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Palmer Golf set to diversify portfolio

Palmer Golf set to diversify portfolio

Overbeck, Andrew

ORLANDO, Fla. – After spending 2001 opening five courses and dealing with the `financial realities of Sept. 11, Arnold Palmer Golf Management is moving full speed ahead into 2002 with a strategy to further diversify its portfolio.

The firm signed its first management contract of the year at Stone Ridge Golf Club in Bowling Green, Ohio, and is looking to add four more facilities before the end of the first quarter. In addition to management deals, Palmer Golf will be paying more attention to acquisitions and will be working more closely with Palmer Course Design.

“We want to have a diverse portfolio of owned, leased and managed facilities,” said Palmer Golf president and CEO Tim Tierney.

With the addition of Stone Ridge, Palmer Golf now manages 30 properties across the country. The semi-private club opened in 1998 and features a 6,900-yard, links style layout designed by Arthur Hills. “Stone Ridge is a great golf course,” said Tierney. “With some more aggressive sales and marketing it will do very well.”

As far as other new management contracts, Tierney said the company would continue to focus on its cluster markets and look at opportunities in the Northeast and Mid-Atlantic. MARKET OPPORTUNITIES With large numbers of courses for sale, and the golf market at or near the bottom, Tierney said the company has received the green light from its financial backer Olympus Real Estate Partners to look at acquisition opportunities.

“If you are a major player like us, now is the time to take advantage of the down cycle and the lower multiples to bulk up,” he said. “This is a very reasonable time to add to your portfolio.”

According to Tierney, the firm is getting calls from banks that have repossessed courses. “This may be a good opportunity to come in and operate under a management contract for a bank,” he said. “It would be a good way to do due diligence while operating the course. If it worked out you could just take over the debt.”

High-end courses present the biggest acquisition opportunities, said Tierney.

“Affordable golf will continue to prevail,” he said. “High-end daily fees that were underwritten at $80 to $100 a round at 50,000 rounds per year will be on the market. They can do 50,000 rounds, but at $50 a round. There is a lot of great product out there that is not going to be able to command the rate that was anticipated, but if you buy right you can make it work.”

While they have not officially teamed up on any developments to date, Palmer Golf is looking to partner with Palmer Course Design on several projects this year. “We are exploring more possibilities with PCD than we have in the past,” Tierney said. “The design and build team will work with our management team. Some renovation work, new development and international projects will come on line.”

SUMMING DOWN While acquisitions and new projects are a focus for Palmer Golf, the events of Sept. 11 forced the firm to concentrate on cutting costs and running its courses more efficiently.

“We took a hard look at how we were operating our facilities from revenue management to expense control, to doing more with less in the off season,” said Tierney. “In the end it was healthy.”

In order to slim down, the firm implemented early seasonal layoffs, reduced fixed costs and combined some positions. They also held 2002 budgets until the end of December. Moving into the year, the firm is using more regional marketing and Internet promotions and advertising.

It is too early to tell whether levels of play at its facilities have returned to normal or notbecause many of the company’s courses are closed for winter. However, Tierney said event booking is coming in, albeit at lower rates. “A couple of years ago we were able to package food and beverage and merchandise and a lot of other amenities,” he said. “They are still holding tournaments, but they have scaled back spending on the amenities.”

Copyright United Publications, Inc. Mar 2002

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