Golf Course Appraisals
Golf courses are one of our areas of specialty. We have appraised them from the east cost to the far west and for clients ranging from private and public clubs to clubs owned by the Tournament Player Club (TCP). The TCP is a chain of public and private golf course operated by the PGA Tour.
Golf course appraisals present unique challenges. A golf course is actually a large business enterprise that groups revenue-producing departments under one identity. Performing a golf course appraisal involves the valuation of real estate, personal property and a business. A golf course appraiser must have an understanding of the components that comprise a golf course operation and how their interdependence impacts value.
The type of course (regulation, executive, par-3, learning center and driving range), the operational category (public owned (municipal), private and daily fee (investor) and purpose (stand-alone, resort, mixed-use, retirement community and residential development) must also be taken into consideration by the appraiser.
Generally our reports for golf course properties include two methods for determination of the course value: and income analysis and a market analysis. A cost analysis is usually not applicable for existing golf properties and the income analysis is typically most important.
Much like conventional real estate investments golf course values tend to be linked to their locality. Estimating value by existing sales comparison is tricky since no two courses are exactly alike. Furthermore, golf course sales are infrequent providing few transactions by which the appraiser can make a comparison. Therefore, a sales comparison is often expressed as a value range rather than a single value.
Signature (designed by a renowned architect) and trophy (a signature course with world class reputation and location) golf courses have historically had above normal valuations. This trend has been correcting over the past decade due to investor equity positions being severely eroded. Investors now require bona-fide investment returns along with the sensation attached to a premium property.
Characteristics influencing golf course property value include location, overall site configuration, population density, topography, scenic appeal, course features, and commercial amenities such as access to major highways and expressways.
A golf course consists of many systems that must work in harmony. How they perform will impact the remaining economic life of the operation. A comprehensive appraisal further evaluates such critical components as the irrigation and pumping system, cost and availability of irrigation water, drainage, ADA compliance, food & beverage operation, safety issues resulting from poor golf hole design, maintenance equipment, chemical and fuel storage, bridges, cart paths and utility of the clubhouse, maintenance barn and pro shop buildings. This combination of factors leads to significantly different values for golf properties with otherwise similar attributes. For example, a course may need to replace an obsolete irrigation system. That essential $1,000,000 capital improvement will financially impact the course for many years.
An income analysis is based on the accurate measurement of investor returns. The value is driven by the income the property is capable of generating. This approach requires an appropriate projection period, a forecast of gross revenues and annual operating expenses to arrive at a stable net operating income. By their nature, private or nonprofit golf clubs may have financial statements with a bottom line that does not look good. The purpose of the appraisal has a direct bearing on the approach. For financing purposes the club must be able to support the debt service.
Taking of land by eminent domain can provide a unique valuation challenge when it involves a partial taking of a golf course – a challenge we have dealt with. Losing a portion of a golf hole(s) can severely impact a golf operation. An appraiser must analyze the effect on the remainder of the golf course. Expensive reconfiguration of the remaining course layout is not always an option. The remaining golf property may no longer be suitable for a golf course operation. In either case, a substantial allowance must be made for severance damage by the responsible public agency.
Another special appraisal category is valuation for tax assessment. The total value of the golf property is comprised of three components: real property (land and improvements), personal property (equipment, inventory, etc.) and intangibles. It is important to recognize that the business measurement of a golf course may not be subject to assessment and taxation.
Being national appraisers of golf courses provides the Gorman Group with the experience and knowledge to handle these assignments. We can also provide golf course valuations for leasehold and depreciation benefits.