From landfills to links

As urban land runs out, landfills offer potential sites for golf courses and other development close to downtowns. EnCap Golf of Tampa is struggling to turn its expertise in environmental issues and golf courses into a profitable business.

© St. Petersburg Times, published April 16, 2001

But if Tampa developer Bill Gauger succeeds, the six landfills around New Jersey's Meadowlands marshes soon will be known for something else.

Gauger's dream: Turn these hills of trash 5 miles west of Manhattan into a 1,200-acre resort with 72 holes of golf, two hotels, office buildings, a marina and timeshare condominiums.

It's a pricey and risky proposition. His company, EnCap Golf, must spend more than $100-million to get the landfill ready for construction. The project is expected to cost close to $1-billion.

"It's worth all the trouble because of the location," Gauger said. "How else could you get a site for a golf course where you can see the Manhattan skyline?"

Landfill golf is suddenly one of the hottest ideas in the commercial real estate industry. More than 60 landfill courses have been built over the years, including Mangrove Bay in St. Petersburg. Now, the pace is picking up.

Thanks to better technology, pipe systems do a more efficient job of collecting methane gas and the contaminated liquid that seeps out of landfills. New types of insurance give landfill developers more protection from lawsuits. And as urban land runs out, landfills offer affordable golf course sites close to downtowns.

Still, there are plenty of risks. Capping a landfill is a complicated, expensive proposition. With higher development costs, Gauger has less margin for error. And his courses face a major marketing challenge: convincing golfers that a former landfill won't smell or have slime oozing around their shoes.

EnCap Golf has yet to make money, and success in the Meadowlands will be crucial when it tries to get the capital it needs to take its ideas national.

Gauger is confident he can pull it off.

"We see this as a great business to be in for the next 20 or 30 years," he said.

There aren't many ways to use an old landfill. Around the United States, there are more than 14,000 brownfields, polluted sites that are capable of being used again. Many have sat vacant for years.

Putting buildings on top of the deepest areas of landfills usually is prohibitively expensive. To make it work, a developer drives support pilings through the landfill to the soil below.

"That's like building a bridge over the water," said Larry Thomas, director of golf operations for Pinellas County.

There are a few places, such as a Home Depot in San Rafael, Calif., where the location is so good that it makes sense to build that way. That store, outside San Francisco, required 750 pilings at an average depth of 175 feet. The extra cost: about $2-million.

Also, some areas of a landfill drop dramatically as trash decomposes. At the Mountain Gate Country Club in Los Angeles, some sections have settled as much as 50 feet over the past 15 years. At golf courses, workers fill in and resod them.

Some landfills have been turned into parks, but those don't bring in much revenue. That's an issue because upkeep of a closed landfill can cost hundreds of thousands of dollars a year.

That leaves golf an increasingly popular option. The Willowhill Golf Course in Chicago is atop a landfill, as are the TPC at Eagle Trace in Coral Springs and part of Tampa's Rogers Park course.

In Pinellas County, officials are talking about turning the 240-acre Toytown landfill off Interstate 275 into a course with as many as 27 holes.

Gauger might be interested in developing Toytown, but for now, the Meadowlands project is consuming him. As the plans take shape, EnCap Golf figures it will put the offices, hotels and condos on areas where the trash is not piled as high.

The top priority in the project is to make sure contamination is contained.

A landfill gives off large amounts of flammable methane gas, which can be a safety threat. "If the gas isn't collected and someone lights a match -- boom," Gauger said.

Also, water percolating through the trash layer at the site creates contaminated runoff called leachate.

To counter the problems, companies such as EnCap Golf build extensive pipe systems under and around the landfills. One system collects methane gas; another sucks up leachate.

Also, a layer of protective material, either a plastic liner or clay, is put in the soil to keep most water from entering the trash layer.

Then there's the hassle of building the course.

"In most golf courses, they cut into the ground, move the dirt and mound it," Gauger said. "But with a landfill, you can't cut into the cap. The shaping has to be done with material from off-site."

At a $25-million course in Houston, the company's first landfill project, EnCap Golf underestimated how much dirt it would need to bring in. It was a costly mistake, putting the company about $2-million over budget.

"You can expect 5 to 10 percent cost overruns on a project," Gauger said. "But we'll have to watch that because when the costs are higher, it takes even longer to recoup your investment."

From the highest point, 135 feet up, the view from the Meadowlands landfills is spectacular, in a gritty urban sort of way.

Look east and it seems the Manhattan skyline is right in front of you. As you turn, you can see downtown Newark, then Giants Stadium.

One New Jersey official calls the area an "urban wilderness"; another, the "Everglades of the North." Waterways branching off the Hackensack River wind for several miles, offering a home for herons, sandpipers and more than 50 types of fish.

Its redevelopment has been entrusted to EnCap Golf, a relatively tiny company that competed with more than 12 other developers, including a representative of Donald Trump, Gauger says.

