Loading...
Minutes 01-30-03Minutes of the Golf Course Advisory Board Special Meeting Held Thursday, January 30, 2003 at The Links at Boynton Beach Golf Course Present: Absent: George Barrett, City Member, Chairman Jim Smith, County Member, Vice Chairman Bill McCarty, City Member Diana Johnson, City Member Connie Giangreco, City Alternate Kurt Bressner, City Manager Joe Sciortino, Golf Director Scott Wahlin, Golf Course Superintendent Art Mathews, City Member Robert Lee, City Alternate Dan Winters, County Alternate Chairman Barrett called the meeting to order at 3 pm. He asked the Golf Director if there was an agenda and Mr. Sciortino responded that it was a special meeting with handouts and no other form for the agenda. Mr. Sciortino said the purpose of the meeting was to bring the Board up to date on the current financial condition of The Links, and to discuss the advisability of moving forward with the planned improvements of The Family Golf Course and Practice Facilities based on the current economic condition of the course and the general economy. He directed the Board to the report prepared by the City's Finance Department entitled "Revenue, Expenses and Changes in Retained Earnings - Golf Course". He asked the Board to read from right to left (1997 to 2003 Projected). He highlighted that each year "Net Income" was positive, and retained earnings increased from $1,611,795 in 1997 to $3,035,344 in 2002. He told the Board that this was the financial report that was included in the City's Audited Official Financial Statement that he reviewed each year. He thought that this represented a positive cash flow each year based on his limited ability to read a financial report. Mr. Sciortino then directed the Board to the report entitled "Statement of Cash Flows- Golf Course" that was specially prepared for him by Steve Davis, Assistant Finance Director and Audit Manager. He directed the Board to the top line "Net Income" and the middle line "Increase (decrease) in cash". He said that even though the "Net Income" was a positive figure each year, the cash started decreasing each year starting in 2000 when he started budgeting retained earnings to balance the annual operating budget instead of increasing rates. He pointed out that he thought, erroneously, that even though he was budgeting retained earnings that since net income went up each year that they weren't being used. He next directed the Board to the rounds played chart that he provided. He pointed out that although last August, September, and October were months that had substantially increased rounds compared to the previous year, November had leveled off, and December was a decrease in rounds. The Family Course saw increases in August, September, and October as well, but drops in November and December. Mr. Sciortino then directed the Board's attention to three articles he had given them from the January 2003 "Golf Inc" magazine, published by Crittenden Golf, an industry leader in analyzing the golf business trends. The first article had predictions for 2003 that included continuing declines in rounds played, consolidation of golf equipment manufacturers, sale of many properties from the portfolios of major golf course owners and operators, and development slowdown. The second article showed the trend in new course construction, reconstructions, and additions to existing facilities was down over the past three years, including fewer sources of financing. And the final article, entitled "Munis rescue sinking courses - Governments bail out troubled golf properties", described how several area cities (Ft. Pierce, Plantation, and Martin County) were buying or considering buying distressed golf properties to preserve the green space and bolster sagging property values. With the facts now before them Mr. Sciortino asked the Board's opinion as to whether or not it was advisable to move forward with the planned course renovations if new debt had to be incurred to do it. Although the course would be paying off the current bond that financed the construction of the course this year, should it now go back into debt to upgrade the facility when customers were quite satisfied with conditions? Mr. Bressner pointed out that due to current interest rates it was a good time to borrow, but that based on the news presented that was the only factor favoring new debt. Diana Johnson said that the local businesses were in a holding mode right now due to the uncertainty of the economy, and the possibility of war. Connie Giangreco said he was also on the Board of Sterling Village and they too were currently reviewing their financial condition and critically looking at suggested improvements. Jim Smith said his company was investing currently in new equipment, but also noted that they were contrarians as a rule anyway. Chairman Barrett reminded the Board that the Advisory Board's charter specifically prohibited them from making financial decisions about the course. Mr. Sciortino agreed, but noted that he was not looking for a vote or formal suggestion, but was looking for informed advice, opinion, and counsel. Mr. Bressner noted that he was looking for the Board to keep Staff on their toes and to prevent them from going astray from