It is really said to hear of another Country Club closing due to bankruptcy.
By IAN McCANN / The Dallas Morning News
imccann@dallasnews.com / The Dallas Morning News
Ray Leszcynski contributed to this report.A Garland, Texas, country club that had been posted for foreclosure has filed for bankruptcy.
Oakridge Golf Club LP filed for Chapter 11 bankruptcy in a Dallas court, listing assets and liabilities between $1 million and $10 million. No details were given in the filing about how much it owes each of its creditors.
Jeff Silverstein, chairman of Oakridge owner I.R.I. Golf Group, did not return calls seeking comment. He said two weeks ago that the course had temporarily closed but that he expected it to change hands and reopen. He also said that the course was withdrawn from the foreclosure list.
Club members were sent a letter last week telling them the course was closed. A handful of people were playing on it Monday.
Oakridge is at least the third I.R.I.-owned or -operated course in Texas to undergo financial turmoil. One in Lubbock was shut down last year and put up for sale. Shores Properties in Rockwall filed for Chapter 11 bankruptcy in July.
In Chapter 11, companies are able to restructure their finances under court supervision.
Among the Oakridge creditors is the city of Garland. The city and Garland Power & Light shut off utility service last week because of unpaid bills but restored service Friday after it received notice of the bankruptcy filing.
Bob Flores said he asked club representatives about Oakridge’s financial situation before he bought a membership last month. The answers didn’t indicate it was close to foreclosure or bankruptcy, he said.
“I knew there was some risk there,” said Flores, a Carrollton resident. “What disturbed me about it was they were selling memberships right up to the point when they closed the doors.”
The club was also advertising its memberships in the Oakridge Neighborhood Association’s September newsletter. Association officer Mike Rose said he hopes I.R.I. will find a new owner that will invest in the course, repair the Oakridge image and draw a steady stream of golfers.
“There’s not much any of us can do,” Rose said. “Sure, it has to bring a bruised ego to the city and to the neighborhood – we do share a name.”
Out in Arizona, the situation is not any better.
Golf course owners in rough situation
Downturn in play hits golf properties hard
by J. Craig Anderson – Aug. 8, 2010
The Arizona RepublicArizona golf-course owners have endured month after month of reduced patronage, forcing some into bankruptcy or foreclosure. Others have scaled down operational costs, slashed membership fees or opened private fairways to public play.
Since mid-2008, at least 15 standalone and residential golf properties in the state have entered into foreclosure or bankruptcy. Market analysts said many more are sure to follow, particularly those with outstanding commercial real-estate loans.
So far, the Arizona golf industry has not reported any permanent course closures, but many private clubs have changed hands during the past year.
Nearly all golf-club owners have been forced to re-examine their business models and make adjustments, experts said. That process often leads to deeply discounted membership fees, the addition of daily-fee play for non-members, and the postponement of planned improvement projects such as a course redesign or new clubhouse facility.
Not surprisingly, such changes often do not sit well with members who bought in at or before the golf industry’s economic peak. Many paid two or three times the current rate for their memberships, enticed by promises of royal treatment in an exclusive setting.
Meanwhile, houses built along the fairways in Arizona’s many golf-course communities have been no less vulnerable to foreclosure than other homes, and several real-estate agents have capitalized on their availability by niche-marketing them to seasonal buyers.
In the rough
Pessimism about the private-golf industry’s future prospects is palpable among operators and investors in the sport.
Some course owners have been trying to sell their way out of what has become a money-losing business for 25 percent of private-play course operators, according to a recent U.S. survey by the Florida-based National Golf Foundation.
Across the U.S., about 100 courses have shut down during the past two years, compared with less than 40 closures during the previous decade, according to data collected by golf-industry associations.
Recent sale prices for golf courses have fallen as low as 10 cents on the original developers’ dollar.
The reason, local golf real-estate expert Roger Garrett said, is that courses are being judged today solely on their ability – or lack thereof – to turn a profit.
“When they’re losing money, replacement cost doesn’t really mean anything,” said Roger Garrett, a broker at Phoenix-based Insight Land & Investments who specializes in golf properties.
Garrett said today’s buyer can acquire for $1 million to $1.5 million a golf course that cost $15 million to develop. Some courses have sold for even less.
For example, he said, California-based golf-course owner and developer Wilson Gee recently purchased Club West Golf Course in Phoenix from Pinnacle West Corp. subsidiary Suncor Development Co. for $500,000.
Garrett said the only serious buyers in today’s market are those who have devised a strategy to run the businesses more efficiently while attracting a wider range of regular players.
Gee, who also owns the Ahwatukee Country Club, in Ahwatukee Foothills, the Lakes at Ahwatukee and the Duke Golf Club, in the city of Maricopa, is hoping to boost business by giving each club’s members access to all four facilities.
Still, even course owners with solid recession-survival plans have had trouble keeping the faith.
Gee informed residents of the Lakes in 2009 that he was considering the possibility of shutting down the golf course and building condominiums on the property. He later decided that a condo project didn’t make sense in the current real-estate market.
Battle against time
The number of Arizona’s roughly 340 golf courses exhibiting overt signs of financial trouble has been increasing steadily, and the past six months of mild economic recovery haven’t helped.
“If anything’s changed, it’s probably changed for the worse,” Garrett said.
Month after month of debt repayment and lackluster revenue have pushed many course owners closer to the finish line, he added, despite nominal improvements in the Arizona economy since January.
“People can only continue to write checks for so long,” he said.
Golf-course owners are getting hit from all sides: Tourism is down, fewer locals are playing, water and labor costs are up, and excess competition has forced course owners to lower membership fees and greens fees.
