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WSJ article about Palmer, Eastwood, Ueberroth and others purchased Pebble Beach in 1999

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Twenty years ago, a group including Clint Eastwood and Arnold Palmer banded together to secure the future of Pebble Beach, the site of this...
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PEBBLE BEACH, Calif.—Twenty years ago, one of the most coveted pieces of golf real estate in the world was back on the market. Pebble Beach, the picturesque, seaside host of this week’s U.S. Open, was about to be sold by the Japanese company that had bought it only seven years earlier. It would be the fourth time in two decades that the iconic course changed hands.

Peter Ueberroth—former Major League Baseball commissioner, architect of the 1984 Olympics in Los Angeles and longtime Pebble Beach visitor—imagined how the ownership carousel could continue.

“I was worried that a major American company would throw a great big number at it and then once they owned it, figure out an exit strategy five years later,” Ueberroth said. “It just seemed to me this isn’t a place that should be shuffled around.”

That simple idea—that Pebble Beach is not an asset to be flipped but rather one to be preserved—has changed the course of its history.

It was powerful enough to help Ueberroth assemble an ownership group that included actor and director Clint Eastwood, late golf legend Arnold Palmer and former United Airlines chief executive Richard Ferris. It was compelling enough to clinch the deal at a price of around $820 million, despite higher offers from rivals. And it solidified Pebble Beach, now in its 100th year, as one of the country’s most reliable hosts of championship golf.

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Clint Eastwood, left, and Peter Ueberroth on the 18th hole at Pebble Beach in 2013. Photo: Dane Andrew/Zuma Press

In a rare move, the U.S. Golf Association announced the return of the U.S. Open in 2019 before the previous Open here in 2010 had even been played. Likewise, no matter how this week goes, Pebble Beach is already set to host its first U.S. Women’s Open in 2023 and another U.S. Open in 2027. That’s in addition to the annual celebrity pro-am that has been a mainstay of the PGA Tour for decades.

The Pebble Beach Company, whose assets include three other nearby courses and three hotels, is decidedly a for-profit venture. The listed rate for a round of golf at Pebble Beach is $550. But it also operates more like the caretaker of an old cathedral than an outfit wholly devoted to quarterly targets.

It has spent around $500 million on upgrades ranging from the course to the hotels to a new practice facility. As part of a long-debated expansion agreement with environmental regulators, it also agreed to leave undeveloped more than 635 acres of forestland it owns. Company executives declined to detail its finances, beyond saying it is profitable.

“Some people would have bought it and, if they had hedge fund money or whatever, would have to show a return,” Ferris said. “Our focus has been on the preservation of this natural treasure in an economically sound manner. I would say we are patient.”

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Former United Airlines chief executive Richard Ferris, left, and Arnold Palmer. Photo: Stan Badz/PGA

The ownership group includes more than 100 minority investors whose identities have remained a closely-kept secret. Ueberroth said they include some of the most prominent business executives in the U.S., including several owners of MLB, National Football League and professional soccer teams. One person privy to the list said it includes Charles Schwab, founder of the eponymous brokerage firm. A spokesman for Charles Schwab Corp. did not comment.

The investors were billed as an ultra-wealthy equivalent of a concerned citizens group. Shares sold for $2 million each. It was akin to buying a stake in a professional sports team—less a financial decision than an emotional one.

“There was a currency of ego attached to it,” said Alastair Johnston, the longtime agent for Palmer, who died in 2016. “They were paying with no objective analysis of the investment beyond the basics of what they knew about it. There was a lot of idealism involved.”

The 1969 death of Pebble Beach developer Samuel Morse sparked an ownership shuffle that lasted for three decades. In 1979, 20th Century Fox, flush with cash from the original “Star Wars” movie, bought the resort for $81.5 million.

Two years later, it came under the control of oil magnate Marvin Davis, who bought Fox and then kept Pebble Beach after selling the movie business in 1984. Davis drew criticism for allowing the condition of the course to deteriorate while fielding offers for it. But that paled in comparison to the controversy generated by its next owner.

After Japanese developer Minoru Isutani bought the resort in 1990 for a staggering sum of $841 million, he tried to finance the deal by selling private memberships and limiting public golf access. When an intense public backlash scuttled that plan, Japanese lender Sumitomo forced Isutani to sell to an entity it partly owned.

