Buyer Sentiment

Investors understand that as a commercial real estate investment, golf competes with all other asset classes for investment dollars. Those who are heavily invested in income-producing properties know that there are plenty of options available for commercial investment. Core assets (Multi-family, Office, Industrial and Retail) are the market trend-setters. Non-core assets, such as golf tend to lag behind their less volatile counterparts. Even as the debt market for traditional income-producing properties began to tighten in 2008, we still saw golf assets trade on multiples of gross income near 2X and cap rates in the single digits in some cases. Currently, traditional commercial real estate core assets are very attractive to investors. Financing is readily available and there is a historically high spread between Treasuries and core asset cap rates. This has put a great deal of downward pressure on non-core assets, especially golf courses. Buyer sentiment is such that a leveraged investment in an income-producing core asset is like a safe layup shot on a tricky par-5. So, what makes an investor want to go for the green in two? The answer is irresistible metrics. In 2011, some courses with negative EBITDA have traded in the 0.5X to 0.7X.  For assets with positive EBITDA we saw courses trade in the 1X to 1.5X thus pushing cap rates to numbers well above traditional core real estate returns which has helped stoke velocity in golf transactions. We are beginning to see buyers who are heavily invested in commercial real estate core assets allocating capital for acquisitions in golf. Nearly 50% of the transactions closed by the NGRPG in 2011 involved principles purchasing their first golf assets. Smart money is betting on what it perceives to be purchasing at the bottom of the market with healthy returns from golf properties on a 5 to 7-year holding period. Buyers are taking advantage of opportunities in the golf market where underwriting courses with unleveraged internal rates of return are in the low 20% range. We believe that investors will continue to buy according to the aforementioned metrics for the next 4-8 quarters or until such time as core asset cap rates begin to compress.

CAPITAL MARKETS / COURSE FINANCING

Like the spring, that is obviously months away, the credit markets continue to show signs of new life forming as the long winter thaws. Banks continue to shed unhealthy assets and warm to the necessity that providing debt is critical to their becoming or remaining profitable. Something they are no longer taking for granted. Trepp reports that banks could be as much as 70% through their loss recognition process on commercial real estate. We see new bank lenders entering the market and rejuvenated bank lenders returning to the market now that the light at the end of the tunnel is clearly daylight and not an oncoming train.

2011 saw the reemergence of CMBS lending in the form of CMBS 2.0, which unfortunately was derailed early in 2011 with a lack of investor appetite for bonds rated below AAA. Currently, the CMBS market appears to be back to where we left off in early 2011 and looks like it could be the darling of the credit market in 2012. That is especially so if you consider the amount of debt maturing this year and the level of debt it will require to renew a significant portion of it. Credit standards for CMBS 2.0 are much more conservative than the original CMBS, especially considering the loss retention aspect, so I do not think we will see CMBS lenders considering “specialty asset types” like golf courses, before filling up enough bonds with their main food groups (multifamily, retail and office buildings).

Life insurance companies expanded their allocations in 2011 and some exceeded their allocations once they realized the high quality of the deals they could do. Life companies hope to lend even more in 2012 than they did last year, but again, they typically limit themselves to trophy properties in large metropolitan markets with low leverage needs.

Improvements in U.S. GDP, employment and consumer confidence will support the notion that 2012 should see more rounds played. In addition, an increase in course sales activity should help stabilize course values, to some degree. These trends should help operators attract lenders to both finance, purchase and refinance transactions. Loan-to-values will remain more conservative than the current favorite, multifamily, but that’s a fact that isn’t likely to change anytime soon. Golf and resort buyers will need to show more liquidity, operational experience and lenders will continue to focus on “global cash flow”. Golf course loan options are improving with local and regional banks as well as credit unions taking up most of the slack. To name a few, PNC and Wells Fargo have recently financed golf assets however, the majority of these loans were credit loans based more on the borrower’s financial strength than the golf asset being purchased. The grass is getting greener on “this side” but we have a ways to go until we can play on it consistently like we used to!

RECENT GOLF COURSE LISTINGS & SALES

The NationalGolf and Resort Properties Group of Marcus & Millichap is pleased to announce the sale of Hammock Bay Country Club in Naples, FL and Palm Aire Country Club in Pompano Beach FL. SteveEkovich, the Director of the National Golf and Resort Properties Group and Chris Karamitsos, the groups' co-founder, represented both the buyers and sellers in the purchase and sale. The two transactions consisted of a total of 72 holes of golf bringing the number of courses sold by the group to 21 in the past 14 month.

