John McConnell has a knack for purchasing suffering private clubs and giving them new life. [Photo: McConnell Golf]
If nothing else, John McConnell is a pragmatist. He knows you can’t make a fortune owning private country clubs. But he doesn’t need to make a fortune. He already has a couple of those.
McConnell is the founder and owner of McConnell Golf and, for the last 16 years, he has quietly and unassumingly collected a portfolio of 12 highly-regarded private clubs in the Carolinas and Tennessee. What nearly all the clubs have in common is that they were struggling financially when McConnell bought them.
But this is not merely some rich man’s expensive hobby. McConnell genuinely loves golf and wants to give something back to people who play the game. It’s also a serious business. Yes, he’s pursuing profits because it’s easier to operate from the black than from the red. But that’s not the entire point.
In 2003, Raleigh Country Club, located in North Carolina’s state capital, was in bankruptcy. The club was formed in 1948 by a group of about 20 members from nearby Carolina Country Club. “The good players at Carolina wanted a better place to play,” said 76-year-old Jerry Mangum, who is the longest continuous member at Raleigh CC. “Most of the best golfers in Raleigh played at RCC in the 1950s and ‘60s. Arnold Palmer played a lot at RCC when he was at Wake Forest.”
As the years went by, the condition of the golf course slowly deteriorated and members — particularly younger members – wanted a new swimming pool. In 1993, the board decided to renovate the course and build a new pool.
“We took on a lot of debt,” said Bob Wayland, who joined the club in 1989 and is a former board member. “After the dot.com bubble burst in 1995, a lot of young families and couples who came into the club couldn’t stay. It became a monthly struggle to make ends meet. I can’t remember a board meeting where the red numbers weren’t there. We were always robbing Peter to pay Paul. I was very worried.”
A land developer had purchased the club’s note with the intent of turning the property into a housing development. McConnell went to the club’s board and offered to buy the club and take it out of bankruptcy. The membership agreed and so did the bankruptcy judge. McConnell spent $6.9 million on the sale.
The price wasn’t a problem. McConnell, 67, is the co-founder of publicly traded Medic Computer Systems, a Raleigh-based healthcare information management systems firm, where he served as CEO for 16 years. McConnell led Medic through its public offering in 1992, along with its sale five years later for $922.8 million. He made $60 million on the deal.
In 1998, he invested in and subsequently became CEO of A4 Health Systems, a Raleigh-based provider of electronic medical record software that he sold in 2006 for $272 million.
McConnell started out saving Donald Ross’ last design at Raleigh CC. But it turned into an investment. “The game was always a big draw for me, but to do something I had never planned nor dreamed about became an exciting prospect,” McConnell said.
He was still running A4 Health Systems when he bought Raleigh CC.
“It was obvious to me that one club would not be a business,” he said. “In order to create a business in the golf industry, you needed multiple clubs, an economy of scale.”
So, in 2006, McConnell had a friend whose son was a member at Cardinal Golf and Country Club in nearby Greensboro. Cardinal is a Pete Dye design that has hosted the prestigious Cardinal Amateur since 1978. The club was struggling and the members were looking at options to keep the club in business.
It became McConnell Golf’s second acquisition. He also purchased Treyburn Country Club in Durham, N.C., a Tom Fazio design, in 2006 and the next year added Musgrove Mill Golf Club in Clinton, S.C., a highly-regarded Arnold Palmer layout. He was in the golf business full-time.
“I felt like acquiring golf clubs that were in declining situations might be a good plan for the future,” he said. “Quite honestly, in the 1990s-2000s, clubs were being built and doing well. But the market became saturated and that’s when I thought there were opportunities to buy private clubs and they started to become available.”
“Today, if there is one place when you drive in that really makes a statement, it’s Sedgefield,” says John McConnell, founder of McConnell Golf, of the Greensboro, N.C., club. [Photo: McConnell Golf]
A turning point came for McConnell when he bought Old North State Club in New London, N.C., in 2009. Old North State is ranked among the top courses in N.C. Two years later, he bought Sedgefield Country Club in Greensboro, the site of the PGA Tour’s Wyndham Championship.
