[Mike_Young]

Mike,

Am I understanding your last post correctly? You're describing housing developers who want a Golf Course as an Amenity for their housing units so they basically want to partially subsidize its construction so someone can afford to make an operating profit by running the course. Is that it?

If so, it would argue that any "mom" or "pop" who wanted to be in the golf-course operation business could probably do so by finding such a developer. Or is it really that difficult to break even operating a housing-development course even if you can potentially build it for "just" a million bucks or so over the developer's subsidy?

Brent,
The developer wants to be sure the person doing it has done it plus he wants to be sure you build the cliubhouse etc he wants so that is where the subsidy comes in.....now he can also send you membership fees and dues so it works if done properly....

[Mike_Young]

IMHO golf is mom and pop...will always be mom and pop and if we continue to make it a corporate experience it will continue to lose.....

Is Mike Keiser a multi-course owner or a Mom & Pop?

From my admittedly ill-informed viewpoint, it seems that the experience of Mr. Keiser and Bandon Dunes has nothing to do with Mom & Pop and yet is a model for future golf investors.  He appears to have good taste and golf sense AND a need to get a decent return on capital.

There is always going to be a spectrum of market participants, as in any business.  You can choose to work with real estate developers in the Caribbean or not--I imagine that may limit your income...but only you can decide if that's OK.

We the consuming public will also decide if we want to buy in to mega-developments in Los Cabos.  What's wrong with having variety in the marketplace?  

The suggestion it is killing the game is a bit shrill IMO.

Eric,
I agree that MK is good for the game and I was not speaking of such...I am talking about the everyday golf course being purchased and run by these conglomerates with the only intent to show investors a number on paper.....
I still don't think it is shrill....JMO
Mike

[Chris Cupit]

Chris Cupit, to me, your comments sound like the modus of "Flip This House" only these guys flip courses.  If you are correct about buying stressed courses in down economic times or mismanaged courses, then buffing them up for the sole purpose to flip them for a profit, I must ask... Who is then buying them all buffed up, puffed up, priced up and passing it on to the local golfer?  Is this how greens fees and expectations went over the top?

To the extent that all of us who create a company with the intent to sell it at some point then I guess we are all "flippers".    Nothing wrong with it but it can't help but effect how you view the business of a golf club.

Again, I am not saying McGolfcourses are always bad.  They can do a very good job and in some cases have brought much needed professionalism to the industry.  

[Chris Cupit]

As to the buyers--Japanese in the 1980's, REITS and today private equity groups.  

Certainly the days of paying $800MM for Pebble Beach are over but the market will come back and when it does I think you will see a lot of the multi course owners agressively marketing their portfolios to these big money groups capable of paying for 30 and 40 courses at a time.

Right now I see some of the multi course guys with access to the capital trying to accumulate some of these 30-40 course size groups--pretty sure their exit strategy is to sell within the next 5-7 years if possible.  

[George Pazin]

George,
Land cost is not a problem.....I have two right now where the developer will give the land and 1.5 mill if someone does the course...all they want is housing.....no one pays for land and in most cases can demand more than just the land.....
Mike

Wow, that is fascinating, thanks for sharing. (serious post, no sarcasm intended)

[Bruce Katona]

As someone who has/works for two multi-course owners, the logic behind multiple course ownership is different in each case.  With my former employer, they are a company who specializes in turning around distressed assets, stabilizing the cash flow and repositioning the asset in the marketplace for sale to third parties.  

The current employer is in the marketplace for the long term and derives income from the NOI (Net Operating Income) of the portfolio.

Neither model is right or wrong and both work successfully.  As the saying in the business goes, the best buys are from a group of doctors, dentists, CPA's or business buddies who decided they wanted to play in the business of sports.  The barrier to entry in the sports market is lower in golf than almost any other sport (look at the price of any major league sports franchise). Once they realize running a golf operation is running a business (not a hobby) most bail out at a loss.  If you run the business like a business, it can be quite enjoyable and perhaps profitable.

As mentioned above by my friend Archie Struthers, grass is much easier to grow than customers.

[archie_struthers]

 


Nice to hear from Bruce Katona, who probably has as much insight into this question as anyone,given his resume.

For profits have to withstand the next decade, see how the housing market shakes out, in other words how many golf courses get bulldozed .......and....more than ever, if government regs/taxes will ease.

In NJ they are now taxing memberships for the first time,and government owned course compete right next door to tax paying privately owned clubs.

Twisted Dune, one of the golf course the aforementioned Mr Katona helps operate, is right down the street from a government run and owned muni-that receives financial assistance from the county, pays no real estate taxes and was given a free liquor license.

Fortunately, Twisted Dune is of superior quality (I'm prejudiced LOL)  and better run, because they have to be. The muni has less need to make a profit and discount fees accordingly to help the numbers, further eroding the privately owned entities margins.

The permitting issues/rules are looser for the govt. run/built  facility.  That's just the way it works!

Lately, the municipals are falling out of favor, so the rush to get in the  golf business has slowed, a trend that hopefully will continue. I'm just anti government subsidy to the detriment of  private ownership.

Again, the strong will survive and get better at what they do if true competiton is allowed, that's the scary part of ownership these days.

[RJ_Daley]

...As the saying in the business goes, the best buys are from a group of doctors, dentists, CPA's or business buddies who decided they wanted to play in the business of sports....

So, might that suggest that Dismal River will eventually be on the auction block?  Not to pick just on DR (it is just more high profile than many) that model is probably found all around the country.

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