Charles Greville-Heygate BSc FRICS of Strutt & Parker incorporating William Hillary Leisure and Hotels reviews the golf property market of 2002
With a total of only twelve courses sold in the year, 2002 saw the smallest number of transactions since the first analysis was published in 1995 by William Hillary Leisure and Hotels, now incorporated by Strutt & Parker. Five courses were sold for in excess of £2 million, six courses for between £1-2 million and one for less than £1 million. The estimated total value of all the sales was under £30 million.
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Whilst the market was still active the length of time taken to complete a sale is steadily increasing. Many buyers are taking longer to put together their bids and, once an offer is accepted, the due diligence process is taking longer too.
This delay may therefore distort annual figures. The Shropshire Golf Club and Hill Barn Golf Course, Worthing, sold by Strutt & Parker took place in January. If they had exchanged sooner, the number of sales would have been 14 with a total estimated value of £32.8 million. These figures are then much more comparable with the sales in previous years.
There were no lettings of golf courses in the year. This was despite attempts by a number of operators to do deals. We expect more lettings to take place during 2003.
50% of Sales to Small Multiples
One of the noticeable features of 2002 was the number of existing operators with one, two or three courses that purchased an additional course during the year. Of the twelve sales, six were to this group, four to lifestyle buyers and two to local buyers.
No large operator purchased a course during 2002. This is the first time that this has happened since our research began.
Values Plateau
As forecast last year values appear to have reached a plateau with the exception of the poor courses where values have continued to drift downwards. The range of offers received from interested parties remains very wide with the result that the absence or presence of one or two buyers can have a significant effect on the price achieved.
Major Deals
The major deal of 2002 was the sale of The Oxfordshire Golf Club to Leaderboard Golf for a price in the region of £6 million. This Japanese owned and developed course had been built to a very high standard. It hosted the Benson & Hedges International Open Tournament from 1996 to 1999.
Chesfield Downs Golf Centre at Stevenage was sold by Clubhaus for £3.9 million to Leisure Links International, who purchased Test Valley Golf Club, near Basingstoke through Strutt & Parker in 2001.
Multiple Operators Grow
The ownership of golf courses has always been very fragmented with the great majority of courses owned or operated as single units. However the number of multiple operators has gradually increased over the last five years. There are four principal categories of multiple operators.
Hotels with golf courses
The largest of the five companies is Marriott, with eleven courses then De Vere with nine. There are only very occasional transactions in this sector and there were none during 2002.
Major golf operators
There are only two golf operators with more than ten courses – American Golf UK (‘AGUK‘) and Clubhaus. These two have had a very different year during 2002.
AGUK had a relatively quiet time on the transaction front. They opened the new Sherfield Oaks development at Basingstoke during the summer but quietly sold The Ridge Golf Club, near Maidstone, which they purchased through Strutt & Parker in 2000 to Paul Tory’s group – Pentland Golf. They remain with twenty-three courses.
The AGUK standstill was partly caused by the purchase of their parent company American Golf Corporation and National Golf Properties by an investor group of Goldman Sachs and Starwood Capital Group. The transaction was valued at $1.1 billion! It will be interesting to see how AGUK proceed during 2003 now the deal is completed. Further UK growth is likely.
Clubhaus had a busy and successful year that has seen a financial restructuring and disposals of non-core assets. The debt for equity swap from the principal funders and bondholders has seen the high costs of borrowing greatly reduced. This has benefited the company but not the shareholders who saw their shares heavily diluted.
Clubhaus successfully disposed of their overseas properties in Spain, Germany and France. They also sold two non-core assets in the UK: Three Rivers Golf & Country Club sold by Strutt & Parker to the Terry Peachey Retirement Fund for £2.25 and Chesfield Downs.
This leaves Clubhaus with a good portfolio of eleven properties that either have health and fitness centres or are capable of having health and fitness centres built on them. Will 2003 be Clubhaus‘ year?
Mid-size operators
The three mid-size operators, with between five and ten courses, are Crown Sports, Burhill and the Jack Barker Group. None of these operators added to their holding during 2002.
Crown Sports had a difficult year and since the year-end have sold Crown Golf, with eight courses, for £15.4 million.
Also since the year-end, Burhill have added The Shropshire Golf Club to their portfolio taking their total to eight good quality properties.
The Jack Barker Group looks likely to increase its number to seven properties as it has been selected as the preferred operator for the Delaprà© Golf Complex in Northampton.
The smaller operators
There are 17 operators with between two and five properties. Of these Paul Tory, LLI, Ian Knipe, Leaderboard Golf, Terry Peachey and Max Bishop made acquisitions in 2002.
Paul Tory’s group, Pentland Golf, now has four courses – Etchinghill, Boughton, Austin Lodge and The Ridge, providing a good regional group of commercial courses. Ian Knipe, a previous owner of Three Rivers Golf & Country Club, purchased Woodspring Golf & Country Club near Bristol to add to Tracy Park and Woodlands.
Paul Gibbons‘ Leaderboard Golf added The Oxfordshire to Chart Hills, Dale Hill and Sandford Springs, giving a very high quality portfolio. Terry Peachey added Three Rivers Golf & Country Club to Stock Brook Manor and Max Bishop added Blacknest Golf & Country Club to Huntswood Golf Club.
2003 – where now?
At the time of writing, the market appears uncertain. This reflects the general economic outlook.
If sentiment improves, more courses will come to the market and prices are likely to remain at similar levels to 2002.
However, if the general economic outlook worsens, we also expect more courses to come to the market but in this situation they are more likely to be driven by financial factors and prices may weaken. Time will tell.
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