their mission. Mr. McCarty said he was in favor of a conservative approach and thought that if the City decided to not go forward with the project through additional debt that it ought to let people know that this was a decision based on the current economic uncertainty, and that all citizens would easily appreciate that. All of them, he noted, were struggling with the same decisions in their daily lives. Mr. Sciortino said that if the golfers were asked if they would accept an increase in rates to pay for an improvement bond, or hold rates down and just try and maintain current conditions, he suspected that they would prefer no rate increases. Sales of the Links Club Card had more than doubled from 200 sold from October and December, to 446 total sold to date. Even though the discount was only four or five dollars, and it cost $53 to buy the card, people were seeing real value in that discount. He told the Board that the course would be pushing the sale of these cards in May to attract customers in the summer, including possibly hosting Delray Beach Golf Club's men's and ladies' golf associations while their course was closed to rebuild their greens. Mr. Smith said he would like to see money generated to finance future improvements, starting with the area around the clubhouse as a "first impression". Mr. Bressner suggested money be budgeted specifically for capital improvements. Mr. Sciortino responded that that was the intended purpose of the CIP fee collected from each golfer each time they played, and that that fee had been increased this year from 50 cents to a dollar to generate some $100,000 a year. Mr. Bressner also pointed out that there was a disconnect between the amount listed on the City's CIP budget for the renovation at $900,000 and the amount that was needed to accomplish the final plan of $1.75 million. Mr. Sciortino responded that the amount listed on the CIP budget was, at best, a guess based on a brief walk through with golf course architect Ron Garl two years ago. He pointed out that when he went before the City Commission to get approval for hiring Charles Ankrom as the architect for the project Bob Ensler had questioned the amount budgeted as being too low. Mr. Sciortino had responded at that meeting, which is on the public record, that he was not asking the City Commission to approve the budget for the renovation, but was only asking permission to hire the architect to determine what the eventual cost would be. Mr. Bressner noted that he could only go by the amount listed on the budget and that the disconnect in those figures was a concern. Mr. Sciortino thanked the Board for their input and ideas. Mr. Barrett adjourned the meeting at 4:05pm. Jf?Sci6rtino, Golf Director Sales & Finance Munis rescue sinking courses Governments bail out troubled golf properties by Bruce Buckley As more courses sink finan- cially, some local governments are coming to the rescue. Today's sales market is flooded with unprecedented numbers of prop- erties, and in many cases munici- palities are emergihg as the most motivated and qualified buyers. Angelo Palermo, senior asso- ciate consultant with the National Golf Foundation, said as more troubled courses hit the market, com- munities are nervous about the ramifica- tions. Residential developers often rep- resent the highest bid- ders for golf courses, threatening to replace greens with homes. In such cases, open space is at risk and local infrastructure may face the added strain of more residents. "The alternative uses are unacceptable to some of these municipalities," Palermo said. Meanwhile, municipalities often emerge as the most qualified to purchase troubled properties. Financing is tight for private buyers, espe- cially those looking at properties with ailing cash flows. Municipalities, however, have easier access to low-cost debt. Plus, if a community wants to establish a municipal course, Palermo said it is generally much more cost-effective to buy an existing course rather than build one from the ground up. As a result, last year saw an upturn in interest from govern- ments to purchase courses. The city of Fort Pierce, Fla., closed on the ownership transfer of Indian Hills County Club for $250,000 from the Fort Pierce Golf Association last October. The association built the 18-hole course in 1938 on city land and leased it until the recent sale. It reportedly had run into financial difficuky this year, and had less than 100 members at last count. The course -- which charges $39 greens fees -- histori- Rae Carole Armstrong (left), mayor of Plantation, Fla., and city officials are working to purchase Plantation Golf Course for $7.2 million and revive the dormant layout. cally has logged around 60,000 rounds annually. Rob Schwerer, Fort Pierce city attorney, said the course had recently struggled with rounds and sagging membership. However, he said the buy pencils out for the city. "This was an easy decision for the city," he said. "We don't know if it will be a moneymaker, but we feel it will be sustainable." Martin County (Fla.) commis- sioners spent much of the fall hammering out a deal to purchase Champions Club at Summerfield in Stuart. First Fairways LP -- which has leased the property from