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HomeMy WebLinkAbout; Carlsbad Muni Golf Course Market & ProForma Update; Carlsbad Municipal Golf Course Market & Fin Pro-Forma; 2002-12-28Economics Research Associates Memorandum Date: December28, 2002 ^ To: John Cahill/Lisa Hildabrand From: Gene P. Krekorian Re: Carlsbad Municipal Golf Course Market and Financial Pro Forma . Update EF^ No. 14593 The following memorandum contains an overview of the San Diego golf market and preliminary pro forma fmancial projections for the City of Carlsbad's proposed 18-hole golf course. Note that the market data are current as of mid-2002 and have not-been updated since that time. MARKET CONDITIONS National Market Trends In general, golf markets in most parts of the country have softened considerably over the past two to three years, with the high-end daily fee segment most affected. This softening has resulted primarily from excessive expansion, again mostly in the high-end daily fee market segment, exacerbated by the effeicts pf a sluggish economy and a decline in corporate sponsored individual and tournament play. At the same time, golf demand over the past several years has plateaued. Many golf developers, owners and operators are experiencing financial difficulty, although! much of the problem is the result of excessive amounts of inexpensive capital available in the late 1990s through the stock market boom and extraordinary optimism about continued growth in golf demand which justified overpayment for golf assets. 10990 Wilshire Boulevard Suite 1 500 Los Angeles, CA 90024 310.477.9585 FAX 310,478.1 950 www.econres.com ERA is affiliated with Drivers Jonas Los Angeles San Francisco San Diego Chicago Dallas ' Washington DC London John Cahill / Lisa Hildabrand ERA No. 14593 ' December 28, 2002 Page 2 Most national golf markets appear to have bottomed out, and gradual recovery is expected as the number of new courses under construction and planned has declined sharply, and growth in golf demand should resume in response to America's aging, albeit at a very modest pace of 1-2 percent per year. Golf play propensity increases with age through about 65, and frequency of play increases sharply after 55. San Diego Countv Market Conditions The San Diego County public golf market has fared somewhat better than most national markets. Attached are a series of data tables (Tables 1-5) relating to the San Diego County golf market. The following observations are offered: • There currently are 39 regulation length daily fee golf courses serving San Diego County. Additions to the daily fee/public inventory since 1990 are as follows: New Course Openings I Public I Mt. Woodson 1991 Aviara; 1991 I Steele Canyon 1991 g Eastlake 1991 ' Vineyard 1993 >, Eagle C;rest 1993 I Twin Oaks 1993 Encinitas Ranch 1998 Meadows Del Mar 1999 Maderas 1999 a Auld 2000 Barona Creek 2001 ft I I I John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 3 • With the opening of Encinitas Ranch, Meadows del Mar and Maderas in 1998-1999, the upper mid- and high-end daily fee golf market currently is relatively soft, although the well-designed midmarket courses (e.g. Encinitas Ranch, Vineyard) have performed very well. • Play levels at most courses have remained more or less unchanged over the past three years. However there are a number of manifestations of market softness: - The rate of increase in greens fees has declined and, in some cases, rates have been reduced. - Twilight times for many courses have been moved up as an inducement, and a super twilight rate has been introduced. - Greens/cart fee "specials," particularly during the week, have emerged. - Differentiation between county resident and nonresident rates has been introduced as an inducement for residents, without sacrificing revenue from the less price sensitive visitor market. - New golf course construction and planning has slowed considerably, although there are two North County courses under construction - Morro Hills in Oceanside and Woods Valley Ranch in Valley Center. Both are expected to be positioned in the mid-market ($40-$60 greens fees). • The performance of three courses located in the north coastal region of San Diego County provide informative perspective relative to current golf market conditions faced by a new course in Carlsbad. Encinitas Ranch: Encinitas Ranch continues to perform exceptionally well, accommodating just over 70,000 annual rounds at an overall average I greens fee of about $40. This level of play is approaching the effective 0 maximum capacity of the course. About 30 percent of total play derives from I I John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 4 city residents at a discounted fee structure of $32 weekdays and $47 weekends, plus cart. Eighteen-hole greens fees for nonresidents are $48 weekdays and $68 for nonresidents. Net operating income over the past two years has been about $1.7 million per year. / i Aviara: Aviara up until 2001 had consistently generated about 47,000 rounds per year at the highest greens fee structure in the market. In 2001, play I dropped precipitously to about 37,000 rounds. Most of this decline is _ attributable to a significant drop in hotel occupancy, with non-hotel public play @ declining modestly to about 12,000 rounds. Since rates had increased ^ substantially in 2001, gross revenue was down only about 10 percent from 2000 B levels. Play for 2002, based on year-to-date activity, is projected at about I 42,000 rounds; The percentage of public play - currently about 30 percent of total - is I projected to decline to less than 10 percent as the Four Seasons Residence Club approaches buildout in the next several years. 