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2017-05-27 12:19:03
With a Presidential Boost, the P.G.A. Comes to Trump National

STERLING, Va. — On the green at the 11th hole, the golf stars John Daly and Rocco Mediate sized up their opening tournament putts. Nearby, a Golf Channel crew swung its cameras into place. And a pack of spectators lined up to watch it all.

It looked like an ordinary day on the professional golf circuit — except this scene was playing out on a course here in suburban Washington owned by the president of the United States.

The tournament that opened Thursday at Trump National Golf Club represents a milestone in a strategy that has propelled golf to the center of the Trump family’s fortune.

As the first P.G.A. tournament held at one of Donald J. Trump’s courses since he entered the White House, the event also illustrates the pitfalls associated with a businessman president unwilling to make a clean break with his commercial empire, particularly in the golf business, where Mr. Trump is testing the limits of his own ethics policy.

Over the past decade, the Trump Organization has stockpiled golf courses, spending hundreds of millions of dollars to buy, remake and upgrade a dozen different clubs and resorts from the Hudson Valley to Doonbeg, Ireland. Golf resorts and clubs have accounted for roughly half of Mr. Trump’s revenue, according to his personal financial disclosure last year.

The prominence of the tournament here, the Senior P.G.A. Championship, heightens the buzz around the Trump clubs, which, despite their relatively modest footprint in the golf industry, have become attractions for their proximity to the presidential family. Both Eric and Donald Trump Jr. were at the course this week, and Eric hinted that their father might show up, too.

“All these players are his friends,” Eric Trump said, as he sat at the edge of the 11th hole on Thursday, waving hello to Mr. Mediate. “And he is a golf fanatic.”

Just four months into his presidency, Mr. Trump has visited his family-owned golf clubs 25 times, giving them the kind of media exposure that advertising could never buy. Six of those visits have been to the Virginia course while the P.G.A. marketed tickets to the event. And this week, Mr. Trump courted the senior P.G.A. club professionals in town by arranging a private tour of the White House, despite promising in his ethics plan that “the Office of the Presidency is isolated from the Trump Organization.”

Mr. Trump was out of the country, but a White House official, Andrew Giuliani, was quoted on the P.G.A. website as saying, “The president requested that we do something for the club professionals this week.”

A White House spokeswoman did not respond to questions about the P.G.A. tournament or Mr. Trump’s relationship to his golf business.

Ethics watchdogs and some Democrats in Congress have viewed the convergence of the Trump presidency and his family golf business with suspicion. Some question whether golf club memberships — which can involve upfront payments from $10,000 to $300,000 — could be used to curry favor with Mr. Trump and his administration.

The initiation fees have also aroused the ire of some members leaving the Trump clubs. They complain that the Trumps refuse to refund the money even decades later, according to court records and interviews with former members, which is harsher than the policy at some other clubs. Until the money is returned, the longstanding rules at the Trump clubs state that the Trumps can use the money “for any purpose.”

In addition, prospective members of the Trump clubs do not face the rigorous vetting that the Trump Organization’s new hotel business partners receive, according to person briefed on the company’s ethics policies who spoke on the condition of anonymity. The decision not to scrutinize the new members — because the individual club fees are immaterial to the overall Trump business — means corporate lobbyists and foreign officials could become members without their affiliations being disclosed, a possibility that some Democrats in Congress have raised as troubling.

“The founders of this nation were at great pains to keep elected officials focused on the common good, and not their private interest,” said Representative Jamie Raskin, Democrat of Maryland.

Eric Trump, who is managing the golf business, said the concerns were unfounded.

“We are simply not a political organization — we can’t be,” he said. “Are we always going to be tied into it, obviously because of the election? Yes. But there is nothing we do from an organization standpoint that is political.”

The deal for the golf course here was quintessential Trump. He bought low, added land to his portfolio, gave it his gold-plated touch and put his name prominently at the front entrance: Trump National Golf Club, Washington D.C.

