Selling a golf course or club is a big decision. It’s one that should be made for the right reasons and hopefully not under duress. Prudent planning and sound operational decisions can ensure that when the time to sell comes, the club will be in the best position to command the highest price possible.
The golf property market seemingly becomes more complex and more simple, all at the same time.
On the complex side, most golf courses have some deferred maintenance, or at the very least, upgrades that have been put off for one reason or another. While recently doing an appraisal of a prominent club in the Mid-Atlantic region, we encountered the question of what items required attention to prepare for the marketing and sale of the club.
Among the observed deficiencies were bumpy, uneven and intermittent cart paths, old and antiquated irrigation, the lack of some facilities often considered essential, a practice facility located more than a mile drive (by car) from the clubhouse and a clubhouse facility that was overbuilt (size) and inefficient. The question was: How much of this would be considered as immediately necessary to be done by a potential buyer and what could be deferred? While often the decisions on taking care of capital needs are smaller than the example provided, sellers are often confronted with decisions on which need to be done before marketing the property and which can be put off for the buyer. Regardless, the value, and subsequently the price obtained will be impacted.
Will doing the repairs and renovations pre-sale help the sale price? Conventional wisdom says yes. A buyer will assume that he would not only incur the cost of the improvements, but also need to be paid for the time to implement them. Much like a house that’s staged for sale, golf course sellers should consider “staging” their properties for marketing.
First, it’s important to have the course in good shape and free of eyesores. While some physical elements may not be as critical, having complete and accurate documentation, is essential. This must be easily and readily available to a buyer who executes a confidentiality agreement.
Records
Many daily fee golf courses are family run, “cash businesses”. As such, it is not uncommon for financial records to be less than accurate. If all the revenues can’t be accounted for, as the seller you won’t be credited for them when you sell the property. Nobody will pay you for a “wink of the eye” and the potential that you haven’t realized. Unfortunately, I’ve observed this situation on occasion and it makes a golf course very difficult to sell when the buyer can’t identify what they’re purchasing. Keep accurate and thorough records of revenues and expenses.
Documents
Make it easy for your buyer to do their due diligence. It will save both of you time and money. Have and make available to your broker everything they need to ensure that a transaction evolves smoothly. Items like liquor and pesticide licenses, equipment schedules and leases and water usage permits should be compiled and available and items needed should be summarized in a checklist that can/should be provided by a broker or consultant.
There are other items to attend to, but these take preparation and organization. As your broker or consultant we (Golf Property Analysts) will assist you in compiling all this information. Be prepared to invest considerable time. It will pay off.
Pricing
We’ve observed that unrealistically high pricing is the quickest way to have a golf property sit on the market forever. Most buyers are economic buyers and with the plethora of golf properties on the market, those that are grossly over-priced are passed over for better opportunities. If one gets an appraisal, make sure it’s done by a golf specialist and that it’s commissioned specifically for the function of learning an appropriate selling price. Unfortunately, appraisals done by general practice appraisers may not reflect true and accurate market conditions and those done for financing or tax assessment purposes may resort in unrealistic or inaccurate conclusions. Assume that most buyers are relatively sophisticated and they will uncover the facts in due diligence and are unlikely at best to be swayed by any “fairy tale” offering packages.
There are many in the marketplace who suggest a rule of thumb that values equal one (1) times gross revenues. While possibly a starting point in some cases, there are many variables that should be considered. It is strongly recommended that (like any property) the golf course be priced with some room to negotiate but not so high as to scare off potential buyers.
Like any other property, having an exit strategy is preferable to a distress sale of a golf course or club property. Unfortunately, many golf course owners and clubs come to us in panic mode and when they’ve compromised their position.