1 Meadows del Mar: Meadows del Mar is a Fazio designed high-end g daily fee course with current greens fees of $110 weekdays and $140 weekends, 1 including cart, which opened in 1999 and has generated relatively stable play ^ levels at 36,000-38,000 rounds per year. The average greens/cart fee is now in m the range of$]20 per round. I The golf course and adjoining resort development site have been on the market for the past two years, with a sale probable before the end of 2003. Most likely, the buyer will develop the resort site, substantially limiting golf capacity available to the general public. m John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 5 KSL Corp. recently acquired the La Costa Resort and is proceeding with an extensive renovation plan. One of the golf courses will remain strictly private, while the second will be available on a first priority to resort guests. Excess capacity will be made available to visitors and the general public, although KSL has indicated greens fees for these golfers will likely be in the $150 to $200 range. CARLSBAD MUNICIPAL GOLF COURSE POTENTIALS Although the San Diego County public golf market has been stagnant over the past several years, the outlook for a high-quality daily fee golf course in Carlsbad remains reasonably favorable at this time. The Carlsbad site, though costly to develop, offers an outstanding opportunity to create a high- J quality golf experience. Further area demographics are relatively strong and the locational attributes of the Carlsbad site are outstanding. P The proposed course will be designed to a quaiity level to compete with such courses as Meadows Del Mar, Maderas, and the Talega course in San Clemente. The absence of any residential development on the Carlsbad course will result in a pure golf environment, a characteristic which is well regarded in • • in the marketplace. -1 Play at the Carlsbad course will consist of discount resident and non- •»3 resident golfers. 1^ Nonresident play will derive from several sources: • San Diego County residents outside the City of Carlsbad rj • Visitors, to San Diego County I John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 6 • Hotel guests at La Costa, Aviara and other local overnight facilities • Businesses in and near Carlsbad, particularly those affiliated with golf products The City is committed to offering preferential rates and/or tee times to City residents, but a specific program has not been formulated at this time. For analysis purposes, the following greens fee structure has been adopted; Monday-Thursday Friday Saturday-Sunday 18 Hole Greens Fee (including cart) Resident Non-Resident $45 $50 $60 $ 75 $ 85 $105 D The assumed resident rates, including cart, are slightly above current resident rates at the Vineyard and Encinitas Ranch. These resident rates reflect a discount of approximately 40 percent off non-resident standard rates anticipated at the Carlsbad course. Twilight rates also would be offered to both residents and nonresidents. While the discounted play reduces greens fee revenue to the course, the lower fees for this population segment will stimulate additional play, and may generate additional revenue, particularly if some of this play can be channeled into times when excess capacity is available. There are a number of factors which have been considered in estimating Carlsbad resident play: u • I if/ John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 7 J • The City of Carlsbad population currently is estimated at 88,000. Income levels are well above average for San Diego County and the 1 State of Califomia. I • • • • • In general, demand for public golf play at all courses is generated at 1 a rate of about one round per capita per year. Depending on age and income characteristics, 10 to 25 percent of public demand typically g relates to high-end daily fee courses. » Encinitas Ranch resident play totals 19,000 annual rounds, equal to .32 rounds per capita per year. Greens fees, including cart, for 1^ Encinitas residents are $40 weekdays and $55 weekends. • The amount of resident play at the course will depend largely on the J degree of discount. The resident play by Carlsbad residents is estimated at .2 to .25 annual rounds per capita or about 20,000 P rounds per year. This per capita factor is somewhat below