Once a prime tourist attraction, the Mahogany Run Golf Course on St. Thomas has been deteriorating for nearly two years now, with little done to repair the ravages that Hurricane Irma inflicted upon it in September 2017.
The owner – a Nevada corporation called American Realty Investors, Inc. which is tightly linked to Pillar Income Asset Management and a network of other investment/management companies – put it up for sale last summer, along with some nearby properties. The $40 million asking price for the package is, according to informed sources, more than twice as much as the investment firm paid for it several years ago.
Reportedly, there have been a lot of “lookers” but no hard offers.
“The interest is there” from potential buyers, V.I. realtor April Newland told the Source this week. The problem is that they are put off by the price. “The price is quite high. We need it to be at a price point that makes sense … We’re competing with the whole Caribbean … We have to make it attractive.”
To allow for an offering at a lower price, Newland said she recently made a proposal to the seller to bifurcate the listing, separating out the golf course with its most essential support services from nearby but unrelated properties.
Currently the listing includes 237 acres of land: 130 for the golf course, 87 contiguous acres above the course which are zoned R-3 allowing for residential development, and 20 acres of land in Tutu Bay, as well as a club house and convention center, offices and golf shop, of which the buildings are largely damaged.
Newland is hoping the seller will consider offering a tighter package to include the golf course itself, the reverse osmosis plant, the club house and convention center and what was the Grille Room, a restaurant popular with visitors and residents.
When American Realty Investors bought the properties “it was an acquisition for purpose,” Newland said. The plan was to create a marina and to coordinate with the Hyatt hotel chain on the development of a hotel in nearby Estate Mandahl, and feature ready access to the golf course as one of its amenities. But there was opposition from neighbors and the development stalled in the permitting process.
“It just took too long” to close the deal, she said, and Hyatt eventually moved on. With the original plans gone, the owner had little incentive to further develop the Mahogany Run property.
After the hurricane tore through the property, the company did little to repair damages to any of the buildings but did continue to maintain the fairways for many months. Now, according to informed sources, it isn’t irrigating the property or even cutting the grass. It’s down to two employees who keep the sewage treatment plant operating.
The plant handled gray water not only from the club but also from the Mahogany Run condominiums. The condominiums are not part of the golf course, but were part of the original development, and a major selling point for them is their proximity to, and view of, the golf course grounds.
The 18-hole, par 70 course was designed by George and Tom Fazio, and features the three-pronged “Devil’s Triangle” challenge. It opened in 1980.
The golf course has had a number of owners over the years. Under Contran Resorts, a 300,000 gallon reverse osmosis plant and irrigation system was added. Ginn Clubs and Resorts, which purchased it in 2004, acquired additional acreage and talked of developing a private beach resort to augment the golf course.
For decades, the course was a major attraction, serving as recreation center for local devotees as well as tourists, and drawing a bevy of celebrities including such big names as Tiger Woods and former president Bill Clinton.
Newland said she has talked with Gov. Albert Bryan who is anxious for the course to get back in operation.
She’s hopeful the current owners will consider the proposal to consolidate the offering and lower the asking price.
“They’re in a position to hold if they want to,” she said. “They don’t need the money. They’re not in bankruptcy,” despite some rumors. Nor, she added, are they planning to turn the property into low-income housing, another rumor making the rounds.
While Mahogany Run is a big deal to the islands, it is actually a “small piece” of the company’s portfolio of holdings, she said – an assessment born out by company filings available online.
In a March 31, 2019 filing, American Realty Investors, Inc. describes itself as a New York Stock Exchange Company which “maintains a commitment to greater shareholder value through the acquisition, financing, operation and sale of real estate and real estate assets.”
Its holdings are primarily apartments, office buildings, retail centers and parcels of land in numerous states. It also owns some pizza parlors.
“At the time of purchase, acquisitions are often referred to as ‘undervalued’ or ‘underdeveloped.’ Under ARL ownership, value is added through physical improvements as well as management improvements,” according to the filing. “The result is increased income through higher rental and occupancy rates and increased income.”
As of April 30, 2011, American Realty Investors delegated day-to-day management of the company to Pillar Income Asset Management, Inc. American Realty Investors and “a subsidiary” own about 80 percent of the outstanding shares of common stock of Transcontinental Realty Investors, Inc. which owns about 81.25 percent of common stock of Income Opportunity Realty Investors, Inc. The chairman of the board of directors for American Realty Investors serves as chairman of the boards of Transcontinental Realty Investors and of Income Opportunity Realty Investors, and the other directors serve on all three boards. The officers of American Realty serve as officers for Transcontinental, for Income Realty and for Pillar, according to the company filing.
Most of the companies in the network appear to be incorporated in Nevada but headquartered in Dallas, Texas.
Purchase price is not the only consideration for a Mahogany Run deal, Newland noted. Would-be buyers are also looking at construction costs, the potential for future hurricanes, government regulations and a host of other factors.
“Nobody wants to go in and lose money,” she said.
Although the original plan for Mahogany Run included a permit for a hotel, a new buyer would have to reapply if it wanted to add a hotel.
“If you don’t do work within a year of your permit, you have to resubmit your application,” said Jamal Nielsen, public relations director the Department of Planning and Natural Resources which oversees permitting.
“I think the governor really, really wants to have investment in the Virgin Islands,” Newland said, but she believes the permitting process discourages investors because it is lengthy.
Nielsen bristled at that suggestion.
“The process is there for a reason. It’s there to protect the environment and nearby residents,” Nielsen said. “The process is codified by V.I. law and we are bound to follow the law.”