Jeff Silverstein’s golf operation in greater Charlotte, North Carolina is in financial turmoil, less than a year after similar troubles in Arizona.
Skybrook Golf Club and Charlotte Golf Links have been taken over by court-appointed receivers and appear to be headed to foreclosure, according to the Charlotte Observer. This comes a month after Birkdale Golf Club closed briefly due to non-payment of state taxes.
Silverstein, who made his name by founding Silband Sports with Bob Husband in the 1980s, later founded IRI Golf Group and grew that portfolio to 23 courses.
But IRI found itself with too much debt when the financial crisis hit in 2008.
“Our cash flow dropped by over 50 percent since September 2008, and appraised values dropped a similar amount,” he said. “We were over leveraged and have not recovered from the financial crisis. It has also been a downward spiral of pricing of greens fees. Our rounds are flat, but revenue per round is way down.”
Silverstein has made several moves during the past four years to shore up finances and get things on better financial footing. He closed IRI Golf Group last year and moved the courses into separate entities.
For Skybrook and Charlotte Golf Links, Silverstein took a $6 million loan from Hunting Dog Capital to acquire the assets from IRI. The debt on the course was $13 million and the course was appraised at $9 million. By December, Silverstein and Hunting Dog Capital entered into a forbearance agreement, in which Silverstein agreed to list the properties for sale.
Silverstein said the recent action to place the courses into receivership took him by surprise. He said less than seven days before, an article announced that a developer planned to build a $200 million development project adjacent to Charlotte Golf Links.
“It is my contention that the lender took an arbitrary action to capture the equity, while all along negotiating with me to either pay them off or sell,” Silverstein said.
The lender has also accused Silverstein of improperly transferring more than $86,000 from the companies that operate Skybrook and Charlotte Golf Links to other entities he owns. Silverstein denied this allegation and said he has documented proof that he paid more than $100,000 in bills for the courses from other entities.
Silverstein said he is planning to file suit against the lender, but declined to discuss details on the matter.
Other parties have also filed lawsuits seeking payment for overdue bills related to the North Carolina courses. Silverstein ran into similar problems with non-payment of debts in Arizona in late 2012.
In October, Arizona National Golf Club, in Tucson, Ariz., had to close after its water was shut off. It paid more than $250,000 in back payments to get the water back on, and announced the course would be put up for sale. The Tucson water authority said Silverstein had a history of writing bad checks, the Arizona Daily Star reported.
Two other Arizona courses also closed due to unpaid water bills. Forty Niner Country Club, in the Tanque Verde Valley, Ariz, had its water shut off in January 2012. Silverstein’s company sold the course in May 2012 for $250,000. IRI had acquired it for $3.4 million in 1999.
Silverstein restructured debt for many of his Arizona properties in 2010, at a time when he acquired a new course — The Golf Club at Vistoso for $3.735 million. At that time, he told Golf Inc. he was very concerned about the golf business.
“My sense is that it is getting worse right now,” he said. “Foreclosures, an accelerated drop in revenues and the pressure that lenders will feel over the next six months is very significant. It could get much worse for golf.”
Last fall, The Golf Club at Vistoso suspended a member after he complained in the local press that the club had become a “goat ranch. Employees of the course said they had not been paid on time. A Charlotte television station also reported in August 2012 that Silverstein-owned courses were not paying employees on time.
Vendors have also sued Silverstein’s companies. PNC Equipment Finance sued the Birkdale club in June, seeking to repossess $240,000 worth of maintenance equipment and collect monetary damages of $232,613, court records show. New Life Turf filed a lawsuit in March against Skybrook and Charlotte Golf Links for failure to pay the company $36,083 for Diamond Zoysia grass. The company claims a check bounded.
Silverstein told the San Diego Reader in June “he made money in the early years but concedes that he has lost “a lot of money” since the financial crisis. Some have placed the figure at more than $30 million.
Silverstein said the Charlotte economy was hit hard and has still not rebounded.
“We cut costs but that did not help us in terms of maintaining our rate base,” he said.
Silverstein said his remaining Carolina courses are for sale, and he is hopeful they will but acquired soon.
Billy Casper Golf recently took over operations for Skybrook and Charlotte Golf Links. It hopes to stabilize operations and prepare them for a likely sale.
“We’re getting our arms around the situation,” BCG’s Rich Katz told the Charlotte Observer.
