HomeMy WebLinkAbout; Carlsbad Municipal Golf Course Economic Evaluation; Carlsbad Municipal Golf Course Economic Evaluation; 1995-04-01I
I Economics Research Associates
Affiliaied with Drivers Jonas
Los Angeies
San Francisco
.San Diego
Chicago
Was il ing ion, D,C,
London
ECONOMIC EVALUATION
OF PROPOSED
27-HOLE CARLSBAD GOLF COURSE
PREPARED FOR
CITY OF CARLSBAD
APRIL 1995
ERA PROJECT NO. 11461
10990 Wilshire Boulevard, Suite .1600, Los Angeles, California.90024
(.310) 477^9585 Telex: 857661 (ECON RES CA) Fax:(310)478-1950
TABLE OF CONTENTS
Page
INTRODUCTION 1
GOLF MARKET CONDITIONS 1
HOTEL AGREEMENT 4
CAPITAL COST : 5
DEVELOPMENT/OPERATING SCENARIOS 5
UNDERLYING FINANCIAL FACTORS AND ASSUMPTIONS 8
SUMMARY OF PRO FORMA FINANCIAL PERFORMANCE 14
IMPACT OF RESIDENT DISCOUNTS 15
IMPACT OF CITY MAINTENANCE 17
COMPARISON WITH 18-HOLE OPERATION : 18
IMPACT OF DEBT FINANCING 18
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LIST OF TABLES
Number Page
1 SUMMARY OF GREENS FEES AND PLAY LEVELS 20
2 FUTURE GOLF COURSE SUPPLY 21
3 CARLSBAD GOLF COURSE PRELIMINARY CAPITAL
COST ESTIMATE : 24
4 PRO FORMA FINANCIAL ANALYSIS-BASE CASE 25
5 REPRESENTATIVE FACILITY LEASE 26
6 REPRESENTATIVE GROUND LEASE 28
7 PRO FORMA FINANCIAL ANALYSIS-RESIDENT
DISCOUNT..^ 30
8 REPRESENTATIVE FINANCING SCENARIOS 31
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INTRODUCTION
The followmg report addresses market support and fmancial issues relative to
development of a 27-hole public golf complex in the City of Carlsbad. The City originally
proposed development of an 18-hole golf course. The concept ofa 27-hole facility has evolved
from the City's discussions with The Pointe Resort which is proposing development of a major
resort complex on adjacent property. The Pointe had proposed development of its own 18-hole
golf facility along with its resort hotel. However, it appears that The Pointe may have only
enough property to develop 9 holes and thus joint development of a 27-hole golf facility with
the City is under consideration.
ERA prepared a market overview and economic projections for the proposed City of
Carlsbad 18-hole golf course in August 1994. While this prior work effort was hot a
comprehensive feasibility study of the project, sufficient market mput was provided in
analyzing the economics of several development and operating scenarios.
This report contains a brief update of current golf market conditions and evaluates the
economics of a 27-hole complex. The project concept varies due to the facility size (18 versus
27 holes) as well as the potential use arrangement with the proposed Pointe Resort.
Comparison of the 27-hole operation with an 18-hole operation also is evaluated, and the
impact of debt financing for the various options is evaluated.
GOLF MARKET CONDITIONS
In ERA'S August 1994 report, an overview of golf course market conditions was
conducted and substantial data were compiled regarding the golf market competitive
environment. In general, the San Diego County golf market at that time was characterized as
somewhat "soft" with roimds of play at most existing facilities stabilized, most new courses
generating play levels below pro forma projections, and greens fee increases plateauing after a
period of rapid increases posted during the latter part of the 1980s.
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Current golf rnarket conditions have, for the most part, remained unchanged from
mid-1994. The market has remained "soft," and there has been some repositioning by some
facilities in the marketplace to improve their competitive posture. Table 1 summarizes rounds
and greens fees for selected public courses in San Diego County, and other areas of Southem
Califomia.
The Vineyard at Escondido performed exceptionally well in its fu-st full year of
operations, generating 65,000 rounds of play at greens fees of $25 on weekdays and $35 on
weekends, plus cart. However, play levels at Eagle Crest and Twin Oaks, both entering the
market in 1993 and serving the North County market, have remained in the 40,000- to 45,000-
round range.
Aviara continues its strong performance with annual play levels at about 47,000
rounds at an average revenue per round in excess pf $90 (including cart). Cobblestone Golf
Group's Morgan Run (formerly Whispering Palms) is in the process of renovating their 27-hole
golf course, lodge and clubhouse. The objective of Cobblestone is to reposition the course as a
more upscale facility, moving its greens fees from the $45-55 to the $65-75 range. This will
position the course between the midmarket public facilities (e.g., Twin Oaks) and the top end of
the rnarket (Aviara).
The Oceanside Municipal course continues to operate at capacity, although play is
stimulated by a very low senior rate stmcture. The course generates in excess of 100,000
rounds annually, but the average greens fee is well under $10 per round. Some consideration is
being given to allowing rates to increase somewhat as a means of fimding necessary capital
improvements.
Many courses in the San Diego County market have moved their twilight starting
times earlier in the day, effectively lowering their greens fees in an effort to increase play levels.
In the context of these overall "soft" market conditions, the north coastal golf market
is relatively strong and somewhat underserved at present. Population growth has continued in
this sector of the county without any expansion of the golf inventory, except for the North
County courses (Twin Oaks, Eagle Crest, and The Vineyards) which indirectly service the north
coastal area.
There are a number of golf courses in the planned and proposed stage (see Table 2).
Most of these projects are either highly speculative or part of a long-range planning process and
are not expected to enter the market within the foreseeable future.
The most significant proposed competitive project is the Encinitas Ranch 18-hole
course proposed on Ecke's property at Leucadia Boulevard and Alta Vista Road in Encinitas.
As proposed, the property for the course would be dedicated to the City of Encinitas. It is
possible that the landowner would develop the course, with the City providing take-out tax-
exempt financing upon completion and initial operation of the course. According to sources
close to the project, the site is suitable for a high-quality golf course with a bluff-top setting
which provides quality ocean views from rnuch of the property. The course is intended to have
a midmarket positioning, with greens fees in the $25-35 range, plus cart. Reportedly, the
turnkey golf course development cost budget, excluding land, is in the $7 million range.
While the Encinitas Ranch course had been identified in August 1994, its likelihood
of market entry has increased over the past six months due to resolution of some litigation
issues, the City's endorsement of the project, and proposed fmancial stmcturing. The course
will likely be more directly competitive with the subject Carlsbad course due to its proposed
timing, location, and pricing stmcture.
The impact of a competing Encinitas Ranch course will depend on a number of
factors, including the terms of an agreement with The Pointe Resort (and a second resort hotel),
Carlsbad resident pricing and tee time policies, county resident pricing and tee time policies,
comparative quality of the Encinitas course with the subject, and pricing and policies goveming
play at the Encinitas course. Entry of the Encinitas course is likely to extend the point at which
play stabilization is achieved on the Carlsbad course (estimated at 4 to 5 years) and may reduce
the average greens fee on the order pf $5.00, or 12 percent, from the estimate contained in the
mid-1994 study.
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In the mid- to long-term, additional public golf capacity is expected in the La
Jolla/Santa Fe Valley area of the county. There are as many as five golf courses proposed in
this area as part of area plans, and it is reasonable to conclude that over the next five to six years
at least one moderate fee public course will enter the market. This would result in a continued
balance of golf demand/supply conditions in this region.
