CONFIDENTIAL MEMORANDUM Summary of* SEQUOIA GOLF HOLDINGS GEORGIA, TEXAS, COLORADO UNSUBORDINATED GROUND LEASE A FULLY AMORTIZING FIRST MORTGAGE LOAN, to CABOT GROUND LEASE HOLDINGS, LLC, and affiliates Secured by first mortgages on real property assets subject to and payable from Base Rent payments under long-term unsubordinated Ground Leases Structuring Agent Pinnacle Asset Advisors, LLC JUNE 2012 *This Summary is subject to change and will be superseded in all respects by the final transaction documents. All information in this summary is strictly confidential.
Sequoia Golf Holdings Confidential FULLY AMORTIZING FIRST MORTGAGE LOAN Sequoia Golf Holdings Portfolio Atlanta, Georgia; Houston, Texas; Aurora, Colorado 27 Golf Courses The subject is a fee interest encumbered by a 50-year unsubordinated ground lease improved by 27 golf courses located in Metro Atlanta, GA; Metro Houston, TX; and Metro Denver, CO. There is one ground lease per metro area. 2 Pinnacle Asset Advisors, LLC
Sequoia Golf Holdings Confidential 3 Pinnacle Asset Advisors, LLC
Sequoia Golf Holdings Confidential EXECUTIVE SUMMARY Sequoia Golf Hold ings, LLC (“Sequoia” or the “Company”) is a leading owner and operator of entry-level, trade-up, and high end private golf clubs. Specifically, Sequoia owns 27 golf properties (32.5 18-hole equivalents) located as follows; 19 golf properties (22.5 18-hole equivalents) within the Atlanta, Georgia metropolitan statistical area (“MSA”), 6 golf properties (8.0 18-hole equivalents) within the Houston, Texas MSA and 2 golf properties (2.0 18-hole equivalents) within the Denver, Colorado MSA. Sequoia also leases a golf property in both Atlanta and Houston. Additionally, Sequoia manages an additional 16 properties in various markets across the United States and also provides course renovation services through its Sequoia Greenscapes subsidiary. While the balance of this Company Overview provides further information solely related to the aforementioned 27 fee- owned properties, Sequoia’s third -party management company and other vertical golf- related business’s collectively provide Sequoia with more than $2,000,000 annually in net cash-flow (incremental to the results presented herein). This accretive revenue leverages Sequoia’s executive manpower and back -office support, provides for further expansion of its revenue streams and is an important source for additional deal-flow and growth. For many reasons, Sequoia is a unique and distinguished owner and operator within the golf industry. The following summarizes the key components that differentiate Sequoia and the 27 golf properties: Unique Operating Model – The foundation of Sequoia’s operating model consists of high - quality golf clubs, strategically clustered, offering a unique reciprocal membership wherein all members have complete access across all facilities. Sequoia’s private membership model is targ eted at the golfing “masses” (representing ~70% of the nation’s 27 million golfers) with a modest entry fee, affordable monthly dues and unparalleled course variety. This is in sharp contrast to the remaining golf industry that is highly fragmented, with each facility largely operating on a standalone basis (this is even true for the few existing multi-course operators wherein their portfolio of courses are scattered geographically and offer little, if any, membership reciprocity or operating efficiency). In the markets where Sequoia chooses to compete, Sequoia enjoys dominant market share – within Atlanta Sequoia owns ~ 30% of the private and resort courses with 60 miles of downtown Atlanta while Sequoia owns 100% of the golf facilities within The Woodlands (excludes the high-end exclusive Carlton Woods facility which charges in excess of $100K for membership). Sequoia’s share of members and rounds in 4 Pinnacle Asset Advisors, LLC
Sequoia Golf Holdings Confidential its respective markets is substantially disproportionate to the competition and is virtually impermeable due to the strategic location and expanse of its course platform combined with its unique membership proposition. Further, Atlanta, Houston and Denver each rank as outstanding markets for golf-related products. Quality Properties – Sequoia properties represent a collection of premium facilities designed by top architects, including Arnold Palmer, Gary Player, Arthur Hills, Jay Morrish and Robert von Hagge. Prior to acquiring each property, Sequoia invested substantial due-diligence to insure that each course was well designed with a compelling layout appealing to the majority of golfers. Further, Sequoia’s proprietary analytics expertise carefully screened each location to ensure it was well