The Week That Was, april 17, 2016

     It appears that Jack Nicklaus is about to take control of a valuable golf property on Long Island, and with it a design commission. The North Palm Beach, Florida-based “signature” architect and a residential developer are in the late stages of negotiations to lease Cold Spring Country Club, which features an 18-hole, Seth Raynor-designed golf course. The course dates from 1947, and Newsday says that Nicklaus is going to “completely redesign” it. No specific plans have been outlined, but Nicklaus told the newspaper that he plans to treat the course “like a raw piece of property,” suggesting that little or nothing of Raynor’s work will remain. Cold Spring is in Huntington, New York, on the grounds of the historic Oheka Castle, and it belongs to Gary Melius, a former VIP who’s now virtually broke and desperate to make this deal happen. Melius’ proposal has won the hearts of the club’s equity members, who’ll each reportedly get $150,000 if all goes as planned.

     China’s government appears to be softening its position on golf. Less than a year after Community Party members were unceremoniously banned from golf clubs (according to the prevailing rhetoric, a golf course was “a muddy field” where dishonest government officials and businessmen “trade money for power”), the official voice of the nation’s anti-corruption agency has, according to Time, “revoked the golf ban.” Here’s the declaration from Discipline Inspection & Supervision News: “Since it is only a sport, there is no right or wrong about playing golf.” The agency didn’t explain its change of heart, but the Olympics are looming and it might be difficult to justify sending players to Rio to engage in a form of corruption. But remember: Talk is cheap. It’s nice for China to decree that playing golf “is not a wrongdoing,” but it would be nicer if the nation lifted its ban on golf construction.

     Regarding ClubCorp’s recent purchase of Santa Rosa Golf & Country Club: A sales price still hasn’t been announced, but a club official told the Santa Rosa Press Democrat that “it will look like a $5 to $6 million transaction” on ClubCorp’s books. Some part of that amount, even perhaps all of it, represents club debt that the new owners have agreed to pay. Santa Rosa borrowed $12 million to build a new clubhouse in 2001. Since then, the club has reportedly “struggled with declining membership” and “felt itself in a precarious position,” and more than 90 percent of its members supported ClubCorp’s offer.

     Gifts of Gab: ClubCorp may be our nation’s largest owner and operator of private golf venues, but golf is by no means its raison d'être. “We don’t like to consider ourselves a golf company,” the company’s CEO, Eric Affeldt, told the Dallas Morning News. “We’re in the membership business, and we make money by creating an environment that would be [appealing] to people that aren’t just golfers.” Affeldt didn’t mention that one of ClubCorp’s corollary lines of business is “Building Relationships and Enriching Lives,” a phrase it’s trademarked.

     Okay, so Donald Trump has small hands. Is that why he has such a jones for 80-foot flagpoles? The Candidate has erected them, in defiance of local ordinances, at his golf properties in Palm Beach, Florida and Rancho Palos Verdes, California, each time complaining that the local elected officials who protested were insufficiently patriotic. “The day you need a permit to put up the American flag,” he once lamented, “that will be a sad day for this country.” Sadly, such an argument holds no water, unless you believe that it’s possible to measure a man’s patriotism by the size of his flagpole. Besides, Trump’s great big love for our nation doesn’t explain why he also put up an 80-footer at his resort in Aberdeenshire, Scotland.

Desolation Row, april 15, 2016

     New Bern, North Carolina. After operating for a half-century, time has run out on Carolina Pines Golf & Country Club. Joe and Jeannette Mospaw closed the slowly deteriorating venue earlier this year, blaming its demise on disappearing rounds and revenues. “Our membership has aged out, and nobody’s joining country clubs,” Joe Mospaw told the New Bern Sun Journal. “Every golf club in the area is having the same problem. We’re all fighting and scratching to get new members.” The Mospaws reportedly bought Carolina Pines in 2001. At the time, they say, it had about 200 members. At the time of its closing, it had 51. The 109-acre property has an assessed value of $1.67 million.

