The Week That Was, july 16, 2017

     Apollo Global Management describes itself as a “contrarian” investor that’s willing “to invest in industries that our competitors typically avoid.” Maybe that’s why it’s agreed to pay $1.1 billion for ClubCorp, and to assume the liability for the $1 billion in debt that’s currently being shouldered by “the world leader in private clubs.”
     Apollo has no experience in golf, no record of success or failure. Over the years, it’s created various investment vehicles that today manage assets worth roughly $200 billion, among them ADT Corporation, Redbox, a grocery chain, and a telecom company. ClubCorp is its first true golf acquisition, although last year one of its investment funds bought Diamond Resorts International, a time-share owner and operator that has some golf properties in its portfolio, among them Ridge on Sedona, in beautiful Sedona, Arizona, and Mystic Dunes Golf Club, outside Disney World in Florida.
     ClubCorp’s prospective sale may help to persuade other private-equity firms to make golf investments, but it isn’t a watershed moment for the golf industry, just as KSL Capital Partners’ 2006 acquisition of ClubCorp ultimately wasn’t. Apollo’s purchase doesn’t signify any particular faith in golf from Wall Street or offer any fresh optimism about golf’s economic prospects. It simply indicates that a colossally wealthy private-equity firm has decided to make a monumentally insignificant investment in a company that shows some upside potential.
     News of the sale comes as a surprise only because several months ago ClubCorp declared that it was no longer for sale. The joke, alas, was on us. Almost certainly, ClubCorp’s announcement was a diversion created to give it space to negotiate with Apollo.
     Without question, ClubCorp is about to get a makeover. Two of Apollo’s three principals, Leon Black and Joshua Harris, were key decision-makers in the mergers and acquisition division of Drexel Burnham Lambert before they created Apollo. They’re experts in corporate “restructurings,” which means that in coming months, to reduce debt, they’ll look to sell some of ClubCorp’s poor-performing properties. They’ll also streamline ClubCorp’s operations, which means that expenses will be trimmed and people might be laid off. In a few years – say, three to five – ClubCorp’s balance sheet will look better than it does today, and they’ll look to cash out and deliver value to the investors to whom they ultimately answer.
     To be sure, ClubCorp has likewise been chasing value, in the form of short-term profits, ever since it went public. Some would say that it failed. But in a press release, its chairman said that the sale to Apollo “achieves our goal of enhancing value for shareholders.”
     So is ClubCorp’s sale a sign of failure or success? Sometimes it’s hard to tell the difference.

     For the fourth time this year, Concert Golf Partners has added a property to its golf portfolio. Peter Nanula’s Newport Beach, California-based investment group has acquired Indian Spring Country Club, a 36-year-old, seniors-only venue in Boynton Beach, Florida. The Palm Beach Post reports that Indian Spring’s financial situation has been “uncertain” for several years, and a club official said that it didn’t wish “to wait until disaster hit” before considering a sale. The purchase price hasn’t been disclosed, but the club’s members reportedly approved the sale by a margin of 221-2. Indian Spring, the centerpiece of a gated, 800-acre, 1,900-house community, describes itself as a place where “you can live the life you’ve always dreamed about, surrounded by friends who make you feel right at home.” Such a life includes the opportunity to play on a pair of 18-hole courses, both of which were co-designed by Bruce Devlin and Robert von Hagge. Indian Spring is Concert’s fifth property in Florida. It joins Legacy Club at Alaqua Lakes in Orlando, Heathrow Country Club in Orlando, Carrollwood Country Club in Tampa, and Golf Club of Amelia Island on Amelia Island, in greater Jacksonville. With the purchase, Nanula’s company owns 16 properties in 10 states.

     During the presidential campaign, when Donald “the Candidate” Trump was fouling political discourse with derisive remarks about Mexicans, Muslims, the handicapped, and women, the United States Golf Association came under pressure to strip this year’s U.S. Women’s Open from Trump National Golf Club Bedminster. Sadly, the USGA declined to do so.
     “We have not wanted to get involved in politics, presidential politics,” the group’s executive director, Mike Davis, said in 2015. He added: “It’s a complicated matter, and we want to get it right.” 
     As it turns out, Davis’ comments were an excuse, not an explanation. The truth is, Trump had threatened to sue the USGA if it relocated the event. “We can’t get out of this,” Davis told the USGA’s executive committee, according to Christine Brennan of USA Today. “He’s going to sue us.”
     Davis hasn’t confirmed Brennan’s report, but he hasn’t denied it. So now he must answer other questions, staring with Why was the USGA so feckless? After all, the PGA of America took the Grand Slam of Golf from Trump’s course in Los Angeles. The Scottish Open, which had been virtually signed, sealed, and delivered to Trump’s resort in Aberdeenshire, found another home. And, according to a British newspaper, the R&A had “privately decided that [Trump’s] reputation is now so toxic” that Trump Turnberry can no longer host the Open Championship.
     Golf’s institutional leaders had been warned. They should have known that their famously litigious partner would take them to court, if necessary, to get what he wants. If there was a clause in the contract for the Women’s Open that gave Trump the right to sue, the USGA should never have signed on the dotted line.
     Even so, however, the USGA could have called Trump’s bluff and allowed the matter to follow its legal course. By doing so, the USGA, the sponsor of the Women’s Open, would have proved itself to be a defender of women’s rights. It could have fought the good fight. No matter how the courts ruled, it would have come out a winner.
     It’s possible that the golf industry will be smarter in the future. Now, finally, everyone in golf should understand what we’re dealing with. Trump isn’t interested in doing what’s good for golf. He’s solely interested in what’s good for him. Time and time again, he blackens the reputation of fundamentally good people.
     Maybe now we can finally end this relationship.

     Chinese investment in Africa is growing by leaps and bounds, as government-supported development groups capitalize on U.S. indifference and expand their global reach. The latest: An entity called Guangdong New South Group, Ltd. has secured permission to co-develop an industrial park, AEZ Pearl River, outside Eldoret, in western Kenya. The forthcoming park has been master-planned to include sites for factories, a science and technology center, a university, a convention center, and other economy boosters, and in the final phase of construction New South expects to build houses and a golf course. New South and its Kenyan partner, Economic Zones, Ltd., recently staged a ceremonial groundbreaking, and they could begin building for real before the end of the year.

     Pipeline Overflow – Construction has all but wrapped up at TPC Colorado, a club in Berthoud (it’s north of Boulder) that’s scheduled to open next summer. The property’s 18-hole, Arthur Schaupeter-designed layout is said to be “the first new golf course built in Colorado this decade” and the PGA Tour’s only venue in the Centennial State. In 2019, the club is expected to begin hosting an annual event on the Web.com Tour. . . . Construction has also been completed on the Nest at Friday Harbour, a Doug Carrick-designed layout in Innisfil, Canada, a town roughly an hour’s drive north of Toronto. The 18-hole course, the centerpiece of a long-delayed, 590-acre resort community, is scheduled to open next spring. Carrick told Golf Course Architecture that the course will be walkable and provide opportunities for three-, six-, nine-, 15-, and 18-hole play. . . . Now open for play is Irie Fields, a 100 percent organic golf course at the Kittitian Hill resort community on St. Kitts. The course, co-designed by Ian Woosnam and Gary Johnston of European Course Design, will, according to its publicists, “transform and elevate the game of golf in the Caribbean” and represent “the future evolution of golf.” We’ll see.