Will Any High Profile Courses Go Bust in This Downturn??

[Sam Maryland]

hearing Hamilton Farm has recently frozen initiation refunds and is now offering a membership for $75k with a 6yr pay plan...

...as Chris Farley would have said -- "whoopsy daisy"!

SM

[cary lichtenstein]

I suspect the list will be long and deep before this downtown ends.

Rich guys get tired of covering losses after awhile and private clubs have all but reduced buy ins to 10%.

Resorts will get killed during this time.

[Kalen Braley]

I suspect the list will be long and deep before this downtown ends.

Rich guys get tired of covering losses after awhile and private clubs have all but reduced buy ins to 10%.

Resorts will get killed during this time.

I'd like to think its the resorts, high end CCFADs, and 2nd tier privates that will get hammered the most in these conditions.  I can't imagine there will be too many big issues at the big name privates, even though it could be the case that some of these will start accepting virutually anyone who can write a check.

The resorts will hold on and skimp by, the CCFAD's will get bought up at deeply discounted rates by municipalities, but where will the 2nd tier privates go?

[Jim Nugent]

If Pebble carries lots of debt, couldn't they face big problems? 

[Sam Maryland]

If Pebble carries lots of debt, couldn't they face big problems? 

you bet they could, but it's very difficult to know exactly how their financing is structured these days.

I looked around a bit and came across this article from June of '00 that gives as much detail on the financing as I have ever seen.  the good news for Pebble is that the financing structure looks quite granular and sticky, at least that's the way it was in late 1999 when the deal was struck. 

http://findarticles.com/p/articles/mi_m0HFI/is_2000_June/ai_63026328/pg_1?tag=artBody;col1

quick breakdown of $820mm sale price:

$100mm (Clint, Arnie, Ferris, Ueberroth)
$300mm (spread among 132 limited partners)
$345mm (GE pension fund)
$75mm   (other)
---------------------
$820mm total

but that's just the equity side of it and there's no mention about investment redemption terms or dividends or anything like that.  the article also mentions another "outstanding loan of $400mm" that appears to be separate, and this could have grown or shrunk over the years...hard to tell.

to me it appears that Pebble has large and diverse base of wealthy investors such that the resort will be insulated from any sort of forced sale or restructuring (I guess in a worst case scenario GE could join with the bank, if there is one, to force the issue) but to think that they won't feel the pain of this economy would be foolish. 

SM

(Sea Island is an example of the other end of the spectrum, tons of lumpy bank debt concentrated on a few hands)

[Jerry Kluger]

Hamilton Farms offered one year memberships this year without any initiation fees.  There are other prominent clubs where I have heard the same thing. 

My understanding at Burning Tree was that they never really had a waiting list  - it was more a question of whether you had the necessary support.  Being an all male club in the DC area makes for some spousal and PC issues that many men would have a hard time dealing with.  (Present company included)

[Ed Oden]

Sam, just an FYI, the facts and numbers recited in the article regarding the financing of the Pebble Beach Co. acquisition are not entirely accurate.  Plus, that financing was replaced a year or two later by a new deal.  And that replacement financing has in all likelihood in turn been replaced and/or modified several more time since then.  So I doubt the numbers referenced have any basis in current reality.  I don't know what the current financing situation is (nor could I say so if I did).  But I wouldn't want anyone to make assumptions about the state of affairs there based on inaccurate and outdated information.

Ed

[Sam Maryland]

Sam, just an FYI, the facts and numbers recited in the article regarding the financing of the Pebble Beach Co. acquisition are not entirely accurate.  Plus, that financing was replaced a year or two later by a new bank group on different terms.  And that replacement financing has in all likelihood in turn been replaced and/or modified several more time since then.  So I doubt the numbers referenced have any basis in current reality.  I don't know what the current financing situation is (nor could I say so if I did).  But I wouldn't want anyone to make assumptions about the state of affairs there based on inaccurate and outdated information.

Ed

hence my "this could have grown or shrunk over the years...hard to tell" comment. (referring to the $400mm bank loan mentioned in the article)

but I suspect the composition of the $820mm is largely unchanged.  are you aware of any info to the contrary?  the article seemed to have pretty good detail in this area.

thx.

SM

[Ed Oden]

Sam:

My involvement and knowledge only relates to the original deal back in 1999.  While I agree that the article generally has good information, some of the numbers are off.  More importantly, however, is the fact that the original financing arrangement is no longer in place.  It would not surprise me at all if the current arrangement is vastly different (positively or negatively) than the original.  After all, we are nine years (which seems like an eternity, at least to me) removed from those events.  Regardless, as you point out in the last paragraph of your post #29, while the Pebble Beach Co. is certainly not immune to the downturn, I suspect they will weather it better than most.

Ed

[John Moore II]

Going with what someone else said, my first thought about a high profile course in potential danger was Liberty National or even Bayonne. But I have a feeling that the investors in those are fairly set, given the amount they had so spend just to get the doors open. I think people are also forgetting the fact that Beechtree has all ready gone under, sold. But most courses, at least the old, established ones, will be OK and come through.