The family purchased the course, adjacent to the Potomac River in Virginia, 25 miles from Washington, in 2009, from a local bank for $13 million. It was during the economic recession, and the previous owner had defaulted on his loans.

“This place, when it’s finished, will be the finest club anywhere in the country,” Donald Trump told The Washington Post, with his signature bravado, on the day the purchase was announced. “There will be nothing like it. I already own the best ones, so I know.”

The Trump family said it invested at least $25 million to remake the golf course. The effort, which included removing hundreds of trees, was overseen by Tom Fazio II, a member of the famous golf designer family that has developed several of the Trump courses. Mr. Trump’s 2016 financial disclosure indicated that the Virginia golf course generated $17.5 million in revenue.

The Trump name is visible at the entrance, but there are few other hints of the president. One exception this week: The Trump family helicopter was sitting along the green.

The course was one of 12 that the Trump Organization purchased or took control of over the past decade. Mr. Trump explained in 2014 that expanding his golf portfolio had become a priority because the properties combined two of his passions: golf and real estate.

“I’m buying land,” Mr. Trump said, according to unpublished transcripts of interviews with Michael D’Antonio, author of the critical biography, “The Truth About Trump.” “I’ve always loved land. I have a natural ability for land. I like golf. It’s a good game. It’s doing very well. I mean golf is doing very well.”

Cumulatively, the Trump Organization has said, it invested more than $300 million in the past five years upgrading golf courses and several accompanying hotel resorts. The single biggest chunk went into the Doral resort near Miami.

Mr. Trump’s 16 golf resorts and clubs across the globe (and three more under development, in Indonesia and Dubai) generated more than $320 million in revenue, Mr. Trump reported on his personal financial disclosure last year, which covers all of 2015 and nearly five months of 2016. The amount, a sizable portion of at least $615 million in revenue he received, includes money from the hotels and resorts connected to golf clubs.

The disclosure does not indicate how much profit was earned from the properties, and the Trump Organization is a private company, which means it need not publicly reveal its finances. Eric Trump, in an interview, would say only that the business was profitable and growing rapidly.

Within the fragmented golf industry — largely composed of small nonprofit clubs owned by their members and only a few publicly traded companies — the Trumps have far fewer courses than the industry’s biggest players, like the Dallas-based ClubCorp, which owns or manages over 200 courses and earned some $1 billion in revenue in its last fiscal year, according to IBISWorld, an industry research company.

The Trumps have invested in golf at a time when the broader industry has been in decline. But the Trump business plan, if measured by the sequencing of professional tournaments, seems to be succeeding, industry executives said. The company first hosted tournaments for “junior” players, has now moved into “seniors” and tournaments for women, and is scheduled in 2022 to host the P.G.A. Championship at its course in Bedminster, N.J. The Bedminster course is hosting the U.S. Women’s Open this year.

Bank debt, as with most Trump family deals, has played a part in the expansion of the golf business. Four outstanding loans are listed in the financial disclosure report, including one from Chevy Chase Bank in Maryland for the Virginia golf course and two from Deutsche Bank for the Doral golf resort near Miami.

But a less conventional source of funding has also helped fuel the expansion: initiation fees from members.

The fees are a standard part of joining most golf clubs, some of which allow only nonrefundable deposits. At the Trump golf properties, the amount of the initiation fee required to gain membership depends on the popularity of the club, the quality of the course and the demographics of the market. The initiation fees, as well as annual dues and related club and resort revenue, help underwrite improvements to the courses, Eric Trump said, contending that Trump policies are not unlike those of other clubs.

As such, the Trumps are often reluctant to part with the fees, even after members leave their clubs.

Soon after Mr. Trump’s inauguration, a federal judge in Florida ordered his golf club in Jupiter, Fla., to pay $5.7 million for refusing to refund deposits to members who tried to resign from the club before the Trumps bought it. The Trumps are appealing the ruling.