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Clint Eastwood searches for his ball in the beachside rough on the fourth hole at Pebble Beach in 2002. Photo: Mike Fiala/Associated Press

Bank officials cited concerns over whether the course would be ready for the 1992 U.S. Open as a reason for the takeover. When the new entity, Lone Cypress Co., later began fielding offers for Pebble Beach in 1999, few parties had more at stake than the USGA.

 

The course was just a year away from hosting its fourth U.S. Open, which generates the vast majority of the USGA’s revenue. “All of a sudden it was like, ‘Who’s going to buy it? What kind of commitment are they going to have?’” said USGA chief executive Mike Davis.

One bidder was private equity firm KKR & Co. Schwab was initially involved with another bidder, according to two people familiar with the matter. A spokesman for Sumitomo Mitsui Financial Group declined to comment.

But Ueberroth had dealt with Japanese companies and believed the sellers, wary of being blamed for degrading Pebble Beach, would be swayed by the idea of handing the course to the most credible caretakers.

His first call was to Eastwood, whose longtime local civic involvement included a stint as mayor of Carmel. Eastwood is also wildly popular in Japan. Ueberroth then added Ferris, his former partner in the hotel business, and Palmer, who gave them trust from the golf world.

None of the four could simply write a check for the resort—their investments were for less than $20 million each, according to two people familiar with the deal. Ferris met with a group of syndicated lenders to sell them on their plan.

“This won’t be a home run,” Ferris recalled telling the group. “It probably won’t be a triple. It might be a double. But it won’t ever be less than a single. It’s like putting your money in Fort Knox.”

Ueberroth said the highest bid for Pebble Beach exceeded $1 billion. But his group’s offer was not contingent on an extensive vetting process. They offered to close in 10 days.

“We didn’t need to bring in people to see how much the real estate was worth,” Ueberroth said. “We just said, ‘We’ll buy it.’”

There was just one thing left to do before the closing: raise a few hundred million dollars from investors. General Electric Pension Trust was one of them. But the real feat was courting 132 private investors who put up between $2 million and $10 million each.

Relying on their combined Rolodexes, Ferris said he and Ueberroth did it in about a week.

“There was a bank account that had a zero balance in it, and all of a sudden wire transfers started showing up,” another person involved in the deal said. “It went from zero to, ‘Bingo!’”

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Tiger Woods during the fourth round of the U.S. Open at Pebble Beach in 2010. Photo: Charlie Riedel/Associated Press

The sale closed on July 31, 1999. Palmer spearheaded a series of changes to the course, rebuilding greens and adding bunkers in an attempt to move it closer to its original design. Since his death, his estate has sold its shares in the company.

Eastwood, 89, played a leading role for years in navigating the local politics of an expansion plan approved in 2012, which included a new hotel. The company had to agree to drop other proposed additions such as a new golf course.

The minority shares rarely change hands, but their value has more than tripled, according to Ueberroth, who said they sell for $7 million to $8 million. Both Ueberroth, 81, and Ferris, 82, have installed one of their children on the company’s board of directors.

For now, and potentially for another generation to come, Pebble Beach is not for sale

 

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Never knew this. Also I guess I watched Tin Cup too many times. I thought if you run out of balls it’s an automatic disqualification. Guess it’s onlu two-stroke penalty and you can use a ball from someone else.

 

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He won by 15 shots. It was mind-blowing then. The legend of it has only grown since. But there's a...

 

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3 hours ago, ChrisP said:

Never knew this. Also I guess I watched Tin Cup too many times. I thought if you run out of balls it’s an automatic disqualification. Guess it’s onlu two-stroke penalty and you can use a ball from someone else.

 

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He won by 15 shots. It was mind-blowing then. The legend of it has only grown since. But there's a...

 

It’s only a penalty if the one ball rule is in effect and you play a different ball.

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Somehow I thought Zach Johnson would be better at jumping jacks.  I'm not sure I've done one since high school, so I can't say mine are better... the form just looks off. 

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1 hour ago, Groucho Valentine said:

TIgeris a good bet this week. I threw down $100 on him. I also threw down $50 on fleetwood. 

Contemplating a Tiger bet as well. Already got Kaymer at 200-1 and Cantlay at 28-1. I think Schauffele 28-1 odds and Simpson 50-1 are also really good value and may play that. I usually play 5 bets every major.

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3 minutes ago, boogielicious said:

Fox Sports hits a new low. 

Pretty ridiculous. He's only won the last two.

