Earlier this winter I had the unique opportunity to visit the Republic of Panama on an appraisal assignment, something we’re doing more and more of here at Golf Property Analysts, as foreign golf markets get up to speed on valuation and tax matters — and seek outside expertise on how to get it done properly.
It was exciting to work on a “new” course construction project (of which there are precious few in the U.S. these days) but also to gather further perspective on what we regularly see while appraising and consulting with U.S. courses and clubs.
Of particular interest to us in Panama was the exploding construction and development climate. There are new buildings and construction cranes everywhere, and the Old City (Casco Viejo) of Panama City is undergoing an urban redevelopment process unlike anything I’ve witnessed. Of course, with political instability in the nearby countries of Venezuela and Colombia, many are investing in Panama as a “safe haven” which is seemingly protected by the existence of the Panama Canal and the economic engine it provides for the region. The immense Free Trade Zone, which surrounds the Canal, is another attraction to companies from all over the world, especially when combined with the shipping convenience.
Panama is home to about 3 million people, Panama City to about 2 million. Despite this large concentration of population in a small area, there are only about 12 golf courses nationwide and 4 in Panama City (call it 4.5, as a second nine is under construction). With roughly one course for every 21,000 people in the U.S., Panama would seem under-supplied with one course per 250,000 nationwide — and one per 500,000 in Greater Panama City. This is not unusual for the region. Neighboring Costa Rica has about one per 500,000 nationwide, despite an apparently more vibrant tourist trade.
There are two factors to consider in Panama. First, estimates of golf participation are guesses, at best. Several people we interviewed estimated a golfing population ranging from 2% to 4%, compared to 9% in the United States. This, of course, does not count the second factor, the potential tourist traffic that several Latin American countries depend upon and Panama anticipates in the future.
Money markets seem to consider Panama riskier than the U.S. by about a 3% margin — but less risky than other Latin American countries, which experience lending rates as high as 17% to 22%, according to World Bank Indicators (www.tradingeconomics.com). This would suggest potential capitalization rates higher than what we’re accustomed to in the U.S.
All in all, this promises to be a most fascinating assignment from start to finish. Oh, how I wish I’d invested more time in those 3 terms of Spanish I took at Penn State! We were lucky to have Miguel driving us around to view competitive courses, and help translate our questions to the people working there. Advise to anyone traveling there: GPS in Panama is not nearly as effective as we’ve come to expect in the US.
One last note (on something you don’t need GPS to find): We had the pleasure of visiting and viewing the Panama Canal in operation. This engineering marvel, one of the “7 Modern Wonders of the World” is truly amazing. Now celebrating 100 years in operation, the canal incorporates century-old principles to do a job which, to date, no one has improved upon. In fact, an expansion is now underway using essentially the same concepts. It is quite a sight, and a lasting tribute to those who conceived and built it.