Rachel Ray’s Magnificent Ass
I hate to see the best sport in the world suffer like this
Sunday, November 22, 2009 
Warwick Hills, 17th Hole
Tough times for the economy mean tough times for golf courses:
The recession has dealt a mean bogey to golf. Hundreds of courses have closed in the last two years and many formerly exclusive country clubs have slashed fees or opened their greens to the public.
Sales of golf balls, clubs and apparel — a multibillion-dollar industry — have dipped 10% this year as players trim spending, according to golf researcher Pellucid Corp.
But perhaps the most dramatic examples of golf’s woes can be seen in the string of barren fairways and locked gates. Through September of this year, at least 114 of the nation’s 16,000 or so golf courses had closed, according to the National Golf Foundation, a number that was offset only partly by the opening of 44 new courses.
“People are cutting golf out of their diets because they’ve got to cut something,” said Jeff Woolson, a real estate broker with Los Angeles-based CB Richard Ellis who specializes in buying and selling golf courses.
Woolson and other real estate experts say most golf courses have lost 30% to 50% of their worth in the last two years. Several courses have been forced into bankruptcy. Among them is Chevy Chase Country Club in Glendale, which dates to 1925 and was designed by noted golf architect William P. Bell, who also designed the Bel Air Country Club and the Newport Beach Country Club.
The owners tried to sell it for $6.5 million, but couldn’t find a buyer before the bankruptcy court decided to turn it over to the lender. The asking price, which would have included a Spanish-style clubhouse and Olympic-sized pool on 35 acres, might sound like a bargain — there are homes in the Los Angeles area that sell for more — but golf courses are businesses, not typical real estate investments, because they must remain golf courses. And business has been bad lately.
It’s a big comedown from the glory days.
Golf thrived so in the 1980s that it was widely believed that a new U.S. course could open every day and there still wouldn’t be enough links to satisfy demand. In the 1990s came Tiger Woods, who made the world pay attention to golf as he grew to dominate the sport. The “Tiger effect,” many investors assumed, would launch a youth wave of interest in the sport.
The Tiger effect really didn’t happen. Just because a lot of people began to pay attention to golf, that didn’t necessarily translate into people taking up the sport. I’m sure that a few tried it, but rarely did you see anyone stick with the sport once they figured out just how difficult it was.
The glory days happened because people had money and leisure time. Working for the Man nowadays means no time off, screaming brats on the weekend, and barely enough money to not pay the mortgage. The increase in the number of people wearing nametags and working for peanuts has meant that there are fewer and fewer bankers and financial services people to play golf.
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Reader Comments (1)
As golf course brokers transacting business around the country, we are underwriting assets for golf owners, REO departments for lenders, golf management companies and lenders contemplating lending on certain assets. With the number of P&Ls we have viewed to date through October, we too have seen that both rounds and revenue are down but that is only ½ the story. The dirty little secret is EBITDA is down significantly more than can be accounted for in a reduction in rounds, a reduction in greens fees by owners trying to increase their rounds, a reduction in F&B spending, expenses haven’t gone down. They have done just the opposite. None of the P&Ls we have seen to date, year over year, have had their taxes lowered or insurance lowered. Salaries aren’t going down, seed costs, fertilizer costs, water, utilities, etc. all have gone up. The end result is when an owner comes to us and says, "My value may only be off 5-10% since my rounds are off that much"; they don’t realize the impact on the EBITDA is much more significant. Add to that the lack of financing and the buyer’s perceived risk driving yield requirements up, golf course values are down significantly.
The silver lining is that we do see professionally run properties that are off very little in rounds and have maintained their revenue. There are areas of the country that are still very strong when it comes to that core golfer who has decided the hell with the recession, this is a necessary expenditure. The well managed, well marketed, great customer service courses are experiencing a modicum of pain, but not near as much as others with poor management, little to no marketing, absentee owners and poor customer service. We are working with some excellent management companies that have made a tremendous difference. One management company has increased the EBITDA on an extrapolated based through the end of the year by $1,000 a day, or a net to the owner of $350,000. Attention to detail, personal accountability, cost control, driving revenue and partnering with employees can make a difference. When we market a golf course for sale, we look at what a course should be able to generate in EBITDA, though increasing revenue or reducing expenses and build a credible strategy and business plan of how to get there.
We believe this is one of the best times we will ever see in the market for opportunities to buy courses at prices below historical pricing, for management to differentiate themselves, for the professional golf owners to outshine their competitors and for professional golf course brokers to distance themselves from the pack.
Steve Ekovich
VP, Director of the National Golf & Resort Group
Marcus & Millichap Real Estate Investment Services
www.nationalgolfgroup.com