American Golf Corporation

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American Golf Corporation

2951 26th Street
Santa Monica, California 90405
Telephone: (310) 664-4000
Fax: (310) 664-6160
Web site:

Private Company
Employees: 22,000
Sales: $746 million (2000 est.)
NAIC: 71391 Golf Courses and Country Clubs; 71399 All Other Amusement and Recreation Industries

American Golf Corporation is the worlds largest golf course management company. The company runs over 300 golf courses across the United States and in Australia, Japan, and the United Kingdom. Its courses include municipal and public courses as well as private courses and country clubs. About half of American Golfs courses are owned by a sister company, National Golf Properties, Inc. National Golf Properties is a publicly traded real estate investment trust (REIT). Both companies are chaired by David G. Price. Price also owns a substantial stake in both companies. American Golf has a charitable arm as well, the American Golf Foundation. This nonprofit group endeavors to promote the game of golf particularly among women, young people, and poor or disadvantaged families. Increasing the popularity and accessibility of the sport is one of the goals of American Golf Corporation.

Seeing Golf from a Business Perspective: 1970s

American Golf Corporation (AGC) was founded by David G. Price, who purchased his first golf course in 1970. Price was the son of Welsh immigrants who moved to California during the Depression. Price studied economics at the University of Southern California, then joined the Navy and learned to fly fighter jets. During the Korean War, Price was a flight instructor. After his tour of duty was up, he returned to Los Angeles and earned a law degree at UCLA. His first job was with the leading entertainment law firm OMelveny & Myers. Working at the firm brought Price into contact with such top stars as Marlon Brando and Bing Crosby. Hobnobbing with the illustrious was one form of compensation for young Price. But in terms of actual salary, the job paid very little. After two years with OMelveny & Myers, Price only brought home $525 a month. Then Prices sister Joan introduced him to Joseph Drown, a well-known Los Angeles businessman and real estate magnate. Drown offered to double Prices salary if he would sign on as his personal attorney. Price left the law firm to work for Drown, and soon ran some of Drowns enterprises. Price became president of Getty Financial Corporation, Getty Resorts Corporation, and the Don the Beachcomber Restaurants, and was director and vice-president of the Hotel Bel Air in Los Angeles and of the U.S. Grant Hotel in San Diego.

Drown owned a lot of land in and around Los Angeles, including three golf courses. Price was not much of a golfer, but he was intrigued by the business possibilities of the courses. They were not doing well for Drown, and Price asked if he could buy them. He was sure he could manage them in a professional manner, applying sound business principles. As they were, golf pros managed them, and these people were more concerned with the game than with the finances. At first Drown resisted selling his courses. In 1970 he relented, stung by complaints about the golf course he had overheard while at the bar of his Yorba Linda Country Club. Price bought the Yorba Linda and two other courses from Drown, and then proceeded to run them as he thought they should be. This was the start of American Golf Corporation.

At first, Prices new business was a disaster. He knew the courses were not profitable, and not in good shape, but he was unprepared for the depth of their problems. In an interview with CNN (August 14, 2001), Price told the reporter that everything that could go wrong went wrong. His friends reassured him that when he and American Golf went bankrupt, they would find him a new job. But Price persisted in spite of dreadful obstacles. All the grass on the fairways died at one course when a maintenance crew applied the wrong fertilizer. But Price solved the physical problems while going ahead with rearrangement of the management technique. He kicked out the golf pros and replaced them with people with a business background. He insisted on quick and accurate reporting of financial statistics from each course. Within five years, the three courses were turning a profit.

Building a Network of Golf Courses: Mid-1970s-80s

Once the first small group of courses was running well, Price realized he had a model for turning around other troubled courses around the countryand there were thousands of them to choose from. AGC began buying up courses or taking over management contracts. When AGC started its acquisition program in the mid-1970s, there were over 8,000 public courses in the United States, including some 2,200 courses run by municipalities. The municipal courses made especially good targets for AGC. The municipalities for the most part managed their golf courses much as they would any other public park. Sometimes management decisions were captive to factions within a city bureaucracy. Often courses were in poor repair and losing money. Municipalities often resisted turning their courses over to private management, yet AGC was able to move in when the other option would have been the city closing the course down. AGC brought the courses back to profitability, and split the revenue with the city.