positioned in a thriving community complete with positive and upward trending demographics and successful developers. The passage of time has validated Sequoia’s due-diligence, with each and every course positioned in healthy developments with layouts that are well-liked by all members and complementary to other Sequoia properties. All properties have been well-maintained, as Sequoia has continually re-invested in to the properties to not only maintain the existing facilities, but also to expand the facilities to address the interests of a broader market. Economies of Scale – Sequoia’s clustering of facilities not only offers its members an unparalleled selection of courses, it also provides Sequoia with enormous operating economies of scale relative to purchase of product, deployment of personnel, design and procurement of marketing (common brand across the franchise) and back- office support. Sequoia’s cost to support a club is very cost-advantageous vs. the typical single-course operator while also being superior in quality. Proven Track Record – Over 75 % of Sequoia’s facilities have been owned for 5 years or more. During this period the course level performance has been enhanced and well established. Despite the economic downturn during the last several years, cash flows at the property have remained steady, strong and predictable. The economic growth projections of Atlanta, Houston and Denver, combined with positively trending golfer demographics (from 2010 through 2025 over 60 million Americans will reach retirement age), will serve to further enhance course level participation and cash flow going forward. Experienced Management Team – The core of Sequoia’s management team has been in place since 2005 and collectively represents over 100 years of combined experience in the golf 5 Pinnacle Asset Advisors, LLC
Sequoia Golf Holdings Confidential industry. Sequoia’s ex perience and track record within the industry has enabled it to be the employer of choice, thus enabling it to attract and retain the best talent in the industry. 6 Pinnacle Asset Advisors, LLC
Sequoia Golf Holdings Confidential FINANCIAL ANALYSIS Sequoia Golf Holdings, LLC (“Sequoia” or the “Company”) is a leading owner and operator of entry-level, trade-up, and high end private golf clubs. Sequoia has developed an innovative business model that resonates soundly with the golfing public: for a modest entry fee and affordable monthly dues, members receive private club membership and reciprocal golfing privileges at every property within the Company’s geographic cluster. Sequoia operates its clubs collectively rather than as individual courses with 27 owned golf properties strategically clustered in the Atlanta, Geor gia; Houston, Texas; and Denver, Colorado MSA’s. Committed to providing course variety and value under one membership, Sequoia has leveraged its cluster strategy to gain disproportionate market share and to create an experience that no competitor can match. Sequoia has built a powerful network of roughly 20,000 golf and social members through its unique value proposition, mid-tier pricing strategy, and well-known brand. The successful execution of this unique business model has yielded strong margins and has established Sequoia’s reputation for providing quality, variety, and value. In the seven years since 2004, the Company has generated aggregate compound annual revenue and EBITDA growth of 22.9% and 19.6%, respectively. Membership has grown at a 12.6% rate over the same time period. Led by a senior management team (“Management”) that has largely been in place since 2005 and that collectively represent over 100 years of industry experience, Sequoia has seamlessly acquired and integrated 20 owned properties into its operating platform since 2004, including twelve properties in Atlanta, six in Houston, and two in Denver. In conjunction with this impressive growth, Management has instilled significant cost and operating improvements at acquired courses, generating earnings before interest, taxes, depreciation, and amortization (“EBITDA”) growth from $7.2 million in 2004 to $25.4 million in 2011. Furthermore, the Company has invested approximately $40.0 million in capital expenditures during the last 5 years to ensure all properties are in excellent condition. Sequoia is well positioned to continue its track record of generating increased revenue and profitability from existing clubs and acquiring and integrating additional clubs. The figure below prese nts Sequoia’s historical and projected growth and financial performance for the 27 owned properties. 7 Pinnacle Asset Advisors, LLC
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