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Blues on the Green


Inverrary Country Club, just outside Fort Lauderdale, has a storied history. It has hosted Presidents from Richard Nixon to Bill Clinton, as well as more than a dozen PGA and LPGA tournaments. At the Jackie Gleason Inverrary Classic in 1978, Jack Nicklaus finished with five birdies to steal a come-from-behind victory. Times, however, have changed. With dozens of new courses carved out of South Florida during the past decade, Inverrary's owner, ClubCorp Inc. in Dallas, dumped the 54-hole resort for just $8.1 million--to new management that runs cheesy TV spots hawking $29.95 weekly passes to Inverrary and eight other local courses.

Inverrary isn't alone, as Sunbelt operators from Hilton Head to Houston struggle in the wake of the 1990s' unprecedented development boom. Betting that aging baby boomers would turn to golf en masse, developers built over 3,000 mostly upscale courses (chart).

Yet for all the Tiger Woods-fueled popularity of golf, the number of rounds played on U.S. courses was flat in 1999 and 2000--and has plunged a surprising 6.9% so far this year as novices confront the enduring realities of the game. "It's time-consuming, intimidating for newcomers, and access to the game is expensive at $80 to $100 a round," concedes William D. Golden, marketing director of Myrtle Beach Golf Holiday, a collective promoting more than 100 courses in that coastal community.

"FREE FALL." A growing number of course owners and operators, faced with plunging greens fees and flat demand, are in financial trouble: In Myrtle Beach, Links Group Inc., which manages 10 of the 117 courses packed into a 60-mile stretch, filed for Chapter 11 bankruptcy protection last January. And in May, Golf Trust of America Inc., a real estate investment trust (REIT) whose holdings include Sandpiper Golf Course in Santa Barbara, Calif., voted to liquidate its entire 47-course portfolio after outfits it had hired to manage 16 of those courses defaulted on their lease payments. "The industry is in free fall," says George Marderosian, president of Providence-based Clubhouse Capital, a golf course finance and development consultancy. He predicts "auctions and bankruptcies" ahead. Already, some courses are simply being razed and converted to new uses. Last December, the Gator Hole Golf Course in Myrtle Beach suffered the ignoble fate of being bulldozed to make room for a new Home Depot.

How did the golf glut happen? Industry insiders partly blame homebuilders, particularly in Sunbelt cities like Atlanta and Orlando, who install new courses as loss leaders to raise house values in their upscale subdivisions. "Florida is out of control," says Richard Creed, a consultant with PricewaterhouseCoopers' golf group. Consultants say developers can fetch an extra $20,000 or more for homes built on the edge of or near golf courses. For a 1,500-home development, that's $30 million in extra profit--more than enough to offset the $8 million to $10 million in construction costs for a new course.

Also contributing are a new breed of publicly traded REITs like Golf Trust that have driven prices through the roof. Two Golf Trust courses outside of Williamsburg, Va., Royal New Kent and Legends of Stonehouse, sold for $10.8 million in May--half the $21.5 million Golf Trust paid for them in 1997. Such fire sales are expected to drive values down everywhere.

The golf glut is also behind some creative marketing. American Golf Corp., which operates 300 courses in 30 states, now promotes weddings and bachelor parties on the links. And the glut is a bargain-hunter's dream for golfers like Larry Brooks, 50, of Mocksville, N.C., who makes annual pilgrimages to Myrtle Beach. "It was hard to find something under $40 four or five years ago, but now you can get $25-to-$30 rounds on good golf courses," he says. Time will tell whether the buyers of Inverrary and other struggling courses are getting a bargain as well. By Brian Grow in Myrtle Beach, S.C., with Ann Therese Palmer in Chicago


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