Developments that beat their handicaps.

• Position: Golf communities; special advertising section

In the 1980s, golf communities with courses designed by such big names as Jack Nicklaus, Arnold Palmer and Tom Fazio popped up throughout the Carolinas.

From the Cullasaja Club, near Cashiers, to the Country Club of Callawassie, near Hilton Head Island, such developments sprang up from the mountains to the shore in both states - buoyed by a golf boom that's expected to continue until the turn of the century.

The communities are attracting retirees, people buying second homes and others simply looking for a country-club style of living.

"The demographics are there," says Carlos Evans, an executive vice president of NCNB National Bank of North Carolina who's in charge of commercial lending in North and South Carolina. "Those looking for pre-retirement homes are going to double in the '90s and into the 21st century. And with baby boomers getting older, the demographics will get even better."

But just having sumptuous links crafted by a golf great hasn't always been a ticket to success. Some resorts with signature courses have fallen victim to the same problems that can afflict any real-estate development: undercapitalization, market downturns, natural disasters, legal problems. By far, undercapitalization is the biggest factor in development problems, say lenders and lawyers in the Carolinas.

"If you go out and build a golf course where none has existed before, it takes time for it to mature, for leisure patterns to develop," says Larkin Pahl, a bankruptcy lawyer with Smith Debnam Hibbert & Pahl in Raleigh. "It takes [financial] staying power on the part of developers, and very few have it."

Says NCNB's Evans, "The golf-course business is a great business, especially in resort areas. But just because it's a great business and demographics and economics are right, it doesn't ensure success, particularly when you're combining a land deal with a golf course. The land-development deal can cause failure for a variety of reasons that don't deal with the golf course.

"Capital is most important," Evans continues. "So many [developments] falter because they don't have sufficient funds to fall back on in periods of slowdown.

"The way the project is underwritten [is also important]. Projects that do pre-sales and are structured without a lot of debt can kill a lot of that debt with the pre-sales. Historically, those have been a lot more successful."

Pinehurst National Golf Club, built around a Jack Nicklaus-designed course that opened in April 1989, is a good example.

It pre-sold at least 160 lots and had planned to sell 200 before starting development. But when its neighbor, Pinehurst Plantation, with an Arnold Paimer-designed course, fell on hard times, the Pinehurst National folks sped up their timetable-"for credibility's sake," explains Claude Smith, one of the original developers and still an owner.

"I got a call from some friends of mine in Philadelphia," recalls Smith, the president of Tri-City Inc. of Rockingham...