With America's golfers and other slow-sports fans aging — and since hedge-fund manager Nelson Peltz attacked DuPont Co.'s "country club" management style — it was just a matter of time before the Wilmington chemical giant's three golf courses went on the block, like its Rodney Square ex-headquarters or its old offices at nearby Chestnut Run, now in foreclosure.
"Dear Valued Member," the letter to DuPont Country Club members from manager Jeff Bradway began last week: "Today we are announcing DuPont will initiate a process to explore a potential sale." It will stay a club, he pledged. Unlike the former Hercules Inc. links down the pike, now a Toll Bros. development.
Who buys golf clubs, when members still want to golf a few more years? Guys like Concert Golf Partners boss Peter Nanula, a Harvard Law grad, ex-private equity partner, and onetime boss of the former Arnold Palmer Golf Management club chain.
Concert Golf is an investor-backed, $150 million-asset fund that has bought 14 U.S. clubs, including White Manor Country Club, near Malvern. Nanula tells me his firm has agreed to pay off the club's debt (following a 2003 renovation that hadn't paid for itself), plus more than $1 million in upgrades.
White Manor members tell me Concert has promised to keep golf for at least seven years. Nanula says he's also close to a deal with Philmont Country Club, in Huntingdon Valley. Members tell me that deal would keep golf for at least five years. He also is looking for more clubs around Philadelphia.
In Glenside, North Hills Country Club members have been told the managers have talked to another investor, ClubCorp. of Dallas. "We are exploring our options," president Del Markward tells me, adding that North Hills plans to stay a members' club.
How can investors run a golf course and turn attractive profits if members on their own can't quite swing it?
Call someone like Toll Bros. But Nanula insists he's here for the golf: "Our capital comes from wealthy families who invest for the long term." He says Concert hasn't sold a club since it started in 2011. "Our sole business is preserving and enhancing country clubs. We make money, like hotel companies and restaurants, by operating more efficiently, attracting new members, and utilizing the club facilities better."
Paying down debt and "operating more efficiently," Nanula says, boosts annual cash flow at least $500,000 a year "compared to the member-funded clubs nearby."
Concert finds other ways to raise cash. Members of the Golf Club of Amelia Island, in Florida, were surprised to see Concert negotiate with a mobile-phone service company to build a 130-foot tower after it took over the property, member David Lipo tells me. He expects Concert will exploit more revenue opportunities before scoring terminal profits in a "final sale."
Towers "are usually unpopular with the neighbors," Nanula acknowledges. But "we can hide the tower well, near the maintenance area."
Cutting deals with investors, these clubs are buying a few more years. Maybe longer, if high-end housing demand slows. Or young people suddenly take up golf. Fore!