NATIONAL GOLF FOUNDATION CONSULTING, INC.

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1 May 18, 2018 Arlington Ridge Community Development District (Board of Supervisors) c/o George Flint, District Manager Governmental Management Services - Central Florida, LLC 135 West Central Blvd, Suite 320 Orlando, Florida RE: Arlington Ridge Golf Club Acquisition Feasibility Study Dear Mr. Flint: The following letter and report comprise a summary of the National Golf Foundation s ( NGF ) review of the Arlington Ridge CDD s ( CDD ) consideration to acquire the community golf facility Arlington Ridge Golf Club ( Arlington Ridge GC or ARGC ). The review is based on NGF market research, visits to the property, and meetings with various CDD and ownership contacts in March and April of This NGF analysis includes a comprehensive evaluation of the subject ARGC facility, its market potential, and its ability to produce the revenue needed to cover its operating expenses and any additional capital (or debt service) requirements. NGF has considered the CDD s conceptual framework for the acquisition of ARGC through direct purchase of the facility from the current owner Arlington Ridge Golf Management, LLC ( ARGM ). It is expected that ARGM will seek to continue the management of the golf facility until the sale of any remaining inventory of new residential units inside Arlington Ridge is complete. The golf facility will continue to operate as a community-oriented country club with activity divided between club members (currently only residents) and guests from outside the Arlington Ridge community. The NGF expects a continuation of the current operational model, with quality amenities and good customer service. The NGF team notes that ARGC is a unique property with several parts of key infrastructure owned separately by the CDD and the golf course (ARGM). This results in intertwined uses and the necessity of shared use agreements that must be addressed in any golf facility acquisition. As the CDD is the owner of several key pieces of adjacent components, these shared use agreements would have to be addressed, and what rights are owned by the golf course for any entity that acquires the golf course other than the Arlington Ridge CDD (specific components and amenities requiring shared use agreements are addressed in the body of this report). This NGF review was managed by Richard Singer, MBA, NGF s Senior Director of Consulting Services, with assistance from Barry S. Frank, NGF s Senior Associate Consultant and Kevin Downing of 3-Putt Services (GCSAA member & Certified Golf Course Superintendent). Field activities conducted in completion of this consultant s report included meetings with key Arlington Ridge CDD management team and Board members, the facility owner / manager and other club facility staff. The team also completed two inspections of the subject Arlington Ridge GC, collected materials to aid in the understanding of the area golf and club market, visited several of the area s competing golf club operations, and reviewed of other materials and records related to the Arlington Ridge Golf Club and the Arlington Ridge CDD. NATIONAL GOLF FOUNDATION CONSULTING, INC. A Subsidiary of the National Golf Foundation 501 N. HIGWAY A1A, JUPITER, FL (561) FAX: (561)

2 OVERALL SUMMARY This executive summary letter is presented to provide an at-a-glance summarization of the full NGF review, detailing the main findings and NGF recommendations for the Arlington Ridge CDD in the context of the proposed Arlington Ridge GC acquisition. Full detail and elaboration of these items can be found in the full NGF report. Key findings include: Subject Facility Arlington Ridge GC Arlington Ridge GC has design features and club amenities that typically correlate well with golf club success. General impressions of the facility are favorable - a good layout with interesting golf holes and design features that add challenge (Palatlakaha Creek). ARGC was in fair condition at the time of our visits, with some deficiencies in condition observed by NGF, mostly as a result of a combination of drought in early 2018 and a modest maintenance budget. However, the course did not appear to have significant capital needs at this time. ARGC has several unique ownership issues that are part of its current operation and will have to be considered in any golf club acquisition. Specifically, the NGF notes a separate CDD-ownership of associated components such as drainage retention areas, parking lots and the majority of the clubhouse. There are also shared use agreements in place between the golf course and CDD for water and pump-house use, as well as storage facilities in the maintenance area. This property situation makes the CDD the most likely acquirer of the ARGC and could create complications and a different economic model for any other entity to acquire ARGC. ARGC generated total top-line revenue from all sources of $1.15 million in 2017, an increase of nearly 30% from However, it is essential to note that ARGC had several months of limited revenue in 2016 due to damaged greens. The primary revenue sources at ARGC include membership fees (including trail fees), green fees and golf cart fees. Total revenue at ARGC is approximately 15% higher than the standard 18-hole golf course; although ARGC revenue does not include any significant food and beverage income (F&B is included in the standard benchmark). Total expenses needed to operate the ARGC facility totaled $1.042 million in 2017, including all direct operating expenses and direct cost of goods sold, but excluding income taxes, depreciation, debt service and shared use transfers. Arlington Ridge GC has a modest-sized staff which the CDD may seek to adjust after acquisition to match desired quality and service. The facility labor expense includes only one golf management position (Pro or manager). The golf course maintenance is outsourced via contract to a private, third-party vendor called Down to Earth (DTE). The overall condition of club facilities is good, with only a few minor items that the CDD may want to address to maximize its competitive appeal. The NGF has estimated a total of approximately $215,000 to $295,000 in one-time enhancements to the golf course, including drainage issues on holes 5 and 16, tee box improvements, new landscaping improvements and practice facility upgrades. The total club net operating income before income taxes, depreciation and bond debt service was approximately $54,500 in However, upon acquisition, CDDdesired service and quality may result in expense savings in some areas and increased costs in other areas of the operation. Considering these changes, the NGF is estimating that ARGC will have to earn at least $1.3 million in total revenue for the club to break even under CDD ownership. This assumes the approximately $1.2 million in existing bond principal is paid off at the time of acquisition.

3 External Market Factors The District should understand that despite some evidence of improved golf facility performance at ARGC, there are still external market challenges for continued strong economic performance of Arlington Ridge GC. The national trends in golf facility operations show declines in golfer interest, and expenses to operate golf facilities are increasing. Further, while our research notes a general stabilization in golf rounds demand, there are more golf facilities present to divide up the total volume of play. ARGC is located in a small suburban market that experienced rapid growth in the last few years with continued growth expected in the future. The broader region has become an attractive location for retirees, and this attraction has driven much of the growth in the surrounding market area. The Arlington Ridge community currently includes a total of about 650+/- completed residential units, with 1,041 residences to be developed upon full build-out. This sized community is expected to provide a strong core of support for future club operations, although NGF has observed that neighborhood participation at community country clubs has declined in the past decade, resulting in increased reliance on non-member and non-resident customers. In addition to the subject Arlington Ridge community, the Leesburg area is home to other similar developments that could enhance demand for golf service at ARGC. Of particular note is the large Villages master-planned community located as close as miles from ARGC. This community is expected to have 60,000+ residences at build out, including 4,500 units proposed for a tract of land located at CR 470 and the Florida Turnpike (5.0 miles from ARGC). Although The Villages has been developed with several golf courses, current operators report strong demand from that community at Arlington Ridge GC that is expected to continue into the future. The immediate Leesburg / Lake County resident demographics are moderately favorable for golf and club demand. Incomes in the immediate Arlington Ridge market area are lower than the State, but this measure is mitigated by the presence of a large retiree population living off a nest egg, as opposed to wages. NGF is estimating upwards of 800 golf and/or country club prospect families currently living within five miles of Arlington Ridge GC. From a macro perspective, we note that contrary to popular belief, golf is not dying and we expect new prospects for golf and club communities in Lake County to be prevalent (especially among the retiree market). However, ARGC may find that in order to remain economically viable, the club will have to rely on customers who are not residents of the Arlington Ridge community, meaning that services like casual dining should also be present. As noted, the ancillary amenities are currently owned by the CDD making acquisition of ARGC by any other entity possibly problematic. On the negative side, there is a clear un-favorable demand/supply ratio in the local market, with far more golf courses per-capita than the total U.S. In addition, this is an extremely price sensitive golf market making it difficult to establish player loyalty. Based on feedback from local golf courses, there has been a recent decline in rounds activity and increasing pressure to reduce fees to attract market share. Many of the area s golf courses are resorting to deep discounts and pre-paid green fee arrangements to attract adequate activity, increasing downward pressure on prices. ARGC is one of the newer golf courses in this local market. However, aggressive pricing at competing daily fee courses could cause defection of market share at ARGC if the product isn t materially better than the competition. The NGF has not observed demonstrated demand for high-priced public golf in this local market.

4 Financial Projections The financial projection created by NGF and detailed in this report shows that if ARGC is acquired and operated as presented, with slight improvements in membership and rounds activity, the facility is fully capable of generating revenues in the range of $1.3 million (+/-) in the first year after acquisition, perhaps increasing to as high as $1.6 million within five years as the surrounding area grows. This projection assumes the presence of professional golf management from the time of initial CDD acquisition and the completion of NGF-recommended property enhancements. Considering all preliminary expense estimates, the stabilized annual earnings before interest, income taxes, depreciation and amortization (EBITDA) is projected to be close to break-even, growing as high as $128,000+/- after three years, then falling back to under $50,000 as new expense for maintenance equipment may have to be added. This is a realistic estimate based on NGF experience of similar golf properties with comparable market and expected site characteristics. The analysis suggests that the ARGC operation is capable of covering its day-to-day on-site expenses and will have some net income available for capital cost reduction (debt service), although it is expected that the facility will require external funding (possibly CDD assessment) to cover large-scale capital costs associated with acquisition, any upgrades and additional working capital. The total historic revenue produced by the facility is enough to sustain an initial CDD investment of around $1.25 million+/-, which the NGF believes is a good foundation for establishing a fair sales price to the CDD. However, this estimate was intended to reflect the warranted investment appropriate for the CDD and would not apply to any other purchaser given the uniqueness of the property ownership and various CDD-owned components and shared-use agreements that could serve to increase operating and maintenance expenses for any non-cdd Purchaser. RECOMMENDED COURSE OF ACTION The NGF review of this market and subject facility suggests that there is opportunity for the Arlington Ridge GC, under CDD ownership, to produce revenues sufficient to sustain basic dayto-day operations and set aside some amount of capital to save for future upgrades. However, we do not project that the revenues generated from the continued operation of the ARGC will be sufficient to cover the full amortization of the expected investment that would be incurred to acquire the facility and complete recommended improvements totaling as much as $295,000 over and above the cost of acquisition. Still, this proposed acquisition by the CDD will serve to preserve the asset for the community and help to sustain the value of each home in Arlington Ridge from a very likely decline if the golf facility were to deteriorate or even close entirely. NGF believes that Arlington Ridge GC would best be operated as a mid-to-high-end public access (semi-private) golf club in the Leesburg market, with an operating program that allows non-member use of the golf facility. ARGC has broad appeal and should continue to serve a wide variety of customers, including daily fee patrons, members, community residents and tournaments. In addition, the club should include beginner programs, leagues and other welcome to golf programs to develop new players for the future. Given the importance of outside play and the development of new players, the NGF suggests that the CDD employ professionally-trained management, most likely through a full-service management contract. This structure will offer ARGC the greatest chance for success in the operation and provide the CDD a level of hands-on control so as to maximize the potential of the facility.

5 SUMMARY STATEMENT In summary, NGF believes the subject Arlington Ridge GC makes for a good and logical acquisition target for the Arlington Ridge CDD, and that the CDD should be successful in the continued operation of the facility. If community participation in club membership could increase to just 20% (~15% at current), the Arlington Ridge GC would have an easier path to economic success and have less reliance on non-member play. Without improvement in community participation, external sources of activity will be required to sustain sufficient revenue, and so enhanced marketing will continue to be needed. The NGF fully expects the subject ARGC to produce income sufficient for ARGC to cover all of its direct operating costs, including a management fee to any third party manager, but income will not be sufficient to make payments to retire large-scale capital that would be required to acquire and upgrade the facility. This golf facility is in good physical condition with no urgent mission-critical capital investment required in the short-term, with the exception of various optional golf course improvements we have identified to bring the facility to its maximum competitive position. ARGC does not currently budget for two senior level management positions at the facility, and NGF recommends the funding of a second senior staff position for the facility going forward. Further, we have recommended an increase in the annual golf course maintenance budget to improve overall conditioning and provide a more appealing and marketable golf facility. In addition to the direct economic benefit derived from membership, green, cart and other fees, a community golf and country club brings other value to all residents within a community like Arlington Ridge that cannot be measured directly in club economics. Golf courses in masterplanned communities provide open spaces, a healthy recreation outlet, a good reflection on community image and sustenance of property values for homeowners within the community. While the NGF has not completed a formal analysis of actual property values in communities with struggling or closed golf courses, we can state with a high level of confidence that the impact is almost universally negative. George, we very much appreciate your confidence in the NGF and its consulting services, and we have enjoyed the opportunity to be a part of your planning for the proposed Arlington Ridge GC acquisition. I am hopeful that the information and recommendations we have provided will assist the CDD Board in its upcoming decision. I am happy to talk with any individuals to discuss our consulting report, or other matters related to golf facility operations or market/industry trends. Sincerely, Richard B. Singer Director of Consulting Services rsinger@ngf.org;

6 Acquisition Feasibility Analysis For The Arlington Ridge Golf Club in Leesburg, Florida Prepared For: Arlington Ridge CDD Board of Supervisors Governmental Management Services - Central Florida, LLC 135 West Central Boulevard, Suite 320 Orlando, FL Prepared By: 501 North Highway A1A Jupiter, FL (561) May 2018

7 Table of Contents INTRODUCTION... 1 Purpose... 1 Background... 1 Proposed Acquisition Concept... 1 NGF Report Overview... 2 NGF Disclaimer... 2 SUBJECT FACILITY ARLINGTON RIDGE GOLF CLUB... 3 Site Overview... 3 Location and Access... 3 Inventory of Facilities The Arlington Ridge Golf Club... 5 Golf Course The Arlington Ridge Golf Club... 6 Golf Course Physical Condition Review... 7 Additional Amenities and Structures Review Review of Golf Operations...18 Oversight and Staffing Oversight and Staffing Marketing and Fees Other Operational Issues Facility Performance and Data Analysis...24 Rounds and Membership Arlington Ridge GC Revenue Arlington Ridge GC Expenses Review of Ancillary Operations (Concessions, Pro Shop and Practice Facilities) The Arlington Ridge Golf Club Financial Summary Summary Arlington Ridge Golf Club...30 EXTERNAL FACTORS AFFECTING AREA GOLF AND COUNTRY CLUB OPERATIONS...32 Market Overview...32 Demographic Analysis Key Economic Factors National Golf Industry Overview...34 Key Trends in Demand: Golf Course Supply Other Measures of Health Local Club Market Local Golf Supply Golf Course Market Supply / Demand Summary Local Competitive Golf Market...38 Competitive Golf Facilities Map Summary Information... 40

8 General Findings Local Supply External Factors Summary...45 NGF FINDINGS & RECOMMENDATIONS FOR THE ARLINGTON RIDGE CDD...47 Preliminary Acquisition Conclusion...47 Physical Recommendations...48 Short-Term Upgrade Needs Operational Recommendations...48 Senior Staffing and Management Marketing Programming ARLINGTON RIDGE GC PRELIMINARY FINANCIAL PROJECTIONS AND WARRANTED INVESTMENT...52 Arlington Ridge Fiscal Performance Metrics...52 Preliminary Financial Analysis Arlington Ridge Golf Club...52 Basic Assumptions Activity Inputs Revenue Inputs Expense Estimates Year Cash Flow Statement Arlington Ridge Golf Club Projection Preliminary Warranted Investment Estimate...57 Income Capitalization Warranted Investment Summary Limiting Conditions...59 Market Share Conclusions NON-ECONOMIC VALUE OF RETAINING GOLF...60 Potential Impact of Failing or Closed Golf Facility on a Golf Community...60 Other Benefits of Retaining Arlington Ridge GC SUMMARY STATEMENT...61 APPENDICES...62 Appendix A Golf Course Life Cycle...63 Appendix B Local Demographic, Demand and Supply Data...64 Arlington Ridge GC Local Demographics + Golf Demand and Supply Data Appendix C National Rounds Played Report...67

9 PURPOSE Introduction NGF Consulting was retained by the Arlington Ridge Community Development District ( CDD ) in Leesburg, Florida to assist in evaluating the possibility of acquiring the community golf facility Arlington Ridge Golf Club ( Arlington Ridge GC or ARGC ) and operating it as a communityowned country club for use by community residents and other non-residents. The client is considering the feasibility of the acquisition, and the results of this market and facility analysis will be used to help determine the appropriate course of action. BACKGROUND Arlington Ridge GC is a semi-private golf facility owned by Arlington Ridge Golf Management, LLC ( ARGM ), and located as part of a master-planned community in Leesburg, Florida. The club owner is affiliated with CB Arlington Ridge Landco, LLC ( CBAR ), an entity functioning as the Developer of the community and marketing the sale of new residences through Arlington Ridge Homes, LLC. The golf course facility is the centerpiece amenity to the gated Arlington Ridge community of 1,041 single-family homes (at build-out). The property to be acquired includes an 18-hole golf course, separate golf shop, golf cart storage barn, irrigation pumphouse and golf maintenance compound. All other existing community amenities (the town center, food and beverage service areas, parking lots, community pool, fitness facility, tennis & pickleball courts, etc.) are already owned and managed by the CDD. The facility is being offered for sale to the homeowners (through its CDD) however, ARGM intends to retain management of the golf course until the community has been sold-out and fully developed. It is also possible that ARGM could offer the facility for sale to other parties that are unaffiliated with Arlington Ridge. Both ARGM and the CDD agree that sale to the homeowners would be preferable due to the importance of the club to the community and the certainty that residents would work to keep the facility in outstanding condition and good working order. In addition, the mix of ownership for various components and amenities as noted above, create a unique situation in evaluating this proposed acquisition. The structure in place at the time of the NGF analysis involves several intertwined uses and the necessity of shared use agreements that must be addressed in any golf facility acquisition. As the CDD is the owner of several key pieces of adjacent components, these shared use agreements have to be addressed for any entity that acquires the golf course other than the Arlington Ridge CDD. This structure is addressed by NGF in the completion of this review for the CDD. Proposed Acquisition Concept Under consideration for this report are the present condition of ARGC, and the status of the greater Leesburg / Lake County area golf and club market. The conceptual framework for the acquisition has not been determined by the CDD at the time of this report. There are several options available to, and under consideration by, the CDD, including refinancing existing bonds, issuing new bonds, resident assessments and/or utilizing traditional funding sources. The NGF notes that the re-payment of the bonds will not be tied to the performance of the club or club revenue generation, but rather be tied to the CDD s ability to assess community residents. A preliminary summary of the acquisition program and costs is noted below: National Golf Foundation Consulting, Inc. Arlington Ridge CDD 1

