Mistake Golf Club, Part Two

A kind G4G spy sent me the following note regarding the price paid by GolfNorth for Mystic Golf Club, the course near Hamilton that went into receivership and was acquired officially by GolfNorth at the end of May.

My spy said:

You should get a copy of the Court documents for Mystic. It makes interesting reading. One of the things you would noticed is the variance of the bids between GolfNorth and the others. Below is an extract.

Robert, the chart below means that, for example, Bidder # 2 was $4,000,000 less than GolfNorth, Bidder #3 was $6,900,000 less than GolfNorth, etc.. So, the closest bid to GolfNorth was $3,390,000 lower than the price GolfNorth paid. So right off the top you know they paid more than $6,900,000.

Assuming ClubLink’s bid price of $4.1 million is accurate, and they weren’t the second highest bidder, it would appear GolfNorth may have paid more than $10-million for Mistake GC, shocking considering it went into receivership the first go round.

My spy wasn’t kind to GolfNorth:

This is public knowledge as it was filed in Court. The actual price will come out a month from now (apparently sealed by the Court for a month after closing) but I think GolfNorth is a little embarrassed at the price they paid. Looks like they really wanted it at any cost.

The other thing that was interesting. GolfNorth was advertising 2 days ahead of the actual closing that the deal was done. In fact, it wasn’t done until late Thursday. Not a very well organized group. The right hand wasn’t telling the left hand what was happening.

Intriguing that GolfNorth really wanted a flagship course, and maybe Mr. Balsillie, the CEO of Research In Motion, and the money behind GolfNorth, really wanted a tax loss. One thing is clear — by acquiring Mistake, GolfNorth is now playing in another league, and one that is full of bodies.

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Robert Thompson

A bestselling author and award-winning columnist, Robert Thompson has been writing about business and sports, and particularly golf, for almost two decades. His reporting and commentary on golf has appeared in Golf Magazine, the Globe and Mail, T&L Golf and many other media outlets. Currently Robert is a columnist with Global Golf Post, golf analyst for Global News and Shaw Communications, and Senior Writer to ScoreGolf. The Going for the Green blog was launched in 2004.

26 CommentsLeave a comment

  • Robert….You don’t overpay for a golf course for a tax loss. That is just a completely ridiculous and absurd statement.

    And how do you know they have overpaid? Golf North is in the golf course business. I think they can determine fair value much better than you can because they are in that business. The course may have strategic value to Golf North, and much less value to other bidders. You really cannot say they overpaid until a couple of years have passed and the purchase price is assessed against results achieved. Sorry, Robert, and I know you will get angry at me, but fair value can only be determined by the purchaser, taking into account what value the course may have to their particular cirsumstance. You have to understand Golf North’s perspective and how they arrived at fair value before you can make a statement that they overpaid. Anything else is just mere unsubstantiated conjecture.

  • Very interesting stuff!

    One way of determining whether they overpaid or not is to determine the replacement cost – much would it cost to build a course in a nearby location and then add in a premium since the course is already built and open for play whereas it would take 2-3 years (at a minimum) to build a new course.

    Given that, I find it very hard to believe that you could not build a similar, or better, golf course for about $7-8 million if not much less. Of course the largest variable here is the cost of the land – how much does it cost for 175 acres or so in that area?

    One other thing to consider – I don’t believe the course has a decent clubhouse. That must be built, and I also understand that the course could use some alterations to make it a bit more playable which may be another couple hundred thousand.

    By the way – how much did GolfNorth pay for Paris Grand?

  • Alfred:

    I think you are confusing obtaining an acceptable return over time for an asset purchase with paying too much. You can pay more than you need to for an asset while still obtaining value for that asset. Obtaining value for the asset AND paying too much for the asset can occur at the same time (effectively it means one’s return on the asset is less than it could have been).

    If the seller of the Mystic Golf Club was willing to accept the highest offer from any buyer (even if the highest offer was $1 higher – not a realistic assumption but used for illustrative purposes), then it could be argued that any price more than $1 over the second highest bidder is deemed to be paying too much for the asset…regardless of whether the buyer earned a return or not on the asset over time.

  • Hey Alfie and WE: I don’t know for a fact they paid too much. Just a source suggesting they paid significantly more than the next highest bidder. If the original owner couldn’t get enough people to play at $100 (and often less), why should GN get them at $85 or $95? Using the old mom’n pop rule of thumb for $10 of green fee for every million spent, you’d figure GN would have paid around $10 million. But they still have to hook up to electricity and build a clubhouse. Perhaps they won’t build a clubhouse — worked for Osprey, but you don’t get the tournament market that way.