The Tampa company's advantage, according to Meadowlands officials: It specializes in landfill golf; the other bidders concentrate on landfill development or golf, not both.

Also, Gauger's educational pedigree (a degree in economics from Cornell and a master's in business administration from Duke) and experience in dealing with environmental issues helped New Jersey officials overcome the perception that he was some hick from Tampa. After initially working as a commercial banking executive for NationsBank in Tampa, Gauger went out on his own in 1990 and became involved in environmental cleanups. In addition to EnCap Golf, Gauger has a venture, Environmental Capital International, that funds companies that do cleanups.

The Meadowlands project is crucial as EnCap Golf works to gain respectability.

The company plans to finish its first project, the 450-acre landfill golf course near downtown Houston, this fall. And once Gauger gets plans for the Meadowlands project in shape, which will take at least six more months, he will consider sites in Atlanta, Boston, Dallas, Washington, D.C., and New Orleans.

But until its initial projects are finished, and revenues start coming in, EnCap Golf has to keep its staff lean. About 60 people work full time for EnCap, while day-to-day management is handled by Gauger, the president, and senior vice president Jim Hockensmith.

So far, EnCap Golf has been funded by Cherokee Investment Partners, a Raleigh, N.C., real estate investment trust that specializes in development of brownfields. Gauger will not say how much Cherokee has invested in his privately held company.

EnCap Golf hasn't decided yet whether it will build the Meadowlands project itself, including the offices, condos and hotels. While it considers bring in partners, it also is working on getting other financing to supplement Cherokee's funding, Gauger said.

Another way to raise capital would be to sell the resort after it's finished, but Gauger says it is too early to know if EnCap Golf will do that.

For the intense Gauger, the pressure of such a massive project takes a toll.

Until he cut back a bit recently, Gauger was working 70 to 80 hours a week, often from 7 a.m. to 10 p.m. each day. He spends as many as three days a week in New Jersey, while his wife and three children remain in Tampa.

During a recent trip to the Meadowlands, he spent one morning grilling two New York architects who didn't share his vision for the office buildings. They offered an 1800s feel; Gauger wants a modern look but with classic architectural lines.

Later, he worked through plans to move several radio towers out of the way of the golf course.

"I do need to relax more, but it's hard," he said, riding in a taxi heading to dinner in Manhattan. On top of everything else, he's been dealing with problems related to an irregular heartbeat.

"There are so many things, from the design to everything else, that require me to be there," he said. "A developer can't leave decisions to someone else and just hope things come out okay."

EnCap Golf couldn't pull off these landfill developments without good deals on the land and some tax incentives. "We couldn't make the numbers work otherwise," Gauger said.

The company plans to develop only sites where the owner has done much of the environmental cleanup work, as was the case in Houston, or where tax incentives help cover the cost.

At the Meadowlands, Gauger estimates that EnCap Golf can expect to get back 50 cents for every dollar it spends on capping the landfills. As businesses on the site pay their state taxes, a cut will go to EnCap Golf over a 15-year period.

Another incentive: EnCap Golf gets its landfill sites for next to nothing. At the Meadowlands, for instance, it's paying $1,000 annually for a 99-year lease. Landfill owners are happy to offer such deals, because upkeep can cost $250,000 or more a year.

Still, this endeavor is no sure thing.

The amount of upfront money required for the Meadowlands project is daunting: The cleanup will cost $100-million. Building the golf courses will cost $60-million. Then there's the cost of the hotels, office buildings, marina and condos, totaling $810-million.

The total cost: $970-million.

Once it's finished, the resort would offer people from Manhattan a place to play golf just a short train ride from the city.

"We'll make our money when the project goes vertical beyond the golf," Gauger said. "What makes money in a golf course development isn't the golf itself as much as the property on it and around it."

The move to turn the Meadowlands landfills into golf courses has met with little opposition from the community. Homeowners who look over trash heaps like the idea of seeing their views turned into golf course frontage.

"This could go a long way to stopping all the jokes about this part of New Jersey," said Alan Steinberg, executive director of the Hackensack Meadowlands Development Commission, which is leasing the property to EnCap Golf.

Not everyone is thrilled.

"I'd say it's a missed opportunity," said Beatrice Bernzott, a New Jersey environmental activist. "Instead, the state could have saved the habitat for the birds and other wildlife."

But even critics say a golf course is more aesthetically pleasing than, say, a shopping center. And with strict regulations spelling out how to deal with the contamination, that hasn't been an issue.

If everything goes as planned, Gauger hopes to have the Meadowlands' first course open by July 2004, with the second course opening a year later.

Gauger sometimes has sleepless nights, worrying about some Meadowlands detail he might have forgotten. The sense of urgency comes with his role on the leading edge of a new industry.

Insurers such as AIG offer policies that give developers better protection against contamination liability if they follow regulations. That means more developers soon may be getting into the business.

"Landfill golf courses are less risky for developers than they used to be," Gauger said.

"Of course, we don't want it to be too easy. We're gaining some unique knowledge on how to do this."