Buyers hope to lift golf firm out of rough

By Robert Burgess
Bloomberg News Service

SANTA MONICA, Calif. — A Goldman Sachs Group Inc. fund and Starwood Capital Group will buy National Golf Properties Inc. and an affiliate, together the largest U.S. golf course company, for $1.1 billion in cash and debt.

The groups will pay $12 for each share of the Santa Monica-based company or $246 million, said Charles Paul, chairman of National Golf's independent committee of directors and interim chief executive. The purchase includes the assumption of $850 million of debt, preferred shares and other liabilities.

National Golf turned to the investors after a plan to fix a technical default on its debt by merging with the affiliated golf course management company, American Golf Corp., fell apart. The investors may be able to raise lower-cost debt, giving them a better chance to weather a surge in course development at a time when the number of golfers has stagnated, analysts said.

"Homebuilders are building golf courses as an amenity, not as a business, and that has created huge problems for the golf business," said Paul Puryear, a real estate and housing analyst at Raymond James & Associates.

National Golf, a real estate investment trust, and closely held American Golf own, manage or lease more than 250 courses from California to New York. Among the courses is the Port Royal Golf & Racquet Club in Hilton Head, S.C., ranked by Golf Digest as one of the top 75 U.S. golf resorts.

Goldman Sachs has a history of buying troubled properties. The securities firm's real estate fund paid $1.2 billion to buy New York landmark Rockefeller Center out of bankruptcy in 1995, and sold the office and retail complex for $1.85 billion in 2000.

In the golf business, Goldman Sachs owns Japanese course operator Nitto Kogyo Co., which in July sought protection from creditors for the second time in five years.

Both National Golf and American Golf share the same chairman, David Price, who in the 1990s was ranked by Forbes magazine as one of the wealthiest people in the United States. Price will become chairman emeritus and along with other owners of American Golf receive $10,000 in cash, a 2 percent stake in National Golf and an option to buy a 2 percent stake in American Golf.

Since 1995, the number of golfers has stayed about the same while the number of courses is up 16 percent as developers banked on a boom in demand from an aging U.S. population — a boom that hasn't materialized, according to the National Golf Foundation, a nonprofit research group.