The scale of risk billionaire Donald Trump is prepared to take to create the world's best golf course and resort in Scotland was outlined yesterday.
The public inquiry into the development on the Menie Estate, Aberdeenshire, heard that Mr Trump will fund the first golf course, which will cost at least £12m, out of his own pocket and that his organisation will have to invest around £600m in the first six years before any money begins to come back.
"That is a big risk," said Iain Webster of accountants Johnston Carmichael, giving evidence at the public inquiry, which he also revealed was costing Mr Trump £1m.
That figure is before any loss of income as a result of delays in the projected start of the development.
Mr Webster said he had been engaged to provide a critical and analytical review of the financial case for the proposed development to determine whether it was viable based on the assumptions being employed by the management of Trump Scotland.
The proposal is for two golf courses, a clubhouse, a five-star hotel, 950 holiday homes, 36 golf villas and 500 residential homes - including around 25 six-bedroom houses costing £1m each.
His analysis showed that without the residential homes the project was not viable. The net present value (NPV) - a standard method for the financial appraisal of long-term projects - was £35.5m over 14 years with the homes and minus £20.7m without them.
"The golf resort on its own would be unlikely to generate sufficient return on investment to be attractive to investors and lenders since it produces a negative net present value," he said, and added that it would not even meet the interest costs of the capital borrowed for the project without the homes.
"The inclusion of the residential development provides the project with income from the profit on sales of the residential homes which reduces the capital outlay for the whole resort."
He explained the risk involved. "In any large-scale capital project, and this is one of the largest I have ever seen, you have real risk in terms of construction costs. This is a seven-year construction period during which there is expected to be a higher than normal level of construction inflation. And there is also going to be construction going on in relation to the London Olympics and the Commonwealth Games in Glasgow, which will draw on construction resources around the country.
"That is a big risk. That is all pretty much up front before there is any real revenue."
Earlier, Martin Hawtree, the course designer recommended by the Royal and Ancient Golf Club and engaged by Mr Trump, said that an alternative design for the championship course drawn up by Mike Wood for the RSPB and Scottish Wildlife Trust would not create a world-class course.
He said the holes moved off the Site of Special Scientific Interest at the heart of the controversy by Mr Wood were not world-class substitutes.
He said other courses he had cited as world class had weaknesses.
"This is why I am so enthusiastic about this site because from a links golf point of view it has very few weaknesses because there is no area of dull land, no dull holes on it, no hole which is on arable land, and there is no hole where there is not a view of the sea.
"The new holes which Mr Wood has placed are behind the dunes and that has lost a lot of that spirit of being close to the sea.
"This golf course is going to be part of a £1bn investment and I cannot afford for my client to go wrong with it."
He said it was a spectacular stretch of land. "It has amazing topography, scenery, drama and those things will, I believe, immediately push it into that world-class bracket."
The inquiry continues.
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