Potential Country Club owner James A. (Bob) Husband fielded questions at a small club meeting earlier this month, and he sits for a half-hour Q&A here.
Here’s a question-and-answer session with James A. (Bob) Husband, a golf industry veteran who’s working with the Country Club to buy out its lease and take over ownership. He talks about the challenges in the golf industry, how he would like to improve our Country Club and how his most recent company handled the challenging economy of recent years.
Husband has four decades of experience heading large golf companies. Through his companies, he has owned and operated dozens of high-end golf courses.
After months of behind-the-scenes work, the club earlier this month revealed the plan to cooperate with Husband, who would loan the club the money to buy the property from the landlord, the North developers. The club would sell Husband the property for $1 and he would forgive the purchase loan. Among the improvements pledged is $2.5 million for a pool, fitness center and other work. That coverage is here.
Husband started as co-founder, chairman and CEO of a company that ultimately became CCA/GolfCorp, the public golf operations subsidiary of Club Corporation of America. He formed Cobblestone Golf Group in 1992 and sold it in 1998 after it had become the third-biggest golf operator in the U.S. Most recently, he headed Heritage Golf Group, which he left last year, after the company was recapitalized by a private equity firm that became majority owner.
Vince Lepera, country club president, said he has done considerable vetting of Husband, starting with Husband’s business relationships.
Husband’s past partners speak highly of him, Lepera said, and so do others in the industry. As for the finances to do the deal, “He has the money in the bank,” Lepera said. “...That’s always been important to me, because that brings more credibility to the table.”
The club will hold meetings this weekend to give members a chance to hear from Husband and club leaders prior to a member vote on the proposal. (The sessions will be held in the Murieta Room 3:30 p.m. Saturday, 3 p.m. Sunday and 7 p.m. Monday. The club says questions must be written on cards and submitted to the club office no later than 5 p.m. Thursday.)
Several times in the interview, Husband refers to the non-compete agreement he signed when he left Heritage to explain why he’s cautious about answering a question. He said Heritage has no problems with him doing the Rancho Murieta deal.
The interview, which lasted 30 minutes, has been lightly edited.
RM.com: You’ve started a string of golf companies over almost 40 years. What trends in the industry have you seen in that time?
Husband: Well, my first company concentrated on public golf courses. So we started with the City of L.A., County of L.A. courses, City and County of San Francisco courses, Harding Park and Lincoln Park, and then we ran Alameda – this is going back into the 1980s. And then I sold that company to Club Corp.
Over the course of my career, I’ve been in public, semi-private and private. I’ve just decided that I like the private side a lot better. So that’s kind of where I’ve gravitated.
What was the high-water mark for your companies in terms of number of courses you owned or operated?
Well, I’ve actually operated two that had between 40 and 45. I operated the public-course division of Club Corp., which was about 40 courses, and then when we sold Cobblestone we had 45, I believe. Plus or minus one. And those were a combination of public and private at Cobblestone.
In terms of your personal satisfaction with your career, what was the high-water mark for you?
Oh, I think selling my company in 1998. And then we had to sell it again in 1999, because the company that bought it was trying to do what’s called a paired-share REIT (real estate investment trust), and that got thrown out by Congress that same year, so they had to retool and start over. So they sold the company again, a year later.
Obviously, for me, that was a good and bad time. But it was a lot of fun going through.
To today, I think that’s still the second-largest golf transaction. That was about $430 million, something like that, when we sold.
What were the good years for the golf industry? What were the bad?
Clearly the best years for the golf industry were the late ‘70s, and all the way through the ‘80s were pretty good. We had some ups and downs in there. The ‘90s were consistently very good – ‘92 to ‘98 was tremendous. We had double-digit growth almost every year. I’d have to say that was the best period, from ‘92 to ‘99.
How about the bad stretch?
2008 to 2012. We had a situation where the three major lenders in golf decided to get out of the business after the crash of the market and everything else. It hit the golf industry a lot harder than it hit most things.
Looking at the last decade, the Heritage story seems to be one of acquisitions on the one hand and defaults or stress sales on the other. Is that accurate?
This is where I get into the issue of non-compete. I don’t how much I can say to you.
All I can tell you is that everything we did was in cooperation with the banks. We didn’t do any bankruptcies or anything like that. What we tried to do was to cooperate with them because, basically, we couldn’t find another place to borrow the money.
