Developing Property With Recreational Amenities

Ever wonder why so many recreational facilities at condominiums, housing projects, mixed use developments and resorts suffer low usage, are poorly managed, and badly maintained?

What is ‘amenity oriented development’? Applied to real estate, this is a broad concept that can include any feature that is attractive to a project’s chosen market and thus adds value to the land. Many amenities are integral to a site, such as a splendid view, convenient access, or even the climate and local culture. In an urban environment like Bangkok or other major cities in South East Asia, or a seaside resort environment, natural amenities are often recognized as the key drivers of both commercial and residential real estate development. However, integral amenities can also be those that are man-made.

As developers, when we consider man made amenities we usually mean a recreational, hospitality, leisure, or social facility that is developed as part of the core project such as a tennis court, fitness facility, restaurant, lounge, full facility private athletic club, or a golf course or marina. The basic assumption is that man-made amenities complement the core real estate project. Nearly any type of commercial or residential property development can utilize amenities to maximize the attractiveness of the project to its target market. However, there are potential pitfalls along the way.

Why Add Amenities to A Project?

The primary reasons developers add recreational amenities to their projects is to 1) add value to improved land or real estate projects, or 2) gain marketing leverage for sales. Most certainly a well-planned amenity package can establish a project’s credibility, market attractiveness, and brand image. In some larger developments recreational amenities are included with a view toward being profitable entities on their own. In larger projects, amenities can be large enough to become the social focus of a community and serve a noble purpose well beyond adding value to the building or land and selling units faster.

Risk

Developing with large scale major recreational amenities can carry risks. Most obvious is that the project’s amenity strategy might not work. If it does not attract a market and generate sales, the higher carrying cost and debt, accentuated by lower than expected revenues, could cripple the entire project. A poorly planned amenity package can also tie up a developer with high maintenance and operating cost. Many developers allow pride to get in the way of realizing that they are not in the business of managing the operational complexities of large recreational or hospitality amenities. Golf courses, sports clubs, and marinas are classic examples of this. Land development and amenity management are not necessarily compatible or complementary fields.

Conflict

For developers, having an “amenity strategy” means 1) having a clear understanding of the market, 2) a recognition of the reality of the core project’s life cycle, and 3) an early plan for the eventual transfer of the operational management and/or equity control of the amenity. The two basic purposes of recreational amenities ie. increase land value, and adding marketing leverage reflect the interest of the purchaser/user on one hand and the interest of the developer on the other. Developers may choose some facilities for their marketing value and others because they will be heavily used. For example, club houses and restaurants add value, while children’s playgrounds and tennis courts have user appeal. This divergence between marketing orientation and user orientation has long term implications. Sometimes the developer’s chosen amenity, geared to sell real estate, will be expensive to maintain and also under-utilized, while facilities with extensive user appeal may never get built. The natural combination of recreational and social amenities usually found at country clubs that appeal to families are never built as promised in the marketing literature. By the time a critical mass of users are available, the developer is gone or disinterested.

Project Phasing

The phasing of a project is one of the principle issues of amenity oriented development. Many experts believe recreational amenities should be built first so that they can be used to attract buyers. But this can be one of the major risks involved in recreational development. The facility may require heavy early financial resources and produce high initial operating losses that the project cannot absorb.

Project Quality

One of the biggest conflicts between the developer and the purchaser/end user is the quality of the recreational facilities. Very often when a developer includes a package of recreational facilities for the purpose of gaining marketing leverage, he does not have the end user in mind. What gets built is a basic, brochure fulfilling, poor quality facility that soon falls into disrepair by the phase of the project in which the buyer becomes the end user and is asked to contribute common area fees. Buyers would be wise to check the specifications, construction techniques, and the quality standards of sports facilities and the equipment selection of the recreational amenities being promised to them. Poorly designed and built facilities can cost more to maintain and repair than the resident’s common area fees can afford. One of the most reoccurring situations in residential and commercial property development is that poor quality specifications in the architect’s bid package sometimes leaves the developer at the mercy of his general or turn-key contractor. All this stems from poor initial planning or developer lack of interest in what happens after title transfer. In other words, if there are 100 units in a development, each unit sale is another reduction of 1% in the developer’s long term interest in his amenity package. Amenity positioning is an important branding tool for developers.

Project “Disclosure”

The key to resolving these conflicts between the developer and buyer/user is for the developer to establish an ‘operational plan’ that sets forth who will develop, who will own, and who will operate the amenity, for how long, and who will use the facilities on what terms. Public ‘disclosure’ of the developer’s operational plan can actually add perceived value in the minds of buyers. This is a fact all but the most astute developers tend to miss. Developers with an up-front amenity strategy can use disclosure as a compelling marketing tool that convinces buyers of a project’s credibility and commitment to quality.

