OVERALL SUMMARY. March 11, Kyle Dudgeon Economic Development Planner City of Casselberry 95 Triplet Lake Drive Casselberry, FL 32707

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1 March 11, 2013 Tel: (407) x Kyle Dudgeon Economic Development Planner City of Casselberry 95 Triplet Lake Drive Casselberry, FL RE: Casselberry Golf Club and Acquisition Feasibility Study Dear Kyle: The following letter and report comprise a summary of the National Golf Foundation s ( NGF ) review of the City of Casselberry s ( City ) consideration of the acquisition of the privately-owned Casselberry Golf Club ( Casselberry GC ). The review is based on NGF market research, visits to the property, and meetings with City officials in early The review included a strategic look at the local area golf market, with specific review of the subject Casselberry Golf Club, its current capital needs and its ability to produce the revenue needed to cover its operating expenses and keep from being a burden to the City and its taxpayers. NGF has considered the present physical condition of the subject golf facility, the market environment in which it operates, alternatives for continued operation, and concluding with NGF recommendations for the proposed acquisition to be completed with the smallest risk to the City of Casselberry. This NGF review was managed by Richard Singer, MBA, NGF s Director of Consulting Services, with assistance from Ed Getherall, NGF s Director of Operations. Our activities conducted in preparation of this report included a visit and inspection of the subject Casselberry GC, review of the area market, meetings with key golf course staff, meetings with City of Casselberry staff and visits to several other area golf facilities that were deemed to be directly competitive with the subject Casselberry Golf Club facility. 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 City of Casselberry in the context of the proposed Casselberry Golf Club acquisition. Additional details and support data on this summary can be found in the full body of our report and its appendix. OVERALL SUMMARY The points listed below represent a brief summary of NGF findings on the City s proposed acquisition of the Casselberry Golf Club in March Full detail and elaboration of these items can be found in the attached full report from Key findings include: Casselberry Golf Club has the basic design features and location to be a successful public golf course. However, as it sits today (March 2013), the course has several mitigating factors that prevent it from achieving its maximum economic potential, especially a declining condition especially related to condition of turf and greens. NATIONAL GOLF FOUNDATION CONSULTING, INC. A Subsidiary of the National Golf Foundation 1150 SOUTH U.S. HIGHWAY ONE, SUITE 401, JUPITER, FL (561) FAX: (561)

2 Casselberry Golf Club has experienced declining rounds activity and total revenue in each of the last four years. The declines documented by NGF are more severe that other comparable golf facilities in the market area, suggesting that while many golf courses have experienced reduced revenues in recent years, something specific to Casselberry GC has led to even more severe declines. This is most likely due to deteriorating conditions and the small size of the Casselberry golfer population. There has been a general decline in the overall demand for golf in this local market and nationally, leading to a reduction in rounds activity at area golf courses and a reduction in average revenue earned per round. The City should understand that the external golf market is not favorable for strong economic performance of Casselberry GC. The basic age, income and ethnicity profile of the Casselberry market does not coincide with high demand for golf activity. Still, it is a reasonable goal for Casselberry Golf Club to become operationally selfsufficient (revenue sufficient to cover day-to-day operating expense), but not cover or amortize acquisition cost or capital upgrades / improvements. The financial projections created by NGF and detailed in this report consider three possible courses of action for the City in its acquisition of Casselberry Golf Club. These include: (1) acquire the course and operate as-is ; (2) acquire the course and upgrade the facility to a more appropriate and marketable level; and (3) acquire the course and re-program the facility into a shorter 9-hole golf course and driving range with some open/passive park space and some possible residential (or other) development. The NGF review of these possibilities from the golf perspective show: As-Is Operation Under this scenario the City should expect no more than $600,000 to $700,000 in total revenue (as in 2012) for the foreseeable future. Given the expenses, the annual net income is not likely to be positive, with net losses before debt, depreciation, and City overhead reaching as low as $220,000 each year through Put simply, it is clear that the Casselberry Golf Club operation, as it currently situated, is not sustainable for the long term, as it is not capable of even sustaining basic day-to-day expenses, let alone any large-scale capital cost reduction. The Casselberry GC is likely to operate with continued losses and require subsidies from the City. Upgrade 18-Hole Operation If the City were to acquire and then upgrade Casselberry Golf Club, there would be some improvement in operations, with revenues perhaps returning to levels experienced in the late 2000s of over $1.0 million annually (from all sources). The NGF expects that expenses would also increase to maintain the facility to appropriate levels, also perhaps as high as $1.0 million annually. Under this scenario, the NGF expects that the City of Casselberry could create a golf operation that would generate enough revenue to cover basic day-to-day on site expenses, but not generate enough to cover any capital expense needed to acquire the property or create the higher quality. 9-Hole Operation Under this scenario there would not likely be enough revenue to cover day-to-day expenses, let alone cover any cost to acquire or modify the facility. This is primarily driven by the golf industry reality that reduction from an 18-hole golf course to a 9-hole golf course very seldom, if ever, produces an improved economic picture. Under this scenario, the NGF expects that the City of Casselberry will not be able to create an economically sustainable operating model and it is not likely that this scenario would produce positive economic performance. 2

3 RECOMMENDED COURSE OF ACTION It is clear from our review of this market that the immediate permanent resident population in and around Casselberry may not be sufficient to sustain a lower quality municipal golf course, although the opportunity is improved if the Casselberry Golf Club was to be upgraded as recommended by NGF. However, it is not expected that the revenues generated from the continued operation of Casselberry GC, even if improved/upgraded, will ever be sufficient to cover a large annual capital investment reduction schedule for the property. Thus, if the capital investment needed to acquire and upgrade the golf course is to be tied directly to the golf course (i.e. annual debt payment), it is the NGF opinion that the golf course revenues will not be sufficient to cover this added expense, and maintain the golf facility at an acceptable level. Given this reality, it is the recommendation of the NGF that the City of Casselberry should not purchase the property unless there is no acquisition expense tied to the golf course operation. Even with no direct acquisition expense tied to the golf revenue, the City 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 reduce the initial capital investment will help to reduce or eliminate this risk and help the facility achieve break-even shortly after acquisition. Summary Statement In summary, NGF Consulting believes that there is demonstrated demand for lower-fee public golf in the Casselberry market, and the subject Casselberry Golf Club could be well positioned to capture a reasonable share of this market for years to come. However, the subject facility has some clear physical deficiencies that must be overcome if the operation is to produce income sufficient for the City of Casselberry to manage the facility adequately. It is unlikely under any scenario that the facility can generate enough revenue to cover day-to-day expenses AND make required payments to retire any capital for acquisition and upgrade. Even if the facility can be re-opened and improved, the City s economic interest in the facility will continue to be at risk for bad weather and other unpredictable factors that may reduce revenue or increase costs. Any contribution from an alternative funding source separate from the golf facility used to reduce the initial capital investment (i.e. City donation or grant) will help to reduce or eliminate this risk. Kyle, I very much appreciate your confidence in the NGF and its consulting services, and I have enjoyed the opportunity to be a part of your planning for the proposed Casselberry Golf Club acquisition. I am hopeful that the information and recommendations I have provided will assist you and other City officials in your upcoming decisions. I am happy to talk to you or any other City staff or Council member 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;

4 Acquisition Feasibility Analysis For Casselberry Golf Club in Casselberry, Florida Prepared For: City of Casselberry 95 Triplet Lake Drive Casselberry, FL Prepared By: 1150 South U.S. Highway One, Suite 401 Jupiter, FL (561) March 2013

5 Table of Contents INTRODUCTION...1 Purpose...1 Background...1 SUBJECT FACILITY CASSELBERRY GOLF CLUB...2 Site Overview...2 Casselberry Golf Club...2 Inventory of Facilities Casselberry Golf Club...3 Golf Course Casselberry Golf Club...4 Clubhouse Review...5 Practice Amenities...6 Review of Golf Operations...6 Oversight and Staffing...6 Marketing and Fees...7 Other Operational Issues...8 Facility Performance and Data Analysis...9 Rounds Activity...9 Revenue and Expense Analysis Casselberry Golf Club Financial Summary Summary Casselberry Golf Club...13 EXTERNAL FACTORS AFFECTING THE OPERATION OF PUBLIC GOLF FACILITIES...15 Basic Demographics and the Local Economy...15 Demographic Analysis Key Economic Factors Golf Market Supply and Demand Indicators...17 National Trends in Golf Predicted Golf Demand in the Local Casselberry Market Golf Supply Factors Golf Course Market Supply / Demand Summary Local Competitive Golf Market...23 Competitive Public Access Golf Facilities Map Summary Information Golf Group Facilities Case Study Dubsdread Golf Course General Findings Local Supply External Factors Summary...30 NGF RECOMMENDATIONS FOR THE CITY OF CASSELBERRY...31 Preliminary Acquisition Recommendation...31 Other Operational Recommendations...31

6 Structure Considerations Specific Physical Recommendations Marketing Plan Player Development CASSELBERRY GOLF CLUB BASIC OPERATIONS AND PRELIMINARY FINANCIAL PROJECTIONS...36 Casselberry Fiscal Performance Metrics...36 Preliminary Financial Analysis 18-hole As-Is Operation...37 Basic As-Is Assumptions Casselberry Golf Club Expense Projections (18 Holes As-Is ) Cash Flow Statement As-Is Projection (18 Holes As-Is ) Preliminary Financial Analysis 18-Hole Upgrade Operation...41 Basic Upgrade Scenario Assumptions Casselberry Golf Club Expense Projections (18 Holes Upgrade Scenario) Cash Flow Statement As-Is Projection (18 Holes Upgrade Scenario) Preliminary Financial Analysis 9-Hole Option...44 Basic 9-Hole Scenario Assumptions Casselberry Golf Club Expense Projections ( 9-Hole Scenario) Cash Flow Statement As-Is Projection ( 9-Hole Scenario) Limiting Conditions...48 Market Share Conclusions SUMMARY STATEMENT...50 APPENDICES...51 Appendix A Golf Course Life Cycle...52 Appendix B National Rounds Played Report...53

7 Introduction PURPOSE NGF Consulting was retained by the City of Casselberry, Florida to assist in evaluating the possibility of the City acquiring the privately-owned Casselberry Golf Club and operating it as a City-owned municipal golf course. The City 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 The Casselberry Golf Club is a smaller golf facility that includes an 18-hole golf course, driving range, and multi-purpose clubhouse facility (pro shop, snack bar, cart storage, and maintenance barn). The facility is now owned by Golf Group of Longwood, Florida, which is considering a redevelopment of the property. Under consideration for this report is the present condition of the Casselberry Golf Club, and the status of the greater Casselberry / Seminole County / Orlando area public golf market. If acquired, Casselberry GC will be operated as a pay-for-play facility that may include some discounting for City residents. The purpose of this market and facility analysis is to provide the City with an evaluation of the local golf market and an estimate of the overall economic potential of the Casselberry GC as a City-run municipal golf course. The key issues evaluated in this report include: Status of the local golf market. The present condition of Casselberry Golf Club and requirements for improving and re-opening the facility as a municipal golf course. Economic potential of Casselberry Golf Club after City 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 Casselberry Golf Club facility. Field activities conducted in completion of this consultant s report included meetings with key City of Casselberry staff (City Manager, Economic Development Planner, Customer Service Supervisor, Public Works Director, and others), an inspection of the subject Casselberry GC, meetings with the Chief Operating Officer of The Golf Group, collection of materials to aid in the understanding of the area golf market, visits to several of the area s competing public golf facility operations, and review of other materials and records related to Casselberry Golf Club and the City of Casselberry. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 1

8 Subject Facility Casselberry Golf Club The subject property is Casselberry Golf Club ( Casselberry GC ), an 18-hole golf course facility located within the City of Casselberry, Florida. The facility is privately owned, and managed by The Golf Group of Longwood, Florida. Casselberry GC is operated as an affordable, goodquality public-access golf course that serves year-round and seasonal residents of Casselberry, residents of other Seminole County communities, and tourists and visitors to the area. This property forms a key open space for the City within a dense area of residences, with direct connectivity to the City s Triplet Chain of Lakes. All of the property used by Casselberry Golf Club is zoned as residential, but restricted in deed for use as a golf course subject to public referendum. At the time of the NGF review of Casselberry Golf Club, the club was reporting declining activity and revenue, with increased financial losses, leading to a desire on the part of ownership to re-develop the property into more economically sustainable use, or sell directly to the City of Casselberry. SITE OVERVIEW Casselberry Golf Club Casselberry Golf Club is located in the section of Casselberry that is east of Highway and north of Highway 436, all approximately 0.5 to 1.25 miles from the Casselberry City Hall on Triplet Lake Drive. Access to the site is generally convenient and provided via S. Triplet Lake Dr., a secondary corridor through Casselberry with connection to US Highway near Casselberry City Hall. There is access to S. Triplet Lake Dr. from other Casselberry side streets, although these routes to the golf course are more complex. In all, Casselberry Golf Club is proximate to much of the greater Casselberry region, although it is not convenient for patrons less familiar with the location. Signage directing golfers to the golf course is minimal, with signs only observed on S. Triplet Lake Dr. at the intersection with Triplet Lake Dr. The property comprises a total of 88 acres, of which nine acres are defined wetlands. The configuration is not a traditional core golf course, but rather the property is fully interspersed within the area residences, many of which include direct frontage to the golf course. The layout of the golf course through the community results in the golf layout coming into contact with several streets, with a total of five (5) road crossings required to complete the 18-hole sequence. The most significant of these crossings is the crossing of S. Winter Park Drive between the 3rd and 4th holes, and then again between the 4th and 5th holes. These road crossings may result in total insurance expense being higher than standard in the operation of Casselberry GC. The site is fixed within its boundaries and any expansion or significant renovation/alteration of the property will be difficult. The close proximity of homes to the golf course in several locations will also likely limit any re-development possibilities, although there are portions of the Casselberry Golf Club property where it may be physically possible to redevelop. The facility also includes an all-in-one clubhouse / maintenance facility located in the center of the property at the intersection of Overbrook Dr. and S. Triplet Lake Dr. The property has a total of about 120 parking spaces spread out over three separate lots, including the driving range. This amount appears sufficient for most days of activity, including busier weekends in season and/or during large golf events. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 2