     Tallahassee, Florida. Regarding Killearn County Club, Barton Tuck’s wish has been granted. Tuck has closed Killearn’s North nine, a rarely played track that dates from the early 1980s, and he’s promised to invest the profits he realizes from redevelopment into long-overdue improvements on the club’s original 18-hole layout. The plan had stirred controversy in the club’s accompanying community, for Tuck, the principal of Greenville, South Carolina-based Wingfield Golf, had threatened to close Killearn’s entire 27-hole complex as soon as he could -- that would be in 2021 -- if he didn’t get his way. To mend fences with the home owners he’s alienated, Tuck has guaranteed to maintain the surviving holes until 2061.

     Fallbrook, California. The battle between Jack Lamberson and the members of a group called Save the Fallbrook Golf Course may not be over, but it’ll rage on without Fallbrook Golf Course. Lamberson pulled the plug on the 18-hole, Harry Rainville-designed track in March, claiming that he can’t continue to cover its mounting losses. “I can’t even think about keeping it open anymore,” he told the San Diego Union Tribune. The course opened in 1962. Lamberson thought he’d sold part of it earlier this year, but the sale fell through.

     Birmingham, Alabama. A home builder has agreed to buy Eagle Point Golf Club, which means that the end is near for the venue’s 18-hole, Earl Stone-designed golf course. Highpointe Properties’ plan still needs a thumbs-up from Shelby County officials, but the club’s fate appears to be sealed. “The golf course was going to be sold one way or another,” a Highpointe representative told 280 Living. “Somebody was going to develop it. We’re glad that it’s going to be us.”

     Fairfax, Minnesota. With losses continuing to pile up, Minnesota’s department of natural resources has decided to close the nearly 90-year-old golf course in Fort Ridgely State Park. According to the Mankato Free Press, the nine-hole track has suffered from “years of steep deficits.” It rang up a measly 2,609 rounds of golf last year, generating just $24,186 in revenues -- by my math, about $9.25 a round. Red ink flowed to the tune of roughly $125,000. The DNR hasn’t yet said when it plans to turn out the lights, but it’ll be sometime this year.

     Edgmont, Pennsylvania. More houses are coming to suburban Philadelphia, and they’ll be built on the 190 acres formerly occupied by Edgmont Country Club. The club, which opened in 1963, had catered to what’s been described as “the middle-class golfer.” Its 18-hole course was designed and built by Frank Mariani and his uncle, Nazz Mariani, and had remained in the family until it was sold, in late March. “We worked very hard to keep the course open, but it didn’t work out that way,” Frank Mariani told a local newspaper. The Marianis tried to sell Edgmont to the owners of other golf properties in the area, but they couldn’t find any takers.

     Livermore, California. You can forget about celebrating the 50th anniversary of Springtown Golf Course this summer. Six months after the course’s private-sector operators went out of business, and after giving concerned citizens a last-ditch chance to save it, the city has closed the nine-hole, money-losing track. The property will likely remain as open space.

     Huntsville, Alabama. As it turns out, Sunset Landing Golf Course was only temporarily grounded. The 18-hole track, located adjacent to Huntsville International Airport, was closed earlier this year but has reopened with new private-sector managers. “We’re very excited for this new endeavor and for the potential we believe Sunset Landing offers,” said Mike Parrish, one of the new operators. “Our goal is for Sunset Landing to become a premier public golf course in the Huntsville area.” Of course, the contract that The Birdie Boys II has signed only delays the inevitable, as the Port of Huntsville eventually plans to use the course’s 100 acres for airport expansion.

The Week That Was, april 10, 2016

     McConnell Golf has set out to create a revenue stream in daily-fee golf operations. The Raleigh, North Carolina-based company has leased the Raleigh Golf Association’s 27-hole complex, an affordably priced public venue that John McConnell views as a place where “the average high-handicap golfer can play and feel good about his or her game.” The RGA facility opened in 1929 and is reportedly the second-oldest golf property in the capital city area. McConnell plans to add a McConnell Golf Training Center to the complex, so he can introduce the sport to a new generation of players. “We want to offer lessons at a very reasonable price to people wanting to learn the game,” he told the Raleigh News Observer. McConnell, who’s purchased a dozen private clubs in recent years, called the arrangement with the RGA “a beta test,” an indication that similar ventures may be on the horizon.

