Insight Into Golf Course Financials?

[LuDawg]

Hi all! This is my first post, so please let me know if this doesn't belong here.

I've been toying around with a business idea and I thought some people in this group may have some insight. I live in metro Atlanta, which is a bit of a golf desert surprisingly. I know so many people that play and everyone has the same complaint: if you can't justify paying a $50k-$100k initiation fee, you're stuck fighting to find a tee time at one of the relatively few public courses, most of which are neglected.

My still-very-early-stages idea is to buy struggling golf courses, fix them up and operate them with shared management to pool resources and reduce overhead. The courses I'd target would be mid-tier public courses that could be much better with some love and capital injected.

I'm still in the "does this make any financial sense at all" stage, so I haven't put in a ton of time yet. I'm just trying to get a rough handle on expenses. I put together the below VERY high level estimate of expenses using a few sources online, but my biggest concern that I don't know what I don't know!

• Operating expenses - $350k (monthly)
  • Course maintenance - $150k;
  • Operations (inl. payroll) - $100k;
  • Water/irrigation - $25k;
  • Food & Bev - $25k;
  • Misc. non-recurring - $50k
• Capital expenses - $750k (annual)
  • New equipment, major repairs & upgrades - $750k
• Upfront expenses - $2m (per course)
  • Purchase price - $1m
  • Maintenance & upgrades - $1m

Does anyone have any relevant experience or insights? I know it's impossible to talk real numbers without a lot more context, but that's ok because I'm not at that stage yet anyway. Any kind of directional help would be amazing! Thanks so much in advance!

[Wolfstrum]

That $1m purchase price seems low. Here in Portland OR not sure you can get a 9 hole course for under $2m. 

[Shapotomous]

In our area the $1m purchase price is very low.  Here the value of the land for housing pushes the price to 5 or 6 times that depending on various things.  A course very close to us closed about 6 years ago and the current plan is to build 700 housing units on the property.   The money the 700 units will bring pushes the property value much higher than if it is kept as a course.

[Rob Person]

Inside the Atlanta 85 belt, i think your estimates are low, bu5 depends on the course.  Sounds like you are wanting to start a management resource company with shared profit.  You front,  they pay dividends? 

Some of the issues you will face are re-issue of permits from the city, state, and county they reside in. Also taxes, potential liens/loans, employment retention (salaries) etc.   Essentialy a silent partner trade.

I see this in property management for commercial complexes too.

At it's foundation,  it's a solid plan, but unless you work in commercial finance,  there will surprise expenditures, at minimum, quarterly. 

I wish you luck though!

[Hacker60521]

@LuDawg this is really interesting. Three quick thoughts from a non-expert,

• Since I know nothing about operating a golf course, I’d ask operators to get a handle on what expenses and revenue really look like for a course that’s up and running.
• How much revenue will you generate? At the end of the day, it’s all about net operating income.  If you can’t pencil a profit, then it doesn’t matter how much the property costs.
• Finally, I think most real estate is basically priced as NOI / Cap Rate. So let’s say the cap rate for a golf course is 10%. Then a $1M course has NOI of $100k

Good luck with your adventure!

[DaveP043]

19 hours ago, LuDawg said:

• Operating expenses - $350k (monthly)
  • Course maintenance - $150k;
  • Operations (inl. payroll) - $100k;
  • Water/irrigation - $25k;
  • Food & Bev - $25k;
  • Misc. non-recurring - $50k
• Capital expenses - $750k (annual)
  • New equipment, major repairs & upgrades - $750k
• Upfront expenses - $2m (per course)
  • Purchase price - $1m
  • Maintenance & upgrades - $1m

Based on my home club, a smaller (and less expensive) club in the Washington DC area, your operating expenses may be reasonable.  I have no idea about your initial costs, really, but as others have said, they seem to be at the low end of what's possible. The capital expenses will depend completely on the condition of the course and the equipment purchased.  As others have said, you'll need some level of contingency fund.  We've had "emergency" irrigation pump replacements in the past, and we're now planning to replace our primary pump station at a cost of about $200,000.

But predicting costs is something you can do with some degree of accuracy.  Your biggest concern has to be predicting your revenue.  How many rounds, at what price?  You're talking about taking over a business that's struggling, and there's almost certainly a reason they're struggling.  And you're anticipating that you, a relative novice at golf course management, can somehow correct the problems.  

19 hours ago, LuDawg said:

shared management to pool resources and reduce overhead.