9 Google Earth image showing Casselberry GC and its immediate surrounding elements. The tight configuration shows the limits on options for expansion or renovation. The immediate proximity of local residences is clear in several narrow corridors of golf holes that would be difficult to reconfigure. INVENTORY OF FACILITIES CASSELBERRY GOLF CLUB Casselberry Golf Club includes the following elements: 18-hole golf course on 88-acres. 11,000 square foot (sf) facility that includes pro shop, cart storage, offices, snack bar, and maintenance barn. Of the 11,000 sf, roughly two-thirds are devoted to cart storage and golf course maintenance, and thus are not under air." In addition, there is another approximately 7,000 sf of an open fenced-in maintenance yard. 5-acre driving range with ground lighting and netting. The above elements offer a varied mix that could fit as a City golf course, allowing for appeal to all segments of golfers from beginners to seasoned players. The golf course dates back to the 1940s as a 9-hole facility, with a second nine holes added in the early 1970s. The facility had a National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 3

10 new clubhouse added in 1976 after a fire had destroyed the old clubhouse (at the location of the parking area between 17 and 18). For the most part, the golf course turf, design, and irrigation remain from the early 1970s renovation and expansion. Golf Course Casselberry Golf Club The NGF consultant has identified the following key elements for consideration on the primary 18-hole golf course at Casselberry Golf Club: Casselberry GC is one of the City of Casselberry's oldest existing recreational and athletic facilities, dating back to The course was designed by lesser-known architect Paul McClure, with a redesign in 1973 led by more well-known Lloyd Clifton (also redesigned local courses Deer Run, Dubsdread, and Tuscawilla). The course has golf design features that are typically associated with high quality golf, capable of commanding median market rates. Attractive and challenging features make the course desirable for golfers. However, present (2013) conditions are such that achieving this median may be difficult. The golf course has moderate sloping, some tree-lined holes, and a few water hazards that come into play on 10 of the golf holes. The smaller property size has led to a shorter golf course and tight configuration of holes. The Casselberry GC golf course plays 5,452 yards from its longest tee and to a par of 69, which is below the standard of 72. The course has a USGA slope rating of 124, which represents that the golf course is approximately 12% harder than the standard slope of 111. The generally shorter length does give this facility strong appeal in the large senior golfer market in Casselberry. The key defining feature of the Casselberry GC golf course is the large mature Oak trees that define several holes. While this adds to the aesthetics, it also contributes to some difficulty of the course for less-skilled golfers, and can be a concern for maintenance going forward as roots can damage irrigation lines and cart paths. Casselberry GC has limited on-course facilities such as restrooms and drinking stations, other than portable restrooms that are in need of replacement. As noted, Casselberry GC has 5 road crossings and there are also four bridges, including an important bridge on Hole #9 that crosses the Casselberry Blueway Trail. While there are some areas with cart paths, the course does not have full coverage ( wall-to-wall as it is known in the golf industry) of cart paths. Although the layout and design of holes is a positive for the Casselberry GC, the golf course is more than 70 years old, and the City should expect that upgrades will be needed in the near future. Key upgrades that are likely to be required in the coming short term (within 3 to 5 years) include: Greens / Turf The turf at Casselberry GC are 40+ years old and the greens have never truly been fully renovated. The club reported problems with conditions and drainage; some form of upgrade or replacement is likely to be required in the next few years. NGF Estimated cost = $450,000 to $500,000. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 4

11 Driving Range Upgrades Casselberry GC would benefit from improvements to the driving range, including upgraded lighting and new barrier netting. NGF Estimated cost = $20,000 to $30,000. Drainage Improvements Several holes on the front nine are lower-lying and tend to drain slowly and retain standing water for longer periods after rain events. The result is key areas of the golf course that cannot be open to cart use, limiting the total demand for rounds of golf, even when the weather is nice and the golf course is open to walkers. A program to raise the fairways and improve drainage may be required to help maximize activity, even during wet periods. NGF estimated cost = $150,000 to $200,000 to provide drainage improvements. Cart paths Casselberry GC does not have wall-to-wall cart paths. A full cart path system may allow for carts to return to the course with cart path only service to help maximize rounds. More study should be conducted to estimate the cost to complete (NGF has observed other golf facilities spending a standard of $20 per linear foot (lf) of asphalt cart path and a typical golf course will have 20,000 (+/-) lf for full coverage of an 18-hole golf course). NGF estimates that new cart paths at Casselberry GC will cost $120,000 for the approximately 6,000 linear feet needed to complete full coverage. Pump Station The golf course irrigation system appears to be fully functional, needing only an upgrade of the pump station. It is understood by NGF that this replacement is the City s responsibility regardless of whether the golf course is acquired, and that the replacement has already been approved. NGF Estimated cost = $82,500. Clubhouse Review The support structures at Casselberry Golf Club include one key multi-functional construction that houses the clubhouse, cart storage, and maintenance functions together in one building. The structure dates back to 1976 and is showing some age. However, all elements appear to be fully functional with no urgent problems reported to NGF. As such, the NGF recommends that if acquired by the City, upgrades should be completed to the golf course (greens and irrigation) in higher priority to the building structure. Key issues on each include: Clubhouse / Pro Shop The space is generally small but functional. The location is adequate with proximity and visibility of the 10 th and 18 th holes, and is proximate to the 1 st and 9 th holes. Golfers must pass right in front of the clubhouse when completing the 9 th and travelling to the 10 th hole, which is ideal for a public golf course. At present, Casselberry Golf Club is offering only a very small volume of merchandise that could be expanded if desired by the City. Snack Bar / Bar The facility includes a snack bar area with seating for around 25+, with additional seating in an outside veranda that can be covered. The facility does not have a full kitchen and thus the golf course is limited to snack items, beverages, and pre-prepared food items. The restrooms in the building are in need of upgrade. Cart Storage A central covered area with storage and charging facilities for up to 60 electric golf carts. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 5

12 Maintenance Area / Equipment The maintenance area appeared functional, with adequate space to store maintenance equipment. The equipment used for the maintenance of the Casselberry GC is owned by the club, with most pieces appearing in functional, but not outstanding, condition. If the facility is acquired, the City will have to consider replacement of some or all maintenance equipment. Practice Amenities In addition to the 18-hole golf course, Casselberry GC also includes a full-length, lighted driving range on the east side of S. Triplet Lake Rd. Key NGF findings related to this amenity include: At 250 yards long, the range is not of adequate length to serve the needs of golfers of all skill levels. The range is wide enough to accommodate up to 30 golfers at any one time. There is a large practice green on the east side of S. Triplet Lake Dr., plus another just south of the clubhouse that functions as a practice chipping area. The range and chipping area offer an ideal venue for beginning golfers and lessons. Driving Range The driving range is somewhat low lying and tends to be wet. Range balls often get stuck in mud in the landing area and can be lost, or can be lost flying over containment netting, thus increasing the expense to replace range balls. REVIEW OF GOLF OPERATIONS As a privately-owned golf course, the operation of the Casselberry GC is relatively simple. The Golf Group ownership and management have been in place since Golf Group is headquartered in Longwood, and has six other Orlando area golf courses under management and/or ownership. The recent declines in operating performance at Casselberry Golf Club have led ownership to consider alternate options for the property, including redevelopment or an outright sale, possibly to the City to continue to run the facility as a municipal golf course. Oversight and Staffing All staff at the facility are employed directly by Golf Group, with a full-time general manager and additional on-site staff. Casselberry Golf Club has reported the on-site staff to NGF Consulting as shown below. NGF estimates a comparative total of 11.5 full-time equivalent (FTE) positions in the Casselberry Golf Club staffing: Pro Shop / Clubhouse Staff (6.0 FTE) General manager (FT Salary) Golf Professional (FT Hourly) Snack Bar manager (FT Hourly) Additional part-time golf and operations staff (2-4 positions inside/outside) Additional part-time snack bar staff (3 positions) Golf Maintenance Staff (5.5 FTE) Golf superintendent (FT Salary) Assistant superintendent (FT Salary) Mechanic (FT Salary) Additional part-time maintenance staff (5 positions) National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 6

13 The standard golf facility in the U.S. southern climates (12-month golf season) employed a total of 20 FTE personnel in 2012, with 10 in golf maintenance, 7 in pro shop/operations and another 3 for clubhouse/f & B. 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 and Casselberry Golf Club is no different. Based on the NGF review of the Casselberry GC staffing, and in comparison to golf industry norms, it appears that Casselberry GC is operating with a staff that is at the very lowest level to be sufficient to sustain operations at a high level. Marketing and Fees Casselberry Golf Club is engaged in several initiatives designed to increase overall sales, including a membership plan for six golf courses (Golf Group Membership Package), an aggressive marketing program, and maintenance of the course website. At present the management company did report that it is employing a dedicated marketing specialist responsible for growing all facets of the company s six golf courses. It appears to NGF that activities related to marketing the facility are above the standard for public golf courses, reflecting the higher-than-standard quality of the management in place at the facility. The key activities/programs underway at Casselberry Golf Club are summarized below: Website - There is no doubt that the Internet is the most cost-effective form of advertising outside of word-of-mouth. Casselberry Golf Club has an outstanding website ( and it appears the site is receiving appropriate attention. NGF notes that the well-designed website is easily found when searching the Internet for key terms. The Casselberry GC website also includes information on many of the most important elements of a golf course website including up-to-date fees, description of facilities, scorecard, pictures of the facility, directions, upcoming events, and contact information. The site is powered by CourseTrends, and there is the ability to book tee times on-line. Upon acquisition, the City of Casselberry should continue with a website of this type to help maximize play at the facility. NGF Consulting encourages an active campaign. The program should have two parts one for locals and one for tourists. The local program would promote specials and could be used to help fill up the tee sheet at the last minute. The tourist program would be used to help book future business. This can also help in cross-marketing with hotels in the area for summer/fall golf packages. The Golf Group management entity reports having an database of more than 42,000 golfers that is uses for marketing its golf courses. 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. Casselberry GC presently has only three to four events each year, as the small clubhouse setting and lack of a kitchen facility have limited the type of events that can be accommodated. It was reported that afternoon league play has been increasing in recent years. Fee Structure and Membership Program Casselberry GC utilizes several programs for repeat players. First, there is a full membership to Casselberry GC for National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 7

14 $1,200 per year. However, given the low daily rates there are only a handful of regular members. Second, Golf Group sells a 25-play discount card that is good at any of the six Golf Group facilities. This program is preferred in the industry as it leads to higher overall realized revenue per round for the golf course while still providing a discount for frequent users. A summary of Casselberry GC fees are shown in the table below. More detail on fees at key competitors in the market appear later in this report, although management reports that Winter Pines GC is a key model for rates at Casselberry Golf Club. Casselberry Golf Club Rates Monday - Friday 18 Holes w/ Cart Walking Open 10 12:00 $21.00 $ :00 to 3:00 $19.00 $ :00 to Close $17.00 $11.95 Golf & Lunch Special $25.95 Saturday - Sunday - Holiday 18 Holes with Cart Walking Open 10 12:00 $24.00 $ :00 to 3:00 $20.00 $ :00 to Close $17.00 $11.95 Golf & Lunch Special $27.95 All rates are plus tax Other Operational Issues Other key issues related to the Casselberry Golf Club operation that was observed by NGF Consulting in this review: Driving Range The driving range facility at Casselberry GC has potential to add direct and indirect revenue to the facility. The range is lighted for night use (a key feature for enhanced revenue), although the lighting system itself could use upgrade. The overall package of practice amenities (range, practice chipping area and practice green) have good appeal for beginners and a strong golf learning / lesson program. On-Line Sales Casselberry GC is using the GolfNow site for direct online sales of tee times. However, the club reported an avoidance of other online discount outlets such as Groupon and or Living Social. Carts and Equipment The 66 electric carts used in the operation of the golf course are leased by the club for around $5,800 per month (also includes beverage cart and range cart). The number of carts (66) is appropriate for this type of operation. The equipment used to maintain the course is owned by club. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 8

