The Pulpit Club Preaches Green Space Investment To Members

The Pulpit Club comprises a pair of golf courses that sprawl across the bucolic countryside of Caledon, Ontario. The property sits 30 minutes north of Toronto’s Pearson Airport on land that is part of a development-restricted environmentally protected greenbelt that rings Canada’s largest city.

Founded in the early 1990s by the creators of the board game Trivial Pursuit, the club hosted the inaugural Telus Skins Game—a televised summer spectacle featuring a foursome of notable tour pros that was broadcast for twenty years. If the question ‘what golf club played host to the 118th Canadian Men’s Amateur Championship this past August’ was asked in the game, knowledgeable players could earn an orange wedge by correctly identifying the Pulpit Club as the venue.

During the great recession, while the courses themselves maintained their standing among Canada’s best, the fortunes of the club itself began to slide thanks to dwindling membership. The non-equity member styled club had become increasingly reliant on a steady stream of continued sales to fund major expenditures.

“Once demand for memberships ebbed, it began to spiral. When something broke, they’d have to inject money and they eventually said enough is enough. One of the key partners also died, so it was taken over by his estate and they had less passionate interest in it,” Longridge Partners president and co-founder Mackenzie Crawford, explained. The real estate investment company acquired the club a couple years ago after buying up contiguous properties.

Private golf clubs’ governance structures most often fall squarely into two camps: equity-memberships where members elect a board and have a piece of the action but are also responsible for financial liabilities or non-equity memberships where members don’t have an ownership stake but then are not on the hook for assessment fees when capital improvements are made.

When Longridge Partners, which specializes in acquiring large scale natural properties, purchased the Pulpit Club, the real estate investment company ideated a third structure that plays into their core strengths of catering to investors seeking long-term capital appreciation in properties with superior natural features.

Working with corporate lawyers they conceived of selling land based participating interests, a securitized membership that on the face may look like an equity-membership but yet shields members from ongoing exposure to the inherent risks of owning a golf club. It is a real security that holds value and if the club is sold, it automatically equates to a fixed percentage for every member, ensuring that it can never fall in value unless the overall property itself were to decline in value. Shrinking golf demand alone wouldn’t be enough to erode the value, unless the underlying land value itself depreciated—a very unlikely scenario when talking about green space in close proximity to a major metropolitan area.

“Unlike a club that has 500 members and everybody pays 1/500^th of any cost in an assessment, we’ve said, we’re going to collect money upfront to pay for this, run it like a business and there is going to be a continuous stream of membership sale proceeds and capital contributions through the transfer process,” Crawford explained.

So, once members pay their capital contribution to join the club, there is no further assessment.

“The security that your membership has is in the land value of the club which we determine and any transfer that occurs at the club will be at that price,” Crawford added.

Cumulatively their members currently own 31.5% of the real estate comprising the clubs and each time they sell a new membership they are giving away a new .07% interest in the land.

“In the future if the club is sold, we are not going to get as much—the members will reap the rewards—but our belief is the club will be worth more as a result of having done it this way,” Crawford said. But they firmly believe the club will be worth more in the future partly because of the way they structured memberships.

While they couldn’t compel existing members to opt in, they gave them the opportunity and more than half of the existing members opted into the land interest memberships along with scores of brand new buyers who were attracted by the unique value proposition. They sold out their targeted 450 memberships, each of which have the option of adding associate members and have since begun a wait list.

“That raised over $15 million in the initial wave and all of the money was invested into infrastructure projects,” Crawford said.

Whether other private clubs will emulate the Pulpit club model, set up for the club to achieve financial self-sufficiency with ongoing membership sales funding the capital reserve necessary to fund future projects, will come down to whether ownership groups are willing to give up part of their interest in a property. It is certainly an entrepreneurially minded approach.

If in the future for instance, if they find themselves having excess tee sheet access because members are adding less associates or simply playing less, Longridge Partners would have myriad options. They could sell more memberships with an equity portion and further reduce their ownership, allow non-land-investment members to pay dues to access the club, or negotiate a deal among some members to reduce their interest.

“There is so much financial engineering that we can do treating each membership like a stock security. It is fun and exciting,” Crawford said.

Longridge has made a number of core capital improvements to spruce up the property, refurbishing the bunkers, installing a new irrigation system and redoing the cart path. They also added sheep the links styled Paintbrush course to amplify its Scottish feel and with their grazing biodynamically bolster its green footprint.

While golf is certainly prioritized, it is not Longridge Partners’ sole focus at the property. They’ve striven to reposition the club as a bastion for year-round outdoor adventure, including adding over 6 acres of cross-country ski and snowshoe trails and a groomed toboggan hill to augment existing offerings.

While they have various stay-and-play properties for visitors to enjoy these recreational amenities, in the longer run, utilizing the adjoining properties they own, they hope to augment these offerings in the form of a resort anchored by the golf club with new offerings, cottages, restaurants and event centers added.

“The vastness of land is just incredible for its proximity to Toronto and yet a world away. You can see the CN Tower from our property which is stunningly beautiful but also there is deer and coyotes and greenery and it doesn’t feel like the city,” Crawford said.