The Pellucid Perspective - August 2010 - (Page 13)

UPS & DOWNS Winning, losing and treading water in today’s golf industry Challenging times bringing opportunity to some By Jim Dunlap P roblems for some in the industry create opportunities for others. From where we sit, here’s a look at which are which in today’s marketplace. If there is any group quietly raising champagne toasts these days, when they get the time, it is golf course appraisers. Lenders are trying to determine the current value of their unwanted assets, buyers and sellers are assessing their prospects for a satisfactory deal, attorneys on both sides of foreclosure proceedings want numbers they can use in legal disputes, etc. Gregg Lindquist, an appraiser with Phoenix area-based Brekan-Nava Group, said, “I’m moving as fast as my legs can take me these days. The banks are keeping a pretty short leash on their loans – one I’m doing is an update on an appraisal we did a couple of years ago. It’s busier than I’ve ever seen in the 10 years I’ve been here – we’ve actually contracted a few out to other appraisers.” Private and municipal owners faced with a growing volume of red ink on their books are increasingly turning to professional management to turn courses around. More significantly, the growing number of courses in receivership or being taken back by their lenders are seeking experienced operators, generally those with other properties in the area, to improve or at least preserve the salability of the courses until a buyer shows up. Third party managers like Atlantabased Affiniti Golf, which is operating several Textron foreclosures in the Southeast, Florida-based ClubSpecialties, International, long-time “caretaker” specialist www.PellucidcorP.com Golf course appraisers Kitson & Partners, and some of the larger managers like OB Sports have all picked up business from lenders-turned-owners. “Everybody wants to manage those for the banks,” said Tom Frost, a principal in the Synergy Golf Management course ownership entity and his Tom Frost Golf operating group, which is currently operating Mt. Woodson in Ramona, Calif., for lender and reluctant owner Textron Financial. “There’s no risk, and the money is OK as long as it lasts, and maybe if you do a good job, the new owner will keep you on.” In some cases, that stay can be much longer than expected. Kris Strauss, director of marketing for OB Sports, said, “We went into one on a 60-day contract, and we’ve been there for two and a half years.” ers with a surfeit of courses that are not currently likely to sell for what is still owed on their notes. Many of those are losing money, or not making enough to service the debt, and cannot be converted to any other highest and best use. While some banks would prefer to just dump the property for the best available offer, increasingly (some would say “finally”) vigilant bank regulatory agencies frown on what they consider deceptive or illadvised write-downs of bank losses. While logic might dictate that tough economic times would drive cost-conscious players to value level municipal facilities, there is little evidence that’s the case thus far. As pointed out in a Pellucid OTR newsletter earlier this year, a number of cities whose golf facilities lobbied for and got designations as Enterprise Fund operations are no longer able to generate enough revenue to fund themselves. Requests for subsidies from the city’s General Fund are typically not well received, although they may be granted for a time in order to keep the recreational amenity open to the public. In any case, as competition for the golfing dollar becomes more cutthroat, many cities, hamstrung by fixed staffing and benefit costs or their own debt service issues, find themselves losing the battle to more experienced professional golf operators. Depending upon the size of the check they’re writing — or not writing — to the bank these days, this is not generally a happy time for course owners. If they’re not discounting rates, it’s likely that their competitors are, The Pellucid PersPecTive Municipalities Third party managers On the deal side of the equation, it’s also a golden opportunity for those few fortunate entities who have backers with deep pockets (and weren’t devastated by the mortgage crisis, stock market, etc.). Paul Mauk’s Toano, Va.-based Traditional Golf Properties and financial backer Schooner Capital, for instance, scooped up the four Bluegreen properties that Bluegreen sold earlier this year. The four, The Golf Club at Brickshire in Virginia, The Golf Club at Chapel Ridge, The Preserve at Jordan Lake and Carolina National in North Carolina, fit perfectly into Traditional’s Mid-Atlantic cluster portfolio strategy, and Mauk had the financial horsepower to pull off the deal. The growing number of defaults and resulting foreclosures have left banks and other lend- Aggressive — and solvent — buyers Private owners Lenders 13 http://WWW.PELLUCIDCORP.COM

Table of Contents for the Digital Edition of The Pellucid Perspective - August 2010

The Pellucid Perspective - August 2010
Table of Contents
Why ANOTHER Golf Publication?
Why ‘Affordable Golf ’ Is In Retreat
July Weather, Many Markets Beat by the Heat
Funds Preparing for Course Buys
Price Is Right for Building
Chicago Market Profile
Free Lunch for Harding Park
Win, Lose or Draw?
Virtual Golf and Soccer Marketing

The Pellucid Perspective - August 2010