ClubCorp, Dallas, reported on Wednesday four pieces of news: it will not pursue a sale at this time, CEO Eric Affeldt plans to retire, first quarter 2017 revenue came in at $221.3 million and it acquired its fourth club this year.
Under pressure from active investor group FrontFour Capital Group LLC, Greenwich, Connecticut, the ClubCorp board had put together a strategic review committee to look at strategic alternatives for the company, including a possible sale of the company or the conversion of its real estate to a real estate investment trust. However, the company announced on Wednesday that the committee will not look at strategic alternatives but instead will remain in place to focus on executing the company's three-pronged strategy of organic growth, reinvention and acquisitions.
That strategy led to the company's 12th consecutive quarter of growth. In the first quarter of 2017, ClubCorp had a 3 percent increase in revenue compared to the same period last year. Net loss also decreased $0.8 million to $7.5 million and adjusted EBITDA increased 4.2 percent to $43.7 million. Outlook for the year is that revenue will come in at $1.095 billion to $1.135 billion, according to financials released Wednesday.
So far in 2017, ClubCorp has purchased four clubs, including Oakhurst Golf and Country Club in the Detroit suburb of Clarkston, Michigan, announced on Wednesday as the first acquisition in the second quarter.
Earlier this week, the company announced that it would open a new club in Seattle called The Collective. The facility, being developed with Alexandria Real Estate Equities Inc. and planned to open in March 2018, will be on the first floor of the headquarters of biopharmaceutical company Juno Therapeutics.
“We are realigning traditional club elements with a completely new concept that combines a unique community experience with collaborative work spaces, spa and physical well-being," Affeldt said in an announcement about the new club. "The Collective is being designed to connect the Seattle community and will serve as the perfect complement to ClubCorp’s Columbia Tower Club, a premier private business club atop the Columbia Center."
Whether Affeldt will be with the company when The Collective opens is up in the air, as the company announced on Wednesday that Affeldt intends to retire upon the appointment of his successor. As part of its regular CEO succession planning process, ClubCorp's board of directors has identified what the announcement called "a strong internal candidate" and will work with an executive search firm to find additional external candidates.
"The board extends its deep appreciation to Eric for his outstanding leadership over the past 11 years,” John Beckert, chairman of the board, said in the announcement. “His expertise and strategic leadership have been instrumental in strengthening the company. We look forward to Eric’s continued leadership as we conduct our CEO search and execute a seamless leadership transition.”
Affeldt, who joined ClubCorp as president and CEO in late 2006, has led the company through the best 10 years of its 60 year history, in terms of financial performance, according to the announcement. In addition, he oversaw the investment of more than $720 million in ClubCorp properties, enhancing the value and experience for ClubCorp’s members and guests. He led the company’s 2013 initial public stock offering.
“We have achieved so much since our IPO in 2013, and have set the industry bar for reinventions within the modern club management sector," Affeldt said. "I am so proud of our 20,000 employee partners and the outstanding service they provide to all our members and guests.”
In 2016, Affeldt was inducted into the Hospitality Industry Hall of Honor. The Hall of Honor, which is at the University of Houston Conrad N. Hilton College of Hotel and Restaurant Management, was created in 1996 and includes previous honorees such as Conrad N. Hilton, founder of Hilton hotels; Ray Kroc, founder of McDonald's; Walt Disney, founder of Disney and more.
Affeldt has also consistently been ranked on Golf Inc.'s Most Powerful People in Golf list, including three No. 1 rankings on the list.
Affeldt's retirement and the company's strategic review committee's decision to not pursue a sale of the company or the conversion of its real estate to a real estate investment trust come after executives at FrontFour Capital Group LLC, an employee-owned hedge fund sponsor and active investor in ClubCorp, sent a letter in September 2016 to ClubCorp's board of directors chastising the company for its stock performance. The group, led by co-founders David Lorber and Zachary George, also has urged changes at other companies it invests in, including Ferro Corp., OM Group and North American Energy Partners Inc.
An article by Alexandr Oleinic on Insider Monkey describes FrontFour Capital in this way:
"FrontFour is a value-oriented activist hedge fund that is managed by Stephen Loukas, David A. Lorber, and Zachary George. Similar to the majority of activist investors, FrontFour is focused on identifying companies with good business models but where a company’s management and board of directors are not focused on the best interests of all shareholders. Therefore, FrontFour engages in constructive dialogue regarding that company’s outlook and strategic plans. "
ClubCorp was ranked No. 4 on Club Industry’s Top 100 Health Clubs of 2016 with $1.1 billion in 2015 revenue.