Despite recent sales, golf course market challenging

Not too many years ago, Jeff Woolson expected to have five or six bidders lined up within days after a golf course came on the market.

Things are tougher these days, says Woolson, who helped pull together the recent sale of D'Andrea Golf Course at Sparks.

California investors purchased the course from D'Andrea Golf Course LLC, which was represented by Woolson, a San Diego-based senior vice president in the golf and resorts properties group of CB Richard Ellis.He worked with Michael Schnabel and Aiman Noursoultanova of the CB Richard Ellis office in Reno.

Schnabel and Noursoultanova,meanwhile, represented the sellers in the recent sale of the semi-private Mason Valley Golf Course at Yerington.

A group of Southern California investors purchased the course from Carpenter Nevada LLC.

The market for both properties like the market for golf courses across the country is challenging,Woolson said in a phone interview last week.

"This is a definite time of turmoil in the golf business," he said."There is not a market in the United States that is not overbuilt in golf courses."

Through the 1990s, an average of about 360 new golf courses a year were built in the United States.

Then a bad economy left golfers with less time and less money to spend on the links.

This year, only 150 courses are expected to open.

Golf course operators who need to sell out often are taking a bath.

"I've never sold one over the replacement cost," said Woolson."Building a golf course is like buying a sports car.

It depreciates the moment you drive it off the lot."

So who is buying? There are some speculative purchases by patient investors with deep pockets,Woolson says.

Big investors snatch up courses today at bargain-basement prices and hold them for the days later this decade when Baby Boomers begin to retire in big numbers.

"If you give people time and money, they'll play golf,"Woolson noted.

Buyers also include developers who see possibilities in the land surrounding the golf course itself.

The buyers of the Mason Valley Golf Course, Noursoultanova said last week, were drawn mostly by the 110 acres of residential land that's slated for the development of about 275 residential lots.

As residential development in northern Nevada spills into outlying communities, that's an attractive land position.

"The golf course was only a small part of this investment,"Noursoultanova said.

Other potential buyers of golf courses, Woolson said, are folks who already own another course nearby and believe they can gain some economies of scale through the operation of multiple courses.

No matter what their motivation, buyers face a multitude of issues,Woolson said.

Because golf courses haven't appreciated, that means buyers must value them on their ability to produce cash flow.And that means that the buyer needs to understand everything from restaurant operations to the health of turf on the course.

Financing the purchase may be tricky, too, as banks already are fearful that borrowers who built courses during the boom of the 1990s will default.

That overhang of troubled golf courses that may end up in the hands of banks and sold at fire-sale prices will continue to dampen the market,Woolson predicted.

"It's going to get worse before it gets better," he said.