Whispering Pines, Foxfire Clubs Face Foreclosure
The heavy toll the recession has had on the golf industry hit home again this week when the Country Club of Whispering Pines and Foxfire Resort and Club were sold at auction.
Hillcrest Bank, of Overland Park, Kan., which holds the notes on both entities, set the opening bid at $2.48 million for each, but there were no takers. If no upset bid is submitted by next Friday, the bank will foreclose on both properties.
"Until then, there's an opportunity for someone to step in," said Woody Davis, a Moore County native and the guarantor on both loans. "There's a lot of interest. People are looking, but there's a lot of bottom feeders who are not looking at the value. They're just looking to do a deal."
Heritage Golf Group, which was appointed chief restructuring officer by the bankruptcy court March 9, will continue to manage both properties under an agreement with Hillcrest that kicks in once the foreclosure is completed later this month.
"The bank is interested in selling the properties as quickly as it can," said Andy Crosson, vice president of acquisitions for Heritage, which is based in San Diego. "Our job is to come in and stabilize the properties first, then improve their value in order for the bank to have a successful exit. We'll start with new budgets and new marketing plans to move these properties forward."
Heritage has already purchased new maintenance equipment - fairway mowers, greens mowers and utility vehicles - for both properties and new golf carts for Foxfire, Crosson said Thursday.
"The old carts couldn't make it 14 holes," he said.
Davis and his partners in CCWP LLC secured a $5 million loan from Hillcrest in 2007 to purchase the Country Club of Whispering Pines. One year later, Davis and his partners in FFG I LLC went back to Hillcrest for a $4.6 million loan to refinance their 2002 acquisition of Foxfire.
Hillcrest, which has 41 branches in four Midwestern states, had become a national real estate lender, with loans in 42 states. But the bank was undone by the damage falling property values had on the value of those loans.
"Hillcrest was having more problems than we were," Davis said. "They needed to have their commercial loans reduced so they called our loans in."
Davis, 63, who has a banking and commercial development background, had verbal commitments in early 2008 from GE and Textron - the two largest lenders to the golf industry at the time - to consolidate the loans. But both pulled away from golf course lending that year, GE before the October stock market crash and Textron afterwards.
"That left me with the entire thing," Davis said. "Then we hit some of the worst times we've ever had in golf. You get caught in a cash flow situation that isn't positive."
Hillcrest also failed under a mountain of troubled loans as indicated by a sky-high troubled asset ratio of 572 percent, compared with a national average of 15 percent. Once a bank reaches a troubled asset ratio of 100 percent or greater, recovery becomes a remote prospect.
Hillcrest was closed last Oct. 22 by the Kansas Office of the State Banking Commissioner, which appointed the FDIC as receiver. But the bank reopened the next day after being purchased by NBH Holdings Corp., a Boston investment group.
"I'm working with Hillcrest, Heritage and the other folks to resolve the issue," Davis said. "Every decision I've made has been in the best interest of the employees and members at CCWP and Foxfire. They're fantastic people."
Davis added that he never would have imagined going through a multi million-dollar bankruptcy proceeding at his age.
"It's been an emotional experience," he said. "It's just been a tough time. You just keep trying, working and hoping. Everything is on the table. There are no bad people. It's just a bad situation."
Rodney Russell, general manager and director of golf at CCWP, said the transition has been fairly smooth.
"It has not affected our day-to-day operations in any way, and our membership has held steady," Russell said. "It's been a lean couple of years, but we were able to survive and keep the doors open. A lot of other courses can't say the same."
The Pit Golf Links closed earlier this year under similar circumstances. The golf course was purchased during a foreclosure sale in February by a Charlotte businessman who then flipped it to the Dedman family, which owns Pinehurst Resort.
Jack Nance, executive director of the Carolinas Golf Association, said the golf industry issues in Moore County are occurring across North Carolina and the rest of the country.
"From what I've seen, we're not done yet," Nance said. "It's prevalent around North Carolina. There are some clubs that are barely hanging on."
Not only are clubs closing their doors, but Nance said they are also losing members.
"We had 729 member clubs in 2000, with a combined 192,000 members," he said. "Today, we have 705 member clubs with a collective membership of 168,000. That's a 12.5 percent drop. This is certainly not something that's isolated in Moore County. I think we're going to continue to see fallout in the Carolinas and the rest of the nation."
The National Golf Federation recently reported that the number of golfers in the United States declined in 2010 for the third consecutive year, falling 3.6 percent to 26.1 million.
While the recession took its toll on the industry, the golf federation noted the following silver lining: The participation falloff is more linked to financial pressures rather than golf losing popularity among consumers.
The gradual decline since 2008 in golfers and rounds was primarily because of "the impact of lower job security and concern over personal finances, not waning appeal for the game," NGF president and CEO Joe Beditz said in a statement.
"An uptick in NGF's consumer confidence measure in March 2011, along with increased equipment sales reported by manufacturers in the first three months of the year, may indicate that we are beginning to pull out of the slump," Beditz said.
Contact Ted M. Natt Jr. at firstname.lastname@example.org.
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