Project Myths

One of the most widely accepted myths in developing large recreational, hospitality, and health amenities is that the developer needs to retain control of the operations and the ownership of the amenity over a substantial period of the development process. This belief is particularly strong in family-owned developments that include major recreational and social facilities in their package. The disadvantage of the developer retaining control is that because of the developer’s lack of expertise, and lack of commitment to the many related disciplines of amenity management, the project may financially fail to live up to its promise and potential.

Project “Disposition Plans”

In a complex residential, commercial, or hospitality development with a variety of interests from owners, residents, members, and users, dealing with disposition issues in the middle or the end of the project’s development can leave the developer in an exposed position. This is because conflicting marketing promises, capital costs, overheads, and the current market-place can become overwhelming. Disclosure means having disposition plans in place early in the project cycle. One of the most important components of amenity planning is to work with a professional who can estimate fixed operating cost under various operating scenarios. In large residential or resort area developments it is advisable to establish a legal formula for common area fees to contribute to the operating cost of profit centre amenities. Voluntary monthly dues and joining fees from residents do not usually provide enough support for community amenities.

There are four main types of disposition plans used by developers when framing their operational plan for the inclusion of larger recreational and social amenities into their projects.

  1. Transfer of the amenity to an Owners Association through an equity plan. In this case it is then up to the residents or members to decide on the day to day management.
  2. Contract out full day to day operational control to a professional management firm specializing in recreational, hospitality, membership, and marketing issues while retaining equity control and financial responsibility.
  3. Lease the space and/or jointly invest in the amenity with a professional amenity development and management company which then assumes full profit and loss control of the facility.
  4. Retain full control of the amenity by hiring an employee Professional Manager of the facility and give him a corresponding level of responsibility and authority. As in # 2 above, the developer must decide if retaining equity control is worth the financial responsibility.

Summary

For the developer looking the add value to his project with the inclusion of recreational or hospitality amenities it is important to have an amenity strategy that addresses the issues of phasing, quality, disclosure and the disposition of the facility after it no longer has economic importance for unit sales. For the buyers, club members, and users of these amenities, it would be wise to understand the ‘transfer’ of not only the perceived value over time from the developer to the user, but also the transfer of economic responsibility of maintaining the facility. Quality sells and costs less in the long term. Buyers should insist on international standard design, construction, materials and surfacing, and equipment in the recreational amenities that are part of the project they are buying into.

George Foose

George Foose is Executive Director of Sports Engineering And Recreation Asia Ltd. (Seara) Seara has had its regional headquarters in Bangkok for 24 years and specializes in the planning, supply and installation of quality recreational facilities through-out the Indochina region. Seara has offices in Bangkok, Phuket, Pattaya, Samui, Yangoon, Ho Chi Minh City, and Hanoi. Mr Foose is considered a regional expert in defining the relationship between property development and recreational facilitites. Seara also developed, owns, and operates the Cascade Club, Bangkok, Aldo’s Mediterranean Bistro and Wine Bar, RPM Health Club, Phuket, and the Green Leaf Spa brand of professional day spas.

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Seara's Investment Protection Plan

Fitness and gym equipment is a very large investment indeed for many companies. Club members all over Asia are expecting the best equipment, friendly service and value for money. Having technologically advanced fitness equipment out of order does nothing for the customer experience, and will cause member complaints.

How can purchasers protect their specialist investment to gain greater returns, increase profitability and reputation within the marketplace?

This is where Seara’s highly trained technical team of engineers come into play – protecting your investment. Keeping your fitness equipment running with minimal downtime requires more than just wiping down equipment and reporting malfunctioning units to a Seara technician. A regular program of Maintenance Service will truly extend the life of your equipment and save money in the long run. Regardless of the number of machines in your fitness center, club or home, and no matter what their workloads, a dedicated preventive maintenance program is crucial. Customers will be content that their favorite equipment isn’t constantly being repaired, so avoiding any interruption both to their training programs and to the facility owner's continued business success.
Seara’s Total Commitment To After Sales
Seara operates the largest customer service organization and spare parts stock in the industry in Asia. This allows us to repair each piece of equipment at your venue or deliver a temporary replacement to be used whilst it is under repair. Through this 365-day service Seara has provided a second-to-none service level across Asia that ensures total customer satisfaction.

The company has just completed a move into a 3,500 square meter Regional Distribution Center located in the Bang Pli Industrial Estate in Eastern Bangkok. This modern facility is conveniently located near Suvarnabhumi Airport, the port at Laem Chabang and regional road and rail links to its offices and customers in Yangon, Phnom Penh, Ho Chi Minh City, Vientiane, and Hanoi. Five existing warehouses are being phased out in this process.
Customer Service Centers
Across Southeast Asia, Seara operates a network of connected service centers, each staffed by specialist engineers individually-trained by manufacturers. Our unique geographical spread ensures our team is ready to support you wherever your facility stands.

