Over my many years as a consultant, appraiser and broker in the golf course industry, we’ve been privileged to assist numerous sellers in the disposition of a variety of golf and club properties. Golf’s performance during the past two years, impacted by the Coronavirus pandemic has had many clubs and owners asking if now is the time to sell. Many courses and clubs have experienced welcome surges in rounds, membership and gross revenues. While some have suffered declines in food & beverage revenues, the golf business has generally been favorable and see now as an opportunity to move on and sell their properties at top dollar. Since nobody can say for sure how sustainable the surge in rounds and participation is, could now be the best time to sell?
In first determining the best option for clients, I seek to learn their goals and objectives. All sellers want to maximize price, but in some cases there are factors which may prioritize other considerations, such as:
- Retirement Planning
- Personal Issues
- Imminent capital needs
- Closing between seasons
- Financial distress
- Fatigue
- Market considerations
- Debt
- Timing
The last of these (timing) can often determine as much as anything how a golf property should be marketed and at what price, depending on when buyer and seller want to consummate a transaction. A seller has several options for marketing a golf property or structuring a deal. One can list with a specialty broker (like us), a commercial broker or a local broker. Some sellers market themselves and others choose the auction process. Each has its advantages and disadvantages.
As we begin our analysis of 2021 golf property sales, we are observing Gross Income (Revenue) Multipliers seemingly a bit higher than in years past. If proven accurate, this will demonstrate that not only has COVID positively impacted golf participation, rounds and membership, but also enhanced (at least for the time being) golf property values. Will it last?
Among the most interesting statistics we’ve observed so far is that private clubs are busier. Not only do they have increased membership levels, but members are playing more golf. Of the clubs we’ve surveyed, the average number of rounds generated per membership (from all sources) has risen approximately 12.35%. This is significant as we all wonder if, and when more people will head back to the office and how much of the surge is sustainable. Once we begin seeing 2021 year-end numbers (vs. 2020) this may provide a clue as to the sustainability of the surge. NGF and Golf Datatech have reported an increase in overall rounds from 2020 to 2021, but 2020 had up to 6 week closures in many states.
Those with tax considerations may want to consider an installment sale, holding a note from the buyer for a period of time. Others (most) require a cash at closing sale. Some sellers, especially those seeking an expeditious sale but wanting to create competition, choose the auction route. Others, who see the auction option as an indication of weakness, and who have the luxury of time prefer more traditional methods of marketing, typically involving listing with a broker and taking advantage of the broker’s network and marketing skills. Some transactions require creativity. If bank financing isn’t available, other means may be necessary. Installment sales with the seller holding a note, private equity and participation are just some of the methods buyers and sellers employ to complete a transaction.
As mentioned above, timing is of considerable significance given the seasonal nature of most golf operations, the considerable amount of due diligence necessary on the buyer’s part, and maybe most importantly the objectives of buyer and seller. In most brokerage situations, working for the seller, we advocate developing an exit strategy that considers the desired timing of the sale in conjunction with the time required to prepare, market and close an acceptable transaction. Of course, such timing can always be impacted by pricing expectations which should be established in a realistic manner. A big part of the timing component is consideration of any deferred maintenance or capital the property may need.
Pricing is often the most important element to the seller. In many cases, their equity in the property represents life savings or profit from a long term business venture. Every seller wants the highest price achievable. This can be a “double-edged sword” in that over-pricing a property for sale will discourage some legitimate buyers from even considering the opportunity. Proper (not too high and not too low) pricing is critical to a successful sale.
It’s often been estimated that golf properties can take a year or more to prepare, market and finalize a sale transaction. That’s true. But it can also be done in much less time. Pricing and method of marketing impact timing considerably. We’ve had properties take up to a year and a half and completed other transactions from listing to closing in less than 4 months.
Every seller’s situation is different. To meet their goals and objectives often requires considering a variety of creative methods of marketing and preparing the property for sale, or the possibility of us joining forces with a local commercial broker, auctioneer or even a competitor golf broker to do what’s best for the client. The goal is a successful sale at the maximum price.
Having a strategy that enhances and emphasizes the property’s specific strengths and acknowledges its weaknesses and realistic market dynamics at the time will yield the best results. Combining these with the seller’s goals and objectives makes for a well-rounded approach.
It’s not uncommon for sellers to call us having already been approached by a prospective buyer. In such cases, we’re often able to create competition for a property that is beneficial to the seller. In one recent transaction involving a very desirable property, an offer was made that through creating that competition resulted in the ultimate buyer increasing his offer on two occasions to a level exceeding appraised market value, and which we predicted would occur. Is now the time to sell?