"10 Billion Won Per Hole?"... The Man Who Only Sells Golf Courses [K-INVESTORS]⑮

Golf Course Expert Who Opened Jack Nicklaus GC and Wellington CC
Now Excelling as a Golf Course Sales Specialist at an Accounting Firm
Top Domestic Golf Course Deal Guy Advising on Sale and Acquisition of 22 Golf Courses

Editor's NoteThe Korean capital market is more turbulent than ever, driven by greed and selfishness. Manipulations and foul play are rampant. However, many investors have carved out their own investment worlds and emerged as role models for individual investors, having endured all the hardships from the foreign exchange crisis, dot-com bubble, global financial crisis, to COVID-19. Through meetings with these investors, we aim to convey the value of money through war-like stories of the capital market, their philosophies, failures, and successes. Starting now, we bring you stories from experts across various fields, including the chief investment officers of domestic pension funds who have become global 'big players' through value investing and activism, leaders of private equity and asset management firms, and CEOs of financial companies.

There is a man who has been buying and selling only golf courses in the domestic mergers and acquisitions (M&A) market for over a decade. Youngseok Kim, Partner at Deloitte Anjin Accounting Firm’s Financial Advisory REI (Real Estate Infrastructure Advisory Group), is one of Korea’s leading golf course deal experts.

He never planned to become a golf course transaction specialist from the start. After majoring in Physical Education at Kyung Hee University and completing a master's degree in Economics at Sogang University, he began his career at the prestigious Rio Secco Golf Club in Las Vegas, USA. After gaining four years of experience in the US, he returned to Korea and planned the opening of Jack Nicklaus Golf Club. After completion, he served as the head of the competition team overseeing all rounds for three years. Around 2010, when the Korean golf course industry’s growth stagnated and the restructuring market began to bloom, he joined Deloitte Anjin Accounting Firm.

Kim Young-seok, Partner at Deloitte Anjin (Golf Course Deal Specialist), is being interviewed by Asia Economy in a conference room in Yeouido. Photo by Jo Yong-jun jun21@

"At that time, I was resting in the US because golf course work was very tough. The vice president I worked with at Jack Nicklaus became the CEO of Wellington Country Club and called me every day for two weeks asking for help as the opening was just a few months away. I had already promised to join Deloitte, so I explained the situation to the company and helped with the opening by working overnight in the construction site container at Wellington for four months before the opening. I also helped hire staff and then joined the accounting firm."

Overnight Work in Containers at Prestigious Jack Nicklaus and Wellington Golf Courses... Firsthand Golf Course Experience as Deal Competitiveness

Until the mid-1990s, golf had a negative image as a sport for the elite, but after golfer Se-ri Pak’s major tournament victory in 1998, positive perceptions of golf spread. The golf course industry grew rapidly following former President Kim Dae-jung’s 'Golf Popularization Declaration' in 1999. From 2001 to 2009, the evolved golf course operation model spread, entering a mature phase, but after 2010, it faced a period of rapid restructuring.

"Until then, no matter who came to lead golf courses in Korea, business was good. There weren’t many golf courses, and there were many golfers, so business was thriving. Most CEOs came from large conglomerate-affiliated golf courses. Until around 2010, before restructuring, the industry was booming. After 2010, due to oversupply of golf courses and issues like membership refund problems, the domestic golf course industry faced its first crisis. There were many cases of distressed sales. CEOs from large conglomerates only managed profitable businesses well, but when the economy worsened, crisis management failed. With restructuring, many ownership changes occurred. It also became an opportunity to shift from high-salary CEOs to younger manager-level leadership."

His actual work experience on-site greatly helped in deal competitiveness. He increased his understanding of the entire golf industry by observing the rise and fall of domestic and international golf courses.

"When estimating golf course cash flow, unlike other industries where inflation is naturally reflected, golf courses rarely raise green fees. They might raise them once every eight years or so. When preparing cash flow, the graph is stagnant, and numbers don’t come out. At first, accountants applied inflation rates directly to green fee increases. People unfamiliar with golf courses might do that. Even now, some say green fees are too high and should be lowered, but green fees don’t align with actual inflation. Because we have experience working in the field, the numbers we prepare differ in many ways."

200 Billion Won for US Golf Courses, 2 Trillion Won for Korean Golf Courses... Why Korea Is Especially Expensive

Globally, golf is a declining industry, but in Korea, the golf industry is still booming.

"There are many more golfers, but the number of golf courses is still small. People say Korea has many golf courses, but compared to the number of golfers, it’s not that many. The US has about 20,000 golf courses. Japan has about 2,000. Korea is said to have 500, but that’s not the actual number. More precisely, 18-hole plus 9-hole courses are counted separately. If you exclude those, the actual number is far less than 500."