“In the early years, we didn’t lose that much money that we couldn’t keep the operation of the clubs going,” McConnell said. “When we bought Old North State and Sedgefield, those were two brand names that everyone in North Carolina knew about. I think that really put us on the map as a long-term, sustainable business.”
The first thing that happened under McConnell at Sedgefield was to tear down an old workout center that he said had become an “eyesore.” A new fitness center was built that “gave the campus a whole new look.” Golf course improvements took place and the interior of the clubhouse was completely renovated.
“Today, if there is one place when you drive in that really makes a statement, it’s Sedgefield,” McConnell says.
McConnell estimates that he’s spent $25 million purchasing clubs and has put another $35 million into golf course, clubhouse and other infrastructure renovations at all 12 properties. McConnell Golf also owns a nine-hole course and manages the golf operations for the public 27-hole Raleigh Golf Association and Grande Dunes Members and Ocean Club in Myrtle Beach.
The McConnell model includes a priority of renovating and upgrading the golf course because ultimately, it’s golfers who are attracted to a private club. The company consolidates back office operations into a central location in Raleigh and uses its purchasing power to improve profitability in food and beverage operations across the board, along with the ability to buy golf course equipment at a lower cost.
Today, McConnell Golf has 1,000 employees and the company as a whole is profitable, with about half the clubs in the black. “Each year, you focus on the bottom performers and come up with new ideas for them and chip away at it one day at a time,” McConnell says. “Almost every club we’ve bought was losing money when we bought it. We’ve done a great job of selling memberships at higher values.”
McConnell is not satisfied with the status quo at his clubs but is constantly looking for ways to grow. Members are the lifeblood of private clubs, particularly young members, given the current economic climate for clubs. On March 1, Sedgefield opened its Pete Dye Course to limited public play.
“We always focus on what the golf course looks like and what it could look like,” he says. “And how many rooftops are within five miles of the club. The one thing I have learned, early on, I focused on the golf course. And today, you need to focus on the potential membership you have for that property.”
In that regard, McConnell clubs focus on family events, including free golf and tennis clinics for the children. And part of the strategy is an active social calendar for the whole family. “It’s the value and entertainment for each member of the family that’s key,” he says. “So that they enjoy coming to the club and never want to give up that membership. Keep bringing new ideas to the members so that they feel like they are members of a thriving community.
“If (the club is) in a market that’s losing population or if the per capita income is dropping, it’s a challenge no matter who owns the property. In our metropolitan markets, we do very well in attracting members.”
One of the big attractions for golfers is that members of McConnell clubs have privileges at all the company’s other clubs. It’s a membership perk like no other in the Carolinas.
Company expansion, if it comes, won’t be rapid.
“The good ones are harder to find now.,” McConnell says. “We’re very selective about the clubs we’d like to buy at this point. We’re at critical mass.
“People ask me when I’m going to be finished. I say, in golf, you have the 14-club rule. That’s a good business model for us, as well. I can’t even get around to play all these courses anymore. This thing started as a boutique business and it’s grown into a major company. We have to keep our eye on it every day.”
As a man who’s built and sold two big companies in his career, he says that’s not the case with McConnell Golf.
“I’m sure that other companies keep an eye on us but we have no interest in selling,” he says. “First of all, I don’t see a need to do that. Second, we’re having so much fun, I can’t imagine not doing this the rest of my life. The beauty of the golf industry is that most all of your customers are pretty happy. They come to the property to have fun. In software, companies bought our product because they had a business problem. It’s a different customer feel.
“As long as I keep the management team and people are excited about coming to work, new employees coming with great ideas, why would I just sit back and watch Fox News?”
Mike Purkey has written about golf for more than 30 years for a number of publications, including Golf Magazine and Global Golf Post. He lives in Charlotte, N.C.