Representing the purchasers was Randy Addison, a partner at Addison Law in Dallas, which in a survey by Golf Inc. magazine this month was the most recommended law firm nationwide for golf course owners, developers and private club boards. Listed closely behind were Foley & Lardner, at No. 2, and Troutman Sanders, at No. 3.
Addison spoke to The National Law Journal about the Desert Mountain deal and how it exemplified a trend toward members buying their clubs. His remarks have been edited for length and clarity.
NLJ: How has the economy affected the golf club business?
Randy Addison: What’s happened in the last three years, since the recession, is that the number of people buying into new clubs, buying memberships, has slowed quite a bit. And the amount they’ve been willing to pay for a membership has slowed and decreased. The entities we had been representing, and still represent, the major players in the industry, really stopped buying courses because the economics didn’t work for them. There was no financing. The situation was just that it wasn’t the right time to buy facilities. What we’ve been doing for three years are the members buying the clubs.
NLJ: Tell me about the Desert Mountain deal.
R.A.: Desert Mountain was another member-owned acquisition. There was a turnover plan — after a certain period of time, the developer would turn it over to the members. [Desert Mountain] was one of the few [clubs] doing significant cash flow — it was a successful club, but it also had a range of issues. Several years of negotiations took place in that transaction. There were a couple parcels involved. The largest was 2,000 acres — a large conservation area for hiking, biking. Every club is trying to find alternative recreational facilities to add.
NLJ: How is dealing with club members as clients different from an investor group?
R.A.: In the past, when I was doing over 1,250 acquisitions throughout the country, I was dealing with sophisticated operator-owners of clubs. When you’re dealing with the boards, they’re very sophisticated but they’re all in different industries. The key is how to unite that board. You’re working with nine different individuals and in a lot more time-intensive basis to get them unified. And then the next step is, you have to get the vote of the members to approve it — you have to get a vote package. And you have dissenting groups you have to deal with to get the vote across. It’s a very involved process, but an interesting process.
NLJ: What are the biggest disputes you run across in drafting contracts for golf courses?
R.A.: The biggest things revolve around members’ rights and the relationship with what they have in terms of refund rights and utilization of facilities. A lot of times, developers or owners have used sophisticated counsel to do membership documents. A couple of key sentences one way or the other can have a drastic impact on liability exposure, especially on turnover plans when it’s non-equity and goes to equity.
NLJ: Do you see investor purchases of golf clubs coming back in the future?
R.A.: I think for a while — especially in developments that have finished — the members and homeowners’ associations are going to be buying the clubs to protect their real estate values. I do see golf as a very long-term game. I’ve been in the business a long time. What we’re advising our clients is: Hold on to pricing, because we believe the market is coming back. I think it’ll be a couple more years before we get back to a normal situation.
NLJ: So how’s your own golf game?
R.A.: It’s not the best. I’ve got more golf courses I can play in the country, but we’re real busy.
Amanda Bronstad can be contacted at firstname.lastname@example.org .