that at Encinitas Ranch, reflecting a slightly more challenging golf course, m somewhat higher greens fee and the mandatory use of carts. PROJECT ECONOMICS Based on current and anticipated golf market conditions and the type and quality course envisioned for the subject Carlsbad site, pro forma financial operating projections have been prepared. The analysis assumes development of the course by the City with maintenance, operation, and management by a private firm under a management contract. I I i John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 8 A series of operating revenue factors and assumptions have been adopted. The following rate structure, ancillary revenue potentials, and course utilization appear to be reasonable and attainable, and reflect the development of a high- quality, modest-size permanent clubhouse. An altemative analysis is conducted I assuming the course opens with a temporary clubhouse. The values are expressed in constant 2002 dollars. ^ Golf Course Utilization Annual golf play for the subject course, reflecting the greens fees and other course characteristics indicated below, is projected as follows: Annual Rounds Year Residents Nonresidents Total 1 18,000 30,000 48,000 2 19,000 33,000 52,000 3 20,000 35,000 55,000 The distribution of play at stabilization is estimated as follows (moderate): Number of Rounds Weight Average Rounds/Day Monday-Thursday 27,500 50% 135 Friday 8,250 15% 165 Saturday-Sunday 19,250 35% 175 Total 55,000 100% 160 18-Hole 46,750 85% — • Twilight 8,250 15%. — Total 55,000 100% I John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 9 i Greens/Cart Fees Type of Round Greens Fee ^including cart) Weight Carlsbad Resident 18-Hole Monday-Thursday Friday Saturday-Sunday Twilight/9-Hole Monday-Thursday Friday Saturday-Sunday Nonresident 18-Hole Monday-Thursday Friday Saturday-Sunday Twilight/9-Hole Monday-Thursday Friday Saturday-Sunday Average Less: Complimentary/Discounts Overall Weighted Average $ 45.00 14.4% 50.00 4.3% 60.00 10.1% $ 30.00 3.6% 35.00 1.1% 40.00 2.5% $ 75.00 25.6% 85.00 7.7% 105.00 17.9% $ 45.00 6.4% 50.00 1.9% 65.00 4.5% $ 68.45 100.0% ( 3.42) ( 5.0%) $ 65.03 95.0% Other Revenue Other potential sources of revenue include practice range, pro shop merchandise sales, food and beverage operations, and other income. Projections for these are as follows: n 1 I n John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 10 Practice Range (40 tees, night lighting) Gross Revenue — $350,000 armually Pro Shop Gross Revenue — $7.50 per round Food and Beverage (gross revenue) Bar/Grill (golfers) — $6.00 per round Special Events — $500,000 per year Other Income Gross Revenue — $50,000 annually Cost of Sales Pro Shop — 58% of gross sales Food and Beverage — 3 5% of gross sales Course Maintenance Payroll and Benefits $ 550,000 Water and Utilities 3 5 0,000 Service and Supplies 300,000 Maintenance Equipment Lease/Reserve 125,000 Total $1,325,000 Golf Operations , Payroll and Benefits $ 275,000 Cart/GPS Leasing 195,000 Cart Maintenance/Staffing 75,000 Practice Range 75,000 Services and Supplies 50,000 Total $ 670,000 • I John Cahill / Lisa Hildabrand ERA No. 14593 December 28, 2002 Page 11 1 E Food and Beverage Operating Expenses 40% of gross sales Clubhouse Undistributed Expenses Maintenance, utilities, repairs and other expenses related to the. operation of the clubhouse which are not allocated to either the pro shop or food and beverage operations General and Administrative Salaries and Benefits Insurance Property Taxes' Other Services & Supplies Advertising'^ Credit Card Charges Management Fee'^ Total Capital Replacement Reserve 2.0% of gross revenue $ 374,000 $ 150,000 $ 175,000 40,000 75,000 150,000 78,000 277,000 $ 795,000 $ 104,000 i Pro Forma Proiections As shown in Table 6, stable year (year 3) net income, expressed in constant 2002 dollars, is projected at $1.26 million. Including the effects of 3 percent average annual inflation, stable year net operating income is projected at $1.45 million. Assumes municipal ownership. ^ 1.5% of total gross revenue. ^ $120,000 base plus 3% of total gross revenue. Pi i, a. B. I (John Cahill / Lisa Hildabrand ERANo. 14593 December 28, 2002 I Page 12 I A five-year pro forma projection for the course is presented in Table 7. The five-year projection reflects a 3 percent average annual inflation rate I applied equally to operating revenues and expenses. Net operating income is presented before taxes, depreciation, and debt service. A capital replacement I reserve and professional management fee are deducted. I Sensitivity Tests The impact in stable-year net operating income related to variations in ^ annual play and green fees is presented below: Nonresident 0 18-HoIe Greens Fees Annual Play (Mon-Thrs/Fri/Sat-Sun) 50,000 55,000 58,000 $65/$75/$ 95 687 982 1,150 $75/$85/$105 943 1,263 1,456 $85/$95/$120 1,248 1,599 1,810 Temporary Clubhouse Operation of the golf course from a temporary clubhouse is a common occurrence for new golf courses, clearly reducing the original capital outlay. Use of a temporary clubhouse would also impact revenue and operating expenses for the course. The following assumptions relate to use of a temporary clubhouse: • Merchandise revenue is reduced from $7.50 to $5.00 per round. • Golfer-generated food and beverage revenue is reduced from $6.00 to $5.00 per round. John Cahill / Lisa Hildabrand ERANo. 