Frank Stronach’s potential multimillion-dollar losses on a luxury golf course in central Florida are expected to play a central role in a court case involving control of his family’s fortune.
Mr. Stronach, founder of auto parts company Magna International Inc., filed a lawsuit in October asking the Ontario Superior Court of Justice to remove his 52-year-old daughter, Belinda Stronach, as head of their family company, The Stronach Group (TSG), and reinstate him as leader of a horse racing, real estate and farming empire worth an estimated $1.6-billion. If the court case goes forward, a judge will be asked to rule on who is the better steward of the family’s affairs.
The Globe and Mail reported on Monday that Andrew Stronach has also filed a lawsuit against Belinda Stronach, his sister, alleging “serious misconduct” at the family company and demanding that she hand over control of his stake in the business.
In their court filing, Frank Stronach and his wife, Elfriede Stronach, say one of the reasons they launched the lawsuit is that their daughter closed and is selling the Adena Golf and Country Club, a 1,200 acre project Mr. Stronach launched near the horse ranches around Ocala, Fla.
The pair, who proudly backed their daughter as a Magna executive and a federal cabinet minister, now claim the sale of the golf course reflects cash flow issues at The Stronach Group brought on by Ms. Stronach’s “lack of business acumen” and “extravagant lifestyle.” Ms. Stronach is expected to highlight the problems of the golf course in her response to her parents' lawsuit.
Mr. Stronach paid US$17-million in 2008 for the property in the industrial outskirts of Ocala, a city of 60,000 that hosts the thoroughbred racing crowd during the winter. While the countryside is dotted with stately mansions, rolling hills and moss-draped trees, the golf course’s neighbours also include Harley Davidson and Caterpillar dealerships.
Mr. Stronach’s vision was to create “the finest private club in Florida,” according to marketing materials. Adena included a 7,086-yard golf course, seven tennis courts and a swimming pool, and restaurants and a wellness centre that would spread the gospel of healthy eating while serving grass-feed beef, chicken and pork dishes from the Stronachs' nearby ranch, Adena Farms.
The country club opened in 2015, with a former executive at the Augusta National Golf Club – home of the Masters tournament – as head of golf operations. Adena was instantly voted one of the best courses in Florida. The property’s previous owners quarried limestone on the site. Stronach’s architects incorporated four of the rock pits they left into the course, putting spring-fed waterfalls beside elevated tees and ponds next to fairways and the clubhouse.
Mr. Stronach also planned to build up to 120 high-end homes adjacent to the course. This approach worked at the Magna Golf Club, a lavish development near the head office of Mr. Stronach’s auto parts company in Aurora, Ont. That development was a short drive from Canada’s business hub, and in a region that is home to more than five million people.
Rival courses in central Florida had already rolled out the same game plan. Just down the highway from Adena, the Golden Ocala Golf & Equestrian Club features condos priced from US$500,000 to $800,000 and mansions selling for up to US$7-million. Golden Ocala opened in 1986. It is one of 18 private and public golf courses within a 30-minute drive of Mr. Stronach’s Florida property.
Mr. Stronach sank more than US$100-million into Adena, according to former and current employees of The Stronach Group, which owns the property. The club never had a traditional business plan. One former executive said: “Frank’s vision was if you build it, they will come.”
They did not come. Mr. Stronach was building when the golf industry was contracting. Developers opened too many courses in the two decades before the 2008 global financial crisis, said Chris Karamitsos, a former professional golfer who specializes in resort properties as a commercial real estate agent based in a Tampa Bay, Fla. Over the past decade, the number of new golfers slowed, and existing ones played less.
“Many of the courses opened during the development boom were built on flawed feasibility studies using exaggerated assumptions,” according to research done by Mr. Karamitsos’s firm, Marcus & Millichap Real Estate Services. Since peaking 10 years ago, the average sales price of golf clubs has dropped by 31 per cent.
“In my opinion, the Stronachs misjudged the market,” said Mr. Karamitsos, who played the par-72 Adena course and posted a respectable score in the mid-70s. He said part of the problem is the small pool of wealthy locals – and the horse crowd does not tend to golf – and a two-hour drive from tourist destinations such as Orlando.
Adena Golf Club closed in July. A huge “For Sale” sign is in front of its wrought iron gates. In a court filing, Mr. Stronach said his daughter “is currently attempting to sell the development for a fraction of its worth, claiming that the sale is necessary to address liquidity issues facing the organization.”
Real estate experts agree the Stronachs can expect to recover only dimes on the dollars they invested.
“The number of potential buyers is incredibly small for a property in that area. It’s not likely to attract a golf buyer, it’s likely to go to a residential developer,” Mr. Karamitsos said. He said: “It’s likely to sell for far, far less than they invested.”