Long-Term Advisory Relationships

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LPGA International

The Situation

Ownership of LPGA International was the largest developer and land owner in Daytona, Consolidated Tomoka Land. At the time, they were leasing the 36-hole golf course known as LPGA International from the city of Daytona. The investment was operating at a $900k loss, to which ownership decided to sell the asset so a new ownership/management group could better maximize the business.

There is very little that the LIPG golf advisors have not seen, and near the top of the list is expiring leases. This was the exact situation for Consolidated Tomoka Land, as they had a very short lease term remaining that would make subsequent investment very tough, at a fair market price. Thus, LIPG advised Consolidated to buy out the lease, helping the city of Daytona and Consolidated through a fair appraisal process. As the land owners, Consolidated was in a much better position to sell the property at a price point that made financial sense. Simultaneously, the members of LPGA made Consolidated an offer in an effort to retain the course under their umbrella.

LIPG Difference

While the offer was unsolicited in nature (otherwise known as an “off market offer”), the seller consulted with the LIPG to evaluate the proposed offer price, valuation in the current market environment, and strategy for entertaining the most qualified buyers and securing the best deal. LIPG analysis determined that the market could bear nearly $1.5M more in price higher than the member offer. This required professional marketing and a network, but Consolidated knew LIPG was equipped to bring both of those elements to the table. We had six offers at list price or within 5% of list price. The first buyer with Asia Private Equity which was driven out of contract by city council because of some disparaging remarks that were made about the Asian Group by a member of the city council. The second buyer, a local golf company started complaining the course needed $5M in cap-ex, so we advised the seller to move on to buyer number three. Buyer number three, Fore Golf closed exactly as promised on time even in the face of about dozens title issues. Our long-term relationship with LPGA, ended up giving them a course the could sell, ended with a price $1.5M higher then the members offer and provided back up offers so the seller didn’t have to settle for a penny less when buyer one and two did not close.

Winning Result

LIPG ran a competitive process and secured six offers, all of which were at list price or within 5% of list price. The first prospective purchaser originated from private equity in Asia, but the offer was ultimately driven out of contract by city council (another challenging force some golf course and master-planned community owners have to navigate). As typical with an LIPG marketing process, the back-up prospective purchaser (a local golf company) was selected to move forward in the due diligence process. Issues were risen about projected (yet unsupported) capital expenditures in the coming years. This was displeasing for ownership, who then consulted LIPG on process and strategy to either 1) remedy the issues or 2) maximize the situation for a better deal.

Option 2 was selected and LIPG move to the second back-up prospective purchaser, Fore Golf. As a purchaser, “guarantees” are sometimes made but never upheld due to unforeseen circumstances – Fore Golf made good on every promise made to ownership, and closed on time even when external factors (i.e. third-party inspections) created issues.

The long-term relationship that was built over years in advance of selling LPGA International gave ownership the confidence in the LIPG advisors and their guidance to make sound business decisions, especially in a time of urgency and in a reactive state. The end results was a price that was $1,500,000 more than the initial off-market offer from the LPGA members, but also included back-up offers that ultimately secured the deal. Without the back-up offers generated by the LIPG marketing process, it is very likely that the property would have sold for far less than it did, should owner not have had the proper guidance to maximize an expiring lease and annual fiscal losses.