Drive Shack raising capital to challenge Topgolf

Drive Shack

Drive Shack raising capital to challenge Topgolf

Business of Golf

Drive Shack raising capital to challenge Topgolf

Drive Shack, a new, publicly traded competitor to Topgolf, announced its intention to open as many as 15 mega-ranges by 2020.

Drive Shack, formerly known as American Golf, is selling off much of its golf-course portfolio to raise capital, which it plans to redeploy to build giant “eatertainment” facilities with 90 or more hitting bays, restaurants and other games and activities. The company opened its first location near the Orlando airport in April, and has five other sites under development.

Each Drive Shack location costs about $30 million to build. The company said it has identified 30 sites it would like to develop, with the goal of building 5 to 10 new locations annually starting in 2020.

Sarah Watterson, CEO of Drive Shack, said during the company’s second-quarter conference call Friday that the company’s Orlando location, which opened April 7, attracted more than 40,000 visitors, who averaged $44 per visit, for about $2 million in revenue during the quarter. The company’s projection is that it can generate $16 million to $23 million per site once each is fully ramped up.

“The focus now that we’re open is pre-selling future events, launching great marketing programs and efforts to propel the site, and to give us lessons for future sites that we’re opening as well,” Watterson said. “On the (locations), there’s always going to be things that we want to change as we move from (version) 1.0 to 2.0 to 3.0, mostly small things. We’ll continue to evolve.”

The company currently operates 74 golf courses in 12 states. It is in the process of selling off its 26 owned courses, with hopes of raising as much as $160 million in capital. The company also has more than $125 million in cash on hand to fund expansion.

Watterson said the company has sold one owned course for $3.5 million and has letters of intent on 15 more that either are under contract or have letters of intent. The company hopes to sell all of its owned courses by early 2019.

Watterson said the company hopes to continue managing some of the courses that it sells, creating an additional revenue stream.

Drive Shack also has 48 leased or managed courses, but has been attempting this year to terminate or convert 14 of its leased properties. One lease has been converted to a management agreement and one other has been terminated, generating an annual savings of $1 million.

 

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