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Matt_Cohn

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Making $$$ off a public vs. private
« on: December 04, 2007, 02:07:00 PM »
Let's say you're going to build a golf course, and your goal is to make money. (I know, maybe you should invest elsewhere, but just for the sake of the question...!)

Do you build a public course or a private club?

If there's not one simple answer, what are the factors (location, anticipated course quality, etc.) that would suggest building one vs. the other, again if your goal is to make money off the project?

Steve Lapper

  • Karma: +0/-0
Re:Making $$$ off a public vs. private
« Reply #1 on: December 04, 2007, 02:19:40 PM »
Very simple question=very complex answer.

The single biggest factors in any equation are the price of land and proximity to golfing demographic (income level sensitive). Course quality and  the maintenance budget necessary to sustain that quality factor  matter, but are much lower on the list, far behind things like availability of water, power and anticipated round count. If the climate is year-round, how many rounds can you expect and what will the demographic allow for a RevPar figure. Needles to say, there are so very many factors, all with different weight and purpose, that determine whether you can make any $$ of it. That said, in today's world and in North America, privates are generally more profitable than publics, especially so when they offer a RE component.
The conventional view serves to protect us from the painful job of thinking."--John Kenneth Galbraith

Jim_Kennedy

  • Karma: +0/-0
Re:Making $$$ off a public vs. private
« Reply #2 on: December 04, 2007, 02:43:42 PM »
Matt,
It depends on whether you are looking for a cash flow or a cash-and-go, similar to the lotto winner who either takes the lump sum(private) or takes the long pay-out(public).



"I never beat a well man in my life" - Harry Vardon

John Foley

  • Karma: +0/-0
Re:Making $$$ off a public vs. private
« Reply #3 on: December 04, 2007, 03:38:44 PM »
To the folks in the know:

What is the minimal # of people needed to maintain a course in very good condition given the folowing:

1- Private - limited membership / 200 or less and hence fewer rounds.

2- Bunker numbers and maintenance. - No daily sand pro's - no wall to wall coverage.

In this scenario can some of these cost factors can be controlled or am I just thinking wishfully?
Integrity in the moment of choice

Chris Cupit

  • Karma: +0/-0
Re:Making $$$ off a public vs. private
« Reply #4 on: December 04, 2007, 11:47:26 PM »
To the folks in the know:

What is the minimal # of people needed to maintain a course in very good condition given the folowing:

1- Private - limited membership / 200 or less and hence fewer rounds.

2- Bunker numbers and maintenance. - No daily sand pro's - no wall to wall coverage.

In this scenario can some of these cost factors can be controlled or am I just thinking wishfully?

You are talking about a VERY expensive course.  For instance, the course I'm a member at started with a cap of 300 members and now has a cap of 395 with about half living 120 or more miles away.  With 200 or so local members the course still only generates around 12-13,000 rounds a year and the course closes down from the third week in December until mid March.

The club also actively seeks hosting amateur golf events and has liberalized its guest policy a lot since 1991.  That staff is around 25 or so and the budget is certainly north of 1.2MM despite its 9 month season.  

The course I own hand rakes bunkers and walk mows greens and is a lower end club price wise.  But I will have 17 or so full time staff and an operating budget of $850,000 not including any capital expenditures.  To do this I have between 525-600 members (600 is my cap) and 36,000 rounds a year.

If you want to get rich then go somewhere else.  But, for those willing to work their property as opposed to having other people work for them, you can have a nice and rewarding life--the real reward is from being around the game--not the money!

(I do think the very high end clubs ($100k and up IDs) are a market that will continue to do well and will be able to maintain better margins than more modest clubs.

For 350 members, 24,000 rounds and a course in very good condition all the time, in a major southern city be prepared to plunk down at least 20k and $500 a month.  At least.   :(

Mike Sweeney

Re:Making $$$ off a public vs. private
« Reply #5 on: December 05, 2007, 06:09:56 AM »

If you want to get rich then go somewhere else.  But, for those willing to work their property as opposed to having other people work for them, you can have a nice and rewarding life--the real reward is from being around the game--not the money!

For 350 members, 24,000 rounds and a course in very good condition all the time, in a major southern city be prepared to plunk down at least 20k and $500 a month.  At least.   :(

1. As Chris states, you need to somehow get the land for free, which means you are a farmer or you partner with a farmer or 2-3 years ago, you have enough real estate markup where the houses effectively give you free land. The real estate play is gone for now but demographics will bring it back down the road.

