Golf is growing. Significantly. In the United States, there are 14,000 golf locations and over 48 million people participating in the game — 18 million more than in 2006 — with 13% less supply in the market. As a result of the increased demand, golf course valuations have grown with this interest and the competition for golf course acquisitions is at an all-time high.
So where is the opportunity for ownership for the little guy? The answer is in The Secret Golf Course Market.
The industry has been attracting investors from individuals, commercial real estate, private equity, and family offices. Their deep pockets made a lot of noise in the industry last year with transactions like:
- Bain Capital’s acquisition of Concert Golf, with reports of the deal being $1.3 billion, inclusive of debt.
- Kemper Sports’ strategic partnership and transaction of Touchstone Golf, with purchase price undisclosed, but bringing to Kemper one of the key golf management companies in the space.
- Arcis Golf’s purchase of The Woodlands Country Club, with price undisclosed but by all reports one of the biggest single transactions in our space ever.
- EPR Properties announced a $113 million leaseback transaction on five Dallas golf courses.
These are big deals with big expectations and big valuations that continue to show confidence in the golf market.
The approachable market — the Secret Golf Course Market — exists outside of discussions in high rises about exit value, terminal value, interest rates, internal rate of return, cash on cash return, discounted cash flows, value creation, and run rate. This market is full of people impacted day in and day out by the experience of golf.
They live it. They love it. They need help operating it and they want a great strategic partner.
How do you find a club that is in need of help, might consider a sale, and isn’t on the radar of golf’s big investment players? Start with these three steps:
- Find a club that is the centerpiece of a community and its customer base.This is essential. These stakeholders aren’t driven by deriving maximum value; they are driven by protecting their way of life. If you are the answer to continuing to improve and protect their experience, you will be elevated.
- Find a club under $4 million in annual revenue. The market above $4 million is full of golf’s big investment players. You will find stiff competition, high valuations, and challenging properties. The reality is that any property under $2 million annually becomes extremely difficult to operate and reinvest the needed capital. The sweet spot is in the $2 million to $4 million range. You can make a return, reinvest, and deliver a better experience.
- Find a club that currently reinvests less than 6% of its annual revenues into capital improvements. If a club hasn’t historically invested this amount each year, they are jeopardizing their long-term future. This commitment is fundamental to the long-range planning for any golf property. And, it can be the key for completing a deal. Stakeholders care about the future and investment.
The real secret about the Secret Golf Course Market? It isn’t a marketplace at all. It’s an opportunity for a partnership where stakeholders will cede control of a property for a fair valuation to improve their experience with the right buyer. These stakeholders need to find owner-operators who share their passion for the property and are committed to its continued improvement.
The industry is booming with big business deals, plans, ideas, initiatives, and more, but sometimes it’s as simple as trusting the person you’re selling your property to. That trust is what will develop a fair valuation and a realistic path forward.