     For the second time this year, a survey has determined that those nasty, ill-informed, and controversial statements that Donald Trump is making on the campaign trail may be doing lasting damage to his namesake brand. In January, a division of Young & Rubicam, the big advertising company, determined that “the value of the Trump name is collapsing” among “the people Trump’s business depends on,” which it defined as folks who earn more than $100,000 a year. Now Forbes, citing the results of a survey of 500 U.S. residents who earn at least $200,000 a year, has concluded that the Candidate is “alienating a broad portion of the demographic that makes up the core clientele for his high-end golf course and hotel properties.” Penn Schoen Berland, which did the polling, reports that 53 percent of the respondents are now either less likely or much less likely to patronize a Trump-branded hotel than they were previously, as opposed to the 11 percent who are either much more or somewhat more likely to do so. In addition, the survey’s results indicate that 45 percent of Trump’s prime demographic “would make a specific point of not visiting Trump-branded hotel or golf properties over the course of the next four years,” while only 7 percent would. Despite these findings, it’s worth noting that Trump’s golf properties are still on track to host some of our industry’s most coveted events, among them next year’s U.S. Women’s Open, next year’s Senior PGA Championship, and the PGA Championship in 2022.

     In a scathing analysis, a New York City-based hedge fund contends that ClubCorp’s stock is a risky investment because the self-described “World Leader in Private Clubs” is wildly over-valued. Kerrisdale Capital Management, which is short-selling ClubCorp’s stock, finds much to dislike on the Dallas, Texas-based company’s balance sheets. It complains of ClubCorp’s “billion-dollar debt burden,” its annual losses, the lack of membership growth at its “same-store” properties, and its weak profit margins, which “have been flat or down over the past five years, even as the number of clubs in its portfolio has grown almost 40 percent.” After talking with the general managers of more than a dozen competing private clubs, Kerrisdale has concluded that ClubCorp differentiates itself from its competitors by “targeting lower-end customers and skimping on service,” and it asserts that ClubCorp’s properties “appear to perform worse than average,” with “member attrition three times the industry median,” “lax course maintenance,” and “bad customer service.” Boil it all down, and Kerrisdale contends that ClubCorp’s stock, currently priced at just over $12 a share, should be trading at less than $3.

     For what it’s worth, the Street also recommends that investors sell their shares in ClubCorp. The Street is bothered by ClubCorp’s “deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins, and generally disappointing historical performance in the stock itself.” If you’re wondering how such analyses are playing on Wall Street, ClubCorp’s stock ended last week trading at just over $12. In July 2015, the price was nearly $25.

     My Bad: In last Sunday’s post about ClubCorp, I wrote that the company’s golf and country clubs division generated revenues of $694,680 last year. The number was wrong in two ways. First, it came from the column of 2014 results, not 2015 results. Second, I neglected to measure it in thousands: The number is $694,680,000, or $694.7 million. In 2015, ClubCorp’s golf and country clubs division actually generated revenues of $842.6 million. I apologize for the mistake.

