|By Aaron Sharockman, St. Petersburg Times, Fla.|
Knight Ridder/Tribune Business News
May 6, 2004 - PALM HARBOR, Fla. -- The company waiting to take over the troubled Westin Innisbrook Resort doesn't exactly have deep pockets.
Golf Trust of America has spent the past few years trying to sell its golf courses and go out of business.
Since 2001, the company has dumped 38 of its 47 golf courses, some at huge losses, after its business plan misfired. Meanwhile, Golf Trust's stock dropped from a high of nearly $34 per share to $2.35.
When the South Carolina company formed in 1996, it was championed as a business breaking into a new market. Golf Trust's approach was to buy dozens of independent, high-end golf courses and consolidate the operations costs.
On top of that, Golf Trust decided to lease the courses to third parties, usually the original owners, who would continue the day-to-day upkeep of the facility. Golf Trust figured it would save on costs, earn a cut of the profits and make money off rent.
"From the management side, you will find some economies in marketing courses as one package," Golf Trust CEO Bradley Blair II said in a 2000 article of Real Estate Portfolio. "It's not simply owning them and they'll come. You have to manage the process."
Golf Trust couldn't draw duffers to its 47 golf courses in 17 states. With too many competing courses chasing too few players, revenues fell. Third parties couldn't pay the rent. Golf Trust decided to get out of business four years after the company launched.
"They went out in the heyday and took on a lot of property," said Tom Manno, the general manager of Miami's Doral Resort. "They suffered the consequences, as anyone in an overbuilt situation did."
In 2001, Golf Trust began dumping its golf courses at huge losses. Persimmon Ridge, a Louisville course Golf Trust purchased for $7.5-million in 1998, was sold back to its previous owners for $5.2-million in 2001.
Silverthorn Country Club in Brooksville was sold for $4.25-million in April 2001, $450,000 less than Golf Trust paid in 1998.
Then there's Tarpon Woods in East Lake. New owner and Clearwater resident Greg McClimans and his partner, John Huston, a PGA Tour golfer from Palm Harbor, became interested in Tarpon Woods after they had heard about Golf Trust's fire sale. The two already owned the Clearwater Executive Golf Course.
Golf Trust bought Tarpon Woods, which was then called Lost Oaks, for $5.7-million in October 1997. McClimans and Huston acquired the 6,515-yard track north of East Lake Woodlands last year for $2.3-million, or about 40 cents on the dollar of Golf Trust's original investment.
"Maybe the industry was better back then," McClimans said. "I don't know how they came up with that price. That would be a tough loss for anybody to swallow. But we're sure glad they did."
Golf Trust has nine golf courses left to sell, including its interest in Innisbrook's four layouts.
The company had hoped to liquidate all of its assets by the end of 2005, but the pending acquisition of Innisbrook has stalled those plans. Golf Trust has also lowered expectations for shareholders' final return.
When the company decided to fold in 2001, Golf Trust said stockholders would see per-share returns of $10.74 to $13.93 once it sold all 47 courses. In 2003, Golf Trust said returns would be between $4.75 to $7.21. Now the company won't project what the final payout might be.
Meanwhile Blair, Golf Trust's top executive, received more than $5-million in company bonuses in the past three years, according to filings with the Securities and Exchange Commission. He also had $2.1-million of company loans forgiven and is set to make millions more when the company folds.
Blair did not return calls seeking comment for this article.
Golf Trust had said in SEC filings it would sell Innisbrook next year. But because of continued poor financial projections, the company now says it doesn't know when it will be able to maximize shareholder return by selling the resort.
Ted Barney, a board member of the Innisbrook Condominium Association and a condo owner for more than 30 years, said residents and resort guests are forced to trust the proposed new managers.
"Bradley Blair seems like a very nice person," Barney said. "Hopefully, he has the best interests of Innisbrook at heart. I guess, we have to assume he does."
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(c) 2004, St. Petersburg Times, Fla. Distributed by Knight Ridder/Tribune Business News. GTA,