Michael A Kahn, Consultant. Email: firstname.lastname@example.org. Phone: 941-739-3990. Skype: GOLFMAK
ACQUISITION ADVICE: WHAT IS A GOLF COURSE
often interviewed by property appraisers asking me what I think a
golf course is worth. To me, it has a lot to do with what entitlements
are included with the property, and/or what the golf course earns.
For instance, if a golf course is on land designated as open space,
meaning you can't use it for development, I only see value based on
what the business earns. My factors are performance over the recent
three years. If development entitlements have not been given (or taken)
away the risk factor has a exit on future land value, which means
you might pay a premium if all entitlements are still in place."
place a value on a golf course with no development possibility,
the trailing 36-months income and expenses (as do lenders). I also
look at performances from several years back to see what business
was like during golf's good times. I'll do my physical review of the
property, clubhouse, etc., to establish its condition and recent level
of care. I'll review local competition. From these factors I try to
determine whether the golf course has a future.
I can't see a reasonable financial future for a golf course I can't
place any value on it. I mean, if the business cannot make a profit,
and you can never develop the land, what good is it? However, If I
see room for improvement via management I might place some risk value
on the course. Here are my determining factors:
operating income for the past three years.
I would be comfortable paying seven to ten times earnings. Seven if
the property has deferred issues, ten if the property is in very good
condition. In fact, I would pay a very high multiple if it was a new
course with the latest irrigation and drainage, new clubhouse, etc.,
but it must be located in a neighborhood with a future.
development is possible and entitlements are in place,
it may well be worth sustaining a poorly performing golf course while
waiting for land values to appreciate. In fact, many golf courses
are being paved over for development, which is why I predict a net
decline in the number of golf courses in the USA over the next five
years. If there is future value in the land, I can see paying a price
reflecting land values, not value as a business."
THEN WHAT DO YOU PAY FOR A GOLF COURSE TODAY?:
In 2006, an up-and-running golf course can be acquired for a fraction
of replacement cost. It all depends on the course as an asset, its
performance, and its market. As things have changed for the better
since 2004,I believe I'm seeing opportunities.
believe the golf business is recovering from the economic problems
experienced in the years 2000 through 2004. In 2006 it's good news
for existing golf courses, as the addition of new facilities is down
to a trickle (net added 18-hole courses in 2006 less than 100 according
to the NGF). In fact, I predict a net loss of golf courses between
now and 2010.
the golf course buyer, I believe the best golf course deals out there
are marginal or non-performing facilities available for less than
replacement cost. If you're looking at one of these courses, the issues
will be deferred maintenance, added competition, and worn out management.
That's where I can help.
I'm working on behalf of first-time golf course buyers I try to outline
issues that need to be addressed before a decision is made to buy
or pass on the property. The component I can't help determine is the
effort the next owner will put out to make make the golf course a
opportunity today is that you'll be buying golf courses for a fraction
of their original replacement or appraised value. Sure, you'll pay
some back to bring the property back to competitive standards, but
recently we've been selling golf courses you couldn't replace for
$9 million for a little over $3 million. If it costs another $ million
to put the place in condition, it will become competitive and should
deserve its share of business.- yet still you got it for less than
hear about investors buying fixer-upper houses and making good money.
The same can be true buying non-performing golf courses.
understand there's emotion involved in the desire to become a golf
course owner. That's why I try to address important issues so the
buyer understands the nature of the golf course and its marketplace.
Success will be knowing the product, who will buy it, and what needs
to be done to earn the business - no different than any customer-driven
The information above is based on the opinion of Michael A. Kahn,
who takes absolutely no responsibility for your results.