Seara’s head office in Bangkok monitors maintenance programs and spare part stock levels across each center to guarantee minimum downtime when equipment requires maintenance.

Our service centers form a genuine network, sharing best practice ideas through meetings and seminars, constantly upgrading our teams’ capabilities and knowledge. Facility owners and management utilizing Seara Service Packages ultimately benefit from continued support and increased levels of facility member satisfaction.
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Gold Package

This is the ultimate service package for keeping all your equipment in pristine condition without worrying about costly breakdowns, cleanliness or member complaints.

Our Gold package means you pay nothing on labor or travel and ensures total and absolute maintenance coverage.

It can’t get any easier than that! Due to the fact this is our premier investment protection plan your machines will be serviced on a monthly basis – drastically reducing the chances of breakdowns – we will give discounts on all spare parts.

• Monthly preventative maintenance visits (12 scheduled visits per year)
• Guaranteed response on breakdowns within one working day
• No charge for breakdown call outs
• No charge on travel (outside office and metropolitan areas may vary)
• No charge for labour
• Regular audits conducted on older machines
• Regular cleanliness audits conducted on machines
• Detailed reports and quotations on every visit

30% discount on all spare parts required
35% discount on all fast moving spare parts – and printed control
boards for cardiovascular equipment
• Treadmills: Running Belt, Deck, Wax Fill Kit
• Cross trainers: Generator, Drive Belt, Alternator Belt, Carbon Brush, Battery
• Bikes: Generator, Carbon Brush, Battery, Clutch/ Bearing
• Steppers: Clutch/ Bearing (RT&LT), Battery, Return Spring
• Rowers: Seat w/Roller Assembly, Monitor, Footrest and Strap, Chain Idler Pulley, Shock Cord

25%

ESTIMATED DEPRECIATION VALUE RETAINED
*variable on condition and usage

Silver Package

This Silver service package is what Seara would strongly recommend as a minimum package for keeping all your equipment in pristine condition without worrying about costly breakdowns, cleanliness or member complaints.

Our Silver package means you pay nothing on labour or travel and ensures total and absolute maintenance coverage.

It can’t get any easier than that! Due to the fact this is a comprehensive investment protection plan your machines will be serviced on a bi-monthly basis – greatly reducing the chances of breakdowns – we will give discounts on all spare parts.

• Bi-Monthly preventative maintenance visits (6 scheduled visits per year)
• Guaranteed response on breakdowns within two working days
• No charge for breakdown call outs
• No charge on travel (outside office and metropolitan areas may vary)
• No charge for labour
• Regular audits conducted on older machines
• Regular cleanliness audits conducted on machines
• Detailed reports and quotations on every visit

30% discount on all spare parts required
35% discount on all fast moving spare parts – and printed control
boards for cardiovascular equipment
• Treadmills: Running Belt, Deck, Wax Fill Kit
• Cross trainers: Generator, Drive Belt, Alternator Belt, Carbon Brush, Battery
• Bikes: Generator, Carbon Brush, Battery, Clutch/ Bearing
• Steppers: Clutch/ Bearing (RT&LT), Battery, Return Spring
• Rowers: Seat w/Roller Assembly, Monitor, Footrest and Strap, Chain Idler Pulley, Shock Cord

20%

ESTIMATED DEPRECIATION VALUE RETAINED
*variable on condition and usage

BRONZE Package

The quarterly Bronze service package is a solid option for investment protection – this package is for keeping all your equipment in good condition without worrying about costly breakdowns.

Our Bronze package means you pay nothing on labour or travel and ensures total and absolute maintenance coverage. It can’t get any easier than that!

Due to the fact this is a solid protection plan your machines will be serviced on a quarterly basis – reducing the chances of breakdowns – we will give discounts on all spare parts.

• Quarterly preventative maintenance visits (4 scheduled visits per year)
• Guaranteed response on breakdowns within two working days
• No charge for breakdown call outs
• No charge on travel (outside office and metropolitan areas may vary)
• No charge for labour
• Regular audits conducted on older machines
• Regular cleanliness audits conducted on machines
• Detailed reports and quotations on every visit

25% discount on all spare parts required
35% discount on all fast moving spare parts – and printed control
boards for cardiovascular equipment
• Treadmills: Running Belt, Deck, Wax Fill Kit
• Cross trainers: Generator, Drive Belt, Alternator Belt, Carbon Brush, Battery
• Bikes: Generator, Carbon Brush, Battery, Clutch/ Bearing
• Steppers: Clutch/ Bearing (RT&LT), Battery, Return Spring
• Rowers: Seat w/Roller Assembly, Monitor, Footrest and Strap, Chain Idler Pulley, Shock Cord

15%

ESTIMATED DEPRECIATION VALUE RETAINED
*variable on condition and usage

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