Dow Jones Newswires -- November 24, 1998
Golf Trust,Natl Golf Mulling Bid For Meditrust Golf Assets
By Janet Morrissey
NEW YORK (Dow Jones)--Golf Trust of America Inc. (GTA) and National Golf Properties Inc. (TEE) are among the players mulling possible bids for Meditrust Corp.'s (MT) portfolio of 43 golf courses.
For Golf Trust, which has 42 golf courses, the Meditrust golf operations would double the real estate investment trust's portfolio size.
"We're interested ... we're assessing the assets," Golf Trust Chairman, President and Chief Executive Brad Blair told Dow Jones. "But the process is just beginning."
Blair said it isn't clear what percentage of the Meditrust assets would fit into his company's upscale niche. Course construction, golf fees, services and other amenities are among the items that must be reviewed, he said.
Despite the downturn in REIT prices and credit crunch in the debt market over the past year, Golf Trust has managed to double the number of markets it serves over the last 12 months, Blair said. And he said the company will continue to look at expansion opportunities - at the right price.
"Sure we've been challenged by the problems (facing) REITs, but we look at thoughtful ways to enhance shareholder value," he said, adding that he expects to make a decision on a possible bid by year's end.
National Golf, which has 130 golf courses under its wing, is also eyeing the Meditrust package. William Regan, National Golf's vice president and controller, said his company looked at the Cobblestone portfolio when Meditrust won the bid earlier this year, and he said National Golf remains interested this time around.
Meditrust, as part of a restructuring effort, put its golf holdings on the block on Nov. 12 - less than a year after purchasing them. It acquired Cobblestone Holdings Inc., an owner and operator of golf courses, in June in a stock and debt assumption transaction valued at about $400 million. Earlier in the year, it purchased 12 golf courses for $130 million, and five other courses for $41 million.
But Jefferies & Co. analyst James Wilson said it is unlikely Meditrust will recover the $500 million to $600 million it invested in its golf operations. He noted that Meditrust outbid other contenders by 20% to 30% when it won the Cobblestone portfolio bid earlier this year, and he said bids aren't likely to escalate to that level this time.
Raymond James & Associates Inc. analyst Bill Crow estimates the portfolio will likely fetch $350 million to $400 million.
"The loss Meditrust will take on the sale will be a good size," concurred another analyst.
Meditrust President David Benson didn't immediately return phone calls.
The company that purchases the golf courses, Raymond James & Associates' Crow said, will likely be judged by the price it pays and how the deal is financed.
"In the past six or eight months, companies who made acquisitions - even good acquisitions from a strategic and asset quality (perspective) - have been penalized if they leveraged up their balance sheet to do it," he said.
Crow said purchasing the assets through joint ventures could alleviate the debt issue.
There is also the question of how the golf sector will perform in an economic downturn, if such a scenario takes shape, as market watchers fear.
Golf Trust's Blair dismissed such concerns, noting that his upscale golf courses cater to people who are on the high income end who would likely not be affected by a slight economic downturn.
National Golf's Regan said his company chooses sites that are close to major metropolitan areas, which he said could bode well if the economy turns sour.
"People may travel less ... forgo that trip to Hawaii and stay home and play more golf instead," said Regan.
Demographics, even more than the economy, affect the golf industry.
Jefferies & Co.'s Wilson noted that most avid golfers are over the age of 50, with most being retired. While an economic downturn could slow business, he said, golfers will still show up.
Other companies touted as possible bidders for the Meditrust portfolio are private golf companies, such as Club Corp. of America, Presidio Golf, and KSL-Fairways Group.
Bids are expected to be taken through the end of 1998, with Meditrust's goal to sell off the portfolio by the end of the first quarter.
- Janet Morrissey; 201-938-2118
Copyright, The Wall Street Journal, November 24, 1998
|