14593 December 28, 2002 Page 13 • Special event food and beverage revenue is reduced from $500,000 to $150,000 per year. • Tournament rounds are reduced by 10 percent, or 500 rounds per year. Based on these assumptions, stable-year net ^operating income, expressed in constant 2002 dollars, is estimated as follows (see Table 8): Stable-Year NOI ($000) Permanent Clubhouse $ 1,263 Temporary Clubhouse 1,117 Reduction $ 146 A $146,000 reduction in net operating income translates into a decline in value of approximately $1.5 million. A 5-year operating income pro forma projection with a temporary clubhouse is presented in Table 9. GOLF COURSE DEVELOPMENT COSTS The development costs for selected high-quality golf courses constructed in Southem Califomia over the past several years is summarized in Table 10. The total development costs for these courses are segregated into several major categories for purposes of comparison. Off-sites/utilities costs relate to those items located off property such as water wells, access roads, utility trank extensions, off-site environmental mitigation, and the like. Mass grading varies according to topography and soil conditions. The mass grading costs for Talega and Meadows del Mar are not included as these were absorbed by the adjoining residential development. Golf course costs generally range I I John Cahill / Lisa Hildabrand ERANo. 14593 December 28, 2002 Page 14 from $6.0 million to $8.5 million per 18-hole course. Soft costs which include architecture, engineering, construction financing, permits and fees, and water connection fees, range widely based on the golf architect, overhead burden, and city fee structure. Other costs such as parking, maintenance facility, on-course restrooms, grow-in, start-up costs and financing are relatively uniform. Overall, the cost of these high quality courses ranged from $17.0 million to over $25 million per 18 holes. Excluding clubhouse, but adjusting for actual i grading costs, the total costs range from about $18 million tb $22 million. DEVELOPMENT SCENARIO There are three basic development/operating scenarios for the golf course, with several variations to these regarding City maintenance and resident discount policies. The tliree basic scenarios are as follows: City Development with Operation Under a Private Fee - for Service or Management Contract The City would develop the golf course and contract with a private golf management firm for operation of the course, typically for a term of about 5 years. The City would receive all revenues and be responsible for all expenses. The management firm would be compensated by a fixed fee plus incentive- based performance payment. The advantage of this option is that it allows the use of low cost (tax- exempt) public financing and eliminates property tax liability. The City also captures most of the upside financial potential. The major disadvantage is that the basic financial risk is bome almost entirely by the City. A reasonable r i I i John Cahill / Lisa Hildabrand ERANo. 14593 December 28, 2002 Page 15 management fee, including a guaranteed base plus incentive, would range from $180,000 to $250,000 per year. Under this scenario, the City could elect to maintain the course while reta:ining a golf operations concessionaire (pro shop, carts, reservations/starting, food and beverage, practice range). The economics associated with this variation generally would be somewhat inferior to a pure management agreement, although some risk would be shifted to the golf course concessionaire. • City Development with a Facility Lease Agreement The City would develop the golf course and lease the facility on a turnkey basis to a private professional golf course operator. The lessee generally would pay the greater of a fixed lease payment or a specified percentage of gross revenue. The length of the lease term could vary from 5 to 15 years or longer, depending upon the lessee's capital requirements and type of financing in place. The main advantage of this option is that, depending on the credit worthiness of the lessee, financial risk to the City can be substantially reduced while still benefiting from professional golf management. There are many drawbacks, however, including loss of City control over many aspects of the operation. Further, the annual lease payment, whether fixed or a percentage of gross revenue, may not be sufficient to cover debt service. Typically, a lessee can support rent payments equal to about 30 percent of golf related gross revenue (greens, carts, and range), and 6-8 percent of merchandise and food and I John Cahill / Lisa Hildabrand ERANo. 