The State of Tennessee closed bidding for the Bear Trace course in remote Clifton, Tennessee.  Purported to have cost $10 million, only three bids were submitted, the highest being $2,150,000 with the others at $978,000 and $675,000.  

This has been today's golf course bubble blog.

Mike  

The State of Tennessee closed bidding for the Bear Trace course in remote Clifton, Tennessee.  Purported to have cost $10 million, only three bids were submitted, the highest being $2,150,000 with the others at $978,000 and $675,000.  

This has been today's golf course bubble blog.

Mike  

Wow thats cheap, thats about the price of a normal house in some parts of Northern Ireland, probably why trumps team is visiting.

Sorry to hear that, but in reality, for most periods of time - the 20's and 90's being two exceptions, stand alone public courses couldn't pay for operations and debt.

I have done the math before, so you could use the search funtion, but here is a recap for a mid level public course. (All typical assumptions)

Revenues

30,000 rounds at $70 per player - $2,100,000

$45 greens fee
$10 cart
$2.50 Range balls average
$7.50 F and B (can vary up to $15 with good cart girls!)
$5 - With proper logo, etc. merchandise sales can be $2-10 per round.

Golf Maintenance -        $400K-$900,000
Pro Shop Management - $400-$600K
Debt on $2M/$10M -      $200K - $900K
Management Fees -       $100K
Owner Profit at 15%    - $300K

                                  $1.4M - $2.8M
As you can see, the expense numbers can be over or under making a non profitable course.  

The trick is to:

Minimize Debt, which the $2M bid does, or have course construction paid for by housing development or municipal funds.  Like restaurants, there are several golf courses that do much better for the second - or third - owner. In fact, those other bids probably feel they will get the course in a few more years close to the price they bid!
 
Present a course that appears to be worth $+50 to play at a cost closer to the maintenance levels of a $30 course, since golf maintenance is the biggest ticket operations item.  I know a lot of supers who excel at this, getting more bang for the buck than others with bigger budgets.  They are worth their weight in gold!

Present a service level commiserate with a $50 round, and also inexpensively.  I think the trick to that is to not spend a dime on things like lockers that hardly anyone uses, or full service restaurants, when most golfers eat burgers.  Of course, it helps if your clubhouse is 6,000 SF of heat and lights vs. 20,000 SF.  But, if you ever think that a course should provide "mango scented towels" at a %50 greens fee, realize that they are cutting costs as much as they can to make ends meet.

Eliminating debt is the biggest single thing a golf course can do to be profitable.  That's why so many are paid for by housing developers, where the construction cost is in the development. Or why city courses are paid for out of general revenue bonds, rather than special issue bonds.

Without debt, most course can manage quite well, properly managed.  Its a litte skinny right now, but probably closer to golf's long term average business situation than Owner's admit - they aren't comparing to the averages - they are comparing business to the boom of the 1990's.

All of the above is based on the "typical mid range course."  Courses like Cowboys which attract plus $100 fees or Bandon Resorts have a whole different structure than those that cater to local play.  Bear Trace may be a "tweener" in that they were trying to be a golf resort trail, but I am not sure that Tennessee was ever going to be the next Florida for golf.

Jeff, thanks for the in depth numbers- it  will be interesting to see the number of clubs that hit the skids inthe next few years should the economy tank. I belong to a private club that has been managed quite well. Our waiting list is stilla couple of years but we have been proactive in dividing downstroke over 3yrs. Wouldn't surprise me if this becomes the norm as clubs compete for members in some areas of the country.

Matthew:

If you only learn one thing from this web site, learn this:  there is no such thing as "good authority" in predicting gains in the economy.  There is only wishful thinking from people who think they know (or who want to sell you something).

I don't believe they exceed 15,000 rounds annually.  No chance in this location.  Oddly, there's a small airstrip that borders the course and the clubhouse would make a nice cabin.  Maybe some decent duck/deer hunting and fishing nearby.  

Time for a GCA syndicate which I will promote (but not invest in).

Mike

Matthew,

There is a term for those who think it's time to jump into the residential market after recent price declines:  knife catchers.  Think about it:  why try to catch a falling knife when you wait until it hits the ground and then safely pick it up?  

Buyers are on the sidelines, prices are plummeting, lenders are puckered up and there are several years of inventory available.  Also, wherever you are  in the global economy it's not "different here."

I recommmend thehousingbubbleblog.com.  

Mike

Tom, I got this advice personally from a multi-millionaire who is heavily involved in property but I feel there is reasoning behind this. In Northern Ireland we used to lose about 3,000 net a month via migration. Now there is a net gain of about 8000 a month (Huge compared to a 1.7m population). These people are coming and need somewhere to live. Your point is very wise and collates with the advice 'Don't ask a hairdresser if you need your hair cut' but most women can't even take it in its most literal scene.

Jim, That’s the Belfast figure (should have put up to) for the rest of the province it went about 40, 50, 60 per annul and you have to factor in a recent 30% reduction.

Just for information purposes, let me say that that I worked on two of the Bear Trace projects, Cumberland and Chickasaw.
The developers of all the Bear Trace courses was Wadsworth Construction, Jim Hardy's group and the state of Tennessee.
One of the stipulations, at least on the two courses that I was involved with, was that the total construction cost of the course could not exceed $2.9 million and we achieved that.  I am not sure about the other BT courses, but my guess is that that would have also applied to them as well.
I can't comment on the  cost of the clubhouses.   So the 10 million dollar cost number is mostly in equipment and clubhouse amenities.

Matthew

Send this multi millionaire to White House TN.

I had been hanging out there for 8 months waiting for money to come thru to proceed with construction of a Nicklaus course there.

Good authority...........

and I thought I had heard it all

Golf Maintenance -        $400K-$900,000

Pro Shop Management - $400-$600K

Debt on $2M/$10M -      $200K - $900K
Management Fees -       $100K
Owner Profit at 15%    - $300K

Jeff,

Just curious what's generally included in your Pro Shop Management number?

Ken

I would like to know who the person was that bid $675,000.  Talk about trying to steal it, this person must be laughing.

Is there any Bear Trace Course located reasonably near a populated area?  I played Tim's Ford, and it was nice, but it would be a bit of a schlep for those not staying on the lake or attending Sewanee.