The Pellucid Perspective - November 2010 - (Page 18)
THE LAST WORD
Heard it through the grapevine
here comes a time in every columnist’s life when there just isn’t one central compelling theme worthy of the required word count. Actually, that time comes quite often, but sometimes it’s easier to disguise it. This month is not one of those easily-disguised times, so I thought I’d share some of the information, rumors and other not-for-attribution innuendo I tend to gather in conversations with old and new friends in the industry. The names have been totally omitted to protect the gabby, in the certainty that I will need to mine those sources again in the future. One rumor that’s been floated around in idle industry conversation for a few months is that ClubCorp, presumably through its ownership entity of KSL Capital Partners, is planning (hoping, aspiring?) to purchase Troon Golf. One industry newsletter, which is fond of couching its verbiage in phrases like “word on the street is,” “look for,” and even the telling “rumor has it,” actually stated in print that ClubCorp was rumored to have covetous eyes on Troon, supposedly for its cash flow. Asked directly if there were any basis for such speculation, Troon CEO Hud Hinton said, “Absolutely not. I don’t know how that rumor started. There’s no truth to it.” Actually, the blurb in the newsletter in question also stated that ClubCorp is owned by the KKR investment firm, which will be news to KSL Capital, who does own the Dallas-based club ownership giant. KKR has not controlled KSL for a number of years. The same blurb speculated that Troon and principal investor Goldman Sachs would want to take properties off Goldman Sachs’ books (?) due to the fact that Goldman Sachs had received a bunch of government bailout money. Say what??? For one thing, Goldman Sachs has quite publicly paid that bailout money back to we taxpayers. For another, Troon’s portfolio of managed courses is almost entirely that – managed courses, not owned courses, so they’re not “on Goldman Sachs’ books.” Other than
those nitpicks, great rumor. Now that I have trashed someone else for spreading unsubstantiated multicourse owner/operator rumors, I can’t resist disseminating “word on the street,” albeit informed streets, that two very large multi-course operators are looking at substantial long-term debt coming due in the next 6-9 months. Re-financing is obviously no easy task in the current economic climate, so it will be interesting to see how they manage that debt.
only 10 percent or less in the past year should count themselves fortunate. And, for the record, Troon’s Hinton agreed with that assessment for the industry in general, although not necessarily for the Troon portfolio.
What value EBITDA?
Most industry folks, or at least most golf course operators, understand EBIDTA. For those who don’t, that stands for Earnings Before Interest, Depreciation, Taxes and Amortization. Actually, scrap that – almost nobody really understands EBITDA, because like cap rates for golf course buy-sell transactions, there are virtually no limitations on what can be factored into its computation. In any case, IRI Golf Group CEO Jeff Silverstein says that the way lenders
This issue’s pages include Feel Golf CEO Dr. Lee Miller’s defiance of the USGA-R&A advisory on wedge grooves. Conversations with a couple of folks at other club manufacturers reveal that they are frustrated to varying degrees by those bodies’ dictates regarding cessation of the older grooves’ manufacture by the end of this year. One major manufacturer representative told yours truly that a recent communication to manufacturers from the USGA expressed more than a tinge of regret about the ruling and its scope. Unfortunately for those manufacturers who have already spent substantial sums in retooling to produce the newly blessed groove specifications, that’s just a bit late. And, by the way, what the hell was
The Touring professionals could spin a TopFlite out of 4-inch rough with a kitchen spatula, obviously. The rest of us, not so much. And you, Mr. Retailer, your customers are…the rest of us.
and appraisers value a golf course facility’s EBITDA has changed dramatically in recent years. Silverstein said that as recently as three to five years ago, courses were frequently being appraised at 10 times their EBITDA. Now, he says, most of those generating the appraisals are banks, not “golf guys,” and courses are now being appraised at five to six times EBITDA instead of a 10 multiple. Some would say that it is making golf course sale prices a little more reasonably based in the current economy. Exacerbating that situation, as a sidebar observation, Silverstein said that in his opinion, the number of owners who can say that their facilities’ EBITDA dropped the point in the first place? On the PGA Tour, the first place the older grooves were banned, 59 all but became the new 69 in Tour events this year. The Touring professionals could spin a TopFlite out of 4-inch rough with a kitchen spatula, obviously. The rest of us, not so much. And you, Mr. Retailer, your customers are…the rest of us. Par is safe from us, but your bottom line isn’t safe from our absence when we get frustrated because the game is just too damned hard without our gouge grooves. OK, there are other reasons it’s hard for most of us, but if you folks in Far Hills and St. Andrews have to “protect par,” do it with the boys and girls who are actually a threat to it. —Jim Dunlap November 2010
18 The Pellucid PersPecTive
Table of Contents for the Digital Edition of The Pellucid Perspective - November 2010
The Pellucid Perspective - November 2010
Examining the Third Party Tee Time Marketing Issue
A Primer on Third Party Tee Time Marketers
Some Cities Willing to Buck Declining Golf Trend
Feel Golf Head Defies New Wedge Rules
Washington DC/Northern VA Profile
Oct YtD Weather Impact Sep YtD Utilization
Mixed Financial Results for Q3 and September YtD
Heard it Through the Grapevine
The Pellucid Perspective - November 2010