Dallas Buyer Bags Seven Houston Golf Courses

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From the March 14, 2005 print edition

Dallas buyer bags seven golf courses

Jennifer Dawson

Houston Business Journal

Seven high-profile Houston golf courses have a new Dallas owner due to a divestiture in Texas by a California company.

An affiliate of Dallas-based Arnold Palmer Golf Management paid an estimated $107 million for the local links and nine other courses across the state -- six in Dallas, two in San Antonio and one in Austin.

Seller of the 16 properties on Feb. 28 was American Golf Corp. of Santa Monica, Calif.

The local golf courses include Bear Creek Golf World, Longwood Golf Club, Pecan Grove Plantation Country Club, Southwyck Golf Club, Sweetwater Country Club, Walden on Lake Houston and Willow Fork Country Club.

American Golf, one of the nation's largest golf operators, owns or manages more than 250 courses throughout the United States. In the Houston area, the company still owns Sugar Creek Country Club and World Houston Golf Course, which were originally part of the sales package but scratched by the buyer.

The seven new acquisitions join Tour 18-Houston in Arnold Palmer Golf Management's bag of local operations.

Jim Hinckley, CEO of Arnold Palmer Golf Management and parent company Century Golf Partners Management, could not be reached for comment.

Hinckley was formerly CEO of Dallas-based ClubCorp, owner and operator of nearly 200 golf courses, country clubs, private business clubs and golf resorts.

Evan Johansen, CEO of Redstone Golf Management, says he is glad to see a well-established company like Arnold Palmer Golf take over the local courses, because it is nice to compete against strong operators.

As Texas became less important to American Golf, the firm paid less attention to capital improvements needed at the Houston sites, Johansen says. He expects that Arnold Palmer Golf will improve them into quality courses again, which will ultimately help bring new golfers to the game.

Jack Taylor, president of research firm Links and Land Valuations, believes the change in ownership will likely have a positive impact on the local properties.

"I think it's going to be good for the Houston golf market because I think these courses will get some needed attention," says Taylor, whose firm is a division of The Gerald A. Teel Company Inc.

"The courses will be improved over what they have been in the past," Taylor says. "Some of the American Golf courses were run down a little bit."

With dozens of new golf courses teeing off in Houston during the past few years, some have seen their bottom lines land in the rough.

The sub-par financial performances lead Taylor to question the 16-property golf portfolio's $107 million price tag, which averages out to more than $6 million per course.

"I haven't seen a course around here lately that's worth that much," Taylor says. "The only thing I've heard about (this deal) was they paid too much money for them -- that the revenues that the courses are generating did not justify the sales price."

Finding the financial bunker

Courses in markets outside of the overbuilt Houston golf community may also be challenged to make a profit.

American Golf was struggling financially two years ago when the company was purchased by Goldman Sachs Group and Starwood Capital Group, according to a February 2005 article in Golf Inc.

The trade publication reports that a restructured American Golf is selling off a 23-course portfolio in the United Kingdom and several other properties in the United States in addition to the Texas divestiture.

Jeff Hollinden of Holliday Fenoglio Fowler, who represented American Golf on the Texas deal, says the company's greater concentration of golf courses on the West and East Coasts motivated the sale of this geographic cluster.

Hollinden says the sale was the largest non-resort golf transaction in the United States in at least a year. The Texas portfolio received interest from more than 30 investors, including pension funds and opportunity funds.

"There was a lot of interest from non-traditional golf investors," says Hollinden. "I would say for at least half of those groups, it would have been their first time investing in golf."

Rising prices for some conventional types of properties may be making entertainment venues more attractive as real estate investments.

"Some of the investors around the country are getting priced out of the office market," Hollinden says. "They're looking for alternative types of investments."

Arnold Palmer Golf Management is moving quickly to increase playership by knocking a few strokes off the price at the company's new Houston properties.

After only a few days under new ownership, special discounted rates are being offered to select clientele at three of the golf courses, as well as Tour 18.

jdawson@bizjournals.com • 713-960-5935