Another One Bites The Dust!

[David_Tepper]

Tuesday's Wall Street Journal (page C-5) had an article about the impending bankruptcy of Gotham Golf, which owns/operates about 25 courses, mostly in the East and Southeast. The shake out of over-priced, over-blown golf courses continues!  

[Jeff_Lewis]

David, does the article refer to any specific courses in the portfolio? What kind of quality level were they after?

[Scott_Burroughs]

I this was going to be about another one of the Treehouse getting hitched, like the recent thread of the same name.

Here's Gotham's courses:

Alabama

Mongtomery National Golf Club


Florida

California Golf Club
St. James Country Club


Maryland

Bear Creek Golf Club
Glade Valley Golf Club
Lake Arbor Golf Club
Links at Challedon
Montgomery Country Club
Robin Dale Golf Club
West Winds Golf Club


North Carolina

Sapphire Mountain Golf Club


New Jersey

Maple Ridge Golf Club
Wild Oaks Golf Club


Pennsylvania

Edgewood in the Pines
Four Seasons Golf Club
Fox Hollow Golf Club
Greencastle Greens
Hawk Lake Golf Club
Hickory Heights Golf Club
Honey Run Golf Club
Monroe Valley Golf Course
Mountain Laurel Golf Club
Royal Oaks Golf Club
The Bridges Country Club

Virginia

Fairfax National Golf Club



Nothing earth-shattering, in terms of high-quality golf, as I've only heard of about 10 of them and only played one, Lake Arbor in MD, in an eastern suburb of Washington, DC.  

It actually was a fun course, despite perhaps the most claustrophobic housing hole I ever remember playing, a short par 4 on the back nine.  The houses on the right had so many dents in the siding, it was funny.  Even in my few times around, one in my group hit a house, with the owner coming out to talk with him probably looking for money.  What did he expect buying a house in 200 yard slice distance a few yards off the fairway?

Here's Gotham's web site:

http://www.gothamgolf.com

I guess they need Batman to save them.

[Mike_Cirba]

Yikes...

I've played 14 of them, quite a number in PA that are rather decent to pretty darn good.  

The REALLY scary part is that none of these courses were the overblown, expensive types we associate with business failures, but were ALL in the very modest price range....with most of them considered to be very good value courses.

These are largely the ones that the CCFAD's replaced!

[A_Clay_Man]

Mike- So most of these are somewhat older courses, say pre 1980? Could you also qualify other similarities say to type(i.e. housing developments tec.)?

thanx

[Dan Grossman]

Of the ones I've played in PA (Bridges, Edgewood and Royal Oaks), none were housing courses.  Edgewood was older, Bridges and Royal Oaks were newer.  Royal Oaks is actually a pretty good golf course, although it is routed on a pretty wierd shaped piece of property.  Echoing Mike C's comments, none were overpriced and were all decent tests of golf.

[Mike_Cirba]

Adam;

Almost all of them are pre-1990, and the best way to describe most of them would be to say they are fairly rural, fairly placid, fairly cheap places to play with little in the way of housing considerations.

In fact, of those I've played, here's the lineup..

Westwinds - William Mitchell 1974 (some housing)
Maple Ridge - William/David Gordon 1963
Wild Oaks - Joe Hassler 1974
Edgewood Pines - David Gordon 1980
Four Seasons - Dick Funk 1962
Fox Hollow - Albert Cirino 1957
Greencastle Greens - Robert Elder 1991
Hawk Lake - James Ganley 2000
Hickory Heights - Robert Elder 1988
Honey Run - Edmund Ault 1971
Monroe Valley - Edmund Ault 1967
Royal Oaks - Ron Forse/Bruce Hepner 1991 (some housing)
The Bridges - Charles Altland 1995

[Craig Disher]

Montgomery CC and Robin Dale are both semi-private clubs that date from the mid 60s. Gotham purchased MCC within the past 5 years and put some serious money into the course. It is a good design but typical of its era. It also has a loyal membership and with all the outings it hosts in season, I'd be very surprised if it wasn't profitable. What Mike says about the PA courses is also true of the MD ones. None of them are upscale CCFADs.

Nevertheless, the golf market in this area is saturated. The Links at Gettysburg, an upscale CCFAD over an hour away, lowered their greens fees this winter to $12. I also heard a rumor that a privately owned club in the area is on the verge of being sold. Its 36 holes will be converted to housing and a new course. What happens to the current membership is anyone's guess.

[THuckaby2]

Nevertheless, the golf market in this area is saturated. The Links at Gettysburg, an upscale CCFAD over an hour away, lowered their greens fees this winter to $12. guess.

TWELVE dollars?  Is that because of cold weather?  Is the course normally playable in winter?  I ask because I am a geographic nincompoop, and because out here in CA, even the most horrid par3 courses tend to cost over $12....

Man do I live in the wrong place.

TH

[George Pazin]

I wouldn't connect the types of courses they are to the bankruptcy. There are way too many other factors to look at first. Could be just about anything.

Anyone wanna go halfsies on one of the Pennsy courses?

Huckster -

I would assume Craig is referring to winter rates, which (in the Burgh, at least) generally run from some time in mid to late October to maybe mid March. Since the weather is spotty at best, it might not be worth the move.

On the other hand, I play a lot of courses that are $20 or less to walk. 'Course, you won't see many of them reviewed on GCA.

