By Scott Kauffman:
The so-called ‘smart money’ was back teeing up more golf course-related investments at year-end 2021. For everyone in the golf industry, it’s another sign the overall business seems to be on solid ground heading into the new year.
At the very least, two recent deals by some major private equity firms and capital investors indicate golf facilities and associated real estate remain an attractive asset class for the alpha-seeking capital markets. A case in point was Brue Baukol Capital Partners’ blockbuster acquisition of Kukui’ula, the exclusive 1,000-acre private club community on Hawaii’s island of Kauai.
Though terms of the mid-November deal were not disclosed, sources familiar with the transaction indicate majority owner Alexander & Baldwin and development/investment partner DMB Associates, Inc., sold the “trophy property” featuring a Tom Weiskopf-designed course and numerous world-class amenities for between $150 million to $200 million. Jeff Woolson, managing director of CBRE's Golf & Resort Group, brokered the deal and said it was one of the biggest single-asset sales in his 30-year career that now totals $2.5 billion in course sales.
Perhaps the most newsworthy deal, however, was Troon’s announcement Nov. 15 that TPG Capital, the private equity platform of $108-billion alternative asset firm TPG, signed a definitive agreement to make a “significant strategic investment” in the Scottsdale, Ariz.-based course management leader.
Leonard Green & Partners, the Los Angeles-based private equity firm that gained majority ownership of Troon after acquiring the interests of private equity firm Kohlberg & Company in October 2017, will retain a “significant investment in the business,” according to the joint release issued by the new Troon partners. Making the Troon transaction even more compelling was the revelation that Rory McIlroy’s private Symphony Ventures investment fund was part of the TPG Capital investment.
“It has been a privilege for LGP to be a part of the Troon family over the past four years,” said LGP partner Kris Galashan. “We have worked closely with management to accelerate both growth and job creation. During our partnership period, Troon has grown its employee base from approximately 13,700 employees to 24,400, and the number of managed facilities from nearly 300 to over 620. We are incredibly excited about working with TPG, the management team, and Rory through the next phase of the company’s growth.”
Interestingly, when Kohlberg & Company bought out Troon’s original Wall Street partners/majority owners – Starwood Capital and Goldman Sachs -- golf icon Greg Norman’s Great White Shark Enterprises was the other lead investor in that June 2014 Troon transaction.
Celebrity golf investors notwithstanding, Troon now has a lot more capital resources to take its impressive golf and hospitality growth trajectory to even greater levels. For instance, TPG has significant experience in the travel and leisure sectors, having invested in dynamic brands like Airbnb, Life Time Fitness and Viking Cruises that are capitalizing on the long-term secular trend toward consumer experiences.
“Through its impressive scale and operating expertise, Troon has developed a trusted brand that delivers differentiated value to its clients, creating superior experiences for golfers everywhere,” said TPG Capital Partner Paul Hackwell. “We are excited to be partnering with this great group of investors, operators and experts to help Troon reach its next level.”
Troon chief executive officer Tim Schantz, who has overseen the company’s remarkable growth in recent years since taking over as president in May 2017 from company founder and former CEO Dana Garmany, describes Troon’s new investor group as the “recipe for success for the future." And Schantz says he can envision Troon’s signature golf brand – and its growing racquet sports and food-and-beverage interests – eventually landing in 1,000 locations in this next cycle of private-equity fueled growth. That would nearly double the company’s current management footprint, comprising 640-plus 18-hole equivalent courses in 45-plus states and 30-plus countries and another 610-plus food-and-beverage operations situated in every type of golf facility as well as non-golf recreational destinations.
“Golfers are at the core of everything we do at Troon, and over the years we have built a business that combines deep industry expertise with hospitality-caliber customer service to help our clients create first-class experiences for their customers, members and guests,” Schantz said. “The investment from TPG, a leading investor and business builder, is a testament to the quality and strength of our offering. We look forward to working with them and the team at LGP to continue accelerating our growth while providing even more resources for our valued clients and partners.”
As for the timing of Troon’s third private equity investment in seven years, Schantz explained it by saying, “We are a business that is growing and we’re in an industry that they look upon favorably.
“The way private equity works, they're always looking to grow and evolve and that’s what happened with Leonard Green & Partners,” Schantz added. “And for them to run the process for what we’ve been through the last couple years and have it result in TPG electing to be the investor is incredibly beneficial for the company and very flattering. LGP is a great firm and (lead partner Kris Galashan) is a real avid golfer and understands the business. And he really allowed us to grow in the way that we have.
“The fact that they’re both remaining (as investment partners), positioning us in a way that we are, is going to mean great things. And what I mean by that is it’s great for them. They’re investors and like any investor they would like a positive return on their investment. But a positive return is also going to mean great things for the people who work here (at Troon). It means more opportunity; more resources; more capital. … And that’s exciting.”