Thus, while the overall north coastal area golf market currently is underserved,
concurrent entry of a Carlsbad course and Encinitas Ranch course would not only ease the
market undersupply condition but create some softness in the market in the near- to mid-term.
HOTFX AGREEMENT
The economics of the 27-hole golf course are predicated on a variety of factors,
assumptions and projections. With respect to The Pointe Resort, a series of assumed terms and
conditions have been postulated. It is assumed that a formal "golf treaty" or agreement is
formulated with the following characteristics:
• The Pointe Resort guests, as out-of-county residents, are subject to a single-tier
greens feet—that is, the weekend rates apply seven days per week (no weekday
discount).
• Hotel guests have one year advanced tee time privileges.
• Up to one-third ofthe tee times are allocated for The Pointe Resort guests. It is
assumed that every third time is assigned for hotel guests, although there are
several methods for effecting the allocation of tee times.
• Designated hotel tee times are "blocked" up to 24 hours in advance, after which
time they are released for the general public.
• The hotel is subject to the same general tournament guidelines as the general
public.
• The Pointe Resort is subject to a minimum guarantee of annual golf course play-
' say 15,000 rounds at a negotiated rate.
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• Increases in hotel guest (out-of-county resident) golf rates are tied to some index.
This could be a cost of living index or a pool of "comparable" golf courses.
• Discounts associated with golf packages offered by the resort are fully absorbed^
by the hotel.
CAfKTAI. COST
In August 1994, capital cost estimates were provided by the City of Carlsbad relative
to the proposed 18-hole course. Table 3 presents ERA's adjusted estimate of the cost of the 27-
hole facility. It is important to emphasize that these are "ballpark" estimates keyed off of the
18-hole estimate which are highly preliminary and subject to potential major modification and.
refinement.
As indicated, the estimated cost for the 18-hole facility is about $16.06 million,
including land acquisition. The cost of a 27-hole complex is estimated at $20.35 million, about
one-fomth more than the 18-hole option. Note that no additional land cost is assumed for the
27-hole scenario.
The city's cost related to ground leasing the site (planning, general and administrative
costs, capitalized College and Palomar assessments during constmction-, land acquisition, and
other front-end city costs) is estimated at approximately $4.5 million.
DEVELOPMENT/OPERATING SCENARIOS
There are. three basic development/operating scenarios for the golf course, with
several variations to these regarding city maintenance and resident discount policies. Refer to
ERA'S August 1994 study for a more detailed review of the pptehtial development/operating
scenarios. The three basic scenarios under which the golf course financial performance has
been analyzed are summarized as follows:
City development with operation under a private Fee for Service Contract. The
city would deyelop the golf course and contract with a private golf management firm
for operation of the course. 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.
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
management firm. The lessee would pay a fixed lease payment versus a 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
(speciflcally, the lease term is limited to a maximum of five years if tax-exempt
fmancing is used). The following facility lease terms have been assiuned:
Facilitv Lease
Lease Term 20 years
Capital Requirements' $750,000-$ 1,000,000
Minimum Rent $900,000
Percent of Gross Revenue
Golf Food&
Year Related^ Merchandise Beverage
I 20% 6% 10%
2 25% 6% 10%
3-5 30% 6% 10%
6-40 32% , 6% 10%
Capital Improvements Reserve
(percent of greens revenue) 5%
' Maintenance equipment ($400,000), pro shop inventory ($150,000), food service startup ($100,000), and
practice range startup ($50,000).
^ Greens/carts and practice range.
City Operating Expenses (for contract enforcement, golf course monitoring,
audit, accounting, and other administrative services)
Salaries and Benefits
Audit/Accounting/Other
Total
Assessment Districts
College
Palomar
27 Holes
$50,000
25.000
$75,000
$261,000/year (through 2005-2006)
$125,000/year (through 2002-2003)
Reversion Value - Based on 7% capitalization rate
Ground Lease of the site to golf course developer/operator. The private developer
would constmct 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
funded through taxable municipal or private financing. The following representative
ground lease terms have been assumed:
Ground Lease
Lease Term
Minimum Rent
40 years
$100,000'
Percent of Gross Revenue
Golf Food&
Year Related Merchandise Beverage
1 0% 0% 0%
2 3% 3% . 3%
3-5 5% 3% 3%
6-10 8% 5% 5%
11-20 10% 5% 5%
21-40 15% 5% 5%
41+ (facility lease) 30% 6% 10%
Adjusted to 80 percent of prior year's rent.
Capital Improvements Reserve
(percent of golf related) 5%
City Operating Expenses (for contract enforcement, audit, accounting, and
other admmistrative services)
27 Holes
Salaries and Benefits $35,000
Audit/Accounting/Other 15.000
Total $50,000
Assessment Districts
College $261,000/year (through 2005-2006)
Palomar $125,000/year (through 2002-2003)
Reversion Value - Based on 7% capitalization rate
UNDERLYING FINANCIAL FACTORS AND ASSUMPTIONS
The analysis of financial performance for the development/operatmg scenarios is
based on a series of general assumptions:
• The course will be efficiently designed with three nme-hole layouts which, when
combined, create three unique 18-hole routmgs, each with retummg nines.
Further, the design will create uniformity in playability and quality among the
three nines.
• The Pomte Resort is developed and expected to open concurrently with the golf
course in 1998. The hotel contams 600 rooms, less than its approved level of 700
rooms.
• A second hotel, if constmcted, does not participate with the golf course in any
formal arrangement.
• Based on the basic principles of a formal golf treaty, the The Pomte Resort is
projected to generate golf rounds at a rate of .15 rovmds per occupied room.
Based on an annual occupancy rate of 70 percent, the 600-room resort would
generate about 23,000 rounds per year (see ERA memorandum dated February 8,
1995).
• The proposed Encinitas Ranch Golf Course is developed and is open for play by
1998. This course is assumed to be competitive in design quality with the
Carlsbad course with greens fees in the $25-35 range, plus cart.
Clubhouse
For the purpose of this analysis, we have assumed the development of a modest
clubhouse of approximately 6,000 square feet, plus cart storage of about 4,000 square feet (this
clubhouse is smaller than the city's prelimuiary concept which calls for a 14,000-square-foot
clubhouse). This would include a pro shop, small adminisfrative office and storage areas, and a
bar/grill operation with about 80 seats. The following space allocation would be representative
of the proposed facility:
Size
Component (sq.ft)
Pro Shop 1,400
Office and Storage Area 600
Bar and Grill* 2,200
Rest Rooms/Common Area 1,000
Circulation 800
Total 6,000
*Inc!udes kitchen.
Development Schedule
The followmg development schedule has been assumed m each of the scenarios that
have been formulated for the proposed Carlsbad Course:
F.vent Period
Course Planning/Design/Entitlements 1995-1996
Golf Course Construction 1997
First Golf Play 1998
Clubhouse Construction 1997
Clubhouse Opening 1998
Utilization
Annual play for the subject course, reflecting the greens fees and other course
characteristics indicated below, is projected as follows:
Year
1
2
3
. 4+
18-Hole Equivalents
Number of Rounds
27 Holes
60,000
70,000 .
