ClubCorp plans IPO

ClubCorp Holdings Inc. filed plans for an initial public offering of up to $100 million in common stock, as the largest owner of private golf and country clubs in the U.S. looks to raise funds to pay down debt.

The company has a portfolio of 151 owned or operated clubs in North America, with more than 145,000 memberships. In the ClubCorp owns the underlying real estate for 80 of its 102 golf and country clubs. It also owns one business club and leases, manages or operates through a joint venture 48 business, sports and alumni clubs. The company's revenue is comprised mainly of revenues from membership dues, food and beverage operations and golf operations.

ClubCorp was acquired by affiliates of private equity firm KSL Capital Partners LLC in late 2006. After the IPO, KSL will continue to own a majority stake in the company. In addition to paying down debt, ClubCorp will use proceeds from the IPO to make a one-time payment to KSL in connection with the termination of a management agreement.

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Editor's note: We asked GCI columnist Henry DeLozier about the potential impact of ClubCorp's IPO plans on private clubs.

The ClubCorp IPO may prove to be a defining moment for private clubs and owners of private club portfolios because it will set the bar for how those clubs will be valued going forward.

In the due diligence applied by the public-market valuation process, the ClubCorp portfolio will be valued based on revenues received, that is, dues. It will be very clear that market value is tied to annual cash flow, not to property value tied up in things such as golf courses, swimming pools and dining facilities. Private clubs, as the ClubCorp IPO will make clear, are in the business of collecting dues. Except for the handful of remarkable and one-of-a-kind clubs such as Augusta National, Pebble Beach and Pinehurst, whose brands have value unto themselves, private clubs in the U.S. will follow the market and the definition of value now being set by ClubCorp.

Because dues derive from membership sales, retention and growth, there will be great scrutiny on the effectiveness of ClubCorp to sell memberships. In its many years of success, ClubCorp has proven to be an effective membership lifestyle company.