10 Golf Course Acquisition Cost Projected Acquisition Program TBD Optional Club Repairs/Enhancements (high estimate) $295,000 Working Capital $100,000 Professional Fees (underwriting, consultants, fees) $100,000 NGF Report Overview If acquired by the CDD, Arlington Ridge GC will likely be operated as close to its current operating program as possible, meaning a semi-private country club operation with a combination of memberships and daily use on a pay-for-use basis. The golf course and some ancillary amenities (grill, bar, banquet hall) are available for non-resident use on a fee basis. If all community amenities are owned by the CDD, this will greatly simplify the management structure and standardize the operational goals and objectives. The purpose of this market and facility analysis is to provide the Arlington Ridge CDD with an evaluation of the local golf market and an estimate of the overall economic potential of the ARGC if it were to be acquired as-is, and then operated by the homeowners as a community country club that is also open for public (non-member / non-resident) use. The key issues evaluated in this report include: Status of the local golf market. The present condition of the Arlington Ridge Golf Club and requirements for improving the facility to match the desired CDD program. Economic potential of the Arlington Ridge GC after acquisition. Amount of capital expense (or debt) that can be supported by the golf operation. The level of investment warranted for the purchase and improvement of the Arlington Ridge GC facility. This NGF review was managed by Richard Singer, MBA, NGF s Senior Director of Consulting Services, with assistance from Barry S. Frank, NGF s Senior Associate Consultant and Kevin Downing of 3-Putt Services (GCSAA member & Certified Golf Course Superintendent). Field activities conducted in completion of this consultant s report included meetings with key Arlington Ridge CDD management team and Board members, the facility owner / manager and other club facility staff. The team also completed an inspection of the subject Arlington Ridge GC, collected materials to aid in the understanding of the area golf and club market, visited several of the area s competing country club operations, and reviewed of other materials and records related to the Arlington Ridge Golf Club and the Arlington Ridge CDD. NGF Disclaimer This report is based on information that was current as of May The assessment is based on conditions at the time of the analysis (e.g., economic and market conditions) and significant changes in those conditions may affect the relevance of the assessment. NGF has not undertaken any update of its research effort since such date. Because future events and circumstances, many of which are not known as of the date of this study, may affect the estimates contained therein, no warranty or representation is made by NGF Consulting that any of the projected values or results contained in this study will actually be achieved. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 2

11 Subject Facility Arlington Ridge Golf Club The subject property is the Arlington Ridge Golf Club, an 18-hole golf club facility located within the Arlington Ridge community in Leesburg, Florida. The facility is privately owned and operated directly by the current developer through its affiliate Arlington Ridge Golf Management, LLC ( ARGM ). The golf course facility is operated as a semi-private club with both active resident members and allowance for daily fee golf. ARGC is the centerpiece amenity for the Arlington Ridge master-planned community, and this community is seeking to preserve the quality and integrity of the club through acquisition as the developer nears the end of the residential development phase of the overall project. At the time of the NGF review, the ARGC owners agree that sale directly to the homeowners (through the Arlington Ridge CDD) was the most desirable option for both parties. If the property is not sold to the community CDD, the owner has indicated plans to seek other buyers with the ultimate operational program undetermined. SITE OVERVIEW Location and Access Arlington Ridge GC is located approximately 4 miles south of Leesburg, Florida, and is conveniently located on US Highway 27 (this north-south roadway runs from Miami to Tallahassee through the center of the state). The Arlington Ridge community is proximate to the Florida Turnpike, located less than 5 miles to the south. Other local municipalities in the immediate area include the Villages (~10 miles), Wildwood (~13 miles) and Clermont (~17 miles to the south). Primary access to the community (main gate) is via US Highway 27. The entrance access to the community and course is clearly marked and is gated with access for residents, club members and daily fee golfers. There is also a secondary residents-only gate located near the northwest corner of the community from Haywood Worm Farm Road (adjacent to the club s maintenance complex). The area surrounding Arlington Ridge includes a mix of residential communities (such as Highland Lakes, the Plantation and Royal Highlands) and undeveloped agricultural property undeveloped property (primarily to the south). The golf course is developed with considerable frontage of the residences within the gated community approximately 65% of the lots have golf frontage. The golf course has a relatively small number of water features in the layout, with existing ponds / lakes (for golf aesthetics and storage for irrigation) on 4 holes. However, there are wetlands and marsh areas that come into play on another seven or eight holes. The Arlington Ridge residential community will include a total of 1,041 residences, with approximately 650 units developed (as of March 2018). This location offers mixed findings for any potential acquirer of ARGC to continue operating as a golf course: Positive Aspects The Leesburg area (and the general area) is experiencing growth from a retiree / seasonal home market. This is most evident at the massive Villages development (southern units as close as 10 miles from Arlington Ridge) the Villages MSA has a population of over 120,000 residents with more units coming to market every day. The property is convenient to area roadways the community fronts on US Highway 27 (a major north-south roadway) and is less than 5 miles from the northbound access to the Florida Turnpike and 10 miles to the southbound access for the Florida Turnpike. The Arlington Ridge location is proximate to the west side of Orlando as well as to Interstate 75 at Wildwood (the northern terminus of the Florida Turnpike). National Golf Foundation Consulting, Inc. Arlington Ridge CDD 3

12 The Leesburg area is well positioned to accommodate future growth, especially in the area near Arlington Ridge. New residential sales in the area continue at a healthy pace and new commercial and retail development is occurring to support the population growth. The Villages has a significant influence on the local market both positive and negative. It will remain the primary draw for retirees to the area and absorb the bulk of the demand. However, the frenetic activity at the Villages also serves to attract some of their residents to Arlington Ridge (both as potential residents and/or golfers). Negative Aspects While growing, the Leesburg market area is still a small town and there are only an estimated 22,000+/- residents within five miles of Arlington Ridge (2017 estimate). Although all roads inside Arlington Ridge are public and the CDD cannot restrict access, the location of all club amenities inside the gate and the perception this creates to potential customers (who may not know it is public) could serve to limit the club s potential to capture various non-resident revenue opportunities, such as daily fee golf, non-resident golf members and outside banquets and parties. Aerial View The Arlington Ridge property includes a total of 487 acres and we estimate that the golf course constitutes approximately 120 to 150 acres (or 25% to 30% of the land area). This is slightly smaller than the norm, as a standard 18-hole golf and country club facility is approximately 165 acres. The golf course configuration is typical for a residential community, with the routing spread through the property to provide maximum golf course frontage for the residences. The property owned by ARGM includes the 18-hole golf course, the cart barn, the short game practice area, the practice range, a separate golf pro shop and the golf facility maintenance complex. The property has a total of approximately 90 parking spaces on the paved lot and an adjacent overflow lot to the west. This amount of parking is ideal for a public golf course, and more than sufficient for most days of activity, including busier weekends in season and/or during large golf events. As a residential community amenity, the club can function with fewer parking spaces as most residents will utilize private carts for transport inside the gated community. It is also important to note that the aforementioned parking areas, along with other important club components, are owned by the Arlington Ridge CDD (this will be discussed more). National Golf Foundation Consulting, Inc. Arlington Ridge CDD 4

13 Google Earth image showing ARGC and its immediate surrounding elements. This view shows the routing of the golf facility through the entire development and the many homes already completed. The southern end of the property is the final phase of the residential development that is currently underway. The property s frontage on US Highway 27 is also highly visible as well as the limited existing development adjacent to Arlington Ridge. INVENTORY OF FACILITIES THE ARLINGTON RIDGE GOLF CLUB The Arlington Ridge Golf Club comprises the following elements that will be included in the sale of the property to the Arlington Ridge CDD: 18-hole, Gary Koch-designed golf course, including all common support facilities: 280-yard driving range with 25+ stations and 100+ yards of width practice green and practice chipping area on-course restrooms irrigation pump-house 2,000 square foot (sf) golf shop (shop is attached but separate from the other CDDowned buildings that encompass the golf clubhouse) 5,700 sf cart storage building 7,500 sf maintenance building at the northwest end of the property Lease of 50 Yamaha gas carts (lease set to expire in 2019) Inventory of items for sale in pro shop National Golf Foundation Consulting, Inc. Arlington Ridge CDD 5

14 The above elements represent the key components of a good quality golf course operation, but do not include other associated elements to complete a full complement of amenities for a community golf club. Components not included in the proposed sale of the ARGC: Parking lots Food & Beverage service areas in the clubhouse Banquet space Golf course maintenance equipment The first three items on the list of items not included are owned by the CDD making for a seamless transition of ownership to the CDD, but possibly complicating the sale to some other entity. The golf course maintenance equipment is set to be owned by the golf maintenance contract vendor, Down to Earth ( DTE ) at the conclusion of their agreement (November 2021), as per contract. Thus, if the CDD were to continue with DTE after acquisition, the maintenance equipment would be included in the maintenance expense. However, if the CDD were to go in a different direction on the maintenance of the facility, new golf maintenance equipment may have to be acquired, unless they reach a similar agreement with another contractor (more later in this report). Golf Course The Arlington Ridge Golf Club The golf course and all components (course turf, design, and irrigation) date back to the original 2005 design, development and construction. At 12 years of age, the course is in the early middle of its expected life-cycle, and much of the key infrastructure items (Appendix A) should not need replacement for at least another decade (more later in this chapter).the NGF consultant has identified the following key elements for consideration on the primary 18-hole golf course at The Arlington Ridge Golf Club: Arlington Ridge GC is one of several regulation-length golf facilities developed in conjunction with a residential community in Leesburg, FL. The course was originally designed by Gary Koch, a former professional golfer and golf broadcaster for NBC and the Golf Channel. Koch has design several other courses, with the majority in Florida (such as the Las Colinas course at Mission Inn, Mystic Dunes Golf Club in Celebration and the Eagles Golf Club (Forest Course) in Odessa. The golf course playing area at ARGC was in fair condition during NGF inspections, with some deficiencies in maintenance condition being evident. The conditions observed by the NGF consultants were mostly as a result of a combination of the current drought conditions being experienced throughout Florida and the modest maintenance budget. It is not expected that a new owner will have to invest a large amount of capital over and above the acquisition to bring the golf course to an ideal condition (more later in our agronomic review). The golf playing area has design features that are typically associated with successful golf courses and is very playable for all skill levels. General impressions of the golf course are favorable - a good layout with interesting golf holes and a lot of design features that add to the challenge (such as the Palatlakaha Creek that meanders along the eastern boundary). Overall, water features are not significant and come in to play on 6 holes. The real estate component is prevalent throughout the course routing, with homes (existing or future) found lining most holes. However, the landing areas and hole-corridors are reasonably comfortable for players. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 6

15 The ARGC golf course plays 6,633 yards from its longest regular tee (Gold) and to a par of 71 (standard for a championship course). The course has a USGA slope rating of 117, directly comparable to the standard slope of 117. The course includes six total tee positions, providing a good variety for golfers all the way down to 4,877 from the most forward tee. The course is challenging from the Gold tees, and the additional forward tee positions are much more forgiving and provide strong playability for all skill levels, which is ideal for a community golf course. ARGC has adequate on-course facilities such as restrooms and drinking stations, as well as all other amenities commonly associated with good quality golf (benches, ball-washers, yardage markings, signage and other niceties ). This adds to the quality of the golf experience and makes the course and club more marketable. The course does not have continuous or full cart paths ( wall-to-wall as it is known in the golf industry), but approximately 75% coverage. The current path system appeared to be in good condition. ARGC has a total of nine road crossings in the design sequence (5 on the front nine & 4 on the back nine), all within the Arlington Ridge community and thus not interfering with any heavy traffic. Golf Course Physical Condition Review The golf course was designed by Gary Koch and built to provide a fair test of golf for both lessskilled players and top competitors. Sometimes that design concept does not create a welldefined golf course that fits the eye. The current condition of turf can improve, and the landscape from surrounding homes will help better define the course over time. The focus of this review is to evaluate current condition and the contractual arrangement with Down To Earth golf. The NGF Agronomist/Superintendent (Kevin Downing) completed a thorough review of both the physical condition of the ARGC golf course playing area, as well as review of the contract in place with Down to Earth and the recommended course maintenance guidelines in place at the facility. These pre-defined maintenance guidelines appeared to be very well written and quite comprehensive, but are not a formal part of the maintenance contract. While the current golf course owner (ARGM) has contract authority over the maintenance contractor, our team did find a slight disconnect on performing all of the tasks stated in the guidelines. Some type of weekly or monthly report confirming the completed work would be helpful to all parties. The current golf course superintendent showed impressive knowledge, enthusiasm and work ethic. An on-site superintendent can only perform at a high level when provided the necessary resources and manpower. The property is large with an estimated 26 acres of fairway (actual number may be higher) and 45 acres of rough. Currently the facility is maintained by only eight individuals on a forty-hour work week. This allows for only two to three people for weekend setup so the general conditions for weekend play will be compromised. The NGF will address this and other condition issues in this section of our report. The key areas of review include: 1. Review of Primary Components 2. Golf Course Infrastructure 3. Maintenance and Staff Review 4. Upgrade Considerations 5. Summary National Golf Foundation Consulting, Inc. Arlington Ridge CDD 7

16 The relationship between course maintenance expenditures and course revenue is always a balancing act. Of course as golfers, we would prefer optimum conditions but the reality becomes apparent when conditioning levels are tied to finances. The realistic standards need to be funded and then the opportunities for upgrades evaluated at a later date Review of Primary Components Greens The Tifdwarf surfaces are of adequate size and interest for this facility, its clientele and play levels, but the turf health and putting speeds are not an appropriate match. The NGF recommends that maintenance practices be upgraded to provide improved speed and a better roll of the golf ball. Further, the areas surrounding the greens (green surrounds) showed very thin turf that created poor lies and added unnecessary challenge for the golfer. The club should consider: Double Cuts Routine verticutting Increase light topdressing Spiking of thin areas Increasing fertility ( inter-seeding / reduced rates) on green surrounds Photos showing greens at ARGC, along with the green surrounds. The greens were undergoing maintenance at the time of the NGF inspection so we do not detract from overall condition, but some improvement in maintenance is noted by NGF. Fairways At the time of the NGF inspection(s), the mowers were set at a lower height to assist in weed control and the fairways had been recently fertilized. In general, the turf was thin and did not fit the playing conditions for the clientele and play levels. Summer cultural programs and fertility should improve the turf. Reintroducing over-seeding was discussed to improve winter playing conditions. The Tiffsport is a variety of turf that demonstrates a need for increased fertility. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 8

17 Example of some troubled turf area related to several factors, such as irrigation, construction impacts and proximity to retention areas (run-off). Tees The tee box condition was adequate, although mowing patterns, turf coverage, and general care were lacking a necessary attention to detail. Tees on the par-3 holes were over-seeded, but still have ample room for improvement. More care should be implemented and a dedication to follow the stated maintenance guidelines will greatly enhance the quality of tees. In addition, an increase in fertility applications will be needed on the tees. Roughs At the time of the NGF inspection(s), the rough areas were transitioning from semi-dormancy, so it is understandable that the rough turf was not at ideal heath and thickness. Better definition and increased fertility in the spring will improve this situation. Increased aerification and manageable weed control should also help improve playability. Bunkers There are 28 bunkers on the course, which is a relatively low number for a modern golf course, but still appropriate for this facility s clientele. Member complaints about the quality of sand in the bunkers did reach NGF consultants and ARGM reports efforts to improve bunker sand are underway and NGF has assumed they will be complete before any facility turnover. The raking pattern in the bunkers was also inconsistent, creating ridges and poor lies in greenside bunkers. Crossraking, deep raking and hand smoothing should be done periodically (but will require staff attention more below). Fairway bunkers should be double raked occasionally and at a slower speed on the second pattern. Retention Areas - The ARGC has several areas of drainage retention that were developed as part of the original master plan for drainage, and are owned by the CDD. These retention areas affect the play of golf on the course and are maintained via agreement by DTE. Some of these areas present severe impacts to golf (several addressed specifically later in this section), and cannot be improved unless largescale investment is made in drainage improvements and added fill. In general, the club can address these areas with an increase in unmaintained areas or waste bunkers that can be added at select locations where retention areas directly affect the play of golf. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 9

18 Photos showing various issues related to retention areas on ARGC and one possible solution of modest landscaping (upper right). The lower two photos show retention areas not in direct play of golf, either behind greens or between holes that do not require attention or new investment. Cart Paths ARGC does not have a full, continuous cart path system. Overall conditions were mixed and many of the walk off areas and cart run offs were not level and void of turf (see image below). This is a negative to the course presentation and an attempt should be made to repair the most glaring problems this summer. Photos showing cart path issues at ARGC. Much of this can be addressed through various directional programs to guide golfers to take carts to new scatter locations that can be changes every week so as to avoid wear in any one area. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 10

19 Arbor Care Most of the trees on property appeared in good condition and very well cared for. Upon acquisition, the CDD will have to consider a more comprehensive tree-trimming and maintenance program that should include increasing fertility to at least three times a year because the material from the rough applications or fertigation is not enough to promote tree growth. Secondary Rough - Many of these areas blend into retention zones. Due to the nature of the course, these areas are essential for community drainage and collection of nutrient run-off. If the general play conditions of the course were improved, the secondary rough concerns would be minimized. There are areas that the sandy zones should be modified to create a waste bunker look to provide the course more character, interest and golfer strategy. Golf Course Infrastructure In addition to the golf course playing area, the NGF assessment of Arlington Ridge GC included a review of key infrastructure on the golf course, including irrigation, maintenance facilities, equipment, on-course amenities and drainage. Below are NGF summary observations regarding these components: Irrigation/Pump The Rainbird irrigation system is original from 2005 and appears in good working order. The system uses reclaimed water purchased for use on the golf course. The proper distribution of water is paramount for a Bermuda-grass golf course. The pump-house was well situated near the effluent water inflow and appeared to be well maintained and the service records are in place. The cost of water is paid for by the developer at a flat rate up to 15 million gallons a month, with any overflow beyond this figure billed at a different rate (more on water costs and shared use agreement later in this report). Maintenance Facility The maintenance department operates from a 9,600 sf metal building built at the time of the initial course construction. The building seems to be in good condition, is well organized and provides adequate storage for equipment. Further, the fuel tanks and chemical storage also looked sufficient for this operation and within codes. Currently there are trailers in the maintenance compound that are part of a shared-use agreement with the golf course owner and development partner. It is assumed by NGF that these trailers would not be included in the sale of the golf course to the CDD. Photos showing the maintenance facility at ARGC with its ample space for equipment storage and machine lift station, which is important for maintaining proper fleet of equipment. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 11