My partner was (private equity firm) GTCR Golder Rauner, out of Chicago. We just hit a period of time where they said, you know, because we’re at the end of a fund (period), we didn’t have any acquisition money, so we were just trying to stay in the business. And we had a problem because the banks were not lending. They wanted out of the business.
So when banks want out of the business and you have loans, you have to figure out how to replace them. And that’s where we found ourselves. Not just us – a lot of people found themselves in that position.
Over the course of your career, how many acquisitions have you been a part of?
Between 140 and 150 is my best guess.
How many of those situations ended, let’s say, badly – some kind of default or financial stress?
Only a couple, because that’s the only time we ever reached the point where we had no financing available. But I’ve never given back a golf course to a bank, other than, let’s say, between 2008 and 2012.
So there were situations there where you gave a golf course back to the bank?
Again, I can’t get into the specifics of it. We had banks that came to us and said, “You have these loans, and we’re not in this business anymore. So help us out here, find somebody else to take us out.” Well, we came to the end of the loans, and there was no one there to take them out, and my partners were not willing to stay in it with all equity, so we had no choice. So we let the banks sell a few properties.
We kept most of them, but they did sell a few properties, and with our help and our cooperation, and I know that if you talk to the bankers involved, which I know Vince (Lepera) has, you’ll find out they say, “Bob did everything he said he would do,” or “His company did everything they said they would do, and we are happy, overall, that we’ve had the relationship.”
I do not think there’s a negative there.
Can you see trying to build another company, with Rancho Murieta as your first property?
If I’m looking for a restaurant to go to, I’m usually looking for one that’s owned by a private individual who maybe owns one or two restaurants, because they get the most personal attention. And I think it’s the same in the golf business. I don’t want to run 20 or 25 courses. I want to run one or two. I’m not saying I won’t buy two or three, but my goal is to buy one at a time and run it and see how it goes and maybe buy another. I just don’t know yet.
I really want to get my teeth into the operations again and give it the personal touch that you can’t do as a company. There’s no way to do it.
How did you connect with Rancho Murieta?
I was working with a broker who knew of the situation, and he got me in touch with Vince, and we had a couple of meetings, and that’s how it started.
What are the strengths you see here in Rancho Murieta?
Well, I love the fact that you’ve got 2,500 homes there, and there’s another 84 under construction. I really like the idea that you have a great market. And then down the street (in Anatolia), there’s another 2,000 homes, approximately. I think there’s a reasonably good chance of getting a few of those folks from over there.
But my main focus is trying to get as many people as possible inside the gates of Rancho Murieta to join the club on some basis, whether it’s social or, when we get the fitness done, whether it’s fitness, tennis, social, sport, you know, one of those categories where just about anybody there can afford.
You make more and more people that are in the community feel a part of the club. That’s my goal.
What do you see as the weaknesses here?
Well, you’re out there a long ways from a lot of things. That’s a strength and a weakness, I guess.
I think there’s a lot of work to be done there, frankly. I played the course probably in the early or mid-’90s and it was spectacular. I’ve only driven around it once (recently), so I can’t really comment, but the condition of the course does not look as good as it used to. And that may be because they’re putting in a new irrigation system on both courses, so it may be going through a transitional phase. I don’t know. I don’t want to judge that because I don’t know that much about it and I haven’t had that much time there.
But I really want to go from the time you turn off Murieta Parkway and relandscape the whole thing, all the way in, refurbish the clubhouse. When I say “refurbish,” I’m going to spend as much money as I can, and that’s going to depend on the pricing of the lease buy-out. I’m going to spend as much money as I can on the clubhouse, and then we’re going to have to do a priority system for the bunkers and any other thing that needs to be done.
There’s also a situation with the maintenance facility. I think it needs to be moved, because I think the driving range could be so much better if you could lengthen it and regrade it. I’d love to do that. Again, it depends on how much money I have to spend on the front end, because I have made a commitment that for anything under a certain amount (sale price), I’ll just continue to put it into the property.
Clearly, it benefits the developer, because with 13 years left on the lease, it wouldn't make sense for the club to continue to spend huge amounts on the property. This way the club gets a lot of money infused into it, and I think it brings up the values of the homes that are currently there and the homes that will be built in the future. So I think it’s a win-win for everybody.
