For Trump, Risks and Riches Are Par for the Course

This is a story about how the rich get richer.

Donald Trump is buying Ocean Trails in Rancho Palos Verdes, the golf course that attained notoriety three years ago when its 18th hole fell, kerplunk, into the Pacific.

That collapse, which was found to be the result of a busted sewer pipe, sent the golf course’s developers, Robert and Kenneth Zuckerman, into bankruptcy proceedings. It cost the main lender, Credit Suisse First Boston, most of its $100-million loan. And it stuck a collection of insurance companies with some $61 million in claims payments, some of which the bank is using to rebuild that final hole.

In the intervening years, several developers took a look at the golf course with an eye toward buying it at a discount and operating it profitably. No one, though, had the guts to make a bid.

“They just couldn’t see enough golfers paying enough to make the place work,” says Los Angeles developer Robert Lowe, who is about to build a luxury hotel nearby. Nor were these timid shoppers too sure about the stability of the ground -- and for good reason. Ocean Trails, according to Ken Zuckerman, is dotted with what geologists call “ancient slide areas.”

But Trump, the New York mogul, is stepping in where others feared to tread. “That land is solid,” he says with characteristic certainty. “We checked carefully.”

Trump is paying $27 million for the golf course, which comes with adjacent building lots to accommodate 75 houses. In an area where nearby homes are selling for $1 million to $2 million apiece, the overall price is a bargain -- so much so that Trump can now afford to pump a lot of dough into upgrading the property.

“I’m going to put in $30 million more to build the finest course in California,” explains Trump, himself a six-handicap golfer. “I’ll build elegant holes -- all of them facing the ocean -- and a driving range and practice area.”

One idea he has is to turn Ocean Trails into a high-end private club, much like he has done with two golf courses in posh Palm Beach, Fla., and New York’s opulent Westchester County.

At Ocean Trails, he can see charging private club members as much as $300,000 just to join. “Do the numbers,” says Trump. “Three hundred members at $300,000 each comes to $90 million.”

In other words, he might turn a big profit even without building and selling houses along the golf course.

Of course, it won’t be that simple. Les Evans, the city manager of Rancho Palos Verdes, points out that there are deed restrictions requiring Ocean Trails (which the new owner wants to name Trump National) to be a public course.

Changing that, says Evans, would take decisions by the town and the California Coastal Commission, which governs oceanfront property. In the end, Trump may be well advised not to go that route; it took the Zuckermans 10 years to get the necessary approvals to build the original Ocean Trails.

Yet even if the course is opened to the public, Trump still seems to have a highly profitable venture on his hands.

As he has so many times before, Trump has spotted a trend to tap.

“Luxury golf is a growth industry,” says Richard F. Davis, an expert in resorts law and finance in the Los Angeles offices of the firm Greenberg Traurig. Pebble Beach, the famed public course in Northern California, is getting $175 to $200 for a round of golf and has a six-month waiting list to play. And Pelican Hills, a public course near Newport Beach, is snaring $185 to $200 a round.

Those kinds of numbers add up fast.

“A top-class public course in the Los Angeles market could be a big winner,” Davis says.

Trump certainly doesn’t win them all. Like all builders, the 56-year-old has had his rocky moments. A decade ago he put one of his casinos, the Taj Mahal, into bankruptcy proceedings and had to persuade lenders to keep his principal company afloat. And early this year Trump Hotels & Casino Resorts Inc. faced a threat of default on massive debts.

But a recovery in the gambling sector has improved Trump Hotels’ fortunes. And Trump’s development company is finishing a big apartment structure on New York’s Park Avenue and 7,000 housing units overlooking the Hudson River on Manhattan’s West Side. “I’m the largest developer in New York City,” the billionaire says proudly.

And that’s a key to understanding the Ocean Trails deal: Trump is thinking grandly, not narrowly.

“I’ll build better than Pebble Beach,” he vows.

The son of an apartment house developer, whose own son has entered the business, Trump understands above all the value of land -- especially when it includes a view.

With Ocean Trails, he will own 300 acres on the Pacific Ocean. “It’s almost impossible to think of such an opportunity,” he says.

There is no telling how Trump’s brash style will suit the Palos Verdes Peninsula, where finicky residents have made life tough for developers, including one who went bust trying to revive the former Marineland aquarium site where Lowe Enterprises Inc. is building its hotel complex.

Yet Trump could be just what the area, which suffered a decline in its tax base during the last recession, is looking for. “I think he’ll give the community cachet,” says Ray Mathys, a former mayor of Rancho Palos Verdes.

Trump says he intends to own the golf course for the long term, and adds that financing his dreams there won’t be a problem. “I may take a first mortgage but I’m going to own it,” he says. “I’m a rich guy.”

And, it would seem, getting more so all the time.

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James Flanigan can be reached at jim.flanigan@latimes.com