15 Water The Casselberry GC uses water provided by the City for irrigation, as per a previously-agreed to 99-year agreement. The City also maintains the pump stations used in golf course irrigation. Target Market Casselberry GC operators report a very local clientele and a certain stigma associated with Casselberry among some other communities in the Seminole County golf market. As such, the generally lower fee operation of the Casselberry GC appears to be the appropriate fit for the historical target market at this facility. Signage The signage (directional and informational) to the Casselberry GC is poor and/or non-existent. Additional signage can help improve access for golfers from various points within the City of Casselberry. Blueway Trail The City s chain of lakes trail runs through the Casselberry GC property and will have to be considered if changes are made to this property. FACILITY PERFORMANCE AND DATA ANALYSIS The business operation of the Casselberry Golf Club is relatively simple and typical of a public golf course business. Revenues are derived from playing fees (green fees / memberships), rentals, merchandise sales, concessions, and driving range income. Direct expenses to operate the facility are borne by the operator and include direct cost of goods sold, operations, maintenance, occupancy, utilities, and other general and administrative expenses. As is typical in golf course 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 expense inputs for the Casselberry GC facility. The activity, revenue and expense data provided by the operator (Golf Group) did appear to the NGF to be reliable and generally consistent with our expectations for this facility in this market. Rounds Activity At the time of the NGF Consulting review, the Casselberry Golf Club had been experiencing a consistent decline in rounds over a five year period. Overall, Casselberry GC has declined from a recent peak of 47,900 rounds in 2008 down to 29,985 rounds in 2012 (37.4% decline). The decline has been consistent with at least 6% year-over-year declines each year, peaking with an 18.2% decline between 2009 and Average rounds per 18-hole golf course in the total U.S. now stand at about 31,000 rounds per year, with 37,000 rounds per year for golf courses in the Sunbelt region of the U.S. (12-month golf market). For the U.S. overall, golf rounds had declined approximately 10% between 2008 and 2011, and then recovered by about 5% in In the Orlando market, NGF documented an 8% recovery in 2012 over levels recorded in 2011 (see Appendix B). The NGF has also observed that rounds activity at Casselberry GC is not consistent throughout the year, as there is a clear peak season between January and April each year. Data provided by Golf Group shows 43% of all rounds between 2008 and 2012 were played in the four-month winter season (January April), with 24% played in the two-month March-April peak season alone. The key finding from this is that the inventory of tee times available for sale at Casselberry GC is not uniform throughout the course of a year, and that there is a limited window within which key revenue levels have to be earned in order to sustain operations. This is common at Metro Orlando golf courses and will be a key risk factor for the City of Casselberry should it acquire the Casselberry Golf Club. The table below shows the reported rounds totals for the Casselberry GC from 2008 through 2012, with breakouts for the key winter months. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 9

16 Casselberry Golf Club - Rounds Year Total % of Total Jan 3,263 3,169 2,711 4,039 4,563 17, % Feb 3,349 3,517 2,899 3,640 4,692 18, % Mar 3,826 3,785 4,087 5,691 6,167 23, % Apr 3,361 3,627 4,460 5,294 5,424 22, % May 2,516 3,030 3,283 3,742 4,596 17, % Jun 2,170 2,252 2,685 3,245 3,332 13, % % Jul-Dec 11,500 13,536 14,864 17,105 19,129 76, % Annual Total 29,985 32,916 34,989 42,756 47, ,549 Source: Casselberry GC / The Golf Group. 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, while not realistic for any golf course, results in a total available inventory of golf rounds of 224 rounds per day and approximately 80,000 rounds per year in a 52-week golf season. 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. The actual capacity for a given course is difficult, if not impossible, to calculate because most courses differ in physical characteristics and management procedures. For example, a course that has paved cart paths and good drainage can quickly resume play after a heavy rain, whereas a course that does not have paved cart paths and / or has poor drainage may have to suspend play for several hours or the entire day. In the Central Florida market golf facilities are operating with a year-round golf activity, but a strongly compacted high demand golf season in December through April, with more limited activity in the May through November summer season. Based on Casselberry GC s course type and size, fee structure, weather conditions, down time for maintenance, NGF Consulting has estimated an actual capacity of about 60,000 rounds per year. Revenue and Expense Analysis NGF Consulting s review of performance shows that Casselberry Golf Club generated only a little more than $633,400 in revenue from operations (green fees, carts, memberships, sales) in 2012, a decline of over 13% from the $730,700 earned in 2011 and a decline of over 44% from the $1.13 million earned in total gross revenue in While the figures in 2008 and 2009 are in line with expectations for public golf courses in this climate, the 2011 and 2012 totals fall well below the industry standard of around $1.0 million in total gross revenue from all sources in a single year. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 10

17 Expenses to operate the facility have also been declining to match reduced revenue, and were under $630,000 total in This reduction in expense is likely related to below standard conditions observed by NGF in early The overall expense to operate this facility is well below both regional and national averages. The standard U.S. 18-hole golf course spends roughly $1.0 million on total direct operational expenses per year. Casselberry Golf Club Total Revenue and Expense Income FY2012 Memberships $0 $4,664 $7,187 $7,695 $6,495 Green Fees 775, , , , ,789 Cart Fees 1, , , , ,118 Driving Range 104, , ,410 67,469 62,654 Merchandise 66,866 40,377 16,630 11,969 15,386 Food Sales 40,307 48,921 38,501 38,597 43,369 Beverage Sales 142, ,013 81,329 75,789 59,061 Other (104) (17,330) 6,516 4,626 1,591 Total Revenue $1,130,441 $1,018,263 $846,464 $730,719 $633,463 Less Cost of Sales: (COS) Merchandise $21,876 $10,600 $7,673 $5,240 $6,670 Food/Bev. $60,650 $62,148 $49,542 $47,393 $45,375 Total COS $82,526 $72,748 $57,215 $52,633 $52,045 Operating Expense Driving Range $1,078 $7,777 $1,340 $1,430 $1,217 Golf Operations 153, , , , ,969 Cart Lease 46,292 37,699 50,601 54,625 62,919 Golf Maintenance 321, , , , ,431 Food & Bev. 53,953 58,771 49,162 44,768 35,668 Occupancy Expense 116,050 97, ,172 99, ,663 Utilities 46,105 38,491 40,682 44,161 41,829 G & A + Other 91,895 41, Total $829,779 $718,250 $619,434 $585,603 $629,696 Operating Surplus (Deficit) $218,136 $227,265 $169,815 $92,483 ($48,278) Other Items: Less: Total Debt Service $234,520 $239,520 $215,200 $199,122 $65,544 Total Property Tax $37,864 $34,817 $25,465 $16,655 $13,296 Facility Net after Debt + Tax (Loss) ($54,248) ($47,072) ($70,850) ($123,294) ($127,118) Source: Golf Group and Casselberry GC National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 11

18 Average Revenue and Expense Analysis The average revenue and expense results for Casselberry GC are shown in the table that follows: Casselberry Golf Club Average Revenue and Expense per Round % chg Total Facility Rounds 47,903 42,756 34,989 32,916 29, % Revenue Green + Carts per Round $16.21 $16.73 $17.24 $16.17 $ % Range (per total round) $2.18 $2.69 $2.87 $2.05 $ % F & B (per total round) $3.82 $3.86 $3.42 $3.48 $ % Merchandise per Round $1.40 $0.94 $0.48 $0.36 $ % Other per total rnd. ($0.00) ($0.41) $0.19 $0.14 $0.05 Total Revenue* $23.60 $23.82 $24.19 $22.20 $ % Merchandise Cost of Sales % 32.7% 26.3% 46.1% 43.8% 43.4% F & B Cost of Sales % 33.1% 37.7% 41.3% 41.4% 44.3% Expenses Driving Range $0.02 $0.18 $0.04 $0.04 $ % Golf Operations $3.20 $3.52 $3.77 $4.27 $ % Cart Lease $0.97 $0.88 $1.45 $1.66 $ % Golf Maintenance $6.70 $6.71 $6.07 $6.08 $ % Food & Bev. $1.13 $1.37 $1.41 $1.36 $ % Occupancy Expense $2.42 $2.27 $3.81 $3.04 $ % Utilities $0.96 $0.90 $1.16 $1.34 $ % G & A + Other $1.92 $0.96 $0.00 $0.00 $ % Total (excl. COS) $17.32 $16.80 $17.70 $17.79 $ % Source: Golf Group and Casselberry GC A closer analysis of average golf fee revenue shows that while rounds have declined by 44% since 2008, total average revenue per round has declined by only 10%. This is common in the golf industry in the period as golf courses have used discounting as a method to increase or maintain total rounds volume. The NGF notes that this clearly has not worked at Casselberry Golf Club as rounds activity has fallen even more rapidly as the club continues to offer discounts. Overall, the average public golf course in the United States produces approximately $23.00 per round in golf revenue (green, cart, membership), $2.50 per round in merchandise and $6.00 per round in food and beverage ($31.50 total). Other Expense Findings NGF Consulting summary of Casselberry Golf Club expenses: The $217,400 spent on golf course maintenance in 2012 represents a 33% decline from the amount spent in 2008, and both figures are well below golf industry standards (at least $400,000 in maintenance for an 18-hole course). This would suggest that the golf course may not be getting the appropriate level of required maintenance. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 12

19 None of the other line items in the Casselberry GC expense budget show up as being out of the bounds of reason for a golf course operation as compared to industry standards. When evaluating golf facilities NGF Consulting typically looks for large utilities costs, large equipment costs, or large G & A costs, in addition to labor as key line items that often lead to higher-than-average expenses. NGF Consulting did not see a separate line item for marketing expenses. Marketing the golf course appropriately can help to increase revenues, especially among area visitors who may not be familiar with the golf course and/or not fully understand that the facility is open to the public. Golf industry standards call for between 1% and 2% of revenue allocated to marketing (at least $10,000 for Casselberry GC). Casselberry Golf Club Financial Summary NGF Consulting s review of performance shows that Casselberry Golf Club is generating a relatively low level of revenue, with rapid declines in just the last three years. By 2012, this golf course is operating at a loss, even before below-the-line items such as debt service, taxes, and depreciation are factored in. Operators reported approximately $633,000 in total revenue in 2012, or approximately $21.00 per round in revenue from all sources. As revenue has declined, expenses to operate the golf course have also been reduced, likely leading to deteriorating conditions observed at the facility. SUMMARY CASSELBERRY GOLF CLUB Casselberry Golf Club has a generally desirable location in the heart of the small City and convenient for locals who are aware of the property and its location. However, the site is not convenient for golfers residing outside the City. The facility also has a disconnected design in that several (5) roadway crossings are necessary for golfers and maintenance equipment. Other findings from NGF Consulting s review of Casselberry Golf Club: Casselberry GC offers a good quality mix of amenities that should be very marketable in the local Casselberry market and could be incorporated into the City of Casselberry, ranging from golf practice amenities, to a small clubhouse to an 18-hole golf course. Both the golf course and driving range are charging fees well below other area golf courses. However, it is clear that the overall condition of the golf course, clubhouse, restaurant, and driving range is declining due to age, and some level of renovation / upgrade is likely to be required in the coming years. NGF has estimated between $820,000 and $930,000 in upgrades will be required at Casselberry GC to bring the facility to a standard that can attract appropriate levels of play and revenue. This cost does not include any consideration for lost revenue during the 6-month upgrade period (ideal would be in summer). The NGF sees the golf course playing area, particularly the greens and overall turf quality, as having the highest priority for replacement, with urgency for completion within two to three years. The multi-purpose clubhouse facility is functional and did not appear to be in urgent need of repair. However, a key deficiency in the operation of the Casselberry GC is the lack of a kitchen facility, thus limiting the desirability of the property for many golf customers, and especially organized tournament customers. Casselberry GC is presently operating on a very low budget and with a very small staff. The reductions have come as a result of declining revenue, but have also National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 13

20 contributed to declining conditions, which in turn can exacerbate declining revenue (decline cycle). Considering declining revenue and declining expenses, the facility does appear to be managed appropriately. The Golf Group is providing a modern system of marketing and promotion, focused on internet-based activities such as the website, campaigns and utilization of on-line wholesalers (GolfNow, etc.). As such, the course managers are getting a good value for a very small marketing budget. The green fees at Casselberry GC are generally appropriate for the market and the overall quality of the golf course offering. Casselberry GC is priced at the lower end of the scale of area golf courses, with very few (if any) golf courses priced lower than Casselberry GC. Casselberry GC is producing lower-than-average rounds activity, with steep declines in total rounds in the last two years that are more severe than the market overall (more in next section). The total top-line revenue of around $633,000 (from all sources in 2012) represents a decline from levels earned just four years ago. All areas of revenue have been in decline, including green fees, cart fees, range fees, merchandise sales, and food/beverage sales. The course is likely not sustainable at any revenue under $700,000 per year, and it will likely always be difficult to cover key operating expenses when revenues are even below $800,000 per year. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 14

21 External Factors Affecting the Operation of Public Golf Facilities The NGF team completed a thorough analysis of the local Casselberry area golf market to review the supply/demand dynamic that is driving the competitive golf market. This included an analysis of the area s tourist/visitor and seasonal resident market. The summation to follow will identify the existing and projected supply and demand balance, helping to identify the most appropriate balance for a golf facility operating in the City of Casselberry. NGF also reviewed existing golf facilities in the market area to provide benchmarking data and metrics on key factors such as location, course type, relative quality, annual rounds played, fee levels, revenues and expenses (to the extent available). BASIC DEMOGRAPHICS AND THE LOCAL ECONOMY To outline market data for the Casselberry Golf Club the NGF has examined relevant characteristics of the local population. In the following table, NGF indicates the population, median age, and median household income trends for the defined market ring areas, Seminole County, the Orlando MSA, the state of Florida, and the United States. Demographic Analysis Seminole County Orlando MSA Florida U.S. Casselberry Golf Club 5 mi 10 mi Summary Demographics Population 1990 Census 185, , ,569 1,224,859 12,936, ,584,652 Population 2000 Census 207, , ,262 1,644,566 15,982, ,399,034 CAGR % 1.90% 2.42% 2.99% 2.14% 1.25% Population 2010 Census 208, , ,718 2,134,411 18,801, ,745,538 CAGR % 0.74% 1.47% 2.64% 1.64% 0.93% Population Projected , , ,738 2,181,093 19,173, ,893,068 Population 2017 Projected 220, , ,481 2,284,423 20,001, ,560,041 CAGR % 0.83% 0.85% 0.98% 0.89% 0.89% Median HH Income (2012 Estimate) $56,612 $53,875 $59,609 $51,923 $48,900 $59,501 Median Age (2012 Estimate) CAGR = Compound Annual Growth Rate From the data presented above, NGF Consulting has made the following observations regarding the local demographics: The population in the immediate Casselberry market area is of modest size, but is growing. By 2017, we expect nearly 221,000 permanent residents within 10 miles, and more than 753,000 residents within 10 miles (primary market) of the Casselberry Golf Club facility. The median age in the immediate Casselberry market area is slightly older than the U.S. as a whole and the neighboring Orlando market area. Generally speaking, a National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 15

