Biggest Sales of 2018
Stressed private clubs and public courses made up most of the sales in 2018, along with some large resort deals.
By Jack Crittenden, GOLF Inc. (January/February 2019)
American Golf made big news last year when it announced it would sell the 27 golf courses it owned. The income would fund a rapid expansion of Drive Shack, the company’s version of Topgolf, which offers high-tech, entertainment-driven driving ranges.
The management company, once the largest in the world, said it hoped to raise as much as $160 million from the sales. But it closed only one deal during the first 11 months of 2018, selling Brookstone Country Club in Acworth, Ga., to ClubCorp.
That deal was noteworthy because It was ClubCorp’s first under it’s new CEO David Pillsbury.Yet, despite buying a few courses in his first six months on the job, Pillsbury made bigger headlines for a deal he didn’t do. He quashed a plan to acquire 16 clubs from Concert Golf Partners.
“I am surprised Club Corp has not bought more”, said Jeff Woolson, managing director at CBRE’s Golf & Resort Group.“Private equity Companies usually need chunks, not one-offs.’
But buying one course at a time is exactly what ClubCorp did in 2018.
And that was indicative of the broader golf course market.
Several big portfolios were available. Along with American Golf and Concert Golf, Heritage Golf also listed most of its courses. But no big deals took place. In fact, the largest deal was the sale of the 13-course Club Co. across the pond in the United Kingdom.
The year was defined, instead, by sales of big resorts that don’t focus on golf, by golf course conversions and by sales of private clubs that were being forces to stay relevant and solvent.
“Courses that sell to ClubCorp and Concert Golf are not looking for the highest dollar,” said Ken Arimitsu, senior vice president of brokerage services at PM Realty Group. “Generally, they are clubs that want to preserve traditions and the longevity of their club.”
He said such deals often have low sale prices because the buyers are assuming considerable amounts of debtor liability, or they are agreeing to make considerable upgrades to the club.
That makes such deals poor indicators of market rates.
The same is true for the large-resort sales in 2018. PGA National Resort & Spa, with five courses, and LaQuinta Resort & Club, with nine courses, both sold for big dollar amounts. But most of the value for the buyers was in the hotel accommodations, not the golf courses.
Woolson called 2018 a disappointing year for golf.
“The economy is going strong, and most real estate is on fire,” he said. “I blame the debt markets. Everything going crazy is funded by debt markets. But these are only a few small banks lending in golf.”
Woolson is concerned that private equity is sitting on its hands, worried about a possible downturn. But, he said, all indicators point to two more years of robust growth.
More deals were on the horizon. American Golf hoped to close sales on as many as five of its 11 courses before the end of 2018. Concert Golf is expected to be recapitalized, and that will mean new money flowing into golf.
And brokers expect more courses to be sold and converted to other uses, mainly housing.
“Golf course conversions are the hottest product right now,” said Steve Ekovich, national director of the Leisure Investment Properties Group of Marcus & Millichap. “There is so much housing demand that the interest is extraordinary in major metropolitan regions.”
Ekovich has a course in Florida that if sold as developable land, could sell for as much as 15 times its value as a golf course, he said.
He sold Shadow Pines Golf Course near Rochester, N.Y., for $3,65 million this year, even though its estimated worth as a golf course was only a little more than $1 million. It was purchased by the town of Penfield, which didn’t want the land to be developed into housing.
And that seems to be the key takeaway from 2018. Still, a number of sales took place that are worth noting.
Here, we highlight the biggest deals, as measured by sales price, importance and effect on the industry. They fall into four categories: portfolio, resorts, private and public.