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Specializing in Appraising  Unusual Properties Since 1965                                                                                                      Contact Us

 
 
 

 

 

 

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  GOLF COURSE APPRAISALS

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: market approach and the income approach. A cost approach is usually not applicable for existing golf properties.

Unlike fast food restaurants that are sold in a national market, 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. But a golf course also 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.

The income approach to value 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. An appropriate capitalization rate is then applied to determine a value. The projection period should extend until the property’s net income stream is stabilized. Again, it is important for the appraisal to take into consideration the condition and impact of the critical golf course components mentioned earlier. If any major course system component is in distress it may greatly affect the financial stability of the income stream. Utilizing an appraiser with golf course experience is essential to determining overall financial health.

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.

A Highest and best use analysis can also be used to determine golf course property value. It can consider the land as though vacant and ascertain whether the golf course improvements contribute to land value.  If they don’t, it is possible that they should be removed so the land can be put to better use. It reflects the actions of buyers and sellers and the probable price the land would bring in a competitive and open market under all conditions requisite to a fair sale. In many metro areas the land under a golf operation is worth far more than the golf operation itself. A recent appraisal for a golf property in the Chicago metro area produced a market value $2,500,000 higher (if it was vacant and ready for development) than the value indicated (via the income approach) for its existing use.  It should be expressly noted that comment is NOT referencing the appraisal of Olympia Fields Country Club (home of the 2003 U. S. Open) which we recently completed and is noted elsewhere on our web site. 

   

Taking of land by eminent domain can provide a unique valuation challenge when it involves a partial taking of a golf course. 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. Accordingly, the income and sales comparison approaches can provide an allowance.

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.

A sample golf course appraisal report can be viewed here.  Note - this is a large file.  It took one minute to upload via a cable modem.

 

   
     

NOTE : If you are thinking of ordering an appraisal for financing purposes, please consult with your lender first.  Federal law dictates that banks must order the appraisal - not the borrower.

 

   
     
There is no need to read beyond this point.  The following list of terms has been placed at the bottom of this page to "assist" search engines in finding our web pages for you - basically, it is a list of keywords representing some of the various types of properties we have appraised - particularly golf courses, golf course appraiser, executive golf course appraisal, par three golf course, chip and put, driving range, mixed use golf course, country club, private country club. public golf course, greens, tees, golf course value
   
     
Copyright 2012 - The Gorman Group, Ltd