22 comparatively older population in a market area tends to increase golf frequency, as older golfers tend to play more often than younger age segments. As a result, higherthan-average rounds played are generally expected in older markets, including the local Casselberry / Orlando area. Median household income in the immediate Casselberry market area is comparable to the surrounding region and the nation as a whole. Approximately 36% of the households in the immediate 5-mile Casselberry market have incomes higher than $75,000 per year, and 9.5% have incomes higher than $150,000 per year. This compares to 30.2% over $75,000 and 7.5% over $150,000 in the State of Florida. In general, higher income residents are more likely to participate in golf with a high level of frequency. The overall trade area has significant and growing (as percentage of overall population) African-American and Hispanic populations. Seminole County overall reports about 18% residents of Hispanic origin, while the Orlando MSA is 27%. Research studies have revealed that the golf participation rates among African- Americans and Hispanics aged 18 and older are about 3.9% and 7.7%, respectively, compared to the overall U.S. golf participation rate of 9.6%. Therefore, NGF believes it is important that the City cultivate player development programs aimed at stimulating latent golf demand among these communities in order to sustain and maximize utilization of the golf course in the future. Key Economic Factors It is unclear what effects the troubled regional and national economies will have on activity levels at public courses. On one hand, decreased discretionary income and the plunging values of many stock portfolios, retirement accounts, and homes will almost certainly cut down on recreational / leisure spending. The restaurant industry in central Florida has certainly experienced this phenomenon, and interviews with area golf operators have borne out that this is beginning to happen to them, as golfers are shifting to less expensive rounds, and tournament and banquet business is off at many clubs. On the other hand, deep declines in asset values may result in many golfers giving up expensive memberships at private golf clubs in favor of playing at high quality public courses. Some observations related to the local area economy at the end of 2012: Greater Orlando Orlando is the most visited American city in 2009, and is also one of the busiest American cities for conferences and conventions. Like other major cities in the Sun Belt, Orlando grew rapidly during the 1980s and well into the first decade of the 21st century. Orlando is also home to the University of Central Florida, which is the second-largest university campus in the United States in terms of enrollment (within 10 miles of Casselberry). Orlando attracts over 51 million tourists a year (3.6 million of them are international tourists). Its airport, the Orlando International Airport (MCO), is the thirteenth busiest airport in the United States, and the 29th busiest in the world. Orlando is a major industrial and hi-tech center. The metro area has a $13.4 billion technology industry employing 53,000 people. More than 150 international companies, representing approximately 20 countries, have facilities in Metro National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 16

23 Orlando. Orlando has the 7th largest research park in the country, Central Florida Research Park, with over 1,000 acres, 120 companies, and 8,000 employees. The Orlando International Airport (MCO) is Orlando's primary airport and currently the second busiest airport in the state of Florida closely behind Miami International Airport. The airport serves as a key hub for major airlines and is a major international gateway for the mid-florida region. Casselberry / Seminole County Seminole County has a vibrant business climate with several corporate headquarters of major corporations. Seminole County has five employers with over 1,000 employees and 28 employers with over 300 employees. Seminole County had the lowest unemployment rate (7.0 percent) of any County in the Orlando metro region (overall 7.6% in December 2012). Recent expansion at the Orlando Sanford International Airport (OSIA) has provided new facilities, a parking garage, new infrastructure, and road improvements in and around the complex. Coupled with the state s largest foreign trade zone designation, FTZ #250, OSIA is a targeted area of development and a center for international travel, trade, and investment. Seminole County has prepared for growth with everything from an expressway/bypass, improved roadways, and pre-approved development sites to specialized job training and infrastructure incentives. Several new and/or expanded roadways can impact Casselberry directly, including The real estate market in Casselberry has been affected by the recent recession. The site City Data.com documented home sales falling from around 600 per quarter at an average price of about $220,000 in early 2007, to around 250 per quarter at $100,000 average price for each quarter since the middle of GOLF MARKET SUPPLY AND DEMAND INDICATORS NGF made several key observations regarding the local Casselberry area golf market, including national trends, local demand/supply, and area golf facility competition. These are summarized in the section that follows. National Trends in Golf Participation Golf participation in the U.S. has grown from 3.5% of the population in the early 1960s to about 9% of the population today. NGF estimates that the number of golfers fell in 2011 to 25.7 million, essentially even with For research purposes, a golfer is defined as a person age 6 or above who plays at least one round of golf in a given year. All U.S. Golfers (in millions) All golfers age Source: National Golf Foundation National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 17

24 The number of golfers remained essentially steady in 2011 at 25.7 million. (Compared to the 26.1 million recorded in 2010, the estimated drop of 400,000 golfers is within the range of research sampling error.) For research purposes, a golfer is defined as a person age 6 or above who played at least one round of golf in a given year. The South Atlantic Region, which includes Florida, statistics are shown below: Participation Rate Regional Profile Number of Golfers Percent of Golfers Total Annual Rounds South Atlantic Region 8.2% 4,560, % 103,700,000 United States 9.0% 25,682, % 463,000,000 Source: Golf Participation in the U.S., 2012 edition, National Golf Foundation Considering the severity of the recession and its effects on both discretionary income and time, golf has held up rather well. Multiple NGF studies of golfers since 2008 would attribute the gradual decline in golfers and rounds primarily to the impact of lower job security and concern over personal finances, not waning appeal for the game. Over the past 50 years, golf demand grew at about 4% per year while facility supply grew at about 2% per year. However, since 1990, the situation has reversed demand has grown at only 0.5% per year while facility supply has grown at 1.4% per year. With the increase in supply, we are seeing a marked increase in competition, and the supply is greater than the demand in some markets. In addition to increased competition, other factors have contributed to a decline in the number of rounds per course nationally from 2002 to In the NGF s most recent survey of core golfers conducted in September 2011, we found that fearful financial outlooks, weak consumer confidence, and negative golfer attitudes have also played a role. The combination of these has caused many golf facilities to become distressed, particularly those that have a high debt load because of higher construction costs and the perceived need to build high-end courses. The number of golf course closings quadrupled from an annual average of 24 courses per year in the time period to more than 100 courses in In 2006, there was negative net growth in golf facilities for the first time in six decades, with hole equivalents closing and opening. In 2007, there were 113 openings and closures, and in 2008, 72 golf course openings and 106 closures. In 2009, 49.5 openings minus closures equated to a net loss of hole equivalents. Closures continue to be disproportionately public, standalone 9-hole facilities or short courses (executive or par-3 length) with a value price point. Net growth in supply has been negative now for four consecutive years, with the largest drop of 90 courses in However, U.S. openings averaged 200+ (net) for 20 years, and total 18-hole equivalent supply is up 5% since 2000, indicating a slow market correction is underway. As of December 2011, NGF reported 2011 net growth of negative (openings minus closings). On the positive side, the growth in golf course development has slowed considerably nationally and in the majority of local markets, a trend that should help ease some of the competitive pressure. Another positive trend is the aging of America. Baby Boomers are rapidly approaching retirement age when golf activity flourishes. The baby boomers represent not only the largest single demographic in the US, but they also approach retirement age with more disposable income than any previous generation. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 18

25 2012 Golf Course Openings & Closures Update U.S. golf course openings remain at historic lows, as NGF recorded only 13.5 openings in 2012, compared to golf course closures, measured in 18-hole equivalents (18HEQ). As in recent years, closures were disproportionately lower priced public facilities (68% of total closures). 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 (18HEQ), which represents a drop of 3.3% off the peak supply year of However, the cumulative decline over that period must be considered in context: even with seven consecutive years of net reduction in supply, closures represent only about 500 of 16,000 total facilities. For perspective, we opened 400 courses in a single year during the heart of the building boom. And, over the 20-year period from 1986 to 2005 the U.S. saw more than 4,500 18HEQ golf courses open. NGF projects that golf course openings will remain at 20 or fewer per year for the foreseeable future, while annual closures are expected to continue in the range. The gradual market correction is expected to continue with annual net reduction of supply in the range, helping us inch gradually closer to equilibrium. Local Market The local market area has had a history of golf course closures, as the NGF has identified three facilities in Seminole County, all of which have been closed for more than six years. In addition, the overall Orlando MSA has a total of 14 additional closed golf courses since The closed facilities in Seminole County include: National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 19

26 Golf Course Winter Springs Golf Club Sabal Point Country Club Markham Woods Golf Club CITY Winter Springs Status Date TYPE Holes NOTE 7/31/2006 DF 18 Longwood 2/13/2006 DF 18 Lake Mary Source: National Golf Foundation 12/9/2004 DF 18 Closed as of 12/09/04. The City of Winter Springs was considering a purchase and conversion to municipal golf, but elected not to make the purchase. The facility closed 7/31/06. Present owner is considering redevelopment of the site. This facility closed 2/13/06. Present considerations are for a passive park on the site Rounds Update The most influential factor in the golf economy in 2012 was the 5.7% increase in rounds played, through the end of the year. The resulting increase of 27 million rounds takes the national total to about 490 million. Since rounds declined approximately 11% or 55 million during the past 10 years, 2012 alone recovers half of that dip. Nearly every state experienced a gain versus Improved weather was the biggest influence on rounds played. PGA PerformanceTrak has reported a healthy 6.5% increase in playable days nationwide in Weather in the northern region of the country that drove up the national rounds played numbers was particularly favorable compared to Playable days in these states increased 13.6%, compared to 5.5% in the rest of the country. In Florida, rounds were up only 1.3% in 2012 over However, the Orlando MSA recorded the largest gain in the State, with a 7.6% increase in rounds in 2012 over 2011 (Appendix B). As you would expect, golf course operators have benefitted most directly from the jump in rounds played. PerformanceTrak reported that median golf fee revenues were up 6.6% at member facilities through December However, given that all golf is local, individual facility performance is driven largely by the nature of local competition, weather, and economic/socio-demographic factors. Competition certainly remains fierce in many markets, and the battle for market share is illuminated by the following statistic: the national average for rounds-per-18 holes approximately 32,000 is more than 20% lower than it was prior to the start of the building boom in the late 1980s. Despite positive trends, golf remains a buyer s market. Predicted Golf Demand in the Local Casselberry Market Using NGF-created modeling, our consulting team has crafted an estimate of the golf demand potential in the subject market. The predictive demand models are based on historical golfer participation characteristics, and incorporate existing and emerging demographic trends in the subject market area. Estimated Market Area Golf Demand The Golfing Household Index is based on Predicted Number of Golfing Households, and compares golfing household participation in a particular geography to the national base index of 100. The Rounds Index is based on Predicted Number of Rounds, and compares the propensity of rounds played per household in a particular geography to the national average rounds index of 100. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 20

27 The predictive indices for golfing households and rounds demanded were developed in order to determine the relative strength of a particular golf market area in comparison to other golf markets and the nation as a whole. These predictive demand indices help identify where golfing households and rounds activity are concentrated by comparing various geographies with one another and the national average, which is 100. For example, if an MSA has a Golfing Household Index of 120, that area is estimated to have 20 percent higher golf participation rate as compared to the U.S. average. And, if a MSA has a Rounds Index of 120, that area is estimated to have 20 percent higher average rounds per household as compared to the U.S. average. Seminole County Orlando MSA Florida U.S. Casselberry Golf Club 5 mi 10 mi Golf Demand Indicators # of Golfing Households 16,549 52,464 33, ,058 1,246,397 18,334,168 Projected Golfing Households (2018) 16,253 52,464 88, ,804 22,129 18,902,232 Number of Rounds Played 449,732 1,349, ,813 4,030,779 42,532, ,452,832 Golfing Household Index Rounds Played Index Expanded Golf Demand Seasonal Golfing Households , , ,687 Seasonal Rounds Played 3,414 10,875 7, ,802 4,527,133 22,052,904 Latent Demand Households 9,492 32,473 19,146 86, ,544 12,133,551 The golf demand analysis shows that the Orlando MSA has a predicted golf participation rate that is approximately 14% higher than the U.S. benchmark (Index=114), while the rounds played index shows that predicted rounds activity per household is 57% higher than the U.S. benchmark. This result is an indication of a demographic profile that is consistent with high golf participation and high golf frequency among those who are golfers. We note that the immediate 5-mile ring around the subject Casselberry GC shows similar, but slightly lower participation rates indicating fewer golfers in the Casselberry market than in the overall Orlando MSA. Golf Supply Factors There are six total golf facilities totaling 99 holes, within five miles of Casselberry Golf Club. Of these facilities, all but Interlachen CC are public access (Tuscawilla is listed as private but allows public play). The 10-mile market is home to 20 facilities (13 public), totaling 342 holes (216 public). The ratio analysis that follows puts these numbers in context, compared to national benchmarks. Seminole County Orlando MSA Florida U.S. Casselberry Golf Club 5 mi 10 mi Golf Supply Summary Total Golf Facilities ,049 15,647 Public Golf Facilities ,644 Private Golf Facilities ,003 Total Golf Holes ,980 21, ,627 Public Golf Holes ,611 12, ,916 Private Golf Holes ,811 72,711 National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 21