80,000
90,000
81,000
The distribution of play at stabilization is estimated as follows:
Number of Rounds
27 Holes Weight
Weekday
Weekend
Total
49,500
40.500
90,000
55.0%
45.0%
100.0%
18-Hole
9-Hoie/rwilight
Total
72,000
18.000
90,000
80.0%
20.0%
100.0%
Greens Fees
18-Hole
County Resident
Weekday
Seniors (weekdays only)
Weekend
Nonresident
Weekday
Weekend
Fee
(including
cart^
$38.00
25.00
50.00
50.00
50.00
Weight
21.6%
,9.2%
25.2%
13.2%
10.8%
Monday-Friday.
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Fee
(including
eart) Weight
9-Hole/Twilight
County Resident
Weekday 25.00 5.4%
Seniors (weekdays only) 15.00 2.3%
Weekend 30.00 6.3%
Nonresident
Weekday 30.00 3.3%
Weekend 30,00 2.7%
Average/Total $40.38 100.0%
Less: Complimentary (1.23) (3,0%)
Overall Weighted Average $39.17 97.0%
This analysis assumes that county residents will comprise 70 percent of total play on the 27-
hole resort course.
Qther Revenue
Other potential sources of revenue include practice range, pro shop sales, and food and
beverage operations. These are assumed to remain the same for each of the scenarios.
Projections for these are as follows:
• Night-Lighted Practice Range
Gross Revenue (50 tees) — $450,000
• ProShop
Gross Revenue -—$5.00 per round
• Food and Beverage (gross revenue)
Grill Operation — $4.00 per round
Special Events — $350,000
Operating Expenses — Contract Management
The costs of operating the proposed municipal golf course with an outside management
fum, including course mamtenance, water, replacement reserve, and general and admimsfrative
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expenses, are estimated below. These costs were developed based on the experience of local
operators and ERA's experience with comparable quality golf courses in Southem Califomia.
Golf Course Maintenance
Pavroll (Salarv> 27 Holes
Superintendent ($50,000) $60,000
Assistant Superintendent ($35,000) 35,000
Greens ($15,000) 60,000
Otiier Landscape ($15,000) 90,000
Equipment Operators/Otiier($ 18,000) 72,000
Part Tune ($7.00 per hour) 45.000 ,.
Subtotal Salaries $362,000
Benefits at 25 percent 88.000
Total Salaries & Benefits $450,000
Services and Supplies 275,000
Total Golf Course Maintenance $735,000
Water and Power
$740/acre foot' $481,000
Replacement Reserves
Maintenance Equipment $ 75,000
Golf Course 100,000
Golf Operations 27 Holes
Pro Shop Staff ($20,000) $ 80,000 .
Golfer Service Personnel ($12,000) 72,000
Starters/Marshals ($15,000) 45.000
Subtotal Salaries $197,000
Benefits at 25 percent 53.000
Subtotal Pro Shop Staff $250,000
Carts
Lease Payments ($750 per cart) $ 90,000
Maintenance 90.000
Subtotal Carts $180,000
' Assumes 450 acre feet of water for the 18-hole course and 650 acre feet for the 27-hole course.
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Practice Range 75,000
Utilities/Miscellaneous 50.000
Total Operations $555,000
Clubhouse Undistributed $ 50,000
Food and Beverage
45% of Gross Revenue , $320,000
General and Administrative
Salaries and Benefits
Course Manager/Golf Pro $70,000
Assistant Manager/Support Staff 50.000
. Subtotal Salaries $120,000
Benefits @ 25 percent 30.000
Subtotal $150,000
Other Expenses
Insurance $ 75,000
Property Taxes 0
Advertising/Miscellaneous 50.000
Subtotal Expenses $125,000
Management Fee (4 percent of gross) 214.000
Tptal General and Adminisfrative $489,000
Assessment Districts
College V 261,000/year (tiirough 2005-2006)
Palomar 125,000/year (tiirough 2002-2003)
City Operating Expenses
(for city budgeting, policy formulation, audit,
accounting, and other administrative services)
Salaries and Benefits $ 70,000,
Audit/Accountmg/Otiier 20.000
Total $90,000
Reversion Value — Based on 8% Capitalization Rate
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SUMMARY OF PRO FORMA FINANCIAL PERFORMANCE
Based on the underlying fmancial factors and assumptions outlined above, pro forma
financial projections are presented in Tables 4 through 6. Note that the following scenarios
assume no "resident discounts" are offered.
I. City Developed/Confract Operation (Table 4)
II. Facility Lease (Table 5)
III. Ground Lease (Table 6)
The net revenue to the city for these three basic scenarios over a 40-year tune frame
following construction completion has been projected. For each scenario, a reversion value is
estimated at the end of the 40th year (effectively representmg tiie value of fiature earmngs) and
an estimate of the value of the income sfream (present value) is calculated. Note that in all
cases, net operating mcome is projected before debt service.
The value of the income sfream is based on discbunting the annual net cash flow sfream,
including the asset reversion value at the end of the 40th year, to the present value at an
appropriate discount rate. The discount rate (and reversion value capitalization rate) must
reflect the cost of capital, development profit, and risk. Accordingly, within a 3 percent
inflation environment, the discount rate for Scenario I is indicated at 11 percent, reflecting the
highest degree of risk, and 10 percent for Scenarios II and III which entail less risk. (The
ground lease scenario may require city-issued taxable financmg which would increase the city's
risk.) The results are summarized below:
, Amount
thousands of dollars)
Less*
Present Cost of Net
27-Hole Scenario Value Development* Yalwe
I. City Develop/Contract Operate $18,454 $20,349 ($1,895)
II. Facility Lease 15,900 20,349 (4,449)
III. Ground Lease 2,613 4,500 (1,887)
*Excludes land.
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As shown, under Scenario I (City develop with Confract Operation) the differential
between the value of the asset at constmction completion is mdicated at $18.45 million
compared with capital cost of $20.35 million, yielding a negative $1.89 million net (residual
land) value. There are three major factors which negatively impact the net value:
• Water costs for the proposed golf course are very high at $481,000 per year ($740
per acre foot).
• Assessment district costs of $261,000 per year extending tiirough 2005-2006
(College) and $ 125,000 per year extendmg tiirough 2002-2003 (Palomar).
• The capital cost ofthe golf course is at the high end of the range.
Under Scenario II (Facility Lease), the value of the course resulting from the lease
terms assumed in this analysis is about $4.4 million less than development costs. Under a long-
term lease agreement, it is possible tiiat a portion of tiie capital cost, or slightly higher lease
payments, could be exfracted from the lessee, thus mcreasmg the net value somewhat.
Under Scenario III (Ground Lease), based on typical ground lease terms for similar
facilities, the value of the income sfream is estunated at $2.61 million. The city's cost of
planning, land acquisition and other front-end costs is estimated at $4.5 million, yielding a
negative $1.89 million net value; While this appears to compare with city development as the
most economic approach, ground leasing the site at the standard terms assumed in this analysis
is somewhat speculative and may be overly optunistic in the current market. Further, ifthe site
is leased, the developer/operator may elect to develop a different type and quality of course
which could affect tiie projected ground lease mcome sfream, requfre subsidies on water, or
other concessions from the city includmg city-issued taxable financing.
