Operating a Local Par 3

[greatjay23]

Hi everyone. My name is Jay, I’m a first time poster, just joined. I know this is mainly a forum for golfers, and I’m looking for a forum for golf course owner/operators, but I couldn’t find one. So I figured I would post here...

 

My family has had a business since the 70’s located right next door to a nice little 9 hole Par 3 course. Growing up as a kid always at my family’s business, I got to know the course really well. It kind of has a special place in my heart. I’ve gotten to know the owners really well through the years too. 

 

The course always did well. I remember seeing people lining up to tee off. It was nothing special but a simple little par 3 that everyone liked. Recently however the owner who is reaching his late 80’s, has been looking towards retirement. So the last few years he has been letting some things go. He didn’t want to put a lot of money into the place only to retire soon. This past year he finally decided he was too old to keep going there every day and called it quits to retire. 

 

Having liked the course so much, I went to talk to him. I offered to operate the course for him. We came to an agreement. The rent is very low, he really doesn’t want much. At this stage of his life he is not looking to make much money, he’s more happy to see that someone will be continuing the legacy of his course and looking after it. His dad built it in 1961, and shortly after his dad built it he has been going there everyday. He wants me to toss a couple bucks his way every month and pay for my utilities and that is it. He had two guys who did all the maintenance on it. I plan on keeping them on. I’ve met with them and they are honestly more interested in the welfare of the course rather than their own wages. They are very dedicated and have a long connection with the course. I have full faith that they are decent men to keep on while I run the course. 

 

As as far as what I need to do to get the course going... the greens got infested with grubs last year. Seeing as he was planning on retiring, he did not treat them for grubs. The grubs did major damage to almost all the greens. I have to remove the dead grass, aerate, apply the grub treatment, and reseed. The owner has enough seed to reseed all 9 holes, plus sand and some fertilizer. I will have to buy the grub treatment, some fertilizer, rent an aerator, and that’s about the extent of my expenses. I am doing the work myself which will cost me a little under 1,000 dollars to do. 

 

I have posted locally on Facebook about restoring the course and reopening it and have gotten an unbelievable positive reaction from everyone in the community. I plan to have it open around the end of April / early May. 

 

In my personal opinion from what I have witnessed in years past and what I have been seeing on social media about restoring the course, I believe it will be able to make a strong come back. I want to see what kind of profit it turns this year, and depending on such, I am thinking of buying it. 

 

The asking price is 2.4 million. Obviously I would need to try to get a loan. I don’t know how difficult that will be. I do not have a lot of money to put down, but I do have collateral. Obviously the property the course sits on (24 acres), plus I have 24 acres of commercial property that my family’s business sits on that I could put up.

 

Im curious what everyone’s opinion is on the viability of buying this course. This is in PA so we do get some snowy winters, however when we get nice days over winter when the snow is melted, there’s always a handful of people out on the course playing. 

 

If anyone has any input on this I’d be curious to hear it. Do you believe it would be a good business decision to purchase it providing it does well? I planned at some point in the future once I started generating revenue, to add a miniature golf, and an actual concession that served decent food. I also planned on adding a few sand traps. I just don’t know how hard it is to get financing for a golf course and whether or not it is a smart decision to buy it, or if I’ll be paying so much I’ll have no hope of seeing my money back. 

 

Any input would be apprediated!

[upndown21]

2.4m for a 24 acre golf course it crazy unless.....

1. Course, structures, and income stream are crazy strong (how much is nine holes). 

2. It is hella close to the nicer parts of philly. 

 

Make a business plan and ensure you can turn a healthy profit before wasting time finding financing. 

[David in FL]

26 minutes ago, upndown21 said:

Make a business plan...

 

^^^^ This ^^^^

Until you do your due diligence and put real numbers to paper, you’re risking everything based on emotion.  That’s seldom a recipe for success.

 

[billchao]

3 hours ago, greatjay23 said:

The asking price is 2.4 million. Obviously I would need to try to get a loan. I don’t know how difficult that will be. I do not have a lot of money to put down, but I do have collateral. Obviously the property the course sits on (24 acres), plus I have 24 acres of commercial property that my family’s business sits on that I could put up.

I don't think it's a good idea to put up your family's commercial property as collateral because you'll end up losing everything if the course goes under. You really need to make sure the course is viable before you make any major decisions like that, as others have mentioned.

There was a driving range and 9 hole course around me that ended up being turned into condos and retail stores. I don't know what the area is like around you but getting into a bidding war with a developer could be a possibility and their pockets are deeper than yours.

[ncates00]

Make sure you do as the others have suggested by making a thorough business plan and have real numbers.  Even then, it's a gamble.  To me, 2.4m for a par 3 course doesn't sound like a legitimate business venture--if you're wanting to make money on it.  I don't know what the going interest rate would be for you, but you'd have to collect a lot of greens fees, cart fees, membership fees, etc. to make this worth it to make it to the principal on the loan.  Talk with your CPA and attorney as well; should you proceed, you need to make sure you do your due diligence and not just make an emotional decision but a smart business one.

[Vinsk]

40 minutes ago, ncates00 said:

To me, 2.4m for a par 3 course doesn't sound like a legitimate business venture-

Sorry but I agree with this. It certainly shouldn’t be hard to see the books on this place for the past 5-10 years. Not sure what the property taxes are running and the other expenses. 2.4M seems unreasonable based on limited knowledge of course.

[Carl3]

4 hours ago, greatjay23 said:

Any input would be apprediated!