    As for Alfred’s contention about fair market value — I agree, they can pay whatever their model dictates. But that doesn’t mean the model will work and can still indicate they overpaid for the asset.

  • Robert….Only time will tell if the “model will work”. I think that indicates that one can really only determine if one has overpaid with the benefit of time, when results are evaluated against purchase price. As for WE comments, Golf North does not have the benefit of knowing what others are bidding. It prices the asset based on its own circumstances, and its own cost of capital. It may turn out that Golf North could have in fact bid lower, granted, but this information isn’t known when a price is being developed. I guess what I am saying is that Golf North knows the golf business as well as anybody, and it would arrive at a bid price with careful analysis.

  • I’m not so sure that Golf North knows what they have gotten themselves into here Alfred. I’m pretty sure the maintenance budgets of Golf North properties are fairly low. I would guess they are in the neighbourhood of $250,000 to $300,00. This is half(or up to 30%) of what they will have to spend if they want to try and maintain Mystic at any type of level. We are talking about a young bent grass golf course that needs a lot of TLC if it is going to mature properly. I agree with Robert on the pricing. Bereger struggled to get $85 and now Golf North is trying to get $95 on weekends with no more amenities? I’m not sure the public player is now going to flock to Mystic now just because GN owns it.

    I think it will be very interesting to see how this buy out plays out and what happens to the golf course. The total cost to GN to finish the project including a club house and everything else they need to do will probably run in the neighbourhood of $12,000,000 to $15,000,000. This is a huge out put of cash in a very slow, price driven industry. I hope they are successful and I would love to see their business plan on how they are going to make Mystic a financial success. I’m glad I am not the GN executive who recommended they but Mystic for a reported price of over $8,000,000 plus plus!!! That gentleman could be looking for a job shortly.

  • It may be the same guy who recommended that Balsillie buy the Nashville Predators for $200+ million. Sometimes you have to look a little further than the front page to read the whole story.

    Everyone must remember that Golf North comes with a decent sized membership already in place that will now have a higher quality golf course as part of the stable. All those members get 25% off of the posted rates as well as anyone who bought their Players Program card gets 20% off.

    Adding Mystic is only going to increase sales of both memberships and PP cards while increasing the value of each for the Golf North patrons. Good on them.

  • I believe the Mystic was set on 300 acres of land. I have no idea what the zoning is there but it would make a very attractive area to build a few homes on.
    I thought I read somewhere that they had spent almost $30 million on the course (land and construction).
    If they can get the course in a little better shape I will play there often. Personally I could care less about a snoty clubhouse as I have usually lost all my money on the course anyways.

  • Derfman,

    You are correst in saying the golf course sits on 300 acres. The only problem with this area for housing is that the only part that could be used fot housing is the part that fronts Jerseyville Road. The rest of the land is either landlocked by the golf course with no access or is protected land within the golf course.

    The golf course cost no where near $30,000,000 to build. As a matter of fact if you take out land cost (land was purchased in the early 1980s) it cost way less than the number you quoted. And when you take the number of people Mr. Berger chose not to pay in the construction of the course this number becomes even smaller. I think it would shcok people if they knew what the construction costs actually were for Mystic.

  • John,

    You sound like you know alot more about it than I do.
    John, hmmmmmmm, John eh? Just one question: Why rename a course after Nessy?

  • I worked at Mystic during construction 4 years ago when it was going to be called Heritage Club oF Ancaster, and I can assure you that the cost to build the course was between 4-5 million. I know this becasue I worked for the company that built it and ended up going out of business. The costs were so low because it was under construction for 4 years! The crew that built it was 6 guys who did the clearing, shaping, built the greens and tees and constructed bunkers. The drainage crew was all temp help that was being paid minimum wage and the grubbing(picking up sticks and debris) ws all done without tractors, all hand picked. The totals that I know of
    are: irrigation-1 million(the crew quit 3 times from not getting paid), cartpath- 1/2 million, clearing, drainage-1 million, green and tee construction-1 million, seeding- 1 million, bunker sand-1/2 million. The course saved a lot of money by not hiring a big company like Gateman or Evans to do it who would charge 3 times for labour, instead they cheaped out and hired students that had no clue and everything had to be done twice. The company that did the construction is now out of business a far as I know. I just had to post this because 30 million couldn’t be further from the truth, maybe a fifth of that.