As golfcourse brokers specializing in an array of golf courses for sale, The National Golf and Resort Properties Group will soon bring to market multi-course portfolios in Columbus, Oh and Williamsburg, Va. Please visit www.nationalgolfgroup.com for more information pertaining to these quality golf assets.

FEATURED PROPERTY

GOLF COURSE FOR SALE

EAGLE RIDGE AT SPRUCE CREEK COUNTRY CLUB

SUMMERFIELD, FL

Priced at $4,200,000, Eagle Ridge buys investors proven cash-flow at a three-year average NOI before management expense of $438,925. The Ocala market is supported by a bustling retirement population with little other than golf to occupy their time. And with approximately 3,250 houses within this gated, 55+ retirement community serving to fortify customer demand, play has averaged at 117,409 over the last three years, or nearly 60,000 rounds per 18-hole course. That is significantly higher than the national standard of approximately 32,500 rounds per 18-hole daily fee facility, and suggests there is ample room to move green fees north of current rates. 

Located in Central Florida along the I-75 corridor between Orlando and Gainesville, Ocala is known for its horse farms, small-town feel and retirement friendly communities. The city is continually rated as one of America's "Top Five Places to Live" by Money Magazine because of its mild three-season climate, beauty, shopping, restaurants, medical facilities, and low crime. 

From an investment standpoint, Eagle Ridge offers stabilized return from a proven, cash-flowing golf asset that is turnkey day one of ownership. Previously owned by the developer, a golf-centric ownership group can immediately capitalize on significant upside to move green fees north of current rates. Course play is protected by strong local demographics, proximity to the densely populated Villages community, and approximately 3,250 households of 55 and older Spruce Creek residents that play predominantly at their home course, Eagle Ridge. This surrounding strength in housing density from the immediate market area accounted for an outstanding 105,000+ rounds in 2010 from 288 "passholding" members, and $3.4 million in gross revenue. With modest improvements to club operations, this facility has great potential, both immediate and over the long-term, to become one of Ocala's most profitable golf operations.

Contact our golf brokers to learn more about this opportunity as well as other properties available.

Restructuring A Financially Strapped Club

The Crittenden Golf Conference (formerly the Golf Inc. Conference) is three day event for professionals in the golf industry. This event included 9 hours of educational sessions facilitated by the industry’s leading executives and designed to aid in the growth of your business. We have been a consistent participant in panels and this year the National Golf & Resort Properties Group had both of the founding partners participate, the Director Steve Ekovich was on a panel entitled Restructuring the Cash Strapped Club and Chris Karamitsos was on the panel entitled “Moving the Needle”- Increase Market Share- Improve your Property’s Valuation. On Mr. Ekovich’s panel was an Attorney John Theirl, Partner at Gordon & Rees and Darius Hatami, Managing Director, with HVS Golf Appraisal Services. In the session Restructuring the Cash Strapped Course, we discussed how to handle a course that can’t pay its bills or has debt coming due. Chris Karamtsos’ panel was entitled “Moving the Needle”- Increase Market Share- Improve your Property’s Valuation.

If you are searching for a solution to your problem whether it be for golf course brokers to sell your course, refinance it, someone to bring in equity, or discuss other solutions we can help. Below was an outline of the source of distress, how the distress manifests itself and the five options.

Restructuring a Financially Strapped Club

What Is The Source Of The Distress?

• Term On Note Due
• Can’t Make Loan Payments
• Club Revenue Down
• Competition Is Up
• Costs Have ↑ & Revenue Neutral
• Loosing Members
• Weather Event
• Poor Course Management

How Does The Distress Manifest Itself?

• Can’t Pay Lenders
• Can’t Pay Vendors
• Poor Maintenance
• Loss of Club Activities
• Not Paying real estate Taxes
• Loosing Good Employees
  

WhatAre the Options?

