By Scott Kauffman, Contributor, Golf Business
While the Federal Reserve continues aggressive monetary policies to drive down inflation and preserve healthy unemployment levels, more than doubling the federal funds rate to 5.25% in a span of 12 months, financing keeps drying up and the booming residential real estate market remains sluggish from coast to coast.
Coupled with ongoing pandemic-influenced work-from-home/lifestyle trends resulting in some of the highest office vacancy rates in years, commercial office space is another major real estate sector experiencing dramatic declines in investor demand/interest.
One real estate asset class that continues to gain favor, however, appears to be golf courses. At least that was one way to describe a trio of blockbuster deals involving major golf industry companies Arcis Golf, Troon and Invited over a span of three weeks.
Troon, fueled by aggressive newfound capital from private equity powerhouse TPG Capital, Rory McIlroy’s private Symphony Ventures investment fund and longtime investor Leonard Green & Partners, got the deal-making fireworks started with two deals themselves July 4th weekend.
First, news surfaced that Invited and Troon formed a strategic relationship, whereby Troon took over Invited’s entire management business featuring management and consulting agreements across 18 facilities. As part of the alliance, officially announced July 5, Invited and Troon will introduce a program that allows Invited members to play participating Troon-managed resort and daily fee courses, complementing Invited’s portfolio of more than 150 clubs and 200 courses.
Later that day, Troon announced another major acquisition, acquiring Applied Golf Management, a N.J.-based golf and hospitality management company with 13 public and private courses in New York, New Jersey and Florida. Of course, the biggest deal of them all last month was the Arcis acquisition of Pacific Life’s golf portfolio, including three nationally recognized courses: Grayhawk Golf Club in Scottsdale, Ariz.; Angel Park Golf Club in Las Vegas and Tijeras Creek Golf Club in Rancho Santa Margarita, California.
Terms of the deal were not disclosed, but sources familiar with the transaction indicate it represents one of the largest golf portfolio sales ever in the $160 million range. Longtime managing director Jeff Woolson of CBRE’s Golf & Resort Group brokered the transaction with colleagues Tom Berry and Morgan Abbott, giving his Carlsbad, Calif.-based firm nearly $200 million in gross sales through the first six months of 2023.
To be sure, the trophy property in the portfolio was Grayhawk, a 370-acre 36-hole facility renowned for its championship Talon and Raptor layouts and separate world-class practice facilities. Grayhawk has played host to numerous junior, amateur and professional events over the years, including the last three NCAA Men’s and Women’s Division 1 Championships.
By some estimates based on the club’s robust cash flow and taking into account a typical 10-multiple metric being used in the industry, Grayhawk alone might have traded for a value in excess of $100 million, making it one of the largest single-asset course sales ever.
Nevertheless, Arcis is thrilled by its latest acquisitions as it quietly becomes the second-largest golf owner/operator in America.
"These complementary additions to our irreplaceable portfolio of clubs strengthens our unique value proposition within each of these markets," said Arcis founder/CEO Blake Walker. “The respective management teams have done an excellent job of creating a truly differentiated offering for their customers. We are privileged and uniquely positioned to continue our collective positive momentum by implementing our family-centric model.”
As for Woolson and CBRE, he continues to see growing interest and demand for the golf course business, despite macroeconomics and Fed moves affecting so many other aspects of real estate and the mainstream economy.
“I know many describe this rolling recession we’re in and some industries are getting hit harder than others,” Woolson added. “But we’re fortunate that golf is still just raging. And I think you’ve got more and more types of buyers looking into golf.
“I have a call coming up with a private equity group from Los Angeles and they haven’t been in the golf space but they would like to start getting into it. You’ve also got (real estate investment trusts) and others looking at how to get in this space. Basically, a lot of investors are asking, how can we play in this space because really. … the returns can be pretty good right now in the right places. And there doesn’t seem to be any slowdown in the attraction to play golf.”
This article was featured in the July/August edition of Golf Business magazine.