28 Household/Supply Ratios and Indices The Household/Supply Ratios are derived by dividing the number of households by the number of 18-hole equivalent golf courses. This measure is used as a benchmark to establish the level of support (households) that is available for each 18 holes of golf in the market. A Household /Supply index is derived from these ratios and compared with the base national figure of 100. As the table below indicates, the subject markets have a much higher proportion of households per total 18-hole golf course than the national average, an indication that the golf course supply in this part of Central Florida is generally favorable to golf operators, compared to the nation as a whole. These ratios are mitigated somewhat by the large influx of tourists and seasonal residents during the winter season. In terms of the public golf market, Seminole County has 60% more homes per 18-hole golf course than the nation overall. Seminole County Orlando MSA Florida U.S. Casselberry Golf Club 5 mi 10 mi Demand vs. Supply Households per 18 Holes: Total 16,497 15,630 13,051 7,579 6,475 8,149 Households per 18 Holes: Public 25,923 24,747 20,729 9,315 10,955 11,237 Households per 18 Holes: Private 45,366 42,424 35,239 40,669 15,834 29,658 Households Supply Index: Total Households Supply Index: Public Households Supply Index: Private Golf Supply Change As noted previously, the net change in golf facilities since 2004 has been a decline of 36 holes in Seminole County (3 closures one new opening). Seminole County Orlando MSA Florida U.S. Casselberry Golf Club 5 mi 10 mi Golf Supply Change Total holes net past 10 years ,241 Public holes net past 10 years ,772 Private holes net past 10 years ,013 Percent Total Holes Net % 5.30% % 0.00% -1.80% -0.80% Percent Public Holes Net 0.00% 8.30% % -0.60% -2.90% 1.40% Percent Private Holes Net % 0.00% 0.00% 2.40% -0.20% -6.90% Facilities in Planning or Under Construction The NGF has not recorded any new golf courses in planning or under construction in the Casselberry market area, although there are several renovation projects throughout the Orlando region that are planned, underway or recently completed. It is not expected that the basic ratio of golf courses to households will change dramatically in the next five years (through 2018). Relative Market Support The NGF has compared the relative strength of the Casselberry Golf Club market area with the threshold of golfers per golf course within 10 miles of a golf course. In its 2010 publication The Future of Public Golf in America, NGF hypothesized that the best predictor of a public golf course s success was the number of golfers per 18 holes within a 10-mile radius, with 4,000 identified as the key number for projected financial stability. Our review showed that the overall National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 22

29 Orlando market has only 1,800 golfers per course, or approximately 55% the number of golfers per golf course compared to the identified success threshold. The more local Casselberry GC market has a much better ratio, very close to the 4,000 identified as the threshold. Est. No. of Golfers Total 18-H Equivalent Golfers per 18 holes Casselberry GC 10-Mile Market 73, ,866 Total U.S. Threshold for Successful Public Golf 4,000 Orlando MSA 198, ,808 Source: National Golf Foundation. # golfers = total golfing households x 1.4. Golf Course Market Supply / Demand Summary Using the most basic measures of golf demand and supply, the Casselberry golf market would appear to be stable, with a generally low per capita supply of golf courses (favorable for golf courses) when compared to the national benchmark, although the overall Orlando market has a much higher per capita supply (unfavorable). Further, these measures are enhanced somewhat by the large seasonal resident and tourist populations that contribute significant golf demand during the winter and early spring. Though the predictive demand model and supply ratio analysis is very useful in evaluating the relative strength of golf markets, it cannot stand on its own in determining the status or health of a golf market. Rather, these analyses must be considered in the context of what is actually happening on the ground in the market, in terms of price point and activity level trends at existing golf courses. LOCAL COMPETITIVE GOLF MARKET NGF Consulting has analyzed the public access golf market in Casselberry Golf Club s primary trade area, with particular emphasis on determining Casselberry GC s current market position, and prospects for sustaining and/or building market share in the future. On the following pages, we list summary operating information for a group of selected golf facilities in the greater market area for comparison to Casselberry GC. This list was not meant to be totally exhaustive or to account for all of the potential competition to Casselberry GC. Rather, NGF Consulting is presenting this information to offer a frame of reference in evaluating actual performance of the subject Casselberry GC in recent years. At the end of this section, we provide our significant findings regarding the competitive market. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 23

30 Competitive Public Access Golf Facilities Map National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 24

31 Summary Information The following tables provide summary information for Casselberry Golf Club and a selection of other area golf facilities. Facility Casselberry Golf Club and Primary Competitive Golf Facilities Location Type / Holes Year Open Par / Slope Back Tee Range Tees Distance From Casselberry GC* Casselberry Golf Club Casselberry DF / / 124 5, The Country Club At Deer Run Casselberry DF / / 125 6, mi SE Rolling Hills Golf Club Longwood DF / / 130 6, mi NW Winter Park Country Club Winter Park MU / / 50 2, mi SW The Links at 434 Altamonte Springs DF / / 100 1, mi W Winter Pines Golf Club Winter Park DF / / 106 5, mi S Dubsdread Golf Course Orlando MU / / 123 6, mi SW Wekiva Golf Club Longwood DF / / 123 6, mi NW Lake Orlando Golf Club Orlando DF / / 130 6, mi SW Mayfair Country Club Sanford DF / / 123 6, mi N Magnolia Plantation Golf Club Lake Mary DF / / 138 7, mi NW Twin Rivers Golf Club Oviedo DF / / 142 7, mi SE Source: National Golf Foundation KEY: DF = Daily Fee; MU = Municipal *Air Miles; driving distances will be greater National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 25

32 Primary Public Access Competitive Golf Facilities 18 Holes Golf Course 2012 Rounds Peak Season Morning WD/WE Green + Cart Fee Peak Season 1 st Twilight WD/WE Green + Cart Fee Peak Season 2 nd Twilight WD/WE Green + Cart Fee Annual Membership Casselberry Golf Club 30,000 $21/$24 $19/$20 $17/$17 $1,200 CC At Deer Run 31,000 1 $26/$30/$37 1 $22/$23/$25 1 $20/$20/$21 1 $1,740 1 Rolling Hills Golf Club 35,000 $20/$25/$33 2 $20/$25/$33 2 $20/$25/$33 2 $1,000 Winter Pines Golf Club 50,000 $21/$24 $19/$20 $19/$20 $765 Dubsdread Golf Course 50,000 $26/$30 3 $20/$28 3 $20/$28 3 No Memberships Wekiva Golf Club 27,000 4 $27/$30/$35 4 $24/$27/$30 4 $24/$27/$30 4 $2,700 4 Lake Orlando Golf Club 35,000 $26/$30 $20/$25 $20/$25 $1,710 Mayfair Country Club 32,000 $20/$25 $15/$20 $15/$20 $1,500 Magnolia Plantation GC 30,000 $35/$45 $27/$30 $22 $1,700 Twin Rivers Golf Club 39,000 $25/$29/$33 5 $23/$25/$27 5 $20/$20/$22 5 $1, Holes Winter Park Country Club 25,000 6 $8/$14 Jr $6 Jr $6 $560 6 The Links at ,000 $13/$13 $13/$13 Source: National Golf Foundation 1 Middle rate is Wed-Fri. Add lunch for $3 more. Single Membership. Greens poor in Middle rate is Tue-Fri. Add lunch for $4 more. No defined twilight rate. 3 Florida residents same rate as Orlando; Sr/Jr is resident rate 4 Middle rate is Tue-Fri. Membership is single rate. On temporary greens in Middle rate is Wed-Fri. There is a discount for UCF students. Add lunch for $4 more. Single Membership. 6 total 9-hole rounds. resident rate KEY DF = Daily Fee; MU = Municipal Golf Group Facilities As noted, the manager of the Casselberry GC facility, Golf Group, also manages several other facilities in the region, including three of the primary competitors to Casselberry GC. Reviewing information provided to NGF, we can see that Casselberry GC has had a much more dramatic National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 26

33 decline in rounds activity than these other three facilities, even though two of the golf courses (Deer Run and Wekiva) have had problems with the turf health of greens. Below is a review of actual reported rounds activity at the four local area Golf Group facilities from 2008 through Golf Group Clubs Rounds Activity Course Change from Casselberry GC 47,903 42,756 34,989 32,916 29,985 % Change -10.7% -18.2% -5.9% -8.9% -37.4% CC at Deer Run 40,000 38,000 32,000 30,000 31,000 % Change -5.0% -15.8% -6.3% 3.3% -22.5% Twin Rivers 35,000 36,000 32,000 38,000 39,000 % Change 2.9% -11.1% 18.8% 2.6% 11.4% Wekiva 29,000 30,000 27,000 28,000 27,000 % Change 3.4% -10.0% 3.7% -3.6% -6.9% Source: Golf Group Case Study Dubsdread Golf Course This property is an example of a large-scale municipal golf course renovation, which may be a consideration for the City after the proposed acquisition of Casselberry Golf Club. The NGF has reviewed the recent history of the Dubsdread Golf Course, including some performance metrics noted before and after the renovation that was completed during 2007 and Dubsdread Golf Course is an 18-hole municipal golf course owned by the City of Orlando, Florida. The site was a winter playground for the rich and famous in the 1920s and 30s, and hosted many prestigious golf events, including professional tournaments prior to World War II. Although the site was partially renovated under Lloyd Clifton in 1990, by 2004 Dubsdread was deteriorating with obvious deficiencies and declining rounds and revenue. In , the City of Orlando completed a full-scale renovation of the property, re-introducing the facility as a higher quality public golf course in The City was able to piece together a funding mechanism to complete the renovation of Dubsdread GC as a part of a broader highway/drainage project, with funding from several sources, such as Federal highway funds, State FDOT funds, Environmental Protection Agency funds, City taxpayers; and the sale of newly-created residential lots. As the project was completed as part of a broader City project, the exact cost of the renovation is not clearly stated, although it is assumed to be around $3.0 million. In summary, while the City has noted economic improvement in the golf operation since the renovation, the total economic benefit to the City has not been that strong and would not have been enough to cover the cost of the renovation. We note that timing played a role in this result as the City did re-introduce Dubsdread to the market at a time when the local and national economies were in recession and peak-season winter weather was not ideal. While the economic return on investment has not been strong, the other indirect economic benefit to the City has been positive and the College Park neighborhood has seen a renaissance of sorts in National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 27

34 the last three years with many older homes being replaced by newer, upscale residences. Some of this can be attributed to the golf course renovation, both in terms of the nicer golf course that resulted but also by demonstrating to the community that the City was committed to improving this section of its City. Before and After Performance The effect on activity and revenue performance of the Dubsdread GC was mixed, with the full benefit of the renovation not realized due in part to the timing of the re-opening during a steep recession. In summary, the results included: Green Fees Base green fees were increased at Dubsdread. Prior to the renovation the highest peak winter non-resident green fee was $49 (with cart). In January 2012, peak winter non-resident green fee is $65 (with cart). There were before, and still are, Orlando and Florida resident discounts. Prior to the renovation the resident discount was around $5 to $7 and it is now $16. Rounds Prior to the renovation, Dubsdread had hosted between 56,000 and 59,000 rounds in Since re-opening in 2008 rounds totals have been: 58,000 in FY2009 (1 st year after renovation July 1, June 30, 2009) 50,000 in FY ,000 in FY ,000 projected for FY 2012 Revenue total golf facility revenue has remained relatively steady before and after the renovation. The City reported between $1.3 and $1.55 million in total golf revenue (greens, carts, passes) from 2004 through The City reports revenues of $1.548 million for FY2011. Revenue per Round Based on revenue and rounds data, average revenue per round is estimated to be: 2004 to $24.78 per round $26.72 per round $30.00 per round $29.42 per round Other Key Changes: Other key differences before and after: Merchandise revenue has nearly doubled F & B revenue also increased 67% Maintenance expense increased $100,000 per year Marketing expense increased $20,000 per year National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 28

35 General Findings Local Supply NGF Consulting research indicates the following general findings regarding the supply of public golf facilities in the Casselberry / Orlando market. The local market area offers a wide variety of golf facility types and offerings. The pricing is also varied offering the golf consumer a wide range of choices for price, quality, and facility type. 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 is the case in most markets nationally, local golf operators reported a drop-off in rounds played between about 2000 and about 2005/2006. Some markets nationally experienced declines on a per-facility basis of 25% to 30% or more. 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 has clearly declined since a recent peak around 2008, and the long term peak around In 2012, only two of the areas golf courses exceeded 50,000 total rounds of golf, a figure that a decade ago was a standard for the area. In addition to reduced activity, there has been significant downward pressure on green fees in this market area. Very few Seminole County area golf courses are able to charge in excess of $40 per round, with cart included. As the higher quality golf courses like Rolling Hills, Wekiva and Magnolia Plantation are not able to push green fees higher, even in season; the pressure on lower-quality golf courses like Casselberry Golf Club to reduce pricing even further becomes strong. The result is green fees getting so low that there is no room for discounting and the only avenue to increased revenue is through higher activity (rounds), which is not happening. Only about half of the 18 public courses reviewed by NGF (including the subject Casselberry) have driving range facilities. Most of these driving range facilities are smaller and not able to accommodate large numbers of golfers for both pre-round warm up and lessons / clinics. The NGF expects that Casselberry GC would be able to generate activity in the 36,000 to 44,000 rounds per year range, with highest green fees (with cart) in the $30 range and summer green fees (with cart) in the $20 range. 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. City of Casselberry, FL / Casselberry Golf Club 29