IMPACT OF RFSTDFNT DISCOUNTS
Resident discounts would affect tiie economics of each of tiie development/operating
scenarios deluieated above. The financial impact would depend on the amount ofthe discount
and policies regarding restrictions pf discount play at selected times. It should be noted tiiat
offering resident discounts would probably result m an mcrease in overall play levels from
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tiiose under a pure market rate scenario. Based on market area demographics, including
Carlsbad's resident population versus the balance of the principal market area, the experience of
other cities, and the resident discount policy, the followmg distribution of play is projected:
Annual Rounds
Weekdav Weekend Total
City Resident 16,000 15,500 31,500
County Resident 7,900 15,250 23,150
Nonresident (including hotel) 18,000 12,000 30,000
Seniors (residents) 10.350 — 10.350
Total 52,250 42,750 95,000
Note that the total armual play is projected at 5,000 rounds higher than the "no discovmt" policy.
There are various forms of preferential freatment and discount policies which may be
employed. For analysis purposes, the following resident discount policy characteristics are
assumed:
Greens Fees
- (including cart)
City County
Resident Resident Nonresident
18-Hole
Weekday $30.00 $38.00 $50.00
Weekday-Senior 25.00 25.00
Weekend 45.00 50.00 50.00
9-Hole/Twilight
Weekday 18.00 23.00 30.00
Weekday-Senior 15.00 15.00
Weekend , 25.00 30.00 30.00
Senior discounts (city and county residents) apply only to weekdays. No restrictions
are placed on resident play. Witii resident discounts, 75 percent of play is 18-hole play
compared with 80 percent under a no-discount scenario.
Stable-year net operatmg income and golf course value, under the assumption of
increased play v^th resident discoimts, is only slightiy below the np-discpimt scenarios (see
Table 7):
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Total Average Stable-Year Project
Annual Rate per NOl' Value^
RowPds ROHnd (thousands) (thousands)
27 Holes
No Resident Discounts 90,000 $39.17 $1,492 $18,454
With Resident Discounts 95,000 36.67 1,460 18,206
As indicated, annual net operating income with resident discounts is only about
$32,000 below the no-discount scenario for the 27-hole altemative, with about a $250,000
reduction m course value. This assvunes that play levels would mcrease imder the discount
scenario by 5,000 rounds annually. If play levels remained the same, annual net mcome would
decline by about $240,000 annually with 27 holes. This results in a reduction in value of about
$2.7 million from the no-discount 27-hole scenario.
IMPACT OF cny MAINTENANCE
Under the first scenario (city develop/confract operate), the city could elect to maintain
and operate the course, or maintain the course while retaining a golf operations concessionaire
(pro shop, carts, reservations/starting, food and beverage, practice range). Golf course
mamtenance by the city would result in higher golf course maintenance expenses attributable
primarily to higher public employee wage rates and benefit packages. There may also be some
cost savings relating to professional golf course operation resulting from economies of
purchasing supplies.
Mamtienance expenses with public employees are calculated at $250,000-$300,000
more than with private sector employees. This would translate uito about a $3 million decrease
in the overall value of the golf course.
' Year 4, expressed in current dollars.
^ Based on 8% capitalization rate and 12% discount rate.
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COMPARISON WITH 18-HOLE OPERATION
The results of the 27-hole facility economic analysis can be compared with an 18-hole
course as initially considered. For analysis purposes, the base case (confract operations - no
resident discounts) is assumed. Comparative assumptions include the following:
18-Hole 27-HoIe
With No With
Hotel Hotel Hotel
65,000 65,000 90,000
3 . 4 4
$39.17 $36.83 $39.17
Total Annual Rounds
Years to Stabilization
Average Greens Fee per Round
The basic economics of the 18-hole versus 27-hole development are summarized below:
Amount
(thousands of dollars)
18-Hole 27-Hole
With No With
Hotel Hotel Hotel
Stable-Year Net Operating Income
(thousands of constant 1995 dollars) $ 944 $ 824 $ 1,492
Project Value 13,969 11,936 18,454
Development Costs (excluding iand) 16,064 16,064 20,349.
Net (Residual) Value (1,151) (3,304) (1,895)
As shown, imder the base case option of city development with confract operation, the
economics of the 27-hole golf cpurse are superior tP the 18-hole scenario without hotel
affiliation, but inferior to the 18-hole scenario with hotel affiliation.
IMPACT OF DEBT FINANCING
Table 8 presents net cash flow after debt financing for each of the three development/
operatmg scenarios over the mitial 20-year operatmg period. Armual debt service, based on
fmancing 100 percent of city cpsts, is calculated as follows:
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City
Develop/
Contract Facility Ground
Operate Lease Lease
Principal Financed ($000) $20,349 $20,349 $4,500
Term 30 years 30 years 30 years
Rate 7.5% 9.5% 7.5%
Annual Debt Service ($000) $1,711 $2,056 $381
Annual net cash flow, after debt service payments, tums positive in Year 6 under the
city develop/confract operate scenario. Year 9 under the ground lease scenario, and Year 17
under the facility lease scenario.
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Table 1
SUMMARY OF GREENS FEES AND PLAY LEVELS
Number
of Annual Percent 18^Hole Greens Fees
Holes Bsmnds 18-Hole Weekdav Weekend
Including Cart
Aviara 18 47,000 90% $105 $105
Steele Canyon 27 65,000 85% 40 50
Carlton Oaks 18 44,000 90% 55 55
Twin Oaks 18 48,000 80% 38 50
Eagle Crest 18 41,000 90% 35 50
Morgan Run ' 27 96,000 100% 45 55
Pala Mesa 18 55,000 85% 35/45^ 65
Carmel Mountain Ranch 18 46,000 100% 40 50
Mount Woodson 18 48,000 90% 40 55
Redhawk 18 47,000 90% 45/55^ 65
Moreno Valley Ranch 27 • 80,000 70% 38' 53
Oak Valley 18 45,000e 85% 35 50
Pelican Hill 36 50,000' 90% 125' 145
Tustin Ranch 18 70,000 90% 65' • 85
Tijeras Creek 18 65,000 90% 50' 75
Monarch Beach 18 50,000 90% 75' 100
Rancho Bernardo Inn 18 50,000 85% 55' 70
Industry Hills 36 110,000" 80% 42' 57
Sandpiper 18 55,000 85% 55
1
75
Cypress/Los Alamitos 18 45,000e 90% 75' 95
Excluding Cart
Eastlake 18 50,000 85% 29 45
Carmel Highland 18 40,000 90% 32 62
Castle Creek 18 60,000 80% 20 30
Meadowlake 18 55,000 85% 24 32
San Luis Rey 18 65,000 80% 25 35
Fallbropk 18 70,000 75%. 20 28
Singing Hills 36 120,000 80% 27 32
Rancho San Diego 36 130,000 80% 27 32
Sun Lakes 18 65,000 85% 45 45
Soboba Springs 18 40,000 85% 27 36
Quail Ranch 18 40,000 85% 25 40
Temecula Creek 27 75,000 80% 33 44
Menifee 18 52,000 85% 25 35
Rancho Califomia 18 47,000 85% 35 45
Municipal (excluding cart)
Oceanside 18 120,000 70% 16 21
Torrey Pines 36 195,000* 75% 20/40* 24/47*
Vineyard 18 65,000' 80% 25/30* 35/40
Monday-Thursday. j
both courses, ^orth course/south course
'Projected, first year of operation.