the city since 1993 -- built the 18-hole course. However, in October, First Fairways had not made lease payments since February, and county commis- sioners w~ted to make a $2 mil- lion offer. Commissioner ~ Dennis Armstrong said ~ a feasibility study con- g ducted by the National ~ Golf Foundation showed that there is room in the market for a course with greens fees below $40. Armstrong said the county also considered the civic need to keep the course in good working order. A resi- dential community sur- rounds the course, and if the property fell into disrepair or was shut- tered, it would affect the local residents. In Hobart, Wis., the village board is consid- ering an option to pur- chase Thornberry Creek Country Club for $7.3 million. The option stems from a 1997 agreement with a principal owner of the course that allows the city to purchase the 27-hole facil- ity if ownership dissolved. A recent court case ended the part- nership among certain owners of the property, and the village is considering its options. Village President Len Teresinski said the course is championship caliber and the vil- lage wants to keep it that way. "It would be our way of pro- tecting who the owner is," he said. "It's surrounded by a lot of high-value homes, and you want to protect those property values." in lease-to-buy deal Gotham Golf Partners has added another course to tts mid-Atlantic portfolio with the acquisition of Spnngwood Golf Course in York, Pa~ The course is being purchased from M&T Bank as part of a lease-to-buy deal.. The deal comes at a time when Gotham Partners, the fund that backs GGP, is looking to take its golf port- folio public through a merg-~/ er with First 1 Estate ag] O6tham i~ considering tlk~ January 2003,11 Jack Crittenden Publisher & Editor in Chief Editorial Team Keith Carter Managing Editor Rebecca Luczycki Tom Stabile Senior Edi(ors Bruce Buckley Jim Dunlap Associate Editors Chris Kain Copy Editor ChrisUne Willard Reporter _Production Team Shannon Harrington Production Manager Emily Sheredos Ad Production Coordinator Michelle Easterling Creative Specialist Publishing Team Mike Wright Senior Marketing Specialist Klm Boalick Kafina Walker Marketing Specialists Donna Tanner Circulation Manager Elizabeth Callahan Circulation Coordinator Camilla Tanner Telephone Research Mike Burke Accountability Manager Ricardo Brambila Administrative Assistant How to contact us: Subscriptions: 1-877-Golf inc. (toll4ree) Advertising/Reprints: 703-294-5500 Editoriak 858-503-7562 Cdttenden Golf inc. (UPS 009-747, ISSN I074- 9276) is published monthly by Crittenden Golf Magezines LLC., 3959 Ruffin Road Ste G, San Diego, CA 92123. U.S. Sutiscriptions -- $48.00 per year. Single copy -- $4.g0. Periodical postage paid at San Diego, CK and at oddit~nal mailing offices. POSTMASTER: Send address changes to: Crit~enden Golf inc., P.O. ~:~x 939~39, San Diego, Co, 92193-9039. Entire contents cooyrlght © 2003 Cdttenden Golf Magazines LLC. All rights reserved. Material in this pubiicatioo may not be reproduced without written permission from the pobiisber. Golf InC. ~s a trade- mark of Crittenden Golf Magazines LLC. Golf Inc.'S fearless forecasts for 2003 We looked into our crystal ball to get a taste of what's ahead for 2003 It's always difficult to predict the future. And it's a task made tougher by the uncertainty that swirls throughout the golf world as we enter 2003. But now, as we finally put a disappointin~ 2002 behind ies time to look ahead. Golf lac. editors put their heads together recently and came up with l0 predictions for the coming year. 1. Bounds stay down Pnrticipauon will drop as more players leave the ~ame and fewer people take up golf. Rounds may remain stagnant, however, as des- perate operators increasing- ly discount greens fees to focus on attractin~ the core golfer, bleanwhile, grow-the- game initiatives will lan;rash as operators spend their limited marketin¢ funds fiehtinE for existinE Eolfers. 2. The big breakup American Golf and National Golf Properties ~ represent- ing the largest portfolio of golf courses in the world ~ will be pared down dramati- cally by its new owners, Goldma'n Sachs Group and Starwood Group. By the end thc year ~ after an initial evalu- ation period ~ do:cas of courses will be on the sales block. 3. Equipment consolidation Golf equipment companies will continue to consolidate or form strategic alliances, follow- lng the example of TaylorMade and its purchase of Maxfli. Some of the mid- to small-size compa- nies will e~ther disappear or cease productkm and license their technology. 4. Chain F&B Some food-service franchises wdl expand their operations to golf courses. Small national com- panies or regional chains will recogni:e the built-in market golf courses offer. Golf operators wilt find that the chain name recognition draws more business and that franchising provides operational savings. 5. How dry we are Water issues will become an even greater concern for courses. Some operators will be required by local governments to let their t(irf go brown. A few will even be forced to close down because they simply can't get an ade- quate water supply. 