Real Estate Forum - April 2013

NEWS FRONT
Investors Tee Up for Golf Course Deals

CHICAGO—Many real estate sectors went into a steep decline, or even collapse, during the recession. But few were hit as hard as golf courses, and experts say the whole industry has to change.

“Part of it was the economy, but partly it
was a demographic shift,” says Chris Charnas,
principal at the Evanston-based Links Capital
Advisors Inc., a broker that specializes in golf
courses. “No one has as much time to spend
at country clubs.” Even if the economy recov-
ers, younger fathers spend more time pro-
viding childcare or coaching soccer than
they used to, making it difficult for clubs to
attract the next generation of players.
“They’re going to have to downsize; there’s
going to have to be fewer clubs.”
But with many longtime owners looking
to get out, a lot of courses will change hands
over the next few years, and at bargain-base-
ment prices, Charnas adds. A club with 180
acres that might have fetched $5 million in
the previous decade can now get picked up
for $2 million, and sometimes much less.
“That’s a great deal for that much land.”
“We are still seeing a number of distressed
assets coming to market for sale and we
believe this trend will continue for the next
12 to 18 months,” Charnas told GlobeSt.com
in February. He had just completed the sale
of the Woods Golf Club in Green Bay, WI
ple of a club’s net income. But “you can’t
put a net income multiple on something
with no net income,” says Charnas, cur-
rently the unfortunate situation of most
golf clubs. Instead, it has become accepted
practice to peg the value as 1 to 1. 5 times
gross revenue.

Hard times have not hit every Midwestern country club. Charnas says that the established clubs along Chicago’s North Shore seem immune to the industry turmoil. “There is so much money behind them that they’ll be fine forever.”—Brian J. Rogal

Thinking of a Recourse Loan? Don’t Do It
As owners look to get
out, a lot of courses
will change hands over
the next few years, and
at bargain-basement
prices.

and the Silver Spring Golf and Banquet Center in the Milwaukee suburb of Menomonee Falls, and was marketing at least six others across the Midwest. If a viable debt source returns to finance acquisitions, prices might rise, making it less of a buyers’ market. But for the near future, Charnas expects a steady stream of cheap deals, many the result of bank foreclosures.

The sport’s decline even required bro-
kers, buyers and sellers to change how they
calculated the value of a golf course. For
many years, the value was typically a multi-
The owner of a commercial property is exposed to multiple risks of both an opera-
tional and a market/financial nature. Operational risks include the risk of loss
caused by fire and other types of casualty or damage to the property caused by
weather and other events, personal injury liability or risks caused by injury or death
taking place on the property, or from environmental risk related to past, current and
future uses of the property. Fortunately, most of these risks may be mitigated by pur-
chasing and maintaining appropriate insurance coverage.

Jim Conway is principal and the chief credit officer of A10 Capital. He may be contacted at jconway@a10capital.com. The views expressed here are the author’s own.