[JWinick]

With the economy and the commercial real estate industry struggling, many golf courses are distressed.   Golf courses are ending up in the possession of banks, who will need to dispose of them.

Assuming you could buy the golf course at a distressed price, what would be the cost of operating a golf course for the benefit of you and your friends?   I wondered recently why a club member didn't buy Ravisloe Country Club, build a house on the property, and then have your closest friends over to play.

If you owned your own golf course and played it on a set schedule (i.e. every Saturday), wouldn't the maintenance costs be substantially lower?  Presumably, you would only need to mow once a week?   

[John Moore II]

You would not be able to get by with mowing it only once a week. The grass would grow too much in that time for it to have any color come Saturday. It would need to be cut at least twice a week. Even if you could cut it only once weekly, you still have to have the machines to do the job, a worker or two, and someone who knows what is going on with grass. You'll still need chemicals to keep weeds out and the like. Even using it as you say, I would think you'd need at least $100,000 a year to run it.

[JWinick]

Could it be done with just a few part-time employees?   You could sub-contract the work out to another club and have them cut the grass twice a week.   

[Joe Hancock]

Could it be done with just a few part-time employees?   You could sub-contract the work out to another club and have them cut the grass twice a week.   

Greens would be the big issue. If you aren't mowing them daily, they won't perform like greens. You can't mow them twice a week and expect to play golf on them.....unless you convert them to fescue....hmmmmm.....

Seriously, this would be more expensive than most people would expect. Just to mow 60, 80, or 100 acres of grass one time would burn more fuel and take more time than you can imagine if you haven't been involved in golf course maintenance.

But, if the pockets are deep enough....

Joe

[JC Jones]

Could it be done with just a few part-time employees?   You could sub-contract the work out to another club and have them cut the grass twice a week.   

Greens would be the big issue. If you aren't mowing them daily, they won't perform like greens. You can't mow them twice a week and expect to play golf on them.....unless you convert them to fescue....hmmmmm.....

Seriously, this would be more expensive than most people would expect. Just to mow 60, 80, or 100 acres of grass one time would burn more fuel and take more time than you can imagine if you haven't been involved in golf course maintenance.

But, if the pockets are deep enough....

Joe

Joe, please wait to post until your 3 hole energy drink has a chance to take effect.  Thanks.

[Matthew Mollica]

It would be hundreds of thousands of dollars surely.
Even with a smallish property, with modest fairway widths, and greens which weren't massive.
Even when coupled with minimal play.

Staff, fuel, chemicals, water, machinery and so on.

It'd be great but it's an expensive back yard!

MM

[PCCraig]

I would guess it costs about the same as belonging to about 15 upscale golf clubs, which is why most very wealthy golfers either break the 14 club rule or decide to build their own course! 

[Trey Stiles]

I'll get to the point :

   - Don't do it
   - You will be disappointed with the golf experience
   - It will be the most expensive golf you will ever play
   - For what you will spend , you could buy a King Air and fly your 4some somewhere good every week to play

With the current industry meltdown , the lenders can't sell their foreclosed properties using traditional valuation methods ( 8-9 x EBITDA )
Their only options are :

   - Hire good mgt to turn it around prior to selling
   - Take a serious haircut
   - Look for a " hobbyist " to sell it to
   - All of the above

BTW : There's alot more to it than just mowing grass.

[Rob_Waldron]

Jon

If it were that simple and inexpensive the clubs with 200+ members footing the bill would not be going under in the first place. The fixed costs to maintain a golf course also include the cost to purchase or lease equipment, staff to maintain the course and equipment. Joe and the other posters have pointed out the cost of chemicals, fertilizer, labor, etc. My job is to identify distressed golf courses and find a way to make them work by lowering expenses through our corporate buying power and driving revenue through aggressive marketing programs. Evn then most courses do not make sense financially. Especially with limited available capital and debt. 

[archie_struthers]

Liability is a major issue , sorry as it seems!

[Chris Cupit]

With the economy and the commercial real estate industry struggling, many golf courses are distressed.   Golf courses are ending up in the possession of banks, who will need to dispose of them.

Assuming you could buy the golf course at a distressed price, what would be the cost of operating a golf course for the benefit of you and your friends?   I wondered recently why a club member didn't buy Ravisloe Country Club, build a house on the property, and then have your closest friends over to play.

If you owned your own golf course and played it on a set schedule (i.e. every Saturday), wouldn't the maintenance costs be substantially lower?  Presumably, you would only need to mow once a week?   

I hate to burst your enthusiastic bubble but it would cost far more money than you think.  I would guess $500,000 for a 180 acre, eighteen hole course and that's a minimum.

Here are two examples of people who (sort of) did what you suggest.  One gentleman named Larry Dean who lives off of Old Alabama Road in Johns Creek, GA near the Atlanta Athletic Club built his dream home with a six hole "mini" course for a front yard.  I think the house cost around $40,000,000.00 when built back in the late 80's or so.  He had six small greens, narrow fairways and a set of three tees to make 18 holes.  I actually got to play once and for about three years the course was "decent".  If you google earth it now or any time in the last 10 years you would see and overgrown front yard with deteriorated bunkers and barely visible greens.  Obviously he had some bucks but it is almost impossible to sustain a course on your own.

