Golf Course

[feetup]

Hey guys,

I need a hand with this deal I am working on.

I recently purchased a golf course and have seven investors to come in on the venture with me. I will be operating the golf course myself as I work in the golf industry and am a certified golf professional. The Golf Course was purchased for 1.2 million with first mortgage/ vendor take back of $700,000.00 at 3%, need $500,000 down payment and an additional $200,000 for reserve fund /to bring course up to par. I am looking for advice on the best way to structure this deal. The way I have it set up now will be myself as 51% shareholder and seven investors at 7% ownership. Does this seem like the way to do it?



Another question one of my investors would like to use their RRSP's. I know we can do an armslength second mortgage paying him a set rate annually but is there any other options to get him involved with his RRSP's and not have to pay annually?



Any feedback would be appreciated, thanks.

 

[Thomas Beyer]

One way to structure it is an LP. or a corporation issuing shares. Or a trust.



Do you know these 7 fellows well ? As doing such a JV could be construed as "securities" and thus, falls under the Ontario Security Commission supervision.



51/49 may be a good enough deal for investors .. or not .. it depends. Do you also take a salary or management fee ? Do you also put money in yourself ? What is the 51% worth on an annual basis ? fair ? excessive ?



A BIG RISK is that you are unable to service the VTB and will lose the golf course and the investors $s through a foreclosure !



What is the income, after all expenses, of this golf course, before you pay the mortgage ?



And yes, you could have a 2nd mortgage behind the first, using RRSP money.



Related post, on limited partnerships, here: http://myreinspace.com/forums/p/20200/100713.aspx?#100713

 

[feetup]

Defiantly want to set up a corporation issuing shares but no very little about it.



I no guys very well 2 of them are related to me and between the three of us we are buying two of the available shares.Each share is $110000 and i am splitting each one with both guys so really i will have 58% ownership.Is that unreasonable?

The other five are very well respected in the golf industry and will provide me with knowledge and expertise and help fill up tournaments.

They are giving me a chance to put the deal together because i said i could and i found the property and negotiated the price,But i can not afford to mess up the structure of the agreement. It has all happened so fast i am learning as i go as far as shareholders, percentages setting up a corporation and now securities which i no nothing about.





I do take a management fee of $30000 annual it is only a nine hole course, and once it is up and ruining well i should only be spending about 20 to 30 hours a week tops there my self . (again is that unreasonable $30000)

We already have great grounds keeper and his helper who will take care of day to day maintenance of the course,one person in the pro shop at all times and a beer cart person on weekends and tournaments.



I don't think we should have problems servicing the VTB for two reasons. First we have a $200000 reserve fund for course improvements and to help protect against any short falls for the first few years and any money remaining in reserve fund after that would go into course improvements or paying down VTB.





Income of golf course after expense's should be about $55000 to $65000 for the first year and get better following years hopefully $150000 to $200000 by its forth year.The previous owners were doing a horrible job which we expect to improve quite a bit.

The plan is that all money maid each year after paying expense's and mortgage will go toward paying down the VTB as fast as possible.Once VTB is paid then we will be providing dividends of shareholders.Does this sound right?



I understand how to do 2nd mortgage but is there a way to use RRSP'S besides a 2nd and not have to pay a mortgage patments.



The upside to this deal is that there are 7 acres beside the course, which we own that is all ready zoned residential,and the land that the golf course sits on is zoned recreational open space now but is inside the residential boundary for the future plans of the municipality.We are looking to hold on to this place for a minimum of ten years.

 

[Thomas Beyer]

find a corporate lawyer that will set up this structure. usually this requires folks to be accredited investors or friends/family/close business associates.



If you can keep 58% and make 30,000/year and the folks put in all the money .. hey, why not ?

Also, have a good part-time accountant immediately ! Perhaps $8h/h plus free golf !

 

[markl]

On another note where is the golf course so we can help you get some extra revenue. Is there a possible REIN member discount?

 

[GaryMcGowan]

Good question Mark!

 

[EdRenkema]

Any realtor looking for a discount on golf fees needs to look for a new line of work, maybe as a caddy that'll get a reduction in fees for sure