Through the 1970s and early 1980s, American Golf picked up management contracts for underperforming golf courses in many states. The company liked to take over a cluster of courses in one area, because it was actually easier and more cost efficient to run multiple courses than a single one. AGC could then offer golfers a centralized reservation system for the courses in the area, for example. The company liked to take over longstanding courses too, as opposed to newly built properties. In some cases, the problems of old golf courses seemed too much even for AGCs expertise. In the mid-1980s, the company snagged management contracts for five municipal courses in New York City. Some of these courses were dangerousgolfers had been mugged, and employees allegedly came to work only in order to play cards together, letting the grounds go to ruin. AGC pumped approximately a million dollars into the New York courses, hauling off the cars that had been left to rot on some, buying new golf carts, renovating the clubhouses, and repairing the irrigation systems. The company also did extensive marketing, to tell New Yorkers that the courses were now much improved. After two years, the courses began to be profitable. Eventually the city received between $150,000 and $500,000 per course annually. AGC did not disclose what its share of the revenue was. But overall, the company was quite profitable. By the end of the 1980s, its earnings were about 10 percent of its revenues, and total annual sales were around $300 million.

Moving More Upscale in the 1990s

American Golf had found success by leasing underperforming courses, such as those in New York City. The company was able to cut costs while improving the courses. The cleaned-up courses attracted more people to the game, and AGC usually managed to increase revenues substantially at properties it managed. By 1991, AGC managed about 80 public golf courses in 20 states, as well as a handful of private ones. The company was a solid earner, and it began to put some of its profits into purchasing more golf courses outright. In the early 1990s AGC spent some $500 million to buy 45 courses. At this point the company began to deviate from its earlier acquisition plan. Most of the courses it leased or owned had been public courses with a relatively low daily user fee. It ran courses near airports and ones that had been neglected city properties, not fancy country clubs. But the company realized that not all golfers were alike. Its customers included casual players as well as devoted amateurs, some who liked a no-nonsense course and others who preferred a touch of luxury. To diversify its properties, AGC began to buy up country clubs and private resort courses. By 1993, the company had 14 courses that were substantially more upscale than most of its others. It formed a separate management division, American Golf Country Clubs, to run these as a unit. Within a few years, the 14 country clubs had expanded to almost 70.

The company made another major move in 1993. As it began to own more courses, the company moved away from its original business plan of leasing and managing. Consequently, David Price formed a new company, National Golf Properties, Inc., in 1993. National Golf was a real estate investment trust (REIT), a publicly traded pool of real estate properties. REITs traded as stocks, but were required to pay out at least 95 percent of their income as dividends. National Golf Properties was the first golf REIT on the market. Its properties comprised about 50 golf courses when it debuted. It leased these to AGC, so that the original company now focused just on management. National Golf received a base rent for the courses it leased to its sister company, plus a percentage rent based on the courses revenue. The companies grew in tandem, though the REIT was public and AGC remained private, with most of the stock in the hands of Chairman David Price, family members, and other top management. Acquisitions were completed by National Golf, and the management contract in all but a few cases went to American Golf. By 1996, National Golf had spent more than $300 million to buy up some 70 more golf courses. A major transaction was the purchase in June 1996 of 43 golf courses from a Dallas-based competitor, Golf Enterprises Inc. This cost the company $160 million. By the end of 1996, American Golf operated over 250 golf courses, including a substantial number of private country clubs. Annual sales were around $490 million. National Golf Properties owned over 110 courses, and its stock was booming.

Company Perspectives:

Our mission: To be the world leader in golf course management by providing first class facilities and services to the golfing community and operating with the highest standards of integrity and professionalism, while at the same time opening the game of golf to wider audiences.

AGC managed a large number of courses nationwide, and it tended to own multiple courses in any one area. Its country club division began offering members special deals at other courses the company managed. It offered a Platinum Plus Golf & Travel Advantage program, which gave its members free access to over 200 courses across the United States. It ran a national reservation center, so members could book tee time at any AGC country club up to 60 days in advance. The reservation center also handled airline, hotel, and rental car reservations. The country club division also offered its members their own tournament, called the American Classic. Running tournaments became a very lucrative business for AGC.

While the company poured resources into its country club arm in the 1990s, it also moved to introduce more people to golf. AGC sponsored a Women in Golf Task Force, encouraging women to get out and play. It also gave free golf lessons to inner city kids and adults, to defuse the image of golf as an elite suburban pastime.

