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Golf clubs struggling to stay in bounds
Tuesday, February 19, 2008

Orland Bethel is like so many other golfers who spent much of their earlier life playing golf at the country club: He longs for the days when his course was crowded with members entertaining guests or corporate clients and the club was a social epicenter for dining, recreation and entertainment.

But, like so many other private facilities in Western Pennsylvania, Mr. Bethel saw his club, Greensburg Country Club, wither and tumble into financial bankruptcy, the victim of a declining and aging membership, a change in social habits among people with disposable income and a drastic downturn in the number of rounds golfers everywhere are playing each year.

Mr. Bethel, though, wasn't about to let his club disappear like a wayward tee shot into the woods. As founder and owner of Hillandale Farms, one of the nation's leading supplier of shell eggs, he and two other businessmen bought Greensburg out of bankruptcy for $4.5 million in 2005, a purchase born more from Mr. Bethel's personal connection to the club than some sound financial investment.

"I've been a member at Greensburg for quite a period of time," he said. "I have a fondness for the membership and a fondness for the club, and I didn't want to see it go away. It wasn't a monetary approach for me; it was more saving the club for the membership."

Mr. Bethel is not alone.

He is one of several individuals or ownership groups who are purchasing private golf clubs from the memberships in Western Pennsylvania, a trend that has become as alarming as it has been surprising. Most of the clubs, including Greensburg, tend to be older facilities where the members cannot keep up with the rising cost of maintaining a quality golf course and balk when they are assessed fees for capital improvements.

Since 2002, nine country clubs in the area have been sold: Alcoma, Beaver Lakes, Beaver Valley, Duquesne, Greensburg, Greenville, Oak Tree, Sharon and Youghiogheny. More are expected to follow. Of those, four have been converted to public facilities (Alcoma, Beaver Valley, Duquesne and Oak Tree) that still offer some type of membership privileges.

Others, such as Beaver Lakes (now Shadow Lakes) and Sharon (now Avalon at Buhl Park), have retained their private status, despite their new names, but offer some type of social membership that allows the public to play on a limited basis.

"It's all about finances," said Jeff Rivard, executive director of the Western Pennsylvania Golf Association, which lists 60 private clubs and 60 public courses among its membership. "The members can't afford to foot the bill anymore and some members who have deep-enough pockets have stepped in and bought the club. The trends that are showing up in Western Pennsylvania are also happening nationally, especially with clubs with lower budgets."

The decision to purchase a golf facility, especially one with declining numbers and financial instability, would appear to raise more than a few eyebrows among the fiscally prudent. The golf industry in general, and facilities in particular, are caught in a troubling downward spiral that goes beyond a five-year decline in the number of rounds played. For the first time since 1945, the number of course closings has outgained the number of course openings each of the past two years, according to the National Golf Foundation.

Granted, of the course closures, 43 percent were courses that are considered nontraditional, like nine-hole layouts or executive (par-3) courses. Part of the reason: Courses are sold to developers because the land on which they are built has greater commercial real estate value than the cash-flow value of the golf course.

Even in Myrtle Beach, S.C., the nation's No. 1 golf-tourist destination, 17 courses have closed in the past several years, including Bay Tree Plantation, which once hosted an LPGA Tour event.

Such individual ownership arrangements are not uncommon at resort facilities -- Mystic Rock at the Nemacolin Woodlands Resort in Farmington, Pa., is an example -- or even at other private facilities around the country where billionaire owners like Donald Trump, Wayne Huzienga and Steve Wynn have built high-end clubs for the rich and famous. But it has become a recurring practice in Western Pennsylvania, and for different reasons.

"In Western Pennsylvania and northeastern Ohio, you have slow economic growth coupled with an aging population," said David Axson, president of Sonax Group Inc., a golf facility consulting firm based in Bath, Ohio. "A lot of youngsters are moving out of state, out of the region, so you're dealing with an aging membership. Western Pennsylvania tends to have more members at its clubs who are over 65 than under 45.

"The lifeblood of clubs is the older members, but, no disrespect to them, they tend to play more and pay less. The under-45 members are the ones who drive the club. They're the ones who spend money. You need to attract those younger members. But then you have conflict -- the older members don't want to see females and kids running around their club."

Mr. Axson said there are three types of investors who seek to purchase a private golf facility:

• A person who buys the club because of some personal or familial bond to the facility and doesn't want to see the club fade from the community.

• A businessman who thinks he can do a better job of running a club and managing the finances than the ever-rotating club presidents, committee chairmen and board members.

• A person who is really not interested in the facility at all; rather, he is more interested in developing the land for real-estate or commercial profit. "He'll run it for five years and then he uses it for real estate development,' Mr. Axson said.

In most cases, the private clubs that are purchased have non-equity members -- members who have no financial investment in the club and do not share in any of the profits. The buyer reaches a financial settlement with each dues-paying member of the club and, in some instances, also assumes the facility's debt.

"Most clubs have too many chiefs and not enough Indians," said Jim Manganello, 63, who bought Beaver Lakes Country Club in Aliquippa last month for approximately $2.4 million. "Everybody wants to be the boss. Everybody has their own ideas and they're all pulling in a different direction. When you're the owner, everybody comes to you."

Ron Klingle, chairman of the board of Avalon Holdings Corp. in Warren, Ohio, shares a similar belief -- that clubs can be better managed by one person rather than an always-changing board of directors or a club president who rotates every two years.

Mr. Klingle is building himself a golf empire in northeastern Ohio and Mercer County called Avalon Golf & Country Club, a private club that offers affordable memberships to three golf courses at three different locations: Avalon Lakes in Warren, Ohio; Squaw Creek in Vienna, Ohio; and Avalon at Buhl Park in Sharon, Pa., formerly Sharon Country Club.

Mr. Klingle purchased Squaw Creek and Sharon, a pair of private clubs, in the past two years to complete the package. As part of the project, he is building a $12 million, 120,000-square-foot clubhouse at Buhl Park that will include three restaurants, private Duquesne Club-like dining rooms, a fitness center and wine cellar.

"I think we've changed what country clubs are," Mr. Klingle said. "Most of the clubs are stale, they're stuffy, they're not fun, and there is hardly anyone at them. We freshen them up."

Unlike clubs that remained private, Oak Tree decided to convert its 18-hole facility in West Middlesex to a daily-fee course when the membership sold the club to three general-partner groups for $2.4 million in 2004. Bob Collins, the club's general manager and one of the investors, said the cost of operating a golf course became too much for most of the members.

But, after showing a $50,000 profit in its first season as a public facility, Mr. Collins said the rising cost of chemicals, fuel and equipment have caused Oak Tree to merely break even the past two years, even though the club charges a $60-plus greens fee and is often crowded.

"It's amazing -- there are so many [private] clubs that are thinking of [selling]," Mr. Collins said. "I bet I get about two phone calls a month asking, 'How's it going?' It's so hard anymore. You just can't cut it as a private club. The cost is just so much to operate."

"It's tough to maintain a top-echelon club without paying a lot to do it," said Mr. Bethel, who has been able to attract more than 100 new members and is operating the club debt-free since he purchased Greensburg CC three years ago. "There are only a few clubs where the membership says, 'I'm willing to pay.' But we think we are in a position to increase our growth. We have put stability into the club again."

First published on February 19, 2008 at 12:00 am