GMACCM enters golf lending sector with a bang

RED BANK, N.J. - GMAC Commercial Mortgage (GMACCM) recently entered the golf lending market with a splash – by providing $650 million in financing to the investor group that purchased National Golf Properties (NGP) and American Golf Corp. (AGC), both of Santa Monica, Calif. GMACCM provided the financing to GS Capital Partners, Goldman Sachs Whitehall Street Real Estate Fund 2001 and Starwood Capital Group for the acquisition of 253 golf courses, the majority of which are located in the United States.

While this was one of the largest standalone, single-transaction financing deals in the history of the golf industry, GMACCM isn’t resting there, said GMACCM executive vice president Jerry Earnest, who heads the company’s specialty lending and hospitality and golf finance groups.

“We’d like to talk to good players. We’re looking to do portfolio transactions if we can but also if it makes sense to do individual transactions as well. We have an appetite for both,” he said. “We’re active, we’re here to stay and it’s still a relatively competitive market from our perspective.”

While the company is affiliated with former golf lender GMAC, Earnest said because the two are separate entities, this is more of an entry into the market than a return.

“It’s really a first foray. There was a mortgage banker who worked for the company four or five years ago, who specialized in golf and was teamed up with us to try to do some of that business with us,” Earnest said. “It all happened around 1998 when we had the capital markets crisis and a lot of lenders got out of the business. The timing was not the best. There is a sense that GMAC Commercial Mortgage did try to do something here several years ago, but that never really got started.”

The good news behind this large deal is tempered by published reports that parent company General Motors may be looking to sell GMACCM, which also recently closed on a joint fund between one of its subsidiaries and Apollo Real Estate Advisors. Earnest did not discuss either topic.

The main reason behind GMACCM’s entry into the market, Earnest said, was the company’s vision for the segment’s potential to be hot in coming years.

“Clearly, we thought this was an industry that had a lot of opportunity. There are only a few national lenders that are consistently in the industry,” he said. “Bank of America capital and others, when they were active in the mid- to late-’90s, were very active and had a very good book of business and a good product type, so we spent some time studying it.”

Earnest said the company is also looking to create relationships with industry players.

The NGP financing deal came about mainly because of GMACCM’s existing relationship with members of the investment group.

“We have a long-standing relationship with Whitehall, Goldman Sachs and we’ve done some things with Starwood as well. It was people we knew and understood,” Earnest said. “That group was also an owner of Troon Golf, so they’re not just novices in the industry. They brought some real expertise and some significant capital.

“It was not the easiest thing, but it was one that we were able to work through with very good, established clients,” he added.

In addition to the NGP deal, GMACCM has also completed two other golf financing deals totaling nearly $50 million. However, because those deals were not yet public at press time, Earnest declined to name the principals, but did say both deals involved players new to GMACCM.

“With these other two new deals this year, we’ve formed two new relationships with very prominent players in the industry,” he said.

Earnest said he hopes the announcement of the NGP financing deal will give a boost to the financing segment of the golf industry, which has been an area that has been going in reverse for several years.

“We may be a little early in terms of the industry’s problems, but we think we may be if not at the bottom, then we’re approaching it,” he said. “We may be a little early in terms of capital coming back, but we do think that, opportunistically the problems of the past two or three years – the oversupply and slowdown in demand – are behind us. That’s not to say this year, and potentially next year, won’t be tough years, but we think we’re at the trough, or very close to it.”

As for industry competitors, Earnest said it is too early yet to tell where GMACCM fits in the picture.

“I don’t know what they’re doing. Two of our other major competitors – I don’t want to mention their names – seem to be pretty busy right now,” he said. “I think in six months, we’ll all know better what each other have done.”

For now, GMACCM is looking for more financing deals, regardless of their size, Earnest said.

“We can do larger deals, and as small as one-offs, and we’ve done some in-between,” he said. “We’d like to talk to good players. We’re looking to do portfolio transactions if we can but also if it makes sense to do individual transactions as well. We have an appetite for both.”