The Pellucid Perspective - January 2013 - (Page 5)

GOLF COURSE SALES Boom times for golf course brokers Buyers capitalizing on falling values, new debt sources emerging By Jim Dunlap T he rising tide of golf course foreclosures and distressed properties is certainly not floating all boats in the golf industry, but it’s enabling a number of golf course brokers to start looking at buying a sizable boat of their own. With golf course values continuing to decline - and many sellers beginning to acknowledge that reality - new course buyers, and even some new capital sources, are emerging and helping a number of brokers to record numbers of transactions. While the average sale prices (and broker commissions) have declined over the past five or six years, brokers are, as the saying goes, making it up in volume. The Tampa-based National Golf & Resort Properties Group headed by Steven Ekovich reports 16 course sales in 2012, and claims a whopping 39 in the past 27 months. Jeff Woolson of Carlsbad, CA-based CBRE Golf & Resort Properties enjoyed his busiest year in his 20-year career with 15 course transactions. Industry veteran Hilda Allen sold nine courses through a combination of auctions and direct sales from her Adel, GA base. Chris Charnas enjoyed his best year since going solo and forming Links Capital Advisors, with five sales. Another industry veteran, Ken Arimitsu, joined PM Realty Group and teamed with Collier’s broker Keith Cubba to close a number of transactions for eager buyer Pacific Links, primarily in Hawaii and Las Vegas, and has a large number of listings due to hit the market, including one major portfolio. In some cases, 2012 transactions were a function of owners or lenders either accepting the new reality of course values or just tiring of keeping the courses on their books. Woolson, who calls such transactions “legacy deals” because the listing is inherited from year to year, said that his group’s 2012 total included three such deals. “Sellers are becoming more reasonable,” Woolson said. “I think in 2013, we’ll still see some of those legacy deals finally transacting.” Sale prices falling While there are occasional trophy property deals for big prices, there is no question that the average transaction carried a smaller price tag in 2012. Ekovich said that his firm’s research indicates that 38 per cent of the transactions during the year were for less than $1 million, compared to their estimate of 17 percent at that price range the previous year. The good news, he said, was that the average time on the market for courses seems to have come down, while the number of transactions has risen. Woolson sees two reasons for the increased sales activity - the buyer pool has increased, and prices have declined. He pointed to the gross revenue multiplier benchmarks that many buyers and brokers have begun using to determine a reasonable selling price. “What we’re seeing is that there are ‘haves’ and ‘have-nots’ in terms of courses and their valuations,” Woolson said. “Quality properties are selling for 1.25 to 1.5 times gross annual revenues, while lower end properties are going for as low as between .75 and .5 times revenue. He pointed out that in 2008, when he first started tracking the gross revenue multipliers, he sold five properties, all of which were cash-flowing, and nearly all garnered a sale price of greater than 2 times gross revenues. Charnas agreed, saying that he’s seeing courses close at 1 times gross annual revenues or slightly higher, with a ceiling around 2 times for trophy properties. With prices tumbling, Charnas wondered if perhaps some courses, tired of fighting a nearby competitor for business, might just buy the rival out and either sell it off for other uses or just shut it down and hope to inherit its customers. New buyers, debt sources surfacing Analogous to nature’s law that where there is prey, there will be predators, it was an economic certainty that once course values declined sufficiently due to competition from overbuilding, declining demand, debt service pressures, etc., buyers would start to make their moves. A number of them are golf industry veterans of other campaigns, such as Fore Golf Partners, Peter Nanula’s Concert Golf Partners, ClubCorp, Donald Trump and the Pacific Links group headed by former ClubLink CEO Bruce Simmonds, which Arimitsu said was probably the big- “What we’re seeing is that there are ‘haves’ and ‘have-nots’ in terms of courses and their valuations. Quality properties are selling for 1.25 to 1.5 times gross annual revenues, while lower end properties are going for as low as between .75 and .5 times revenue.” jeff woolson, cbre golf & resort properties, carlsbad, ca The Pellucid Perspective 5 http://WWW.PELLUCIDCORP.COM

Table of Contents for the Digital Edition of The Pellucid Perspective - January 2013

The Pellucid Perspective - January 2013
A Pellucid Preview of the 2012 State of the Industry
Boom times for golf course brokers
Show time: Happy days are here again?
Sharp Park wins
Private owner launches another attack on municipal course tax exemptions
December golf weather impact: 2012 a year for the record books!
Goofy had company in Orlando course developers
Dallas negotiating for construction of new championship course
“Customer co-production” worth looking into for golf

The Pellucid Perspective - January 2013