Supporting Document No. 1 - Background to the Proposals

1. Background

Angus Council is seeking views on proposed changes at Carnoustie Golf Links. These proposals affect who will manage and operate the golf courses at Carnoustie but access for local golfers will be protected. The changes are intended to deliver improved experiences for golf, leisure and hospitality users under a more sustainable business model and represent an initial but important step towards securing Carnoustie’s long term future as an Open Championship venue.

Angus Council owns the land and golf courses at Carnoustie Golf Links but since 1980 Carnoustie Golf Links Management Committee, and then on incorporation in 2011 CGLMC Ltd (CGLMC), has managed and operated the golf courses on behalf of the Council under a number of Management Agreements. During that period CGLMC has evolved into a charitable company, limited by guarantee. The current Management Agreement is due to come to an end in March 2033.

The Council also owns the land on which the Carnoustie Golf Hotel is built but has leased this to a private company which manages the hotel.

It is a priority for the Council to ensure that Carnoustie remains a venue suitable to host major events such as The Open Championship. However, achieving this requires financial investment in both golf and hotel provision which neither the Council nor CGLMC can influence and provide.

CGLMC has been working for some time with external investors to develop a long-term investment plan for golf and hotel provision at Carnoustie Links. The Council, following consideration of a number of options, has been discussing these proposals with CGLMC and their investors for approximately two years. A significant initial step was taken in August 2023 when CGLMC’s investment partners acquired the existing Carnoustie Golf Hotel. This was done at risk by those investors in the absence of any agreements in relation to the operation of the golf courses which are a crucial part of the Hotel’s business.

The proposals from CGLMC and their investment partners have developed over the last two years to a point where they now require input from the public and other stakeholders through a public consultation. Angus Council will have regard to all representations made in the consultation process in future decision-making.

2. Summary

CGLMC are proposing to commission a separate company (owned by their external investment partners) called Carnoustie Golf Heritage and Hospitality Group Limited (CGHH) to undertake the day to day management of Carnoustie Golf Links on their behalf. CGHH is the holding company which owns Carnoustie Golf Links Properties Ltd (CGLPL), the company which owns the Carnoustie Golf Hotel. The proposed new arrangements will allow the management and administration of the golf courses and golf hotel to be brought together and operated as if they are a single business by CGLMC’s investment partners.

The investors are developing a long-term investment plan for Carnoustie and have a clear vision for what they want to achieve. Having already acquired the Golf Hotel they now propose that their long term investment plan be delivered in two phases as follows: -

Phase 1 – CGLMC commissions the investor’s company (CGHH) to manage and operate the golf courses on its behalf in the short-term (until no later than 2033), while further development continues on the full long-term investment plan. It is this phase (Phase 1) which is now being consulted on.

Phase 2 – the investor’s company (CGHH) develops its long term investment plan on a basis which ensures that Carnoustie remains a venue which is asked by partners such as the R&A to host major events like the Open Championship. Once the investment plan is ready to be implemented CGHH would enter into a new long term agreement (perhaps aligned to the life of the lease of the Golf Hotel) with CGLMC and Angus Council for the management and operation of the golf courses. Angus Council will continue to own the land and golf courses under any such long term agreement.

As part of the Phase 1 proposals, all of CGLMC’s current staff group would transfer to CGHH and all of CGLMC’s assets (except trophies) would be sold to that company. However, ownership of the golf courses and all related land would remain with Angus Council. CGLMC would still be responsible to the Council for meeting its obligations under the Management Agreement until 2033. CGLMC would continue as a charity and use the proceeds from the transfer of its assets to CGHH to pursue its charitable objectives.

The Council is consulting only on the Phase 1 proposals (covering the period to March 2033) at this time. The Phase 2 (long term) proposals will be the subject of a separate public consultation process before any further changes to the operation of Carnoustie Golf Links are considered by the Council.

3. Overview of the Current Ownership and Management Arrangements

Current arrangements for golf and hotel provision at Carnoustie Links are as follows: -

• Ownership of Carnoustie Links land and golf courses – Angus Council
• Ownership of land on which the Carnoustie Golf Hotel is built – Angus Council. This land is leased to Carnoustie Golf Links Properties Ltd (CGLPL) a subsidiary of CGHH until 2123
• Operation and Management of Carnoustie Links Golf Courses – CGLMC on behalf of Angus Council – governed by a Management Agreement which expires in 2033
• Operation and Management of Carnoustie Golf Hotel – Bespoke Hotels on behalf of CGLPL
• Ownership of Carnoustie Golf Links Properties Ltd (CGLPL) – Carnoustie Golf Heritage and Hospitality Group Limited (CGHH). CGLMC propose to commission CGHH to manage and operate the golf courses on their behalf.

4. Carnoustie Golf Links Management Committee Limited (CGLMC)

Carnoustie Golf Links Management Committee now known as CGLMC Ltd (CGLMC) manages the golf courses at Carnoustie on behalf of Angus Council. This covers all aspects of day-to-day management and administration as well as longer term investment in the courses. CGLMC also manage access for Season Ticket Holders (STHs) and visiting golfers and set prices for play which are subject to Angus Council approval.

