The economy is so healthy it's bad for business, according to Mitsuo Hirose, who heads golf operations in Japan for John Grayken's Lone Star Funds.

"It used to be we'd just buy and buy," Hirose, 70, said of the company's roster of 111 Japanese golf courses. "But now, because prices went up so much, we have to be very careful about acquisitions."

Lone Star's Pacific Golf Group International Holdings KK lost 36 percent of its market value in the three months after Feb. 16, when it abandoned a goal of owning or operating 200 courses by 2010, citing increased acquisition costs. Property values in Japan rose in 2006 for the first time in 16 years as expansion of the economy drew more foreign investors.

"It's a disappointment that their growth target looks increasingly difficult," said Oliver Cox, a Tokyo-based analyst at Macquarie Securities Ltd. "The situation has changed. Golf courses have become more profitable and valuable, so owners are reluctant to sell."

Pacific Golf, 64 percent owned by the Dallas-based buyout fund, more than doubled its net income from a year earlier to 1.47 billion yen in the three months to March 31, as sales rose 9.8 percent to 14 billion yen.

Lone Star and rival Goldman Sachs Group Inc. expanded golf businesses in Japan by buying courses bankrupted when land prices plunged as much as 80 percent in the 1990s. More than 700 golf courses failed — leaving 14.8 trillion yen in debts — between 1991 and May 2007, according to Ikki Publishing Co., a Tokyo-based publisher of golf magazines.

"We used to buy bankrupted golf courses in bulk," Hirose said. "Now we buy one by one."

Pacific Golf typically paid between 1 billion yen and 2 billion yen for courses, compared with an average cost of 7 billion yen to build one from scratch, according to documents prepared when Lone Star sold a third of the company in an initial public offering in December 2005. Goldman's Accordia Golf Co., which now manages 124 golf courses, sold shares about a year later.

Today it costs an average of 3.5 billion yen to buy a golf course and 15 billion yen to build one, Hirose said.

Pacific Golf will spend 1.2 billion yen to build a clubhouse at Shibayama Green Hill Golf Club, which it will buy from Tokyo-based developer Cosmos Initia Co. when completed next May. The firm hasn't disclosed a price for the course, which is near Narita International Airport.

Land values rose last year as investors competed to buy property in the three largest urban regions of Tokyo, Osaka and Nagoya, according to Land, Infrastructure and Transport Ministry data. The rise boosted prices for both golf courses and links memberships, said Yoji Otani, an analyst at Credit Suisse Group.