“ICONIC” CLUBS – More Valuable?

Recently, while being deposed in connection with the appraisal of a prominent private club property, I was asked by opposing counsel the following question:  “Does the iconic status of a club increase the monetary value of the club?”  This is a very interesting question.

First and foremost, it’s important to understand the definition of the term “iconic”.  The Merriam-Webster dictionary defines the term as follows:

Definition of iconic

  1. of, relating to, or having the characteristics of an icon

  2.  widely recognized and well-established an iconic brand name:  widely known and acknowledged especially for distinctive excellence an iconic writer, a region’s iconic wines

In the golf world, particularly with respect to golf courses, the term iconic has been used to describe courses and clubs that have held major championships, been designed by signature architects or have a significant place in golf history.  Of particular relevance here is what constitutes a club as being iconic and does the application of such status translate into additional monetary value to the club?

During the deposition mentioned, on several occasions opposing counsel presented me with various lists which he described as being indicative of “top clubs”, in an effort to suggest that the club in question was worth more than our appraisal, since by just about any of the criteria suggested above, the subject property could be considered iconic.  What are the elements that might make a club iconic?

Though I know of no ranking that lists clubs in order of their level of iconic importance, there are several lists of golf course rankings.  These lists, provided by such publications as Golfweek, Golf Digest and Golf Magazine focus exclusively on the intrinsic quality of the golf course itself with no consideration paid to the club’s economics, location, or history (with the exception of Golf Digest, which has a “tradition” category).  Many intertwine these rankings with the concept of “top clubs” which may or may not have anything to do with the actual golf course and may relate to the prestige of the membership, history of the club or even the exclusive nature or cost of membership.  A quick online search of “iconic clubs” revealed only two lists, one that seemed simply to be one person’s personal wish list of golf courses to play and another listing supposedly iconic golf courses in Pennsylvania, some of which I’ve never heard of, despite having lived and played golf in PA my entire life, one which definitely has no business being on such a list and one or two others that are marginal at best.  Not long ago, Golf.com published an article on iconic clubhouses which ranked some clubhouse facilities at some of the world’s clubs.  Other than those clubs designated as “Distinguished Clubs” by Board Room Magazine there are no rankings of clubs (as opposed to golf courses), and it would seem that one of the (at least implied) criteria for being considered would indirectly include financial stability, rather than the club’s recognition promulgating that financial performance.

While nobody would dispute that positive recognition of a club’s golf course or clubhouse facility might help that club’s economics, there are numerous examples of clubs with excellent and desirable golf courses and beautiful clubhouses that fail economically and carry limited market value.  Golf properties, like other income producing properties are bought and sold based on their economic potential.  Accordingly, primary consideration for valuation is often given to the club’s market dynamics, operational characteristics and other investment fundamentals like location.  If I had $20 for every time someone (seeking to embellish a golf property’s value) started a conversation by saying “it’s a great golf course”, I’d be a rich man.

No doubt, a course’s desirability contributes to its economics, however surveys of golfers consistently indicate that course conditions, proximity to home and cost are the major determinants of where players will choose to play golf.  Many more casual golfers even prefer a less challenging course to avoid feeling like they get “beat up” every time they play.  Many of these (well located, well run and with great personal service) courses of the more “plain vanilla” variety are often the ones that achieve the best financial performance, while other more elaborate facilities might struggle.  Just like all politics are local, so are market dynamics in golf.

The bottom line is that simply being considered an iconic club may or may not contribute to that club’s economic value, and those clubs considered iconic may not be among those considered the most desirable.  A few years back Golf Digest published an article entitled “Best Damn Clubs” which profiled clubs characterized as follows: places perhaps lesser known, but whose special atmosphere is tangible—almost hits you in the face the moment you drive in. Though members of the typical country club might share geographic proximity, similar financial health, a penchant for golf and maybe tennis or swimming, members of Best Damn Clubs share much more. The French call it esprit de corps, or the strong pride, fellowship and loyalty of a like-minded group. There would be limited or no value to iconic status here, but the desirability of these clubs is likely to have an impact on financial performance.

There is no “metric ratio or measurement to adjust the overall financial value of a club to reflect its iconic status”, to answer another question posed by counsel.  A quality club without any recognition of being iconic may actually perform better than a more recognized course that doesn’t cater to the available market share, and thus have a higher market value.  “Does the iconic status of a club increase the monetary value of the club?” It might, but it might not. It can depend on a variety of factors.  For sure, it is a myth that a club that simply has a better, or even iconic golf course automatically has a higher market value than another that might boast better economic performance.  One of the questions begging an answer is whether that value is the real estate or the entire going concern.  A topic for another day.