Source: Economics Research Associates.
'Monday-Wednesday/Thursday-Friday. 'Ocean course, first year of operation. "Total,
*City resident/nonresident.
Table 2
FUTURE GOLF COURSE SUPPLY
1994
Golf Course/
Developer/Location
Number
of Holes
Course
Type Status Comments
CityofCarlsbad
Palomar Airport Road
Carlsbad
18/27 M Subject.
The Pointe Resort
Carlsbad
TPC/Potomac/
Black Mountain Road
San Diego
Horizon Country Club
Rancho Santa Fe
Encinitas Ranch
Ecke/C ity of Encinitas
Leucadia Blvd. & Alta Vista Rd.
Encinitas
Old Coach Golf Club
Environmental Development
Old Coach & Espola Roads
Poway
18 R
36
18
18
P/DF
UC
M
27 DF
The Pointe originally proposed development of
a golf/resort facility in Carlsbad. Currently
considering joint development of 27-hole
course with City of Carlsbad.
Courses to be phased. Initial 18-hole course
could be daily fee or private, and may be
affiliated with the Tournament Players.
Robert Trent Jones II design. Project in
foreclosure; constmction halted.
Developer proposes land dedication to city in
retum for public financing of course. Within
planned community of about 1,200 residential
units.
Planned community to include 156 custom
homesite. 18 holes proposed to be developed
initially. Robert Trent Jones II design.
Table 2
(Continued)
Golf Course/
Developer/Location
Number
of Holes
Course
Type Status Comments
Daley Ranch
Shea Homes
North of Dixon Lake
Escondido
Costa del Sol
Wolf Industries
Questhaven & Elfin Forest Rd.
San Marcos
Morro Hills
Wimpey Inc.
N. River Road
& Vandergrift Boulevard
Oceanside
Stagecoach Ranch
Golf Ventures Inc.
Stagecoach & Tavern Roads
Alpine
18 DF
18 SP
18 SP
18 SP A
In^environmental review process. 3,000-acre
development proposed to include 1,700
residential units. Probability of entry low
within next five-year period.
San Elijo specific plan-2,000 acres & 2,500
units. Plan adopted 2 years ago, no action.
Very low probability of entry with golf
course on former land fill.
Ted Robinson design. Planned community
encompasses 600 acres with 820 residential
units. City approved March 1993; final map
approval anticipated in 1995. Project is con-
sidered speculative due to residential market
cpnditions.
Tentative map and specific plan approved
May 1994. Developer must construct waste-
water treatment facility which is anticipated
to require 12-18 months. Total site area is
365 acres-golf course, clubhouse and tennis
courts proposed for 169 acres. Project also to
include 131 homes on 1-acre lots.
The Pointe
Spring Valley
18 R Plan approved for 900 units and hotel/
conference center and golf course on 1,200
acres. Project is in bankruptcy. Developer
(Pointe Resorts) Hkely to abandon.
Table 2
(Concluded)
Golf Course/
Developer/Location
Number
of Holes
Course
Type Status Comments
City of Coronado
Coronado
Santa Fe Valley
Sunland Corp.
North of Black Mountain Ranch
Bougainvillea
NCFUA Subarea V
18
36
18
M
PR/DF
R
Second municipal golf course proposed.
Part of Santa Fe Valley master plan,
project in default. Considerable
environmental, plarming, and fmancial
issues will delay project at least several
years.
Part of proposed master plan which calls for
a private and/or resort golf course.
n.a. means not available.
Status: P = Proposed, A = Approved, UC = Under Construction, DP = Daily Fee, M = Municipal, SP = Semiprivate, P = Private, R = Resort
Source: Economics Research Associates.
Table 3
CARLSBAD GOLF COURSE
PRELIMINARY CAPITAL COST ESTIMATE
(Thousands of Constant 1994 Dollars)
Component 18-Hole 27-Hole
Off-Site Water/College Crossing $ 500 $ 500
Entry Road/Parking/Resfrooms/Course Fumiture 400 400
Golf Course Constmction' 7,785 11,285
Clubhouse^ 1,250 1,250
Design/Soft Costs 450 600
Grow-In Maintenance • 420 550
Mamtenance Area 500 500
Contingency (at 5%) 565 755
Constmction Interest and Fees^ 950 1.265
•Subtotal $12,820"* $17,105
Land Cost 2,086 2,086
Capitalized Assessments^ 1.158 1.158
Total $16,064 $20,349
' Cleaning and grubbing, grading, irrigation system, pump station, lake construction, tees, greens and traps, turf,
cart path, landscaping, bridges, other.
^ Clubhouse of 6,000 square feet plus 4,000-square-foot cart storage at $125 per square foot.
' Based on 18-month construction, even draw, and 8% interest plus 2 points.
" Excludes commercial pad grading and construction interest and fees.
' Represents three years of improvement district (College and Palomar) at $386,000 per year.
Source: City of Carlsbad and Economics Research Associates.
Table 4
PRO FORMA FINANCIAL ANALYSIS-BASE CASE
Carlsbad 27-Hole Municipal With Hotel
(In Current SOOOs)
1 2 3 4 5 6 7 8 9 10
TOTAL ROUNDS 60,000 70,000 80,000 90,000 90,000 90,000 90,000. 90,000 90,000 90,000
REVENUE
Greens Fees @ $ 39.17 $2,350 $2,824 $3,324 $3,852 $3,968 $4,087 $4,209 $4,335 $4,465 $4,599
Carts (1) '
• -
------
• -
-
Practice Range . 450 464 477 492 506 522 537 553 570 587
Pro Shop 300 361 424 492 506 522 537 553 570 587
F&B/Grill 240 288 339 393 405 417 430 443 456 470
F&B/Special Events 350 361 , 371 382 394 406 418 430 443 457
Gross Revenue $3,690 $4,297 $4,937 $5,611 $5,780 $5,953 $6,132 $6,316 $6,505 $6,700
Less: Cost of Sales
ProShop 195 234 276 320 329 339 349 360 371 382
Food & Beverage 207 , 227 249 272 280 288 297 306 315 324
Subtotal Cost of Sales $402 $461 $525 $591 $609 $627 $646 $665 $685 $706
TOTAL REVENUE $3,289 $3,835 $4,412 $5,020 $5,171 $5,326 $5,486 $5,650 $5,820 $5,994
OPERATING EXPENSES
Course Operations
Salaries & Benefits $450 $464 $477 $492 $506 $522 $537 $553 $570 $587.
Water & Utilities 481 495 510 526 541 558 574 592 609 628
Services & Supplies 275 283 292 300 310 319 328 338 348 359
Replacement Reserve
Equipment 75 77 80 82 84 87 90 92 95 98
• Course 100 103 106 109 113 116 119 123 127 130
. Subtotal Course $1,381 $1,422 $1,465 $1,509 $1,554 $1,601 $1,649 $1,698 $1,749 $1,802
Golf Operations
Pro Shop Staff $250 $258 $265 $273 ' $281 $290 $299 $307 $317 $326
Cart Leasing 90 93 95 • 98 101 104 • 107 111 114 117
Cart Maint/Staff 90 93 95 98 101 104 107 111 114 117
Practice Range 75 77 80 82 84 87 90 92 95 98
Miscellaneous 50 52 53 55 56 58 60 61 63 65
Subtotal Operations $555 $572 $589 $606 $625 $643 $663 $683 $703 $724
Food & Beverage Op Exp. $266 $292 $320 $349 $360 $370 $381 $393 $405 $417
Clubhouse Undistributed $50 $52 $53 $55 $56 $58 $60 $61 $63 $65
General & Administrative
Salaries & Benefits $150 $155 $159 $164 $169 " $174 $179 $184 $190 $196
Insurance 75 77 80 82 84 87 90 92 95 98
Property Taxes
Advertising/Miscellaneous 50 52 53 55 56 58 60 61 63 65
Management Fee 148 172 197 224 231 238 245 253 260 268
Subtotal G&A $423 $455 $489 $525 $541 $557 $574 $591 $609 $627.
