Investors are entering from different type, from large international funds, as Cerberus, which acquired Sotogrande, or Lone Star, participating in Vilamoura, family groups, or even groups of amateur golfers that are grouped into market instruments appropriate to participate in these operations.
This stage of transactions of golf courses, is beginning to get speed. I think that is a very good news, yes, provided that the sector will prove to be ready for the opportunity. It is important for us to demonstrate both the "seller", as to the new "buyer", that we are capable of accompanying them, since the valuation of assets, passing through the "Due Dilligence", complex in these businesses, until the post operation-sale or post-purchase.
One of the key points to consolidate many of the numerous operations that are in the "kitchen", is the proper valuation of the assets, much more complex than in most other activities. How much is worth one golf course?, this is the great cuestíon. Here usually start some of the discrepancies between the applicant and the owner. Immediately appears the "book value", which is the value at which the owner has it in its balance sheet. This effect of "book value", fortunately is playing better, since the huge amount of supplies to those who have been forced to confront the financial entities, the owners of the most fields, has been that this figure is already quite reduced.
Returning to the previous reflection, we continue with the question of how much is worth one golf course?, we are going to see if we are able to create a little bit of criterion, which obviously, never is sovereign. Though there are numerous criteria of valuation, when it comes to a golf course, usually manage three.
1.- REPLACEMENT VALUE, Is to assess what it would cost to return to make that same golf course. Here it should be attributed to the cost of the land, permits, licenses, projects, the work, the administrative costs, management, pre-opening....etc. Usually leave a very high figure, 6-20 mm Euros of normal range.
2.- GOODWILL VALUE, in this case, are considered to be the values of sale of similar assets, of the area, the value of the trademark and the exclusivity (single field with 36 holes of the locality...or single license of golf for the next ten years...or...). In this assessment focuses more on emotional aspects, or even of whim.
3.- CASH FLOWS DISCOUNT VALUE. Applies to assess "operational assets ", as is the case of the golf courses. In this case, analyzes, through a operating audit, the cash-flow of business, always considering the potential, which does not have because to agree with the current. For example, if money is to 3% , it is logical that the buyer wants to get a higher return, because it has higher risk than a bonus of the state, and want to take, for example, 10%, then if we divide 100 between 10, gives us 10 times by which we should multiply the cash-flow potential for achieving the assessment by this method.
Then, what do you recommend? Do which of the methods we use?, my answer is that we must reject the replacement value, indicating as "costs", and not, as "value". The Fund of trade i am looking, but only as a parameter spelling, and I choose the discount of cash flows as a method more binding, corrected upward or downward by some data that gives us the method of Goodwill.
For example if it is the last license of golf that is going to give in an area of high demand, I will use it as a corrective to rise, equally it will upwards, if for example, the coming year is to celebrate the Ryder Cup in the field...and, on the other hand, use correctors to low, if, for example, we know of some threat of water restrictions, or data from similar threats. As a summary, we have already established the criteria of valuation, but the process does not end there, there are now as you see fit with one thing from the other, if the value obtained is much lower than the "book value", will see as we approach, because nobody likes to contabiizar a great loss of balance. In such situations, very common there to see as approximate positions, everything depends on the need of "Exit" the owner and the rush to "enter" The Buyer. All of the above does not remove, that if the buyer has real estate assets and/or sightseeing in the area in the field, may consider other values, since in that case the field, in addition to its direct value, will contribute to revalue these other developments.
Before the end of this reflection, and then to transmit the assessment criteria, I do not want to forget how important it is to the "Due Dilligence" prior to review the economic aspects, and physical active, you must analyze in great detail other headings, as much or more relevant, as are the licenses, activity, use..., water supply, critical aspect, and many other aspects that are vital to the nature of the golf courses.
Here I end this reflection of an aspect that is topical at the moment how worth a Golf Course? Thanks to all,
Francisco Aymerich
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