“Even though
per-capita
spending was
down, visitation
remained strong
in the lifestyle
assets sector.”
BYRON CARLOCK JR.
CNL Lifestyle Properties
Lifestyle Assets
The boomer generation is not only affecting medical office, but
it is also having an impact on lifestyle assets, which includes
everything from golf courses to ski resorts. According to Byron
Carlock Jr., president and CEO of Orlando, FL-based REIT CNL
Lifestyle Properties Inc., baby boomers’ entrance into retire-
ment should translate into more travel time and an uptick in
leisure activities. CNL now owns around 119 properties that it
categorizes as golf, ski, attraction and destination retail. “We
made it through the Great Recession without a single bank-
ruptcy or lingering default,” says Carlock of the lifestyle indus-
tries’ hardiness. “Even though per-capita spending was down,
visitation in the sector remained strong.”
But other lifestyle investors were not so lucky. In February,
East West Resort Development V LP LLLP,
an owner of luxury ski resorts, multimillion-
dollar townhouses and a Jack Nicklaus golf
course near Lake Tahoe, NV, was forced to
file for bankruptcy as its real estate sales
plummeted nearly 60% and it was unable to
secure funding to maintain its properties,
including the $100-million Tahoe Club in
Truckee, CA. Resort investors have been hit
particularly hard by the one-two punch of a
sharp economic downturn and collapsing
commercial real estate prices, which have
combined to cut revenues and at the same
time devalue the collateral that might be
used to refinance, relates Trepp’s Andersen.
While not as cost-consuming as ski slopes,
the typical 18-hole golf course can rack up a
$500,000 to $1-million tab per year for maintenance alone, says Mike Kahn, president of
GolfMAK Inc., a golf consulting firm in
Bradenton, FL. And this doesn’t take into
account additional fees such as food and
beverages, staff and building maintenance.
Ideally, Kahn says, investors should look for
at least a 15% return.
For its part, CNL, which hopes to invest
another $300 million to $400 million this
year, has sought to remove some of the volatility inherent in lifestyle assets by putting 90%
of its portfolio into a net lease structure. “Our
investors’ return is protected by the rent payment on the downside and then enhanced by
long-term percentage rent on the upside,”
Carlock says. “But we are not directly tied to
the underlying operations of the asset.”
Carlock is confident in the sector’s future.
Indeed, Warren Buffet’s Berkshire Hathaway
propped up Harley-Davidson Inc. last year
with a $300-million note and Anheuser-Busch InBev NV sold its wholly owned subsidiary, Busch Entertainment Corp., to
Blackstone Capital Partners, a subsidiary of
the Blackstone Group. Meanwhile,
Blackstone has also been busy recapitalizing
Universal Orlando and growing Merlin
Entertainment Group Ltd. and Legoland.
“If you look at the recent entries of new
money into the space,” Carlock says, “this
area has real validity.”
