The many facets to consider in golf course valuations

Golf Course Valuations

One of Cambridge Partners' specialty practice areas is in the valuation of Golf Course facilities. We are leaders in understanding that golf courses are complex real estate businesses deriving their income from myriad sources. When completing analyses of golf courses, we consider revenues generated from more than just greens fees, cart rentals and concessions. We work hard to understand income generated from other sources, such as: lessons, clubhouse merchandise sales, beverage carts, USGA memberships, banquets and events, tournaments, outings, sponsorhips, etc.

Cambridge has appraised courses for financing, management and financial planning, purchase and sale agreements, federal estate tax and gift tax planning purposes, stock swap and others.

In preparing golf course valuations, Cambridge Partners will consider use of the cost, market and income approach, with the ultimate selection based on specifics of the assignment. (e.g. going-concern, alternative use scenario, stabilized income, pre-revenue, etc.).

Market Approach 

In using the market (also referred to as the sales comparison approach), the value of the golf course is based on the assumption that if course's comparable to the subject property have sold within a certain price range, then the value of the subject course will be related to that price range. Properties are comparable if they are similar in their condition, utility and income generating capacity. The reliability of the market approach depends upon the availability of recent sales data points for comparable items. If reliable sales can be found, this approach may assist in indicating a value conclusion.

Cambridge Partners has compiled an extensive list of golf course market transactions and subrscribes to data sources having current listings and sales.

Income Approach

The income approach considers expected returns on an investment, which are discounted or capitalized at an appropriate rate of return to reflect investor risks and required rates of return for the selected capital structure.

In utilizing the income approach, we review the course's projections, industry and economic trends, competing course data (usually proprietary) and other factors, as well as, have discussions with management. Our income and expense estimates compare the subject's categories of expenses and estimated revenue to other golf courses and golf clubs. Income streams we have seen include: greens fees, cart rental fees, concessions, banquets, instructional lessons, range income, etc. Another key factor to consider is consider the available number of operable days (e.g., April through November). Measuring the maximum days tests the reasonableness of the projections.

Once these projected revenues and expenses are tested to determine they are reasonable, we then review managment's forecasted net cash flows and apply a discounted net cash flow method to determine a value indication of the course operations.

Please call us to discuss your facility and how we may be of assistance to you.