20 Golf Course Maintenance Equipment - In general the equipment seems to be in good working condition, but we note the unique situation in that the equipment will be owned by the sub-contract maintenance company at the end of the maintenance contract. Costs to maintain items are within the contractual agreement up to a certain dollar amount. There is some surplus equipment from previous management on site which should be disposed of. A summary of equipment in place is noted below: Arlington Ridge GC Golf Course Maintenance Equipment Inventory Transport Vehicles Mowers Construction/Cultivation Utility 5 Triplex 7 Dump Trailer 1 Truckster 2 Fringe Surrounds 2 Sod Cutter 1 EZ-GO Service 1 Rotary/Bush Hog 3 Fairway Aerifier 1 Workman 2 Fairway Unit 2 Greens Aerifier* 1 Fairway (Lease)* 1 Tractors Applicators Grooming Kubota 2 Sprayers 2 Trap Rake 1 New Holland 2 Top-dresser 1 Green Roller 1 Backhoe 1 Spreader 1 Verticut Reels 3/5 *Lease up in 2019 Spiker 1 Blower PTO 1 On-Course Amenities ARGC includes two separate comfort stations on the golf course (one for each 9-hole course), both of which were in good overall condition and not requiring any repair or upgrade. Maintaining these facilities in good working order and a high level of cleanliness is important in maintaining good value at a public golf course, as NGF surveys continually show the high value customers place on the on-course comfort stations. Drainage The overall drainage of the golf course is good, due largely to the retention areas designed into the golf course as noted previously. However, there are several locations where drainage has caused problems for this golf operation and improvement is recommended by NGF as part of a capital improvement program (more later in this section). Of particular interest are areas on holes #5 and #16 where both the play of golf and maintenance efficiency is directly impacted by identified drainage concerns. Some detail is noted below: Hole # 16 This hole is a long par-5 on the back-9 with drainage problems related to the original design of retention areas and drain installation. The primary drain on the hole is at least three feet too high to effectively drain the area on the left side of the golf hole. The result is a muck area all the way down the left side of the hole, directly affecting the area where golfers are aiming to lay up on the par-5. This area must be improved to provide ideal conditions for higher-fee golf. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 12

21 Photos showing the hole #16 issues. The drain (r) is not effectively catching water run off leading to the conditions shown in the other photos, which are not pleasant for golfers or maintenance crews / equipment. Hole # 5 This hole is a long par-4 on the front-9 directly alongside the Palatlakaha Creek, with drainage problems related to concentrated run-off into this body of water. Another separate low-lying area on the right side of the hole has also required staff to add hazard markings to identify a water hazard for golfers. While the second issue is less important for the quality of golf provided, the first issue related to run-off into the creek should be corrected. This will improve both play and maintenance responsibilities. Photos showing the issue on the left side of hole #5. The water run-off towards the creek has created a natural drain that needs to become more formal so as to prevent turf damage and nutrient run-off. Golf Maintenance Expense Golf course maintenance expenses at Arlington Ridge GC totaled $600,000 in 2017 (plus water cost), which is the actual contract amount paid to Down to Earth as a contract vendor. This amount does not include any direct cost for maintenance equipment, which is currently owned by ARGM and set to convey to DTE at the end of the contact. The NGF notes that the total $600,000 maintenance budget includes an inherent 10%-15% mark-up for the contractor as is appropriate and customary in golf maintenance contracts. As a result, the effective dollar amount spent to complete all golf course maintenance is probably closer to $525,000+/-, well below the NGF-standard of $625,000 to $750,000 maintenance budgets expected at mid-level 18-hole golf courses in Florida in The NGF review in 2018 suggests a new maintenance budget level for the CDD after acquisition that represents an increase to at least $710,000 (including water), assuming continuation of the contract approach with DTE for golf course maintenance. Continuing this approach eliminates the need for the CDD to acquire new maintenance equipment. The specific line-items projected for a new golf course maintenance budget after acquisition includes: National Golf Foundation Consulting, Inc. Arlington Ridge CDD 13

22 Arlington Ridge GC Projected Golf Course Maintenance Expenses Beginning in 2019 Golf Maintenance 2019 Amount Comments Labor $325,000 This is within the accepted industry standard of 50-55%. This item is $4,444 per hole, above the standard of $2,750 per Fertilizer 80,000 hole due to requirements as noted above. Chemicals 45,000 Right at the standard of $2,500 per hole. Contract Services 25,000 Includes arbor care and trimming, plus other contracted services Supplies 40,000 At or close to standard Close to the 10% standard and considers the historical cost for Utilities (incl. water) 65,000 water that will be borne by the club after CDD acquisition. R & M + parts 40,000 At or close to standard Other 25,000 At or close to standard At the lower end of the range for mid-level golf courses in Base Golf Maintenance $645,000 Florida, where $625-$750,000 is common. Additional Items: Contractor Mark-up 65,000 10% is standard Total Effective Contract Amount for ARGC $710,000 Golf Course Upgrades for Consideration The NGF team has identified some areas of the golf course that new ownership should consider for improvement upon acquisition. These are expected to be one-time capital items that should be considered in addition to the maintenance budget increase noted above, and are items NGF recommends to bring the facility to its optimal condition for marketability and to achieve projections presented later in this report. These projects listed in priority order include: Landscaping / Beautification Enhancement The club would benefit from improvement to open areas in a golf course beautification program. These improvements would include the addition of new vegetation around or near the tee boxes (such as shrubs & perennials) as well as adjacent to the cart paths near greens this will also encourage players to keep all 4 golf cart wheels on the paved paths. NGF estimated cost = $75,000 to $100,000. Hole #16 Improvement Project This involves the improvement of hole #16 issues noted previously through one of three possible options: Fill Option the owners could raise the low lying area on #16 to match the fairway. NGF expects the cost to be excessive, plus settling over time will likely allow initial problem to return. Option is not recommended by NGF. Lake Option the owners could opt to create a new lake/water feature on hole #16 in the low lying area. NGF expects the cost of this to also be excessive (excavation, lining, fill), plus would add significant playing difficulty to the hole. This option is not recommended by NGF. Waste Bunker Option The most ideal option (and the one recommended by NGF) is to create a waste bunker area to the left of hole #16 using a crushed coquina shell base and some ornamental grasses. The coquina shell area could then serve as both play feature and cart path, and is common in Florida golf (see photo below). This option also includes a lowering of the drain intake, but the area would still be low-lying and water retention will have much less impact on coquina. NGF estimated cost = $75,000 to $100,000. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 14

23 Example of a coquina waste area on the low-lying side of a par-5 at Jupiter CC in Jupiter, FL, seen just after heavy rain with some water retention. The coquina area serves as both waste bunker area (in play) and as the cart path for the hole. Hole #5 Project Project to re-grade the left side of the hole and add a new formal interceptor drain system to redirect water run-off and other turf enhancements designed to retain soil nutrients. NGF estimated cost = $20,000 to $25,000. Tee Boxes Program to enhance existing tee areas (re-grading + re-grassing) and add new forward tees to offer an alternative for less-skilled players on some holes. NGF estimated cost = $40,000 to $60,000 ($5,000 per tee area on 8 to 12 holes). Practice Area Enhancement A program to expand and improve practice chipping area and the practice green. NGF estimated cost = $5,000 to $10,000. A summary of NGF-recommended capital upgrades for ARGC after acquisition by the CDD: Capital Project Low Estimate High Investment Landscaping / Beautification $75,000 $100,000 Hole #16 Project (Coquina) 75, ,000 Hole #5 Project (Drain) 20,000 25,000 Tee Box Enhancement 40,000 60,000 Practice Area Enhancement 5,000 10,000 Total Capital Investment $215,000 $295,000 Additional Amenities and Structures Review The support amenities at ARGC for the purpose of this analysis include the golf shop, cart storage building, maintenance building and the driving range & practice area. As noted, additional amenities and components that support golf operations (parking areas, clubhouse, restrooms, F&B, etc.) are not part of the golf facility sale and already belong to the CDD. All ancillary facilities owned by ARGM and subject to property sale date to the original club development in approximately These facilities generally appear to be fully functional with limited deferred maintenance or modest improvements needed. It is important to note that the Arlington Ridge CDD currently owns and operates all facilities in the Arlington Ridge community with the exception of the golf course and related facilities owned by ARGM. The Town Center community facilities currently owned by the CDD include: National Golf Foundation Consulting, Inc. Arlington Ridge CDD 15

24 Administration building - 1,905 square feet (sf) Tavern & restaurant building (the Chesapeake Bay Grille & the Village Tavern) Fairfax Hall (the 10,644 sf multi-purpose building) Social Center (3,944 sf building that includes the movie theatre and arts & crafts area) Fitness Center & Ice Cream Parlor Building (5,477 sf) Community pool, lap pool, Jacuzzi & pavilion facility Town Square gathering area Paved & unpaved parking facilities The NGF recommends that upon acquisition, the CDD maintain the newly-acquired golf course facilities in a similar fashion to the other CDD-owned public facilities. It will be important to operate and maintain all the facilities in a consistent manner. A brief overview of these areas follows below: ARGC Golf Shop Review The golf shop at the Arlington Ridge GC is a building of approximately 2,000 square feet and is adjacent to the club s parking lot, the main putting green and the cart staging area. The interior space within the building is approximately 1,000sf and the exterior area has a roof overhang of approximately 12 (+/-). The golf shop includes open space for merchandising (mainly soft goods), the front counter and the golf shop office (including some storage area). Based on our review, it appears that the golf shop (and other CDD-owned buildings) is original with little or no updating since it was built approximately 13 years ago. As such, the club buildings (including the golf shop) are still operating with original electrical, HVAC and roof systems. As the expected useful life of a club community clubhouse is about 30 to 35 years, the Arlington Ridge facility is still well within its expected lifespan. Photos showing the golf shop exterior entrance and the interior layout (including the golf shop merchandising) National Golf Foundation Consulting, Inc. Arlington Ridge CDD 16

25 The club golf shop shows well and appears to be well-maintained. Key NGF observations regarding the ARGC golf shop include: Shop sales could be improved with enhanced merchandising including a larger selection of women s goods and new fixturing of the shop. The shop currently includes a small beverage cooler and a selection of snack items and cold drinks. Once the CDD owns and operates all facets of the golf operation, there can be better synergy with all F&B venues and thus enhanced service to golfers. Eliminate the storage of all non-golf-related items Cart Storage Arlington Ridge GC includes a 5,700 square foot concrete block and metal frame cart storage building, conveniently located proximate to the clubhouse and cart staging area. The cart storage facility is located north of the golf shop (behind Fairfax Hall) and contains space for up to approximately 55 carts and includes an on-site gas storage tank for the gas carts. The space has a sealed concrete floor and roll-up doors for entry and exit. The inventory of driving range balls is also stored in this building. Photos of the golf cart storage building at ARGC. The building is fully functional and adequate in size especially as most resident members have private carts that are parked at their homes. Golf Range & Practice Facilities The practice facilities at ARGC include a full-length driving range, a chipping green with sand bunker and putting green. These practice amenities allow members and guests to work on all facets of their game. The driving range is approximately 280 yards and has enough length to allow most players to safely hit all clubs in their bag. The range has significant width, with approximately 100 yards this is clearly a practice facility (as opposed to simply a warm-up range). The teeing area can accommodate 25 to 30 golfers and has about 25 yards of tee depth. The chipping green is approximately 4,000 square feet in size, with a small bunker to practice greenside sand shots. The putting green is approximately 6,000 square feet and is ideally located by the golf shop and the cart staging area. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 17

26 Photos showing the club s various practice facilities - driving range, short game green & putting green Practice Facilities Condition Review and Issues - ARGC has a complete practice facility and this is appealing to members & guests. The range tee was over-seeded for winter season and appeared to have ample grass. The area around the chipping green was showing wear and would benefit from enhanced conditioning practices (additional fertilizer, water, perhaps over-seeding, etc). The putting green had been recently top dressed and was in fair condition. REVIEW OF GOLF OPERATIONS The original developer of the Arlington Ridge community (and golf course) was Blair Communities of St. Petersburg, FL. Blair Communities filed for Chapter 11 bankruptcy in October 2008 at the time, approximately 235 homes (of 1,041 approved lots) had been sold and delivered. Upon bankruptcy, the original developer involvement was concluded and Wells Fargo took over the operation of the community. The golf course remained open during this period the bank initially brought in a management company to run the course and Arnold Palmer Golf Management Company (Century Golf Partners) was brought in later. The remaining lots and property for development were purchased in the latter part of 2013 by CB Arlington Ridge Landco, LLC. The purchasing entity is a joint venture between Common Bond Capital Partners, LLC of Coronado, CA and affiliates of Florida Leisure Communities a retirement community development company from Lakeland, FL. The golf course was purchased and is managed by Arlington Ridge Golf Management, LLC. After the purchase of the land and the golf course, Arnold Palmer Golf Management remained as the management company through the end of Commencing in 2016, ARGM took over the management responsibilities for the golf course as it is a critical component to the success National Golf Foundation Consulting, Inc. Arlington Ridge CDD 18

27 of the Arlington Ridge real estate component. The golf course maintenance function is outsourced to Down to Earth Landscape & Irrigation of Tangerine, FL this independent company has been involved at Arlington Ridge since November The current operational structure of Arlington Ridge GC is non-traditional due to the ownership nuances of the assets that comprise the entire development. The golf course is owned and operated by ARGM and the community is being developed by CB Arlington Ridge Landco, LLC. As previously mentioned, course maintenance is outsourced to Down to Earth (with a contract between ARGM and DTE). Lastly, the club s food & beverage operation is owned and operated by the Arlington Ridge CDD. The food & beverage operation consists of several on-site venues: the Chesapeake Bay Grille, the Village Tavern and O Hara s. Further, the ownership structure and site nuances create the need for various shared use agreements between the CDD and the golf course. These agreements cover the use of a shared roof in the clubhouse (between the pro shop and F&B service area), pump-house and other water expenses, direct maintenance of drainage retention areas owned by the CDD and an offset agreement for use of storage facilities (trailers) in the golf maintenance compound. The current golf course owner has all necessary easement rights for uses as granted in governing documents. Oversight and Staffing At present, the club operation is managed by the ARGM ownership group, who provides senior oversight for the operation. The club employs an on-site manager (Jake Doty), but the direct cost of senior oversight (currently provided by ARGM and/or CBAR) is not included in the income statement for the club and will need to be replaced under CDD ownership. NGF expects that a club of this complexity will require professional management or a management contract arrangement, and thus the expense of such a position should accrue to the golf course. ARGM s golf operations group is a combination of full-time staff with benefits, full-time hourly and part-time/seasonal staff (but no key direct senior management such as a club manager). The overall structure is very fractured and it is expected that there will be changes after the CDD acquisition and operational take-over. Oversight and Staffing The golf shop and golf operations staff are employees of the Arlington Ridge GC while the personnel associated with the course maintenance function are employed directly by Down to Earth (the golf course maintenance sub-contractor). The current structure does not include all departments as the F&B operation is under the Arlington Ridge CDD. For the various golfrelated departments, they are staffed with a mix of full-time and part-time employees. Total Staffing Department FT Salary Staff Arlington Ridge Golf Club Total Facility Staffing 2017 FT Hourly Staff PT Staff Responsibilities Golf Operations Pro shop, golf carts, starter, range & ranger services Golf Maintenance Maintaining the golf playing area & all club grounds TOTAL Outsourced function to Down to Earth National Golf Foundation Consulting, Inc. Arlington Ridge CDD 19

28 Staffing by Function In reviewing the staff by function at ARGC, we note that the club operation functions are covered by a mix of full-time and part-time positions. NGF estimates a comparative total of 18.0 full-time equivalent (FTE) positions in the Arlington Ridge GC staffing: Pro Shop / Golf Operations (10.0 FTE) Director of Golf (FT Salary) Golf shop coordinators including one teaching professional (5 positions PT) Part-time cart & range attendants + course rangers (12 positions - PT) Golf Maintenance Staff (8.0 FTE) all employees of Down to Earth Golf Superintendent (FT Salary) Assistant superintendent (FT Salary) Mechanic (FT Hourly) Full-time maintenance crew (5 positions FT Hourly) It is important to note that the current ARGC operational structure does not include a specific executive department that manages the club. The functions / job positions not currently represented include the club general manager, administrative assistant, marketing / membership director, office manager (payroll, accounting, etc), etc. Additionally, the clubhouse operation & maintenance and the food & beverage departments are currently under the CDD. The standard country club facility in the U.S. with a 12-month golf season employed a total of 45 FTE personnel in 2015, with 12 in golf maintenance, 9 in pro shop/golf operations, 20 in food and beverage and 4 in administration. This level of staffing represents a reduction from 2009 figures as a result of declining income and the need to reduce expense. As a result, many golf operations around the country are operating with very lean staff. Based on the NGF review of the Arlington Ridge staffing and in comparison to golf industry norms, it appears that Arlington Ridge GC was operating with a staff that is well below the national norms. It is expected that the CDD will carefully review the club staffing levels in consideration of the operational consolidation after acquisition. Marketing and Fees From a marketing perspective, the ARGC ownership has relied on mostly electronic platforms and some specific local newspaper advertising to promote the facility (in addition to the area road signage). Going forward, the CDD will have to develop their own marketing campaigns to improve the level of interest in the community and country club (especially once the residential community has been completed). Review of operating data shows the club spent a total of approximately $9,900 on advertising in 2017 an amount equal to about 0.86% of total revenue. The NGF typically recommends a country club to spend at least 1.0% ($11,500 for ARGC) on marketing and advertising. The NGF observations on ARGC marketing, programs and other activities include: Website - There is no doubt that the Internet is the most cost-effective form of advertising outside of word-of-mouth. ARGC has an effective website ( that is designed and powered by The Golf Channel, a leader in golf club websites. NGF notes that the well-designed website is easily found when searching the Internet for key terms. The ARGC website also includes information on several of the most important elements of a golf course website including up-to-date fees, scorecard, directions and contact information, and National Golf Foundation Consulting, Inc. Arlington Ridge CDD 20

29 there is the ability to book tee times on-line (for both members & non-members). However, the website could be improved with the addition of facility pictures (aerial & course layout), property description, a summary of upcoming events and information on hosting weddings, banquets and golf outings. Upon consolidation of CDD ownership, the club will expand revenue opportunities that are currently limited. Local Print Advertisements ARGC currently advertises in the Villages Daily Sun local newspaper, offering a round of golf + cart for a discounted rate. This program has been highly successful and attracts approximately 5,000 rounds per year. NGF encourages an active campaign. Current ownership does not appear to maintain an updated database of addresses these addresses would generally include the existing members and active (regular) daily fee golfers. Organized Events Organized events (commonly referred to in the industry as tournaments or outings ) are a great way to enhance overall business at a golf facility. These events encourage use by golfers who otherwise may not use a facility, and these events are typically accompanied by high ancillary spending, providing the ancillary amenities are adequate. As such, a high volume of organized events is desirable as long as the events are played at a fee rate comparable to, or in excess of the average play rate for no-events. ARGC is active in this area, with leagues and tournaments representing approximately 12% to 14% of annual play. Examples of the golf programming in place at Arlington Ridge GC. An active calendar of events correlates well with economic success in club operations. Fee Structure and Membership Program In its current operation as a semi-private country club with a mix of members and daily fee players, the fee structure at ARGC is also divided between membership and daily greens fees. A summary of Arlington Ridge Golf Club fees is shown in the tables below. More detail on fees at key competitors appear later in this report. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 21