Another example is Bernie Marcus of Home Depot riches.  A genuine billionaire who simply wanted his own real grass putting green.  My superintendent was the super at his club at the time and despite his best efforts to dissuade Mr. Marcus, Mr. Marcus insisted on having the "real thing".  The green was properly built and certainly he could have afforded all the maintenance that was needed but today it has been converted to synthetic.  A golf course is an EVERY DAY living organism that must have daily attention and no matter how rich you are, how many want to spend crazy money and ultimately end up with a crap course compared to the courses they could easily afford to join otherwise.  If you want to play golf, join a club.  If you want to spend a lot of $$$ and never stop working on the course, buy a course

The lesson is that a course is not a plaything or a hobby and "part timers" will not and can not do it.  Greens must be mowed and groomed EVERY day with maybe one day off a week.  They must be fertilized, constantly checked for proper "nutrition levels", spoon fed at times, aerated, top dressed, watered properly................  An entire course just adds to the impossibilities and a part time crew ain't gonna cut it.  A regular crew does not have "spare time" to do a proper job either.

[Tom_Doak]

Chris:

I agree with you that a "personal" golf course is an expense that no one wants to keep up with for years and years.  The novelty eventually wears off, even for the person who can afford it.  A course must find an equilibrium between its maintenance costs and its revenues if it is to succeed.

However, your longer diatribe implies that it is almost impossible for golf courses to cut back on the outlandish maintenance expenditures we've seen for the past 10-15 years.  If that's the case, then the golf business is doomed, because most courses cannot produce enough revenue to offset those costs.  There IS a lower level of maintenance which can still provide for fun and affordable golf; let's all hope that the golf business in America finds that new equilibrium before it's too late.

[SB]

Consider that a municipal golf course will have expenses of around $350,000 to $500,000 for the maintenance department for fairly modest conditions, and that will give you a start.  Then add property taxes, insurance, utilities, leased equipment, any employees not on the maintenance crew, and whatever you want to spend to get "better than muni" conditions,  etc. etc. etc. 

[Michael Dugger]

Where's Melvyn when you need him?

Traditionally, the golf course was a meeting place for the community.  All involved owned the course, did battle over the course, grew up on the course, and grew old, etc.....

And I think the further we stray from this model, the more courses we will see go by the wayside in the coming era.

[Mike Sweeney]

The guy to contact is Donnie Deck. Hay Harbor Club is 9 holes on Fishers Island and if I remember, the science teacher is the greens keeper during the summer and then Donnie does it in the off season at Hay Harbor when he is back in school. It is not fancy and I would love to play it someday.

I grew up working for a family (on their boat in New Jersey) that had a 9 hole course on their farm property on the Chesapeake. Mile and a half of waterfront and something like a 1000+ acres. Similar to boats and Neverland, they got tired of the cost/upkeep of their golf course and let it grow over and eventually sold the boat too.

[Adrian_Stiff]

Unless you look to spend up and around $500,000 annually your product is not going to be great. With an iffy product why would you want to play it, as mentioned..use the money to play the greats.

You can cut maintenance costs, Painswick is the idea UK business model for as low as you can go they probably mow the greens 3 times a week, fairways 20 times a year. It could survive on 2 greenstaff with fuel, chemicals, mowing equipment maybe a run cost of $150,000. You won't do this in many places in the world tho.

At many golf courses the only way to cut substantial costs is to cut the mowing frequency and that means labour, maybe greens every other day, fairways weekly.

[Bruce Katona]

There are multiple people on this Board (both friend and partners of ours) who, in addition to me, look for these great deals in an on-going quest.  Looked hard, kicked the tires really well, but haven't taken the plunge on anything yet as the valuations to make the places work and get a return on your invested equity don't make sense financially as yet.

Posted something last year that rans like this (you can search it out if you want):

Modest Maintenance Budget - $500,000 (salaries, fert. chemicals, repairs, sand, etc)
G&A Costs (real estate taxes, utilities, overhead) -$200,000
Equipment and Cart leases - $200,000 (no one wants to buy these, if you can finance them)
Capex Ex Reserves and Operating Reserves - $100,000
Debt Service (see below) - $100,000

Total Annual Operating Costs - $1,100,000


What did you play for the asset - $2,000,000 - you got a steal

How much can you borrow - $1,000,000 - debt service is $100,000 annually

You need to have gross revenues of $1.2 million annually on the above to get a 10% return on your investment....given the weather this year in the northeast, that would not be easy.....golf is not an easy businees to be profitable in.

[Bill_McBride]

There are multiple people on this Board (both friend and partners of ours) who, in addition to me, look for these great deals in an on-going quest.  Looked hard, kicked the tires really well, but haven't taken the plunge on anything yet as the valuations to make the places work and get a return on your invested equity don't make sense financially as yet.

