Korean golf course price likely to set new record per hole

The price of a public golf course in South Korea has surged 35% in one and a half years to set the highest per-hole selling price for a Korean golf course on record, according to people with knowledge of the matter on Thursday.

Club Mow, a 27-hole golf course in Hongcheon, Gangwon Province, will likely sell for around 250 billion won ($200 million), or 9.2 billion won ($7.2 million) per hole, to Seoul-based Kalon Investment Asset Management Co.

The expected per-hole selling price is 35% higher than the 6.8 billion won paid by Moa Construction Co. at the end of 2020 to buy the golf course from debt-laden Doosan Heavy Industries Co. for a total of 185 billion won.

Putting it up for sale after one and a half years, Moa Construction has chosen Kalon Investment as its preferred buyer. Founded in 2018, Kalon chases real estate assets, particularly golf courses and logistics centers.

The price tag is also 10% above the previous record of 8.35 billion per hole paid for Southspring CC, another public golf course in Korea, last year.

Centroid Investment Partners, a homegrown private equity firm, acquired Southspring CC in Icheon, Gyeonggi Province, for 8.35 billion won per hole for a total of 250 billion won in March 2021 from BGF Retail Co., a domestic convenient store chain.

Driven by the growing number of golfers and soaring profit margins at golf courses, the average selling price of a golf hole has leapt nearly 80% from 4.55 billion won in 2017 to 8 billion won in 2020, according to Samjong KPMG.

Two other Korean golf courses on the market are expected to sell for over 10 billion won per hole as demanded by the sellers, according to the sources.

RISING NUMBER OF GOLF PARTICIPANTS

Despite the limited supply of golf courses, the number of golf participants has nearly doubled to 10.2 million as of 2020, meaning one out of every five people in South Korea has experience playing golf. 

Golf course operators in the country reported an average operating profit margin of 31.8% in 2020, versus 7.4% in 2014. Public golf courses posted much higher profit margins than membership-based ones with an average profit margin of 40.5% in 2020.

Club Mow's operating profit margin reached 60.9% last year, with 21.5 billion won in revenue and 13.1 billion won in operating profit. 

MIXED OUTLOOK

Views diverge over the business outlook for domestic golf courses. The growing popularity of the sport among those in their 20s and 30s underpins the upbeat outlook for the golf industry.

But some warn that the border reopening by other countries and eased social distancing would spur demand for overseas golf trips, away from higher-priced local golf fields.

The Ministry of Culture, Sports and Tourism has put forward a bill to remove tax exemptions from public golf courses. If the bill is passed, public golf clubs should push up green fees paid by golfers to compensate for their reduced income.

To capitalize on the popularity of the sports, Golfzon Country, a Korean golf course management company, is planning to list on the Korea Exchange this year. Its IPO looks set to deliver a fourfold return to MBK Partners, its majority shareholder. 

The upcoming IPO follows MBK’s profitable exit from Japan's largest golf course operator Accordia Next Golf by selling it to SoftBank's Fortress Investment Group for 400 billion yen ($3.5 billion) in November 2021.

Write to See-Eun Park and Hee-Chan Cho at seeker@hankyung.com
Yeonhee Kim edited this article