Among the more complex processes in the purchase and sale of a golf property is the due diligence process. While one may think it involves only the buyer, the seller typically has a significant role to play.
Golf courses and clubs are complex businesses. All at the same time, any golf course is a farm (turfgrass cultivation), a hospitality enterprise (personal service, food & beverage), a retail operation (pro shop) and a service business. Many golf facilities have more than 100 employees. Among the things any buyer needs to know about are not only the condition of the buildings and mechanical systems, but also the health of the turf and age and condition of the golf course infrastructure (irrigation, drainage, etc.), the maintenance, kitchen and other equipment and the staffing situation. There’s also the element of memberships and play. With many golf courses and clubs having both operational and property legal issues, there is a legal element to due diligence that must be addressed.
Buying or selling a golf course requires a qualified and experienced team effort. To evaluate the condition of the turf, irrigation, drainage, equipment and maintenance facility takes a knowledgeable agronomist. The food & beverage operations and equipment require the expertise of a an F & B consultant. Since all clubs are part of a bigger marketplace, understanding the club’s finances, competitive market and appropriate market positioning needs input from an analyst experienced in golf.
As with any real estate or business sale, there are contracts to be drafted and reviewed, deeds to be prepared and financing issues to deal with. With golf properties, this can go much further. Since most golf courses have liquor licenses, the transfer of these needs to be done properly. In many cases, there are leases for equipment which are typically assigned to the buyer. Water rights can also be an issue that requires attention and licenses for liquor sales, food & beverage and chemical and pesticide storage and application may need to be transferred. At private clubs, there are usually membership documents and bylaws dictating the rights of members in the event of a transfer of ownership. All of these require specialized legal expertise focused on golf properties.
While it’s the responsibility of the buyer to exercise his/her due diligence in a transaction, most purchase and sale agreements (PSA) call for cooperation (not surprisingly) on the part of the seller. This means not only accommodating requests for documentation and access but also being prepared and able to provide relevant due diligence information. This is a considerable undertaking and typically takes anywhere from 30 to 90 days from the time a PSA is executed and actual closing of the transaction.
As a seller, the more information that can be provided, when the property goes on the market, the easier and more efficient the due diligence process becomes. When listing a property for sale, we have a checklist which asks the seller for an extensive “laundry list” of items ranging from the club’s financial operating history and relevant licenses and permits to schedules of equipment, payroll records, and physical information about the property. The more we receive, the smoother things progress.
Whether buying or selling, being prepared for this process will ensure the smoothest transition possible and help to avoid extensions enhancing the chances of a more expeditious closing of a sale.