14593 December 28, 2002 Page 16 beverage revenue. Applying, these percentages to stable year gross revenue yields annual rent of about $1.3 million. Ground Lease ofthe Site to Golf Course Developer/Operator The private developer would construct and operate the golf course, subject to negotiated policies, terms, and other conditions, paying a ground lease payment to the City. The payment would consist of a minimum guarantee versus a percentage of gross revenue. The length of the term would likely range from 35 to 55 years. Course constmction costs could be financed through taxable municipal or private financing. This option entails virtually no financial risk to the City, particularly if the land is not subordinated. The disadvantages related to a ground lease include loss of City control and minimum financial participation. As well, depending on the cost of the course and market opportunity, there may be little, and possibly negative, land value. In strong markets, ground lease payments equal to 10 percent of total golf related gross revenue may be expected. In the case of Carlsbad, an investment level in the $12 to $14 million range appears supportable. Thus, to the extent that the ground lessee's cost is below this level, underlying land value is created and ground lease revenue would be expected. 0 I #14593 Table 1 SUMMARY OF GREENS FEES AND PLAY LEVELS 2001-2002 18-HoIe Greens Fees (including cart) SB i Number Annual Monday-Saturday- Golf Course of Holes Rounds Thursday Friday Sunday Mount Woodson 18 46,000 $56 $ 76 $81 Fallbrook 18 60,000 37 37 47 San Luis Rey 18 60,000 42 44 62 Castle Creek 18 48,000 43 45 56 Meadow Lake 18 50,000 35 35 55 . San Vicente 18 65,000 49 59 59 Twin Oaks 18 50,000 54 60 74 Pala Mesa 18 52,000 65 70 80 Eagle Crest 18 50,000 38 45 65 Carmel Mountain Ranch 18 54,000 66 76 86-76' Temecula Creek 27 70,000 60 60 80 Steele Canyon 27 68,000 65, 75 85 Rlverwalk 27 65,000 75 85 95/ 85 Aviara 18 48,000 155/175' 175/195' 175/195 Maderas 18 38,000 85 120 120/ 95' Meadows del Mar 18 35,000 no 140 140 Rancho Bernardo Inn 18 48,000 85 85 110 Carlton Oaks 18 48,000 55 70 80 Redhawk 18 48,000 49 .59 69 Carmel Highland 18 40,000 50 60 70 Encinitas Ranch 18 70,000 60^ 65^ 80' Vineyard 18 60,000 55^ 55^ 6T Barona Greek 18 38,000 85 85 85 The Auld Course 18 36,000 75 85 95 Torrey Pines South 95' 95' 117' North 77^* 77" 87' 'Saturday/Sunday. 'Hotel guest/public. ^Southern California resident. ''Nonresident. Source: Economics Research Associates. 'tmi m-'. Ess 1^ l^gj {Mu Tablel GREENS FEE STRUCTURE — SELECTED SAN DIEGO COUNTY COURSES 2000 #14593 1 S^Hole Greens Fees (includes cart) Monday-Thursday Friday Saturday-Sunday-Holiday Twilight Greens Fees (includes cart) Monday-Thursday Friday Saturday-Sunday-Holiday Super Twilight Monday-Thursday Friday Saturday-Sunday-Holiday Senior Rate (18 holes) Monday-Thursday only Rate Includes Cart GPS Range Fees Advanced Reservation Fee per Player Maderas $ 85 120 120/95^ $ 50 65 65 X X $ 20 Meadows at Del Mar $110 140 140 $ 70 80 80 X Aviara Vineyard $155/175^ 175/195 175/195 $105 105 105 $ 55' 55' 55' $ 20 X X $ 20 $55/47'-* 55/47 66/57 $42/34''* 44/34 46/42 —/36''* X Encinitas Ranch $60/44^'* 65/50 80/59 $ 32^'* 36 55 X Eagle Crest $ 38 45 65 $ 27 " 27 40 $ 28 X 3-13 I3IE3 K!3 Table 2 (Continue) 18-Hole Greens Fees Monday-Thursday Friday Saturday-Sunday-Holiday Twilight Greens Fees Monday-Thursday Friday Saturday-Sunday-Holiday Super Twilight Monday-Thursday Friday Saturday-Sunday-Holiday Senior Rate (18 holes) Monday-Thursday only Rate Includes Cart GPS Range Fees Advanced Reservation Fee per Player Twin Oaks Mt. Woodson Carlton Oaks Barona Creek San Luis Rey $ 54 60 74 $ 33 43 43 $ 25 25 28 $ 42 X X Carmel Mountain Ranch $ 56 76 81^ $ 30 40 35 $ 39 X $ 55 70 80 $ 45 45 45 $ 40 X $ 85 85 85 $ 45 45 45 X X X $ 44* 46* 62 $ 31* 31* 45 X $ 66 76 86/76' $ 46 56 66 X Riverwalk $ 75 85 95/85' $ 40 45 50 X $ 5 Saturday/Sunday. Applies to residents of Aviara community only from 3-4 PM. 'Hotel guest/general public. 'Nonresident/resident (Escondido, City of San Diego). Nonresident/resident (Encinitas). *Rate includes $ 12 fee for cart. Source: Economics Research Associates. Bass 33 ms^m mS3 m^mm mmim Course/Location Table 3 SELECTED CHARACTERISTICS OF PUBLIC GOLF COURSES San Diego County 2002 The Vineyard Escondido Twin Oaks San Marcos Carmel Mountain Ranch San Diego Mount Woodson Ramona Carlton Oaks Santee tea #14593 Encinitas Ranch Encinitas Course Type Course Architect Owner Operator Year Opened Number of Holes Par Course Length (back/middle) Rating (back/middle) Slope (back/middle) Greens Fees ~ Standard.