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Drive Shack, a new, well-financed competitor to Topgolf, is preparing to open its first location in Orlando and promises an aggressive nationwide expansion.
New York-based Drive Shack is an offshoot of American Golf, the multi-course operator that Fortress Investment Group LLC acquired in 2013. American Golf was managed in recent years by Newcastle Investment Corp., a Fortress affiliate that used to operate as a real estate investment trust. Newcastle announced in late 2016 that it was changing its name to Drive Shack and would not retain its REIT status.
Sarah L. Watterson, Drive Shack’s CEO and president, said the company’s decision to enter the “eatertainment” category could be traced to the acquisition of American Golf. In a December 2016 investor presentation, Drive Shack noted that there is “limited player growth” in golf, but that consumers were attracted to “social entertainment options.”
“We saw a lot of the great aspects of golf in owning this business, and we also saw the opportunity to take some of the best aspects of golf – the food and beverage, the camaraderie, the good feeling of whacking a golf ball – and pull them off the course and put them into another venue,” Watterson said.
Some regional competitors to Topgolf already have emerged. Those include FlyingTee in Tulsa, Okla., and 4ORE! In Lubbock, Texas.
What separates Drive Shack from those start-ups is cold cash. As of Sept. 30, the end of the company’s fiscal third quarter, Drive Shack had $182 million in cash on hand to self-fund expansion. The company still operates 77 American Golf facilities. It owns 27 of those courses, leases 41 and manages the remaining nine. Drive Shack trades under the ticker “DS” on the New York Stock Exchange.
Drive Shack already has announced five locations: Orlando; Palm Beach, Fla.; Glendale near Phoenix; Raleigh, N.C.; and Richmond, Va. The one near Phoenix is particularly interesting because it will be located across the street from a soon-to-be-opened Topgolf in Glendale, near
University of Phoenix Stadium.
A typical Drive Shack will cost $20 million to $25 million to build, according to the company’s public filings.
In a Nov. 1 investor presentation, the company estimated that each facility
could generate $3 million to $6 million in earnings before interest, taxes, depreciation and amortization, or EBITDA.
Drive Shacks will look similar to Topgolf’s locations, even down to the square footage and the size of the range. Drive Shack will be 60,000 square feet across three floors, with more than 90 hitting bays and a 220-yard range. There will be restaurants and bars, and event space for more than 150 guests, though Sara Yakin, Drive Shack’s COO, said that can be configured to accommodate larger groups.
“I think Topgolf is just the beginning,” Watterson said. “They think and we think there’s room for a second competitor in what they’re doing. We’re looking to grow, and grow very quickly.”
Topgolf last month opened its first location in Orlando, its 36th location worldwide. It’s perhaps not a coincidence that Topgolf Orlando is the first venue to feature Toptracer (formerly Protracer) technology, which provides instant data on ball speed, distance, curvature and height of each shot. That might have been Topgolf taking a shot across the bow at Drive Shack, whose first location is 16 miles away in Lake Nona near the Orlando airport.
Watterson said Drive Shack will offer “virtual technology” that will include data such as ball speed and distance, but declined to elaborate. The company also promises an expansive food and beverage program, with what Yakin describes as a heavy emphasis on “share-ables.”
Drive Shack Orlando will open in the first quarter of 2018, though an exact date has not been announced. Watterson anticipates hiring 350 employees at each facility.
“We believe it’s an incredible business,” Watterson said. “It’s up to us to execute on it. We believe that we can grow very quickly as if we execute on it.”
(Note: This story appears in the Nov. 13, 2017 issue of Golfweek.)
