1. Evaluating a Golf Course
  2. How do you appraise a golf course these days? None of the traditional methods apply.
  3. What is a golf course worth?
  4. Can a Golf Course Survive as a Business in this Economy?

My status

NOTE: I am not a lawyer, accountant, appraiser, banker, or mortgage broker. Information herein comes from my own experience in golf since 1956 (yep, 56). I have bought, sold, financed, leased, managed, and consulted hundreds and hundreds of golf courses all around North America. I have 100% confidence that my evaluations are absolutely fair.

Of course, all is subject to disclaimer.

Evaluating a golf course in 2013 drives MIA appraisers crazy - especially if the land has no higher and better use. When the land under the fairways is designated green space, which includes nearly all courses built since the mid 1980's, the only criteria for value is what the business returns in cash flow. Unfortunately, the formulas we used twenty-years ago don't work today.

  • We often valued a golf course on a multiple of earnings - somewhere between six and ten times earnings
  • Sometimes we valued a golf course on a multiple of gross receipts or revenues, usually one and a half to two times gross
  • If the land had other usage, entirely or partially, the value of real estate for development purpose could be factored into the value of the subject.
  • Sales comparisons were sometimes reliable twenty years ago, but usually only useful if they were compared based on rounds and earnings along with the selling prices
  • We could rely somewhat in appraisals even as recently as ten years ago - but a 6-month old appraisal today is worthless.

ALL THE ABOVE METHODS ARE USELESS IN 2012

LOOK AT THESE EXAMPLES (real situations, but remain confidential by name)

  1. Here's an outstanding 18-hole world class golf course in the upper northwest including several hundred fully service mountain residential lots with well over $30 million invested. They can't get $9 million for the place!
  2. A Carolina golf course appraised at $4.5 million seven years ago, recently appraised by the bank holding the mortgage at $1.6 million. Can't sell the place for $2 million.
  3. A Wisconsin 18-hole course by a top-ten architect appraised only a year ago at $4.7 million offered at $1.95 million. A fire sale!!
  4. A beautiful old South Carolina private country club announces to its banker they cannot make further payments on their $2 million note.
  5. An Orlando 18-hole golf course traded for over $6 million not seven years ago was offered $1.8 million.
  6. Two Tampa area golf courses only a few mile apart. Similar acreage, round counts, clubhouse sizes. One sold for $8.5 million, the other for $2.3 million, which baffled the county assessor office like crazy!
  7. I believe there are over 1,000 more courses around the USA like that.

THE THREE METHODS OF APPRAISING:

  • CASH FLOW: If the business loses money, what value does it have? Would anyone buy a bond that requires you to pay negative interest?
  • ASSET REPLACEMENT: All that personal property might have liquidation value - usually worth less than 25-cents on the dollar. So what's the real estate worth? Nothing if you can't do anything else with it!
  • COMPARABLE: Comparing recent sales never make sense - like the two Tampa courses mentioned above.

 

HOW CAN I HELP?

  • This is where Mike Kahn's (my) detailed knowledge of golf courses, their markets and many years of experience can help put a value on a golf course. With appraisers and assessors virtually helpless to evaluate a golf course property possibly the only thing you have to go on is an analysis by a person with my skill and background. So how do I evaluate a golf course?
  • I look at a golf course and its marketplace and determine whether I can apply my years of experience at the wheel to make the place profitable. However, like appraising, my work is more of an art than a science.
  • My first consultation is free. All I need to know is the basic facts of the specific golf course to give you my professional opinion. Keep in mind I AM NOT A CERTIFIED APPRAISER, AN ACCOUNTANT, OR AN ATTORNEY. I am a golf course expert backed by over 50-years in the business.

YOU MIGHT BE SMART TO TAKE YOUR MONEY AND RUN!!

If you're operating a golf course and show more then 18-months of negative cash flow my advice to you is sell for whatever you can and get out. I say that because either the market just is not there, or your operational methods are not working. I know it's hard to admit it, but it's better to get out while you still have the skin on your back than wind up in the poor house. I've watched stubborn owners pour money down the drain out of foolish pride rather than move on with life. There's a cold, hard fact of life you have to accept:

A business that loses money is not worth anything to an investor!

BUYING?

I can tell you there is no magic bullet to move a money-losing golf course to a money-maker! However, you must look at the subject as a longer term investment - looking ahead at least five years. Therefore, you'll need staying power in the form of operating capital and patience. Build the cost to reach stabilization as part of your acquisition cost. If you can accept that the near-term cost to take the business to profitability is a part of the acquisition cost, you can be more comfortable and patient.

I believe virtually every golf course in existence today can make money. In fact, it is not that difficult to move a course into the black the way I (would) run a place.

No! I'm not bragging. I just know how to build a golf course business and keep my customer base. Not rocket science either. If you follow my approach, you should be able to make a decent return from just about any golf course. However, there several 'abandon-ships' out there. If I tell you to stay away from it, take my advice.

Call me: 941-739-3990. First consultation is free.

Email: mike@golfmak.com

Mike