At other Trump clubs, including in Philadelphia and in Westchester County, N.Y., some members complained in interviews that they were still waiting to recover their fees five or more years after leaving. Under bylaws, if a club member leaves, the Trumps are entitled to hold on to the fees, interest-free, for at least 30 years or until the club is at full capacity, a threshold that increases when the club expands, preventing former members from recovering their fees.

Alfred P. Carlton Jr., a past president of the American Bar Association and an expert in country club law, said in an interview that tension existed “throughout the industry about rights to redeem initiation fees and the length of time it takes to redeem” because of golf’s slow recovery from the financial crisis. That said, he described the Trump initiation fee policy as “a little unusual.” (Mr. Carlton died on Thursday, the association announced.)

Court documents also show that the Trumps believe they have the authority to use the fees as they see fit. In litigation with a former member of his West Palm Beach, Fla., club, the Trump Organization declared, “Membership deposits and all other club revenues are the property of the owner of the club and may be used for any purpose, in its sole discretion.”

Another document states that “Mr. Trump will have the use of these funds for that period without cost.”

The Trumps have not disclosed how much money they collect in initiation fees, but that same document shows that in 2004 — before the stepped-up expansion into golf — Mr. Trump said he had control of nearly $75 million in such fees.

Last month, Mr. Trump golfed with his budget director, Mick Mulvaney, as well as Senator Rand Paul, Republican of Kentucky, at the course here in Virginia. The stated topic during the round was health insurance.

It was one of six trips that Mr. Trump made to the course since mid-March, a surge that started days after the P.G.A. started to promote ticket sales for this weekend’s KitchenAid Senior P.G.A. Championship.

“The fact that we have a sitting president of the United States affiliated with the facility where a major championship is being played — that is very good for golf and for this course,” said Ted Bishop, a former president of the P.G.A. of America who in 2014 negotiated the deal to bring the tournament here.

“It offers exposure and probably credibility and prestige,” he said. “It is tough to put a dollar value on those things. But it helps.”

The P.G.A. compensates club owners in a variety of ways including, typically, giving the club owner a cut of revenue from sales of tickets, concessions and other merchandise, creating an incentive for them to help increase attendance, Mr. Bishop said. The P.G.A. expects between 25,000 to 30,000 spectators for this week’s championship, although attendance was relatively light on Thursday.

The field at the 7,130-yard, par-72 course includes 156 golfers with dozens of championships between them competing for a purse of $3 million.

But publicity for the event can cut both ways. Some say that the politics that come with the presidency can be bad for business and take a toll on membership.

At Mr. Trump’s Westchester club in the suburbs of New York — an area where Hillary Clinton outpolled Mr. Trump last November — several members departed in the months after Mr. Trump entered the presidential race, current and former members said.

Eric Trump did not dispute that the club — or perhaps others in the family’s collection — may have lost some members who had issues with his father’s politics. But he added that the Westchester club, which he frequents, remains popular, and that all golf clubs have some turnover.

The company has been seeking new members in Virginia by sending personal letters to new homeowners offering tours of the facilities, and promoting the P.G.A. event, though Eric Trump’s name is mentioned, not his father’s.

The outreach has also drawn protesters. Lisa Holliday, a member of a local chapter of the advocacy group Indivisible, said that people planned to be “protesting by land and by sea,” including kayakers and canoeists who will paddle the Potomac River to the course.

Others, like Jeffrey T. Sammons — a history professor at New York University who formed the group Golfers Opposing Bigotry — are trying to pressure professional golf associations to cut their ties with the Trump family courses.

“Golf claims to stand for inclusion and civility and etiquette,” Mr. Sammons said. “It seems to me that he represents the opposite.”

Joe Barta, an engineer from Great Falls, Va., who is a longtime member of the club here, said that the Trump family’s investment had been a boon for local golfers. He has never had to pay a special assessment, but the course and its associated amenities, including a renovated club house and new tennis center, is much improved.

“If he wants to spend his money on my club, improving it, I am all for that,” said Mr. Barta, who was watching the start of the tournament on Thursday.