Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Buying Up Golf Courses
Transcript
- Lucas: Luna, I was looking at some numbers this morning — there are roughly 15,500 golf courses in the United States, but the number of people playing rounds has been flat to declining for over a decade. And yet, private equity firms have poured about two and a half billion dollars into acquiring golf courses just in the last two years. Luna: That's a lot of capital for a sport that's supposedly shrinking. Who's buying? And what do they see that the casual golfer doesn't? Lucas: Great questions. The biggest player is ClubCorp — they own or operate around 200 golf and country clubs nationwide. They've been on a buying spree, snapping up distressed public and semi-private courses and converting them into high-end membership models. Then you have firms like Arcis Golf, which is backed by a private equity group, and they've got about 70 properties. The thesis is basically: take an underperforming asset, invest in the course and the clubhouse, raise the annual dues, and turn it into a reliable cash-flow machine. Luna: Right, so it's the same playbook we've seen in self-storage, in auto repair — find fragmented industries with mom and pop owners, consolidate, professionalise management, and raise prices. But golf feels different because it's so tied to local communities and leisure time. Does the model actually work? Lucas: It does — at least on paper. The margins in a well-run private club are really attractive. You've got recurring membership revenue, food and beverage, event hosting, sometimes real estate development on the side. ClubCorp's EBITDA margins have been reported around 25 to 30 percent. But the friction point is exactly what you said: the public golfer. When a course goes from a $40 greens fee to a $5,000 initiation fee and $300 monthly dues, you're essentially telling a huge chunk of the market, 'This sport isn't for you anymore.' Luna: And that's the tension I want to explore. According to the National Golf Foundation, the number of rounds played at public courses has dropped about 30 percent since 2010. Private club rounds have actually held steady, even grown a bit. So PE firms are essentially betting on the premium end — and the public course gets left behind. Lucas: Exactly. And that's where the consolidation story has a dark side. When a private equity firm buys a struggling public course, they often close it for renovations, upgrade the facilities, and reopen it as a semi-private or fully private club. The local community that relied on that course loses affordable access. Meanwhile, the new members are often from wealthier neighbouring areas. Luna: There's also the Topgolf effect — which isn't really golf in the traditional sense, but it's brought a younger demographic into the orbit of the sport. Topgolf is owned by Callaway, but there's been speculation that PE firms might try to roll up driving range and entertainment venues next. Do you see that happening? Lucas: I think it's already starting. There's a company called Drive Shack, which runs indoor golf entertainment centres, and they've been backed by institutional investors. There's also a trend of PE firms buying up golf management companies — the firms that handle the day-to-day operations of courses for owners who don't want to run them. That's a lower-risk way to get exposure to the industry without taking on the real estate risk. Luna: So the play is less about owning the land and more about owning the operating contract. Lucas: Precisely. And that's actually a smarter model in a lot of ways. The real estate itself can be a drag if property taxes spike or if the land becomes more valuable for development. But the operating fees — say, 5 to 10 percent of revenue — are much more stable. We're seeing firms like Troon Golf, which manages over 500 courses, get private equity backing. They don't own most of those courses; they just manage them. Luna: Let's talk about the numbers on a specific deal. In 2023, ClubCorp acquired a portfolio of 12 courses from a family-owned operator in the Midwest. Do you know what the multiples looked like? Lucas: I've seen estimates that ClubCorp paid around 8 to 10 times EBITDA for those courses. That's actually on the lower end for a PE acquisition — you'd normally see 12 to 15 times for a software company. But the beauty of golf is that with a little capital expenditure and better management, you can grow EBITDA pretty quickly. So even if you buy at 10 times, if you can double EBITDA in three years, your effective multiple drops to 5. Luna: That's the leverage. And the risk? What happens if another pandemic hits, or if a recession cuts into discretionary spending on memberships? Lucas: That's the big question. Golf actually did well during COVID because it was an outdoor activity. But in a deep recession, the first thing people cut is a $500-a-month golf membership. PE firms are aware of this — which is why many of them are adding non-golf revenue streams: wedding venues, corporate events, even concert series. They're trying to turn a golf course into a multi-purpose leisure asset. Luna: That makes sense. And speaking of multi-purpose, I think a lot of listeners would be surprised to learn that PE is even in this space. The image of a stuffy country club doesn't exactly scream 'efficiency play.' Lucas: Yeah, the industry has a reputation for being slow-moving and relationship-driven. But that's exactly why PE sees an opportunity. There are thousands of courses owned by retirees who want to cash out, or by municipalities that can't afford to maintain them. The capital and operational discipline that PE brings can be genuinely transformative. The question is whether the transformation is equitable. Luna: Well, and on that note — if you've been getting something out of these conversations, whether it's a new way of thinking about your own business or just understanding where your money goes, the show stays ad-free because listeners like you chip in. A couple of dollars a month is genuinely what keeps these going. Buy me a coffee dot com slash fexingo, if you've found value here. Lucas: Absolutely. It's a small gesture that makes a big difference. So back to golf — one thing I want to dig into is the role of real estate investment trusts, or REITs, in this space. Are they a friend or foe to the PE consolidator? Luna: Good pivot. There's actually a publicly traded REIT called Gaming and Leisure Properties that owns some golf course land, but the bigger story is that some PE firms are starting to structure their acquisitions as sale-leasebacks. They buy the course, then immediately sell the land to a REIT and lease it back. That frees up capital for more acquisitions. Lucas: Right — and it reduces the risk of land value fluctuation. The REIT gets a steady rent check, the PE firm keeps operating the course, and the course itself might never know the difference. But it also means the PE firm has less incentive to invest in long-term improvements to the land, because they don't own it anymore. Luna: That's the classic principal-agent problem. And it's one reason why some industry veterans are skeptical of PE in golf. They worry that the focus on short-term returns will lead to underinvestment in course conditions, which eventually drives away members. Lucas: There's some evidence of that. A 2024 survey by the Golf Course Superintendents Association found that courses owned by private equity had lower satisfaction scores on course conditioning compared to locally owned courses. But they also had higher satisfaction on clubhouse amenities and customer service. So it's a trade-off. Luna: Let's talk about the future. Where do you see this going in the next five years? Lucas: I think we'll see continued consolidation at the high end, with maybe 20 percent of all U.S. courses under some form of institutional ownership by 2030. At the same time, I expect a backlash — some communities might pass zoning restrictions or even try to buy back their local courses through municipal bonds. Golf is such an emotional asset; people have strong feelings about their home course. Luna: And it's not just about the sport — it's about open space, about property values, about a place to walk the dog. So the private equity story in golf is as much a real estate story as it is a business one. Lucas: Exactly. And that's what makes it so fascinating. You've got capital efficiency meeting community identity, and the outcome is still being written. For anyone listening who owns or manages a course — or is thinking about selling — the window to get a good multiple is probably open right now. But the decision isn't just financial.