36 EXTERNAL FACTORS SUMMARY The local demographic and economic factors affecting the demand for public-access golf in this market tend to be mixed in that the immediate local Casselberry market area tends to show characteristics unfavorable to golf participation, while the broader Orlando MSA market is more enthusiastic about golf activity. The most concerning aspect of the local Casselberry market area is the modest income levels of residents in this market area. Lack of growth in local market incomes is viewed by NGF Consulting to be a limiting factor in the City s consideration of taking over the operation of the subject Casselberry Golf Club. The location of the facility in an established residential section of Casselberry provides positive and negative implications for the future operation of the Casselberry GC. The positive implications involve the proximity of the subject facility to residences, while the negative is that the golf course is somewhat isolated and not easily accessible or convenient for those outside this local pocket of residences. As such, the long term sustainability of the Casselberry GC will require it to capture a strong share of the market of golfers not presently residing in Casselberry, meaning the course will require a strong non-resident clientele in order to survive. Overall, the Orlando metro area is one of the largest golf markets in the United States. The sheer size of the population drives much of the golf demand rather than high activity rates. We also note a potentially large tourist golf market that any public access golf facility in Casselberry should actively cultivate, although recent history suggests this is much harder in Seminole County than in other areas closer to active tourist destinations. Also, there has been a lot of new golf facility inventory added to this market in the last 15 years and this has impacted the expected number of rounds per golf facility that can be reasonably achieved in this location. The balance does seem to be turning as there have been three key golf course closures in the last few years that may help the surviving golf facilities. The national trends in golf facility operations show increasing expense to operate golf facilities, particularly in the public sector. 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 result is a generally lower average rounds per golf course across all facilities in both the U.S. overall, and in this local market. Locally, the NGF Consulting estimates for golf participation and frequency in the Casselberry market mirror the modest income demographic profile we noted earlier. However, we also note an overall increase in the total number of golf facilities in this defined market area, along with a corresponding decline in the number of rounds being generated on a per facility basis. As a result, most golf facility operators in this market reported a significant drop-off in rounds played between the late 1990s and about The local area market shows a generally favorable household / supply ratio that is generally more favorable to golf facility operators, indicating there may be an opportunity to stimulate more demand from local residents through an enhanced beginner / player development program at Casselberry Golf Club. The City should understand that the external golf market is not favorable for strong economic performance of the Casselberry GC. The local market is crowded with golf courses, the national golf market is stagnant (or in decline), and the expense to operate golf facilities is increasing rapidly (faster than the rate of inflation). National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 30

37 NGF Recommendations for the City of Casselberry Based on our evaluation of the Casselberry Golf Club operation, the area market, and the City s proposal to acquire the facility, the NGF has presented recommendations that the City can use to assist with formulating a course of action for the acquisition. The goal of these recommendations is to help the City identify the parameters within which an acquisition can be successful and to help document for the City the best strategy for this success. NGF Consulting has prepared a schedule of specific recommendations to be considered by the City of Casselberry in light of this proposed acquisition. These recommendations have been organized into: (1) Preliminary overall recommendation; and (2) Activities upon acquisition. PRELIMINARY ACQUISITION RECOMMENDATION It is clear from our review of this market that the immediate permanent resident population in and around Casselberry may not be sufficient to sustain a lower quality municipal golf course. The opportunity is improved if the Casselberry Golf Club was to be upgraded as recommended by NGF, and the local area continues its recent growth in both population and employment. Then there may be an opportunity for the City to successfully operate the Casselberry GC to a level of producing revenues sufficient for sustaining basic day-to-day operations. However, it is not expected that the revenues generated from the continued operation of the Casselberry GC, even if improved/upgraded, will ever be sufficient to cover a large annual capital investment reduction schedule for the property, like may be required to retire any debt that would be incurred to acquire and renovate the facility. Thus, if the capital investment needed to acquire and upgrade the golf course is to be tied directly to the golf course operation (i.e. annual debt payment), it is the NGF opinion that the golf course revenues will not be sufficient to cover this added expense, and maintain the golf facility at an acceptable level. Given this reality, it is the recommendation of the NGF that the City of Casselberry should proceed with the purchase only if there is no acquisition expense to be tied to the golf course operation. Even with no direct acquisition expense tied to the golf revenue, the City 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 reduce the initial capital investment will help to reduce or eliminate this risk and help the facility achieve break-even shortly after acquisition. OTHER OPERATIONAL RECOMMENDATIONS As a City golf course, the facility would probably operate best if it were to reflect a more municipal-oriented program including lower fee golf, beginner programs, leagues, tournaments, outings, and a strong junior golf program. Toward this end, the NGF offers some basic operating recommendations for the City to consider if it were to acquire the Casselberry GC and operate as a City course. These recommendations include basic operations, marketing and player development programs and would apply to the property regardless of the final selected operating configuration (18-holes, 9-holes or upgraded facility more in next section). National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 31

38 Structure Considerations If it elects to acquire the Casselberry GC, the City of Casselberry will have to establish a basic structure for operations. Below are descriptions of the most typical management/operational options for municipal golf courses. In our experience, there is no ideal operating scenario that fits all situations, and each municipal entity must arrive at its own unique approach to operation and maintenance. The most common management options (these are not intended to be exhaustive, as there are hybrids and variations thereof) follow, presented in order from most direct City involvement to the least direct City involvement: 1. Self-Operation. Under this scenario, the City of Casselberry would operate the golf course under direct control of the City. This would require the City to create a program of operation and retain the appropriate expertise and all employees. This is a common form of operation in municipal golf nationwide, although the recent trends are away from this model due to the rising cost of labor and the need to employ professionals with appropriate skills in managing a complex golf business. 2. Concession Agreements: These are similar to lease agreements and can come in several types or combinations. The key areas of operation include Pro Shop, Food and Beverage, and/or Maintenance and involve the City contracting for one, some, or all of these services. One subset of this concept includes multiple concessions, a system in which the City creates multiple contract agreements for separate entities for each facet of the golf operation. The most common concession agreements for municipal golf courses include: a) Contract for Food / Beverage Services involves direct City of Casselberry control of maintenance and pro shop management while contracting food / beverage operations. b) Contract for Maintenance and Food / Beverage Services involves direct City of Casselberry control of the pro shop function, while contracting with a private entity to provide golf course maintenance and food / beverage services. c) Multiple Concessions would involve creating multiple contract agreements for separate entities for each facet of the golf operation (pro shop, food / beverage, and maintenance). 3. Full-Service Management Contract. Hire a management company to operate all aspects of the City of Casselberry golf course. The City 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 for the City but may end up enhancing the overall economic picture through golf expertise and employment expense savings. 4. Operating Lease(s). Lease the Casselberry 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 regarding green fees. 5. Hybrid Contract. A hybrid contract combines some of the advantages of a lease with those of a management contract. These are usually of shorter term (3-5 years) than a lease and should have escape clauses that can be triggered if the operator does not perform up to expectation. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 32

39 Given the realities of the economics of the proposed acquisition, the highly competitive nature of the area golf market and the need for golf management expertise in the Casselberry Golf Club operation, the NGF recommends the City opt for some form of professional management via contract with a qualified golf operator. This form of structure will offer the City the greatest chance for success in the operation and provide the City a level of expertise and experience that will be necessary to compete effectively in this market, while at the same time implement many of the other program elements that will be required for the City to succeed with this property (leagues, events, lessons, golf schools, junior programs, etc.). Specific Physical Recommendations In an effort to raise the quality of the Casselberry Golf Club golf course and help to improve performance, the City must be prepared to make some capital investment in the facility in addition to any acquisition expense. It is clear that without upgrade, the Casselberry GC will continue its downward slide in rounds and revenue (more in next section). Key upgrades documented earlier in this report that are likely to be required in the coming short term (within 3 to 5 years) include: Casselberry Golf Club Needed Physical Improvements Highest Highest Priority Items Estimated Cost Greens / Turf Improvement $500,000 Driving Range Upgrade 30,000 Drainage Improvements 200,000 Cart Path Program 120,000 Pump Station* 82,500* Total Casselberry GC Upgrades $932,500 *City approved for FY2013 Marketing Plan A marketing emphasis is critical to creating awareness, correcting any misperceptions in the market (e.g., Casselberry will soon be closing), and increasing daily fee and tournament play. Strategies may include advertising to create a brand image (e.g., centered around themes such as Casselberry s history and high quality) and maintain awareness, developing a public relations campaign, and increasing utilization of web, print, and yield management 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. Efforts to enhance golf activity at Casselberry Golf Club should include (in order of importance): (1) Website; (2) programs; (3) Golf school / lesson programs; (4) Member clubs; (5) Printed promotions / advertisements and (6) improved signage. While some of these activities were ongoing under the previous ownership group in prior years, it is clear that these efforts, particularly web and , could be enhanced in the coming years of operations. The marketing plan that at Casselberry Golf Club should be revised annually and address: National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 33

40 Market conditions Competition including pricing and any changes in policies, facilities, or apparent market strategy. Target markets Overall Strategy / Implementation strategy Media sources, Budget, Specials / Promotions Customer feedback, research and Follow-up Measurement (a mechanism to gauge the effectiveness of the marketing plan). Create a Rack brochure for hotel tourist racks, and include: Color pictures. Be designed to fit on the tourist racks seen at various visitor centers. Have the word GOLF written on the top 1 ½ so that it is clearly visible in a rack. Have facility descriptions (features, amenities, etc.) Have a map and directions. NOT have pricing, as pricing changes too frequently. databases are essential in today s golf market place, as a means of staying in touch with the club s customer base. The City should create and then aggressively market to an database. marketing, with the exception of word-of-mouth and free advertising, 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. The facility s website should help Casselberry GC build upon its existing database. Website and Internet The Internet is having a larger and larger impact on golf as time goes on. Golfers, especially when traveling, are using the web more and more to find places to play. The web has several key advantages over other forms of advertising: Cost: A website is relatively inexpensive to setup and maintain. Reach: As the name world wide web indicates, the Internet is international in scope. Today, almost every household that contains a golfer will have access to the Internet. Information: The amount of information that can be put on the Web is virtually unlimited. At the very least, clear directions and contact information can be used to dramatically increase impact. Of course, for a Website to be effective, people have to be able to find it. It has to be designed such that today s Web search engines will find it based on key terms people are likely to use. It is essential that the Website be kept current for rates, hours, etc. The best sites are the ones that are constantly being updated with new promotions and news items, so that customers get in the habit of checking them regularly. The Website (or page) should continue to include: Pictures and verbal descriptions of the facility A full scorecard Map/directions to the course National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 34

41 signup: There should be a way to sign up for the program. Information about group and individual lessons Current rates and operating hours Amenities A calendar or news of promotions and upcoming events Branding Casselberry should strive to differentiate itself from other area public courses. Strategies may include advertising to create a brand image, like what is being done by the current operator Golf Group. Player Development We note that new player development will be one of the critical elements to the long-term viability of Casselberry GC, and this should be a point of emphasis at the facility. Direct selling, advertising, and public relations are key to any successful attempts at building market share at Casselberry. However, one of the critical elements to the long-term viability of the club is player development, including a strong Junior Program. Also, because of today s difficult climate for golf operations, tapping latent demand among groups that traditionally have shown relatively low golf participation such as women and minorities is more important than ever. Increased Women s Participation - Recently, PGA Magazine dedicated an issue to women and golf. Of the many conclusions drawn in the series of articles, two that were unanimous were that when women play golf they like to involve their families, and that women view the social aspect of the game as very important. There are common characteristics that female-friendly golf facilities exhibit, such as: On-course restrooms (cleaned daily) at least every six holes on the golf course. Ball washers on the forward tees. Golf instruction that takes a consistent approach to all players regardless of gender. Promotion of Ladies clubs Women-only demo days. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 35

42 Casselberry Golf Club Basic Operations and Preliminary Financial Projections The Casselberry Golf Club is presently being operated as a public golf course for use by a very small number of Casselberry members, and other pay-for-play golfers. The full operating data for the last five years of operation at the subject facility has been provided in this NGF Consulting report. This information is helpful in a full understanding of the subject golf property even though the facility is operated by private ownership and may be changed to a City of Casselberry ownership structure and the expectation that the City will have a different operating philosophy at Casselberry Golf Club. The Casselberry Golf Club management did provide NGF Consulting with basic rounds and gross revenue data that NGF Consulting will use for this analysis. It is the experience of NGF Consulting that an existing daily fee golf facility will tend to retain some of its basic activity and revenue characteristics after take-over by a municipality. On the expense side the NGF team recognizes that comparison can be made for a privately-owned golf course after acquisition by a municipality expecting a similar operation. As part of this study effort, NGF Consulting has prepared an analysis to show what the potential economic performance of Casselberry Golf Club could be considering the recommendations made in this report, and under various forms of operational condition. In this section, the facility s economic potential is evaluated with 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 complete review of the operation. The Casselberry GC performance is evaluated assuming: (1) continued as-is operation with no real improvement to the facilities; (2) modified as-is that retains the present golf layout but assumes large-scale capital upgrade to the property as identified by NGF Consulting beginning in 2014; and (3) a full re-programming of the property into a smaller, 9- hole golf course and driving range facility beginning in January CASSELBERRY FISCAL PERFORMANCE METRICS The Casselberry Golf Club has a predominance of revenue generated derived from golf playing fees, with some additional revenue generated from the driving range. Additional revenue is collected by the facility, including merchandise sales and food and beverage sales. In total, these revenue drivers generated just over $633,000 in revenue in Total expenses to operate the facility have been examined closely in this consulting effort. Overall, it is expected that the operational expense structure for the City of Casselberry will be different than that currently being experienced by the Casselberry GC should the City take over the Casselberry operation. This will be addressed, and City of Casselberry expense estimates provided, in the financial analysis section that follows. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 36

