Is an investment in golf courses a high risk? Yes, the majority of golf course investments have been high risk. Primarily due to poor management, reduced marketing and wrong type of course for the market. Are there exceptions? Yes, but they are far and few between. So, if investing in golf courses is very risky – why are people still investing? When golf and the economy are in a downturn, there will be opportunities. These opportunities vary in amount of investment from $250,000 to over a $1,000,000. However, these opportunities must be realistic, reasonable and attainable. Good market research needs to support investments with lower and/or acceptable risks. Investors want investments that are based on relative data, informed judgment, and common sense.
How does one find these investment opportunities? Spear Consultants assist clients in determining what is an acceptable opportunity for investments. Spear Consultants has Investors, but wants additional investors interested in the upside potential. If there ever is a time to invest – invest in good projects in a down market. All investors are asked to sign a Confidentially Agreement and call for additional information without obligation.
It is very difficult to obtain a golf course loan in today’s uncertain economy. There are only a few investor groups interested in golf and only a handful of credit companies will consider golf, and even if they do, the Loan to Value is 40 to 60% with high rates over a short period.
Public funding with government guarantees is still available. While banks are not interested in conventional golf loans, they are interested in government guarantee loans. Under this type of program, the government provides a 90% guarantee and the bank always has 10%. These loans will finance up to 100% of costs over a 30 or 40-year term (at a preferred rate based on prime).
Example: An owner agrees to sell his golf course to a non-profit entity for $2,000,000. An additional $1,000,000 is needed for necessary improvements plus working capital of $200,000 for a total new loan of $3,200,000. With terms of forty years, annual payments are only $185,000 versus $367,000 for a typical conventional loan. The new non-profit owner does not co-sign or endorse the loan and will hire a professional management firm to oversee all day-to-day operations. When the loan is paid off, the owner can sell the course or continue to operate as income producing property.
These loans will not work in New York City, but will work in rural areas. At the current time this program is available, but considering today’s political climate, the future of this program is unknown.
Please contact us for additional information.
In the new year of 2011 the negative economy is having “mixed results” with some courses maintaining rounds played, some barely surviving, and unfortunately, some closings. Golf investment companies are not investing and banks are not lending. The long-term stability of many golf courses will be highly dependent on driving revenues (marketing) rather than cost reductions. Many existing properties in a variety of urban and rural markets are losing the competitive battle as owners lack the resources and banks withhold lending. Alternative land uses are being considered, but with a struggling housing market, it will be several years before one realizes any benefits. There will be more remodeling and renovations and more course closures, turnarounds and debt restructuring. The future is not all dim because a few courses have made necessary adjustments, but majority of the courses are still recovering. Professional firms are providing acceptable benefits to golf operators, but not all can afford the cost of professional services, therefore, the end results is more golf course closings, more foreclosures and more bankruptcies.
However, help is still available. Over the past forty years, Spear Consultants has positioned itself as an established and trusted advisor to owners seeking guidance on buying/selling, marketing and financing golf properties. Evaluations (Feasibility Studies) by Spear Consultants have continued to be in demand, as more owners, developers and lenders need an outside opinion on present operations and future projections. An Evaluation determines what is in the current market and does your course or proposed course align with what is needed in your unique market. Our reports will show what the future golf market is, and how certain corrections can save an existing course, and what are the benefits to customers, owners, lenders and investors.
A government guaranteed (90%) loan program provides the opportunity to finance golf courses with a 30 to 40 year amortization at a lower rate.
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Most of our efforts for clients have been for public courses, but this past year has shown an increase in private courses seeking assistance.
This program has been active for several years, but the future is uncertain as the government continues to adjust or omit programs. Spear Consultants has assisted many public funding requests, of which 20% are new projects and 80% are turnaround opportunities. If your operations are suffering or you are unable to pay obligations, call and give us the opportunity to review your situation and determine what is needed, and how such will benefit you.