6. More ClubCorp woes The country's other major owner of golf courses, ClubCorp, wdl continue to struggle and sell courses -- particularly its daily fee properties. Look for several major investors to line up to bid either for specific assets or to make a play for the entire corn- 7. Lending squeeze At least one major new lender wilt enter the golf market- but money will continue to remain tight. With cash flows remaining weak in the industry, national lenders will be reluctant to commit large amounts of debt to new acquisitions. 8. Bargain hunters More small- and medi- um-si:ed investors will jump into the golf industry as they see an opportunity to pick up troubled courses at good prices. With the stock market still struggling, these investors are looking for new places to park their cash 9. Pipeline going dry Development will con- tinue to fall as the flow of projects from the planning pipeline begins to dry up. Housing sales, which have dri- ven golf course development almost single-handedly for the past two years, will slow, depress- ing even further the number of new courses. 10. Retail: a buyers' market Golf shop buyers will enjo'? better prices and terms from apparel vendors. In the heat of increased competition, clothing companies will offer high-quality product lines at lower prices and require smaller commitments from green-grass shops. 4 Golf Inc. 'lop New How Continued development slowdown New golf course construction lived down to expectations in 2002 and is expected to remain sluggish in 2003. The National Golf Foundation (NGF) forecasted approximately 326 openings -- including additions -- in 2002. But totals for 2003 will fluctuate depending on individual market conditions. As of earl,/' December, the NGF's 2003 forecasted openings total was still short of 300. Richard Singer, NGF's director of consulting, estimates the 2003 total will be around 280 courses, based on what is currently in the pipeline. The immediate future of golf course development appears -- like beauty -- to be in the eye of the beholder. Most agree that new construc- tion will continue at 2002 levels in 2003, but there is less consen- sus on what types of projects will go forward. Fidel Garcia, president of the Golf Course Builders Association of America, said stand-alone, upscale membership facilities have been hurt by the economy and uncertainty since 9-11. "I think municipal construc- tion is going to continue -- municipalities, state parks, uni- versities -- I've seen an up-tick recently in that area," Garcia said. Andy Hinds of the Hotel and Club Associates appraisal firm in Greensboro, N.C., disagrees. "In certain markets we've worked in, we've seen higher-end courses doing fairly well -- it's the mid- and lower- tier courses that are hurting," he said. In the Kansas City, can itgo? forecast for 2003 by Jim Dunlap Course openings in the U.S. Mo., mar- ket, Steve Hughes of Hughes and Co. said he sees poten- tial for pri- vate-niche courses and municipals. "There's no need at all for any daily fees right now," he said. Pete Melvin, principal of the Sportometrics research and con- sulting firm, said demand for his company's services picked up sig- nificantly late in the year, in large part from developers who had been postponing projects until the economy and the indus- try began to stabilize. He noted substantial interest in alternative facilities, such as ranges that include an executive course. The diversity of those opin- ions points to another conclusion on which industry observers agree: There is activity and opportunity to be found; it's just a matter of location, land availabil- ity, market conditions and ability to find financing. The other general agreement is that renovations, remodels and 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Totals include new courses, reconstructions and additions to existing courses. Source: National Goff Foundation redesigns will continue to prolif- erate in 2003. Golf courses turn- ing 20, 15 or even 10 years old are beginning to need a facelift -- and owners are willing to spend the money to compete with new arrivals in the market. Those two factors -- a decline in new construction and the increase in renovation -- are drawing some big fish into waters they disdained before, which could be bad news for smaller builders who in recent years have depended on renovation work. "A lot of tis larger builders looked at renovation as a sec- ondary market -- today it's a pri- mary market," said GCBAA's Garcia. "In 2001, it was probably 50 percent of our business. If you go back five or 10 years, it was probably 10 or 20 percent." If there is any other consen- sus, it is that the recent construc- tion decline has probably leveled out, as course supply comes more in line with a fiat demand. Doug Main, director of PriceWaterhouseCoopers -- The Golf Group, is even more certain. "I think new construction -- virgin sites -- will actually pick tip a little vs. 2002," blain said. "In general, I see some lenders coming back into the industry -- for acquisitions and consolida- tions, not new coqstruction -- but that brings stability. When stability arrives, lenders are then more inclined to lend for renova- tions and additions." For more information customerservice@crittendenmagazines.c°m~ 1,877.GOLF INCA January 2003 7