Colony West Country Club 6800 N.W
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Tel: (954) 721-7710 Email: [email protected] April 23, 2013 Craig Rack, General Manager Sand Trap Management Colony West Country Club 6800 N.W. 88th Ave Tamarac, FL 33321 RE: Review of Operations for Colony West Country Club Dear Craig: The following letter and report comprise a summary of the National Golf Foundation’s (“NGF”) review of the City of Tamarac’s (“City”) golf program, specifically related to Colony West Country Club (“Colony West CC”). The review is based on NGF market research, visits to the property, and information gathered from Colony West staff and City officials in March and April 2013, as well as data collected from previous engagements in the area dating back to 2009. The review included a strategic look at the City’s overall municipal golf offering, with specific review of the lease in place for the operation of Colony West CC. NGF has considered the present physical condition of both golf courses and the clubhouse facility at Colony West, the market environment in which this facility operates, alternatives for continued operation, and concluding with NGF recommendations for maximizing the economic potential of municipal golf within the City. 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 Colony West CC, review of the area market, meetings with key golf course staff, phone meetings with City of Tamarac staff, and visits to several other area golf facilities that were deemed to be directly competitive with the subject Colony West CC. This executive summary letterD is presented R to provide A an “at-a-glance”F T summarization of the full NGF review, detailing the main findings and NGF recommendations for the City of Tamarac in the continued operation of Colony West CC. Additional details and support data can be found in the full body of our report and its appendix. OVERALL SUMMARY Following is a brief summary of NGF findings on Colony West Country Club in April 2013. Full detail and elaboration of these items can be found in the attached full report from 2013. Key findings include: Colony West CC has the basic design features and location to be a successful public golf course. However, as it sits today (April 2013), the course does have several mitigating factors that prevent it from achieving its maximum economic potential, including: NATIONAL GOLF FOUNDATION CONSULTING, INC. A Subsidiary of the National Golf Foundation 1150 SOUTH U.S. HIGHWAY ONE, SUITE 401, JUPITER, FL 33477 (561) 744-6006 FAX: (561) 744-9085 www.ngf.org . Aging infrastructure, especially related to turf conditions and the clubhouse. Lack of adequate practice amenities (no driving range). Burdensome lease structure that lacks flexibility to adjust payments from the lessee to the City to reflect declining market conditions. Declining golf market regionally and nationally due to increased competition, aging population, and changing demographics. The Colony West Country Club asset is deteriorating and will need substantial investment in the coming two years to bring the facility to its highest level of condition and functionality. In this report, I have recommended and detailed $870,000 in improvements to the property, mostly related to the golf course playing area (turf, practice area, cart paths, etc.). The lease in place at Colony West CC appears to be favorable for the City in that it is providing a level of professional management and there is guaranteed income to the City ($100,000 in 2012) at a time when many other municipal golf courses are operating with negative net income. This has implications for the continued operation of the facility as the lessee has to make cuts in operating and maintenance expenses in order to meet the lease payment. The operator spent $25,000 on capital upgrades in 2012 and is required (via lease) to invest $190,000 in 2013-14. The City should understand that the external golf market is not favorable for strong economic performance of Colony West CC. 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). Locally, the NGF Consulting estimates for golf participation and frequency in the Tamarac market are lower than standard, mirroring a modest income demographic profile. Furthermore, most golf facility operators in this market reported a significant drop-off in rounds played between 2005 and 2012, with virtually no 18-hole golf course in this area hosting over 40,000 rounds annually, a figure that was considered a low rounds total a decade ago. The local area market shows a generally favorable household / supply ratio, indicating there may be an opportunity to stimulate more demand from local residents through an enhanced beginner / player development program at Colony West CC. Colony West CC has seen significant declines in rounds activity and revenue since 2007, with reductions in both being more severe than the overall local and national golf market. The total top-line revenue of over $2.4 million (from all sources including catering)D represents R a 48%A decline F from levelsT earned five years ago. The City has collected very little “bonus” lease income in the last year as the facility has not exceeded the $3.0 million “target” in revenue. Given the reality of the local market environment, the condition and location of facilities and the present downward pressure on golf revenues, NGF does not expect that the $3.0 million “target” in revenue is realistic for this property in the 2014-2016 timeframe. There is no “easy answer” for Colony West CC in operational structure or alterations to the lease model currently in place. The City could: . Self-Operate the facilities directly, but have to add golf management expertise to the City staff, take on the cost of labor, and absorb high capital costs to fund needed improvements. Create a concession agreement with private vendors for golf management, pro shop, food/beverage, and/or maintenance, resulting in multiple agreements and diverging private interests. 2 . Hire a management company to run Colony West Country Club for a guaranteed fee paid to the management firm of between $100,000 and $150,000. The private company would then have to improve revenue and/or reduce expense by that amount just to retain the present position. Continue to Lease the property outright to a private firm in exchange for a fixed annual lease payment, ceding full control of the operation. However, the City should understand that the trends in municipal golf in 2013 reflect the reality that very few municipal golf facilities are operationally profitable and a declining number of qualified vendors are willing to pay a fixed annual lease to a municipality, in addition to capital investment. RECOMMENDED COURSE OF ACTION The NGF recommendation to the City of Tamarac for Colony West Country Club is three-fold: (1) continue to lease Colony West CC, with adjustments in terms; (2) invest in improvements to Colony West CC; and (3) enhance the overall marketing and promotion of Colony West CC, specifically targeting demographic groups with lower demonstrated golf participation, such as juniors, minorities and women. Basic Oversight and Structure The NGF team is recommending that the City of Tamarac continue to operate Colony West Country Club through a lease agreement with a private entity. However, the NGF recommends the type and details of the lease agreement be modified to create more of a “win-win” scenario for the City and its golf lease partner. NGF recommends the following terms be incorporated into a modified lease agreement for Colony West Country Club: Be a 10-year agreement. Include a small base management fee, perhaps as low as $10,000, plus an incentive of 10% to 30% of total revenue over $2.5 million (inflation-adjusted each year). Continue with capital program as is. Encourage an aggressive golf lesson/learning program, perhaps with assistance from the City’s Recreation Department. Physical Improvements D R A F T In addition to the basic recommendation described above, the City and Sand Trap Management should work to make physical improvements to the golf course playing area. The conditions observed by NGF during the March 2013 site visit were less than ideal and would be difficult to market aggressively. Both the Champ and Glades courses at Colony West CC are in clear need of upgrade to turf conditions and other ancillary items such as cart paths and practice amenities. Improvement in these items should lead directly to an increased rounds capacity that can be accommodated, thus potentially leading to increased revenue. While the total estimated cost of these improvements ($870,000) is high, over time, the improvements to the facility should improve the operational efficiencies of the operation and allow the golf course to improve rounds and revenue. Operational Recommendations NGF has also prepared a list of additional recommendations that should be helpful in growing Colony West CC business and lowering expenses. These recommendations are based on the lead consultant’s experience and expertise and stem from a limited review of the operation and facilities. We also recognize that many of these items are already being enacted. Our 3 recommendations include improvements to marketing, enhancement of electronic capabilities (website, email, etc.), promotion of bilingualism, improved branding, enhanced programming (tournaments, outings, leagues), improved signage, enhanced player development programs, and an increased emphasis on improving female golf participation. CASH FLOW RESULTS The NGF has prepared an estimate of Colony West’s performance at various rounds played totals (‘as-is,’ modest growth and best case), assuming expected 2013 inputs for revenues and expenses.