Strutt & Parker say that 1999 was a good year for the UK golf market. Writing in the firm’s “Leisure Comment” publication, golf specialists Charles Greville-Heygate and Mark Smith comment on the main deals, level of activity and prices. They also make predictions for 2000.
Main Deals of 1999
De Vere acquired the highly successful 70 bedroom 4 star Dunstan Hall Hotel just outside Norwich for £15m plus and have now extended it to 130 rooms. This takes the De Vere golf hotel portfolio to eight, including the Belfry, home of the 2001 Ryder Cup. In terms of golf hotel market share they trail Whitbread who have eleven UK golf hotels under the Marriott brand.
American Golf took leases on the Jack Nicklaus Jnr designed Hertfordshire, together with Farnham Park in Hampshire and Abbotsley Golf Hotel in Cambridgeshire. They also acquired the Neil Coles designed Chartham Park just outside East Grinstead and now have 19 courses (the equivalent of 30 18-hole units) under their control in this country.
The UK’s leading quoted specialist golf operator, Clubhaus took their UK golf presence to 15 by acquiring three courses owned by Invicta Leisure for £12.2m. These were Mentmore (36 holes – Leighton Buzzard), Chelsfield Lakes (Orpington) and Mapledurham (Reading).
AIM listed Golf Club Holdings had an excellent year in terms of portfolio growth. They acquired Penkridge Golf Club in Staffordshire (now re-named The Chase) and Wickham Park just north of Fareham in Hampshire. They also took control of Ecclestone Park near Prescot, Merseyside. Golf Club Holdings then sold The Lambourne Club between Maidenhead and Slough to the investor consortium (including Bill Gates) who own the nearby upmarket Cliveden Hotel.
There were few deals by ‘lifestyle’/private buyers but the most notable was the sale of the Nick Faldo designed Chart Hills in Kent. This was sold to a wealthy private buyer for over £4m. The highly attractive Wildwood Golf Club in Surrey was sold to a London buyer. The guide price was £2.5m.
The number of courses sold and estimated value of those sales has actually fallen in the last 2 years compared with 1996 and 1997 since many of the corporate deals are now by way of occupational leases, and the number of insolvency-related sales has reduced to a trickle.
Forecasts for 2000
With the current strength of the UK economy there appears to be scope for good profit growth for the better courses over the next 12 months. This, coupled with a desire for the leading specialist operators to increase market share, should translate into price increases of 10% plus for those courses. Demand far outstrips the supply of high quality commercial courses. The Lambourne deal, at the close of 1999, implied a multiple of around 9 times EBITDA (earnings before interest, tax, depreciation and amortisation) on a mature business. Typically multiples have been around 7 to 8 times EBITDA.
For the good commercial courses, leasing will continue to be attractive since it will allow individual course owners to retain their golf investments and at the same time provide opportunities for the specialist operators to build market share without the need for large capital outlays.
There will be relatively few offerings of good quality courses which suit the ‘lifestyle’ buyer. Courses that trade well will be snapped up by the corporate operators. Because of the strong residential market, high quality courses that lack prime commercial locations will continue to attract lifestyle buyers, but prices of these will remain relatively static unless profits rise significantly.
The market has seen substantial change over the last five years and this will continue. Service standards are rising as a result of the specialist golf operators and so are customer expectations. Good news for golfers in the 21st century and the leading operators.