Supporting Document No. 4 - Frequently Asked Questions (FAQs)

Supporting Documents 1, 2 and 3 provide a detailed explanation of the proposals and how they are intended to work. The FAQs below cover additional points which may be of interest when considering how to respond to the consultation.

In the answers below CGLMC is CGLMC Ltd, the charity which currently operates the golf courses on behalf of Angus Council and CGHH is Carnoustie Golf Heritage and Hospitality Group Limited, the company which owns the Carnoustie Golf Hotel and which CGLMC propose take over the operation of the golf courses.

Part A - Background

1. Why are changes to existing arrangements needed at all, why can't we keep the status quo?

Mostly it’s about trying to ensure Carnoustie remains a host venue for major tournaments such as The Open. The Open brings significant recurring economic benefits to the area and that includes large numbers of visiting golfers and associated income which helps subsidise play by local golfers and enables the courses to be maintained to the highest standard. Carnoustie must respond to the competitive market for hosting major tournaments and that means offering a full package of facilities not just a historic high quality golf course. Significant investment is needed to deliver the facilities required which is beyond what Angus Council and CGLMC can afford hence the need to seek external investors who are willing to take the commercial risks involved.

Change is also required because:-

• The current delivery model is not financially sustainable – it is highly dependent on Carnoustie continuing to host The Open and maintaining strong visitor numbers because of that.
• The current agreement runs out in 8.5 years and work to develop a new Agreement would be needed which delivers best value for multiple stakeholders - the council, local golfers, local community etc.
• There is an opportunity to deliver meaningful change for Angus which supports local priorities which are underpinned by a strong well-being economy. This is measured not purely by economics but also by people and place benefits. The Council is currently updating the Angus economic strategy which will broadly align to the national vision set out in Scotland's National Strategy for Economic Transformation: summary - https://www.gov.scot/publications/scotlands-national-strategy-economic-transformation/pages/2/

2. Why is hosting The Open important?

Carnoustie Golf Links is Angus’s flagship golf venue which is globally renowned. Carnoustie regularly hosts major golf tournaments, including The Open, which was last held in Carnoustie in 2018. In addition to the significant economic benefits The Open and other major championships deliver to Carnoustie and the wider Angus region (£21.67m in direct and indirect benefits to Angus from the 2018 Open), The Open provides a global platform to showcase Carnoustie to audiences around the world. This generates interest and creates demand, attracting thousands of high spending UK and international visitors to Carnoustie and to Angus every year. This generates the revenues necessary to sustain the current business model and to enable CGLMC Ltd to deliver on its community and charitable aims. It also protects and creates local jobs, provides local access for thousands of golfers in Carnoustie and Angus, and enhances the lives of the people who choose to live and work in Carnoustie and Angus. Without The Open, the revenues at Carnoustie would decline considerably and the business and benefits as it currently operates could not be sustained.

3. Has the Council considered other options as an alternative to what CGLMC is proposing?

The Council’s initial assessment of how to achieve its priorities for the golf courses at Carnoustie identified 5 possible options. Following further consideration and assessment those initial 5 options (Report 428/22 refers) have been reduced to the single option now being covered by this consultation. The other options initially considered were ruled out in Report 428/22 because they would not deliver the Council’s priorities, were undeliverable practically or were financially unattractive for the Council.

4. What happens if the investment needed in Carnoustie does not happen?

Decisions about which venues host major tournaments are made by other organisation such as the R&A. Competition to host tournaments is very strong and without significant investment Carnoustie is much less likely to be awarded tournaments in the future.

If Carnoustie was no longer a host venue for major tournaments such as The Open, visitor numbers (and income) would, over time, fall significantly and that in turn would mean having to reduce the costs of running and maintaining the courses. The cost to play for local golfers and the quality of the courses would in all likelihood suffer (increases being required) if the investment being proposed is not made as would the Angus economy.

5. What happens if the proposals covered in this consultation are rejected by the Council?

The Council remains committed to trying to ensure Carnoustie remains an attractive host venue for major tournaments – this is a Council priority. If the current proposals were rejected the Council would need to consider how best to achieve this priority. Other options have however already been considered and rejected so there would be a high risk of the Council’s priorities for Carnoustie not being achievable if what CGLMC are proposing does not go ahead.

6. Who are the Investors, what is their background in golf and leisure and why are they proposing to invest in Carnoustie?