  • Derfman,

    Not hiding who I am, I’m John Hayward and yes I obviously know alot of the inner workings that weant on at Mystic. I’d be glad to share whatever I know to be the truth and am proud to hold the course record of 67 at Mystic!

    Why the name change from Hunters Pointe to LochNess Links? Quite simply to have a name that better states what the golf course stands for and is. If you come down and play say hello. Robert has a post on here about the name change.

    John Hayward
    Director of Golf
    LochNess Links

  • Just kidding around John.
    I play both Hunters and Mystic often. I just hope the Mystic gets a little love from the new owners and they are able to keep the price reasonable.
    Not knowing a lot about the golf industry I guessed the cost to build would be 5-10 million. But what does 300 acres cost these days?? I have no idea. If the course cost 4 1/2- 5 million to build (on the cheap as Scott suggests) then wouldn’t the course be a good deal at, say, $8 million including the land?
    The $30 million figure I threw out there before was a number I thought I read last year. I very well could be (and apparently am) wrong about that.
    If GN overpaid I don’t care (I don’t own a Blackberry). I will play it if the price is reasonable and I will go elsewhere if it is not. There are a lot of good golf courses offering excellent value these days.
    Maybe they could offer an E club membership at The Mystic or at least advertise in a local paper.

  • Such is the dilema facing the golf industy and course owners in todays market. what makes sense for an owner to charge to receve a suitable return on his investment the publis deams too much money, so they go elsewhere. The rule of thumb is charge $10 for every million invested. That menas with GN charging $85.00 with range cart and green fee included there investment has to be in the neighbourhood of $8,000,000. If they charge less they could be in trouble. the question is does the average player consider Mystic fair value at $85.00? I guess this is the $8,000,000 question GN is asking themselves right now.

  • Fixed up and amenities added it should be worth close to that, relatively speaking. Now that you are elsewhere and being in the industry what do you think that course is worth, as a patron, I mean?
    Also, is that $10 per million an average price? Is it suppossed to be based on a certain percentage of tee times being sold? If you are not drawing a early morning crowd, why not offer$45 early bird rates? An empty tee time is like an empty airline seat. You obviously know that and that is why you are on Lastminute golfer and offer the Eclub memberships.
    Another thing that may have to be considered is financing. Is GN borrowing money to pay for the purchase? If they are not, does that rule of thumb still hold true?

    PS Hunters Pointe is probrably the best golfing value out there with the different offers (E club, Niagara golf trail and Last minute).
    Just wish you could move it closer to Burlington.

  • From what I know about Mystic which is a bit more than the average guy just from working there while it was built, it will cost 10 million to finish it. Don’t forget its just a course, that’s it. No clubhouse (5 million- saw the plans for the original) , no hydro(1 million- needs 3 phase power which is 1/2 kilometer away, needs to be trenched all along Jerseyville then another 700 yards to the clubhouse, parking lot is still unpaved, no maintenance building ( 1 million-building , washpad, chemical storage, gas tanks, staff parking), only half of the equipment needed which is going to be another half million. I haven’t even mentioned halfway house, benches, ballwashers, gardens, additional irrigation, course improvements. So I don’t really know how this long story that started 15 years ago will pan out, I hope it works, but I don’t know. The course is very tough and I don’t know if the average golfer will pay 90 bucks to shoot 5 shots worse than he would at other public tracks.

  • Well Scott C…..Not really your name!

    I was there from day 1 when there was still cow patties on the land..Where is it that you get your info?Theres was lots of machinery there..Please do tell..and mabey post your real name….

  • If this is ex envirolinks please state your name, Doug ? I was there for half a year the last year of it being built and not at any point did I see more than 10 people working on it, there was ROB and his drainage crew which was 4 people, 2 guys on dozers building tees and 3 or 4 other staff seeding or picking up sticks. I met Matt, Curly aka LOSER, and all the envirolinks guys, I hope its not true that they went tits up but I think it is. I’m just saying what I saw, maybe its because I was there after all the clearing and shaping, but I couldn’t help but notice how slow it was to do everything. It took weeks for the drainage crew to put drainage in 6 tee decks. WOW