30 Before 12:00 PM After 12:00 PM Summer / Fall 2017 Standard Public Rate $32.00 $22.00 Winter 2018 Standard Public Rate $42.00 $30.00 Range Fees Small Large $4 $7 * Golf carts are included in all golf rates Arlington Ridge Golf Club Resident Membership Rates 2015 / / / 18 CAGR Fiscal Year Fiscal Year Fiscal Year 2016 to 2018 Resident Initiation Fee $1,000 $1,000 $1,000 N/A Annual Dues & Fees Individual $2,336 $2,525 $2, % Each Additional HH User $1,558 $1,685 $1, % Annual Trail Fee Individual $844 $910 $ % Each Additional HH User $422 $455 $ % Annual Cart Fee Individual $1,055 $1,140 $1, % Each Additional HH User $528 $570 $ % Seasonal Dues & Fees Individual $1,622 $1,750 $1, % Each Additional HH User $1,082 $1,170 $1, % Seasonal Trail Fee Individual $595 $645 $ % Each Additional HH User $298 $320 $ % Seasonal Cart Fee Individual $747 $805 $ % Each Additional HH User $374 $405 $ % Other Operational Issues Other key issues related to the ARGC operation that was observed by NGF in this review: Pro Shop The level of merchandise sales in the golf shop is averaging less than $1.00 per round this is well below the industry standard of approximately $2.50 per round. Direct cost of sales (COS) was approximately 95% compared to an industry standard of 70% COS. There is additional gross revenue opportunities and net revenue upside through the improvement of the golf shop sales. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 22

31 Carts The 50 Yamaha gas carts used in the operation of the golf course are under lease, with the agreement ending in late NGF observed good condition of the carts in use, and consistent with a quality golf facility operation. It is assumed that upon acquisition, the new owner would have the opportunity to assume the cart lease, presently estimated to be about $18,000 per year. However, the NGF has observed that the pricing on the ARGC cart lease is well below the industry-expected $1,000 per cart per year standard, and thus the CDD should plan for a possible increase in cart expense upon lease renewal. Maintenance Equipment ARGM provided Down to Earth with an initial inventory of maintenance equipment and tools the specific items were identified in an inventory list as an attachment to the Golf Course Maintenance Agreement. Down to Earth assumed responsibility for the maintenance of the equipment up to $36,000 per year. DTE also assumed financial responsibility for the existing equipment leases on 5 items (3 leases ended in July 2015 and 2 leases expire in May 2019). Per the agreement, all equipment and tools on the ARGM equipment list will become property of DTE at the successful completion of the contract agreement on November 7, 2021 (to the extent they are still owned by ARGM). This is a significant point as any new owner of the course will be required to supply an entire fleet of golf course maintenance equipment, unless a similar agreement can be reached with another contractor. At ARGC, this can be accomplished by retaining / extending the DTE contract, or by obtaining new equipment via lease (ongoing expense) or purchase (capital cost) that must be accounted for in future operating projections. Non-Member Activity At present, the majority of activity and income at ARGC is derived from non-member activity in the golf-related revenues. Going forward, it is assumed by NGF that the new CDD ownership would continue with this structure and allow non-member use of the facility while at the same time seeking to grow the number of members. At present, only Arlington Ridge residents can join the club as a member. Consideration should be given to modifying the membership requirements and allowing non-residents to join the club (but at a higher rate than community residents). Food and Beverage Operation As previously mentioned, the primary food and beverage operation at Arlington Ridge is owned and operated by the CDD. Under this structure, the various ownership groups have different goals and this does not allow the F&B operation to maximize its potential. Once the ownership is consolidated under the CDD, the food & beverage operation can serve as a true revenue center to the golf operation. This will also enable the club to develop a stronger golf and meal package for attracting local events and outings. The only F&B-related revenue currently being realized by the golf course are the sales from the snacks available in the pro shop and on-course beverage cart. These revenues have been averaging under $1.00 per round. In the future, it will be possible to be creative in the use of the F&B venues to grow overall revenues such as offering a round of golf and a meal (breakfast or lunch) for a set rate. We anticipate that this type of packaging will be appealing in the Lake County market. The growth of the food and beverage operation is viewed by the NGF as a key goal for the ARGC. Industry standard expenditures for the F&B operation of comparable public-access (semi-private) golf clubs is between $6.50 and $10 per round. This would represent a significant increase over the current level of expenditures. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 23

32 FACILITY PERFORMANCE AND DATA ANALYSIS The Arlington Ridge Golf Club is operating with a mix of member and non-member revenue sources and an expense structure consistent with a public access facility club operation. The significant difference observed by NGF is the separate ownership and operation of the food & beverage venues by the Arlington Ridge CDD. If the facility were to be acquired by the CDD as proposed, then it is expected that the income for Arlington Ridge GC would include all revenues derived from the operation of a traditional golf facility meaning membership dues and fees, playing fees (green fees / cart fees), merchandise sales, and all food/beverage income. Direct expenses to operate the facility are currently borne by ARGM as the owner/ operator and include direct cost of goods sold, operations, maintenance (with a private vendor providing this service), utilities, and other general and administrative expenses. There are additional direct expenses resulting from various shared use agreements and offsets, some of which also have corresponding revenue offsets. As this report was prepared under the assumption of the CDD as the acquiring entity, the NGF has reviewed the historic economic performance of the subject ARGC from the perspective of basic on-site golf operations. As is typical in golf and club operations, much of the total expense is fixed in that the expenses must be borne regardless of how many rounds are played. The following paragraphs summarize the activity, revenue, and expenses for the ARGC facility based on the limited NGF review of operations and input from the ARGM owner/operator representatives. Rounds and Membership At the time of the NGF review, ARGC had seen a recent increase in rounds activity, growing from around 37,600 in 2015 to over 41,400 in Figures through February 2018 are 2% ahead of 2017 results and 19% ahead of the 2016 results. In comparison, the total U.S. has experienced a 9.7% decline in per-course golf rounds between 2005 and 2010, with a 3% decline from 2010 to 2014 and approximately 5% recovery through November Total average rounds per 18 holes now stand at 31,500 for golf courses nationwide. It is important to note that the Arlington Ridge GC greens were in extremely poor condition during the 2 nd quarter of 2016 and this adversely impacted play for at least 4 months. The situation was so bad that the club had to refund a portion of members dues and collect a refund from the DTE maintenance contract (more below). The overall rounds played for 2016 were down nearly 2,500 rounds versus the prior year. The loss of the greens also had a significant impact on revenues for The NGF has also observed that rounds activity at ARGC is divided into several categories, the majority of which involve member play and daily fee activity (in various forms). Over the last few years, ARGC has generated approximately 25% of total play from resident members, 10% from resident non-members and the remaining 65% from non-resident non-members. This is common at semi-private golf courses in this central Florida area and will be a key risk factor for any new owner/operator of ARGC. The table below shows the club-reported rounds totals for Arlington Ridge Golf Club from 2016 through late March National Golf Foundation Consulting, Inc. Arlington Ridge CDD 24

33 Arlington Ridge Golf Club - Rounds by Type Category 2016 % 2017 % % Member 9, % 10, % 3, % Resident 3, % 4, % 1, % Non-Resident 7, % 8, % 3, % Coupon Special 2 5, % 5, % 1, % GolfNow 4, % 6, % 1, % League 1, % 3, % 1, % Tournament 2, % 2, % % Comp % 1, % % Total 35, % 41, % 14, % 1 Through March 27, Ad in the Villages Daily Sun Source: Arlington Ridge Golf Club & NGF Consulting (April 2018) Rounds by Month The review of rounds by month shows the seasonality of ARGC. On average, 46% of all rounds are played in the four-month January-April season each year. Rounds drop in May and are lower during the warmer summer months. However, there is a shoulder season in October- November-December. The key finding from this is that the inventory of tee times available for sale at ARGC is not uniform throughout the course of a year, and that there is a limited window within which revenue must be earned to sustain operations. Arlington Ridge GC Average Rounds Played by Month ( ) Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Avg. Rounds 4,014 4,554 5,288 3,893 2,307 1,911 1,723 2,147 2,250 3,358 3,706 3,406 38,557 % of Total 10.4% 11.8% 13.7% 10.1% 6.0% 5.0% 4.5% 5.6% 5.8% 8.7% 9.6% 8.8% 100.0% Source: Arlington Ridge GC & NGF Consulting (April 2018) Capacity Issues A golf course s theoretical capacity can be determined mathematically by multiplying the number of available tee times (utilizing only the first tee as the starting hole) by the maximum number of players in a group, usually a foursome. This measure is not realistic for golf, but results in an absolute maximum of around 80,000 total rounds per year. A more realistic measure, a golf course s actual capacity takes into account the loss of tee times for weather, unplayable conditions, cancellations, no-shows, groups of less than four players, and other reasons a golf course would never actually play the theoretical capacity such as a desire to maintain course conditions and market realities. In estimating capacity, NGF Consulting has defined a round as one person teeing off in an authorized start, so 9-hole and 18-hole rounds are counted equally. In the Leesburg area market golf facilities are operating with a year-round golf activity, with some compaction in the high demand January through April winter season, with more limited activity in the hotter summer months. Based on the ARGC s course type and size, fee structure, weather conditions, down time for maintenance, NGF Consulting has estimated an actual capacity of about 50,000 rounds per year. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 25

34 Annual Members Membership at Arlington Ridge Golf Club includes only golf members all community residents have access to the other community amenities and a secondary non-golf category is not needed. Review of records shows current ARGC membership at 66 annual golf members and 41 seasonal golf members for the 2017/18 membership year (as of March 2018). Below is an illustration of the club s membership for the past 4 years. Arlington Ridge Golf Club Membership Summary 2015 to Current Fiscal Year Annual Members Seasonal Members Total Members Average Annual Rounds Per Member 2014 / / / / N/A Source: Arlington Ridge Golf Club & NGF Consulting (April 2018) Over the past 3 years, the number of members has been modestly increasing. However, the current figures are considerably higher than in 2014/15 when there were less than 70 total members. Additionally, the number of annual rounds generated by club members has been growing, with the members averaging approximately 100 rounds annually. With total membership revenue of approximately $300,000 in 2017 (including member cart trail fees), each member generated nearly $2,800 in membership fees and about $28.00 per round of golf. It was reported that nearly every golf member has a private golf cart. Based on the club information, it appears that about half the membership are single players and half are couples. There are approximately 650 completed homes in the Arlington Ridge community. Based on the number of members, less than 20% of the community residents are electing to join the golf club. Arlington Ridge GC Membership Review ( ) 2017 Annual Golf Members 79 Seasonal Golf Members 26 Total Membership Member Rounds 10,436 Total Collected Dues 1 (2017) $290,080 Dues Per Member 1 $2,760 Dues Per Member Round 1 $ Including member trail fees Source: Arlington Ridge GC Arlington Ridge GC Revenue The table below shows a condensed and rounded (to the nearest $1,000) summary of total operating revenue from defined sources at Arlington Ridge GC from 2015 through 2017, the last full year to review. The figures have been collapsed into the categories shown from a detailed master sheet provided by ARGM to NGF that provided sufficient detail for preparation of this report. ARGM ownership group indicated a willingness to provide additional financial detail as National Golf Foundation Consulting, Inc. Arlington Ridge CDD 26

35 requested (including when course under contract). The green fee total shown includes play by residents, non-residents, member guests, GolfNow bookings, leagues and tournaments. Club revenues were approximately $1.151 million in 2017, about 30% higher than the previous year. As we previously mentioned, the greens at ARGC were virtually unplayable for several months in 2016, leading to a decrease in rounds, a decrease in revenues and the necessity to refund to members nearly 25% of annual membership dues ($63,000 was refunded in 2016). However, the club recovered in 2017 and total rounds exceeded 40,000 for the first time since The Arlington Ridge Golf Club Summary of Actual Revenue ( ) Revenues Total Green Fees $460,000 $395,000 $521,000 Membership Fees & Dues 222, , ,000 Cart Fees 239, , ,000 Driving Range Fees 35,000 38,000 36,000 Merchandise + Pro Shop Snacks 35,000 52,000 77,000 Other / Disc. / Refunds (3,000) (63,000) 0 Total Revenues $988,000 $887,000 $1,151,000 Source: ARGM 2018 The table above does not include food and beverage revenue for ARGC, although F&B revenue is a common and important source of revenue at clubs (especially alcoholic beverages due to high margins). The current revenue for ARGC reflects only golf, with some sale of snacks and beer in the pro shop as noted. We estimate that the Arlington Ridge F&B operation could gross as high as $350,000 annually and this revenue is usually shown as part of the club operation. If the F&B at ARGC was included in revenue, we project ARGC would be grossing approximately $1.5 million annually. The standard in the U.S. for private clubs is $2.1 million in total revenue, while the standard for public courses is now at $1.0 million. Arlington Ridge is exceeding the public course revenue standard at present, even without a significant F&B revenue source. Arlington Ridge GC Average Revenue Analysis The total average revenue per round at ARGC was $27.79 in 2017, inclusive of all revenue sources. Of the total gross, approximately 93% of the figure is golf fees (memberships, green fees, cart fees, trail fees, tournament fees and the driving range), with the remaining 7% as ancillary revenue (golf shop sales and on-course beverage cart). This figure is very low but also does not include the primary food & beverage operation for Arlington Ridge. Arlington Ridge Golf Club Total Average Revenue per Round ( *) Year * Rounds 37,553 35,130 41,417 3,951 Total Green Fees $12.24 $11.24 $11.24 $13.92 Membership Fees & Dues $5.91 $7.32 $7.00 $11.31 Cart Fees $6.36 $5.92 $5.48 $6.04 Driving Range $0.93 $1.08 $0.87 $0.86 Merchandise + Pro Shop Snacks $0.93 $1.48 $1.86 $1.79 Total Facility Gross Revenue** $26.31 $25.25 $27.79 $34.07 Source: Arlington Ridge GC. *2018 is partial year through January **Total does not sum due to 2016 refund. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 27

36 Arlington Ridge GC Expenses The table below shows the total operating expenses at Arlington Ridge GC by category since The expenses shown in the table do not include direct cost of goods sold (not an operating expense), depreciation (not a cash item) or debt service on the existing bond (may not apply to CDD after acquisition). The NGF has made these adjustments for appropriate comparison to benchmarks. The figures have been collapsed into the categories shown from a detailed master sheet provided by ARGM to NGF that provided sufficient detail for preparation of this report. ARGM ownership group indicated a willingness to provide additional financial detail as requested (including when course under contract). The total labor amount pertains to golf operations only, while non-labor operating expenses includes items such as course supplies, repairs & maintenance, dues & subscriptions, office expenses, various fees (credit cards, payroll processing, accounting, professional, etc). The ARGC operating expenses have remained fairly steady during the 2-year period examined (excluding the $114,000 DTE chargeback for poor course conditions). The overall expense to operate ARGC is lower than the expense average for standard private clubs ($2.1 million annually) and higher than the standard for public golf courses ($1.1 million annually) in the nation. Direct expenses for personnel are the largest for golf facility operations. The standard threshold for the ratio of personnel expenses to total expenses is between 50% and 60%, excluding cost of sales. The golf course maintenance function is outsourced at Arlington Ridge for a flat fee amount and this impacts our ability to make personnel expenses comparisons. If we assume that personnel costs represent 55% of the maintenance budget, then the general personnel expenses at ARGC have run between 46% and 48% during 2016 and This amount is within the acceptable range for golf and club operations. NGF notes that the club s operating structure does not include expenses associated with ARGM oversight or administrative assistance. It is expected that these expenses will need to be included in the club s budget after CDD acquisition as either a salary for a club employee or management fee for a contracted operator (more later in this report). Arlington Ridge Golf Club Total Direct Operating Expense ( ) Expenses Total Labor $212,000 $222,000 Non-Labor Operating Expenses 133, ,000 Maintenance Contract 582, ,000 Property Taxes Data Not 14,000 12,500 Water Expense Available 58,000 40,000 Other Utilities 40,000 31,000 Advertising 9,000 10,000 Maint. Contract Chargeback (114,000) 0 Total Expenses $934,000 $1,042,500 Source: ARGM 2018 Review of Ancillary Operations (Concessions, Pro Shop and Practice Facilities) Arlington Ridge GC has ancillary revenue earned from the sale of golf shop merchandise, some snacks and beverages sold in the pro shop, an on-course beverage cart and the driving range. Total ancillary revenue to the Club from these sources totaled approximately $110,000 at ARGC in The NGF review of ancillary revenue at the Arlington Ridge GC follows below: National Golf Foundation Consulting, Inc. Arlington Ridge CDD 28

37 Arlington Ridge On-Course Food and Beverage Cart The course realizes food and beverage sales only from the on-course cart and this will represent only a fraction of the total food & beverage sales ARGC. The table below provides a summary of the on-course food and beverage sales at Arlington Ridge GC: Arlington Ridge Golf Club Food and Beverage Concession Course Basic Features 2017 Total Gross Revenue 2017 Revenue/ Round* U.S. Std. Rev./ Round* Direct Cost of Sales (COS) COS % of Revenue U.S. Std. COS* ARGC On-Course beverage cart $39,600 $0.96 $6.50* N/A N/A 40% *U.S. Standard minimum for 18-hole courses. $/round based on total starts. Arlington Ridge Merchandise Operations Arlington Ridge GC has a moderate selection of merchandise for sale to customers (including men s & women s apparel, balls, gloves and hats). The total gross revenue for merchandise at Arlington Ridge was approximately $37,000 in 2017, up nearly 25% from 2016 (when rounds were down due to course conditions). This volume equates to $0.90 per round of golf, an amount that is well below the national standard for pro shop revenue of $2.35 per round of golf. A review of pro shop performance at Arlington Ridge: Arlington Ridge Golf Club Pro Shop Merchandise ( ) Avg. Total Club PS Income $30,045 $37,334 $34,690 Direct Cost of Merchandise Sold (COS) $28,800 $36,643 $33,722 Net Pro Shop $1,245 $691 $968 COS % 95.9% 98.2% 97.1% Gross Pro Shop / Round $0.86 $0.90 Arlington Ridge Driving Range Operations Driving range operations accounted for nearly $36,000 in revenue in 2017 (a slight decrease from the prior year). Arlington Ridge has a 25-to-30 station natural grass range with ample tee space. Range balls are available by the bucket (small at $4 and large at $7) and an unlimited range membership at $39 per month for daily fee players. Unlimited use of the range is included for all club members. The range is currently generating less than $1.50 per non-member round over the past 2 years a figure that can certainly be increased. Practice amenities are important to golf courses for two reasons: Direct Revenue Driving ranges and other practice amenities have a relatively low cost of production and thus a large portion of any revenue that can be generated goes directly to profit. Indirect Revenue The presence of good quality practice amenities can also improve revenue by attracting more rounds and members and enhance F&B and merchandise sales. A good practice amenity can help sell more rounds and attract group events and tournaments. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 29

