Departure an Option for Golf REIT Chief
By ANTHONY PALAZZO
Staff Reporter
National Golf Properties Inc. Chairman David Price may be willing to give up operating control of the Santa Monica REIT as part of an equity infusion that would restructure the finances of the ailing firm and its affiliates, according to sources familiar with the bidding process.
Such a deal would be a significant departure from a merger plan announced Feb. 13 between National Golf and two Price-controlled affiliates, American Golf Corp. and National Golf Operating Partnership. Under the framework announced at that time, Price would remain chairman of the combined entity, after an infusion of equity by an investor that hadn’t yet been found. National Golf would go on to act as a consolidator in the troubled golf course industry, interim Chief Executive Charles Paul said at the time.
More recent signals of Price’s flexibility indicate that National Golf, the largest publicly held golf course owner in the United States with 130 courses, could end up becoming another consolidator’s quarry.
“We do not want to say whether we are going to be interested or not,” said Arnold Rosenstein, Beverly Hills-based chairman of Meadowbrook Golf Group, one of the firms mentioned as a possible investor in National Golf. “They’re going to be looking for a large amount of capital, and I don’t know yet exactly what that number is.”
Meadowbrook, with its main offices in Florida, is an owner-operator with about 100 courses under management, including the newly built SilverStone Golf Club in Las Vegas. It has an investment partnership with the Los Angeles buyout group Apollo Management L.P., run by financier Leon Black. The group just finished raising some funding and plans to buy $100 million worth of properties over the next year or two, Rosenstein said.
Another investor being mentioned is Boston-based opportunity fund Westbrook Partners, owner of about 50 courses. Westbrook officials did not return calls seeking comment. “All the big names have been mentioned at one point or another, but last I heard none had seen the materials yet,” said one National Golf shareholder. (Meadowbrook’s Rosenstein declined to say whether he’s seen a detailed term sheet.)
Deadline passes
The process of finding an investor has gone slower than originally projected. The target date for a definitive agreement on the National Golf-American Golf deal was Feb. 28. That date has come and gone without any announcement from National Golf or its investment banker, Lazard Freres & Co.
Meanwhile, a rent deferral granted to American Golf by its landlord, National Golf, expired on March 14. At the end of March, a key revolving credit line expires at National Golf, presenting another potential stumbling block. As of Sept. 30, 2001, National Golf had $150 million outstanding on the $200 million revolver, and was not in compliance with some of the terms of the loan with its bankers.
Price did not return calls seeking comment. Paul did not answer questions sent to him by e-mail.
Two sources familiar with the process said Price was willing to give up control of his golf empire if it was required in order to rescue the ailing companies, which have been hurt by a glut of golf courses and fewer players.
Price, who founded American Golf in the late 1960s and National Golf in 1993, has taken out numerous loans against his golf interests. He is said to also have potential tax liabilities that could be triggered by a sale. “David’s concerns are not to make a big killing, what he really wants to do is make sure he doesn’t lose anything,” said one source. “What I’m told is David is just trying to preserve himself and would turn over the keys.”
Information scarce
From publicly available information, it appears that National Golf needs to restructure its debt, but combined with American Golf, it could be a viable cash generator. Nevertheless, the secrecy surrounding National Golf and American Golf’s finances may delay the process of attracting an investment.
Very little has been disclosed about the companies’ current financial condition, and potential bidders must be given non-public information by National Golf’s bankers. If potential investors sign confidentiality agreements, they become subject to restrictions on their activities, such as buying or selling National Golf’s stock in the open market.
“I have yet to talk to anybody who has actually seen the documents,” said a National Golf investor. “The couple of groups I’ve talked to at this point have not agreed to be restricted. They’re all trying to keep their options open.”
Another investor disagreed. “Plenty of people will sign the confidentiality agreement,” he said. “It’s way too soon to gauge much of anything.”
The alternative is for National Golf to open its books and make much more information public. “I think they’re not giving shareholders the benefit of the doubt that we can make an intelligent decision,” the first investor said.