  • Here is some info i heard while biulding the course i was talking to a friend who reccomended i check out this web page after reading i am alittle surprised! HERE IS A LITTLE INFO THAT I REMEMBER WHEATHER IT IS TRUE OR NOT ???? when i first started at the course i was installing silt fence on the course it was all fields and everything had to be carried by hand no trucks or carts were availableas the acess was up a side road where there is a house at the top of the hill on the right! if u know the course where u drive across either #3 0r#4 there is a pond that use to be a marsh so it was difficult to get any equipment around anyway the idea was to biuld the course and envirolinks was the main contractor the problems soon occoured. when we started envirolinks was a small companie that had problems before in the past but doug rose again and wanted a new start we were doing good i started with doug in about 2000 till mid 2005 we had done several low budget courses but always gave 100% doug has been in the biusness for years since he started at gateman milloy then venturing to start his own biusness we had done projects like wild winds in fergus and renovations at the summit regulary in toronto. and biult a new nine in pike lake and several other jobs but nothing big doug started fresh in 2000 bought all new equipment and had a good chance and he was growing but still wanted to stay small we had at the most maybe 10 employees we also had a very good contract at toyota in cambridge for snow removal this is what kept doug afloat throught working at the mystic or he would have been done long before he was
    we started there and bought a new dozer and loader and some new equipment that doug hat to payfor but was billing every month to the course as well as all the guys that were working there so soon bills were adding up at first he got paid a little at a time and was ok but as the project grew so did the bills soon doug felt it as well as the employees he lost the equipment and the equity he had in them but persivered as this was a big project there was excuse after excuse by don mc faul that the german was coming from germany to pay but most times did not soon doug was worried and employees quit and left i was one of few to stay working i tried to convince the guys to stay but as our cheuqes were always late and bounced they left . other contracters were also there here is a few / joe rebeiro owner operator / he lost some where around $30.000 that i know of wilson ponds earth moving companie also left unpaid some money/ toro irrigation also pulled out halfway done as like did hutchison who was supplying the greens mix also said nomore they wanted paid up front doug craig another owner operator un paid th bigger one was brantco who installed the cartpaths and curb unpaid ! as for the other guys not sure most employees were hired by the golf course origionally the heritage club most of these guys were off the street and from temp agencies and a few who said they had done golf before but did not last rob and his small srew soon grew as they were cheap labour they installed most drainage there and some irrigation and raking and bunker sand installation buththere were al sorts of problems ie tomany chiefs not enough indians i would say about 90% of this cource had been rebiult two or three times either it was wrong or had been damaged or NOT DONE RIGHT THE FIRST TIME….. but they all worked very hard most time speaking to rob very un guided
    the envirolinks guys stuck together as i was sort of there leader and respected them as the majority was portugeese that all knew right from wrong there were some the course hired thar were good but soon left when they had issues
    envirolinks employyes were on envirolinks pay roll so basically we got paid when doug did or when he had money left over from the winter at toyota but soon it all snowballed and doug couldnot keep going on like this paying employees and keeping enough cashflow to keep working at toyota sadly i understand envirolinks is bone and i feel bad but i also had to sue envirolinks for unpaid wages amounting close to $10,000 i myself persivered for the last two years of working for doug not getting paid regulary and chueques bouncing and almost loosing my house so i was left no option to bail at the end this is just a little of what happend there this cource was biult on a grand scale and very low account to pay for itat the end of the day envirolinks should have pulled out but it was to late the bamage was done and they were to commited to proceed and hopefully get paid what was always owed from previous invoices i will end for now

  • the problem was that all the employees of the golf course were unexperienced that is why it took so long envirolinks employees mostly worked on detailed tasks ig drainage and finishing of all greens tees and finishing i worked with the architect tom pearson for some time getting the greens tom what he wanted he also soon dissapeared he was probably one of the only ones paid in full

  • the issue i have is how people have put so much sweat and effort into biulding this coures and have not been paid for so much material and work and put there companies on the line and maybee still have not been paid for it DOES THAT MEEN PEOPLE WHO ARE IN THE GOLF BIULDING INDUSTRY ARE WORKING LIKE A CHARITY FOR NOTHING! unbelevable i heard somany excuses by don mc faul how things were damaged example cart path kids working for the course drive on the asphalt curb and path with tractors damaging them and sprinkler heads some how this was the contracters problem????? i guess this makes for some good excuses not to pay or play the regular game of u aint getting paid till u come back and repair your work this was probably every contractor heard atleast once all i can say it was very un organised


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