Investors Buying Troubled Golf Courses

What some see as a crisis, others see as an opportunity. The New York Times has an article on how savvy investors are taking advantage of depressed golf course prices.

In 2007, the three big players in this area — GE Capital, Textron and Capmark — had more than $2 billion in golf loans outstanding, which were already in decline, Mr. Nanula said. In 2012, that number was just $500 million. Today, what lending is done is extremely fragmented, with interest rates starting about 7 percent and loan-to-value ratios around 50 percent, compared with 90 percent before the recession.

“It would be like if Wells Fargo and Chase suddenly quit making home loans,” he said, noting that lenders left the market for a variety of reasons, not all of them related to loan performance.

But that has opened the door for investors like Mr. Nanula, who raised his $50 million private equity fund in 2012 and has since bought eight golf course clubs and loans. In 2013, the asset management giant Fortress Investment Group began financing Arcis Equity Partners, a Dallas-based private equity firm that specializes in leisure. In March, Tower Three Partners of Greenwich, Conn., took a majority stake in the Heritage Golf Group, an owner and operator of premier private, resort and daily fee golf properties.

Foreign investors are also joining the game. Heritage Est. St. Andrews, based in Luxembourg, recently formed a fund to invest in and enhance undervalued golf properties. Pacific Links International of Canada began acquiring clubs in 2012 and now owns 10 in the United States, bringing its network of owned, affiliate and reciprocal clubs to more than 100 worldwide.

Last September, the world’s largest owner and operator of private clubs, ClubCorp Holdings, went public at $14 a share. The Dallas-based company, which had been owned by the private equity firm KSL Capital Partners, has used the injection of capital to add to its portfolio of clubs and eventually pay off its high-yield debt. It now owns 109 golf and country clubs in 23 states and Mexico. Its shares climbed as high as $19.30 in May and closed at $18.63 on Thursday.