By David Wren, The Sun News, Myrtle Beach, S.C. Knight Ridder/Tribune Business News
Dec. 18--The Grand Strand's golf industry, battered in recent years by stagnant growth and overbuilding, received a vote of confidence Tuesday with Signature Horizons Inc.'s announcement that it will buy Sea Trail Plantation & Golf Links in Sunset Beach, N.C., for $45 million.
'That area is a great destination market, not only for vacationers but for retirement-home buyers,' said John Mans field, executive vice president of Signature Horizons. 'It's an excellent project.' Sea Trail is the 2 1/2-year-old Signature's first major acquisition, and Mansfield said the company is looking to buy other golf course and retirement projects throughout the Carolinas.
Real estate experts said the purchase from the family-owned Sea Trail Corp., expected to be completed in January, is a shot in the arm to the area's struggling golf industry.
'It shows a lot of confidence in the future strength of this market,' said E. F. 'Buddy' Hucks, owner of the E. F. Hucks & Associates appraisal and real estate analysis firm.
Signature will buy Sea Trail's 2,000-acre collection of three golf courses, two clubhouses and a 32,000-square-foot conference center. Signature also is buying the land where Oyster Bay Golf Course is located, but will not operate that golf course.
In addition, Signature will get to operate Sea Trail's home rental program, which provides accommodations for vacationing golfers.
The $45 million sale price is 9 times Sea Trail's average profit of $5 million a year. Hucks said area golf courses typically sell for 8 to 10 times their annual profit figures. The sale price represents an 11.1 percent annual return on investment for Signature if profit levels remain the same.
'Real estate is a very sound investment now in view of what the stock market is doing,' said Ed Gore, one of the owners of Sea Trail Corp. 'That's why people like Signature are looking for places like Sea Trail.' Ronald Potts, Signature's chairman and chief executive, said he expects profit levels to increase significantly in coming years because of growth in the sport and future residential development of the company's Sea Trail property.
'There is excellent long-term income potential,' Potts said.
An average of 115,000 to 120,000 paid rounds of golf are played each year on Sea Trail's three 18-hole courses, Mansfield said. That is well within the range of 35,000 to 40,000 annual rounds golf experts say most newer courses need to turn a profit.
'Our operations have been very satisfactory so far,' Gore said. 'We've maintained our market share in the difficult climate we're in.' Many area courses have struggled to hit that level in recent years because a slow economy combined with stagnant growth in the number of golfers and too many new courses.
Through October, there were 2.95 million paid rounds of golf played at more than 100 Grand Strand golf courses this year. That compares with 2.98 million rounds for the same period in 2001 and 2.97 million rounds in 2000.
Despite the slowdown, the Grand Strand has fared better than many other golf resorts that have seen 10 percent to 15 percent declines in business, said Mickey McCamish, of Myrtle Beach Golf Holiday, which markets golf vacation packages.
'A soft economy and war with Iraq continue to have an influence on golfers taking a golf vacation,' McCamish said.
Among the biggest casualties of this area's golf slowdown was Myrtle Beach-based The Links Group, a golf course management company that filed for bankruptcy protection last year.
Recent transactions such as the Sea Trail sale and Burroughs & Chapin Co. Inc.'s decision this year to buy Pine Lakes International Country Club in Myrtle Beach for $10 million indicate better times might be ahead, Hucks said.
'It's a good sign for this area,' he said.
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(c) 2002, The Sun News, Myrtle Beach, S.C. Distributed by Knight Ridder/Tribune Business News.
