Last week, like others in the golf industry I participated in the Golf, Inc. Strategies Summit at Hilton Head Island, SC. While always great to see old friends and make new ones, I was particularly interested in how industry colleagues view the state of the golf business and where it’s headed. Yes, there are some new courses being developed again, but while I’ve heard those who perceive with great enthusiasm that COVID saved the golf industry, I’ve often felt that we need to do more to achieve sustainable growth and keep the business “in the fairway”.
One panel in particular, featuring Heritage Golf’s Mark Burnett, industry veteran Joe Guerra and ARCIS Golf’s Andy Crosson was most informative. Generally, these guys are bullish on the golf industry and one even indicated that they would “overpay” for acquisitions in many situations while another indicated that in his opinion, “Golf will remain strong for decades”, and shared his observation that growth actually began in 2017 (pre-COVID). Certainly, right now can be characterized as a “buyers” market for golf course properties, with sellers often taking advantage of competition for acquisitions. Concerns raised by this panel included the sustainability of the current surge we’re enjoying as well as sustainability as it relates to water usage and supply, now already a big problem in the more arid regions but expected to reach other areas soon.
There’s always the fear of the impact of the upcoming elections and “where the world is headed” especially with the geopolitical unrest in many areas of the world.
Financing for acquisitions is still a challenge as most of the super-regional banks remain averse to golf loans and smaller community banks sometimes picking up the slack. One panelist hinted at the establishment of a golf focused lending operation, the likes of which hasn’t been seen for some years now, since Textron, Bank of America Credit and GATX, among others receded from the golf industry. Another presentation included a history of interest rates for golf acquisitions showing a recent low of 3.5% to 4.5% in September, 2021 to a high of 7% to 8% in September, 2023 and today’s rates of 6.5% to 7.5%. It also indicated that in 2021 loans without recourse were available, but not anymore.
Most (not all) of the multi-course management companies are currently in growth mode and not looking to divest of any of their properties. Among the issues noted that often drive acquisitions are capital needs (CAPEX) of a particular property and (especially with private clubs) a diversity of activities and amenities. Most are financed by private equity capital and are seeking the higher returns offered by golf courses as compared to more traditional investment property types.
I participated in two panels, moderating one on real estate tax assessments (PowerPoint Slide Deck) with Zack Fleming of Ryan and Ben Blake of Kemper Sports and presenting during the session on Capital Planning, along with moderator Forrest Richardson, ASGCA, Jerry Lemons, ASGCA, Tom Bugbee (CourseCo), Kirk Reese (Club Council) and Randy Hoffacker (Destination Design).
Among the things I learned from my co-panelists on Capital Planning were the most interesting fact that the biggest carbon footprint on a golf course operation comes from irrigation, due to the energy needed for pumping, along with the fact that modern pumps can save 40% on those energy costs and that modern 4+ row irrigation systems can conserve 60% on water, along with the impact of modern turfgrass varieties. The question was also raised as to whether the (often over zealous) green chairman or board member at some private clubs actually and accurately represent the broader membership. This needs to be determined.
Of course, many capital projects include improvements or expansion of other facilities and the “experience” of the whole visit to the club is not something to be overlooked. Hoffacker showed examples of things like club entry areas that can set the tone for the day’s visit.
The last presentation I attended was from Jim Cronk (Golf Guru), who, along with many of the speakers and attendees focused on the term “culture” which most certainly pleased me, as the author a few years ago of “The Culture of Golf – Isn’t it Just a Game?” and is now an issue which is now at the forefront of successful clubs and golf courses.
The golf industry continues to become more sophisticated in its investment approach and time will tell how sustainable to COVID surge really is.