CGLMC Ltd is a company limited by guarantee and a registered charity, and all surplus revenues are reinvested into maintaining the facilities and pursuing the objectives of the charity. CGLMC also supports local charities and community groups through delivery of its charitable aims.

Further information about CGLMC can be found at the following link: - https://www.carnoustiegolflinks.com/about-us/

Further information about CGLMC’s charitable purposes can be found at the following link: - https://www.carnoustiegolflinks.com/about-us/charity/

The proposed changes to current arrangements set out in this consultation have been developed by CGLMC and their investment partners over several years and have been subject to detailed scrutiny and review by the CGLMC Board which includes nominees from local golf clubs and Angus Council.

5. Why are Changes to Current Arrangements Being Considered by Angus Council?

Angus Council, as custodians of Carnoustie Golf Links, has two core objectives for how this public asset is used and managed, which are: -

1. To ensure fair access and pricing for local people wishing to use the golf courses;
2. To ensure Carnoustie remains a venue for major tournaments such as The Open Championship, due to the significant economic benefits that these bring to Carnoustie and Angus.

The Council is also supportive of CGLMC’s other charitable objectives including to promote participation in the game of golf.

Maintaining the Carnoustie golf courses to championship standards is very costly and competition from other venues to host major tournaments is fierce, due to the revenue and wider economic benefits they bring in, not only for the event itself but also from visiting golfers wishing to play a championship course.

Data shows that Carnoustie attracts large numbers of visiting golfers each year and visitor numbers rise before and after a major event is held at the course. Visiting golfers pay more to play the courses, subsidising Season Ticket Holders, keeping their costs down.

It follows therefore that if Carnoustie falls below championship standard, there will be, in time, a fall in visitor numbers and a corresponding fall in the income which helps cover the cost of maintaining the courses to the required standard and subsidising local players.

It is therefore crucial that Carnoustie continues to be a host venue for major events such as The Open Championship if the Council is to meet its two objectives as indicated above. The Council considered a number of options for delivering its objectives, but these were undeliverable practically, would not achieve the Council’s objectives or were financially unattractive for the Council.

It is important to note that while the golf courses at Carnoustie, especially the Championship Course are maintained to the highest standard, hosting major tournaments requires a complete offer, including not just the golf course, but also hotel accommodation, player and visitor facilities which offer both player and visitor experiences of the highest quality. Unfortunately, Carnoustie is not currently able to offer this complete package at the required standard and significant investment is therefore required, particularly in hotel accommodation. This is well beyond what CGLMC and Angus Council can afford to provide and neither CGLMC nor Angus Council have control over the quality of hotel provision at the current Golf Hotel.

To address this, CGLMC has been seeking external private investors to deliver the level of financial investment now required and has been working with a lead investor, Mr Max Herberstein, for the last five years to create a proposal which is intended to deliver the improvements required. Mr Herberstein is the majority owner of CGHH, the company which operates the golf hotel and which CGLMC propose to commission to operate the golf courses.

Angus Council officers, supported by specialist advisers, have been reviewing and discussing the proposal with CGLMC and CGHH and have undertaken a substantial level of due diligence on what the proposals might mean for local golf provision and the Council’s strategic priorities for Carnoustie and the Angus economy. CGHH has recently undertaken an interim refurbishment plan of the Golf Hotel ahead of The Senior Open in July 2024.

6. Why are There Two Phases to the Proposals?

The scale of improvement work needed to give Carnoustie the best chance to continue as a host venue for major championships is significant and cannot be delivered overnight. Mr Herberstein and his fellow investors, having already acquired the Carnoustie Golf Hotel, are now working on a long term investment plan but this remains in development at this time and will require significant expenditure by them (at risk) to finalise. Planning permissions will be required for the major building works which are expected to be part of the investment plan.

Angus Council wants to have more certainty and detail on the investment plan before it considers entering into a long term agreement with CGLMC and the investors (what is referred to in this consultation as Phase 2). It is for this reason that an arrangement (what is referred to in this consultation as Phase 1) is being proposed between now and the expiry of the current Management Agreement in 2033. Agreement by the Council to what is being proposed in this Phase 1 consultation would therefore only run for a maximum of 8.5 years until 2033. This consultation is only concerned with Phase 1, the shorter-term agreement.

Mr Herberstein’s company CGHH (as owner of CGLPL) now holds the lease of the Carnoustie Golf Hotel with Angus Council and is currently operating the hotel separately from the golf courses, as has been the approach since the hotel was built. However, running the hotel and golf courses separately is not a commercially attractive nor sensible way to operate while CGHH develops its long term investment plan.

It is therefore proposed that CGLMC will appoint CGHH to operate and manage the golf courses on CGLMC’s behalf so that the same company can run the hotel and golf courses together. This combined approach will be more efficient and enable the best use of the golf courses and hotel as an integrated package which is expected to deliver many synergies and benefits to the overall customer experience. It also creates a more sustainable business overall, while CGLMC and Angus Council retain the necessary controls to safeguard local golf access and price. Without this approach, CGHH has advised that it will not be able to justify commercially the significant further expense required from them to develop their long-term investment plan, putting future development at risk.