Posted something last year that rans like this (you can search it out if you want):

Modest Maintenance Budget - $500,000 (salaries, fert. chemicals, repairs, sand, etc)
G&A Costs (real estate taxes, utilities, overhead) -$200,000
Equipment and Cart leases - $200,000 (no one wants to buy these, if you can finance them)
Capex Ex Reserves and Operating Reserves - $100,000
Debt Service (see below) - $100,000

Total Annual Operating Costs - $1,100,000


What did you play for the asset - $2,000,000 - you got a steal

How much can you borrow - $1,000,000 - debt service is $100,000 annually

You need to have gross revenues of $1.2 million annually on the above to get a 10% return on your investment....given the weather this year in the northeast, that would not be easy.....golf is not an easy businees to be profitable in.

Bruce, you can't borrow for less than 10%?

Of course it might not be possible to borrow at all in the current environment, particularly with a golf course as collateral.

[Bruce Katona]

You can borrow for less than 10%, but when you amortize the loan (interest and principal repayment) the annual coupon will be about 10%.....even if you borrow at 0% your cost annually will be something as you need to repay principal.

Happy to share or anwer whatever other questions you have.

[Bill_McBride]

You can borrow for less than 10%, but when you amortize the loan (interest and principal repayment) the annual coupon will be about 10%.....even if you borrow at 0% your cost annually will be something as you need to repay principal.

Happy to share or anwer whatever other questions you have.

Sorry, I knew the answer to that dumb question right about when I hit the Post button!

[Chris Cupit]

Chris:

I agree with you that a "personal" golf course is an expense that no one wants to keep up with for years and years.  The novelty eventually wears off, even for the person who can afford it.  A course must find an equilibrium between its maintenance costs and its revenues if it is to succeed.

However, your longer diatribe implies that it is almost impossible for golf courses to cut back on the outlandish maintenance expenditures we've seen for the past 10-15 years.  If that's the case, then the golf business is doomed, because most courses cannot produce enough revenue to offset those costs.  There IS a lower level of maintenance which can still provide for fun and affordable golf; let's all hope that the golf business in America finds that new equilibrium before it's too late.

Of course you are correct that there is absolutely a reasonable but lower level of maintenance that would be "healthy" for more in the industry (owners, supers and of course golfers) to accept.  But I have found that those golfers who want their "own private course" tend to be the ones that want the best possible conditions all the time and they severly underestimate that cost.  I also agree that for the business side of the industry that equilibrium point needs to be found fast or our great game will really, really suffer as the "game" gets lost amidst the quest for perfect conditions.

[Jim Thompson]

There are multiple people on this Board (both friend and partners of ours) who, in addition to me, look for these great deals in an on-going quest.  Looked hard, kicked the tires really well, but haven't taken the plunge on anything yet as the valuations to make the places work and get a return on your invested equity don't make sense financially as yet.

Posted something last year that rans like this (you can search it out if you want):

Modest Maintenance Budget - $500,000 (salaries, fert. chemicals, repairs, sand, etc)
G&A Costs (real estate taxes, utilities, overhead) -$200,000
Equipment and Cart leases - $200,000 (no one wants to buy these, if you can finance them)
Capex Ex Reserves and Operating Reserves - $100,000
Debt Service (see below) - $100,000

Total Annual Operating Costs - $1,100,000


What did you play for the asset - $2,000,000 - you got a steal

How much can you borrow - $1,000,000 - debt service is $100,000 annually

You need to have gross revenues of $1.2 million annually on the above to get a 10% return on your investment....given the weather this year in the northeast, that would not be easy.....golf is not an easy businees to be profitable in.

If you're serious, call me.  Price and parameters are in line and can obtain municpal repayment on Brownfield recapture over ten - twenty years plus interest for over half of purchase price.  Send IM and I'll give you phone number.

CHeers!

JT

[JWinick]

My company helps banks sell their real estate assets (primarily whole loans), ranging from performing to non-performing , commercial to residential.   We have not yet marketed a distressed golf course note, but we expect to see more product than we can possibly sell.

I am trying to understand the best buyer(s) for a distressed golf course.  Right now, the residential option is so remote in most markets, since we have way too much inventory.   So, you have to view the current use as the only reasonable use of the asset for the time being.  Ravisloe, for example, was purchased (based on some inside knowledge) with the expectation to also generate revenue down the road via residential development. 

If you can buy a golf course for $1MM, spend $500,000 a year to keep it for you and your friends, and develop it in 10 years, it might be both a profitable investment and a fun way to live.   

Regarding financing, I'm one of the leading experts in SBA financing and the SBA programs do allow up to 90% financing providing the property is primarily owner-occupied and it is does not have restrictive membership policies.

[JWinick]

What's the minimum number of employees you would need?   

[John Moore II]

What's the minimum number of employees you would need?   

2, but they will both have to work a lot. With that number, you could mow greens once daily, fairways and rough once weekly, rake bunkers once weekly and have a little time to spray chemicals and the like when needed. (At least I think that would work, but I'm not a Super) With only two though, the conditions would not be very great though.

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