Unlike the Japanese and South Koreans before them, Chinese investors are buying at the bottom of the market. “We’re seeing a lot of tires getting kicked by the Chinese,” said one broker who specializes in golf and resort properties. “They only recently came forward and started buying. They do love golf, so it makes sense.”
A recent feature article in the business section of the Los Angeles Times highlighted how Du Sha, who sold his chain of home-improvement superstores to Home Depot for $100 million and has a net worth of more than $600 million, is leading an influx of wealthy Chinese investors that are quickly adding golf courses to their growing portfolios of U.S. holdings.
Teaming with a Canadian golf executive, Du has bankrolled Pacific Links International, which now owns 10 high-end U.S. courses, including the $20 million Dove Canyon (Calif.) Golf Club in a private community abutting the Cleveland National Forest in south Orange County, Calif., the Times reported.
In the last year, Du and other Chinese investors have bought prime properties including the 2,000-acre Sea Trail Golf Resort, built around three Sunset Beach, N.C., courses, along with smaller ones, such as the Rancho Duarte Golf Club in Duarte, Calif. a nine-hole, par-31 course built on a former dump, the Times reported.
“We’re seeing a lot of tires getting kicked by the Chinese,” Jeffrey Woolson, Managing Director for golf and resorts at the CBRE Group real estate services firm, told the Times. “They only recently came forward and started buying. They do love golf, so it makes sense.”
Terry Vanek, a specialist in golf properties for the Marcus & Millichap real estate brokerage in Tampa, Fla., told the Times that more than half of his company’s golf course listings generate Asian interest.
Much of that interest comes from the fact that from a Chinese perspective, U.S. courses can look like screaming bargains, the Times noted.
“You’re seeing courses sell for less than $2 million that back in 2004 or 2005 would have cost more than $5 million,” Chris Charnas of Links Capital Advisors, a brokerage in Evanston, Ill. told the Times.
In December, Charnas told the Times, he arranged the sale of Chalet Hills Golf Club, a foreclosed course in Oakwood Hills, Ill., for $1.5 million, to a Chinese investor who commented: “This is like a $15 million deal in China.”
The investments mark the third wave of U.S. golf course purchases by Asian investors, it was noted. But unlike the Japanese and the South Koreans before them, the Times reported, the Chinese are buying at the bottom of the market, to try to take advantage of an overbuilt industry that has suffered from declining American interest in golf since well before the Great Recession drove many courses into bankruptcy.
Pacific Links, which has about 4,000 members worldwide, plans to buy two or three more Southern California courses, Harry Turner, the company’s Vice President for mainland U.S. operations, told the Times.
Du and other Chinese investors in U.S. golf courses are working to make sure this third round of Asian acquisitions won’t go the way of the previous two, which occurred during real-estate bubbles that burst.
Pacific Links has committed $6.2 million to refurbishments after buying the Dove Canyon property in April 2013, the Times reported, from the U.S. arm of Japanese noodle maker Sanyo Foods, which had owned it since 1992 and still owns three other Southern California courses.
At the time, Pacific Links acquired a club that had never made a profit and had been losing nearly $1 million a year as membership stagnated.
But Dove Canyon raised the initial membership fee to $13,500 from $8,000 and still picked up nearly 75 new members in the last year, according to Russell Sylte, PGA, the club’s General Manager, the Times reported. The club now has 401 golfing members and 245 who pay $2,500 for non-golfing social privileges or $1,500 to be able to use the dining room.
“The club will turn a profit this year for the first time,” Sylte told the Times.