The Pellucid Perspective - June 2013 - (Page 5)

GOLF COURSE SALES So you want to buy a golf course? Current golf course sales trends present a mixed message By Jim Dunlap P otential buyers, hopeful (or desperate) sellers and the golf Midwest have recently sold to farmers who see a much brighter course brokers who hope to bring the two together are profit potential for corn and beans than birdies and bogeys. faced with a variety of mixed messages from today’s golf Chris Charnas, principal of Chicago-based Links Capital course transactions marketplace. On the positive side of the led- Advisors, who recently brokered the approximately $3.25M ger, a slowly recovering real estate market has revived interest in sale of Elks Run GC in Ohio and has had a banner six or seven golf courses with accompanying residential acreage to develop, months of sales activity, said, “At some point, you’ve got to look farmers seeking to convert cheaply priced rural courses to lucra- at alternative uses. So many courses in the past were built so far tive farmland have entered the buyer pool, and some invest- out in anticipation of future development that never occurred, ment funds and private equity players are returning to the golf and people are not willing to drive 30 miles to play golf. If you ownership fray. On the down side, debt financing for purchases can grab some acres for farming, why not? The problem is that is still elusive, owners looking to sell have not reached the “sell so many of the courses that are being shut down are the entry at any price” stage for the most part, and owners who got an un- level ones that we need to grow the game.” expected but welcome boost from last year’s generally benevoTo borrow from the social media vernacular, another tenlent weather may have priced their assets at dency “trending” is the revival of interest in points which are unrealistic in terms of the As a recent article in developable acreage surrounding golf coursmore typical weather which the country has be only peripherthe Washington Post es from buyersinwho maythe golf course, but returned to this year. ally interested owning Observations vary, depending upon pointed out, a number are very interested in possible profits from which market niches they typically serve, of rural courses in the building golf course community housing. but some common themes emerge after conAs existing inventory from failed housing versations with a number of the industry’s Midwest have recently developments is absorbed, and the economy leading course brokers and buyers. Steven sold to farmers who improves, raw land for golf course commuEkovich of course mega-broker Marcus & nity development looks much more promisMillichap, Hilda Allen of Hilda Allen Real see a much brighter ing. Estate and multi-course owner Heritage “People are starting to buy golf courses profit potential for Golf Group CEO Bob Husband agree that with real estate attached, particularly in most standalone courses today are selling for corn and beans than failed developments in Florida,” said Allen, anywhere between 6 to 9 times annual earnbased in Adel, birdies and bogeys. whose company is amount of bothGeorgia ings or EBIDTA (Earnings Before Interest, and does a healthy auction Depreciation, Taxes and Amortization), and and private listing course sales. CBRE’s both Ekovich and veteran broker Jeff WoolWoolson, meanwhile, said that while they son of CB Richard Ellis concur that somewhere between1 and have recently closed a number of golf course-only sales, much 1.5 times annual gross revenue is also a typical purchase price of his current business involves not just golf, but the residential guideline. All agree, however, that “typical” is an elusive term or commercial development opportunities adjacent to or assowhen one is talking about golf course asset pricing, which can ciated with the golf course itself, such as the recent sale of the swing wildly depending upon changes in what Ekovich calls Warner Springs spa resort/golf development east of San Diego “life changes” impacting owners’ motivation such as age, ill- to the Pacific Hospitality Group entity. ness or financial concerns, to pressure from course lenders or One aspect of the golf course sales situation that may seem investors, or simply fatigue from trying to wring a profit from a counter-intuitive, but may not be, is that according to a hiscourse that is struggling to make ends meet somewhere north toric purchaser of golf courses, courses that are actually makof the break-even point. ing money may be more difficult to sell for a big number than Some course owners, particularly in the Midwest farm belt those running in the red. Bob Husband, whose track record and other agricultural areas of the country, are finding eager buy- includes a development and mega-sale of the Cobblestone ers for their rural, reasonably priced courses among local farmers. portfolio to MediTrust in the 1990s, said, “Courses which are The high prices currently commanded by products such as corn making money tend to price less [than struggling courses]. It’s or soybeans have made golf course acreage, in many cases, much harder to sell those courses unless you can sell a story - a new more desirable as farmland than fairways. As a recent article in owner thinks he can run them better, or add a new clubhouse the Washington Post pointed out, a number of rural courses in the or F&B operation that will take it to the next level and jump www.PellucidCorp.com The Pellucid PersPecTive 5 http://WWW.PELLUCIDCORP.COM

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

The Pellucid Perspective - June 2013
Contents
Golf ’s Consumer “Leaky Bucket” Challenge
So you want to buy a golf course?
Are you on the clock?
IRI, R.I.P.
May golf weather impact: Down, but pace of decline slowed
In theory, operators sing “I Love LA”
ClubCorp buys Oak Tree CC in Oklahoma
Shock waves from the home of the Magic Kingdom

The Pellucid Perspective - June 2013