38 The Arlington Ridge Golf Club Financial Summary NGF Consulting s review of performance shows that the Arlington Ridge golf operation is generating approximately $1.15 million of revenue with total operating expenses of $1.042 million in 2017, resulting in a Net operating income of $54,500. The large losses from 2016 were largely due to poor course conditions and the corresponding drop in rounds leading to a required refund of a portion of member dues. It is important to remember that the golf course is a key amenity and vital sales tool for the Arlington Ridge development team and operating losses are factored into the overall site development program. In the future, the CDD will have to work to enhance revenue at the club in order to meet the basic expenses needed to operate the facility, and to cover any additional expenses that may be desired and noted by NGF. Arlington Ridge Golf Club Summary of Performance ( *) Total Revenues $988,000 $887,000 $1,151,000 Total Cost of Sales N/A $46,000 $54,000 Gross Profit $988,000 $841,000 $1,097,000 Total Expenses N/A $934,000 $1,042,500 Net Income N/A ($93,000) $54,500 Debt Service N/A $123,000 $119,000 Net After Debt N/A ($216,000) ($64,500) Source: ARGM 2018 SUMMARY ARLINGTON RIDGE GOLF CLUB Arlington Ridge GC is a good quality golf facility with modern design features located within a growing master-planned community in Leesburg, FL. The facility is offering a semi-private golf club within a community that will ultimately contain 1,041 residences at build-out, but with only about 15% of the current residents as club members. The facility has unique ownership characteristics that are part of its current operation that will have to be considered as part of the club s proposed acquisition. However, most of these issues relate to CDD ownership of appurtenant components, and thus would not apply to CDD acquisition but could complicate the transaction for another purchasing entity. Other findings from NGF s review of ARGC: ARGC offers a good quality mix of amenities that should be marketable in the local Leesburg / Lake County market. The golf course and club have a favorable reputation as a good golf option in this area and the facility is very welcoming to all players. The overall offering of the ARGC is directly comparable to the other semiprivate courses in the local area, with the price / value relationship being a significant factor in the market. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 30

39 The overall condition of the golf course playing area was fair to average at the time of NGF inspections, although we acknowledge inspections were completed at a dry time of year and during a defined drought. The course maintenance function is outsourced to a private vendor for approximately $600,000 annually (not including water). The golf course should be maintained to a defined set of golf maintenance standards that do not appear to be adhered to in Upon acquisition, the CDD may need to re-define its desired golf maintenance standards, possibly requiring an increase in annual golf maintenance expense. The overall condition of club facilities is good, with only a few minor items that NGF recommends be addressed to match CDD-desired conditions and maximize club marketability. At less than 15 years of age, most club elements are comfortably within the life-cycle periods on many of the key infrastructure items (Appendix A). The NGF has estimated a total of approximately $215,000 to $295,000 in one-time enhancements to the golf course, including drainage issues on holes 5 and 16, tee box improvements, new landscaping / beatification of the property and practice facility upgrades that NGF believes will greatly enhance the ARGC property and help the club achieve the revenue growth projections presented later in this report. ARGC generated total top-line revenue from all sources of $1.15 million in 2017, a generally successful year for the facility. The primary revenue sources at ARGC include membership fees (including trail fees), green fees and golf cart fees. Total revenue at ARGC is approximately 15% higher than the standard 18-hole public golf course; although ARGC revenue does not include any significant food and beverage income (F&B is included in the standard benchmark). Total expenses needed to operate the ARGC facility totaled $1.042 million in 2017, including all direct operating expenses and direct cost of goods sold, but excluding income taxes, depreciation and debt service. Arlington Ridge GC has a modestsized staff which may require some modification after CDD acquisition (depending on desired service levels). The facility labor expense does not currently include the oversight services provided to the club by ARGM senior staff. The golf course maintenance is outsourced via contract to a private, third-party vendor called Down to Earth (DTE). The total club net operating income before income taxes, depreciation and bond debt service was approximately $54,500 in However, upon acquisition, CDDdesired service and quality may result in expense savings in some areas and increased costs in other areas of the operation. Considering these changes, the NGF is estimating that ARGC will have to earn at least $1.3 million in total revenue for the club to break even under CDD ownership. This level of revenue is very much achievable at this location and in this market environment. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 31

40 External Factors Affecting Area Golf and Country Club Operations The subject Arlington Ridge Golf Club is operating as a semi-private golf facility within an agerestricted residential community in the Leesburg / Lake County, Florida area. In this section NGF Consulting will provide an overview of important factors that characterize the local area golf and club market. MARKET OVERVIEW The Arlington Ridge Golf Club is part of a master-planned community that will include approximately 1,040 residential units at final build-out in central western Lake County (within the city limits of Leesburg). Arlington Ridge GC is situated within the Arlington Ridge gated community in a growing region of north-central Florida. The Leesburg area is technically part of the Orlando Kissimmee Sanford Metropolitan Statistical Area (MSA) but the City of Orlando is not a factor in the local golf market. In addition to Leesburg, the primary cities in Lake County include Clermont, Eustis, Mount Dora and Tavares (the County seat). Lake County had approximately 297,000 residents in 2010 and has grown to nearly 334,000 residents in 2017 (with the current population of Leesburg at approximately 22,400 people). This market area has become more and more popular with retirees this can be attributed the main Florida attractions, the lack of population & congestion, growth of the Villages and the low cost of living (relative to other parts of the state). The region includes a full range of activities to attract residents, seasonal residents, and tourists, including activities present inside Arlington Ridge such as golf, tennis and swimming. The population total in and around this central Florida area can be misleading due to the high number of seasonal (winter-only) residents that populate the area s housing units. Demographic Analysis The table in Appendix B summarizes key demographic measures and trends that relate to golf participation. NGF key observations include: Local / State / National Summary Demographics Radials County State Total Summary Demographics 5 Miles 10 Miles 20 Miles Lake County Florida U.S. Population 2010 Census 20,085 87, , ,052 18,801, ,745,538 Population 2017 Estimate 21, , , ,917 20,631, ,310,011 Population 2022 Projection 25, , , ,063 22,619, ,744,388 CAGR % 3.37% 3.53% 3.16% 1.86% 0.82% Median HH Income (2017 Estimate) $46,596 $45,649 $51,774 $51,447 $52,517 $59,240 Median Age (2017 Estimate) CAGR = Compound Annual Growth Rate Demographic Summary Key findings from the review of permanent resident demographics: National Golf Foundation Consulting, Inc. Arlington Ridge CDD 32

41 The permanent population in the area surrounding Arlington Ridge GC is modest in size, but there is growth observed. This growth tends to be stronger at present in the larger Arlington Ridge 20-mile market area that includes the growing Villages retirement community. The demographic characteristics of the immediate area show a considerably older population (compared to the State of Florida). Median household income is lower in the immediate Arlington Ridge market as compared to the State, as this reflects a combination of retirees and working population. Demographic data shows approximately 2,400 households within 10 miles of ARGC and 500 households in the defined 5-mile market with annual incomes in excess of $150,000 per year, a key sweet spot for golf club member prospects. We would normally use households with annual incomes in excess of $200,000, but most retirees will show well less income. Market Area Strengths Lake County is a growing Florida location, with relatively affordable real estate The region still retains vast areas of open land and possibility for additional residential growth (especially south of Arlington Ridge) The area is continuing to attract a growing retirement market to the numerous HOPA (Housing for Older Persons Act) communities Market Area Weaknesses Small total population limits the market for Club membership (as does the mandatory residency requirement) The high concentration of more modest-income retirees creates competition for members and daily fee players this is a very price-sensitive market The seasonal population reduces demand in summer Very limited commercial and employment activity in close proximity Key Economic Factors The Arlington Ridge GC is located in Leesburg, Florida, a small but growing community located in central Lake County. Lake County is part of the Orlando Kissimmee Sanford MSA but the northwest part of the county has different economic indicators than the MSA s urban areas. The area is characterized by the growing retirement market but is also proximate to the Orlando metropolitan area via the Florida Turnpike. Recent growth has continued to be heaviest in and near the Villages (the majority of the Villages is in adjacent Sumter County). A summary of Lake County population since 1990: Lake County Population Year Total Population % Change by decade , , % , % , % National Golf Foundation Consulting, Inc. Arlington Ridge CDD 33

42 Following are some key observations highlighting the economy, transportation, and visitation characteristics of the Leesburg/Lake County area and the possible impact on ARGC operations: The Leesburg area economy is small with the majority of employment is focused on retail, services and healthcare (constituting more than 50% of employment). For the larger trade area of Lake County, the economy is similar to Leesburg and is dependent on the same primary industries. Leesburg s largest employer is the Leesburg Regional Medical Center and employs nearly 1,800 people. Leesburg and Arlington Ridge are proximate to the Florida Turnpike (5 miles south) and to Interstate 75 (~23 miles northwest). These roads, as well as US Highway 27, are convenient for Arlington Ridge and will serve the bulk of the non-resident players. Climate - As with any outdoor recreation, weather will have impact on golf participation. NGF data estimates that almost all golf is played with temperatures between 50 and 90 degrees Fahrenheit. The data suggests that golf can be played year-round but can be interrupted by periods of extreme summer thunderstorms and lightning. Peak summer heat generally arrives in early June and continues to early October. The combination of high temperatures and high humidity result in significant thunderstorm activity from June to September. This part of western Florida records more lightning strikes per area than any other region in Florida or the U.S. NATIONAL GOLF INDUSTRY OVERVIEW While socio-demographic, financial and cultural headwinds certainly persist for golf, the industry continued its macro trend toward stabilization in The game remains popular and is fortunate to have a deep well of interested prospects. While golf s pay-for-play green fee revenues and other spending will always be vulnerable to outside forces such as weather and the economy, its chief challenge remains getting more of those non-golfers who express interest in playing ( latent demand ) to actually give golf a try, and converting more beginners into committed participants. Still, some socioeconomic and demographic trends continue to present challenges for golf operators. For instance, golf is having trouble attracting and retaining young adults (i.e., Millennials); though this segment continues to account for a large percentage of annual play and spending, factors such as debt and competing recreational activities have suppressed golf demand from this segment. The smartest, best-managed and most innovative golf facilities will win market share and have the best opportunity for growth. Key Trends in Demand: Participation - The national golfer number (participation) continues to show some net attrition, primarily among occasional/less committed golfers. Overall, NGF survey research indicates that in 2016 there were 23.8 million people in the U.S. that played at least one round of golf in the prior year, about ±1.2 million fewer than in However, the vast majority of core golfers remain in the game. Rounds Played - Nationally, rounds played were down 5.6% year-over-year through March 2018, at least partially attributable to weather events. For Florida overall, rounds were down 6.6%, despite a nearly 19% decline in September (Hurricane Irma). The Greater Orlando market was up 2.7% for the 12 months ending March 2018, with a 4.5% increase in March 2018 over March (data source: Golf Datatech see Appendix C). National Golf Foundation Consulting, Inc. Arlington Ridge CDD 34

43 Baby Boomer Effect As Baby Boomers age and retire over the next 15 years, we expect to see a measurable increase in total rounds played in the U.S., with particular effect in retirement locations like Central Florida. This generation (born between 1946 and 1964) is presently 53 to 72 years old. About 6 million of them are golfers; that s about 1/4 of all golfers, and they currently play about 1/3 of all rounds. Boomers started turning 65 in 2011, and already 1 million+ golfing Boomers have reached retirement age. The Social Security Administration reports that 10,000 or more Boomers retire every day. And ~300,000 Boomer golfers will turn 65 each year for the next 15 years. Retired Boomers (age 65+) play about twice as much as younger, non-retired Boomers (40 rounds vs 21 rounds). Golf Course Supply The correction in golf course supply continued in 2016 at a level comparable with the previous several years. According to NGF data, since the market correction in golf course supply began in 2006, there has been a cumulative net reduction of golf courses equivalent to 5.9%. For perspective, golf supply grew by 44% in the previous 20 years ( ). Closures continue to be disproportionately high among value priced (peak green + cart fee below $40) facilities; in 2016, nearly 70% of closures fell in this category. Many golf courses shutter due to competitive dynamics; increasingly, however, golf courses especially in geographies where developable land is at a premium are closing because residential or commercial is a much higher and better use. This phenomenon has been particularly acute in areas of Central Florida, as 9 golf courses ( hole equivalents) have closed in Lake County since Few markets in the country have lost as many golf holes during that time. This move toward supply/demand equilibrium is expected to continue for several years, and should positively impact an improved Arlington Ridge GC. Other Measures of Health Other important metrics to consider when measuring the health and trajectory of golf include: Investment in Facilities: Investment in major renovation projects has replaced new construction as the largest source of U.S. golf course development activity. NGF tracked just under 1,000 major renovations completed since 2006, representing at least $3 billion. New development activity also remains in the pipeline, with NGF tracking 37 facilities currently under construction and another 55 in planning stages as of the autumn of Engagement: Several years ago NGF developed a scale to gauge engagement/ passion for golf. NGF annual golfer survey research indicates that the number of engaged golfers has remained steady at 20 to 21 million for the past four years. But the proportion of engaged golfers has increased from 78% to 85% over this period. These engaged golfers are responsible for ±95% of rounds played and equipment spend. Those more engaged are significantly more likely to continue playing. Beginners: The number of beginners rose to a record 2.5 million in 2016, surpassing the record set in 2000 when Tiger Woods was in his prime and drawing newcomers to the game in unprecedented numbers. Since 2011, the compound annual growth rate (CAGR) in beginners is an impressive 10.8%. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 35

44 Off-Course Participation: Driven primarily by the popularity and growth of Topgolf, a non-traditional form of golf entertainment, there were an estimated 20 million offcourse (involves only those activities that involve hitting a ball with a golf club) participants in 2016, about 40% of whom did not play on a golf course. Latent Demand: Overall interest in playing golf remains very high. NGF survey research indicates that the number of non-golfers who say they are very interested in taking up golf has doubled over the last five years, growing at a CAGR of nearly 15% and now totaling 12.8 million people. There are an additional 27.8 million nongolfers who say they re somewhat interested in taking up the game. Together, these two cohorts represent about 1.7 prospects for every existing golfer. Local Club Market The data displayed below shows the NGF-estimated club market in the local Arlington Ridge area, as compared to the State and total U.S. The data shows a more favorable market for memberships close to Arlington Ridge (higher demand index), with a large overall market within 20 miles of the club in Club Demand Indicators Local Area Golf Demand 2017 Arlington Ridge GC 5- Mile Ring Arlington Ridge GC 10-Mile Ring Lake County Florida U.S. # of Golfing Households 2,157 6,240 20,575 1,154,776 17,069,440 # of Other Club Households* 863 2,496 8, ,910 6,827,800 Projected Total Rounds 83, , ,152 38,657, ,634,000 Comparative Indices Golf/Club Household Index Rounds Index Source: NGF, *Other club households include potential tennis and social members (40% golf households) There are an estimated 3,000 prospective country club families living within five (5) miles of Arlington Ridge GC, with the potential to demand as many as 84,000 rounds of golf each year. Local Golf Supply The following are some summary NGF observations regarding key golf supply measures for the local golf market. Please see the supporting tables in Appendix B. The Lake County area has adequate supply to meet the demand with 32 total golf facilities (4 private) comprising 639 total holes (63 private). The data show a large per-capita supply of private golf, with 56% fewer permanent households in the County available to support each 18 holes of golf (Index = 44), although the private club market does seem more undersupplied (favorable) than public (Index = 120). Golf supply overall is unfavorable in the market (both public and private), with fewer households to support each golf course and thus the market requires the influx of seasonal residents, tourists and other outside sources to support golf operations. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 36

45 Golf Supply Summary Arlington Ridge GC 5- Mile Ring Arlington Ridge GC 10- Mile Ring Lake County Florida U.S. Total Golf Facilities ,006 15,061 Public Golf Facilities ,279 Private Golf Facilities ,782 Total Golf Holes , ,610 Public Golf Holes , ,778 Private Golf Holes ,280 68,832 Household / Supply Ratio SITE: Arlington Ridge Golf Club Arlington Ridge GC 5- Mile Ring Arlington Ridge GC 10- Mile Ring Lake County Florida U.S. Households per 18 Holes: Total 2,082 3,304 3,850 7,214 8,802 Households per 18 Holes: Public 2,290 3,604 4,271 12,101 12,063 Households per 18 Holes: Private 0 39,642 39,049 17,862 32,559 Households Supply Index: Total Households Supply Index: Public Households Supply Index: Private Source: National Golf Foundation, 2017 Growth of New Facilities There had been considerable new golf facility development within a 20-mile radius from Arlington Ridge in the last 25 years. However, there has only been only six new facilities developed in this area (in addition to Arlington Ridge since 2005 and 5 of these courses were part of the Villages. In the previous 10-year period ( ), 9 new facilities were developed (about 15% of the golf inventory), with 4 being developed by the Villages community. This growth has contributed to the increasing competitiveness of the golf market and clearly illustrates the dominant position of the Villages as the largest golf community in the area (and perhaps in the US). Proposed New Golf Courses The NGF database shows no other new golf course construction projects in planning or ongoing in the Lake County area as of April However, the are several new courses currently in planning at the Villages community for the next 2 to 3 years. Closed Golf Courses In keeping with a current trend, Lake County has seen the closure of 9 golf facilities since Only two closed courses were 9-hole facilities - the par-3 Twin Lakes Reserve & Golf Club in Umatilla and 9 of the 18 holes at Bishop s Gate Golf in Howey-in-the-Hills. Additionally, five of the 9 closed courses were affiliated with real estate developments 3 of these courses included projects in the Clermont area (Palisades CC, Sugarloaf Mountain Golf & Town Club and the recently closed Legends Golf & CC). It is interesting to note that only residential community courses have closed in past 10 years (versus standalone golf courses). The most recent area closure was the Legends Golf & Country Club, with the courses closing at the end of March However, it is expected that the course will have a new owner and re-open in the near future. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 37