TOTAL EXPENSES $2,674 $2,793 $2,916 $3,044 $3,136 $3,230 $3,327 $3,426 $3,529 $3,635
NET OPERATING INCOME $614 $1,043 $1,496 $1,976 $2,035 $2,096 $2,159 $2,224 $2,291 $2,359
Less: City Monitoring 90 93 95 98 101 104 107 111 114 117
Less: Assessment Payments
Palomar 125 125 125 125 125 -----
College 261 261 261 261 261 261 261 261 - .
ADJUSTED NET INCOME $138 $564 $1,015 $1,492 $1,548 $1,731 $1,791 $1,852 $2,177 $2,242
Asset Value @ 8.0% --- . ------
CASH FLOW $138 $564 $1,015 $1,492 $1,548 $1,731 $1,791 $1,852 $2,177 $2,242
Net Present Value @ 11,0% $ 18,454
(1) Included in greens fee.
Note; Reflects 3.0% average
annual inflation rate.
Cash flow includes assumed
asset value at end of year 40.
Source: Economics Research Associates. CARL-95.XLS, 7/20/95
Table S
REPRESENTAXrVE FACILrTY LEASE
Carlsbad 27-Hole Municipal With Hotel
(In Current SOOOs)
PERCENTAGE RENT
Greens Fees
Cara(l)
Practice Range
Pro Shop
F&B/Orill
FiB/Speci»l EvenB
Replacement Reserve (2)
INCOME
Greens Fees
Carts (I)
Practice Range
Pro Shop
, F&B/Grill
F&B/Special Events
Replacement Reserve (2)
TOTAL GROSS INCOME
Less: Cost of Sales
Pro Shop
Food & Beverage
Subtotal Cost of Sales
TOTAL INCOME
OPERATING EXPENSES
Course Operations
Replacement Reserve
Equipment Lease
Subtotal Course
Golf Operations
F&B Operating Exp.
Clubhouse Undistributed
General &. Administrative
City Intemal Services
TOTAL EXPENSES
TOTAL NET INCOME
Less: Assessment Payments
Palomar
College
ADJUSTED NET INCOME
Asset Value @ 7 0'/.
CASH FLOW
Net Present Value @ 10 OV.
(1) Included in greens fee.
(2) Percent of greens revenue.
Note: Reflects 3,OVi average
annual inflation rate.
1 2 3 4 5 6 7 S 9 10 11 12 13 14 IS 16 17 18 19 20
.20'/. 25% 30% 30% 30% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32%
20"/. , 25% 30% 30% 30% 32% 32% 32% . 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32%
20% 25% 30% 30% 30% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32%
6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%
10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% , 10% 10% 10% 10% 10% 10% 10% 10%
10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
.5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
$470 • $706 $997 $1,156 $1,190 $1,308 $1,347 $1,387 $i,429 $1,472 $1,516. $1,561 $1,608 $1,657 $1,706 $1,757 $1,810 $1,864 $1,920 $1,978
90 116 143 148 152 167 172 177 . 182 188 194 199 205 211 218 224 231 238 245 253
18 22 25 30 30 31 32 33 34 35 36 37 38 40 41 42 43 45 46 47
24 29 34 39 41 42 43 44 46 47 48 50 51 53 54 56 58 • 60 61 63
35 36 37 38 39 41 42 43 44 46 47 48 SO '51 53 55 56 58 60 61
118 141 166 193 198 204 . 210 217 223 230 237 244 251 259 - 267 275 283 291 300 309
$755 $1,050 $1,403 $1,603 $1,651 $1,793 $1,846, $1,902 $1,959 $2,018 $2,078 $2,140 $2,205 $2,271 $2,339 $2,409 $2,481 $2,556 $2,632 $2,711
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$755 $1,050 $1,403. $1,603 $1,651 $1,793 $1,846 $1,902 $1,959 $2,018 $2,078 $2,140 $2,205 $2,271 $2,339 $2,409 $2,481 $2,556 $2,632 $2,711
$118 $141 $166 $193 $198 $204 $210 $217 $223 $230 , $237 $244 $251 $259 $267 $275 $283 $291 $300 $309
$118 $141 $166 $193 $198 $204 $210 $217 $223 $230 $237 $244 $251 $259 $267 $275 $283 $291 $300 $309
$0 JO $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0 $0 $0. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$75 $77 $80 $82 $84 $87 $90 $92 $95 $98 $101 $104 $107 $110 $113 $117 $120 $124 . $128 $132
$193 $218 $246 $275 $283 $291 $300 $309 $318 $328 $338 $348 $358 $369 $380 $391 $403 $415 $428 $441
$562 $831 $1,157 $1,328 $1,368 $1,501 $1,546 $1,593 $1,641 $1,690 $1,740 $1,793 $1,846 $1,902 $1,959 $2,018 $2,078 $2,140 $2,205 $2,271
125 125 125 125 125 , . -. ---. . . ---
261 261 261 • 261 261 261 261 261 -------$176 $445 $771 $942 $982 $1,240 $1,285 $1,332 $1,641 $1,690 $1,740 $1,793 $1,846 $1,902 $1,959 $2,018 $2,078 $2,140 $2,205 $2,271
$176 $445 $771 $942 $982 $1,240 $1,285 $1,332 $1,641 $1,690 $1,740 $1,793 $1,846 $1,902 $1,959 $2,018 $2,078 $2,140 $2,205 $2,271
Source: Economics Research Associates CARL-95.XLS. 7/19/95
Table 5 (Continued)
REPRESENTATIVE FACILITY LEASE
Carlsbad 27-Ilole Municipal With Hotel
(In Current SOOOs)
PERCENTAGE RENT
Greens Fees
Carta (I)
Practice Range
Pro Shop
F&B/Grill
F&B/Spccisl Events
Replacement Reserve (2)
INCOME
Greens Fees
Carts(l)
Practice Range
Pro Shop
F&B/Grill
F&B/Special Events
Replacement Reserve (2)
TOTAL GROSS INCOME
Less: Cosl of Sales
Pro Shop
Food & Beverage
Subtotal Cost of Sales
TOTAL INCOME
OPERATING EXPENSES
Course Operations
Replacement Reserve
Equipment Lease
Subtotal Course
Golf Operations
F&B Operating Exp
Clubhouse Undistributed
General & Administrative
City Internal Services
TOTAL EXPENSES
TOTAL NET INCOME
Less; Assessment Payments
Palomar
College
ADJUSTED NET INCOME
Asset Value @ 7.0%
CASH FLOW
Net Present Value @ 10.0% •
(1) Included in greens fee.
(2) Percent of greens revenue:
Note: ReflecU 3.0% average
annual inflation rate.