The Week That Was, april 3, 2016

     Like a magician who distracts you with one hand while pulling the wool over your eyes with the other, the National Golf Foundation is trying to convince people that the “numbers remained strong” for golf in 2015 and that “interest in playing golf is at an all-time high.”
     In its just-released report on golf participation in the United States, the Jupiter, Florida-based trade group draws attention to some legitimate positives -- the number of rounds played increased by 1.8 percent in 2015, and 2.2 newcomers gave the game a try -- but by and large it pleads its case by relying on irrelevant data. For example, the NGF finds potential for growth in the fact that last year 95 million Americans either watched golf on television, read about golf somewhere, or “played golf on a golf course or alternate venue.” Seriously, does the NGF think that number of rounds played at miniature golf courses predicts anything about the future of our business?
     What’s more, the NGF is exploiting a trick it’s used previously, which is to highlight the enormous number of non-golfing Americans -- 37 million by the current count -- who are “interested in taking up the game,” perhaps as soon as tomorrow. “The interest is there,” the NGF argues.
     All these distractions are proving their value in some golf circles -- Pete Bevacqua has called the NGF’s report “overwhelmingly positive,” and Golf Digest has decided that “the game appears to be in a healthy state” -- but the report’s key data is cause for continued concern among those of us who count dollars and cents. The NGF now counts just 24.1 million U.S. golfers, down from 24.7 million in 2014 and 25.3 million in 2012. The group dismisses the decline, contending that it’s “confined mainly to those who never really got into the game” and within the study’s margin of error, but the losses can be measured in many significant ways, most particularly by the number of courses that remain on the endangered list.
     What’s more, it’s fair to question the accuracy of the NGF’s count. Even at 24.1 million, the NGF’s number is still substantially higher than the 23 million that Pellucid Corporation submitted for our consideration way back in 2014.
     No matter how much the NGF wants to keep hope alive, statistical sleight of hand can’t hide the cold, hard facts: Golf participation is still shrinking and golf operations are still in trouble.

     One of the golf industry’s most watched companies, ClubCorp, is touting what it describes as “another year of record revenues” and claims to be “positioned for excellent results again in 2016.” Thanks in part to numerous acquisitions (including the 39-property Sequoia Golf portfolio), the publicly traded, Dallas, Texas-based company says that it owned and operated 148 golf properties (and managed 10 others) when it closed the books on 2015. During the year, the company’s golf and country clubs division generated revenues of $694,680 (Correction: The number is $842.6 million), an increase of 21.3 percent over the amount posted in 2014, and if ClubCorp is looking forward to 2016 it’s probably because its new acquisitions haven’t yet contributed significantly to the bottom line. One concern: The number of total memberships in ClubCorp’s golf and country clubs division increased by 4.3 percent, but its “same-store” memberships -- that is, memberships in existing properties as opposed to acquisitions -- increased by less than one-half of 1 percent. No growth there. Another concern: A red flag is always waved when a company admits that some of its financial metrics “are not calculated in accordance with accounting principles generally accepted in the U.S.”

Transactions, april 1, 2016

     Gainesville, Florida. Gainesville Country Club is no longer teetering on the edge of a financial cliff. The 95-year-old club has been rescued by a small group of members who’ve associated themselves with Brown Golf Management, a Bluffton, South Carolina-based firm that describes itself “the leader in golf facility turnarounds.” “We love the club, and to let a 100-year-old club go under was more than we could take,” one of the rescuers told the Gainesville Sun. Gainesville’s 18-hole, George Cobb-designed golf course made its debut in 1963. Years ago, the club had 500 golf members and a waiting list but today it reportedly counts less than 150 members. Citing sources at the club, the Sun says that Gainesville was “on the brink of closing” due to “unpaid bills and declining memberships,” “poor management,” “bookkeeping issues,” and other problems. Brown Golf, which owns and/or operates nearly two dozen golf properties, took a 25 percent stake in the club in exchange for $500,000 worth of promised upgrades.

     Moreno Valley, California. First, the good news: Moreno Valley Ranch Golf Club, which was shuttered last year, is going to reopen, perhaps sometime this summer. The bad news? The club is going to lose its driving range and nine of its 27 Pete Dye-designed holes. At least that’s what Bridge Investment Group intends to do with its recently acquired 112-acre property, pending approval of its plans by city officials. Bridge plans to turn the club’s Valley course into a park and replace its range with 450 apartments. “Having a healthy, viable golf course there will actually increase our land values and property values,” a Bridge official told the Riverside Press-Enterprise. Bridge paid $5.25 million for Moreno Valley Ranch, which by my math is $1.29 million more than Shaco, Inc. paid for it just last summer.

