Go for the Green : Country Club Members Scrambling to Buy PGA West, Mission Hills Courses at Auction

At first glance, the palm-lined fairways and blue-green lakes scattered across the fabled PGA West and Mission Hills golf courses near Palm Springs appear to be tranquil oases far removed from financial turbulence or uncertainty.

In fact, the future of the two country clubs is very much up for grabs these days as nearly 2,000 of their well-heeled members scramble to buy the resorts and keep them out of the hands of several big-name suitors--including Ross Perot Jr., Marriott Hotels, and Wall Street’s Morgan Stanley.

The ownership issue is scheduled to come to a head next month when the Resolution Trust Corp. puts the courses on the auction block at a foreclosure sale in Texas. They had been owned by a now-failed savings and loan.

“With all those ‘big guys’ involved, we feel a little like it’s David versus Goliath all over again,” said Dick Selberg, a member of the Mission Hills Country Club, which the government estimates is worth nearly $40 million.

At PGA West, about three-quarters of the 1,600 members have already pledged $24 million toward a down payment on the resort, which has four courses and an estimated value of $127 million.

Nevertheless, “We feel like we’re a little outgunned, because none of us have tried to pull something like this off before, and those Wall Street guys are old pros at it,” says member Jim Gilstrap, who is leading the fund-raising effort.

PGA West and Mission Hills are among a group of six golf resorts that the RTC is planning to sell at the auction, scheduled for July 14 in Dallas.

Perot, a Dallas-based developer and son of the former presidential candidate, has said that he is considering the purchase of all six resorts--currently valued at a combined $385 million--instead of just one or two.

Officials at Morgan Stanley, which agreed to purchase $1-billion worth of real estate from Bank of America earlier this year, have attended all of the RTC-sponsored bidders’ conferences but remain mum about their plans.

And Roger Maxwell, chairman of Marriott’s golf resorts division, said his company might make offers on some of the properties itself or sign joint-venture agreements with other bidders.

A third Palm Springs-area facility, La Quinta Golf & Tennis Resort, is also up for sale. Its 550 members cannot afford to buy the sprawling complex, valued at more than $100 million, but member spokesman James Lloyd said the group may bid with a partner.

The Mission Hills complex in Rancho Mirage has drawn a lot of attention from outside bidders, partly because its smaller size makes it more affordable. Its $39.9-million price tag includes three 18-hole courses, 24 tennis courts, 73 rental villas and a small amount of developable land.

Members of the Mission Hills Country Club include baseball Hall-of-Famer Johnny Bench, who has played a key role in the membership efforts to purchase the property. A recent mailer to members urged them to join “Johnny’s team” by pledging $25,000 each; about 700 of the club’s 1,100 members have already signed up.

Yet it is the four-course PGA West facility in nearby La Quinta that is the crown jewel of the RTC auction.

Its famed TPC Stadium Course--one of two open to the public--is rated the most difficult course in America by the United States Golf Assn. Its two private courses were designed by Jack Nicklaus and Arnold Palmer.

PGA West has hosted some of the world’s most-prestigious golf tournaments, including the Bob Hope Chrysler Classic and the Grand Slam of Golf. The facility includes 19 tennis courts and nearly 1,500 acres zoned for expensive homes, a 1,000-room hotel and four more golf courses.

Club members recently enlisted NationsBank of South Carolina to help them. While details of the agreement remain secret, fund-raiser Gilstrap said club members “will definitely be in a position to make a good, solid bid.”

Part of the association’s efforts are motivated by fear, according to Gilstrap, a retired investment banker.

Most of the members paid a one-time, $30,000 fee for lifetime rights to enjoy the facility’s well-kept greens. Now, they worry that a new owner might skimp on maintenance or open more courses to the public to boost cash flow.

Members also worry that a sale might harm the value of their homes, most of which overlook the fairways. Prices at the gated complex are already down between 20% and 30% from their peak of a few years ago.

Potential bidders, however, dismiss those worries.

“There are almost 1,500 acres left at PGA for a 1,000-room hotel and more than a thousand houses,” said Frank Zaccanelli, vice president of Perot-owned Hillwood Development Co. in Dallas. “If we buy this property and run it into the ground, how many of those rooms could we rent or homes could we sell? Not very many.”

Hillwood already owns and operates similar golf resorts in Texas and elsewhere. The company opened a satellite office in Irvine last fall as a first step toward expanding on the West Coast.

The homeowner groups at both PGA West and Mission Hills are also teed-off at the bidding guidelines established by the RTC. For one, they don’t like the fact that bidders paying cash will be given a 15% price discount.

In addition, the RTC is essentially holding two rounds of bidding--one on individual properties and a second for “pools” of two or more resorts.

Even if PGA West and Mission Hills members submit top bids for individual properties, Gilstrap and Selberg both say that it is virtually impossible for them to participate in the pool bidding.

“We might offer the best price for PGA West but lose out because somebody with more money agrees to a package deal,” Gilstrap said.

The RTC defends the bidding process, however.

“We’re giving discounts to all-cash bidders because we can close those deals quickly and we don’t have to provide any (cut-rate) financing,” said RTC spokesperson Felisa Neuringer. “The pools are being offered because we might get more money for a package of properties than we would get if we sold them off individually.

“I feel sorry for what happened to the members at those resorts, but our job is to sell these properties for as much as we can,” Neuringer said. “We have to serve the greater interest of all taxpayers, not just the members of those country clubs.”

Golf Values Sinking

Investor interest is heating up in the premier golf courses once owned by a savings and loan association that later failed. Values on most of the courses have plunged. In millions of dollars:

Club Book Value Investment Value Decline/Increase PGA West $278.0 $127.0 -54% La Quinta 261.0 105.0 -60 Mission Hills 44.2 39.9 -10 Carmel Valley Ranch 45.4 22.8 -50 Palm Beach Polo & Country Club 54.5 25.0 -54 Kiawah Island 55.8 64.7 +16

Note: Figures are as of Sept. 30, 1992.

Source: Resolution Trust Corp.