By Larry Hirsh, President, Golf Property Analysts
I seem to get about a call per week (if not more) from participants in the golf course industry seeking insight on the state of the market. 2021 promises to be a most interesting year for the buying and selling of golf courses and clubs. It’s widely believed that the spike in rounds and membership most courses/clubs experienced in 2020 delayed either closure or distress sale for some facilities. The spike in golf revenues was balanced in many cases by a decline in revenues from Food & Beverage and Events. As a result, some courses saw no gain, a small net gain or, in many cases a net loss in total revenues, despite increased golf activity.
As many states withdraw restrictions from the pandemic, what remains to be seen is how sustainable the golf participation spike is, and if/how soon those facilities that rely heavily on non-golf revenues (F & B) can ramp up to revenue levels of 2019 and before.
We observed a limited number of golf property transactions in 2020, from which we got a glimpse of investor confidence which seems to have declined ever so slightly by the metric of gross revenue multiples (GRM). This suggests that some investors are staying on the sidelines hoping for a decline in prices.
Though most courses find golf revenues (dues/fees, carts, etc.) more profitable than F & B, it’s no secret that clubs with large dining and banquet facilities that were (and still are) either closed or limited in capacity are feeling the greatest hit, with none of the crowded gatherings they rely on. Most golf investors seek opportunities less reliant on F & B revenues.
Where do I see the golf property transaction market in the coming year? Some thoughts:
One of the issues I see as most determinant of value and sale pricing is deferred maintenance. In particular, it seems as though many of the courses that inquire of us about selling are experiencing considerable deferred maintenance. These typically start with irrigation, bunkers and cart paths, but can also include things like roofing, HVAC, tree management and other infrastructure items. All factor into any sophisticated buyer’s analysis and sellers should be aware of these issues. On the flip side, a seller recognizing these conditions and documenting same can possibly use them to his or her advantage if the property is excessively assessed. Achieving a fair assessment prior to selling can increase the potential sale price in a significant manner.
- Properties with smaller, more efficient clubhouse facilities and a high percentage of golf revenues will become more desirable in comparison to those reliant on heavy F & B revenues;
- Private clubs are likely to be seen as a “safe haven” for families as the hangover from the pandemic lingers. There is an active market for acquisition of member-owned clubs by for-profit firms;
- Sale prices (multiples) are likely to rebound as the economy rebounds;
- Marketing times will continue to be impacted by asking prices, especially with overpriced properties garnering limited interest.
- With those clubs in distress, the auction option is likely to become a more popular method of marketing golf properties for sale to enable sellers to sell quickly and cut losses;
- Given the stability of multiples (of both gross and net incomes) of the past decade or more, movements (up and down) are not likely to be dramatic;
- With COVID having delayed the inevitable distress sale or closure of some courses, it’s possible that more transactions could occur in 2021 and 2022;
- Properties with strong and stable cash flow are likely to be in demand, meaning for some this may be the time to sell;
- Those owners seeking to sell based on possibly enhanced 2020 revenues/rounds will likely need to reconsider and demonstrate the sustainability of same.
For a consultation on marketing your golf property for sale or acquiring a golf course property, you call or email me.