Land of the rising wave

The US Ryder Cup team may not have fared well in Ireland, but Tiger Woods is a fan of the golf course at Seagaia, one of Japan’s largest and most ill-conceived property developments.

The prefecture of Miyazaki on the island of Kyushu, located 953 miles south of Tokyo, features picturesque beaches, pine tree forests and, a few hundred yards from the Pacific Ocean, the world’s largest indoor water-amusement park. The park comes complete with 280 feet of shoreline, plastic palm trees and chirping birds filtered through a sound system—all under a retractable dome to provide for year-round beach weather.

Welcome to Seagaia—the name is a combination of sea and the Greek word for earth—perhaps as much a symbol of Japanese excess in the 1980s as any Hawaiian resort or luxury golf course. Conceived in the country’s real estate boom two decades ago, the Seagaia resort opened its doors—and the world’s largest retractable roof—in 1993. The total cost of the project, a joint venture between the local government and private investors, was $2.3 billion.

In addition to the man-made beach, made up of 600 tons of crushed pebbles, the resort also included five golf courses, two hotels, a bowling alley, 20 tennis courts, a zoo, a ride simulating white-water rafting and a fake volcano that erupted every half-hour. The resort was designed to appeal to Japanese visitors, who supposedly prefer the cleanliness and order of an artificial beach in lieu of the real thing.

Woods: enjoying the sand

But the resort also attracted other visitors. In July 2000, Seagaia hosted the G8 foreign ministers summit; attendees included US Secretary of State Madeleine Albright and British Foreign Secretary Robin Cook. The Phoenix Country Club, one of the finest golf courses in the world, is home to the Dunlop Phoenix tournament, where Tiger Woods has been crowned champion for the past two years. Even the German soccer team stayed at Seagaia during the 2002 World Cup.

But by the time the Germans arrived at the resort, the property had already fallen on hard times. The sputtering of the Japanese economy led to significant losses and in February 2001, Seagaia went into bankruptcy with liabilities of ¥300 billion. Shortly thereafter, the assets were acquired by the US private equity firm Ripplewood Holdings, led by chief executive officer Tim Collins, for ¥15 billion, or as little as $130 million.

But things have not been easy for the private equity investor, which has spent a significant amount of time and capital to change the image of the resort from a water park to a resort destination. At the time of the initial public offering of RHJ International, the vehicle that owns Seagaia, on the Belgian stock exchange, one of the biggest question marks surrounding the listing was the problems facing the resort. In the face of low occupancy rates, operating losses and a cash shortfall, Ripplewood was forced to provide additional equity to Seagaia and, potentially, sell off two of the golf courses and one of the hotels.