Asian buying boom

The latest wave of golf course buyers from Asia have been more selective than their predecessors when it comes to U.S. properties
  • Ocean Course at Hokuala

In early 1991, as a thriving economy was creating immense new wealth in Asia, a respected U.S. golf broker declared that American golf courses were the best real estate investment in the world.

A wave of Japanese investments had crested on U.S. shores. Noboru Watanabe spent $108 million on Riviera Country Club. Sports Shinko shelled out $250 million for La Costa Hotel & Spa. And unforgettably, Minoru Isutani coughed up a staggering $830 million for Pebble Beach Co.

Japanese investors even sunk money into golf course design. In 1989, Perry Dye sold a minority share of Dye Designs International to Dunlop Japan, the global sporting goods company.

Those buyers led the procession of Japanese investors who began shopping for U.S. golf properties in the late 1980s, motivated by a passion for the sport and an appreciation for the doors it opened and the status it conveyed. They paid top dollar, and they boosted the value of golf courses everywhere.

Building on the foundation laid by those pioneers, and stirred by similar impulses,  Asian investors have been buying and selling U.S. golf properties ever since. It’s tempting to think of them as arriving in succession — the Japanese, followed by South Koreans, followed by Chinese — but history rarely follows neat patterns. Groups don’t come and go en masse.

Today, Asian owners of U.S. courses face significant headwinds. Even before the coronavirus infected economies worldwide, a variety of threats — a trade war, clampdowns on foreign investment, corporate financial instability and concerns about U.S. play and participation — made many worry about the future.

Those factors and others shrank the pool of both domestic and international investors. And now, in the wake of a pandemic, the pool is likely to shrink further.

“There will always be an appetite for U.S. investments,” said Jim Hinckley, founder and CEO of Century Golf Partners, which earlier this year took a minority stake in Hankuk Industrial’s purchase of the nine-course PGA West portfolio. “But it’s hard to say how big it’ll be in the future. Who knows what will happen?”

Today’s major players

Lately, though, Asian investors have been seizing opportunities in the United States.

One who has raised his profile is Shin Il Yoo, a South Korean golf-equipment distributor whose Hankuk Industrial bought PGA West. Yoo likes to work under the radar, but in the past three years he’s acquired eight golf properties in California and one in Oregon.

Another is Woong-ki Kim of SJS Tomorrow, an affiliate of a South Korean clothing manufacturer. Described by an associate as a golf-aholic, Kim last year bought his fifth golf property in Southern California, the struggling Bermuda Dunes Country Club near Palm Springs. He wants to buy two or three more.

There’s also Liang Sheng Liang of the Hong Kong-based C-Bons International Golf Group, which since 2012 has acquired 10 properties in Texas and more than a dozen in Arizona, California, New York and other states. Liang is said to be very private, but he’s a long-term investor who wants to increase his holdings.

Also getting notice is Yuki Sasada, a Japanese buyer who has said that his family “shares a passion for golf.” Last year, their Sasada Sports International paid $11.3 million for Willows Run Golf Course in suburban Seattle. 

“It’s their first golf course, but they’re going to be a major player,” predicted Ken Arimitsu of Madison Marquette, who’s been facilitating transactions with Asian investors since 1992. “They could buy four or five over the next 10 years.”

If these buyers have anything in common, it’s that they’re more sophisticated than their predecessors. They’re skeptical of claims about the value of U.S. real estate and are focused on properties capable of generating returns on their investments. And they’re evaluating the risks in the post-pandemic golf industry.

Disruptions caused by COVID-19 have left the U.S. golf business in limbo. People believe it will recover, but some operations still haven’t recovered from the last economic crash more than a decade ago.  

Japanese buying boom 

Before Japanese buyers began to fade away less than a decade after they arrived, they almost singlehandedly sparked a U.S. golf boom. By 1992, according to a contemporary estimate, they’d financed the acquisition and development of almost 100 U.S. golf courses. In 1990 alone, according to Kenneth Leventhal & Co., they spent nearly $294 million on U.S. courses.

The Japanese favored trophy properties on the West Coast and in Hawaii, but they bought courses everywhere, and paid premium prices.

Shinwa Golf Group spent $300 million on the Kauai Lagoons (now the Ocean Course at Hokuala) on the island of Kauai and $197 million on the Wailea Resort on Maui. Asahi Juken Co. paid $127.5 million for Turtle Bay Resort on Oahu.

Sanyo Foods acquired four venues in Southern California, among them Tustin Ranch Golf Club for $35 million. Hiroshi Furui paid $22.5 million for The Country Club of Louisiana, and Daiichi Real Estate Corp. paid $25 million for Lakeover Country Club in Bedford, N.Y. Kiyonori Higa, an Osaka-based based developer who is said to love John Wayne movies, paid $35 million for The Club at Sonterra in San Antonio.

Eventually, though, the money tree stopped shaking. In the midst of this buying frenzy, the United States slipped into a recession, and Japan’s golf business was being suffocated by real estate-related bankruptcies, corporate scandals and a near-collapse in the value of golf memberships.

To nobody’s surprise, most Japanese said sayonara to golf.

“The Japanese aren’t completely out of the market today,” said Jeff Woolson of CBRE, who’s been involved in numerous Asian golf transactions. “They just aren’t as active as they used to be.”

Editor's note: this is the first of a two part series on this topic. The second story, Asian buying boom II, will be published next week and will address the new buyers in the market and why you should be cautious when selling to an Asian investment company. 

Comments

Hi, thanks for this interesting article. Is it possible to provide email addresses for Shin Il Yoo and Woong-ki Kim? I'm currently the GM at Arrowood Golf Course in Oceanside, CA and would like to get in touch with these Korean owners. Any feedback would be greatly appreciated. Best, Tom Son

Hi Tom, Please contact the author, Robert Vasalik, for the contact information you are requesting! He can be reached at WorldEdition@aol.com or call 301/680-9460.

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