The investor consortium is led by majority shareholder, Max Herberstein. Mr. Herberstein began his investing career over 20 years ago and is an experienced leisure asset owner and operator. Mr. Herberstein has been in discussions with CGLMC management since 2018 with a view to supporting a combination of the golf operations and the existing hotel – unlocking both further investment in facilities and securing a return of The Open. Mr. Herberstein is joined by Paul Lisiak, a NYC-based investment manager and golf enthusiast with a long-term interest in transforming the hospitality infrastructure at Carnoustie Links through capital investment.

Part B – Governance Arrangements

1. What will change as a result of CGLMCs proposal to sub-contract the running of the Carnoustie golf courses to the Investor’s company (CGHH)?

In terms of day-to-day operation of the courses very little is expected to change as a result of the proposals. This is because CGHH will be taking on all of the obligations for the efficient operation of the courses which CGLMC currently has. CGHH will also take on the staff and assets of CGLMC to make transition to the new arrangements as seamless as possible.

Over time CGHH may wish to make some changes to how the business operates compared to now but any such changes will still need to meet the obligations set out in the legal agreements.

2. Will CGLMC still operate as a charity?

Yes. CGLMC intend to continue as an OSCR registered charity seeking to achieve the same objectives as now. The future direction for CGLMC as a charity and how best to deliver its charitable objectives will be a matter for the Trustees.

3. What will CGLMC do with the money they receive from the sale of their assets to CGHH?

This a matter for the CGLMC Trustees but it is understood the sale proceeds will be invested in order to generate a financial return and that financial return will provide a source of funding for the charity to continue to pursue its objectives.

4. Will CGLMC still run their community benefits programme and give money to local causes?

Yes. The CGLMC Board has confirmed that the community benefits programme will continue into the future using funds generated from investment of the proceeds from selling their assets to CGHH.

5. Will the membership of the CGLMC Board change as a result of these proposals?

Possibly. The CGLMC Board are currently undertaking a review of their existing governance arrangements which may lead to changes in how the Board operates. This is a matter for the CGLMC Directors not Angus Council, albeit Angus Council currently has 3 places (only 1 currently taken up) on the Board and will have a say in any proposed changes.

6. Will Angus Councillors continue to be part of the CGLMC Board as a result of these proposals?

Angus Council currently has three places on the Board of CGLMC and this is expected to continue unless and until any changes are approved by the Trustees. All Trustees on the Board must act in the best interests of the Company regardless of which organisation appointed them to the Board.

7. Will CGLMC Board members or staff benefit financially from the proposals?

No. The CGLMC Board and their legal adviser confirmed in writing following a meeting with senior Council officials that no Board members nor staff members are expected to benefit financially from the proposals. CGLMC staff do however have a vested interest in the proposals as salaried employees of CGLMC who would become employees of CGHH if the proposals are ultimately approved for implementation.

Part C - Golf Provision

1. Why are changes being proposed to pricing and access arrangements?

The current Management Agreement lacks clarity and transparency over how the courses are accessed by different groups of users and how prices are determined. CGHH is a commercial company and the existing wording in the Management Agreement is wholly inadequate for the new arrangements being proposed. A Golf Access Rights Agreement (GARA) is therefore being proposed to bring the clarity and transparency needed for all parties to the proposed new arrangements which explains how prices will be set and how access to the tee times available will be determined. It is vital to have these matters set down at the outset to avoid potential issues and disputes later. Further detail is included in the GARA (see section 4).

2. Will the cost of season tickets increase?

The Golf Access Rights Agreement (GARA) proposes that season tickets will increase in line with the Consumer Prices Index (CPI) annually. As the operator of the courses, CGHH will have the option to adjust this CPI position by plus or minus 2%. Every five years a review will be undertaken to compare season ticket prices with the actual costs of provision and if required revise season ticket prices in response. CGLMC and Angus Council will however continue to have a say over season ticket pricing. Further detail is included in Supporting Document 2 (see section 4).

3. Will changes be made to the times season ticket holders can play?

No changes to the times allocated for play are proposed at present but the GARA includes provision to vary the allocation of tee times between season ticket holders and visitors based on usage / demand patterns to ensure the availability of the courses is maximised. Further detail is included in the GARA.

4. How does CGLMC/Angus Council plan to ensure that the cost to play golf for local people including season ticket holders remains fair and comparable to other similar facilities?