43 PRELIMINARY FINANCIAL ANALYSIS 18-HOLE AS-IS OPERATION NGF Consulting has created a cash flow model for the continued operation of the Casselberry Golf Club under the assumption of the first full year of City operation beginning in 2014, as well as the other assumptions outlined below. The primary assumption that drives the NGF Consulting financial projections is that the Casselberry Golf Club will be operated as similar to the present operation as is reasonable, operate on 18 holes, and include a professional private operator to manage the facility for the City. Basic As-Is Assumptions The course will continue to operate in similar fashion to today, with the predominance of golf activity derived from daily fee customers. There will also be an active junior golf program. Physically, the golf course will remain in its present condition and operate with 18 holes. The existing clubhouse will continue to function under its present configuration. No new clubhouse will be added through The number of annual rounds will remain at 29,000 total rounds per year through 2018, divided by daily fee, tournament and league rounds. The club will continue to allow some walking (no cart) rounds as at present. The existing fee structure will remain in place with modest (1% to 2%) increases every year. Casselberry Golf Club Expense Projections (18 Holes As-Is ) NGF Consulting has prepared estimates of expenses for the 18-hole Casselberry Golf Club under the ownership of the City of Casselberry and the assumption of professional operation via management agreement with a professional golf operator. Fixed Expenses (18 Holes As-Is ) Golf course maintenance expenses (includes practice facility) have been estimated to be $305,000 in the first full year of operation (2014), growing at two percent (2%) per year to just over $330,000 by the fifth year of operation. General, administrative and clubhouse expenses have been estimated to be $265,000 in the first year of operation, growing at two percent (2%) per year to about $287,000 by the fifth year of operation. The general, administrative, and fixed clubhouse expenses have been estimated based on the operation of a good quality municipal golf course. Overall, the fixed expenses are expected to conform to the following general schedule prepared by NGF Consulting. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 37

44 Estimated Golf Course Maintenance Expense Casselberry Golf Club (18 Holes As-Is ) Salaries & Wages Full-Time Employees Course Superintendent 1 Asst. $25,000 1 $25,000 Benefits & 35% $50,000 25,000 25,000 35,000 Part-Time Labor 10,000 $10.00/hr. 100,000 Total Salaries & Wages $235,000 Seed, Sod & Sand (incl. Top-Dress program) 40,000 Supplies (Chemicals & Fertilizer) 20,000 Miscellaneous (incl. Landscaping) 10,000 Total Course Maintenance Expense $305,000 Administrative & General / Clubhouse Expense (18 Holes As-Is ) Salaries & Wages Full-Time Employees General Manager / Director of Golf 1 Assistant Golf $25,000 1 Kitchen Benefits & 35% Part-Time Labor Shop Clerks, wait staff, starters, rangers, etc. $55,000 25,000 20,000 35,000 60,000 (6,000 $10.00/hr.) Building Maintenance 20,000 Advertising & Promotion 10,000 Professional Services 15,000 Insurance 15,000 Supplies & Miscellaneous 10,000 Total Administrative & General Expense $265,000 Other Expenses Expenses associated directly with revenue centers, such as merchandise and food and beverage, have been assumed based on historical patterns established at U.S. golf facilities of this type. Utilities expense has been assumed at the historical $45,000, growing at 2% per year through Shop merchandise expenses (cost of goods sold) are assumed at 75% of total merchandise sales revenue. An estimate of 50% is used for direct costs for food and beverage sales. Expenses to lease golf carts have been assumed at $62,000 per year, increasing by two percent (2%) each year through National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 38

45 NGF has assumed an $85,000 management fee to a professional operator, growing at two percent (2%) per year through In keeping with the conservative posture taken for this feasibility study, NGF Consulting has assumed an operations reserve contingency expense to account for any possible unforeseen expenses, and / or cover any key capital upgrades. This contingency has been estimated to be three percent (3%) percent of all expenses, excluding cost of goods sold and management fee. Cash Flow Statement As-Is Projection (18 Holes As-Is ) NGF Consulting has utilized the previously mentioned assumptions to create the cash flow statements in the following exhibits. Each category of revenue has been listed separately, and an estimate of the total facility average revenue per round has been provided. All figures have been rounded to the nearest $100 for simplicity. Projected Cash Flow Analysis Casselberry Golf Club 18-Hole As-Is Schedule of Average Revenue and Activity Total Rounds 29,000 29,000 29,000 29,000 29,000 Average Fees Green + Carts/Round $15.00 $15.30 $15.61 $15.92 $16.24 Range (per total round) $2.00 $2.04 $2.08 $2.12 $2.16 F & B (per total round) $3.40 $3.47 $3.54 $3.61 $3.68 Merchandise per Round $0.50 $0.51 $0.52 $0.53 $0.54 Other per total round $0.10 $0.10 $0.10 $0.11 $0.11 National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 39

46 Projected Cash Flow Analysis Casselberry Golf Club 18-Hole As-Is REVENUES: Green + Cart Fees $420,000 $443,700 $468,200 $477,500 $487,100 Driving Range 56,000 59,200 62,400 63,700 64,900 Merchandise 14,000 14,800 15,600 15,900 16,200 Food & Bev. 95, , , , ,400 Other 2,800 3,000 3,100 3,200 3,200 TOTAL REVENUE $588,000 $621,300 $655,400 $668,500 $681,800 Total Revenue/Round $21.00 $21.42 $21.85 $22.28 $22.73 Less: Direct Costs Merchandise (50%) $7,000 $7,400 $7,800 $8,000 $8,100 Food/Bev (40%) $38,100 $40,200 $42,400 $43,300 $44,200 Total Direct Costs $45,100 $47,600 $50,200 $51,300 $52,300 TOTAL NET REVENUES $542,900 $573,700 $605,200 $617,200 $629,500 EXPENSES: Utilities 45,000 45,900 46,800 47,700 48,700 Golf Course Maintenance 305, , , , ,100 General & Admin. 265, , , , ,800 Cart Lease 62,000 63,200 64,500 65,800 67,100 Management Fee 85,000 85,000 85,000 85,000 85,000 Contingency (5%) 18,960 19,300 19,700 20,100 20,500 TOTAL EXPENSES $780,960 $794,800 $809,000 $823,400 $838,200 NOI Before Debt, depreciation and City Overhead (Loss) ($218,660) ($221,100) ($224,000) ($226,600) ($229,600) Cash Flow Results (18 Holes As-Is ) The results of NGF Consulting s preliminary cash flow projection shows that if operated in the same basic structure and condition that exists at the club today, the facility would continue to produce revenue totals in the $600,000 to $700,000 (as in 2012), if the City maintains slight (2%) annual fee increases. Considering all preliminary expense estimates prepared by NGF Consulting for this study, the annual net income after all expenses is not likely to be positive, with net losses before debt, depreciation and City overhead reaching as low as $220,000 each year through Put another way, it is clear that the Casselberry Golf Club operation, as it currently situated, is not sustainable for the long term, as it is not capable of even sustaining basic day-to-day expenses. It is also certain that the Casselberry GC operation will not be able to cover any large-scale capital cost reduction (debt service) and it is likely that the facility will operate with continued losses and require subsidies from the City, in addition to any investment made to acquire and/or upgrade the property. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 40

47 PRELIMINARY FINANCIAL ANALYSIS 18-HOLE UPGRADE OPERATION Another consideration for the City of Casselberry is to acquire the Casselberry Golf Club and then make a significant investment in the facility to upgrade the conditions as documented by NGF Consulting ($820,000 to $930,000). NGF Consulting has created a cash flow model for the continued operation of the Casselberry Golf Club under this assumption with acquisition and upgrade in 2013, followed by a re-opening in Under this scenario, the NGF has also assumed the Casselberry Golf Club will be operated with a generally similar structure with a professional private operator to manage the facility for the City, along with enhanced maintenance and upkeep. Basic Upgrade Scenario Assumptions The course will operate in similar fashion to today, with enhanced conditions, upgraded maintenance, and slightly higher playing fees (as market will allow). The predominance of golf activity will still be derived from daily fee customers. There will also be an extensive learning component to the operation making full use of the enhanced practice amenities. Physically, the golf course will be improved with enhanced turf conditions, new green surfaces, better cart paths and an enhanced practice facility. The existing clubhouse will continue to function under its present configuration. No new clubhouse will be added through The number of annual rounds will return to levels seen in the late 2000s, peaking at 40,000 annually through The club will continue to allow some walking at offpeak times, but most all rounds will include cart rental (all premium weekend rounds). Carts are assumed for all rounds played, excluding league and tournament play. Leagues are assumed to use no cart (walking round) and tournaments assume full ridership (cart required). The existing fee structure will be modified to a new schedule as shown below (assumed 1% to 2% annual increases through 2018): Casselberry Golf Club Proposed 2014 Rates Upgrade Scenario 18 H Weekday w/ Cart 18 H Weekend w/ Cart In Season Premium $32.00 $ st Twilight $25.00 $ nd Twilight $21.00 $21.00 Off Season Premium $22.00 $ st Twilight $18.00 $ nd Twilight $15.00 $15.00 All rates are plus tax National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 41

48 Casselberry Golf Club Expense Projections (18 Holes Upgrade Scenario) NGF Consulting has prepared estimates of expenses for the 18-hole Casselberry Golf Club under the ownership of the City of Casselberry and the assumption of professional operation via management agreement with a professional golf operator. Fixed Expenses (18 Holes Upgrade Scenario) Golf course maintenance expenses have been estimated to be $450,000 in the first year of operation (2014), growing at two percent (2%) per year to just over $487,000 by the fifth year of operation. This maintenance expense reflects a significant upgrade to staff size, materials, and golf course condition. General, administrative and clubhouse expenses have also been adjusted, adding a few positions and increased advertising expense, beginning at $300,000 in the first year of operation, growing at two percent (2%) per year to about $325,000 by the fifth year of operation. Other expenses are expected to remain as comparable to the As-Is scenario presented earlier. Estimated Golf Course Maintenance Expense Casselberry Golf Club (18 Holes Upgrade Scenario) Salaries & Wages Full-Time Employees Course Superintendent 2 Asst. $25,000 1 $25,000 Benefits & 33% $60,000 50,000 25,000 45,000 Part-Time Labor 14,000 $10.00/hr. 140,000 Total Salaries & Wages $320,000 Seed, Sod & Sand (incl. Top-Dress program) 80,000 Supplies (Chemicals & Fertilizer) 40,000 Miscellaneous (incl. Landscaping) 10,000 Total Course Maintenance Expense $450,000 Administrative & General / Clubhouse Expense (18 Holes Upgrade ) Salaries & Wages Full-Time Employees General Manager / Director of Golf 1 Assistant Golf $25,000 1 Kitchen Benefits & 33% Part-Time Labor Shop Clerks, wait staff, starters, rangers, etc. $60,000 25,000 20,000 35,000 80,000 (8,000 $10.00/hr.) Building Maintenance 20,000 Advertising & Promotion 20,000 Professional Services 15,000 Insurance 15,000 Supplies & Miscellaneous 10,000 Total Administrative & General Expense $300,000 National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 42

49 Cash Flow Statement As-Is Projection (18 Holes Upgrade Scenario) The NGF projected cash flow estimates appear in the following exhibits. All figures have been rounded to the nearest $100 for simplicity Projected Cash Flow Analysis Casselberry Golf Club 18-Hole Upgrade Schedule of Average Revenue and Activity Total Rounds 38,000 39,000 40,000 40,000 40,000 Average Fees Green + Carts/Round $20.00 $20.40 $20.81 $21.22 $21.65 Range (per total round) $3.00 $3.06 $3.12 $3.18 $3.25 F & B (per total round) $3.25 $3.32 $3.38 $3.45 $3.52 Merchandise per Round $0.50 $0.51 $0.52 $0.53 $0.54 Other per total rnd. $0.10 $0.10 $0.10 $0.11 $0.11 Projected Cash Flow Analysis Casselberry Golf Club 18-Hole Upgrade Scenario REVENUES: Green + Cart Fees $760,000 $795,600 $832,300 $849,000 $865,900 Driving Range 114, , , , ,900 Merchandise 57,000 59,700 62,400 63,700 64,900 Food & Bev. 123, , , , ,700 Other 3,800 4,000 4,200 4,200 4,300 TOTAL REVENUE $1,058,300 $1,107,900 $1,159,000 $1,182,200 $1,205,700 Total Revenue/Round $27.85 $28.41 $28.98 $29.56 $30.14 Less: Direct Costs Merchandise (50%) $28,500 $29,900 $31,200 $31,900 $32,500 Food/Bev (40%) $49,400 $51,700 $54,100 $55,200 $56,300 Total Direct Costs $77,900 $81,600 $85,300 $87,100 $88,800 TOTAL NET REVENUES $980,400 $1,026,300 $1,073,700 $1,095,100 $1,116,900 EXPENSES: Utilities 45,000 45,900 46,800 47,700 48,700 Golf Course Maintenance 450, , , , ,200 General & Admin. 300, , , , ,700 Cart Lease 62,000 63,200 64,500 65,800 67,100 Management Fee 85,000 85,000 85,000 85,000 85,000 Contingency (5%) 24,360 24,800 25,300 25,900 26,400 TOTAL EXPENSES $966,360 $983,900 $1,001,900 $1,020,300 $1,039,100 NOI Before Debt, depreciation and City Overhead (Loss) $14,040 $42,400 $71,800 $74,800 $77,800 National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 43

