Page 14 - GBC summer 2016

Largest Canadian multi-Course management groups
If based on projections rather than historical financials, then the same model normally applies a lower multiple of 5-7 based on the perceived risk of achieving those projected results. If the course is not profitable, then a multiple based on gross revenues rather than EBITDA is more likely applied, recently averaging around 1 times revenues.
Although golf course valuations have generally declined over the past decade, American multi-course operators are now reporting an uptick in the buy-sell price on their transactions.
A cash-rich management com- pany may be the ideal solution for an independent operator who can’t find another independent buyer able to secure the necessary financing in a tight market. When the dust settles on a PSA negotiation, the independent owner may indeed have an ideal exit strategy while the multi-course-operator adds another course to its ownership portfolio.
The Lease option is on the rise and can sometimes be the better solution for both parties. An owner who is not under any financial distress, perhaps with very little or no debt after many years in the business, but ready to retire or move on to another business opportunity, may prefer to lease the property to a management company.
Sometimes, that decision is based on their positioning for a future real estate development, if in the right market. Multi-course operators are now more willing to embrace this lease option due to the turbu- lent market and a preference to bank their cash reserves.
The negotiation of these lease agreements will normally be very performance-based, taking advan- tage of the multi-course operators ability to leverage a better bottom
line. The length of term on the lease influences various other clauses such as capital investments.
The third common model is the Management Contract, as noted earlier in the Troon example. His- torically, these were associated with resort and high-end public courses, but are now showing major growth in the private club market as well.
Most traditional member- owned private clubs are wrestling with their value proposition as the golf market shifted to different demographic and lifestyle trends. Those negative dynamics are moti- vating such clubs to consider engaging professional operating expertise, outsourced on contract, capitalizing on the management company’s systems and efficiencies.
Management fees are charged to the club for these services. There are normally options to outsource the entire operation or solely certain departments such as agron- omy, F&B, amenities, back-of-the- house functions, or IT.
beneFItS AnD DrAWbACKS
Barry Ehlert is Managing Partner of Windmill Golf Group. “We work with all three models. They can all be great, and have benefits, as well as drawbacks. Nothing beats own- ership in that you physically and tangibly own something.
“Management is also great and it is absolutely incredible, making a difference to the owners. Leasing can also be a great model with huge upside, especially if you weren’t the person who had to invest in building the facility.
“There is no silver bullet though. It is the culmination of alot of little things. What separates us is our ability to market properly and differentiate. Our in-house market- ing team adds tremendous value. Individually run courses typically don’t have the capacity to market properly.”
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Golf Business Canada
ClubLink
www.clublink.ca
54.5 18-hole equivalent championship and eight nine-hole academy courses at 41 locations in Ontario, Quebec and Florida, including “unofficial home of the Canadian Open” Glen Abbey.
GolfNorth
www.golfnorth.ca
30 different golf course facilities across Ontario and in Nova Scotia, including Cape Breton Highland Links.
Fairmont
www.fairmont.com/golf
18 facilities located in British Columbia, Alberta, Ontario, Quebec, USA, Mexico, Bermuda, South Africa, and Scotland; including Banff Springs and Jasper Park Lodge.
GolfBC
www.golfbc.com
13 world-class courses across British Columbia and on the Hawaiian island of Maui, including world renowned Nicklaus North in Whistler.
Windmill
www.windmillgolf.com
11 facilities located in Alberta, British Columbia and Montana, including the soon to be open Mickelson National Golf Club.