Adding to those challenges is a decision by some lenders to place golf courses on their “toxic-asset list,” he said, which means they won’t consider lending money for a golf property under any circumstances.
Three lenders that once provided the bulk of financing for golf courses – GE Capital, Textron Financial Corp. and Capmark Financial Group Inc. – have all closed their doors to buyers.
Another Phoenix-area golf club that has been fighting to stay in business recently is the Arizona Golf Resort in Mesa.
The resort, five miles north of Phoenix-Mesa Gateway Airport, was scheduled for a foreclosure sale in late June, but so far the sale has been postponed, owner Izhak Benshabat said.
Benshabat has been trying to renegotiate a $19.2 million loan from LNR Partners, based in Miami.
Angry members
For many Arizona golfers, the net result of such troubles has been positive: Most courses have lowered their fees, and several members-only clubs have opened their doors to daily-fee play.
But for some existing private-club members, the changes represent broken promises.
Among the frustrated members is Don Davis, who joined Sedona’s posh Club at Seven Canyons in 2003 for $105,000.
Davis, a seasonal Arizona resident from Milwaukee, said the club’s owner, Scottsdale developer Dave Cavan, has failed to make good on promises such as building a permanent clubhouse to replace the more modest “temporary” facility.
Cavan spokeswoman Cheryl Walsh said critics such as Davis are being unrealistic, given that Seven Canyons and its primary lender both are in Chapter 11 bankruptcy proceedings.
She added that the course is still well-maintained under its new, outsourced management and that Cavan remains committed to revitalizing the business.
“His goal is to not do what so many others have done, which is to walk away,” Walsh said.
Davis is one of two Seven Canyons members who have been trying to organize other players against Cavan.
He said that when the celebrated Sedona club opened in late 2002, Cavan told prospective members that a portion of their entry fees would be set aside for a multimillion-dollar clubhouse.
“He was supposed to have put money in escrow to build that clubhouse,” Davis said. “There’s no money in escrow, and he won’t say where the money is.”
Course owner Sedona Development Partners filed for Chapter 11 reorganization May 27 in U.S. Bankruptcy Court, listing its remaining 150 members as unsecured creditors.
Cavan reassured members at the time that the bankruptcy did not threaten Seven Canyons’ future operations.
“Seven Canyons is one of the premier golf communities in the world, and we have every intention to operate and develop this beautiful and unique property,” he said in a company news release announcing the bankruptcy.
Walsh said much of the company’s financial trouble stems from a time-share resort community that surrounds the golf course.
Despite selling all 12 one-month fractional shares in 230 of the community’s 300 casitas, the inconsistency of timeshare-based members has made it difficult to support a full-time service staff, she said.
Two development partners originally involved in the project have since bowed out, Walsh added, leaving Cavan’s company to fend for itself.
“They weren’t planning to be the sole developer of it,” she said.
But the biggest problem, Walsh said, has been the demise of Seven Canyons lender Specialty Financial, a real-estate investment trust that also filed for bankruptcy protection in May.
“The lender on this particular property went into bankruptcy, so the loan was basically recalled,” she said.
Like many prominent Arizona real-estate developers, Cavan has more than one project in bankruptcy today.
Cavan Management Services, owner of the upscale Raintree Corporate Center office complex in Scottsdale, also filed for reorganization in June, when its lender sued.
The lawsuit was filed in Maricopa County Superior Court by Merrill Lynch Mortgage trustee U.S. Bank, which is seeking about $71 million in unpaid debt, interest and fees. The case has since been remanded to U.S. Bankruptcy Court.
Walsh said the real-estate market has wreaked havoc on all developers, adding that Cavan “feels terrible” about the situation and that he and his staff intend to make it right.
“Their goal is to maintain their projects and not to walk away from everything,” she said.
Bargain opportunities
Garrett said Arizona developers overbuilt golf communities during the real-estate boom because they could charge far more for a residential lot situated along a golf course.
Now, many of those homes have been foreclosed on or sold via short sale, in which the mortgage-holding homeowner sells the property for less than the outstanding loan balance.
Ryan Melville, an agent with Keller Williams Realty, is among a number of Arizona real-estate professionals who have capitalized on the recent availability of low-priced homes in golf-themed developments.
“Arizona has more golf communities than California,” Melville said. “I can show you homes for the low $100s on a golf course.”
Melville and partner Darrell Lund, based in Tempe, said golf-property distress sales have created a cottage industry in the Phoenix area that caters mostly to Canadians and Midwesterners.
Melville and Lund built a website in 2008, azgolfhouses.com, which they said has led to a number of sight-unseen home purchases.
“Most of our golf buyers are out-of-state buyers who are paying cash,” Melville said.
Lund and Melville, both of Keller Williams Realty, were not the only Phoenix-area real-estate agents to come up with the idea of marketing golf-course homes on the Web.
Other local Realtors operate similar sites, the names of which include azgolfhomes.com, azgolf properties.com and luxury golfpropertiesaz.com.
Lund said the number of golf homes coming on the market in poor condition has decreased, which could indicate that foreclosures are decreasing.
Still, he said there are more than enough golf-course homes available to anyone who really wants one.
“If I had the money right now, I don’t know if I would build another golf course community,” Lund Said.
Read more:
One can only hope that golf businesses, and the many country clubs in the country, will start looking outside the traditional methods of marketing their needs and start hiring people who know how to get old traditional business models, like Country Clubs, back on track with New methods of marketing. Golf’s survival depends on these club’s staying afloat. Hope the ones that are in rough financial situations start looking for new ways of generating business before going into foreclosure and they are the next ones I report on my blog . Let me know how I can help.