valuable as any other asset class they own.

Golf club membership is an aspirational purchase. Besides the enjoyment of the game and facilities, it also provides members access to affiliated clubs overseas.

Of the 12 clubs dotting this island, 11 have tradeable memberships (Marina Bay, a public course, is the exception). About half are "members" clubs, where members have voting rights and, theoretically at least, share ownership of its assets. The rest, like Laguna Golf & Country Club, Sentosa Golf Club or Orchid Country Club, are proprietory clubs owned by individuals or entities.

Open market membership prices range from about $226,000 for the exclusive Sentosa, to as low as $5,000 for the 9-hole Changi Golf Club.

All golf clubs in Singapore sit on leasehold land, which, until now, has been renewed for 30 years at a time by their respective landlords, such as the Public Utilities Board, Singapore Land Authority and JTC. The assumption among members has been that this will continue in perpetuity.

But renewal is never guaranteed.

Singapore has one of the highest acreages of land, relative to its physical size, allocated to golf courses.

But most golf courses were originally built on land deemed unsuitable for intensive economic use. TMCC sits just below the flight path of Changi Airport. Others sit next to reservoirs, nature sanctuaries and other restricted areas where buildings and other infrastructure cannot be constructed.

However, Singapore's land use policies and practices are evolving.

Keppel Club's precious real estate at Bukit Chermin Road is now owned by the Singapore Land Authority, which could offer it up for mixed use property development after 2021. With nine years to go, the club has yet to secure (or at least, has yet to reveal) a new location.

Though newly renovated Jurong Country Club has the longest lease of 23 years, it sits at the centre of the growing Jurong Town hub, where demand for land has been rising.

Tanah Merah, Seletar, Sentosa and Laguna also have their leases running out in nine years, while SICC has 11 years. Laguna is on the verge of clinching a lease renewal in return for building a hotel.

But with golf regarded as an elitist sport by many non-golfers, there has been growing opposition to allocating precious land for golf courses. In recent years, there have even been calls to convert some of the land to public parks. Policymakers cannot entirely ignore such calls indefinitely. And the crunch, when it comes, will centre on lease renewals.

Currently, the indicative price is $30 million for a 30-year lease on a property capable of holding an 18-hole course, clubhouse and affiliated facilities. How many clubs have this kind of money in the kitty? And if not, how will they raise the funds?

Going by available data (see table) Keppel, Seletar, TMCC and SICC certainly have the funds, based on current renewal price. Laguna, is raising money by selling new memberships at $150,000 each and renewing of existing memberships at $80k each. Raffles, Jurong and Warren have less money in the kitty, but enjoy relatively long leases. Sentosa and Orchid Country Club are controlled by Sentosa Development Corp and Singapore Labour Foundation respectively. There have been recent rumours that Sentosa could ask members for cash "top-ups", though management has not made any such decision.

The question club members have to ask themselves is: given the policy constraints and balance sheets, is a membership as good an asset as it used to be 20 years ago?

This year, only four of the 11 clubs in Singapore were in the black in terms of net operating income - though most made up for the shortfall from transfer fees levied on those who sell their memberships.

The third and final issue to consider is the crowded-ness of courses.

There is little point in buying into a golf club where one has little chance of a preferred slot during weekends.

Most clubs have golfing as well as social members with access to golf by paying the favoured rate.

Going by the gross member/holes rate (see table), Sentosa appears the "least" crowded, with a member-per-hole rate of just 42. But Sentosa has a high number of guests who use its courses.

Next is RCC, with 72 members per hole. OCC, Seletar and Warren may seem to have large numbers of members, but almost half are social or associate members with golfing access.

Members could also be "crowded out" if their cash-tight clubs are forced to raise funds by accepting large numbers of competitions. If you decide to sell and move on, you could lose some $20,000 to $40,000 in transfer fee payable at the exit door.

So when you ponder buying a golf club membership, consider that this could be a depreciating asset, just like your car. Shop around and get one which offers you the best value for money. Price per hole, reserves and length of lease are three critical factors which could help you decide.

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