|
Course Transactions are More Complicated than Many
Realize
Did you ever think that golf has fundamental economics? As much as there is to
know about the game, there is even more to know about the concepts in the
valuation of a golf course. The game of golf is a business -- it needs to be
profitable.
Profit is a combination of understanding a course's design, its development and
its operation. Its investment is multi-faceted, including real estate, personal
property and inventory. A golf course's people and its goodwill round out the
valuation.
The basics of any economic analysis are supply and demand. The foundation of
golf as a business is predicated upon the available population, the percentage
and quantity of those who play golf and their frequency of play.
The size of a course, whether regulation, executive or par 3 first must be
identified. There are private courses, daily-fee and municipal courses. Various
configurations include a core course, single or double fairway (continuous or
returning nines). The terrain of golf courses can be flat, gently sloping or
hilly.
The difficulty of a golf course is affected by the quality of landscaping, tee
placement, length, green size, hole visibility, contour, hazards and climate.
The difficulty of a course should be coordinated with the typical player for
that type course.
The income characteristics of a golf course are extensive. Revenues are diverse,
and predicated upon whether play is for nine or 18 holes; private, public or
municipal; and the course's motivation as support for a subdivision, resort,
country club or for municipal (potentially nonprofit) purposes.
There are multiple profit centers within a golf course, including but not
limited to a driving range, cart rentals, pro shop, clubhouse, restaurant and
lounge, snack bar, and health and fitness facilities.
Economic considerations also include an irrigation system, and the extensive
quantity of facilities that can be included in a clubhouse. There is a
potentially wide variety of furniture, fixtures and equipment that can be
included in the personal property category. There is surely more to a golf
course that just the land.
The basics of a golf course are its costs. Appraisers often use valuation
services, such as Marshall Valuation, which categorizes minimal quality, simply
designed courses, typical private clubs and championship courses.
The investment in a golf course is substantial. The investment must make sense.
There needs to be a significant return on this investment. The investment needs
to be financed. There needs to be a mortgage component and equity component.
The golf course must be financially competitive.
In analyzing the sale transactions of golf courses, there are many indicators
and units of comparison that can be relevant. These include total revenue
multiplier, golf revenue multiplier, prices paid per round, prices of
memberships and green fees and rounds multipliers.
Golf courses are often sold in the open market. Review of public records and
discussions with brokers who specialize in this market reveal that there are
probably more golf course transactions than you might imagine.
The valuation of golf courses considers all three approaches to value that are
typically in any appraisal: the income approach, cost and comparable sales
approaches to value. Highest and best use analysis is the most relevant, as it
analyzes each golf course to determine its economic viability. The unique
nature of each course is considered and adjusted, just like for any other type
property, whether it is an apartment complex, retail center, industrial
warehouse, office building or hotel/motel.
Golf courses are real estate, but they are also businesses. They are complex
business entities that require the skills of a professional appraiser to
ascertain their values. There are many resources to assist in the valuation,
and there are many nuances to the property's cost components, income
characteristics and comparability.
Return To Listing...
|
