Peter Nanula, a former corporate lawyer and member of private-equity firm Warburg Pincus LLC, has up to $50 million to buy golf properties that he intends to revamp and sell within five to seven years.
Nanula, the former chief executive officer of Arnold Palmer Golf Management, started Concert Golf Partners in 2010. The investment firm made its first golf course purchase in July when it bought Heathrow Country Club's golf course and racquet club for $4.5 million. The Lake Mary, Florida club, located in Northern Orlando, was previously sold in 1996 for $20 million, the Orlando Sentinel reported, citing Seminole County court records.
"Mortgages are gone, so buyers are paying in cash and the value of properties keeps getting lower and lower," said Nanula, who's currently bidding on four properties.
Declining home values also are pushing the price of golf courses lower as many are attached to housing developments where homeowners are delinquent on their loans or in foreclosure, Marcus & Millichap's Ekovich said.
Homes values fell 4 percent in December from a year earlier and are down 34 percent from a July 2006 peak, according to the S&P/Case-Shiller index of property values in 20 cities.
Toll Brothers, the largest U.S. luxury homebuilder, is buying private golf clubs as an alternative until the residential real estate market improves, according to David Richey, president of Toll Golf, a division of the Horsham, Pennsylvania-based company.
Toll plans to buy three golf properties in cash at "distressed prices" between $3 million and $4 million by the end of this year, Richey said.
The homebuilder rose 50 cents to $24.89 as of 12:47 p.m. in New York. It's gained about 22 percent this year and is at the highest level since October 2008.
Lending Dried Up
Lending to buy the properties has dried up after Textron Inc., GE Capital and Capmark Financial Group Inc., once "the go-to financiers" for golf mortgages, pulled out of the business, according to Don Rhodes, a former manager of Textron's golf credit business, and now head of investment at Florida- based CNL Lifestyle Company LLC, a property group.