(18 Holes) Municipal David Rainville Escondido American Golf December 1993 18 70 6,531/6,160 70.3/68.3 125/119 Daily fee Ted Robinson .JC Golf JC Golf May 1, 1993 18 72 6,535/6,146 71.9/70.1 130/126 Daily fee Ron Fream National Golf Prop. American Golf April 1986 18 71 6,330/5,934 71.9/69.7 131/123 Daily fee Landmark Capital Golf Capital Golf August 1991 18 70 5,779/5,265 68.8/65.7 130/121 Daily fee Dye Designs Kunimoto Kunimoto 1961/1989 18 72 7,008/6,534 74.6/71.2 137/127 Municipal Bickler Encinitas JC Golf March 1, 1998 18 72 6,821/6,521 72.7/71.0 127/124 Weekday $42 $54/60' $66/76' $56/76' $55/70' $48/53' Weekend $54 $74 $86/76' $81' $80 $68 Twilight (9 Holes) Weekday $30 $33/43' $33/38' $30/40' $45 $24/28' Weekend $34 $43 $43 $35 $45 $35 Resident (18 Holes/Twilight) Weekday ' $34/26' . $49/55''' $46/56''* $32/38'-^ Weekend $45/30' $69 $66/56' $47' Seniors (18 Holes/Twilight) $47' Weekday $24/19' $42 $36' $40' Weekend -— $39' Cart Fees (18/9 Holes) $13/7 per rider Included Included Included Included $ 12/person Mandatory Weekends 'til 12 Yes Yes Yes No No Percent Using Carts 80% 100% 100% 100% 95% 65% Inventory •75 75 80 80 80 75 Facilities 75 Clubhouse Size (sq.ft.) 3,500 4,000 20,000 Modular Modular Seating Capacity — — 190 70 250 — Driving Range Yes Yes Yes No Yes Yes Number of Tees 35 25 15 20 25 Average Daily Rounds 20 25 Weekday 150-200 150 100 100-125 no 175-200 Weekend 200-250 245 150 150-200 150-175 200-250 Annual Number of Rounds 60,000 50,000 54,000 46,000 48,000 70,000 Percent Twilight/9-Hole Play 20% 20% 15% 15% 10% 25% EDu- es? ESI Table 3 (Continued) Meadows Rancho Aviara/ Maderas Del Mar Bernardo Inn/ Barona Creek Rlverwalk Course/Location Carlsbad Poway Del Mar Rancho Bernardo Lakeside San Diego Course Type Resort Semiprivate Daily fee Resort Resort Resort Course Architect Arnold Palmer Graves/Pascuzzo/Miller Fazio Bell Baird Robinson Owner Hillman Feldman/Sunroad n.a. JC Golf Barona Band Paseo del Rio Operator Four Seasons Troon Golf Western Golf JC Golf American Golf Year Opened July 1991 November 1999 August 1999 1963 January 2001 March 16, 1998 Number of Holes 18 18 18 18 18 27 Par 72 72 71 72 72 72/72/72 Course Length (back/middle) 7,007/6,591 7,115/6,654 6,885/6,353 6,458/6,182 7,088/6,590 6,627/6,383/6,550 Rating (back/middle) 74.2/71.8 75.2/72.8 73.5/71.0 71.0/69.8 74.5/72.1 71.6/70.5/71.5 Slope (back/middle) 137/130 143/139 134/128 125/122 139/133 123/120/120 Greens Fees Standard (18 Holes) Weekday $155/175'° $ 85/120' $110' $ 85 $85' $75/85' Weekend $175/195'° $120/95' $14-$110 $85" $95/85' Twilight (9 Holes) Weekday $105 $ 50/65' $ 70 $39/44' $45* $40/45' Weekend $105 $ 65 $ 80 $49 $45" $50/45' Resident (18 Holes/Twilight) Weekday — — — $55/65' $45/55''^ Weekend $ 85^'^ — $80 $65/55'-* Seniors (18 Holes/Twilight) Weekday — — — Weekend • — — — Cart Fees (18/9 Holes) ' Included , Included Included Included Included Included Mandatory Yes No • Yes 9 a.m.-2 p.m. Yes No Percent Using Carts 100% 95% 100% 90% 100% 95% Inventory 80 84 85 80 84 120 Facilities Clubhouse Size (sq.ft.) 32,000 7,000 14,000 ' 4,000 5,000 Seating Capacity 350 80 150 120 Driving Range Yes 30 Yes Yes Yes Yes Number df Tees 12 30 25 20 25 Average Daily Rounds Weekday 125 100 105 140 Weekend 175 120 115 175 Annual Number of Rounds 48,000 38,000 35,000 48,000 38,000 65,000 Percent Twilight/9-Hole Play 10% 10% 10% 15% 5% 1© -£"3 6^ LZEiii Table 3 (Concluded) Course/Location Castle Creek Escondido Meadowlake Escondido San Luis Rey Bonsall Carmel Highland San Diego Eagle Crest Escondido Pala Mesa Fallbrook Course Type Daily Fee Semiprivate Daily Fee Resort Daily fee Resort Course Architect Daray Sanderson Bell Daray Rainville Rossen Owner EAGL Cresta Verde Vessels MA Mutual National Golf Prop. Triple Tree Operator EAGL EAGL Vessels Doubletree American Golf Triple Tree Year Opened 1956 1965 1966 1967 May 21, 1993 1962 Number of Holes 18 . 18 18 18 18 18 Par 72 71 72 72 72 72 Course Length (back/middle) 6,372/5,939 6,419/6,155 6,750/6,365 6,413/6,013 6,417/6,035 6,504/6,131 Rating (back/middle) 70.8/68.1 71.0/69.8 72.6/70.5 70.7/68.4 • 71.6/69.3 72.0/70.2 Slope (back/middle) 124/116 128/126 128/122 123/116 136/125 131/127 Greens Fees Standard (18 Holes) Weekday $43/45' $35 $32/34 $50/60' $38/45' $65/70' Weekend $56 55 $61" $70' $65 $80 Twilight (9 Holes) Weekday $29/31''" $27/20'^ $23 $30 $27 $30 Weekend $40" $30/20'^ $45" $40 $40 -$35 Resident (18 Holes) Weekday — — ... Weekend — — — Seniors (18/9 Holes) -Weekday $30 $30 ... $40' $28 Weekend — ... Cart Fees (18/9 Holes) Included Included $10 per person $10/8 per person Included Included Mandatory Fri-Sun a.m. Daily 'til 10 a.m. On weekends On weekends Yes Yes Percent Using Carts 60% 90% • 75% 60% 100% 100% Inventory 75 60 82 80 80 90 Facilities Cliibhouse Size (sq.ft.) 11,000 7,000 ... n.a. Modular Banquet Seating Capacity 200 — 250 700 — 600 Snack Bar Yes Yes Yes Yes Yes Yes Driving Range Yes Yes Yes No 20 Yes Number of Tees 15 12 20 15 Average Daily Rounds 15 Weekday 140 110 140-175 100 100 150 Weekend 220 225 210 150 175 175 Annual Number of Rounds 48,000 50,000 60,000 40,000 50,000 52,000 Percent Twilight/9-Hole Play 20% 15% 20% 10% 10% 15% Monday through Thursday/Friday. ^Encinitas resident/JC Player rate is $2 more. Source: Economics Research Associates, 'Saturday/Sunday 'Monday through Thursday, "includes range balls. 'Escondido and San Diego cities. *County resident. 