Kim Young-seok, Partner at Deloitte Anjin (Golf Course Deal Specialist), is being interviewed by Asia Economy in a conference room in Yeouido. Photo by Jo Yong-jun jun21@

Korea is also famous worldwide for having high single golf course sales revenue.

"No other country generates this much revenue. Even the super golf courses in the US or Japan that are considered excellent sell for only about 20 to 30 billion won. Some go for 5 billion won. But in Korea, the basic price exceeds 100 billion won."

Currently, the domestic golf course market has much stronger buying demand than selling supply because many potential buyers want to own golf courses.

"Golf courses, hotels, and resorts are mostly owner businesses. Owners want to operate them directly. When the business does well and earns money, owning a golf course is desirable. There’s a joke that even if a company goes bankrupt, the golf course is the last thing to be sold."

‘Veteran’ Who Has Handled Over 20 Golf Course Deals... Sold Two Golf Courses He Worked At

Partner Youngseok Kim has handled a total of 22 golf course transactions as a seller’s agent and buyer’s advisor. Four deals are currently ongoing.

"All Big 4 accounting firms handle golf course deals, but Deloitte has an overwhelming number. When we do presentations (PT) to get mandates, sellers mostly want to know the desired selling price first. If I say the market value is about 200 billion won, I say, 'It’s about 200 billion, but I will try to see if there’s upside potential.' If a competitor offers 300 billion won, the chairman receiving the PT wants to entrust the deal to the highest bidder. But the market isn’t that easy. I’ve seen cases where the price was set too high, and the property was held for two years without selling, and then the deal disappeared."

He also sold two golf courses where he had worked.

"Having done many deals, I sold the golf courses where I worked. It felt strange. It was very odd to conduct due diligence on a place I worked at daily. It was even more so because the livelihoods of people I worked with were at stake. There were two cases, and both were successfully completed."

Three Key Factors to Consider When Evaluating Golf Courses

He focuses on several key points in golf course deals.

"From a buyer’s perspective, the most important thing is whether there is upside potential. Golf courses have fixed operating hours during the year, with sunrise and sunset times that vary by region. Prices differ depending on winter weather and whether night operations are possible. Sellers tend to ask for a higher price, but if the buyer really wants it, they must consider upside. For example, golf courses on the Gyeongchun (Seoul?Chuncheon) line were once neglected because they had fewer operating days in winter due to cold weather and no night operations. Now, the situation has changed with the development of Dasan New Town in Namyangju and Hanam New Town. The population is increasing with new satellite cities. It takes only 15 to 20 minutes by car to the golf course at night, and night operations are possible. From a buyer’s perspective, even if they ask for 10 billion won more, it’s worth buying because of this upside. You must look not only at the golf course’s surrounding environment but also at real estate development plans. Even if you really want a golf course, paying too high a price leads to the 'winner’s curse.'"

It is also important to review whether there were excessive costs in existing golf course operations and how much additional capital investment will be required.

"Most golf courses are owner-operated and often spend excessively. This is good for buyers because reducing costs increases their upside. You must check these things and also consider how much additional facility investment will be needed after purchase. The biggest investment is replacing old carts or equipment. Sprinkler systems and turf also cost a lot."

Conversely, sellers who want to get the right price must identify and resolve any unresolved issues (permits, design changes, lawsuits, etc.) in advance to sell at an appropriate price.

Golf course deals are among the most difficult in M&A.

"Profitability-wise, it’s actually easier. But most mid-sized company chairmen who want golf courses have very strong personal preferences. They say profitability doesn’t matter, but if the location or golf course layout isn’t 100% to their liking, they can’t enjoy it. Golf courses are unique in this regard. It relates to owners’ desire for possession. They choose and place every stone, select tree and flower species themselves. Even chairmen who have tried various industries say golf courses are a completely different kind of fun. Because of this, deals are extremely complicated."

"100 Billion Won Per Hole?"... Stop the Foolish Golf Course Valuation Now

After the COVID-19 pandemic, golf course prices soared, and at one point, the staggering figure of '100 billion won per hole' circulated in the market. However, Partner Kim said it is necessary to correct such excessive pricing that disturbs the market.

"Ultimately, market disruption comes from excessive competition among advisory firms and entry of people unfamiliar with the golf industry. Among these, pricing per hole is the biggest mistake. Most people use this simple expression because it’s easy to understand, saying 'it exceeded 100 billion won per hole' or 'it’s this much per hole.' In reality, there is construction cost per hole, but no selling price per hole. Construction cost per hole is a term used when building a golf course."

