GlobeSt.com Article 6.20.18
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estate really has one use only, and that is a golf course. As a result, golf courses trade<br />
at a multiple different than real estate because there is really no land appreciation.<br />
There is only value based on current cash flow and future cash flow. A lot of golf<br />
courses don’t make money, but there are <strong>com</strong>panies that do make good money buying<br />
golf courses and operating them as businesses. There is a lot of private equity that is<br />
and has been in the golf business, like Starwood Capital, ARCIS, which is owned by<br />
Fortress, and Apollo Capital. There are a lot of people that believe the golf business can<br />
be profitable and those that have succeeded in it. We have seen a lot of activity this<br />
year related to big portfolios. It has been an active year for the golf business.<br />
<strong>GlobeSt</strong>.<strong>com</strong>: Why do you think there has been an increase in demand?<br />
Woolson: I think the attraction to the golf business, related to today’s environment, is<br />
yield. It is so hard to get yield in anything. Money is looking for yield, and you can buy<br />
golf properties at 10-caps, 11-caps, even 13-caps. Those are the multiples that golf<br />
courses trade at. People often ask why these numbers are so much different than other<br />
asset classes. One reason is that you are limited in the land use, like I said, but you are<br />
also limited in financing. Prices increase when financing be<strong>com</strong>es easier, hence<br />
apartment prices and the cap rates that those properties <strong>com</strong>mand. For apartments,<br />
financing is very easy and low-priced right now. The golf business is not like that. You<br />
get financing with maybe 65% LTV with a 7% or 8% interest rate, something much<br />
higher than where the market is for traditional <strong>com</strong>mercial real estate.<br />
<strong>GlobeSt</strong>.<strong>com</strong>: Are there any geographic trends in the space? Which markets have<br />
been most popular for investment?<br />
Woolson: There is always demand for Southern California, and a lot of the demand in<br />
the Southern California market is driven by the Korean American market. Koreans love<br />
golf. When we take a property to market in Southern California, 90% of the time, a<br />
Korean American or a Korean Corporation is buying it. They love golf and they love it as<br />
an operating business. Southern California has always had that premium, but besides<br />
that specific buyer group, a lot of people are starting to shy away from California. The<br />
water costs and the taxes have spun out of control, and with our labor costs and<br />
regulatory environment, a lot of people don’t want to be in California. There is hardly a<br />
primary market in the country that isn’t desirable from a golf standpoint. We still see a