Starting/Buying a golf course?

[Troy Alderson]

Gentlemen,

As I have noted in posts before, my goal in life as a golf course superintendent is to own and operate a golf course.  One to call my own, maintain as it rightfully should be, and introduce lower income people to the game and that golf is not bad for the environment.

I request help for the first step and following steps to make this happen.  I realize this will take alot of money from the bank and I will owe for the rest of my life, but it is my passion as a career.  

Could those of you with experience in this point me in the right direction or even take my under your wing and show me the way home?

Troy

[Mark_Fine]

Troy,
I don't know your financial situation but I might recommend an "alternative" golf facility to start.  Over 30% of all golf facilities in the U.S. are alternative golf facilities.  And frankly, a lot of them make money.  We just finished designing and building an alternative golf facility in PA and it is quite intriguing.  The investment is dramatically less than what is needed to build a regulation size golf course and the land requirement is minimal.  
Best of luck with your dream.
Mark

[Troy Alderson]

Thanks Mark for the info.  Don't forget that I am looking to purchase also as an alternative.  From the ground up is the ultimate goal, but may not be feasible with my lack of money.

The info I am looking for is where do I start?  At the bank or real estate office.  Do I put together a business plan then hit the banks?  Is there a step by step guide out there?

I have always liked the idea of a practice facility with 3 holes surrounding the range in a clockwise direction.  Start with a par 4, then a par 3, and finish with a par 5.  Maybe even use the Pine Valley practice course as a model, no teeing areas just throw down a ball and play.  I have also learned that 6 adn 12 hole golf courses are needed out there for the golfer with no time to play.  I am also open to the idea of a 9 hole layout with the potential to expand to 18 eventually.  Purchasing an existing course is probably the least expensive route for me since I have not won the powerball yet.

Troy

[RJ_Daley]

Just curious Troy, are you a member of the GCSAA?  Over the years, they have had a number of articles on supers turned owners in their trade journal, Golf Course Management" Magazine. Also, the trade papers like "GC Construction News", and I'm not sure if Crittenden still publishes...  But, one of the things I also found useful is to subscribe for the offering prospectus of various membership offerings.  There (or at least used to be) many types of offerings using various corporate and organizational structures to study.  I have a few from 501 (c) efforts, Limitted Partnerships, etc., and actually did one myself (didn't succeed in the end) common share intra state share offering.  

I think that in this market, in this economy, and given the multitude of development efforts that go begging, that a minimum of several years of study are in order, before making a serious run at such and endeavor should be undertaken.  There are distressed golf properties on up for auction, both reserved bid and absolute.  But, they didn't go bankrupt for nothing.  Just about every one of those on the blocks started with a dreamer, like us, who didn't do enough study upfront.  There are also specialist real estate brokers like McKy golf properties that have lists of those for sale around the country.  Even the Wall Street Journal periodically has GC properties for sale.  It is a real eye opener to go visit some of them.  CAVEAT EMPTOR...

[A_Clay_Man]

Yeah Dick, but for a guy who can come in and knows what he's doing on the turf side, (as long as there is a viable market in reasonable proximity) it should be less risky an endeavor. However, price is everything.

[Troy Alderson]

RJ,

I have been studying this endeavor for many years and I am not done yet.  I am a member of the GCSAA and will look into its resources more thuroughly.  Also, have found many golf course real estate sites on the web.  But many seem to not want to talk unless you have taken preliminary steps already.  That is what I am looking for, the preliminary steps.  

My first step, I assume, is to discuss the issue with a bank loan officer specializing in small business loans.  I am asking the GCA group if that is the right path or should I be looking elsewhere first.  I would assume acquiring the funding is the first step along with finding affordable golf course property.  

Troy

[Jim Thompson]

IM will be sent in near future.

JT

[John_McMillan]

My first step, I assume, is to discuss the issue with a bank loan officer specializing in small business loans.  I am asking the GCA group if that is the right path or should I be looking elsewhere first.

Meeting wiht a bank loan officer might be a productive step - if only to convince you how difficult it will be to obtain bank funding for a golf course project.  