Protection for season ticket holders is built into the proposed Golf Access Rights Agreement (GARA). This will ensure increases in prices are linked to CPI, are subject to a 5-yearly review mechanism which itself will be reviewed by independent auditors and as a final protection a cap will apply so that the price paid by season ticket holders will never exceed 75% of the cost of providing those services. An interim cap of 65% will apply for the first 10 years of the GARA. The cost to play for Angus residents who are not season ticket holders will operate on the same basis as now – 50% of the cost of a visitor round.

5. How will the proposals affect the promotion of golf to potential new participants including young people?

CGHH will provide a golf development programme at Carnoustie. This will be of a nature and in a manner which is materially the same as was provided by CGLMC in the twelve-month period prior to the changes proposed being implemented, including ensuring a selection of offerings for different abilities (such as pathway, advanced, high performance and amateurs) and groups of golfers (such as for girls, women and golfers with disabilities). CGHH shall also oversee and administer the tournament schedule at Carnoustie. This will be of a nature and in a manner which is materially the same as was provided in the twelve-month period prior to the changes proposed being implemented, including arranging tournaments for Season Ticket Holders, participants of the golf development programme and visiting golfers through open events.

6. Will the course be maintained to the same standards?

Yes. The Council requires CGLMC to maintain the courses to an appropriate standard and that requirement will also need to be met by CGHH under the Sub-Contract Agreement. The proposals are intended to enable additional investment in the courses and related facilities.

Part D - General Issues

1. Does implementing phase 1 of the proposals guarantee The Open Championship will return to Carnoustie in the near future?

No not directly but we know that Carnoustie is very unlikely to be asked to host The Open again unless investment and upgrades are made with Phase 1 being the first step towards that.

2. Will Angus Council benefit financially from the proposals?

No. The Council does not receive any income from the operation of the courses and that will remain the case under the Phase 1 proposals. Financial arrangements for the Phase 2 proposals are a matter for further discussion but an arrangement similar to that which exists in relation to the lease of the golf hotel where a ground rental is paid is envisaged. It has been made clear that the Council will require a financial return to be part of any arrangement put in place for Phase 2 .

3. Will there be any redundancies for CGLMC staff as a result of the proposals?

No redundancies will arise because of the proposed staff transfer and sub-contract arrangement. All staff will transfer under TUPE (TUPE stands for Transfer of Undertakings Protection of Employment Regulations). It is the law that protects employees, and their benefits, when their employment changes hands. Like any business CGHH may wish to make staffing changes in the future to best suit operational needs. This may include employing additional staff in the future.

4. Will the Carnoustie golf hotel be replaced?

The future of the current golf hotel will be considered further by the investors as they develop their Phase 2 plans.

5. Why doesn’t Angus Council fund the development work which is required in the hotel, golf courses and other facilities?

The Council does not have the knowledge nor the expertise to operate the golf courses and hotel and would need to buy-in such expertise. The scale of investment required is very large and carries a significant amount of commercial risk. Ensuring a return could be made on such a significant financial investment is not guaranteed and the Council’s difficult financial position and its requirement to achieve best value and protect the public pound means taking such risks on the scale required is very unattractive. Put simply, the Council is not well enough placed to make the investment needed because it lacks the expertise and financial risk appetite to take such large commercial risks in current circumstances.

6. Will the Investors and CGHH as a company benefit financially from the proposals?

Yes, but only if they operate the golf courses and hotel successfully and generate sufficient income to cover their costs. The investors are also investing significant sums and taking a commercial risk in what is proposed and are seeking a financial return from taking that commercial risk. The investors will need to spend sizeable amounts at risk to develop their long term plans. Phase 1 as proposed reduces that risk in part.

7. Is Council land being sold through these proposals?

No. No Council owned land is being sold through what is being proposed in Phase 1. The Council will continue to lease the land for the golf hotel and have a revised management agreement with CGLMC covering the land for the golf courses which operates in a way which is similar to a lease. No land will be sold to deliver the Phase 2 proposals either but legal agreements for that phase (should they be approved by the Council in the future) would be long term and akin to sale.

8. When will the Investor’s Phase 2 plans become public?

The investors behind CGHH have committed to the significant investment required to develop their Phase 2 plans over the next 2 years which will lead to a planning application being submitted.