'JC Player rate. 'Southern California rate; "public" rate is $5 more. '"Hotel guest/public Rate, "Twilight/supertwilight, '^Includes cart. •a ^mm ESS HB ®a fe3 L #14593 Table 4 SAN DIEGO COUNTY FUTURE GOLF COURSE SUPPLY Golf Course/ Developer/Location Number of Holes Course Type Status Comments CityofCarlsbad Palomar Airport Road Carlsbad Woods Valley Ranch Mitsui Fudosan Valley Center Morro Hills Village Morrison Homes Oceanside Helix Water District El Monte Canyon Lakeside San Pasqual Indian Reservation North L. Wohlford Road Valley Center NCFUA Subarea I Black Mountain Road. San Diego San Elijo Hills San Elijo Hills Development Co. San Marcos 18 18 36 18 M/R DF DF DF DF/R DF DF ue UC SUBJECT 18-hole daily fee golf course within planned residential development. Nine holes to open in mid-2002 with remaining holes in fall 2002. City council approved. Total project area — 600 acres; plan proposes 1,135 units. Helix Water District ground lease. Planning commission approved in mid-February 2000. Environmental issues to be resolved. Golf course proposed as part of large-scale resort/casino development Part of Black Mountain Ranch specific plan area. Daily fee course approved for later phase of development. Scott Miller design. Proposed as part of 3,400-unit planned residential community. Status: P = Proposed, A = Approved, DF = Daily Fee, M = Municipal, PR = Private, SP = Semiprivate, R = Resort, UC = Under Construction Source: Economics Research Associates. I Table 5 #14593 ENCINITAS RANCH GOLF COURSE NET OPERATING INCOME FY 1999-2001 (Thousands of Dollars) FY 1999 FY 2000 FY 2001 Revenue Greens Fees $2,430 $2,804 $2,769 Cart Fees 573 608 674 Range 200 250 251 Merchandise 321 396 450 F&B - Concession 80 94 91 Miscellaneous 108 207 211 Total $3,712 $4,359 $4,446 Cost of Sales - Merchandise 216 261 295 Gross Profit $3,496 $4,098 $4,151 Less: Operating Expenses* 2,076 2,323 2.457 Net Operating Incorne $1,420 $1,775 $1,694 Annual Rounds 71,600 76,000 70,300 *Excludes depreciation, capital improvements replacement reserve, and incentive management fee. Source: Economics Research Associates. I I Table 6 ST ABLE-YEAR NET OPERATING INCOME Carlsbad Municipal Golf Course Amount (SOOOs) REVENUE Greens/Cart Fees $3,577 Practice Range 350 Pro Shop Merchandise 413 Food & Beverage Bar/Grill 330 Special Events 500 Other Income 50 ^'' 1.5% of total gross revenue. ^'^ $120,000 plus 3.0% of total gross reyenue. ^'^ 2.0% of total gross revenue. Source: Economics Research Associates. Gross Revenue $5,219 Less: Cost of Sales Pro Shop Merchandise $248 Food & Beverage 291 Subtotal Cost of Sales $538 TOTAL REVENUE ~ $4,681 OPERATING EXPENSES Course Maintenance Salaries & Benefits $550 Water & Utilities 350 Services & Supplies 300 Equipment Lease 125 Subtotal Course Maintenance $1,325 Golf Operations Pro Shop Staff $275 Cart Lease 195 Cart Maintenance/Staff 75 Practice Range 75 Miscellaneous 50 Subtotal Golf Operations $670 Food & Beverage Op. Expenses $374 Clubhouse Undistributed $150 General & Administrative Salaries & Benefits $ 175 Insurance '40 Property Taxes Other Services & Supplies 75 Advertising 150 Credit Card Charges <" 78 Management Fee ^'^ 277 Subtotal G&A $795 Course Replacement Reserve ^'^ 104 TOTAL EXPENSES $3,418 NET OPERATING INCOME $1,263 Table 7 I I 0 i [ PRO FORMA FINANCIAL ANALYSIS Carlsbad Municipal Golf Course (In Current $000s) 1 2 3 4 5 Total ANNUAL ROUNDS 48,000 52,000 55,000 55,000 55,000 REVENUE Greens/Cart Fees @ $ 65.03 $3,121 $3,483 $3,794 $3,908 $4,025 $18,332 Practice Range 350 361 371 382 . 394 1,858 Pro Shop Merchandise 360 402 438 451 464 2,114 Food & Beverage Bar/Grill 288 321 350 361 371 1,691 Special Events 500 515 530 546 563 2,655 Other Income 50 52 53 55 56 265 Gross Revenue $4,669 $5,133 $5,537 $5,703 $5,874 $26,916 Less: Cost of Sales Pro Shop Merchandise $216 $241 $263 $270 $279 $1,269 Food & Beverage 276 293 308 317 327 1,521 Subtotal Costof Sales $492 $534 $571 $588 $606 $2,790 TOTAL REVENUE $4,178 $4,599 $4,966 $5,115 $5,269 $24,126 OPERATING EXPENSES Course Maintenance Salaries & Benefits $550 $567 $583 $601 $619 $2,920 Water & Utilities 350 361 371 382 394 1,858 Services & Supplies 300 309 318 328 338 1,593 Equip. Replacement Reserve 125 125 125 125 . 125 625 Subtotal Coiirse Maintenance $1,325 $1,361 $1,398 $1,436 $1,476 $6,996 Golf Operations Pro Shop Staff $275 . $283 $292 $300 $310 $1,460 Cart Lease 195 195 195 195 195 975 Cart Maintenance/Staff 75 77 .80 82 84 398 Practice Range 75 77 80 82 84 398 Miscellaneous 50 52 53 55 56 265 Subtotal Golf Operations $670 $684 $699 $714 $730 $3,497 F& B Op. Expenses $355 $376 $396 $408 $420 $1,956 Clubhouse Undistributed $150 $155 $159 $164 $169 $796 General & Administrative Salaries & Benefits $175 $180 $186 $191 $197 $929 Insurance 40 41 42 44 45 212 Property Taxes ------ Other Services & Supplies 75 77 80 82 84 398 Advertising/Marketing 150 155 159 164 169 796 Credit Card Charges''' 70 77 83 86 88 404 Manageinent Fee ^'' 260 274 286 291 296 1,407 Subtotal G&A $770 $804 $836 $857 $880 $4,147 Course Replacement Reserve *'^ 93 103 111 114 117 538 TOTAL EXPENSES $3,363 $3,483 $3,599 $3,694 $3,791 $17,930 NET OPERATING INCOME $814 $1,116 $1,367 $1,421 $1,477 $6,196 Note: Reflects 3.0% average annual inflation rate beginning in Year 2. 