The Pellucid Perspective - April 2011 - (Page 7)

MANAGEMENT COMPANY RISE Foreclosures opening new avenues for managers By Jim Dunlap he disappointing economy of the past few years has created an ironic good news-bad news scenario for many of golf ’s course management companies. The bad news is what many managers have had to convey to course ownerclients in the periodic budget review meetings. On the sunny side of the street, numerous risk-free and potentially lucrative short term management deals have emerged from the growing number of golf course bankruptcy and foreclosure proceedings. It is, indeed, an ill wind that blows nobody good. Virtually every management company has picked up at least one management deal for a “distressed property” that finds itself in the (re)possession of a lender institution or court-appointed receiver. Some deals are short term, even month to month, and end relatively quickly if the course is sold, while others may last years. (OB Sports Director of Marketing Kris Strauss cites one course that the company agreed to “baby sit” nearly three years ago for a lender client, and still runs). Regardless of the length of the engagement, interim management deals figure to continue to proliferate, particularly if another wave of foreclosures crops up, as some industry observers have predicted. “Our business model has always been to grow slowly but steadily, but we’ve added a number of new deals recently, and some of them are bank-owned properties,” said Mark Luthman, excecutive VP and COO of Touchstone Golf. The Ft. Worth, Texas- headquartered company headed by Steve Harker now manages over 20 courses throughout the U.S., and recently took over operations of Mt. Woodson Golf Course in San Diego County, California for Textron. Tom Isaak’s Petaluma, Calif.-based CourseCo management company is also in the midst of a growth spurt, although only one deal, the Sun Willows Golf Course in Pasco, Wash., is anything that could be considered a distressed property. (The city recently terminated its lease with the previous operator). Isaak said that while the increase in distressed properties in the public ownership sector has created some management opportunities, he thinks that some of the new management boom may be attributed to the fact that management deals are frequently done for similar lengths, and thus tend to come up for renewal in clusters at the same time. He felt that the number of course lease agreements with management companies has not varied greatly, regardless of the economy. Caretaker deals, tough times keeping management companies busy T Fast movers It can be difficult to track growth among the larger management companies such as Troon Golf, Billy Casper Golf, Sports, Century Golf Properties and American Golf, due to the fact that new contracts are announced, but those which expire and are not renewed are not. Smaller multi-course managers are easier to track. Some, such as Georgia-based Affiniti Golf, are obviously growing. The Whitney Crouse and Steve Willy-led Affiniti, which has benefited from a number of caretaker deals on lender REO properties recently, took over management of The Manor Golf & Country Club in Alpharetta, Ga., recently for the company’s 14th property. California-based Western Golf Properties, which has maintained a small but stable group of properties throughout the U.S., just added three California courses to increase its portfolio of managed properties to 11. One of the more interesting multi-course operation stories is Escalante Golf, a 20-year old company which has historically maintained a relatively low profile. Escalante has grown from four properties to 11 in the last three years. What makes Escalante’s growth unique is that the company is primarily an ownership entity. In the last few weeks, Escalante purchased two Florida properties, Spanish Wells Country Club in Bonita Springs and Black Diamond Ranch in Lecanto. David Matheson, an Escalante partner and vice president of marketing and communications, said the company’s strategy is to acquire (typically private) properties that include real estate assets, and to remain in the picture for the long run. Black Diamond Ranch includes undeveloped real estate, while Spanish Wells and its golf course provide synergy for the nearby golfless Tarpon Cove Resort & Marina which Escalante also owns. Among the other properties the company owns and operates are Country Club of the North in Beavercreek, Ohio, The Raven at Three Peaks in Silverthorne, Colo., and The Crosby National in Rancho Santa Fe, Calif. While it is difficult to put a firm number on net gain of management company deals due to the increasingly problematic golf business, particularly in the municipal and private club sectors, there is no doubt that many managers of all sizes are eagerly monitoring the foreclosures news for potentially lucrative, albeit short term, management opportunities for the new lender owners. “We’re basically in it for the long term,” CourseCo’s Isaak said, “but I can understand why a lot of companies would be going after that bank REO business. It’s my impression that a lot of lenders aren’t all that price-sensitive in terms of management fees for those properties, because they don’t think they’ll have them for long.” So, into each life some rain may fall, but sometimes it makes your garden – and your golf course portfolio – grow. n The Pellucid PersPecTive 7 http://WWW.PELLUCIDCORP.COM

Table of Contents for the Digital Edition of The Pellucid Perspective - April 2011

The Pellucid Perspective
Cover Your Asset
NGCOA Ponders Becoming Southwest Airlines?
Is E-Mail Dead?
Foreclosures Opening New Avenues for Managers
Mar 2011 YtD Weather Impact, Feb 2011 YtD Utilization
An App a Day Takes Your Money Away
Comings & Goings
Golf Deals to Forget
Phoenix, AZ Core Business Statistical Area (CBSA)
Can’t Sell Your Home? Call Tullymore Resort

The Pellucid Perspective - April 2011