North Carolina Department
of Revenue
ADVANCED PERSONAL
PROPERTY SEMINAR
Joseph S. Koury Convention Center
Sheraton Greensboro Hotel at Four Seasons Mall
Greensboro, North Carolina
September 26, 2013
9:00 pm – 9:50 pm
Valuation of Golf Properties
Andy Hinds, MAI, SGA® *
David Pope, MAI, SRA, SGA®
Hotel and Club Associates, Inc.
ahinds@hotelandclub.com
dpope@hotelandclub.com
336-379-1400
* Member of the Appraisal Institute, Society of Golf Appraisers
I. Cost Approach

Seldom Used by Buyers/Sellers/Brokers
Courses typically built to add value to
surrounding real estate – amenity

Limitations




Land Valuation Subjective
Clubs sell at a fraction of replacement costs
Hard to measure external obsolescence
Land Value

According to the Dictionary of Real Estate
Appraisal, Consistent Use is defined as
“The concept that land cannot be valued on the
basis of one use while the improvements are
valued on the basis of another.”
Land Value Continued

Challenges




Value based on consistent use – lack of golf land
comparables
Golf not same as residential use
Golf land more akin to open space
Residential developers sometimes give land to
golf course developers
Depreciation

Physical Depreciation





Greens;
Tees;
Irrigation
Cart Paths
15 – 30 year life
15-20 year life
10-15 year life
5-30 year life
External Obsolescence
Significant levels obsolescence in current market
How to measure
II. Income Approach
1. Uniform System of Financial Reporting
for Clubs
1
An example of the Uniform System of Financial
Reporting for Clubs for a hypothetical public golf
facility is shown next.
1.
Uniform System of Financial Reporting for Clubs, Sixth Revised edition Club Managers Association of America, Inc. www.cmaa.org
Uniform System Example
$
Amount
% of
Total
$600,000
$240,000
$30,000
$180,000
$120,000
$30,000
$1,200,000
50.0%
20.0%
2.5%
15.0%
10.0%
2.5%
100.0%
$20.00
$8.00
$1.00
$6.00
$4.00
$1.00
$40.00
DEPARTMENTAL COSTS & EXPENSES:
Golf Course Maintenance
Golf Carts
Range
Food & Beverage
Pro Shop
Other
Total Departmental Costs & Expenses:
$300,000
$60,000
$20,000
$144,000
$150,000
$26,000
$700,000
50.0%
25.0%
66.7%
80.0%
125.0%
86.7%
58.3%
$10.00
$2.00
$0.67
$4.80
$5.00
$0.87
$23.33
UNDISTRIBUTED EXPENSES:
Administrative & General
Management Fees
Marketing & Entertainment
Professional Fees
Utilities
Clubhouse Repairs & Maintenance
Total Undistributed Expenses:
$120,000
$40,000
$20,000
$6,000
$30,000
$20,000
$236,000
10.0%
3.3%
1.7%
0.5%
2.5%
1.7%
19.7%
$4.00
$1.33
$0.67
$0.20
$1.00
$0.67
$7.87
REVENUE BEFORE FIXED CHARGES:
$264,000
22.0%
$8.80
FIXED CHARGES:
Real & Personal Property Taxes
Property Insurance
Reserves for Replacement
Total Fixed Charges:
$30,000
$18,000
$24,000
$72,000
2.5%
1.5%
2.0%
6.0%
$1.00
$0.60
$0.80
$2.40
TOTAL COSTS & EXPENSES:
$1,008,000
84.0%
$33.60
NET OPERATING REVENUE:
$192,000
16.0%
$6.40
REVENUES:
Public Greens Fees & Annual Fees
Golf Cart Fees
Range Fees
Food & Beverage
Pro Shop
Other
Total Revenue:
$ Per
Round
2. Capitalization
Sources of overall golf capitalization rates:
 Actual Golf Sales from:
buyers & sellers, brokers, appraisers
 Society of Golf Appraisers www.golfappraisers.org
 Realty Rates www.realtyrates.com
III. Sales Comparison Approach
1. Sources of Data
a) Public Records
b) Articles
c) Appraisers and Brokers

CB Richard Ellis www.cbre.com

Hilda Allen www.hilda-allen.com

Marcus & Millichap www.marcusmillichap.com

Hodges Ward Elliott www.hwehotels.com

Coldwell Banker Commercial www.kbgolfcoursesales.com
d) Golf Pros, Managers and Owners
e) Publications

Golf Inc. www.golfincmagazine.com

Golf Business Magazine www.golfbusiness.com
2.
Units of Comparison
a) GRM – Gross Revenue Multiplier or
NIM – Net Income Multiplier
b) Price per Hole
c) Price Per Round, Price Per Acre or Price Per Member
GOLF SALE
NAME:
LOCATION:
DATE OF SALE:
GRANTOR:
GRANTEE:
DEED BOOK / PAGE:
DESCRIPTION
Type of Facility:
Acres:
Holes:
Yards:
Golf Course:
Clubhouse:
Other Buildings:
Amenities:
Equipment:
Golf Carts:
Sample Golf Course
Anytown, NC
January 1, 2011
Sample Golf, Inc.
Sample Golf, LLC
2000 / 100
Semi-Private
150
18
7,000
The course opened in 1990 and was designed by Andy Hinds.
It features a mixture of flat terrain with rolling hills and
wooded areas. Fairways are generous, just a few are treelined. Greens are medium in size with undulations. Four tee
boxes per hole. Water hazards come into play on nine holes.
3,000 SF, one-story building constructed in 2000
6,000 SF metal golf maintenance building built in 2000 and
4,000 SF metal golf cart storage building built in 2000
Putting green, chipping area, restaurant, full bar
All golf maintenance equipment included
72 leased electric carts included
SALES PRICE:
Terms:
Price Per Acre:
Price Per Hole:
Price Per Yard:
Price Per Round:
$1,920,000
Cash to Seller
$8,000
$66,667
$171
$40
ECONOMIC INDICATORS
Gross Income:
Operating Expenses:
Net Operating Income:
Gross Income Multiplier (GIM):
Overall Cap Rate (OAR):
Actual (show either Actual or Buyer’s Pro Forma or both)
$1,200,000
$1,008,000 (84.0%)
$192,000
1.60
10.0%
OPERATING DATA
Rounds of Golf:
30,000
COMMENTS:
The course was owned by a local family and acquired by a
regional golf management company. The market period was
about 12 months.
Allocation


Total Going Concern Value/Price
Must Allocate



Business Personal Property
Intangible Business Enterprise
Real Property