2. You buy/option the land now, hope the other Sand Hills clubs sell out and become the next club: http://www.landwatch.com/460_Acres_Land_For_Sale_North_Platte_Nebraska/pid/48609

3. You move to China and build a course there.

4. Somewhere out there, there is a cheap rehab, where you buy a course cheap and fix it up. There probably aren't too many.


Bruce Katona

  • Karma: +0/-0
Re:Making $$$ off a public vs. private
« Reply #6 on: December 05, 2007, 10:15:25 AM »
My friend Steve Lapper stated very nicely what he and I spend quite a bit of time pondering....how actually to make a reasonable living and get some level of financial return for investing in a golf course or courses.....on the public side; in an above average year (less rain than average, but no drought to cause the course to go into distress) with a product which is received well by the public and a competitive price point (these two matter much more than  you would ever imagine) you can exceed you annual business plan and make some money.
In a rainy or poor weather year, your fixed costs - salaries, benefits, course maintenance costs, real estate taxes, debt service, capital leases, etc. -remain constant, but your revenues are less tees times are lost due to poor weather. In this year, you will be writng a check at the end of the year as expenses will exceed revenues and you will lose money. (Once a tee time is unused, you can't ever get it back; it's not like unshipped inventory that you can sell to the next purchaser.)

On the private side, you can either be equity or non-equity club...In an equity club the members own the club and share equally (usually) in the cost of operations....you joins is as important as where the facility is located and what the cost of enrty is. Equity clubs almost never turn a profit and rent out their clubhouses for events (weddings, aprties, etc) to try to reduce the annual assessment ( additional payment in addition to dues and initiation fee) from each member to cover operating losses.  You generally need about 200-250 members at a typical equity club to operate at a break even....above 250 you can service your debt on the property.  The high end clubs just cover their losses by assessing the members an additional amount at the end of the year.

Non-equity clubs offer no risk to the member as they have no ownership stake in the club; but usually less say in the decision making process. Location, conditions, price point of entry and lastly course design are the keys to making this model work.  If the club turns a profit, the owner keeps the cash; if the club loses money, the Owner pays the added expenses as non-equity clubs do not assess memebers for operating losses.  The non-equity business model is the one most folks are looking at currently as with a membership base, you collect your dues in the beginning of the year, so you know what your cash position will be and look to incrase revenue thruoutings, food sales etc.

Hope this helps.



 

Eric Smith

  • Karma: +0/-0
Re:Making $$$ off a public vs. private
« Reply #7 on: December 05, 2007, 10:16:44 AM »
... for those willing to work their property as opposed to having other people work for them, you can have a nice and rewarding life--the real reward is from being around the game--not the money!

Here, Here!! :)

Tom_Doak

  • Karma: +3/-1
Re:Making $$$ off a public vs. private
« Reply #8 on: December 05, 2007, 07:52:59 PM »
Matt:

The answer depends on your goal.

If your goal is to take a lot of risk and make a lot of money if you succeed -- you keep the ownership and you go public.  Bandon Dunes.

Going private is ultimately designed to reduce risk by selling it off to your members.  You can't really sell it off at a high multiple of what it's worth -- the members would not buy into such a proposition because they have an idea of the approximate investment.

The collapse of many CCFAD's after 9/11 has led many more developers to follow the private model, in order to reduce their risk.  I'm convinced that some of my earlier clients (Jim Knott at Beechtree is one) would be building private courses if they were doing it today.
« Last Edit: December 05, 2007, 07:54:41 PM by Tom_Doak »

SB

  • Karma: +0/-0
Re:Making $$$ off a public vs. private
« Reply #9 on: December 05, 2007, 08:45:17 PM »
You have indeed asked a simple question with an incredibly complex answer.  The short version of how to answer that can be found by looking at the market.  Every area has different market based prices for rounds, membership, dues, number of members, etc.  Once you know that, and base that on what you are building, you can then load in your expenses (which vary based on course, clubhouse, etc.) and see if you are going to make money.  

Darren deMaille

Re:Making $$$ off a public vs. private
« Reply #10 on: December 05, 2007, 11:22:29 PM »
The Rehab idea seems to be the best.  I think a 9 hole property would be the best idea cateering to beginners and seniors.  Low overhead with a tiny food consession.  A good greenskeeper who knows how to fix things.  A good amount of area that you don't have to maintain.  Finally an area where you can have a short busy season, then shut it down for the winter.  This would make money.  I haven't found the place yet