Banks consider two factors in evaluating a loan's riskiniess - probability of default and collateral.  In a golf course loan, the probability of default is high.  The collateral is the land, which is going to have a fairly purchase price.  A bank's option in default is to operate the golf course or to sell the land.  Banks don't like to run golf courses.  When they're selling it they have to factor in that it just failed as a golf course, so they've either got to discount its value to the next owner, or market it for an alternative use.  

A bank will make a golf course loan - so long as you have something else with which to collateralize it.  But then if you had that, why are you going to the bank to ask for a loan?  Kind of a catch-22:  you can get a loan most easily if you really don't need it to begin with.  

An alternative might be to search for a golf course owner who is willing to sell to you on a land-contract.  

[Craig Van Egmond]

Troy,

     You should try to contact (or hopefully he will chime in) Don Mahaffey.  He has been down this road before and probably give you some interesting insights.

     Good luck to you.

[Gary_Mahanay]

Can you build an affordable (low green fees)  golf course today without it being a part of a housing developement or involving some municipality?  Even Angels Crossing and Wildhorse have a housing component to them.  Are the days of building a core-stand alone-mom & pop golf course gone forever?

[Troy Alderson]

Craig,

Don is only 1 hour south of me and I have been conversing with him on other subjects.  I will pick his brain about this option.

John,

Thank you for that info about loaning from a bank.  That was the info I am looking for about the process.  There must be a way to do this without winning the powerball.  I have looked into Regulation D of the SEC, do you have any experience with that?

Troy

[Steve_ Shaffer]

Have you seen these?

www.golfcoursetransactions.com  - This looks like a private placement investment scenario.

www.golfcoursebrokers.com

[Jim Thompson]

I don't know if you can build any course, regardless of its price point, without some sort of subsidy.  Not only do we have a real estate angle at AC, we are also a brownfield.  In addition we had to raise external capital and use other operations in support roles.  I don't think you could use us as a common model of what to do in the affordable arena.

That said there are some lessons from AC:

1.  Don't be afraid of a "brownfield" classification.  It’s a good thing both financially and in getting initial press.

2.  Don't lease any steel you're going to use more than 2 months.  Buy it. Use it. Sell it.

3.  Beware the General Contractor and avoid the change order syndrome.

4.  Never ever call a supplier saying I'm so and so from such and such golf course. Golf is a four letter word and will dramatically increase the cost of everyday items to ridiculous levels.  Get the price before you tell them where to drop it off.

5.  In new design you have a big choice, perhaps the biggest of the project, do you want to be here forever or do you want to develop it and go do it again?  If you have any thought of staying there, the next question is do I want to develop optimum real estate on a compromised course or sell real estate at the best course possible.  We choose the latter.

Price points / Mom & Pop-

If you want a Mom & Pop, go buy one that already exists.  If its a "real fixer upper" all the better.  As you improve it the news will spread through your market like wild fire.  More over, the local Mom & Pop concept near a population base is hard to find affordable continuous land on which to construct.

In our area a lender will require a 30% equity position in golf.  You can often horse trade that for about 40% collateral in some other investment you hold.

As for our price point, if our intent were not a higher goal for our community, we would be at a much higher price point and would be pursuing those options that would maximize immediate revenue and interest.

Troy,

I’m still working on some tools for you.  Hang in there, it should be worth it.

Cheers!

JT

[Don_Mahaffey]

Troy,
Jim makes some excellent points.

The points I would add:

Unless your wealthy, or really lucky you will need help in the form of a lender, investors, partners or all of the above. Choose them carefully.

Structure the deal so you have control. Hire a good attorney and don't give in on this point. It's your vision and your sweat that will make it happen, don't let some impatient fool take away your dream.

Be prepared to live without a salary. Your the last one to get paid and it can be tough if you have a family.

There's a ton of opportunities out there. Good Luck!

[Troy Alderson]

Jim,

I will research your brownfield concept.  And I agree about buying an existing mom and pop that requires improvement.  That is where my skills as a superintendent will shine by giving the golfers a real conditioned golf course.  Not just a overwatered and overfertilized field to hit balls in.

I would prefer to start from scratch, but the money needed may be too much.

Don,

Retaining control is always on my mind.  This is my golf course and I need silent partners, but I make the decisions.  I will call you this next week by Wednesday to talk.

Troy

[Mike Hendren]

Troy,

Simply put, you need a financial angel (i.e., a deep-pocketed partner).

