The game of golf, which hasn't been kind to public REIT investors in recent years, is attracting the interest of private-equity investors. The biggest deal in the history of the golf industry was inked in October when a Denver group, KSL Capital Partners, announced that it was paying $1.8 billion to acquire most of the assets of Dallas-based ClubCorp Inc., including 170 golf clubs and three golf resorts. The deal makes KSL the biggest owner and manager of golf facilities in the U.S.

Meanwhile, other private-equity firms are on the prowl. A year ago Walton Street Capital LLC of Chicago, also a bidder on ClubCorp, bought two portfolios totaling 40 golf courses, and then in August it announced it was acquiring the PGA National Resort & Spa in Palm Beach Gardens, Fla., a sprawling complex with five world-famous courses. Industry experts believe the price was in excess of $150 million. Walton expects to spend another $30 million on renovations.

These mega-deals may seem puzzling in the wake of several REIT flameouts in recent years. In 2003 Santa Monica, Calif.-based National Golf Properties Inc. and its sister company, American Golf Corp., went through a financial crisis and were acquired by a Goldman Sachs-led group for $1.1 billion. Golf Trust of America Inc., its stock trading under $1 a share recently, is in the process of liquidating all assets — six courses — and going out of business.

With the arrival of Tiger Woods in the 1990s, golf developers went on a building binge, erecting as many as 400 new courses around the U.S. in 2000 alone. But then came 9-11 and recession, play declined, and many of the nation's 16,000 golf courses began leaking red ink.

The private-equity firms have been delving deeper into the latest data and see a glimmer of optimism for the industry. New course openings have slowed to about 150 in each of the past two years and play has been up about 1% in 2006, according to the National Golf Foundation in Jupiter, Fla.

Most of the facilities that KSL is acquiring in the ClubCorp transaction are private, with an average membership subscription rate of about 85%, according to Eric Affeldt, a KSL principal. He expects to sink money into course and clubhouse remodeling and fine-tune marketing efforts to raise the membership average. “We can hold membership drives and bring more corporate functions and catered events to our clubs,” Affeldt says. “The clubs we're buying aren't struggling by any means. But each one could benefit from investment and improvements. Sometimes it's as simple as hiring a new chef.”

What kind of returns are KSL and other private-equity firms counting on? They won't say, but the best guess is that their initial capitalization rates are in the range of 8% to 9%. There is another card to play: Some of these golf clubs have surplus real estate once set aside for polo and the like. KSL has peeled away acreage in past deals for redevelopment as homes, offices and shopping centers, and expects to do so again with some of the ClubCorp assets.

Ultimately, KSL will probably spin its portfolio public in a stock offering, though that may be a few years away. By then, perhaps, Wall Street may have forgotten the bath it took on REITs such as National Golf and Golf Trust and be ready to invest again in the sport.