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Golf Club Members in the Rough : Resorts: The sale of PGA West, La Quinta and Mission Hills to outside investors ends a long-shot attempt by local players to buy the Palm Springs area courses themselves.

July 15, 1993|DAVID W. MYERS | TIMES STAFF WRITER

An investment group backed by Kohlberg Kravis Roberts & Co. bought the famed PGA West and La Quinta Golf & Tennis Resort near Palm Springs at a government auction for $276 million Wednesday, while a Texas-based operator of country clubs purchased the nearby Mission Hills Country Club in Rancho Mirage for $34.5 million.

The decision by the Resolution Trust Corp. to accept the bids by the KKR group and Dallas-based Club Corp. has virtually ended a long-shot attempt by members at each resort to purchase their beloved golf courses and keep them out of the hands of outsiders.

"We've been saying that trying to outbid those big companies made us feel like David fighting Goliath," said Jim Gilstrap, a retired investment banker who organized the PGA West members' efforts. "Unfortunately, God wasn't playing on our foursome."

The three Southern California facilities were among six that the RTC auctioned off in Dallas. All the resorts were previously owned by Landmark Land, which owned the now-failed Oak Tree Savings in New Orleans.

KSL Recreation Group, the KKR-backed partnership that bought PGA West and La Quinta, is headed by Kohlberg and Colorado resort operators Michael Shannon and Larry Lichliter. Known for its highly leveraged billion-dollar takeovers in the 1980s, KKR announced its intent to look for acquisitions in the resort industry last year.

About 26 bidders and hundreds of spectators crammed the auction room at the Fairmont Hotel in downtown Dallas for the sale, and values for most of the resorts were bid up quickly.

Members of PGA West, home of the U.S. Golf Assn.'s "most difficult course in America," were in the bidding for their four-course facility to the end. Their final offer of $131 million was finally topped by KKR's $140-million bid.

Bidding for the Mission Hills complex was also heated, but Club Corp.'s final offer of $35 million could not be beaten by the resort's members.

Club Corp. already owns and operates a handful of smaller golf facilities in Southern California, including the Braemar Country Club in the San Fernando Valley, as well as the posh City Club restaurant on downtown Los Angeles' fashionable Bunker Hill.

The KKR Group had an easier time with its $136-million purchase of La Quinta Hotel Golf & Tennis Club after members of the resort were unable to find a joint-venture partner to mount a serious bid.

A partnership run by investment banker Morgan Stanley bought the Carmel Valley Ranch resort on the coast of Central California for $20 million, while Tri-State Group Inc. of Wheeling, W. Va., won the Palm Beach Polo and Country Club in Florida for $27.1 million. The Kiawah Island Resort in South Carolina was sold to Virginia Investment Trusts of Richmond, Va., for $45.1 million.

Representatives of H. Ross Perot Jr.--a Dallas developer and son of the former presidential candidate--also attended the sale but never joined the serious bidding. Perot previously indicated that his company, Hillwood Development, might make an offer for all six resorts. "The bidding just got much higher than our analysis indicated they were worth," said Frank Zaccanelli, Hillwood's vice president.

Randy Williams, whose Club Corp. purchased the Mission Hills complex, agreed that many of the high bidders seemed to pay too much for the properties.

"We're comfortable with the price we paid for Mission Hills, but offers on some of the other properties seemed pretty high," said Williams, Club Corp.'s executive vice president.

The KKR group's purchase of PGA West and La Quinta was the butt of jokes by other bidders, who called the offers "RJR II" and "Son of RJR"--a swipe at the huge KKR purchase of RJR Nabisco several years ago that has fallen far short of expectations.

Officials at KKR's New York headquarters were not available for comment, and partners Shannon and Lichliter could not be reached at the auction in Dallas.

RTC officials said they were pleased with the auction's results, noting that the properties fetched $404 million even though the group was valued at $366 million. However, the resorts had a book value of $708 million when Oak Tree was seized by federal regulators in 1991. Leaders of the Mission Hills and La Quinta golf associations said they hope to hold formal discussions with their new owners soon in an effort to ensure a smooth transition and protect the quality of their resorts.

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