Option 1 - Legal – Bankruptcy 7 or 11

• How To
• Advantages & Disadvantages
  - Members
  - Public
  - Owners

Option 2 - Negotiate With Lender

• How To
• Advantages & Disadvantages
  - Owners

Option 3 - Add Equity

• How To
• Advantages & Disadvantages
  - Members
  - Public
  - Owners
  

Option 4 – Refinance

• How To
• Advantages & Disadvantages
  - Owners
  

Option 5 – Sale

• How To
• Advantages & Disadvantages
  - Members
  - Public
  - Owners
  

Case Studies:

• Steve asset sale and loan sale
• Darius

MARCUS & MILLICHAP BROKERS THE SALE OF PALM DESERT COUNTRY CLUB

PALM DESERT, CALIF., September 22, 2011– The National Golf & Resort Properties Group of Marcus & Millichap Real Estate Investment Services, the nation’s largest real estate investment services firm, has announced the sale of Palm Desert Country Club, a 27-hole semi-private golf facility located in Palm Desert, California, according to Steven Ekovich, Director of the National Golf & Resort Group of the firm’s Tampa office.

Steven Ekovich, the lead agent on the asset sale and his team of Chris Karamitsos and Matt Putnam, represented the seller, a financial institution based in California.  They also secured the buyer of the property, a Canadian investment group.  Ekovich said they had about 27 offers on the property but deteriorating course conditions and a city agreement with the previous developer discovered during due diligence that was part of a CC&Rs forced the new owner to spend almost twice what that course would normally need to spend in maintenance. Ekovich said, “That agreement was so onerous, that once buyers really studied the document and met with the city, they decided the risk to proceed was just too high and they dropped out of the process. The buyer we brought to the closing out of Canada, had the expertise to get comfortable with the agreement, the city and the course conditions”.

            Palm Desert Country Club is a 27-hole semi-private golf facility located in Riverside County, California at the heart of the Coachella Valley in sunny Palm Desert. Voted Golf Inc. Magazine's 2006 "Renovation of the Year" after $12.22 million dollars in course and clubhouse improvements,  the former Bob Hope Tournament venue subsequently fell into disrepair and was foreclosed. An original Bill Bell design, this course was the centerpiece of a thriving community 40 years ago during the early boom years of the Palm Springs era. In 2004, Cary Bickler, a renowned architect, rehabbed the course including rebuilding all greens, relocating some of the greens as well as redesigning fairways, tees, bunkers and water features to enhance the golfers’ experience.

#     #     #

With more than 1,200 investment professionals in offices nationwide, Marcus & Millichap Real Estate Investment Services is the largest firm specializing in commercial real estate investment services in the nation. Marcus & Millichap closed 4,302 transactions in 2010, the highest of any commercial real estate brokerage firm. Founded in 1971, the firm has perfected a powerful system for marketing properties that combines product specialization, local market expertise, the industry’s most comprehensive research, state-of-the-art technology and relationships with the largest pool of qualified investors nationally.

www.MarcusMillichap.com

Atlanta · Austin · Baltimore · Birmingham · Boise · Boston · Brooklyn · Charlotte · Charlotte Uptown · Chicago · Chicago Downtown · Cincinnati · Cleveland · Clinton · Columbia · Columbus · Dallas · Denver · Des Moines · Detroit · Encino · Ft. Lauderdale · Ft. Worth · Honolulu · Houston · Indianapolis · Jackson · Jacksonville · Kansas City · Lafayette · Las Vegas · Little Rock · Long Beach · Los Angeles · Louisville · Madison · Manhattan · Memphis · Miami · Milwaukee · Minneapolis · Nashville · New Haven · New Jersey · New Mexico · Newport Beach · Oak Brook · Oakland · Oklahoma City · Omaha · Ontario · Orlando · Palo Alto · Philadelphia · Phoenix · Pittsburgh · Portland · Providence · Raleigh · Reno · Sacramento · Salt Lake City · San Antonio · San Diego · San Francisco · St. Louis · Seattle · Southern Virginia · Tampa · Tucson · Tulsa · Vero Beach · Washington, D.C. ·

West Los Angeles · Williamsburg

Ekovich & Karamitsos to be Featured Speakers at September Crittenden Golf Conference

Steve Ekovich, Director of the National Golf andResort Properties Group of Marcus & Millichap and Chris Karamitsos, the Group’s Co-founder, will be speaking at the Crittenden Golf Conference in Phoenix, AZ, September 25 – 28. Ekovich will be a contributing panelist on the topic, Restructuring The Financially Strapped Club while Karamitsos will be speaking on the topic, Moving The Needle – Increase Market Share and Improve Your Property’s Valuation.  This will be the third Crittenden Golf Conference in as many years that either Ekovich or Karamitsos have been either featured speakers or panelists.

For more information regarding the National Golf andResort Group, golf course brokers and golf courses for sale, visit www.nationalgolfgroup.com