I have financed income producing property for the past 20 years (office buildings, shopping centers, apartments, etc.) and during that time have passed on every golf course deal I've been pitched.  

From a lender's perspective, the risk/return is disproportionate.  For new projects, the number of rounds and fees are rarely achieved, notwithstanding glowing feasibility reports.  (Note:  I've yet to see a non-feasibility report).  

It's up to YOU to mitigate the risk.  Best done by bringing significant equity to the table - perhaps 25% to 40% of the project cost or acquisition price.  Alternatively, perhaps less equity will be required if a high net-worth individual, reporting substantial liquidity, guaranties the loan.  

Another axiom you must address:  Bank's don't like to do anybody's first deal.  Experience is therefore critical as well.

I don't mean to rain on your parade.  I just think it is perhaps premature to visit the bank.  I suggest you first invest your time and energy with those who have done this before.  Line your ducks up and then go to the bank with something to bring to the table.  Do not assume the bank understands the business.

Debt is an unforgiving and inflexible master.
-Mark Twain

And this:

A guarantor is a fool with a pen in his hand.
-Bogey

Finally this:

A banker is a man who will freely loan you an umbrella on a sunny day only to ask that it be returned when it begins to rain.
-Anonymous

[Troy Alderson]

Bogey,

Thank you for the advise.  That is exactly the way I am approaching this, only proceed when there is no doubt it will work.

GCA is a fantastic site for the knowledge in this arena.  Superintendents, designers, bankers, business owners, consultants, and they all play golf and appreciate its history.

Still, I wish there was a step by step guide to purchasing or building a golf course.  Something out there that does not require membership in an association to get it.  That is why I am picking the think tank of GCA.

Troy

[George Pazin]

Troy, there are tons of books on starting or buying businesses in general. Conceptually, at least, golf courses aren't that much different. Read a few of those, talk to a few of the folks in the industry from this site, talk to the owner of the course where you currently work, and you'll figure the rest out!

[Jim_Kennedy]

Troy,
Get in touch with a group like the Society of Golf Course Appraisers and have them locate a member in your area. Make an appointment and get some professional advice. It is an eye-opening experience to find out how much cash, especially for operations, is needed to buy a golf course.

[RJ_Daley]

That is exactly the way I am approaching this, only proceed when there is no doubt it will work.

Troy, it seems to me that therein lies the rub.  At least in my few attempts at doing this; pulling the trigger VS getting to a comfort zone that there is no doubt it will work, is the THE limitting factor.  There doesn't seem to be (at least for me) a place I could get to where there wasn't serious doubt it would work.  When evaluating conditions, I could always find dozens of reasons why it wouldn't work for every one reason why it ought to...  I think that is what seperates the truly successful entrepreneurs from the ones that go belly up.  They know how to balance the risk/reward, realising full well there are no guarantees, but having the guts to pull the trigger at some point.

[George Pazin]

Dick, the most successful entrepreneurs are the pigheaded ones that ignore the numerous reasons to not do something in favor of the few reasons to do it.

In all seriousness, Troy, the first person I would talk to is the owner of the course where you are currently employed. Buy some folks dinner and listen to their complaints and decide if they're bonafide, or if they're just whiners.

Most hunch is that the most successful courses - and alternative facilities that Mark references - were developed a good while ago, before land prices went insane, and before you needed a permit to do anything and everything.

There is  - whoops, was a little 9 holer, an executive course at best, probably a minor cash cow from a cash flow perspective, near my shop that was up for sale for $10 million. It finally sold, is now laying fallow, while the unused land that was part of it now features a Target, a Sams Club and a Sports Authority.

[Matt MacIver]

Another axiom you must address:  Bank's don't like to do anybody's first deal.  Experience is therefore critical as well.

I don't mean to rain on your parade.  I just think it is perhaps premature to visit the bank.  I suggest you first invest your time and energy with those who have done this before.  Line your ducks up and then go to the bank with something to bring to the table.  Do not assume the bank understands the business.

I have a slightly different slant....go talk to a banker or two early on...maybe just not the one(s) you are apt to eventually use.  There are a lot of bankers out there, pick their brain now about what type of business plan, financing, experience they need.