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32%
32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% ' 32%
32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% 32% . 32% 32% 32% 32% 32% 32% 32%
6% 6% 6% .6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%
10% 10% 10% 10% 10% 10% 10% 10%. 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
10% 10% 10% 10% .10%, 10% 10% 10% 10% 10% 10% 10% |0% 10% 10% 10% 10% 10% 10% 10%
5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
$2,037 $2,098 $2,161 $2,226 $2,293 $2,362 $2,433 $2,506 $2,581 $2,658 $2,738 $2,820 $2,905 $2,992 $3,082 $3,174 $3,269 $3,367 $3,468 $3,572
260 268 276 284 293 302 311 320 329 339 350 360 371 382 393 405 417 430 443 456
49 50 52 53 55 57 58 60 62 64 66 68 70 72 74 76 78 81 83 86
65 67 69 71 73 75 78 80 82 85 87 90 93 95 98 IOI 104 107 111 114
63 65 67 69 71 73 75 78 80 82 85 88 90 93 96 98 101 104 108 111
318 , 328 338 348 358 369 . 380 392 403 415 428 441 454 467 482 496 511 526 542 558
$2,793 • $2,877 $2,963 $3,052 $3,143 $3,238 $3,335 $3,435 $3,538 $3,644 $3,753 $3,866 $3,982 $4,101 $4,224 $4,351 $4,482 $4,616 $4,754 $4,897
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$2,793 $2,877 $2,963 $3,052 $3,143 $3,238 $3,335 $3,435 $3,538 $3,644 $3,753 $3,866 $3,982 $4,101 $4,224 $4,351 $4,482 $4,616 $4,754 $4,897
$318 $328 $338 $348 $358 $369 $380 $392 $403 $415 $428 $441 $454 $467 $482 $496 $511 $526 $542 $558
$318 $328 $338 $348 $358 $369 $380 $392 $403 $415 $428 $441 $454 $467 $482 $496 $511 $526 $542 $558
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 • $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 • $0 $0
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 . $0 $0 $0 $0 $0
$135 $140 $144 $148 $152 $157 $162 $167 $172 $177 $182 $188 $193 $199 $205 $211 $217 $224 $231 $238
$454 $467 $481 $496 $511 $526 $542 $558 $575 $592 . $610 $628 $647 $666 $686 $707 $728 $750 $773 $796
$2,339 $2,409 $2,481 $2,556 $2,633 $2,712 $2,793 $2,877 $2,963 $3,052 $3,143 $3,238 $3,335 $3,435 $3,538 $3,644 $3,753 $3,866 $3,982 $4,101
$2,339 $2,409 $2,481 $2,556 $2,633 $2,712 $2,793 $2,877. $2,963 $3,052 $3,143 $3,238 $3,335 $3,435 $3,538 $3,644 $3,753 $3,866 $3,982 $4,101
-----------$58,591
$2,339 $2,409 $2,481 $2,556 $2,633 $2,712 $2,793 $2,877 $2,963 $3,052 $3,143 $3,238 $3,335 $3,435 $3,538 $3,644 $3,753 $3,866 $3,982 $62,693
Source: Economics Research Associates. CARL-95.XLS. 7/19/95
GROUND LEASE TERMS
Golf(l)
Pro Shop
Food & Beverage
GROUND LEASE INCOME
. Golf(l)
Pro Shop
Food & Beverage
TOTAL GROSS INCOME
Less: City Monitoring
Less: Assessment Payments
Palomar
College
ADJUSTED NET INCOME
Asset Value @ 7.0%
CASHFLOW
Net Present Value @ 10.0%
Table 6
REPRESENTATIVE GROUND LEASE
Carlsbad 27-Hole Municipal With Hotel
(In Current $000s)
1 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20
0% 3% 5% . 5% 5% 8% 8% 8% 8% 8% 10% 10% 10% 10% 10% 10% .10% 10% 10% 10%
0% 3% 3% 3% 3% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
0% 3% ,3% • 3% 3% 5% 5% 5% 5% 5% 5% 5% 5% 5% . 5% -, 5% 5% 5% 5% • 5%
$0 $99 $190 $217 $224 $369 $380 $391 $403 $415 $534 $550 $567 $584 $601 $619 $638 $657 $677 $697
ll 13 15 15 26 27 28 29 29 -30 31 32 33 34 35 36 37 38 39
_ 19 21 23 24 41 42 44 45 46 48 49 51 52 54 55 57 59 60 62
$25 $129 $224 $255 $263 $436 $449 $462 $476 $491 $612 $631 $649 $669 $689 $710 $731 $753 $775 $799
$50 $52 $53 $55 $56 $58 $60 $61 $63 $65 $67 $69 $71 $73 $76 $78 $80 $83 $85 $S8
125 125 125 125 125 ----- ' ---------
261 261 261 261 261 261 261 261 ------------
($411) ($309) ($215) ($185) ($179) $117 $128 $140 • $413 $425 $545 $561 $578 $596 $613 $632 $651 $670 $690 $711
($411) ($309) ($215) ($185) ($179) $117 $128 $140 $413 $425 $545 $561 $578 $596 $613 $632 $651 $670 $690 $711
$2,613
(1) Percent of greens, carts, and
practice range revenue.
Note: Reflects 3,0% average
annual inflation rate.
Source: Economics Research Associates. eARL-95.XLS, 7/19/95
Table 6 (Continued)
REPRESENTATIVE GROUND LEASE
Carlsbad 27-Hole Municipal With Hotel
(In Current $000s)
GROUND LEASE TERMS
Golf (I)
Pro Shop
Food & Beverage
GROUND LEASE INCOME
Golf (I)
Pro Shop
Food & Beverage
TOTAL GROSS INCOME
Less: City Monitoring
Less: Assessment Payments
Palomar
College
ADJUSTED NET INCOME
Asset Value @ 7,0%
CASH FLOW
Net Present Value @ 10,0%
(I) Percent of greens, carts, and
practice range revenue.
Note: Reflects 3,0% average
annual inflation rate.
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%' 5% 5% 5% 5% 5%
5% 5% 5% 5% .5% 5% . 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 3% 5% 5% 5%
$718 $739 $762 $785 $808 $832 $857 $883 $909 $937 $965 $994 $1,024 $1,054 $1,086 $l,li9 $1,152 , $1,187-$1,222 $1,259
41 42 43 44 46 47 49 50 51 53 55 56 58 60 61 63 65 67 69 71
64 66 68 70 72 74 77-79 81 84 86 89 91 94 97 100 103 106 109 112
$823 $847 $873 $899 $926 $954 $982 $1,012 $1,042 $1,073 $1,106 $1,139 $1,173 $1,208 $1,244 $1,282 $1,320 $1,360 $1,401 $1,443
$90 $93 $96 $99 $102 $105 $108 $111 $114 $118 $121 $125 $129 $133 $137 $141 $145 $149 $154 $158
$732 $754 $777 $800 $824 $849 $875 $901 $928 $956 $984 $1,014 $1,044 $1,076 $1,108 $1,141 $1,175 $1,211 $1,247 $1,284
_ ---------------
- • • -
$19,052
$732 $754 $777 $800 $824 $849 $875 $901 $928 $956 $984 $1,014 $1,044 $1,076 $1,108 $1,141 $1,175 $1,211 $1,247 $20,336
Source: Economics Research Associates, CARL-95,XLS. 7/19/95
Table?