     Lincolnshire, Illinois. Bricton Group and some partners have reportedly paid more than $20 million for the Marriott Lincolnshire Resort, a 175-acre spread that includes a 389-room hotel, an 900-seat theater, meeting space, and Crane’s Landing Golf Course. The 18-hole track was designed by George Fazio and opened in 1975. The seller was Strategic Hotels & Resorts, which had reportedly owned the resort since 1997.

     Galion, Ohio. At a recent auction, an investment group led by John Gleason, a New Albany-based lawyer, bid $700,000 for Galion Country Club. The club, which opened in 1926, has seen better days, as it reportedly currently has just 85 members. “Our goal is to make it successful,” Gleason told the Morrow County Sentinel. The transaction is scheduled to close later this month. Galion describes its original nine holes as “a typical ‘old design,’ ” and it says that Jack Kidwell produced the second nine, in the late 1960s. As part of the sale, Gleason’s group promised to operate the property as a golf course for three years.

     Monroe, Michigan. Gary Campbell and Robert “R. J.” Regan didn’t hang on to Monroe Golf & Country Club for very long. Less than two years after Campbell and Regan purchased Monroe, they defaulted on a loan and watched the 97-year-old private club sell at a public auction. The new owners are Jon Syrocki and his uncle, Matt Syrocki, who appear to have paid $850,000 for Monroe and its 18-hole, Donald Ross-designed golf course. “We’re looking forward to making it more of a family establishment,” Jon Syrocki told the Toledo Blade. “That’s something that’s missing in this town, and we want to connect with the community and become part of it again.” To help make the connection, the new owners plan to open the 179-acre property to the public.

     Seward, Nebraska. The city of Seward has purchased Seward Country Club, a nine-hole course that will celebrate its 50th anniversary next year. The price: $348,750. The venue now operates as Seward Community Golf Course.

     Bainbridge, Georgia. The Bainbridge-Decatur County Recreation Authority has, in the words of a local newspaper, “accepted responsibility, financially and operationally,” for the Pines Golf Course. It may not be a long-term relationship, because the 18-hole course reportedly had just 3,600 players last year (3,300 in 2014) and the authority so far hasn’t made any promises about the future. The Pines, which has been in business since the mid 1940s, is owned by Decatur County.

     Grinnell, Iowa. Grinnell College has purchased Grinnell Golf & Country Club, a venue that was founded faculty members way back in 1899. “The opportunity to pick up 56 acres of beautiful space that we already use for our own golf team, directly adjacent to campus, was something that doesn’t come along very often, if at all,” a spokesperson for the college told the Scarlet & Black. The college hasn’t revealed what it paid for the club and its nine-hole course, but the spokesperson noted that the property has been “in a death spiral” in recent years. There was no debate about the club’s future, for its members reportedly approved the sale by a vote of 107-1.

     Cookeville, Tennessee. Lanny Dunn has given Cookeville Golf Club, a property that’s said to be worth $2 million, to Tennessee Tech University. “We are excited about the ways in which this gift expands the university’s ability to offer students added experiences that makes their Tennessee Tech degree distinctive,” the school’s president told the Cookeville Herald-Citizen. Cookeville’s 18-hole golf course, which has operated since 1947, figures to become the new home of the school’s golf teams.

     East Longmeadow, Massachusetts. Dave Fleury, a Massachusetts-based golf course architect, has acquired his second golf property. At a foreclosure auction in January, Fleury and some partners reportedly agreed to pay $1 million for Elmcrest Country Club, a 110-acre venue outside Springfield that opened in the mid 1960s. Fleury, a partner in Roger Rulewich’s design firm, purchased Crestview Country Club in nearby Agawam in 2012. In a conversation with the Republican, he called the golf business in western Massachusetts “a little bit of a struggle” and explained his purchases as a consequence of “my love of golf.”