I live in a small city, Delaware, Ohio. There is a very nice executive course owned by the city called Hidden Valley. It gets a lot of play. It also has a driving range. They post the finances on the city website. I don't think they charge enough for memberships, which run about $320 per year and they have a 10% discount for paying early in the year and also a lesser price for seniors. In 2018 they had $183,000 in their golf course fund. $68,000 for personnel and $115,000 designated as "other". In 2017 they had $150,000 for personnel and $64,000 for "other". I can't seem to locate it, but I think they typically spend about $180k per year, but only have maybe $140k in revenue.

[David in FL]

As a point of reference...

A mature, but somewhat poorly maintained 18 hole course here, in an affluent area outside of Orlando, sold a couple of years ago for $2.3 million.  It subsequently closed for good when the owners didn’t have the operating capital needed to get it back into the condition necessary to attract players from other available options in the area...

[chspeed]

Agree with all above posts - alarm bells are ringing at that valuation unless the real estate has some underlying development value.

If after writing a quick business plan (including an assessment of the land value, etc.), it still looks like a good opportunity, post on Facebook that you're looking for limited partners and see if you can raise money from community leaders. Don't put up too much of your own money or risk any current assets.

[Vinsk]

Analysis of Golf Course Listing Prices - Hotel & Leisure Advisors

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Golf courses with multiple amenities offer buyers more opportunity. List prices reflect the number of rounds...

Just some info. May be helpful. 

[phillyk]

It’s good that you can run its operations first to see how it may do. However first years back typically see more spending to get course nice and you may not get the full amiunt of people back yet, so I wouldn’t expect much if any profit. 

Smaller par 3 courses have a few main customer bases, senior, junior, family of beginners, and after work quickies. Provide oustanding service with a clean, easy navigating shop, it’ll get them coming more. People will want to be in and out quickly but still have the member-ish feel when they see the staff.

Regarding food or merchandising, ask the existing customer base to see what they want that’s reasonable. You don’t want to risk getting something the main groips won’t buy. 

Id also look into doing after work leagues, pre high junior golf stuff, etc. you can do a lot with the right staff and motivation. 

[Buckeyebowman]

$100K/acre for a 24 acre 9 hole golf course is crazy talk! Unless the property is prime for development at 2 or 2.5 times what you are paying for it! This is not some scushabung little 9 holer out in the boonies! Not for that kind of money! If you can sell twelve 2 acre lots to high rollers for $250K apiece, do it! Otherwise, I'd be wary. 

[greatjay23]

Thanks for all the replies. That’s one reason I’m glad I’m operating it first so I can see what it is capable of. I will say this all the times I’ve been over there doing work to get it ready this year there is always a golfer or two stopping to ask if it is going to reopen and sometimes hit a few balls.

 

I do believe 2.4 is high for a Par 3. I know they are looking to sell it for the land rather than the business. They’ve had one or two offer before that’s actually been about asking price, since it is commercial property, but with zoning and ordinances each deal has fell through. I’d love to be able to buy it for less, but I know they are looking at commercial land value. 

 

I guess i’ll be fixing it up and reopening it and I’ll have to see what it brings in. I don’t know that it will bring in enough to justify that price though, because I just don’t know if that kind of money is there.

 

I’ll be redoing the greens this week and hopefully by the end of April I’ll be able to get it open.

[pganapathy]

@greatjay23- The only way that type of number makes sense is if you have excess land that you can turn into house sites/build houses and then recover money that way.  Otherwise, those numbers seem extremely high.  Have a look at the current owners books for income and figure out whether you can service the loan and make a profit.  If not, managing the course is a better alternative

[greatjay23]

It does have 2 houses on it, they’re not the nicest looking houses you’ve ever seen but inside they aren’t bad. The people living in them just got evicted because none of them were paying rent. So they are currently vacant. 

[Buckeyebowman]

On 3/24/2019 at 11:28 PM, greatjay23 said:

Thanks for all the replies. That’s one reason I’m glad I’m operating it first so I can see what it is capable of. I will say this all the times I’ve been over there doing work to get it ready this year there is always a golfer or two stopping to ask if it is going to reopen and sometimes hit a few balls.

 

I do believe 2.4 is high for a Par 3. I know they are looking to sell it for the land rather than the business. They’ve had one or two offer before that’s actually been about asking price, since it is commercial property, but with zoning and ordinances each deal has fell through. I’d love to be able to buy it for less, but I know they are looking at commercial land value. 

 

I guess i’ll be fixing it up and reopening it and I’ll have to see what it brings in. I don’t know that it will bring in enough to justify that price though, because I just don’t know if that kind of money is there.

 

I’ll be redoing the greens this week and hopefully by the end of April I’ll be able to get it open.

Heck, 2.4 Mill is high for a regulation course depending on where and what it is. A local place got sold at auction a couple years ago. Regulation 18 hole, par 72 course that's a really nice design, with big greens that are a joy to putt. Neighboring farmer bought it at auction for $880K! The course pro struck a deal with him to lease the course to see if he could turn it around. Once local golfers heard the news, they came back and the course is still open. 

Another local course that was a bit further out got sold about a decade ago. We loved that place as well, but there were a number of reasons it went under. Cattle graze there now! 

[pganapathy]

23 hours ago, greatjay23 said:

It does have 2 houses on it, they’re not the nicest looking houses you’ve ever seen but inside they aren’t bad. The people living in them just got evicted because none of them were paying rent. So they are currently vacant. 

What type of value are you looking at if you rent/sell the houses.  Also, is there land for you to build and rent/sell other houses/plots.  That kind of thing would help make the course profitable

[p1n9183]

Very interesting topic. I don´t have a clue about business but i will follow the topic. Thanks for sharing.