[THuckaby2]

OK, gotcha - thanks, George.  So sorta like summer rates in Palm Desert... dirt cheap (relatively) for their also... but you deal with the "weather" in both cases.

I just freaked when I saw any course listed at $12.  Pieces of crap near me cost close to $100 year round.  Oh well....

TH

[Craig Disher]

$12 is the winter rate - but it started after Thanksgiving and we've had some decent days since then. It's going to be near 60 tomorrow and if there weren't snow on the ground from last week's storm, I'd be on my way.

[Bill_McBride]

Tom H, Gettysburg is real cold in the winter.  Our club when I lived in Northern VA was pretty much closed Nov 1 - March 31 (no handicaps, play with orange balls, etc).   Gettysburg would be colder.  That $12/round is found money for the maintenace which still has to be done during those dead months.  We used to drive 100 miles south, down near Williamsburg, to find conditions warm enough and turf good enough to play on during the January-February months.

[RJ_Daley]

This is just another example of irrational exuberance.  These Harvard Business School hotshots mixed the unusual positions in illiquid realestate assets with their derivitives trading activity, and when the market went south and investors started trying to cash out, they couldn't just peddle their realestate assets to cover the outflow of cash by disinvesting investors.  It just goes to show how idiotic the golf market is, and how insane the securities market is to have golf course properties, that don't even really throw off huge money when they are going good, as hedges under a debt ridden structure against serious gambling positions in the hedge fund.  I  don't have much knowledge of all the intricacies, but it seems to me that a sure sign of the collapse of both golf properties management and stock funds is when they start mixing those businesses, sort of like the old saying of when it is time to get out of the market is when the plumbers start trading options and other exotic derivitives. :-/  

[Mark_Fine]

I haven't read the article and my paper is at the office but I presume some of them will be up for sale?  I highly doubt many will close in the near term.  Can someone elaborate?

[Craig_Rokke]

I've played just 4 of the course--all in PA--Bridges, Royal Oaks, Fox Hollow, and Mountain Laurel. None are overblown
attempts ay being a CCFAD. I think there's been a lot of "peer pressure" over the last decade for these companies to
add to their bloated course portfolios. Plain and simple, I think some of them have just tried to grow too quickly.

Does anyone know how old Gotham is? Did they gradually acquire their courses over many years, or did they, as I'd suspect, do most of their shopping in the 90's?

[Eric Pevoto]

Springwood, in York, PA, was a later addition not on the list above, that was definitely in the CCFAD category and surrounded by residential development.  The complex included a HUGE community center that was tied to the club.  My understanding is the place was heavily burdened with debt.

I didn't see the WSJ article, but I recently read articles in the Harrisburg paper.  Can't find the links now; I may have them at work.  Their troubles seemed to be greater than overextension.  

RJ Daley's statements may be hyperbolic to some extent.  But I think a strong argument could be made that the golf industry and the stock market should not mix.  Being a public company seems to negatively affect management decisions and the industry as a whole.  

[Mike_Cirba]

Oops..missed Mountain Laurel and Springwood, two others I've played.  ML is a Geoffrey Cornish design from the early 70s, and Springwood was built by Tom Clark/Dan Schlegel of Ault&Clark in the 1998.

Nearly all of these courses were "aquisitions" by the Gotham Golf group, but one notable exception might provide an idea that supports the "overextended" theory.

The group had bought the Yorktowne Golf course in York, PA a few years ago, which was a pretty run down public course built in the 40s having trouble surviving in a saturated market.

The group brought in architect James Ganley and designed a completely new 18 hole course over the original, with bent grass tees, fairways, greens, etc., in an attempt to create a mid-upscale course.  The problem is that York PA is not exactly a major metro area, nor a tourist attraction.  There are already about 8-12 courses in the immediate area, including the aforementioned Springwood, which is head and shoulders above the rest in terms of design.  

The area has been trying to market themselves as a golf destination, but seriously...what the heck does one do in York, PA for fun...even after playing some marginally good, reasonably priced golf??

[RJ_Daley]

Having read the article, I don't think I used too much hyperbole.  It appears they aquired the golf course properties as part of their strategy to back up risky hedge strategies with perceived more stable real estate assets.  But, it appears that the golf properties were all over burdened with debt and not turning a profit, and dwindling in wasting assets, like so many other debt ridden newly built courses.  When investors wanted to redeem their shares in the hedge fund, what was thought to be solid assets backing up the leveraged positions, were illiquid and loosing value.  

The angle that GCA participants should take note of is to have some sympathy for what it must be like to be a superintendent for a management company that has as its principle function, the wheeling and dealing of securities and derivitives in a hedge fund.  What kind of clueless golf management guidance or what kind of idiot bosses must have been making key decisions on operating and maintaining golf courses?  I bet Adam would have some thoughts on the idea of some of his ex-collegue traders making management decisons on operating golf courses.

[Eric Pevoto]

Great point taken and couldn't agree more.    Superintendents, golf professionals, club managers, really all the employees who look after the places are effected.  The more remote the influences and decision-makers, the bigger the problem.  How can you get more remote than shareholders?

[SBusch (Guest)]

In the interest of fairness, financial pain in the golf industry isn't limited to management companies.  Municipal courses and member owned private clubs can be even better at losing money.  

Also, so everyone understands, this will have no impact on the employees unless the courses are sold (if they they are sold) and the new owners decide they don't like the super or GM.  

Considering they're going Chapter 11, it seems to me that everyone's in good shape.  You could make the argument that 11 will give the employees some breathing room.