AGC and National Golf Properties continued to expand in the late 1990s, though the growing popularity of golf began to attract competition. National Golf Properties had been the only REIT of its kind when it went public in 1993. By 1998 it had several competitors, including Meditrust Inc. and Golf Trust of America. Among them all, they only owned several hundred of the 15,000 golf courses in the United States, and investors fueled their rising stock prices, expecting big expansion. But the price of golf course acquisitions went up, too. National Golf Properties moved more slowly in the late 1990s than it had earlier, waiting for good opportunities as the market as a whole overheated. In 1999 it acquired a group of 48 courses known as the Cobblestone Golf Group from its competitor Meditrust. It bought these in a joint venture with another company, ClubCorp. Meditrust had acquired the group for $540 million only a year earlier, then let them go for a deep discount. Another REIT competitor, Golf Trust of America, sprang up in 1997 but was in liquidation by 2001.

International Expansion in the 2000s

Golf grew more popular in the United States in the late 1990s, fueled by a variety of factors. These included the broad appeal of new golf superstar Tiger Woods, and Callaway Golf Companys Big Bertha club, which made the game easier for amateurs. Several golf company stocks and golf REITs hit Wall Street. Meanwhile, AGC began to expand overseas. It formed a new international subsidiary in the late 1990s, American Golf (UK), and began buying up courses in the United Kingdom. By 2000, the British subsidiary owned over 20 courses, and planned for a portfolio of 50 by 2003. Its courses ran the gamut from municipal courses to fancy private clubs. The subsidiary was said to be consistently profitable, bringing in annual revenue of £33 million by 2000. The U.K. subsidiary also followed its parent company plan, and worked to make golf accessible to a broader swath of the population. The company held a special womens day at its courses in 2000, and drew thousands of eager beginners. Women made up only 7 percent of golfers in the United Kingdom, compared to 23 percent in the United States. The company believed it could increase its customer base in both countries by bringing more women into the game.

AGC also moved into Australia around the same time. By 2001 the firm owned two Australian courses. AGCs international division looked to Japan as another growing market. The company studied the Japanese golf scene for two years before closing on its first management contract there in 2001. This was to run the Aso Country Club, a famously picturesque club located in a northeastern suburb of Tokyo. AGCs subsidiary, American Golf Japan, took over the operation of the country club, and agreed to make extensive improvements to the grounds and facilities. This was the first time AGC-style professional management had been tried at a course in Japan. AGC hoped to grow its Japanese subsidiary to 30 to 50 clubs over the next five years, whether through acquiring managing contracts or through outright purchase. The firm continued to make acquisitions in the United States as well. In 2001 it bought two domestic courses, the Sierra Nevada Golf Park in Genoa, Nevada, and the Koolau Golf Club on the island of Oahu, Hawaii.

Principal Subsidiaries

American Golf (UK); American Golf Japan.

Principal Competitors

ClubCorp, Inc.

Key Dates:

David G. Price founds American Golf Corporation and buys first golf courses.
Company secures management contracts for five municipal golf courses in New York City.
National Golf Properties is founded; company operates as a publicly traded REIT as well as sister company of American Golf.
In a joint venture with ClubCorp, National Golf acquires 48 courses collectively known as the Cobblestone Golf Group from competitor Meditrust.
American Golf signs first management contract for golf course in Japan.

Further Reading

American Golf Corp. Catches Its Breath and Speaks, Business Wire, May 14, 1997.

Capell, Kerry, Golf Stocks: Sand Traps and Smooth Greens, Business Week, June 3, 1996, p. 126.

Carlson, Eugene, Privatization Lets Small Firms Manage Everything from Libraries to Golf Courses, Wall Street Journal, April 2,1991, pp. Bl, B3.

Ciandella, Donald R., Investors Take Swings at Unusual Property Niches and Expect Home Runs, National Real Estate Investor, July 1996, p. 83.

Egan, Jack, Going After the REIT Stuff, U.S. News & World Report, July 19, 1993, p. 72.

Harverson, Patrick, Golf Course Industry Hopes Tiger Opens a Fair Way, Financial Times, November 13, 2000, p. 28.

Kirkpatrick, David D., American Golf Turns Away Suitors on Final Nine, Wall Street Journal, November 19, 1997, p. B14.

Lisovicz, Susan, and Gayla Hope, Business Unusual, CNN, August 14, 2001.

Rudnitsky, Howard, On the Green, Institutional Investor, August 2001, p. 95.

Samuelson, James, Clubhouse King, Forbes, October 7, 1996, p. 14.

Slatin, Peter, Buying a Course, Barrons, March 30, 1998, pp. G23-G24.

Taylor, John H., Hole-in-One, Forbes, July 22, 1991, pp. 53-55.

A. Woodward

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American Golf Corporation

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American Golf Corporation