1.5% of total gross revenue. $120^000 plus 3.0% of total gross revenue. 2.0% of total gross revenue. Source: Economics Research Associates. •' I i a B Table 8 STABLE-YEAR NET OPERATING INCOME Carlsbad Municipal Golf Course With Temporary Clubhouse Amount (SOOOs) REVENUE Greens/Cart Fees $3,544 Practice Range 350 Pro Shop Merchandise 273 Food & Beverage Bar/Grill 273 Special Events 150 Other Income 35 Gross Revenue $4,624 Less: Cost of Sales Pro Shop Merchandise $ 164 Food & Beverage, 148 Subtotal Costof Sales $311 TOTAL REVENUE $4,313 OPERATING EXPENSES Course Maintenance Salaries & Benefits $550 Water & Utilities 350 Services & Supplies 300 P Equipment Lease 125 H Subtotal Course Mainteriance $ 1,325 Golf Operations 1 Pro Shop Staff $275 i Cart Lease 195 Cart Maintenance/Staff 75 0 Practice Range 75 Miscellaneous 50 Subtotal Golf Operations $670 Food & Beverage Op. Expenses $190 Clubhouse Undistributed $150 General & Administrative Salaries & Benefits $175 Insurance 40 Property Taxes Other Services & Supplies 75 Advertising 150 Credit Card Charges ^'' 69 Management Fee ^'^ 259 : Subtotal G&A $768 Course Replacement Reserve ''' 92 I] TOTAL EXPENSES $3,196 ^ NET OPERATING INCOME , $1,117 "1 ^'^ 1.5% of total gross revenue. J $120,000 plus 3.0% of total gross revenue. 2.0% of total gross revenue. ' H Source: Economics Research Associates. Jl Table 9 I I 1 i PRO FORMA FINANCIAL ANALYSIS Carlsbad Municipal Golf Course With Temporary Clubhouse (In Current $000s) 1 2 3 4 5 Total ANNUAL ROUNDS 47,500 51,500 54,500 54,500 54,500 REVENUE Greens/Cart Fees @ $ 65.03 $3,089 $3,449 $3,760 $3,873 $3,989 $18,159 Practice Range 350 361 371 382 394 1,858 Pro Shop Merchandise 238 265 289 298 307 1,396 Food & Beverage Bar/Grill 238 265 289 298 307 1,396 Special Events 150 155 159 164 169 796 Other Income 35 36 37 38 39 186 Gross Revenue $4,099 $4,531 $4,906 $5,053 $5,204 $23,792 Less: Cost of Sales Pro Shop Merchandise $143 $159 $173 $179 $184 $838 Food & Beverage 136 147 157 162 166 767 Subtotal Cost of Sales $278 $306 $330 $340 $350 $1,605 TOTAL REVENUE $3,821 $4,225 $4,575 $4,713 $4,854 $22,187 OPERATING EXPENSES Course Maintenance Salaries & Benefits $550 $567 ' $583 $601 $619 $2,920 Water & Utilities. 350 361 371 382 394 1,858 Services & Supplies 300 309 318 328 338 1,593 Equip. Replacement Reserve 125 125 125 125 125 625 Subtotal Course Maintenance $1,325 $1,361 $1,398 $1,436 $1,476 $6,996 Golf Operations Pro Shop Staff $275 $283. $292 $300 $310 $1,460 Cart Lease 195 195 195 195 195 975 Cart Maintenance/Staff 75 77 80 82 84 398 Practice Range 75 77 80 82 84 398 Miscellaneous 50 52 53 55 56 265 Subtotal Golf Operations $670 $684 $699 $714 $730 $3,497 F& B Op. Expenses $174 $189 $202 $208 $214 $987 Clubhouse Undistributed $150 $155 $159 $164 $169 $796 General & Administrative Salaries & Benefits $175 $180 $186 . $191 $197 $929 Insurance 40 41 42 44 45 212 Property Taxes ------ Other Services & Supplies 75 77 80 82 84 398 Advertising/Marketing 150 155 159 164 169 796 Credit Card Charges'" 61 68 74 76 78 357 Management Fee 243 256 267 272 276 1,314 Subtotal G&A $744 $777 $808 $828 $849 $4,007 Course Replacement Reserve''' 82 91 98 101 104 476 TOTAL EXPENSES $3,146 $3,256 $3,364 $3,451 $3,542 $16,758 NET OPERATING INCOME $675 $969 $1,212 $1,261 $1,312 $5,429 Note: Reflects 3.0% average annual inflation rate beginning in Year 2. (1) (2) (3) 1.5% of total gross revenue. $120,000 plus 3.0% of total gross revenue. 2.0% of total gross revenue. Source: Economics Research Associates. mm GZD 3 UTfl ^EM fewij fWm 151 ,P^ySi gj^ g!: Component Table 10 ACTUAL DEVELOPMENT COSTS HIGH-END DAILY FEE GOLF COURSES (Thousands of Dollars) #14593 Year Built Talega Golf Club 2000 The Cascades San Fernando 1999 Tierra Rejada Moorpark 1999 Black Gold Yorba Linda 2001 Meadows del Mar Del Mar 1998 Desert Willow (36 holes) Palm Desert 1997 Utilities/Off-Sites/Site Prep $ 300 $ 2,380 $ 500 $ 1,470 $ 200 $ 8,100 Mass Grading — 4,060 1,000 2,700 Golf Course 7,500 7,870 6,000 7,650 8,500 19,900 Clubhouse/Cart Storage 3,000 2,450 1,250 4,100 3,000 5,000 Parking 400 700 350 500 500 500 Maintenance Facility 650 20' 450 980 500 1,100 Restrooms/Halfway House 150 300 400 250 100 220 Tunnels/Bridges 1,200 175 — — 100 — Grow-In 600 360 650 970 700 1,410 Soft Costs 1,900 3,800 2,000 3,000 3,000 6,000 Financing Cost & Construction Interest 1,000 1,110 1,200 520 1,100 2,800 Start-Up Costs' 600 450 400 1,200 550 1,750 Other 500 500 1,160 920 600 4,500 Total • $17,800 $24,175 $19,110 $24,260 $18,850 $51,280 Includes business equipment, staff hiring and training, pre-development marketing, and other pre-opening costs. 'Temporary facility; $200,000 cost to complete. Source: Individual project developers; and Economics Research Associates.