Okay, we have all heard how golf is dead, the young people won’t play, it takes too long to play a round, customer service is gone, no one has money and hundreds of courses are going to close. Let’s say all that is true. In 20 years golf will still be around, there will be golf courses that make money and we will be looking back on 2010 as the turn around year. Yes there are problems, but is there an industry without them? The auto industry has them, the tech industry has them, the healthcare industry has them, and the manufacturing industry has them. You know what we have that they don’t? A competitive sport that four guys or four gals can play away from the office, away from the kids, way from life’s stresses while enjoying company of friends. How many of us love to play with our friends? Not many of us at 50 years old can play basket ball, football, lacrosse etc., to get our competitive fix, but we can play golf. Our kids will find that out too. The sandwich boomers will find that out and the 79 million baby boomers that are retiring over the next 20 years, already know this. The boomers will figure a way to get back on the course. As the economy begins to recover, boomers will rearrange how they spend money and they will come back. Do we need innovation? Yes. Do we need to close courses? Absolutely. It is good for any industry to close non- performing functionally obsolete stores.
With all this being said, I have a fervarent belief in the resiliency of both our golf industry and the American economy. I visited 16 courses in Maryland, Delaware and Pennsylvania recently. Most all of the courses said rounds were up in 2010. Wasn’t that the worst winter and worst summer on record? The first half of 2011, most clubs we talked to in the mid-Atlantic and South reported memberships are up, play is up and revenue is up. People are coming back to golf. I think it is time to ask if you do believe in golf’s long term viability as a business model or not. If you believe the news papers, the trade rags and industry pundits, you need to be thinking about moving out of the golf business.
So are you a “Contrarian or Lemming? In December of 2000 everyone was telling me their company was going public, they were getting stock options and would be worth millions. The cab driver was telling me to buy CMGI, invest in Yahoo etc. Subsequently, we endured the 2001 stock market melt down. When the cabby and everyone else you know are telling you to get in, you need to sell and get out. In January 2006, the guy behind the counter at Starbucks was telling me how he was flipping houses. Everyone was flipping houses. I have been in real estate for 25 years, and I wasn’t flipping houses, too high risk. In 2007, we all experienced the beginning of the most serious real estate melt down in recent history. How is all this applicable? These were lemmings, which listened to the news, read the newspapers and followed industry pundits blindly and they got slaughtered. “They all fell off the cliff”. Sam Zell, Donald Trump and Berkshire Hathaway sold their real estate in 2005, when everyone else was jumping in. They are three of the most well respected contrarians in real estate and the stock market today. In the recent Golf Inc. publication, the cover page showed Donald Trump’s picture and the caption said” The Most Profitable Man in Golf”. Guess who is buying golf courses?
Years from now, 2011 will be looked at as one of the best markets in history in which to buy a golf course. Some of the courses that will hit the market will be and have been high end courses that would never trade and may not again, until the next major cycle. What that means to a buyer/investor is they can buy a great course; they would otherwise never have an opportunity to acquire, if it wasn’t for this financial crisis. Going-in yields are high, you are buying at well below replacement costs, you are buying on income that is depressed, you are buying in a down cycle, and your leverage, if you can get it, is very low. This is the safest time to buy. If you have access to cash, financing or some kind of capital, you should be buying like crazy.
We recently marketed an asset in Northern California that had 17 offers, a course in southern California that had 24 offers, a course in Maryland that closed with $100K hard at LOI and $1,565,000 hard at signing of the PSA and no contingencies. Our
golf courses for sale and recently closed courses are on our website
http://www.nationalgolfgroup.com.The skeptics out there would say, well the courses must have been under priced. That would be a valid argument if the professional golf buyers, management companies and major owners did not make offers severely under the listed price on these assets. There are hundreds of buyers for golf courses, people that believe in golf’s future, do you?
As
golf course brokers, we are more excited about the future of golf then we ever have been. We have talked to 4-5 new equity funds, in the last six months that want in to golf. We have international buyers that want a piece of our golf market. In the last nine months we have closed 17 golf courses. They range from very high end courses that include master planned communities with excess lots and commercial land to small, one-off daily fee courses. We believe this is just the beginning. We are contrarians, we believe now is the time to double down. Are you a contrarian or a lemming?
