Creative Golf Course Leasing Options
Golf Course leases are usually very similar to other types of commercial real estate leases. They present the owner with the advantages of guaranteed cash flow without sacrificing an ownership stake in the business.
Of course, leases are legal documents which need to carefully outline the responsibilities of either party, but these sorts of solutions present excellent upside opportunities not found in other Solutions.
Guaranteed cash flow
The first big Advantage for ownership guaranteed return on investment through rent payments. Depending on the parties involved, your legal team can advise on negotiating terms and striking the most advantageous deal possible.
Market rates will dictate rental amounts, but much like retail commercial leases, there’s typically a contingency component based on gross revenues.
Additionally, individual components of the golf club could be leased out as well. For example we might recommend leasing out the restaurant and dining facility to a local expert who stands to operate more efficiently.
Lease agreements ordinarily offer excellent security for this cash flow, as compared to the ups and downs of normal operations and fluctuating markets.
Golf Course owners and operators looking to offload responsibility associated with operating the club should also consider leasing options.
Leasing the club normally means relinquishing control over how the day-to-day operations are conducted, but this might leave decision-makers with more free time and resources to focus on higher impact areas.
Sometimes it’s just best to secure a guaranteed return on investment, and simply enjoy the club or go work on other projects.
“Golf course leases represent opportunities for owners to see steady cash flow while the club appreciates in value”
Leasing a golf club to an experience golf management company brings ancillary benefits, like appreciation of the asset.
Assuming that the management company will operate the club more efficiently, has sufficient incentive to market the facility, and works to improve the product presented on a daily basis, the club will likely appreciate in value by the end of the lease term.
In short, ownership can be paid a steady revenue stream over a period of time to improve the strength of the club.
Depending on the lease agreement in place, it’s not uncommon for lessees to assume much of the operational risk of running the golf club. Negotiating an advantageous deal means that downturns in the market or unforeseen circumstances will require that lease payments are made nevertheless.
Upside potential may be limited somewhat in a lease agreement, but downside risk is certainly mitigated.
Carefully considered lease agreements can help struggling golf clubs come up with the steady cash flow they need to cover debt service and other obligations without forfeiting ownership. In this way, leasing can serve as an excellent transitional management strategy for clubs in receivership, or immediately pre or post purchase.