46 Golf Course Market Supply / Demand Summary Using the most basic measures of golf demand and supply, we note four possible combinations for any given market area: (1) favorable demand and favorable supply ( opportunity ); (2) favorable demand and unfavorable supply ( active ); (3) unfavorable demand and favorable supply ( inactive ); and (4) unfavorable demand and unfavorable supply ( saturated ). The review of data for the Arlington Ridge GC area suggests an active market, with a favorable rounds index and unfavorable household/supply ratio. Further, these measures are enhanced by the transient markets that contribute significant golf demand during the year (seasonal residents & tourists) and can be a strong source of rounds volume for ARGC in the future. Latent Demand People who express an interest in playing golf but have not yet started include beginners, former golfers (gave it up), and those who have never tried. The demographic profile of latent demand tends to be more female and younger than the population as a whole. Surveys show these golf-interested non-golfers cite several barriers to entry in golf, including the cost and social aspects (no one to play with). The latent demand population is comparable to the golfer population, and NGF estimates 3,000+ in the 5-mile market, with over 10,000 within 10 miles of ARGC. Golfers per 18 Holes NGF has also evaluated the relative strength of these markets with a comparison to a national target of golfers per golf course within 10 miles of a golf course. In its 2009 publication The Future of Public Golf in America, NGF hypothesized that one predictor of a golf course s success was the number of golfers per 18 holes within a 10-mile radius, with 4,000 identified as a key target for projected financial stability. As shown in the table below, the local Arlington Ridge 10-mile market is well below this target, suggesting over-supply of golf courses. In fact, the entire State of Florida has a low golfer-to-golf-course ratio, showing the importance of the seasonal resident and tourist populations that are needed to sustain golf operations in the state. Market Est. No. of Golfers Total 18-H Equivalent Golfers per 18 holes Arlington Ridge GC (10-Mile Ring) 8, Total U.S. Threshold for Successful Public Golf 4,000 Aggregate Lake County Area 29, Aggregate State of Florida 1,650,221 1, ,449 Source: National Golf Foundation LOCAL COMPETITIVE GOLF MARKET NGF has identified seven key comparable facilities that stand out as being the most important competition to ARGC as it is operated in These facilities are primarily semi-private operations (publicly accessible) and each one is developed in conjunction with a residential community (the Mission Inn property has an on-site resort and a residential community). We note that these facilities offer a variety of fees and amenities, but all are open and available to the public year-round and are generally competing within the same local market strata. The only exceptions are the Mission Inn property (which draws the majority of its play from the resort, transient golfers and the on-site residents) and the 9-hole Bishop s Gate G& L Community (only accessible to members). This list was not meant to be totally exhaustive or to account for all the potential competition to ARGC. Rather, NGF Consulting is presenting this information to offer a frame of reference in evaluating actual performance of the subject ARGC in recent years. At the end of this section, we provide our significant findings regarding the competitive market. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 38

47 Competitive Golf Facilities Map National Golf Foundation Consulting, Inc. Arlington Ridge CDD 39

48 Summary Information The following tables provide summary information for the Arlington Ridge Golf Club and a selection of other area golf facilities. Arlington Ridge GC and Primary Key Competitors Summary Information Golf Facility Location Type Year Open Par / Slope Front Tee/ Back Tee Location Relative to ARGC* Arlington Ridge Golf Club Leesburg DF - 18H / 117 4,877 / 6,633 - The Plantation Golf Club Leesburg DF - 36H Otter Creek Course / 119 3,745 / 6,036 Crane s Roost Course / 115 4,398 / 5,863 The Monarch at Royal Highlands Leesburg DF - 18H / 119 4,278 / 6, Bishop s Gate Golf & Lakeside Community Mission Inn Resort & Club Howey-inthe-Hills Howey-inthe Hills PR 9H / 126 2,673 / 3, DF - 36H 5.91 El Campeon Course / 142 4,811 / 7,015 Las Colinas Course / 133 4,922 / 7,230 Pennbrooke Fairways Golf Club Leesburg DF - 27H The Sanctuary Course 9 Reg 35 / --- 2,065 / 3,036 The Oaks Course 9 Exec 30 / --- 1,006 / 1,688 The Meadows Course 9 Exec 32 / --- 1,050 / 1,591 Clerbrook Golf & RV Resort Clermont DF - 18H / 107 3,852 / 5, Continental Country Club Wildwood DF - 18H /123 4,159 / 6, *Air miles from subject site, rounded to half-mile; actual driving distances will likely be greater. Type: DF Daily Fee; PR Private National Golf Foundation Consulting, Inc. Arlington Ridge CDD 40

49 Competitive Fee Analysis Summary Operating Data Arlington Ridge Golf Club and Primary Competitors Golf Facility Estimated Rounds 2017 Current 18H Prime Time Green Fee & Cart WD/WE Current 18H Twilight Green Fee & Cart WD/WE Current 9H Prime Time Green Fee & Cart WD/WE Winter H Prime Time Green Fee & Cart WD/WE Arlington Ridge Golf Club 41,417 $36.68 $ $42 Plantation Golf Club 70,000 $35.30 $ $41 The Monarch at Royal Highlands 45,000 $42.99 $25.99 $23.99 $45.99 Bishop s Gate Golf & Lakeside Community 1 N/A $50.00 $ $50.00 Mission Inn Resort & Club 60,000 El Campeon Course $89 $54 None $129 Las Colinas Course $69 $44 None $99 Pennbrooke Fairways Golf Club 44,000 $35.50 $23.36 $20.10 $38.00 Clerbrook Golf & RV Resort 30,000 $23.00 $23.00 $13.00 $23.00 Continental Country Club 35,700 $20.00 $10.00 $10.00 $ Bishop s Gate allows only guest of member or resident pricing Season Passes & Membership Offerings Arlington Ridge Golf Club and Primary Competitors Membership Trail Fees Annual Cart Fee Golf Facility Single Couple Single Couple Single/Family Arlington Ridge Golf Club 1 $2,620 $4,370 $945 $1,415 $1,185 / $1,775 Plantation Golf Club 2 $3,588 $6,456 Included Included N/A The Monarch at Royal Highlands 2 $4,644 $6,108 Included Included N/A Bishop s Gate Golf & Lakeside Community 2 $2,000 $3, Mission Inn Resort & Club 3 $4,380 N/A N/A Pennbrooke Fairways Golf Club $2,401 $3,189 Included Included $400 Clerbrook Golf & RV Resort 2/4 $2,460 $3, Continental Country Club 2 $2,780 $3,972 Included Included Pricing does not include $1,000 initiation fee. 2. Pricing includes annual trail fee 3. Pricing does not include one-time initiation fee of $24,000 for residents or $32,000 for non-residents 4. Club allows membership of 1 to 12 months ($205 per month single & $278 per month couple) National Golf Foundation Consulting, Inc. Arlington Ridge CDD 41

50 General Findings Local Supply NGF Consulting research indicates the following general findings regarding the supply of golf facilities in the Leesburg / Lake County market. The local market area includes a variety of golf facilities that were developed in conjunction with retirement-oriented residential communities. The general pricing falls within a reasonably narrow range for both daily fee players as well as members. Anecdotal evidence suggests that, both regionally and nationally, golfers are playing fewer rounds, as well as shifting their play to less expensive rounds, such as twilight. Additionally, large outing/tournament and banquet business is off at many golf facilities. As was the case in most markets nationally, local golf operators reported a general decline in rounds activity, with a peak around , and severe drops in 2006, 2010 and 2013, with recovery in 2015 and decline again in However, it appears that 2017 was a better year as well. The decrease in per-course activity levels, both regionally and nationally, has been attributed to several factors, including emerging socio-economic trends and a general oversupply of public golf courses fighting for market share at a time when golf demand is flat. Total rounds activity among golf courses in this market tends to be between 38,000 and 42,000 rounds per 18-hole course annually (Appendix B). In addition to reduced activity, there has been downward pressure on green fees in this market area. The subject Arlington Ridge GC has green fees at or near the market average both currently and in peak winter season. All the facilities reviewed by NGF offer a form of pre-paid green fee program (referred to as memberships). These programs have many variations and discounts to suit the needs of the golfer, but all are seeking to lock in players at one specific course. With rates at approximately $5,800 per year for a couple (including the trail fee), the subject Arlington Ridge GC is priced at the same level as the primary competitors (Plantation Golf Club, Monarch at Royal Highlands, Pennbrooke Fairways & Continental Golf Club). All members at Arlington Ridge GC must be community residents and less than 20% of the residents are currently members. Other local competitors do not have this residency requirement and attract members from a broader potential target market. The NGF believes that the Arlington Ridge membership could be expanded if nonresidents could join the club however, there should a pricing differential between residents and non-residents. The NGF expects that Arlington Ridge GC would be able to generate activity in the 44,000 to 48,000 rounds per year range. However, the cost-sensitivity in this market is significant and future pricing must be developed based on market conditions as well as the quality of the product being provided. It is also assumed that all rounds would be cart rounds, except for a few off-season walking rounds allowed. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 42

51 Overview of the Villages Retirement Community The Villages is a master-planned community with its southernmost units located approximately 10 miles from the Arlington Ridge GC. The community has more than 33,000 total acres of land area and is found in parts of Lake, Sumter and Marion Counties. New expansion of the community is expected with the recent acquisition of land located at CR 470 and the Florida Turnpike (5.0 miles from ARGC) that is proposed to include 4,500 new residential units. The Villages has grown to the largest retirement community in the US since its inception in This project is a series of community development districts that are extremely well amenitized to provide an active adult lifestyle. At final build-out, the Villages is projected to have over 60,000 total residences (with at least 5,000 new units remaining to sell). Between 2010 and 2017, the population of the Villages grew by nearly 33% - to over 125,000 residents. Throughout the development of the Villages, the developer has used golf as the centerpiece of the community. One of the key marketing phrases used has been Free Golf for Life for all residents and this has been extremely effective. At present, the Villages has 38 nine-hole executive length courses. These courses are owned and operated by the Village Center Community Development District and the Sumter Landing CDD (in essence, the residents of the Villages). There is no fee for residents to walk the executive courses. A trail fee is required for use of a golf cart and can be paid per round ($4.00 per round for each person), on a semiannual basis ($106) or an annual basis ($141). The operating costs of these golf courses are covered via a monthly amenities fee paid by all community residents. In addition to the executive courses, the Villages also includes 12 regulation-length golf courses 10 of the courses have 27 holes and the remainder are 18 holes. Residents pay a greens fee for access to the championship courses and have the option to purchase a Championship Priority Golf membership. This membership provides priority access to tee times, reduced green fees and use of all country club pools and spas in the Villages. Listed below is a pricing summary for the championship courses, the priority golf membership and a map of the various Villages golf courses. The Villages Country Club Green Fee Ranges by Season (2018) 1 Jan 1 April 30 May 1 Sept 30 Oct 1 Dec 31 Priority Member $29 - $45 $21-34 $26 - $40 Resident Member $46 - $62 $28 - $41 $38 - $52 Resident Guest $56 - $72 $34 - $47 $47 - $61 Non-Resident $66 - $82 $37 - $50 $52 - $66 1 Fees are based the individual course selected. Cart fees are in addition to the rates above - $6 for residents & $12 for non-residents National Golf Foundation Consulting, Inc. Arlington Ridge CDD 43

52 The Villages Championship Priority Golf Membership Pricing Single Double 6 Months 12 Months 6 Months 12 Months All Clubs $590 $740 $740 $925 4 Clubs $550 $680 $680 $845 3 Clubs $490 $610 $610 $765 2 Clubs $445 $555 $555 $695 National Golf Foundation Consulting, Inc. Arlington Ridge CDD 44

53 The Villages community is well-known in the area but their influence on the local golf market is very insular. It is an extremely active lifestyle community and the on-site courses are very well used by the residents. For the 38 executive courses, only residents (and their guests) have access to these facilities. For their 12 championship courses, non-resident play is allowed but was reported to be a very small percentage of total play (and almost exclusively in the summer). Continued growth within the Villages is a certainty the development team continues to acquire additional property with recent acquisitions close to the Florida Turnpike. According to a Villages representative, they currently have enough property for an additional 18,000 homes. They also plan to open 2 new executive courses in 2019 and recently announced plans to develop another championship course in the future. Based on our discussions with representatives from the Arlington Ridge Golf Club and other courses in the local area, residents of the Villages are attracted to other properties this is due to both the level of activity at the Villages courses and the pricing structure at their regulation length courses (called their country clubs). Several courses (including Arlington Ridge) run a coupon special in the Villages Daily Sun newspaper and this is successful in attracting this market. For the Arlington Ridge GC, this represents approximately 5,000 rounds annually. EXTERNAL FACTORS SUMMARY The Arlington Ridge community and homeowners should understand that despite the market findings, there are still external market (uncontrollable) challenges for strong economic performance of the Arlington Ridge GC. Below is a summary of our market findings: The Leesburg / Lake County resident demographics are generally favorable for strong golf and club demand, although the CDD should expect some external market challenges for continued strong economic performance of the subject Arlington Ridge GC. Incomes in the immediate Arlington Ridge market area are lower than the State, but this measure is mitigated by the presence of a large retiree population living off a nest egg, as opposed to wages. NGF is estimating upwards of 800 golf and/or country club prospect families currently living within five miles of ARGC. Leesburg and Lake County are experiencing stronger population growth on a percentage basis than the State of Florida or the US. However, the small size of Leesburg provides a limited immediate market opportunity. A key positive for the area is Lake County s continued popularity as a desirable destination for out-of-area residents to retire and other Florida residents to re-locate. Lake County has the appeal to continue to attract interested prospects, providing ARGC an increasing base of potential new residents and members. The seasonal nature of the market and its economy provides advantages and challenges to continued club and community operations. From a macro perspective, we note that contrary to popular belief, golf is not dying and we expect new prospects for golf and club communities in Lake County to be prevalent (especially among the retiree market). However, ARGC may find that in order to remain economically viable, the club will have to rely on customers who are not residents of the Arlington Ridge community, meaning that services like casual dining should also be present. As noted, the ancillary amenities are currently owned by the CDD making acquisition of ARGC by any other entity possibly problematic. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 45

54 On the negative side, there is a clear un-favorable demand/supply ratio in the local market, with far more golf courses per-capita than the total U.S. In addition, this is an extremely price sensitive golf market making it difficult to establish player loyalty. Based on feedback from local golf courses, there has been a recent decline in rounds activity and increasing pressure to reduce fees to attract market share. Many of the area s golf courses are resorting to deep discounts and pre-paid green fee arrangements to attract adequate activity, increasing downward pressure on prices. ARGC is one of the newer golf courses in this local market. However, aggressive pricing at competing daily fee courses could cause defection of market share at ARGC if the product isn t materially better than the competition. The NGF has not observed demonstrated demand for high-priced public golf in this local market. The national trends in golf facility operations show increasing expense to operate golf courses and country clubs, particularly in golf course maintenance. Further, while our research notes a general stabilization in the growth of golf rounds demanded, there are considerably more golf facilities present to divide up the total volume of play. The golf course industry as a whole has experienced a reduction in rounds and revenue since 2000, and this has been felt by all courses in this market. The other public courses in the market experienced declines in play but signs of improvement are underway. There is opportunity to increase rounds, membership and revenue at the ARGC, but new investment in the facility, staff and marketing will be required. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 46

55 NGF Findings & Recommendations for the Arlington Ridge CDD Based on our evaluation of the Arlington Ridge Golf Club operation and condition, the area market, options for improvement, and the District s consideration to potentially acquire the facility, the NGF presents the following recommendations to assist the CDD in formulating a course of action for the acquisition. The goal of these recommendations is to help the CDD identify the parameters within which an acquisition can be successful and to help document the best strategy for this success. These recommendations have been organized into: (1) Preliminary findings; (2) Physical recommendations; and (3) Operational recommendations. PRELIMINARY ACQUISITION CONCLUSION In considering a course of action for the Arlington Ridge CDD, we first review the key findings made by NGF in this analysis. The NGF study suggests: The basic supply/demand equation is expected to improve in the coming years, as an additional 390+/- are added to the community s 650+/- existing residential units. Additionally, there are a variety of other residential communities in the immediate local area that are also growing and should provide new customers for ARGC. The District s success with the club will depend on the ability to attract greater penetration of members from within the Arlington Ridge population, while also attracting destination golfers from a wider geographic area. The Arlington Ridge GC infrastructure is presently in good condition, and new investment in upgrades will likely be minimal for the next several years. The NGF identified approximately $215,000-$295,000 in recommended upgrades, the most significant of which includes enhanced landscaping and repair of Hole #16. The continued operation of ARGC will require the presence of a qualified club general manager to oversee golf course operations. At present, ARGM is providing this service for ARGC, and thus key senior staff must be included in any new ARGC operating budget after acquisition. Further, the equipment used to maintain the golf course will be the property of the contractor upon the conclusion of their contract. This will put ARGC in a vulnerable position to acquire maintenance equipment if the contract with Down to Earth is not renewed, unless a similar contract can be reached with another contractor. Arlington Ridge GC will probably function best as a mid-market semi-private country club with broad appeal and a something for everyone operation. The NGF recommends against a lower-end public golf operation and against a high-end premium club operation (especially in such a cost-conscious market). This facility is capable of supporting a higher level of rounds and revenue. However, there needs to be improvement in marketing, especially electronic marketing, to sustain the non-resident golfer influx required to enhance revenue at ARGC. The NGF review of this market and subject facility suggests that there is opportunity for the Arlington Ridge GC, under CDD ownership, to produce revenues sufficient to sustain basic dayto-day operations and set aside some amount of capital to save for future upgrades. However, we do not project that the revenues generated from the continued operation of the ARGC will be sufficient to cover to cover large-scale capital costs associated with acquisition, upgrades and additional working capital, thus requiring some external funding (possibly CDD assessment). National Golf Foundation Consulting, Inc. Arlington Ridge CDD 47

