Obtaining the cash needed to keep The Sagamore Club operating could be a tall order in this rough economy, which has seen courses and clubs nationwide slash greens fees and waive club-initiation charges.
"Obviously, the private-club sector is struggling right now, and The Sagamore Club is no different," said Scott Van Newkirk, senior vice president of Arizona-based Troon Golf, which operates the Noblesville club. "We're going through a recapitalization, essentially to cover operating costs."
The Sagamore Club, which opened amid much fanfare in 2003, is owned by four groups: Troon Golf, Omaha-based Landscapes Unlimited, locally based University Golf Development, and a group of local founding members. The club has more than 300 members and 330 lots surrounding it. Lots sell for $100,000 to $200,000, and homes on the course sell for $500,000 to more than $1 million. About 125 lots remain vacant.
Golf memberships at The Sagamore Club initially carried an initiation fee of $40,000, a figure club owners later reduced. Now, part or all of that fee is being deferred, Van Newkirk said. Monthly family dues are $465. Non-golfing residents pay about $125 a month in social member fees.
"We feel our dues structure is competitive," Van Newkirk said, adding that the club is undertaking an aggressive membership drive as part of its own bailout plan. Sources close to the club said founding members are also being asked for a larger investment.
Van Newkirk would not detail the recapitalization, and leaders for a members' group declined to comment. It is one of two Jack Nicklaus-designed courses in Indiana, but even that designation might not be enough to put the facility in the black.
"The signature on a course always matters, but cash flow is king," said John Snell, owner of locally based Snell Real Estate Evaluation, which works closely with numerous golf course properties. "The golf industry was already hurting before the economy started tanking, and things have only gotten worse. I'm not sure anyone thinks we have hit bottom yet."
The problems have been exacerbated in Indiana by a golf course building boom in the 1990s, said Mike David, executive director of the Indiana Golf Office, the organizing and sanctioning body for golf in Indiana. The most recent victims were Cattails Golf Club in Elwood and Edgewood Country Club in Anderson, which have been put up for auction, David said.
"This market has simply been overbuilt, and the golf industry hasn't seen the increase in players to support that," David said. "Things might not get better until we have a reduction in courses. Several courses in central Indiana have shut down, and others are going through membership drives. In many respects, 2009 doesn't look too promising."
Nationwide, the number of rounds of golf played in 2008 was down 3 percent from the previous year, according to the National Golf Foundation, a Floridabased firm that acts as the industry's primary research arm. In central Indiana, the situation is worse. Course operators are reporting play decreases of 6 percent to 10 percent.
Sagamore Club members and officials continue to huddle this month to come up with a solution to save the facility. They're far from running up the white flag.
"Four or five clubs out of 10 are having financial difficulty right now, so I don't think it's fair to single out The Sagamore Club," said Ryan Wilson, Sagamore's local general manager. "We have a plan, and there's real good reason, hope and optimism to believe we'll be open in the spring."
Sagamore's loan with Salin Bank "expired" Dec. 31, Troon's Van Newkirk said, and sources close to the club said the bank declined to give an extension on what is probably an eight-figure loan. Van Newkirk said he expects Salin "to be part of the solution." Salin officials declined to comment.
"Banks view golf courses as more risky, anyway," Snell said. "When there's a bit of pressure, golf courses are going to be one of the first to feel the heat from its lenders."
"The sky is not falling," Van Newkirk said. "[The bank] hasn't foreclosed on the loan."
One thing golf courses like Sagamore have going for them is that, with the real estate markets stalled and banks possessing no particular expertise in golf course operations, some banks are eager to see golf courses find a solution on their own and may ease up on payment deadlines, Snell said.
Lavish spending to create a high-end course and other amenities coupled with a soured housing economy put The Sagamore Club in a vise, Snell said.
"I'm sure they were counting on those empty lots to house dues-paying members," Snell said. "Now, they're likely looking to cut expenses wherever they can, and they just aren't in a position to do that very easily. When all these courses in Indiana were built, loans were easy to get. Now these operations are highly leveraged and that makes them very vulnerable as the economy turns south."
Milt Thompson, a local attorney and sports marketer who is also part owner of The Trophy Club, a semi-private course in Lebanon, also has felt the pinch.
"Suddenly, courses and clubs are looking at double-digit declines in revenue and you have to look to cut maintenance, marketing and personnel," Thompson said. "You even have to look at things like golf cart rental and catering services on the expense side.
"We're going to survive, but we've definitely taken a 'haircut,'" Thompson added. "Those in trouble in this industry surely know by now, the banks aren't going to bail you out. They're just not lending to real estate or other more exotic ventures."
While Troon's Van Newkirk thinks some central Indiana golf courses will fail, he thinks The Sagamore Club will ultimately succeed.
"We have a great product and a great community here," he said, "and we're situated right in the path of growth."