An 18-hole public golf course in the metropolitan area generates over 20 billion won in annual revenue. An 18-hole public golf course in a provincial area generates only about 13 to 14 billion won. Expenses differ depending on golf course quality. Therefore, the EBITDA (earnings before interest, taxes, depreciation, and amortization) generated by these golf courses varies. Some places in Seoul generate EBITDA as high as 20 billion won. Regional courses generate about 6 to 8 billion won. EBITDA differs by almost 2 to 3 times. Even if a metropolitan golf course was traded for 200 billion won, that price cannot be applied directly to provincial courses. It’s like how apartment prices per pyeong differ between Gangnam, Gangbuk, and provinces."

Valuation should be based on EBITDA, not per hole, and also vary depending on operation methods such as public vs. membership and transaction conditions.

"Last year, Jack Nicklaus GC was sold for over 300 billion won. Even though its operating profit wasn’t great, the buyer paid that price because they have a different philosophy about golf courses. It’s not just profitability; they use a good golf course as a marketing tool or attach a kind of premium. So, you shouldn’t sensationally and simply say it sold for 16 billion won per hole by dividing the sale price by 18 holes."

Similarly, South Springs’ 200 billion won transaction must be examined carefully. It has a huge idle land next to the golf course, enough for a logistics complex. That land is included in the 200 billion won transaction price. If you simply divide by 18 holes, the per-hole price is naturally very high. You must look at the whole picture."

Korean Golf Industry After COVID-19 Bubble... Future Outlook?

He knows every golf course nationwide but absolutely avoids public golf courses in Jeju Island.

"The only public golf courses we don’t look at are in Jeju. Since COVID-19, operating profit margins dropped by 30 to 40%. Even during peak season, golfers want to go, but flights are unavailable due to tourists. Prices are too high. Conversely, golf courses near the metropolitan area have not suffered much damage after COVID-19. Provincial golf courses are now gradually losing benefits from green fee increases and utilization rates. It’s a time of redistribution and adjustment again."

He remains positive about operating golf courses in Korea.

"There aren’t many industries with such stable operating profit margins. It’s not a bad business. People working at golf courses say that even if serious social issues occur, weekends are 'full booking.' After the Kim Young-ran Act was enforced, people said golf courses would fail, but golf courses actually prefer if government officials don’t come on weekends because people who spend more money fill the spots. Whether weekdays are filled or not affects annual revenue. Weekday revenue is a marketing point. Young and female customers are the most important for golf courses."

What does a good golf course mean to a golf course expert?

"It depends on perspective, but looking at the world’s top 100 famous golf courses, they are made by preserving nature as much as possible without damage. People often say golf courses damage the environment, but abroad, many golf courses are made preserving nature as is. Those are the best golf courses. In Korea, almost none are in the world’s top 100. Even if designed by world-famous designers, it’s the same. Why? Mountainous terrain and permit issues are factors, but owners’ stubbornness is also a reason. Even if they bring in famous designers, the owners interfere with the design. Many forced courses are created, which is regrettable."

Kim Young-seok, Partner at Deloitte Anjin (Golf Course Deal Specialist), is being interviewed by Asia Economy in a conference room in Yeouido. Photo by Jo Yong-jun jun21@

An Expert Who Wins with 'Honesty'... Also Thoroughness in Considering Opposing Views

As felt in the interview, the most important thing he values when leading deals is 'honesty.'

"Whether working for sellers or buyers, honesty is the most important. If you say you can do something for the seller that you actually can’t just to get the mandate, it eventually leads to bad results. And when representing buyers, if you provide false information just for fees or performance, it will definitely cause trouble later. Of course, as a client, I naturally side with the customer, but I honestly say no if I think it’s not right and keep persuading. Still, some people never give in. I keep persuading and pressuring. 'Chairman, if you cross this line, you won’t be able to sell anymore. The market knows, and you can’t sell. This is the best now.' I threaten, persuade, and even beg to sell at this price. (laughs). Another important thing is whether I, as the buyer with this money, would buy it. Because I have to market this golf course. I list all negative factors first and check if they can be resolved. I must know the bad points most accurately to sell successfully for the client. If I judge a problem as critical, I strongly advise the client to fix it even if it costs money. That is my secret, if I have one."

◇Youngseok Kim, Partner at Deloitte Anjin Accounting Firm＝Graduated from Kyung Hee University with a degree in Physical Education, completed a master's degree in Economics at Sogang University Graduate School of Economics, worked at Rio Secco Golf Club in Las Vegas, USA, and DHR Pacific. After returning to Korea, he gained experience at Dongyang Leisure, Jack Nicklaus GC, and Wellington CC, and is now active as a golf course transaction expert at Deloitte Anjin Accounting Firm.

Golf Course Transaction List of Kim Young-seok, Partner at Deloitte Anjin LLC