A Newport Beach-based private equity firm has kicked off a $50 million fund to acquire distressed golf courses across the U.S. with the purchase of a country club outside Washington, D.C.
Concert Golf Partners paid $4 million for the Country Club at Woodmore in an all-cash buy that included payments for the property and a loan from Buffalo, N.Y.-based M&T Bank, a potential template for future deals.
“For us it’s opportunity to invest where most people are not,” said Concert Golf Managing Partner Peter Nanula. “We’re looking for golf clubs all over the U.S.”
The attorney-turned-financier honed his approach to the golf business from 1993 to 2000 as the founding chief executive of Addison, Texas-based Arnold Palmer Golf Management.
He grew the company’s portfolio to some 30 golf clubs—including Strawberry Farms in Irvine—that brought it more than $100 million in annual revenue and 2,000 employees. The operations were sold off in several transactions at undisclosed prices in 2000 and 2001, according to Nanula.
Industry sources pegged the total price of the deals at more than $200 million.
Hiatus
Nanula then took a decade hiatus from the golf industry, concentrating on private equity.
He blended the two in 2010, when he established Concert Golf with former colleagues from Arnold Palmer Golf. Financial backers included Seattle-based Freestone Capital Management, which handles $2.5 billion in assets for wealthy families.
Nanula had worked with Freestone Senior Partner James Rooney earlier in his career at the New York-based private equity firm Warburg Pincus, which counts more than $30 billion in assets under management.
Freestone was instrumental in lining up potential financiers with experience in hedge funds, real estate, and various alternative investments for Concert’s initial fund, Nanula said.
A small portion of the fund’s investors are local.
Concert made its first buy in July 2011, acquiring the Golf Club of Amelia Island off the northeastern coast of Florida.
Two months later Golf Inc. Magazine named Nanula No. 14 on its annual Most Powerful People in Golf issue.
Concert made its second buy a year later, purchasing Heathrow Country Club in Orlando.
The firm, which now employs about 200 people, is targeting established courses near urban centers with more than $3 million in annual revenue.
Woodmore, located 15 miles east of the Capitol in Maryland, hit both those marks. The recently purchased club, which features an Arnold Palmer Signature golf course, was founded in 1923. It hosted a number of major tournaments in decades past, including the U.S. Women’s Open and the National Capital Open in the 1940s.
The industry, in terms of rounds played, is on upswing, increasing 7.4% through the first nine months of 2012, with every state marking a gain, according to the latest report released by the National Golf Foundation.
“We think the golf business is stable,” Nanula said.
The industry has become somewhat of a sand trap for lenders.
The three largest golf course and club lenders—GMAC, GE Capital and Textron Financial—were battered in the recession, prompting them to largely flee the links.
“It was hard to find a loan to buy a golf course,” Nanula said. “They all stopped making loans.”
Loans to buy golf courses are handled much like home mortgages. A buyer issues a down payment, typically 20% to 40% of the total value, and then negotiates loan terms with a 20-year to 30-year amortization.
Downturn
Lending was steady at about $2 billion a year prior to the recession. The downturn and pinched lending led lenders to take over some properties.
“There are a lot of banks who made loans to golf clubs, and they don’t want to be in the business anymore,” Nanula said. “Golf can be very a nichey, unfamiliar asset.”
That is where Concert sees opportunity, scooping up distressed loans on discount, restructuring them or extending the terms.
“We want to make it work with our members,” Nanula said.
