06/01/1992 Park Board Packet - Laserfiche WebLink

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HOW IS A GOLF . FINANCED? The figures do NOT include the architect'sfee or What is Your Projected any design engineering charges. (These may or Cash Flow? may not be included in the architect's fee.)Nor do Inthe above charges include debt service. the Feasibility chapter you were guided through the development of a proforma on course operation.You Nor do they include costs for the various other listed all of your sources of income and detailed your facilities you may want on the course—shelters, expected expenses for the first five years. That gave drinking fountains,etc.—and such off-site costs as you an indication of how much debt service you would ? power and utility hook-ups. These are impossible be able to handle and how much early expense you will for us to estimate, but they might be substantial. have to cover before the operation starts to pay for They are entirely dependent on the location of your itself. Your projections let you know your projected site and the local utility charges. cash flow.low.Since it will probably be a negative flow for a time,you also know how long the operation will have Other costs which you must include are your to be supported out of a cash reserve—either a deep original feasibility study,any legal fees,points or Pocket or an operating loan. appraisal fees. In planning your budget and financing,be sure to cover all the bases. What Return Or) Investment Can You Expect? In individual instances the basic construction figures have been higher than shown above, and in rare This may be the key question in golf course develop- instances lower. They do suggest, however, that ex- ment. And the most complex. Obviously it depends cept for the clubhouse,a construction budget from$3 upon who is making the investment and how much it million to $5 million could be a reasonable planning is—and how much of the total development cost that range to start with,recognizing that there are instances investment represents. Generally,lending institutions in which courses have cost much more. You will find will expect that the amount management invests in the several examples of construction costs and mainte- a golf course to be of significant size that indicates the nance equipment costs in the Appendix. management will exercise due diligence in making the project a success. STEP 4: For example,if an investor put up$1,000,000 up front The Architect's Fee and obtained loans to create a golf facility worth $7,000,000, in just a few years his return on invest- The range of architectural design charges for golf ment would be quite good. On the other hand,if the course layout is perhaps wider than the range of actual daily-fee developer made a 25% investment in a construction charges. An architect's fee might be as $6,500,000 facility,his$1,625,000 investment would low as $100,000 or it might be $1,000,000. Perhaps have a significantly lower ROI. $200,000 to $500,000 plus expenses would be a reasonable budget to work with.Sometimes an archi- It is also obvious that along with the ROI from the golf tect's fee is based on a percentage of the construction course, the subsequent operating income and cash costs — say 5% to 7% plus expenses. On limited flow to handle debt service is a prime consideration. projects the charge is likely to be a flat fee.The best counsel is for you to talk to several architects.Ask for When the foregoing elements have been combined more than one bid. Engineering charges may or may based on your soundest judgment,you should have a not be included in the architect's fee,depending upon practical estimate of the amount of money you need to the complexity of the site,environmental concerns or complete your course.Financing options will be dis- other factors. Re-engineering because of environ- cussed below. mental requirements can often add unexpected dol- lars, so be aware of that working with your architect. Guidelines for Planning and Developing a Public Golf Course 27