56 Given this reality, NGF recommends that the District proceed with the purchase under the expectation that the golf course operation will not be able to pay off all acquisitionrelated expenses. Even with no direct acquisition expense tied to the golf operation, the District s economic interest in the facility will continue to be at risk for bad weather and other unpredictable factors that may reduce revenue, increase costs, or limit funds available to sustain operations. Any contribution from an alternative funding source separate from the golf facility used to amortize the initial capital investment will help to mitigate this risk and help the facility achieve break-even shortly after acquisition. We note that the ability to increase various member and non-member uses of the facility will help support all club operating expenses. PHYSICAL RECOMMENDATIONS The NGF inspection of the Arlington Ridge GC showed a golf facility in generally good overall condition most capital needs are minor at this time as the club elements were within their expected life cycles. We would recommend that the course maintenance procedures be modified to enhance the overall conditioning this suggested modification is projected to increase the operational budget by approximately $70,000 annually to complete some specific verticut and aerification procedures and additional part-time maintenance staff. If the District acquires the Arlington Ridge GC, we also recommend that it set up a capital replacement reserve to fund future improvements (if net revenues after expenses are available). The total NGF-recommended improvements for ARGC are estimated to be $215,000-$295,000, and include key items that we believe are needed to bring the facility to its ideal level of condition and marketability, and achieve the revenue projections made in this report. Short-Term Upgrade Needs The NGF-identified wish list of short-term improvements that will enhance the overall presentation and quality of the club and its amenities are shown below, with NGF-estimated costs. The preliminary NGF recommended upgrades include (in priority order): The Arlington Ridge Golf Club Recommended Physical Improvements Capital Project Low Estimate High Investment Landscaping / Beautification $75,000 $100,000 Hole #16 Project (Coquina) 75, ,000 Hole #5 Project (Drain) 20,000 25,000 Tee Box Enhancement 40,000 60,000 Practice Area Enhancement 5,000 10,000 Total Capital Investment $215,000 $295,000 OPERATIONAL RECOMMENDATIONS The NGF recommendations for day-to-day operation of the Arlington Ridge GC, should the District acquire the club include: (1) Senior staffing and management; (2) Marketing; (3) Fees; and (4) Programming (including new golfer development). We understand that the District would not take over the course operation until the remaining homes have been sold by CBAR (but perhaps not delivered). Hence, some of these operational recommendations may not be applicable until club has been turned over. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 48

57 Senior Staffing and Management If it elects to acquire the Arlington Ridge GC, the new owners will have to establish a basic structure for operations and management upon turnover. At present, ARGM is operating the facility with a Director of Golf reporting to senior management of the CBAR development team. Current ARGC ownership intends to continue in its management role until the majority of the remaining CBAR-owned lots in the community have been sold. Beyond that, the CDD will have to consider other options for management and operations. The most common management options are shown below (these are not intended to be exhaustive, as there are hybrids and variations thereof), presented in order from most direct owner involvement to the least direct owner involvement: 1. Self-Operation. Under this scenario, the new owners would operate the property directly, with all staff employed by the CDD. This structure would require the CDD to create a program of operation and retain appropriate expertise and all employees. The advantage of this structure is direct CDD control over the asset and its day-today operation. The disadvantages include political challenges (changing tastes and Board shifts could impair ideal operation), and the difficulty in finding qualified professionals with appropriate skills to properly staff a complex club business. 2. Concession Agreements: These are similar to lease agreements and can come in several types or combinations for Pro Shop and/or Maintenance services. One subset of this concept includes multiple concessions, a system not that dissimilar to past ARGC operation, with a contract vendor for golf maintenance and F&B operations. The advantage is a shifting of some risk to a private vendor, while a common challenge is keeping concessionaires in place (as was experienced in past ARGC F&B operations). This form of operation is common in public golf but very rare in community-owned country club operations. 3. Full-Service Management Contract. Hire a management company to operate all aspects of ARGC. The CDD would continue to earn all revenues, be responsible for all expenses (salaries, maintenance, liabilities, capital) and pay a management fee to an operator. This concept will have added expense to an owner (management fee), but may end up enhancing the overall economic picture through golf expertise and employment expense savings. There is also a significant advantage in having a single operator for all aspects of club operations (pro shop and maintenance). 4. Lease (or Hybrid Contract). Lease the Arlington Ridge GC to a private operator in exchange for an annual (or monthly / quarterly) lease payment. The lease could be established to include certain lessee requirements, including capital investment in facility improvements, maintenance standards and/or restrictions on fees. A hybrid agreement would provide advantages of a single operator and shifting of risk. The disadvantage is a significant loss of CDD control in the operation. Again, NGF notes this form of agreement is very rare in community-owned country club operations. The NGF recommends that the Arlington Ridge GC will always require professional management, and that new ownership should employ a trained professional club manager (preferably a member of Club Managers Association of America CMAA), either through direct employment or management contract. This form of management will offer ARGC the greatest chance for success in the operation and provide the CDD a level of hands-on control so as to maximize the implementation of member and daily fee programs, and bring professional management for operations and marketing, which will be required for success at this property. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 49

58 Marketing A marketing emphasis is critical to success in golf and club operations. A strong marketing program should work to increase membership and daily fee use of the facility, as well as nongolf use (banquets, parties, etc.). Strategies may include advertising to create a brand image and maintain awareness, developing a public relations campaign, and increasing utilization of web and even print strategies. An effective and comprehensive marketing plan must incorporate research, planning, strategy, market identification, budget, advertising, timetable, and follow-up. Advertising should be tracked adequately to gauge its effectiveness. Our review of the existing Arlington Ridge GC operation showed a total marketing and advertising budget of around $10,000 in 2017, or about 0.9% of total revenue. The NGF typically recommends between 1-2% of total revenue be spent for marketing, meaning the appropriate budget for ARGC should be in the $11,500 to $23,000 per year range. Efforts to enhance golf activity at ARGC should include (in order of importance): (1) Website; (2) programs; (3) Golf school / lesson programs; (4) Member clubs & leagues; (5) Printed promotions / advertisements and (6) improved signage. While some of these activities are ongoing under the current operation, it is clear that these efforts, particularly web and , will need to be enhanced in the coming years of operations. Technology ARGC would benefit from maximizing the POS technology that is available. Use of newer golfspecific POS systems will allow the course to enhance initiatives such as: Loyalty program modules Customer database segmentation through enhanced reporting Direct -to-the-consumer marketing and integration with social media Web site remodeling to become the central focus of the golf marketing databases are essential in today s golf market place, as a means of staying in touch with the club s customer base. The District should continue to build on and utilize the club s database. marketing is the most cost-effective advertising possible. In today s market, it is essential to have and use an database. s can be captured from customers via a sign-up sheet at the pro shop, with a notice that people on the list will receive notice of special promotions. Website and Internet We noted that the Internet is the most cost-effective form of advertising for golf facilities. The website for the club has good functionality for users and included most features typically associated with successful golf facilities. After the acquisition by the CDD, information about the club and its new ownership should be added, with pictures (especially of activities). ARGC would also benefit from the addition of a facility description as well information regarding hosting non-member events. Social Networking - Social networking is the fastest growing marketing tool in golf and country clubs. ARGC should become more active with Facebook and Twitter, which should be used to communicate what s going on type of messages (who won a tournament, who had a hole-inone, etc.). This tends to help build loyalty and repeat activity. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 50

59 Direct Selling Tournaments and Outings Golf staff should expand direct marketing to tournament and outing prospects to bring in a larger share of that business to Arlington Ridge. Prospects that should be proactively contacted include charities, churches, civic organizations, corporations and small companies, especially those that have hosted tournaments in the past and have not been contacted recently. In-House Leagues The golf staff has been active and successful in cultivating, promoting and facilitating golf leagues at ARGC. It may be possible to also expand the existing leagues as well as recruit new players to join existing leagues or help create new leagues. Area Lodging Properties - The club s staff should become active in creating new crosspromotions and package deals with area lodging and other attractions. This may involve allowing for a special rate that can be exclusive to partners, and/or allowing for a longer advance booking of tee times. Programming Programming and new player development will be one of the critical elements to the long-term viability of Arlington Ridge GC and will be necessary for the facility to successfully increase participation among community residents and build overall market share in this suburban location in Leesburg. Key recommendations for programming include: Work with the PGA of America for specific descriptions of programs that work, and how to properly implement and promote these programs (i.e. Get Golf Ready and LPGA s Teaching Her program) Specialized programs for Arlington Ridge residents Programs such as Wine and 9 to engage women and more social golfers Increased Women s Participation - This represents a major industry best practice and is recommended by NGF to every golf course we review. At present, women account for about 20% of golf participants, but 40% of beginners. There are many reasons why female golf participation is low, but increasing participation from women is one of the keys to maximizing revenue. The most common issues relate to golf course difficulty, retail selection, on-course services (restrooms, drinking fountains), food / beverage selection, and customer service. Increased Participation from Less-Traditional Segments - Increasing participation among less traditional golfer populations are generally about three groups younger adults, women and minorities. We know that 50% of the population is female. We also know that about 10% of the Lake County population is considered minority. As a result, the longer-term future of golf demand for Arlington Ridge will be dependent on the ability of this golf facility to engage and grow these less traditional golfer segments. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 51

60 Arlington Ridge GC Preliminary Financial Projections and Warranted Investment The Arlington Ridge GC is presently operated as a semi-private golf facility with use by resident club members, non-members and other patrons who are not residents of the Arlington Ridge community. The NGF has reviewed the financial performance of the ARGC operation for 2016 and 2017 (with revenue information for 2015) and has used this limited historical performance as a basis for future projections. In this section, we evaluate the facility s economic potential and provide estimates of performance based on a set of assumptions that may or may not become reality. We feel that these estimates represent the best effort to create a fair estimate of performance for this facility based on our review of the operation. The NGF has assumed a general continuation of the existing operational program, with professionally-trained on-site management provided by ARGM continuing this role or some other full-service management contract with a qualified golf management entity. We feel that these projections represent a conservative but fair estimate of performance for this facility based on our complete review of the operation and implementation of suggested improvements identified by NGF. We recognize that these projections could be exceeded with outstanding management and favorable external factors. ARLINGTON RIDGE FISCAL PERFORMANCE METRICS The mix of Arlington Ridge GC revenue is documented, with income divided in three primary venues membership fees, green fees (non-member play) and cart fees. Additional revenue is collected by the facility, including merchandise, driving range and the on-course beverage cart. In total, these revenue drivers generated $1.15 million in For the 3 complete years of revenue information we reviewed, 2017 was the peak year for revenue and rounds (41,417 rounds - $27.79 per round). Total expenses to operate the facility have been examined closely in this consulting effort. Overall, it is expected that the operational expense structure for ARGC will be modified to reflect our recommended operational changes after acquisition by the CDD. The additional $70,000 per year for enhanced maintenance to improve the overall course conditions (verticut, aerify, additional PT staff) has been added by NGF in our projections. An allowance of $125,000 for lease of maintenance equipment has been added beginning in Year 4 to reflect the end of the ARGM / DTE operational model and replacement with a single-source, full-service management contract. The NGF has assumed the addition of a General Manager and the payment of a management fee beginning in Year 1 (more below). PRELIMINARY FINANCIAL ANALYSIS ARLINGTON RIDGE GOLF CLUB NGF Consulting has created a cash flow model for the continued operation of the Arlington Ridge GC under the assumption of CDD ownership and professional golf management in place from the initial period of CDD ownership (possibly through ARGM). The primary assumption that drives the NGF Consulting financial projections is that the ARGC will be operated with enhanced course conditions and similar service at a level consistent with the last few years. This includes the completion of recommended capital improvements to the property at the time of acquisition, enhanced golf maintenance and on-going professional management of the club. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 52

61 Basic Assumptions The club will continue to operate in similar fashion to today, with divisions between member and non-member use comparable to the previous years of activity. Activity will be derived from daily fee play, members, tournaments/outings, leagues and some employee/volunteer complimentary rounds. Physically, all club amenities will remain in present configuration with no major upgrades expected over the next five-year period. The existing pro shop will continue to function under its present configuration, with required repairs and upgrades as needed. Activity Inputs The facility activity inputs are estimated by NGF as shown in the table below: Arlington Ridge Golf Club 5-Year Activity Input Projections Year 1 Year 2 Year 3 Year 4 Year 5 Daily Fee Golf Rounds In Season Rounds 13,000 13,000 13,500 13,500 14,000 Off-Season Rounds 15,000 15,000 15,000 15,000 15,500 Tournament Rounds 2,500 3,000 3,500 3,500 3,500 Comp Rounds 1,000 1,000 1,000 1,000 1,000 Total DF Golf Rounds 31,500 32,000 33,000 33,000 34,000 Member Rounds 10,000 11,000 13,000 14,000 14,000 Total Golf Rounds 41,500 43,000 46,000 47,000 48,000 Number of Members Annual Golf Seasonal Golf Total Members Trail Fees 100% 100% 100% 100% 100% Rounds per Golf Member This projected activity reflects modest growth in non-member rounds activity and the number of golf members. Total member participation within the community is projected to increase from 15% in 2017 to only 20% in the future (and this also takes into consideration the growth of the residential community). We believe that the number of resident members could (and should) be higher perhaps in the 25% to 30% range. Further, we also suggest that the CDD give consideration to allowing non-resident members at Arlington Ridge with a slightly higher fee structure (but our projections do not include this potential new membership category). As golf activity is held relatively steady, the number of average rounds per member is also held to the recent member performance from the previous few years. We have also assumed that all facility members will have a private cart and pay a trail fee. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 53

62 Revenue Inputs Revenues are projected based on ARGC continuing with its same basic fee structure with minimal changes for the next 5 years. NGF also assumes a consistent inflation in revenue inputs of 1.0% increases every year for membership fees, green fees and cart fees and 2.0% increases in food and beverage revenue: Arlington Ridge Golf Club 5-Year Projected Revenue Inputs Weighted Average Year 1 Year 2 Year 3 Year 4 Year 5 Dues per Member $2, $2, $2, $2, $2, In-Season Round $24.00 $24.24 $24.48 $24.73 $24.97 Off-Season Round $15.00 $15.15 $15.30 $15.45 $15.61 Avg Tourn green fee $18.00 $18.18 $18.36 $18.55 $18.73 Cart Fee $9.00 $9.09 $9.18 $9.27 $9.37 Trail Fee $ $ $ $ $ Range per Round $1.00 $1.01 $1.02 $1.03 $1.04 Pro Shop per Round $1.00 $1.01 $1.02 $1.03 $1.04 F & B per Round $1.00 $1.02 $1.04 $1.06 $1.08 Expense Estimates NGF Consulting has prepared estimates of expenses for ARGC under the ownership concept previously discussed, with the employment of professional management (either through ARGM continuation or another entity) from the initial CDD acquisition, and the continuation of the Down to Earth maintenance contract at least through Year 3 of NGF projections. NGF assumes a consistent inflation in expenses of 2.0% per year for our 5-year projections. A summary of key expense assumptions for NGF projections are shown below with several key assumptions: Payroll expenses are comparable to the last two years, with the existing staff structure, benefits and Positions (FT/PT mix) plus the addition of a General Manager position (at approximately $85,000). Utilities and insurance expenses are set at comparable levels to 2017 actual. ARGC is assumed to continue the existing cart lease through late 2019, replacing with a new lease in 2020 that is comparable to the existing lease (may be a challenge given the low current rate). Expenses for advertising have been increased to the golf club standard of at least 1.0%, or $15,000 for ARGC in Year 1. NGF has assumed that there will be a management agreement with a qualified operator, projected at $50,000 in Year 1. Management fees are typically separate from wages (including GM salary) that are ultimately the club s responsibility. The golf maintenance contract is assumed to continue with DTE through year 3, after which an addition $125,000 expense for maintenance equipment is added. Direct cost of sales for merchandise (70%) and F & B (40%) are assumed based on industry standards. All figures have been rounded to the nearest $100 for simplicity. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 54

63 Golf Club Operating Expenses (CDD Operation) General and administrative expenses have been estimated to be $578,000 in the first year after full CDD control of the operation. The general, administrative, and golf operations expenses have been estimated based on the operation of a good quality semi-private golf course. Estimated General Operating Expense Arlington Ridge Golf Club (Year 1 Estimate Real 2018 Dollars) Salaries & Wages Full-Time Employees Facility General Manager Head Professional / Dir. Of Golf Benefits & 33% $85,000 65,000 50,000 Part-Time Labor Pro shop, golf support, etc. (8,000 $12.50/hr.) 100,000 Total Salaries & Wages $300,000 Cart Lease 30,000 Advertising & Promotion 15,000 Insurance 28,000 Management Fee* 50,000 Property Taxes 13,000 Other / Professional Services / Add l Utilities 120,000 Total General Operating Expense $556,000 *Base management fee only beginning in Year 4. Golf Course Maintenance Expenses Golf course maintenance expenses (includes practice facility) have been estimated to be $710,000 in the full year after acquisition, growing at 2.0% per year to just under $785,000 by the fifth year of operation. Overall, fixed golf course maintenance expenses are expected to conform to the following general schedule prepared by NGF Consulting. Estimated Golf Course Maintenance Expense Arlington Ridge Golf Club (Year 1 Estimate) Salaries & Wages Full-Time Employees Course Superintendent 1 Asst. $35,000 1 $30,000 1 Irrig. $30,000 Benefits & 33% $55,000 35,000 30,000 30,000 50,000 Part-Time Labor 10,000 $12.50/hr. 125,000 Total Salaries & Wages $325,000 Fertilizer and Chemicals $125,000 Contract Services 25,000 Supplies 40,000 Repairs & Maint. (incl. parts) 40,000 Utilities (incl. Water)* 65,000 Other (Incl. ~10% contractor mark-up 90,000 Total Course Maintenance Expense $710,000 *Assumes some direct cost for water + additional power costs. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 55

