Management companies watch merger
Regardless of the outcome of the National Golf Properties/American Golf Corp. merger, there will be opportunities for both ownership and management companies in the future, according to Mike Kelly, vice president of marketing for Meadowbrook Golf.
“I think because of the deals that were made, there’s going to be a lot of opportunity within the next 18 to 36 months for management companies who are positioned well and who are smart about how they’re going to go about growing,”he said.
At press time, Meadowbrook was finalizing multiple financing deals with major financial institutions turning point for the company.
“They over-leveraged when they bought the Cobblestone courses with ClubCorp,” Boyle said. “They should never have done that transaction.”
The final outcome of this proposed merger could be one of two things, according to industry sources. The deal could go through, either as proposed or with slight modifications, or NGP’s creditors could decide that the value of the assets is greater than the combined debt of the two companies. A third outcome, which would have NGP filing for bankruptcy protection, has been discussed, but Boyle said he doesn’t see that happening.
“I don’t think NGP goes bankrapt, but the lenders may feel that the value of the assets is greater than the debt,” he said.
With such a large portfolio, NGP doesn’t have many options. There are few, if any, management companies who would have the ability, not to mention the desire, to take on a substantial number of those. However, that’s not to say that if certain courses became available, either from an ownership or a management perspective, there wouldn’t be any takers.
“As the competitive landscape changes, you’ve got to be ready to react,” said Mike Kelly, vice president of marketing for Meadowbrook Golf Group.
Kelly said the situation at American Golf and NGP is a symptom of the boom time the golf industry experienced in the ’90s, and may be indicative of the problems that many management companies are experiencing in today’s market.
“I think what happened was that people lost sight of the fact that they were not in the development and acquisition business,” Kelly said. “The management companies understand how to operate effectively, but when they can’t support and service the debt, they really are behind the eight ball from the start.”
Kelly stressed that he doesn’t feel the management at American Golf or NGP has done anything wrong in pursuing a merger.
“We’re just trying to look at what we do and make our world, and how we react and progress, better,” he said.
One industry official, speaking on the condition of anonymity, said the main reason NGP got into trouble is because the real estate investment trust (REIT) model just doesn’t work in the golf industry.
“That structure, as we’ve seen, is fundamentally flawed,” the source said. “When you separate the owner of the property from the operator and the manager of the property, there are all kinds of conflicts, and you lose a lot of flexibility. If things go well, the guy who leased them does very well. If things go poorly, the public company does badly.”
Copyright United Publications, Inc. Apr 2002
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