PRO FORMA FINANCL4L ANALYSIS-RESmENT DISCOUNTS
Carlsbad 27-Hole Municipal (With Hotel)
(In Current SOOOs)
1 2 3 4 5 6 7 8 9 10
TOTAL ROUNDS 60,000 70,000 80,000 90,000 90,000 .90,000 90,000. 90,000 90,000 90,000
REVENUE
Greens Fees @ $ 36.67 $2,200 $2,644 $3,112 $3,606 $3,715 $3,826 $3,941 $4,059 $4,181 $4,306
. Carts (1) ----------
Practice Range 450 464 477 492 506 522 537 553 570 587
Pro Shop 300 361 424 492 506 522 537 553 570 587
F&B/Grill 240 288 339 393 405 417 430 443 456 470
F&B/Special Events . 350 361 371 382 394 406 418 430 443 457
Gross Revenue $3,540 $4,117 $4,725 , $5,366 $5,527 $5,692 $5,863 $6,039 $6,220 $6,407
Less: Cost of Sales
Pro Shop 195 234 276 320 329 339 349 360 371 382
Food & Beverage 207. 227 249 272 280 , 288 297 306 315 324
Subtotal Cost of Sales $402 $461 $525 $591 $609 $627 $646 $665 $685 $706
TOTAL REVENUE $3,139 $3,655 $4,200 $4,774 $4,918 $5,065 $5,217 $5,374 $5,535 $5,701
OPERATING EXPENSES .
Course Operations
Salaries & Benefits $450 $464 $477 $492 $506 $522 $537 $553 $570 . $587
Water-& Utilities 481 495 510 526 . 541 558 574 592 . 609 628
Services & Supplies 275 • 283 292 300 310 319. 328 338 348 359
Replacement Reserve
98 Equipment 75 77 80 82 84 87 90 92 95 98
Course 100 103 106 109 113 116 119 123 127 130
Subtotal Course $1,381 $1,422 $1,465 $1,509 $1,554 $1,601 $1,649 $1,698 $1,749 $1,802
Golf Operations
Pro Shop Staff $250 $258 $265 $273 $281 $290 $299 $307 $317 $326
Cart Leasing 90 93 95 98 "101 104 107 111 114 117
Cart Maint/Staff 90 93 95' 98 IOI 104 107 Ml 114 117
Practice Range 75 77 80 82 84 87 90 92 95 .98
Miscellaneous 50 52 53 55 56 58 60 61 63 65
Subtotal Operations $555 $572 $589 $606 $625 $643 $663 $683 $703 $724
Food & Beverage Op Exp. $266 $292 $320 $349 $360 $370 $381 $393 $405 $417
Clubhouse Undistributed $50 $52 $53 $55 $56 $58 $60 $61 $63 $65
General & Administrative
Salaries & Benefits $150 $155 $159 $164 $169 $174 $179 $184 $190 $196
Insurance 75 77 80 82 84 87 90 92 95 98
Property Taxes
• -•-
-----
63 65 Advertising/Miscellaneous 50 52 53 55 56 58 60 61 63 65
Management Fee 142 165 189 ,215 221 228 235 242 249 256
Subtotal G&A . $417 $448 $481 $515 $531 $546 $563 $580 $597 $615
TOTAL EXPENSES $2,668 $2,786 $2,908 $3,034 $3,125 $3,219 $3,316 $3,415 $3,518 $3,623
NET OPERATING INCOME $471 $870 $1,293 $1,740 $1,792 $1,846 $1,901 $1,958 $2,017 $2,078
Less: City Monitoring 90 93 95 98 101 104 107 111 114 117
Less: Assessment Payments
Palomar 125 125 125 125 125
• -
---
College
ADJUSTED NET INCOME
. 261 261 261 261 261 261 261 261 --College
ADJUSTED NET INCOME ($5) $391 $811 $1,256 $1,305 $1,481 $1,533 $1,587 $1,903 $1,960
Asset Value @ 8.0% . ---
-•
----. --
CASHFLOW ($5) $391 $811 $1,256 $1,305 $1,481 $1,533 $1,587 $1,903 $1,960
Net Present Value @ 11.0% . $ 15,757
Note: Reflects 3.0% average
annual inflation rate.
Cash flow includes assumed
asset value at end of year 40. Source: Economics Research Associates. CARL-95.XLS, 7/19/95
Table 8
REPRESENTATIVE FINANCING SCENARIOS
Carlsbad 27-Hole Municipal With Hotel
, (In Corrent SOOOs)
1 2 3 4 S 6 7 8 9 10 II 12 13 14 IS 16 17 18 19 20
1. crrv DEVELOP
Adjusted Net Income $138 $564 $1,015 $1,492 $1,548 $1,731 $1,791 $1,852 $2,177 $2,242 $2,309 $2,378 $2,450 $2,523 $2,599 $2,677 $2,757 $2,840 $2,925 $3,013
I.es$: Debt Service . 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 1,711 ,1,711 1,711 1.7)1
After Financing Cash Flow ($1,573) ($1,147) ($696) ($219) ($163) $20 $80 $141 $466 $531 $598 $667 $739 $812 $888 $966 $1,046 $1,129 $1,214 $1,302
Cumulative ($1,573) ($2,720) ($3,416) ($3,635) ($3,798) ($3,779) ($3,699) ($3,558) ($3,092) ($2,562) ($1,963) ($1,296) ($557) $255 $1,143 $2,109 $3,155 $4,284 $5,498 $6,800
n. FACiLrrv LEASE
Adjusted Net Income $176 $445 $771 $942 $982 $1,240 $1,285 $1,332 $1,641 $1,690 $1,740 $1,793 $1,846 $1,902 $1,959 $2,018 $2,078 $2,140 $2,205 $2,271
Less: Debt Service 2.056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056 2,056
After Financing Cash Flow ($1,880) ($1,611) ($1,285) ($1,114) ($1,074) ($816) ($771) ($724) ($415) ($366) ($316) ($263) ($210) ($154) ($97) ($38) $22 $84 $149 $215
Cumulative ($1,880) ($3,491) (K775) ($5,889) ($6,%3) ($7,779) ($8,549) ($9,274) ($9,689) ($10,055) ($10,371) ($10,634) ($10,844) ($10,998) ($11,095) ($11,134) ($11,112) ($11,027) ($10,878) ($10,664)
m. GROUND LEASE
Adjusted Nel Income ($411) ($309) ($215) ($185) ($179) $117 $128 $140 $413 $425 $545 $561 $578 $596 $613 $632 $651 $670 $690 $711
l.ess: Debt Service 381 381 381 381 381 381 '381 381 381 381 381 381 381 381 381 381 381 381 381 381
After Financing Cash Flow ($792) ($690) ($596) ($566) ($560) ($264) ($253) ($241) $32 $44 $164 $180 $197 $215 $232 $251 $270 . $289 $309 $330
Cumulative ($792) ($1,482) ($2,078) ($2,644) ($3,204) ($3,468) ($3,721) ($3,962) ($3,930) ($3,886) ($3,722) ($3,542) ($3,344) ($3,130) ($2,898) ($2,647) ($2,377) ($2,088) ($1,778) ($1,448)
Source: Ecooomics Research Associates. CARL-95.XLS. 7/19/95