Yesterday morning, I took a call from a reporter asking questions about how many courses and clubs would fail and possibly close as a result of the Novel Coronavirus pandemic. He asked if I’d received inquiries from owners and clubs wanting to sell their properties.
As of yet, we’ve not received any inquiries from clubs on the brink that decided the COVID-19 pandemic was the last straw motivating a sale.
The call reminded me of 1972, when my father, a residential real estate broker, and I took our dog for a walk after the Hurricane Agnes flooding in Central Pennsylvania. Several neighbors asked my dad to come by after the weekend to list their homes for sale. In each case, he declined.
I learned a great lesson that day. My dad could’ve made a significant sum of (quick) money and told each of our neighbors that he wouldn’t take any listings right away. He encouraged each of them to get things cleaned up, think about it for a while and then he’d sit down and talk with them if they still wanted to sell. What I learned from that was first, was the concept of “doing the right thing” and not taking advantage of someone when they’re down. I also learned that panic is not a legitimate motivation to make big changes. All but one of those people moved back in and lived in the neighborhood for a long time. When the time came to sell their homes, in many instances, they called my dad or later my mother.
I anticipate that some course owners will, in fact call and want to throw up their hands and exit the business. The otherwise early success in the beginning of the 2020 golf season has been stopped cold in many areas. Panic is surely occurring.
I’ve written on many occasions on issues relating to the culture of clubs. I’ve observed over many years that club culture impacts policy. Those clubs which have a culture of “ownership” are more inclined to make sound, more long term decisions. Conversely, those clubs where the membership is populated with “customers” tend to make shortsighted decisions that ultimately cheapen the club and diminish its value to the membership, and otherwise. Those courses and clubs that are owned by investors and operated for profit certainly have a slightly different situation than not-for-profit clubs, BUT still need to focus on the quality of the experience being offered in the interest of long-term stability
Needless to say, the next few months may not be the best time to market for sale a golf property. Accordingly, we will be advising our clients to take the time to develop a well-conceived strategy to move forward, consider their options and plan the best way to move forward. If the resulting strategy concludes that marketing their property for sale is the best option, we’ll look forward to assisting. If that strategy turns out to be an exit, then we can help develop the best strategy for marketing the property. If it turns out to be developing a long term plan for future operations, of course that is the most desirable outcome, and we are happy to assist accordingly.
Developing such a strategy includes an analysis of the cost and time of recovery, analysis of the future competitive market (will any competitors close?) and a future cash flow projection.
Most sellers of golf properties do not plan their exits effectively and often act on panic. We advocate against panic driven sale decisions. If a sale is the right thing to pursue, understanding how to properly prepare a property for sale, what deferred maintenance should be addressed and how best to get the income/expense statement in order to enhance the property’s value are critical.
After writing this blog post last night, I read Ray Cronin’s recent Whitepaper from Club Benchmarking and he makes the excellent point that it’s not the pandemic and resulting crisis itself that will dictate the future of golf clubs and courses. Rather, it will be the decisions made by owners and boards that impact that future.
We will discourage panic-selling and aspire to work with any existing and new clients to assist in their decision-making toward the goal of a successful future, whether it includes disposition or (hopefully) continued future operation.