If we say the club’s difficulties have it in a transitional phase right now, have you done a transition like this before?
I’ve done a bunch of them. A bunch.
Can you name a couple?
I’m trying to think whether it’s prohibited for me to name a course or not. Well, I can tell you, back in the days of Cobblestone, we did a lot of them. We had Sweetwater Country Club in Houston, Texas. It was a 36-hole facility, there were 2,000 homes around it. That was a big turnaround. It went from doing – my numbers may be a little off, but they’re not much off – around $8 million or $9 million to doing $13 million or $14 million in revenue. And we did make a bunch of improvements to it. It’s still a great club.
The club says you believe strongly that this place should remain private. Would you talk about that?
Absolutely. It makes no sense to make it public. Because it’s in a gated community, you have to keep it private. I would never even think of buying this for a public course. Plus, there are so many things going on on the public side of the business right now that it makes it really hard to think about buying a public course.
When you look at the market, it screams private. It would never even occur to me to make it public. I can just promise you, that’s just not in my DNA to do that.
How would you finance this?
We would buy with cash immediately, and then we may finance it at some point in the future. But for now, it would be an all-cash transaction.
You'll be the owner?
I will be a partial owner, and I’ll put in a substantial amount myself.
So you’ll have partners then?
To be safe, I’ll say it will not be more than four or five people. We’ve got plenty of money to do it with just a very small group. We’re not looking for a short-term situation. This is a more of a get in there and develop something and stay there and operate it. That’s what we want to do.
So it’s not institutional money?
There’s no institutional money. It’s all private money.
The club has worked hard in recent years to keep its head above water and hasn’t gotten much beyond keeping its nose above water. How can you grow revenues to support an enhanced club, with additional expense, and provide a return for yourself here?
A club is always a little bit behind the eight ball. They have to go to the members and ask for money in order to do something. So, they almost have to, by their very nature, they have to wait until they really need something and they go out to the members and they assess them.
In this case, we’re going to go out front and we’re going to do a bunch of work and build something that’s different, meaning the swim/fitness club and maybe a couple of tennis courts and do some other things to the club as well. But the key thing here is we’re going to build something new. We’ll have an attraction that I think will be very well received in this community. People can come there for almost all of their recreational needs.
What are your financial expectations? What is your timeline?
I don’t think anybody expects that you can turn this around immediately. It’s going to take a year or two of putting your money into it and operating it and convincing people that you really are serious about what you’re doing. I think it’s a year to two-year process to get it to where it will make a modest return for us. Hopefully, it’s a great return. If it’s a great return, then everybody’s happy. But it’s going to take a little while.
Is $2.5 million enough to build a pool and fitness center and make needed repairs?
It’s enough to do some. A Rancho Murieta Association plan a few years ago for a pool and fitness center was about a $4 million plan, but it was 10,000 square feet on the inside and 5,000 square feet of patios and all that. I don’t think you really need that at this point. But I’m going to look around, I’m going to get a bunch of samples of what other clubs have done and see what fits. We’ll talk to a lot of people and figure out what is our competition in the area and do something nicer than what they have, but maybe not over the top, because over the top doesn’t help anybody.
Some members here may be nervous about this possibility because a business operator coming in might run the club differently than it has run under the membership – maybe more businesslike, with all the risk of an up and down economy. Are there any assurances you can give members?
I think what the members should be concerned about is that they have 13 years left on a lease, and at the end of that time, what do they do? I’m not trying to scare anybody; I’m just saying that’s the situation that exists.
If nothing else, I’d help Vince and the board negotiate – not that they need me – to get something so that the club has some longevity. What I’m hoping to do is, if I come in, we’ll give the club longevity, because we’ll put the needed capital into it.
I do not see a scenario by which the club runs into really hard times in the future. Because once you’ve got a good participation rate within the community and it’s something your family really enjoys doing, and you really enjoy doing, I just don’t see that you’re going to give that up.
I think the long-term prospects for Rancho Murieta are tremendous.
Do you have anything you want to add in closing?
Vince has done a lot of work to check me out personally. I’m just going to tell you that I’ve never run away from any business obligation. I’ve never burned a bridge. I don’t do that; I’ve never done it in my life. No one you talk to in my industry is going to tell you about me, (A) he doesn’t know what he’s doing or (B) he’s done something bad. I just haven’t done that.