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Yeah, they should've definitely included him, but personally I think those promos are cheesy AF and if I were in that position I wouldn't do them even if they begged me. Of course, I'll never have to worry about that lol...

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Sounds like they’re going to keep greens pretty soft. Gotta please the players. Leaning towards a winning score a bit lower than a typical US Open. Really you just gotta keep it in the fairway and you should be able to score. I think somewhere between -4 and -8 will win.

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If they keep the greens soft, I would bet on Rory to win.  He seems to do well when the conditions are soft - like when he won at Congressional.

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Thursday 
10:45 a.m.: Featured groups.
Jon Rahm/Rory McIlroy/Marc Leishman tee off at 10:51 a.m. 
Dustin Johnson/Phil Mickelson/Graeme McDowell tee off at 11:13 a.m.

11:30 a.m.-9:30 p.m.: Holes No. 7, 8 and 17.

4:45 p.m.: Featured groups.
Francesco Molinari/Viktor Hovland/Brooks Koepka tee off at 4:47 p.m.
Tiger Woods/Jordan Spieth/Justin Rose tee off at 5:09 p.m.

Friday 
11 a.m.: Featured groups.
Francesco Molinari/Viktor Hovland/Brooks Koepka tee off at 11:02 a.m.
Tiger Woods/Jordan Spieth/Justin Rose tee off at 11:24 a.m.

11:30 a.m.-9:30 p.m.: Holes No. 7, 8 and 17.

4:30 p.m.: Featured groups.
Jon Rahm/Rory McIlroy/Marc Leishman tee off at 4:36 p.m.
Dustin Johnson/Phil Mickelson/Graeme McDowell tee off at 4:58 p.m.

Edited by Zeph

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11 hours ago, Yukari said:

If they keep the greens soft, I would bet on Rory to win.  He seems to do well when the conditions are soft - like when he won at Congressional.

Rory needs to keep the ball in the fairway. That’s my concern with him.

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2 hours ago, Zeph said:

Thursday 
10:45 a.m.: Featured groups.
Jon Rahm/Rory McIlroy/Marc Leishman tee off at 10:51 a.m. 
Dustin Johnson/Phil Mickelson/Graeme McDowell tee off at 11:13 a.m.

11:30 a.m.-9:30 p.m.: Holes No. 7, 8 and 17.

4:45 p.m.: Featured groups.
Francesco Molinari/Viktor Hovland/Brooks Koepka tee off at 4:47 p.m.
Tiger Woods/Jordan Spieth/Justin Rose tee off at 5:09 p.m.

Friday 
11 a.m.: Featured groups.
Francesco Molinari/Viktor Hovland/Brooks Koepka tee off at 11:02 a.m.
Tiger Woods/Jordan Spieth/Justin Rose tee off at 11:24 a.m.

11:30 a.m.-9:30 p.m.: Holes No. 7, 8 and 17.

4:30 p.m.: Featured groups.
Jon Rahm/Rory McIlroy/Marc Leishman tee off at 4:36 p.m.
Dustin Johnson/Phil Mickelson/Graeme McDowell tee off at 4:58 p.m.

It feels like the opposite of The Open, when I wake up to coverage and catch up on work sometime after 2pm
Tomorrow and Friday I'll work until 2 or 3 and watch live coverage until well after dark.
Finish the night off with a couple of beverages, some snacks and the 18th at Pebble

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Worst part about Pebble is the 9 hour difference from central Europe. I can catch some coverage from the middle of some rounds, but not rounds from the final pairings.

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3 hours ago, Zeph said:

Worst part about Pebble is the 9 hour difference from central Europe. I can catch some coverage from the middle of some rounds, but not rounds from the final pairings.

Wait until we hold the Open at Kapalua ;-) 

[I do not believe that is planned at the moment]

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On 6/11/2019 at 10:20 AM, ChrisP said:

Never knew this. Also I guess I watched Tin Cup too many times. I thought if you run out of balls it’s an automatic disqualification. Guess it’s onlu two-stroke penalty and you can use a ball from someone else.

 

i?img=%2Fphoto%2F2019%2F0605%2Fr552432_1

He won by 15 shots. It was mind-blowing then. The legend of it has only grown since. But there's a...

 

There is no penalty for running out of balls and you can borrow one from a fellow competitor. The penalty may come in if there is a "one ball " rule such as they have in high level play.

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