Sure you can make some incremental reductions in the expenses this way.  But how many courses do you think you'll need to make these shared resources produce a truly significant cost savings?  Are you thinking of 3 or 4 courses, so 3 or 4 times the investment (and risk)?   Do you have a tentative source of financing?  

At the end of the day, there's a reason courses are closing.  

[BillyEnforcee]

Interesting... I have had similar thoughts. Not so much as actually buying a course but always wondered how much more potential specific courses could have.

Here are my random thoughts in no particular order.

1. What I hear is that your fighting for tee times? Is every course booked or just the courses your willing to play? For example the "run down" courses are typically open because they lack maintenance and no one wants to play them because of it?

2. An exercise I ask my self is how much more per round would I be willing to pay and then in turn what can the course do with that cash. If they are booked $5 is $1000-$1500 a day.

3. Are these courses paid off and the current owners are lazy and just doing enough to make just enough money support their (apparently low end) lifestyle? Their current fees could be just supporting the operating costs plus a small profit. Now you have to support higher operating costs, cost of purchase/purchase loan and hopefully a small profit. 

4. On the flip side what if these courses are making the owners so much money that the bookings, price and conditions are EXACTLY where they want them?

Last an 18 Hole course near me in rural Minnesota was listed last year for 4 Mil might have actually been 5. They are established, I actually just played it a week ago. The course needs nothing. 18 Holes during the week with cart was $45. Might be 50 or 55 on weekends. If you want a weekend tee time you need to call 2+ days ahead if you're not time specific probably close to week ahead if you need to be specific. Based on location and plenty of farm fields a developer would never by this plot. Long story short on this one courses are or can be expensive.

I'm not sure any of this helps. But here you go.

[cksurfdude]

I cannot speak to their underlying financials, but there are corporate entities doing this - ie buying up distressed golf properties, recapitalizing and improving them and then selling memberships. 

The distressed courses are usually long standing ones that were member owned and run; then for whatever number of various reasons for themselves into trouble. 

Concert Golf Partners is one such entity that bought and owns the course I currently belong to.

FYI what I can tell you is that...

... A BIG CHUNK OF THEIR REVENUE (and possibly their bottom line profit) IS NON-MEMBER GENERATED ...

.. including outside outings (so the course will be closed to members on those days or afternoons) and catered events (so the bar and dining room with be closed to members during those events; plus the parking lot is filled up).

...

Separately, @LuDawg again while I don't know the underlying financials, I would also guess that the original outlined cost estimates are low .. possibly very low.

I'd also caution that the very seed of your success - a large market of dissatisfied golfers looking for an economical golf experience - could potentially mean your idea works but otoh could quickly cause overcrowding on the course...

...so you'd have to turn around and raise prices to thin out the crowd...

...

Anyway I always like to encourage entrepreneurship but agree with others to keep doing a lot more indepth research. Good luck!!

[LuDawg]

Thanks everyone for your comments! Trust me, I've had the exact same questions that @DaveP043 & others had. I'm still working on those, but I'm taking it one step at a time and focusing on the expenses first, which should be the easier side of things.

One bit of context - I'm not planning on relying on this as my full-time source of income. I'm a lawyer that specializes in tax planning, so I'm basically part-time for 9 months of the year. Most of my coworkers have other jobs during that time, but I really want a non-tax option (shocking, I know haha). Also I may do this with my dad, who's retired and spends most of his days at a golf course anyway.  

@cksurfdude - When I started thinking about it, the fact that Concert Golf and others are doing it made me think it's a valid business idea (maybe not for me, but in general).

@Tom the Golf Nut - I'm not able to reply to your direct message (I'm new here), but I appreciate your insights too. I'd like to take you up on your offer to chat if there's a way to send you messages too.

Thanks again everyone!

[Tom t Moose]

Just a thought on financial information.  In my home town we have one good city run course and there are several other good city/county courses near by.  Being city/county courses their books are open to the public (open records laws in out state).  If you have any city/county courses in your area you should be able to get some real numbers for water usage, employee costs, equipment, etc.

like I said, just a thought.

T

[Roomspimp]

I used to work at a resort that had two courses. Annual EBITDA for the two tracks was only $125K. These were a Pete Dye design and a Gary Player design. The resort was in a market with severe seasonality and saturated with courses. We, realistically, just approached them as amenities for the resort because there was not much upside possible in earnings. Eventually the Player course was sold for around $5M because operating costs kept rising and earnings did not keep up. 

Fixed costs do not change and I would imagine there is seasonality in the ATL market. I would bet your $1M purchase price is low. Golf is on an upswing post CoVid so profitability may be improving but I would grind on your numbers a bit more to make sure everything pencils.