64 5-Year Cash Flow Statement Arlington Ridge Golf Club Projection NGF Consulting has utilized the previously mentioned assumptions to create the cash flow statement in the following exhibit: Projected 5-Year Cash Flow Analysis Arlington Ridge Golf Club CDD Operation Revenues Year 1 Year 2 Year 3 Year 4 Year 5 DTE Maintenance New Maint. Equip Required Memberships $242,000 $277,800 $314,200 $340,000 $343,400 Green Fees 537, , , , ,600 Cart Fees 283, , , , ,400 Trail Fees 88, , , , ,900 Driving Range 41,500 43,400 46,900 48,400 49,900 Tournament Fees 45,000 54,500 64,300 64,900 65,600 Pro Shop Merch. 41,500 43,400 46,900 48,400 49,900 Food & Beverage 41,500 43,900 47,900 49,900 52,000 Total Revenue $1,320,000 $1,397,300 $1,497,500 $1,546,800 $1,595,700 Less Cost of Sales: (COS) Merchandise $29,100 $30,400 $32,800 $33,900 $34,900 Food/Bev. $16,600 $17,600 $19,200 $20,000 $20,800 Total COS $45,700 $48,000 $52,000 $53,900 $55,700 Operating Margin $1,274,300 $1,349,300 $1,445,500 $1,492,900 $1,508,400 Operating Expenses Total Payroll $300,000 $306,000 $312,100 $318,300 $324,700 Utilities (incl water) 20,000 20,400 20,800 21,200 21,600 Equipment Rental (Cart lease) 30,000 30,600 31,200 31,800 32,400 Maint. Equipment Lease , ,500 Insurance 28,000 28,600 29,200 29,800 30,400 Advertising 15,000 15,300 15,600 15,900 16,200 All Other Operating 100, , , , ,200 Course Maintenance 710, , , , ,600 Property Taxes 13,000 13,300 13,600 13,900 14,200 Management Fee 50,000 51,000 52,000 53,000 54,100 Total Expenses $1,266,000 $1,291,400 $1,317,200 $1,468,500 $1,497,900 Net Operating Income (before inc. taxes, deprec. + capital) $8,300 $57,900 $128,300 $24,400 $42,100 Cash Flow Results (18 Holes CDD Operation) The results of NGF Consulting s preliminary cash flow projection shows that if ARGC is acquired and operated as presented, with slight improvements in membership and rounds activity for the initial 5 years, the facility is fully capable of generating revenues in the range of $1.3 million (+/-) in the first year after acquisition, perhaps increasing to as high as $1.6 million within five years as the surrounding area grows. These revenue projections are fully achievable by ARGC and are comparable to actual revenue totals earned by this facility in previous years as reported by ownership. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 56

65 Considering all preliminary expense estimates, the stabilized annual earnings before interest, taxes, depreciation and amortization (EBITDA) is projected to be very close to break-even, growing as high as $128,000+/- after three years, then falling back to under $50,000 as new expenses for maintenance equipment are added. We note that NGF has assumed inflation to be higher for expenses than revenues, which is consistent with our golf industry observations. This is a conservative and realistic estimate is based on NGF experience of similar golf properties, and assumes completion of capital improvements outlined in this report. The analysis suggests that the ARGC operation is capable of covering its day-to-day on-site expenses and will have some net income available for capital cost reduction (debt service), although it is expected that the facility will require external funding (possibly CDD assessment) to cover large-scale capital costs associated with acquisition, any upgrades and additional working capital. PRELIMINARY WARRANTED INVESTMENT ESTIMATE As requested by the Arlington Ridge CDD, NGF Consulting has prepared a preliminary estimate of the level of investment warranted for Arlington Ridge GC. This estimate is based on a limited review of basic market indicators, such as income capitalization, which essentially establishes a level of investment that is warranted based on the ARGC operational expectations for the next five years of operation. NGF Consulting wishes to emphasize that this is not a certified appraisal of value, nor do we expect this estimate to be sufficient to secure financing, nor induce investment. Rather, this exercise has been completed as simply a consultant s estimate of value of the property as an 18-hole community golf course based on the consultant s experience and the data assembled for this report. Income Capitalization The Income Capitalization Approach quantifies the subject's income-producing capabilities, and converts anticipated benefits, in terms of dollar income derived from ownership, into an estimate of the level of investment that is warranted for the ARGC facility with the Arlington Ridge CDD as purchaser. An analysis of the income generating characteristics of the property, and how they impact the net income available for providing both a return on and a return of the original investment, is typically considered paramount to a potential buyer. We note that given the uniqueness of the property ownership and various CDD-owned components and shared-use agreements that could increase operating expenses for any non-cdd Purchaser, and thus the warranted investment estimate does not apply to any non-cdd acquirer. The primary metric for valuing a golf course asset is the Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) multiple or capitalization of those earnings (CAP Rate). In the absence of significant EBITDA, the Gross Revenue Multiple (GRM) is often used as an alternative valuation metric. In consideration of a golf market downturn that has lasted for the last 10 years, the sales of numerous courses are operating at a loss, resulting in a greater reliance on GRM for determining value. With GRM s generally ranging from.9x to 1.25x, the source and quality of the revenue (as perceived by a prospective buyer) can significantly influence the eventual price they are willing to pay (1.0x is average). National Golf Foundation Consulting, Inc. Arlington Ridge CDD 57

66 According to the Society of Golf Appraisers, and supported by Marcus & Millichap / Real Capital Analytics research reports, market cap rates on three years trailing net income for stabilized golf assets with no deferred maintenance traded between 8.0% (high-end) and 12% (lower-end), with respect to location, demographics, upside potential, facility condition, etc. Warranted Investment Based on Gross Income NGF has previously utilized the reported previous three years of actual economic performance of the ARGC. This data showed total gross revenue of about $1.15 million in 2017, with net operating income before income taxes, depreciation and bond debt of about $55,000, or an amount very close to break-even. The net income in 2016 was -$93,000, but with specific issues of condition causing the loss. With little confidence in the three years trailing EBITDA in the ARGC operation, the NGF sees the GRM valuation as relevant for this property. A summary of estimated ARGC warranted investment value in April 2018: Arlington Ridge Golf Club Warranted Investment Estimate Based on Historical Revenue Warranted Investment Estimate Gross Revenue Multiplier Low Estimate High Estimate 2017 Gross Revenue $1,151,000 $1,151,000 x GRM ESTIMATED VALUE $1,035,900 $1,438,800 Arlington Ridge Golf Club Warranted Investment Estimate Based on Projected Future Revenue Warranted Investment Estimate Gross Revenue Multiplier Low Estimate High Estimate 2021 Gross Revenue (NGF Year 3 Estimate) $1,498,000 $1,498,000 x GRM ESTIMATED VALUE $1,348,200 $1,872,500 Warranted Investment Summary Based on both historical and projected revenue generation at ARGC, the level of investment that is warranted for the acquisition of the Arlington Ridge GC (based on current performance) is between $1.035 million (lowest estimate) and $1.439 million (high estimate). Given the state of the golf facility industry at the present time, the NGF Consulting team has high confidence that this range would form a good foundation for establishing a fair sales price for the asset if it were to be sold to the Arlington Ridge CDD. The NGF opinion of Warranted Investment for the ARGC property is approximately $1,250,000, with additional costs required for other expenses and to complete the actual transaction, plus any additional upgrades to be desired by the CDD after acquisition. The NGF notes that this estimate was intended to reflect the warranted investment appropriate for the CDD and would not apply to any other purchaser given the uniqueness of the property ownership and various CDD-owned components and shared-use agreements that could serve to increase operating and maintenance expenses for any non-cdd Purchaser. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 58

67 LIMITING CONDITIONS The income estimates presented by NGF Consulting have been prepared based on existing and projected market conditions, the quality of the subject facility and the intended segment of the golf market toward which it is oriented. Particular focus was paid to the reality of golf supply in the immediate local market where several golf facilities have been struggling to generate enough golf rounds to meet their obligations (but several of these real estate-oriented facilities were in the Clermont area and there may have been too much growth in a short period of time. Proper uses of these estimates include: Determining an appropriate level of operating expense that the facility can support under the proposed Arlington Ridge CDD plan of operation Establishing the basis for financing determinations Providing guidelines for acquisition cost determinations Establishing reasonable parameters for value of the subject facility NGF Consulting is confident that our financial projections can be achieved at the subject facility. From a practical standpoint, those managing the facility will need to respond to variable market conditions as well as unforeseen maintenance needs. Due to the fact that these conditions are more likely to change over time, NGF Consulting has limited its projections to a five-year period. Nevertheless, we are confident that the facility will be able to continue to achieve similar results beyond the next five years of operation. Market Share Conclusions When considering the total market share of the subject facility, it is important to realize that the total number of members and rounds to be played at the club during the first few years after acquisition may be lower than the market opportunity appears to suggest. It is typical for an existing community club to achieve only a portion of its total potential in the initial years after an acquisition by homeowners. Our estimates of performance for the Arlington Ridge GC could change should the following conditions occur: Stronger Performance Future course closings Faster population growth than projected Positive regional publicity Lack of loyalty to existing courses Unforeseen surge in golf interest Excellent yearly weather conditions Weaker Performance New course openings Incorrect price levels Poor customer service Low quality facility Poor yearly weather conditions Regional economic recession It is important to measure a newly acquired facility s likely performance in such a way as to help the CDD make financial decisions based on realistic expectations. It is obviously possible that membership and rounds activity could be greater or less than projected. We note that our estimates for future performance of the ARGC do anticipate modest increases in activity that may not occur, potentially leading to the homeowners to provide subsidies via CDD assessment to sustain golf operations. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 59

68 Non-Economic Value of Retaining Golf In addition to the direct economic benefit derived from membership, green, cart and other fees, a community golf and country club business brings other value that cannot be measured directly in club economics. Golf courses in master-planned communities provide: Open spaces A healthy recreational outlet for residents A view amenity to attract residents and enhance property values Enhancement to the overall quality of life Good reflection on the image/brand of a community Additionally, a golf facility can elevate the quality of life, improve the health and well-being of citizens and provide an outlet for additional programming. POTENTIAL IMPACT OF FAILING OR CLOSED GOLF FACILITY ON A GOLF COMMUNITY The indirect benefits of including a golf facility within the gates of the Arlington Ridge community include many factors related to quality of life and the significant impact on property values of residences. While the NGF has not completed a formal analysis of actual property values in communities with struggling or closed golf courses, we can state with a high level of confidence that the impact is almost universally negative. The NGF consultants note the nearby Palisades Golf Course, which closed in 2016, resulting in considerable decline in the value of adjacent real estate, all other factors being equal. Other Benefits of Retaining Arlington Ridge GC From the homeowner s perspective, participating in the Arlington Ridge CDD acquisition proposal would provide at least the following additional benefits: The generation of political goodwill in the community by taking an action consistent with expressed interests of the community in maintaining the Arlington Ridge GC property as open space and a viable view amenity. This would also avoid the potentially adverse impact of selling the golf facility to a more disinterested third-party that might not have the community s best interest at heart. Retain a good quality golf course for the enjoyment of community residents, the continued marketing of Arlington Ridge as a wonderful retirement community in which to live, and as a venue to host charitable golf and other events that benefit the community. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 60

69 Summary Statement In summary, NGF believes the subject Arlington Ridge GC makes for a good and logical acquisition target for the Arlington Ridge CDD, and that the CDD should be successful in the continued operation of the facility. Specialized programs and events will be required to increase participation in the facility from the Arlington Ridge community and surrounding Leesburg area. With community participation in club membership at 20% (~15% at current) and some modest growth in daily fee play, the Arlington Ridge GC should be able to comfortably cover its on-site operating obligations and contribute some capital toward future enhancements. External sources of activity will remain a required element to sustain sufficient revenue, and value-driven marketing (e.g., all-inclusive green fees) will continue to be needed. The NGF fully expects the subject ARGC to produce income sufficient for ARGC to cover all of its direct operating costs, including a management fee to ARGM, but income will not be sufficient to make payments to retire large-scale capital that would be required to acquire and upgrade the facility. This golf club facility is in good physical condition with only minor capital investment required in the short-term, mostly related to improving the appearance of the facility and addressing some specific drainage problems on holes #5 and #16. The golf course maintenance function is outsourced to a private vendor (Down to Earth) and this relationship is expected to remain intact at least through the termination date of the current contract (November 2021). We have suggested that the maintenance practices be reviewed on a more regular basis to ensure that the best possible product is being provided. NGF also suggests that an increase in the maintenance budget by approximately $70,000 annually be implemented (possibly higher if maintenance equipment is needed). High quality playing conditions are certainly a key goal of both the CDD for the sake of the residents and the Arlington Ridge development team to promote the sale of real estate. The NGF has presented several ideas to help the District generate this revenue, including increased marketing and programming, which is key for the golf course (for both daily fee play and the recruitment of outings / events). We also see a need for more direct outreach to the Arlington Ridge community in areas such as free clinics, specials, intro to golf, wine & nine, etc. The CDD will also have to be sure to monitor market trends and retain market-appropriate pricing (in place today). In all, the move to acquire ARGC should work to protect the value of homes by controlling the future of the golf course asset. The financial pro forma projections made by NGF Consulting for this study indicates ARGC will be able to generate enough revenue to cover operating and basic capital expenses, but not enough to cover a large debt service for repayment of purchase (not in current plan). The total revenue produced by the facility is enough to sustain an initial investment of around $1.25 million+/-, which the NGF believes is a good foundation for establishing a fair sales price for the asset if it were to be sold to the CDD. NGF has made this projection based entirely on the direct performance of the golf course operation, and we have not considered any data on comparable golf facility sales or the ancillary benefit to the District in completing such an acquisition, such as the preservation of open space or any possible enhancement of the value of individual residential units surrounding the golf course. We note that this estimate was intended to reflect the warranted investment appropriate for the CDD and would not apply to any other purchaser given the uniqueness of the property ownership and various CDD-owned components and shareduse agreements that could increase operating expenses for any non-cdd Purchaser. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 61

70 Appendices A: Golf Course Life Cycle B: Local Demographic, Demand and Supply Data C: National Rounds Played Report National Golf Foundation Consulting, Inc. Arlington Ridge CDD 62

71 APPENDIX A GOLF COURSE LIFE CYCLE National Golf Foundation Consulting, Inc. Arlington Ridge CDD 63

72 APPENDIX B LOCAL DEMOGRAPHIC, DEMAND AND SUPPLY DATA Arlington Ridge GC Local Demographics + Golf Demand and Supply Data Arlington Ridge Golf Course 5-mile radius 10-mile radius 20-mile radius Lake County State of Florida Summary Demographics Population 1990 Census 10,722 50, , ,109 12,936, ,584,652 Population 2000 Census 16,011 66, , ,520 15,982, ,399,034 CAGR % 2.80% 3.60% 3.30% 2.14% 1.25% Population 2010 Census 20,085 87, , ,052 18,801, ,745,538 CAGR % 2.82% 4.08% 3.50% 1.64% 0.93% Population Estimate , , , ,917 20,631, ,310,011 Population 2022 Projected 25, , , ,063 22,619, ,744,388 CAGR % 3.37% 3.53% 3.16% 1.86% 0.82% CAGR % 2.96% 2.84% 2.30% 1.55% 0.82% Median HH Income (2017) $46,596 $45,649 $51,774 $51,447 $52,517 $59,240 Median Age (2017) Ethnicity White 85.6% 76.4% 82.7% 79.9% 73.3% 70.4% African American 9.0% 16.3% 10.2% 10.9% 16.9% 13.3% Asian 1.6% 1.8% 1.9% 2.3% 3.0% 5.7% All Other 3.9% 5.5% 5.2% 6.9% 6.9% 10.6% Hispanic Population Hispanic 6.9% 10.7% 10.9% 14.4% 24.4% 17.5% Not Hispanic 93.1% 89.3% 89.1% 85.6% 75.6% 82.5% CAGR = Compound Annual Growth Rate U.S. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 64

73 Arlington Ridge Golf Course Golf Demand Indicators 5-mile radius 10-mile radius 20-mile radius Lake County State of Florida Total Households 11,451 39, , ,671 8,216, ,506,607 Number of Golfing Households 2,157 6,240 28,051 20,575 1,154,776 17,069,440 Projected Golfing Households (2022) 2,300 6,714 30,984 21,942 1,220,899 17,934,830 Projected Annual Growth Rate 1.30% 1.50% 2.00% 1.30% 1.10% 1.00% Seasonal Golfing Households ,491 1, , ,421 Latent Demand/Interested Non-Golfers 2,909 10,269 54,042 39,343 2,711,326 40,573,960 Household Participation Rate 18.80% 15.70% 14.50% 15.10% 14.10% 13.70% Number of Golfers 2,361 8,153 38,100 29,120 1,650,221 23,815,640 Rounds Potential (resident golfers) 83, ,743 1,087, ,152 38,657, ,634,000 Estimated Course Rounds (in-market supply) 228, ,731 2,446,481 1,463,572 43,739, ,634,000 Demand Indices Golfing Household Participation Rate Seasonal Golfing Households Latent Demand/Interested Non-Golfers Rounds Potential per Household (resident golfers) Arlington Ridge Golf Course 5-mile radius 10-mile radius 20-mile radius Lake County State of Florida Golf Supply Golf Facilities Total ,006 15,061 Public ,279 Public: Daily Fee ,788 Public: Municipal ,491 Private ,782 Public Golf Facilities by Price Point Premium (>$70) ,384 Standard ($40-$70) ,034 Value (<$40) ,861 Golf Holes Total , , ,610 Public , ,778 Public: Daily Fee , ,207 Public: Municipal ,845 41,571 Private ,280 68,832 Non-Regulation (Executive & Par-3) ,015 21,006 Net Change Net Change in Holes past 5 years ,170-11,628 Percentage Total Holes Past 5 Yrs -8.30% -4.00% 5.80% -2.70% -5.40% -4.40% Net Change in Holes past 10 Years ,386-14,814 Percentage Total Holes Past 10 Yrs -8.30% % 17.60% -5.30% -6.30% -5.50% U.S. U.S. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 65

74 Arlington Ridge Golf Course 5-mile radius 10-mile radius 20-mile radius Lake County State of Florida Supply-Demand Ratios Households per 18 Holes Total 2,082 3,304 3,048 3,850 7,214 8,802 Public 2,290 3,604 4,253 4,271 12,101 12,063 Public: Daily Fee 2,290 3,604 4,253 4,271 14,253 15,541 Public: Municipal ,162 53,911 Private 0 39,642 10,752 39,049 17,862 32,559 Premium (>$70) 5,726 19,821 11,059 16,079 46,161 73,913 Standard ($40-$70) 0 15,857 14,887 10,934 26,940 28,881 Value (<$40) 3,817 6,099 12,902 12,425 41,922 28,784 Golfing Households per 18 Holes Total ,014 1,207 Public ,701 1,654 Public: Daily Fee ,003 2,131 Public: Municipal ,266 7,391 Private 0 6,240 1,558 5,879 2,510 4,464 Premium (>$70) 1,079 3,120 1,603 2,421 6,488 10,133 Standard ($40-$70) 0 2,496 2,158 1,646 3,786 3,960 Value (<$40) ,870 1,870 5,892 3,946 Household Indices Total Public Private Premium (>$70) Standard ($40-$70) Value (<$40) Golfing Household Indices Total Public Private Premium (>$70) Standard ($40-$70) Value (<$40) Rounds per 18 Holes Rounds Potential (resident golfers) 15,250 21,062 17,133 20,624 33,940 33,131 Estimated Course Rounds (in-market supply) 41,537 42,144 38,527 41,227 38,402 32,927 U.S. National Golf Foundation Consulting, Inc. Arlington Ridge CDD 66

75 APPENDIX C NATIONAL ROUNDS PLAYED REPORT National Golf Foundation Consulting, Inc. Arlington Ridge CDD 67

76 National Golf Foundation Consulting, Inc. Arlington Ridge CDD 68