50 Cash Flow Results (18 Holes Upgrade Scenario) The results of NGF Consulting s preliminary cash flow projection show that if the City were to acquire and then upgrade the Casselberry GC, there would be some improvement in operations, with revenues perhaps returning to levels experienced in the late 2000s of over $1.0 million annually (from all sources). The NGF expects that expenses would also increase to maintain the facility to appropriate levels, also perhaps as high as $1.0 million annually. Under this scenario, the NGF expects that the City of Casselberry could create a golf operation that would generate enough revenue to cover basic day-to-day on site expenses, but not generate enough to cover any capital expense needed to acquire the property or create the higher quality. As a result, although the Casselberry GC can cover its operational expenses, it is not likely to ever be able to cover any kind of large capital cost reduction (debt service) that would be tied to the facility. Of course, the performance would also be subject to other risks such as poor weather, increased competition, and/or recession. PRELIMINARY FINANCIAL ANALYSIS 9-HOLE OPTION Another consideration for the City of Casselberry is to acquire the Casselberry Golf Club and then reconfigure the property to: (1) allow for open space or passive parkland; (2) the sale of some portion for residential (or other) use; and (3) retain a 9-hole golf course, clubhouse and driving range facility. NGF Consulting has created a cash flow model for this option under the assumption that this program would be physically feasible, although it is undetermined which portions of property would fall into which use. Part of this process would involve a significant master plan of the site to determine exactly which elements would go where, other than the site of the driving range and clubhouse remaining as is. Basic 9-Hole Scenario Assumptions The City will complete a comprehensive master plan of improvements that would identify segments of property for various uses, including the existing clubhouse and driving range remaining in use for golf, along with nine holes for a golf course. The cost to complete such a revision is undermined at this time as it was not part of the review completed by NGF. However, the NGF team can assume that the total expense to complete such a change in property would be at least comparable or greater than the $930,000 estimated in the upgrade scenario presented earlier. Upon re-opening, the 9-hole Casselberry GC would operate in similar fashion to today, but likely refrain from employing professional management opting instead for a City-run operation. The predominance of golf activity will still be derived from daily fee customers and there will also be an extensive learning component to the operation making full use of the enhanced practice amenities. The number of annual rounds will peak at 28,000 per year through The majority of play will be walking (no cart) rounds and the facility would be more active in league and other 9-hole activity. The existing fee structure will be modified to a new schedule as shown below (assumed 1% to 2% annual increases through 2018): National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 44

51 Casselberry Golf Club Proposed 2014 Rates 9-Hole Scenario 9 H Weekday 9 H Weekend In Season Premium $15.00 $ st Twilight $12.00 $ nd Twilight $9.00 $12.00 Off Season Premium $12.00 $ st Twilight $9.00 $ nd Twilight $7.00 $9.00 All rates are plus tax Casselberry Golf Club Expense Projections ( 9-Hole Scenario) NGF Consulting has prepared estimates of expenses for the 9-hole Casselberry Golf Club under the operation of the City, perhaps through a recreation department. Fixed Expenses ( 9-Hole Scenario) Golf course maintenance expenses have been estimated to be $220,000 in the first year of operation (2014), growing at two percent (2%) per year to just over $216,000 by the fifth year of operation. This maintenance expense reflects a 9-hole operation that is generally not 50% of the 18-hole operation. General, administrative and clubhouse expenses have also been adjusted at $245,000 in the first year of operation, growing at two percent (2%) per year to about $265,000 by the fifth year of operation. New expenses reflect a reduction in some positions, but retain the basic administration required to run a golf operation, regardless of 18 or 9 holes. Estimated Golf Course Maintenance Expense Casselberry Golf Club ( 9-Hole Scenario) Salaries & Wages Full-Time Employees Course Superintendent 1 Asst. Super/ $30,000 Benefits & 33% $45,000 30,000 25,000 Part-Time Labor 6,000 $10.00/hr. 60,000 Total Salaries & Wages $160,000 Seed, Sod & Sand (incl. Top-Dress program) 30,000 Supplies (Chemicals & Fertilizer) 20,000 Miscellaneous (incl. Landscaping) 10,000 Total Course Maintenance Expense $220,000 National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 45

52 Administrative & General / Clubhouse Expense ( 9-Hole ) Salaries & Wages Full-Time Employees General Manager / Director of Golf 1 Assistant Golf $25,000 Benefits & 33% Part-Time Labor Shop Clerks, wait staff, starters, rangers, etc. $50,000 25,000 25,000 80,000 (8,000 $10.00/hr.) Building Maintenance 20,000 Advertising & Promotion 10,000 Professional Services 15,000 Insurance 15,000 Supplies & Miscellaneous 5,000 Total Administrative & General Expense $245,000 Other Expenses Expenses associated directly with revenue centers, such as merchandise and food and beverage, have been assumed based on historical patterns established at U.S. golf facilities of this type. Utilities expense has been reduced to $30,000, growing at 2% per year through Shop merchandise expenses (cost of goods sold) are assumed at 75% of total merchandise sales revenue. An estimate of 50% is used for direct costs for food and beverage sales. Expenses to lease golf carts have been assumed at $35,000 per year, increasing by two percent (2%) each year through In keeping with the conservative posture taken for this feasibility study, NGF Consulting has assumed an operations reserve contingency expense to account for any possible unforeseen expenses, and / or cover any key capital upgrades. This contingency has been estimated to be three percent (3%) percent of all expenses, excluding cost of goods sold and management fee. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 46

53 Cash Flow Statement As-Is Projection ( 9-Hole Scenario) NGF Consulting estimates for the 9-hole scenario appear in the table below. All figures have been rounded to the nearest $100 for simplicity. Projected Cash Flow Analysis Casselberry Golf Club 9-Hole Scenario Schedule of Average Revenue and Activity Total Rounds 26,000 27,000 28,000 28,000 28,000 Average Fees Green + Carts/Round $12.00 $12.24 $12.48 $12.73 $12.99 Range (per total round) $2.50 $2.55 $2.60 $2.65 $2.71 F & B (per total round) $2.50 $2.55 $2.60 $2.65 $2.71 Merchandise per Round $0.50 $0.51 $0.52 $0.53 $0.54 Other per total rnd. $0.10 $0.10 $0.10 $0.11 $0.11 Projected Cash Flow Analysis Casselberry Golf Club 9-Hole Scenario REVENUES: Green + Cart Fees $312,000 $330,500 $349,600 $356,600 $363,700 Driving Range 65,000 68,900 72,800 74,300 75,800 Merchandise 13,000 13,800 14,600 14,900 15,200 Food & Bev. 65,000 68,900 72,800 74,300 75,800 Other 2,600 2,800 2,900 3,000 3,000 TOTAL REVENUE $457,600 $484,900 $512,700 $523,100 $533,500 Total Revenue/Round $17.60 $17.96 $18.31 $18.68 $19.05 Less: Direct Costs Merchandise (50%) $6,500 $6,900 $7,300 $7,500 $7,600 Food/Bev (40%) $26,000 $27,600 $29,100 $29,700 $30,300 Total Direct Costs $32,500 $34,500 $36,400 $37,200 $37,900 TOTAL NET REVENUES $425,100 $450,400 $476,300 $485,900 $495,600 EXPENSES: Utilities 30,000 30,600 31,200 31,800 32,400 Golf Course Maintenance 220, , , , ,200 General & Admin. 245, , , , ,200 Cart Lease 35,000 35,700 36,400 37,100 37,800 Management Fee Contingency (5%) 15,000 15,300 15,600 15,900 16,200 TOTAL EXPENSES $545,000 $555,900 $567,000 $578,300 $589,800 NOI Before Debt, depreciation and City Overhead (Loss) ($119,900) ($105,500) ($90,700) ($92,400) ($94,200) National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 47

54 Cash Flow Results ( 9-Hole Scenario) The results of NGF Consulting s preliminary cash flow projection show that if the City were to acquire and then modify the Casselberry GC into a 9-hole operation, there would likely not be enough revenue to cover day-to-day expenses, let along cover any cost to acquire or modify the facility. This is primarily driven by the golf industry reality that reduction from an 18-hole golf course to a 9-hole golf course very seldom, if ever, produces an improved economic picture. Golf is a generally high fixed-cost business and reducing from 18 to only nine holes will not reduce expenses by 50%. Further, the shorter golf course will reduce rounds activity and the highest rate that can be charged for golf, thus reducing total revenue. Under this scenario, the NGF expects that the City of Casselberry will not be able to create an economically sustainable operating model and it is not likely that this scenario would produce positive economic performance. The City would not likely ever be able to cover any kind of large capital cost reduction (debt service) that would be tied to the facility, and the performance would also be subject to other risks such as poor weather, increased competition, and/or recession. It is likely that the facility will operate with continued losses and require subsidies from the City, in addition to any investment made to acquire and/or upgrade the property. 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. Proper uses of these estimates include: Establishing reasonable parameters for value of the subject facility Determining an appropriate level of debt that the facility can support under City of Casselberry operation Establishing the basis for financing determinations Providing guidelines for acquisition cost determinations 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. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 48

55 Market Share Conclusions When considering the total market share of the subject facility, it is important to realize that the total number of rounds to be played at the course during the first few years after acquisition may be lower than the market opportunity appears to suggest. It is typical for an existing public access golf facility to achieve only a portion of its total potential in the initial years after an acquisition by a municipality. Our estimates of performance for the Casselberry Golf Club 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 course s likely performance in such a way as to help the City make financial decisions based on realistic expectations. It is obviously possible that either more or fewer rounds will be realized. We note that our projections for future performance of the Casselberry Golf Club do anticipate increases in activity that may not occur, potentially leading to continued City subsidies. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 49

56 Summary Statement In summary, NGF Consulting believes that there is demonstrated demand for lower-fee public golf in the Casselberry market, and the subject Casselberry Golf Club is well positioned to capture a strong share of this market for years to come. However, the subject facility has some clear physical deficiencies that must be overcome if the operation is to produce income sufficient for the City of Casselberry to adequately manage the facility AND make required payments to retire any capital that would be required to acquire and upgrade the facility. The subject Casselberry Golf Club could become a good fit for the City of Casselberry if the City is willing to make a few modifications to the facility to improve its potential as a municipal golf course, as detailed by NGF in this report. The additional amenities of tennis, fitness, and a swimming pool also appear to be a nice fit for the City of Casselberry, which does not have these recreational amenities within the City recreation program. Even if the facility can be re-opened under an improved scenario, the City 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 create any required operating reserves. Any contribution from an alternative funding source separate from the golf facility used to reduce the initial capital investment (i.e. City donation or grant) will help to reduce or eliminate this risk and help the facility achieve break even within one year after acquisition. The result of this situation is that the Casselberry Golf Club, if acquired as expected, will be highly dependent on the facility s ability to create a good quality public golf experience at an affordable green fee level. This means that appropriate pricing, including a frequent user discount card, will be necessary for the new facility to distinguish itself and attract adequate play levels from all market segments. One significant target market segment is the beginner, female, and family/junior golf segment, which could contribute significant play to the proposed Casselberry GC. NGF Consulting fully expects that well-designed golf courses with good management, expert maintenance, well-organized promotion, and good customer service should be able to achieve the market projections made in this study. With favorable weather conditions, increased desire for new residents to take up the game of golf, and the continued increases in area tourism, the new Casselberry golf course could even outperform the market projections made by NGF Consulting. The financial proforma projections made by NGF Consulting for this study indicates that the Casselberry GC will not be able to generate enough revenue under any scenario to cover both operating and capital expenses. These estimates were based primarily on a set of standard assumptions that may or may not apply to the City of Casselberry. Given this circumstance, NGF Consulting is projecting that the financial performance of the proposed new Casselberry will be at risk for the foreseeable future, and that the golf course may not be capable of meeting its fiscal obligations. The NGF has made this projection based entirely on the direct performance of the golf course operation, and we have not considered any ancillary benefit to the City of Casselberry in completing such an acquisition, such as preservation of open space, allowance for expansion of park lands, protection of the property tax base or any possible income that may be derived from the sale of golf course property that may be freed up in some form of future property reconfiguration. National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 50

57 Appendices A: Golf Course Life Cycle B: National Rounds Played National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 51

58 APPENDIX A GOLF COURSE LIFE CYCLE National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 52

59 APPENDIX B NATIONAL ROUNDS PLAYED REPORT National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 53

60 National Golf Foundation Consulting, Inc. City of Casselberry, FL / Casselberry Golf Club 54