[brad_miller]

I wonder how a few of the "GCA loved" recently opened and soon to open projects are going? I think the idea of paying $50,000 or much higher for an out of the way destination club (no matter how good and fun) that many times is someones 2-5th membership is a thing of the past. How many of these projects don't have 100 members yet and have been open for a couple of seasons? When will someone try and make do with such a club with a much cheaper and larger membership, which today still might not work.

[Sam Maryland]

more evidence, Palmira in Fla and a few others:

http://money.cnn.com/2008/10/24/news/economy/florida_golf_courses.fortune/index.htm?postversion=2008102413

[W.H. Cosgrove]

We had/have a public course in my area that was surrounded by housing, it sold a few years back for $18 million based on its real estate value.  The ensuing Battle Royale continues as locals realize that the "park" in their back yard could well become their neighbor in their back yard. 

Which brings me to the question; high profile failures is one thing, but if the middle level of clubs is decimated, will that cause problems for higher end clubs in the future? 

My hypothesis is that high end members begin as mid level club members and then move up to more exclusive haunts as their economice situation improves.  Without the feeder system, will the high end clubs begin to suffer?

Presently, we have 4 privates in the direct local area and several more further away.  I find it difficult to believe that all will survive a long economic downturn.  Exacerbating the problem would be debt piled up during remodels and expansion during the 90's when the future looked very bright.  Have other parts of the country seen an acceleration of failures of clubs and what kind of clubs have failed?  Do you foresee more as the season changes and the hangers on finally resign their memberships due to personal financial issues? 

A good friend quietly left our club yesterday after having lost his Real estate mortgage job. 

[Voytek Wilczak]

Going with what someone else said, my first thought about a high profile course in potential danger was Liberty National or even Bayonne. But I have a feeling that the investors in those are fairly set, given the amount they had so spend just to get the doors open. I think people are also forgetting the fact that Beechtree has all ready gone under, sold. But most courses, at least the old, established ones, will be OK and come through.

Don't know about the situation at Bayonne, but at Liberty National the clubhouse construction is proceeding fast and furious. Fireman retired with $1 billion, which could be considerably less or considerably more now, depending on his investment choices.

[John Moore II]

Good to hear that Liberty National is doing well. My concern was with the amount of money pumped in initially. I was not aware that the owner was so loaded with cash.

[hick]

I grew up on Thorny lea in brockton as did the firemans. I went to school with pauls son dan. Mr fireman did very well with reebok .The firemans were very close to buying the patriots before the krafts. I cant say enough good things about them and hope all goes well. It looks like a risky time for a course like that.

[Sam Maryland]

Pebble can accomodate your 22 person group TOMORROW with consecutive tee-times starting at 7.50am...unheard of.

http://www.pebblebeach.com/avail.asp?nname=Pebble%20Beach&ntype=golf&ndate=10/31/2008


How long can the $495 rate hold up?  (+$35 if you want a cart)

SM

[Sam Maryland]

Pebble Beach can accomodate your 16 person group tomorrow between 7.40am and 8.40am.  Other times available too...

[Sam Maryland]

consecutive tee-times at 7.30, 7.40, 7.50 and 8.00am are available to accommodate 16 people on Pebble on Saturday 11/29...FYI.

[Gary Slatter]

LOch Lomond and related courses, but I think this started before the Downturn.

[Jed Peters]

For the first time in nearly 50 years, Orinda Country Club doesn't have a waiting list.

FWIW, I've heard this club described as the "Cypress Point" of the east bay. More because of it's exclusivity than course design.

[TX Golf]

Jed,

Cypress Point and Orinda in the same sentence? Sound like a crime!!! Anyways I heard the same thing regarding the waiting list. While it is a great social club, the golf course doesn't match up to the rest of it.

[Jed Peters]

Jed,

Cypress Point and Orinda in the same sentence? Sound like a crime!!! Anyways I heard the same thing regarding the waiting list. While it is a great social club, the golf course doesn't match up to the rest of it.

It's a pretty good old course, especially if you're into old-time architecture.

But as for a "social" club, yeah, it's without peer in the east bay.

I spent many a day there eating grilled cheeses and hot dogs in the summers....

[Michael Wharton-Palmer]

I agree with Brad Miller...those kinds of courses are the ones that I worry about.
Unless deep pockets are behind the initial investment,  that 50 k  or so joining fee for a cousre you may play once or twice a year will suffer the most.

[Sam Maryland]

Sam,

There are always a few courses that maintain that stance and kinda need to.  PB may be one of them as the King of US golf resorts.  Once they start discounting it never ends, but it may end their image as an icon of golf.  That said, I can for some reason easily imagine Greenbriar, Pinehurst and others cutting rates, probably with caveats so it doesn't look like they are cutting rates across the board.

just a heads up in case anyone wants to take advantage of these new rates...this info was sent out in an email on the 15th.

Limited Time Golf Offers for NCGA Members from Pebble Beach Resorts
December 15, 2008 – January 31, 2009
 
Pebble Beach Golf Links - $375 +  free cart...Represents a 29% Discount. 

The Links at Spanish Bay - $135 +  free cart...Represents a 54% Discount. 

Spyglass Hill - $185 +  free cart...Represents a 49% Discount. 
 
(800) 654-9300...Ask for the NCGA Special

(hotel stay waived in all instances)