City of Reno Rosewood Lakes: Are We at the Crossroads?

January 15, 2014

J.J. Keegan, Managing Principal

2013, Golf Convergence, Inc. Golf Convergence, 2013

Options on the Critical Path

Decision Time Our Findings Next Steps

Introduction

The Process

The Dilemma
2013, Golf Convergence, Inc. Golf Convergence, 2013

Experience: Managing Principal - Golf Strategist 9 years including 7 months as Interim GM operating golf course in Dallas, TX. CEO - Fairway Systems 16 years (450 golf courses, 7 countries, all major municipalities); Memberships: CMAA inactive (305 hours), NGCOA, NGF, ING, GCSAA Speaker: NGCOA Canada, Clemson PGM, NGCOA, GCSAA, NRPA Webinar Host: Clemson University, Keiser College, Holland College, Golf Academy, Golf Magazine Panelist: Visited 4,000+ golf courses in 41 of the 194 countries, played 1,600+ of the worlds 33,331 courses. Education: BBA TCU, MBA University of Michigan Licensing: CPA, inactive Author: The Business of Golf: What Are You Thinking? 16 countries, 2000+ copies sold, 15 Colleges and Universities Author: The Business of Golf: Why? How? What? Published December 1, 2013 Photo Essay Best Management Practices, Divergent View Newsletter Accomplishments
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Why Are We Here?

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$7,500,000
2013, Golf Convergence, Inc. Golf Convergence, 2013

The Question Before You Today Should the City Reinvest in the Golf Course?
9 hole course on property across the street with driving range and teaching area Yes Executive 18 hole course on property across the street with driving range and teaching area $5.5 million $4.2 million

Will Reno Offer Golf as Recreational Amenity?

Open space with trails

Open space | wetlands for effluent use No Commercial use (sale or lease) Legal restriction may apply

Sell property

Legal restrictions may apply

2013, Golf Convergence, Inc. Golf Convergence, 2013

Your Call

Intangible Asset to Serve Local Golfers

Asset Should be Fiscally Self-Sustaining

2013, Golf Convergence, Inc. Golf Convergence, 2013

The Process

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GLMA
Start

Technology

Facilities

Customers

1 2
Weather Impact
Uncontrollable

4
Financial Metrics

5 6
Operations
Controllable

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The Golden Circle of Communication Simon Sinek

Why?

Introduction What?
How?
Crossing the Chasm
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A Strategic Plan
In a well-managed operation, every operational decision can be traced up to the tactical plan and up to the strategic vision.

Why

Strategic Vision

How

Tactical (Functional)

What

Operational (Execution)

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Green Fees & Carts Outside Tournaments Financial Management Club Events Food and Beverage Banquets and Catering Range, And Lessons Leadership: Management and Training Labor Staffing and Scheduling Brand: Advertising and Marketing Customer Feedback
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Operations: Activities Vision History Tradition Governance Asset Management Golf Course and Clubhouse Human Resources Operations: Management

A Strategic Plan
Culture

Parks and Recreation Program Allocation

Discretionary: Golf Important Swimming Pools, Trails, Skating Rink, Picnic Shelters

Core: Open Park Space 2.5 acres per 1,000

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GLMA
Start

Technology

Facilities

Customers

1 2
Weather Impact
Uncontrollable

4
Financial Metrics

5 6
Operations
Controllable

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Golfers are Found in these Categories

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10 Mile Radius from Rosewood Lakes Not Conducive to Sustainable Championship Golf
Reno Population Within 10 Miles of Rosewood Lakes 7,472 60,575 42,207 20,804 73,644 36,002 68,960 12,649 23,054 561 345,928 Reno MOSAIC Distribution 2.20% 17.50% 12.20% 6.00% 21.30% 10.40% 19.90% 3.70% 6.70% 0.20% 100.00%

Potential Index Sophisticated Singles Bourgeois Prosperity Career and Family Comfortable Retirement Routine Service Workers Hard Working Blue Collar Metropolitan Strugglers Low Income Elders Post Industrial Survivors Rural Inheritance Total

1.30%
-0.70% 4.00% -1.00% -1.00% 3.30% -0.50% 3.10% 0.60% -0.60% -7.20% 0.00%

2013, Golf Convergence, Inc. Golf Convergence, 2013

Category Demographics Age (Median) Age (Index) Income (Med Household) Income (Median) Ethnicity (% Caucasian) Ethnicity Index Hispanic Hispanic Index Black Black Index Asian Asian Index

10 Miles 36.80 99 $52,005 98 75.70% 105 24.90% 145 2.50% 20 5.70% 116

20 Miles 37.40 101 $55,213 104 77.40% 107 23.20% 135 2.30% 18 5.10% 104

30 Miles 38.30 103 $55,120 104 78.80% 109 22.60% 131 2.10% 17 4.40% 90

Nevada 36.80 99 $62,490 117 66.20% 91 27.60% 160 8.10% 64 7.20% 147

U.S. 2012 Data 37.10 100 $53,214 100 72.40% 100 17.20% 100 12.70% 100 4.90% 100

2013, Golf Convergence, Inc. Golf Convergence, 2013

Demand Avid Golfers Total Golfers Golfing Households Rounds Played Seasonal Rounds Rounds Played Per Golfer Golf Participation Population Golfers per 18 Holes Avid per 18 holes

10 Miles 7,656 28,566 20,404 458,184 4,410 16.04 8.28% 345,027 2,484 666

20 Miles 9,672 36,089 25,778 600,559 14,480 16.64 8.35% 432,424 1,951 523

30 Miles 12,330 46,008 32,863 820,024 70,003 17.82 8.31% 553,484 1,416 379

Nevada 56,151

U.S. 6,878,980

209,518 25,667,835 149,656 18,334,168 3,484,903 424,452,832 145,349 22,052,904 16.63 7.63% 16.54 8.31%

2,746,093 308,745,538 2,044 548 1,737 468

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GLMA
Start

Technology

Facilities

Customers

1 2
Weather Impact
Uncontrollable

4
Financial Metrics

5 6
Operations
Controllable

Golf Convergence, 2013

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GLMA
Start

Technology

Facilities

Customers

1 2
Weather Impact
Uncontrollable

4
Financial Metrics

5 6
Operations
Controllable

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Financial Performance - Municipal Golf

Platinum Top 10% Gold Top 25% Silver Median Steel - Bottom 25%

Rounds Played Full Time Employees Revenues Membership Fees Green Fees Cart Fees Merchandise Revenue Range Food and Beverage Total Payroll Golf Operations Payroll Golf Operations Expenses Maintenance Payroll Maintenance Expenses Clubhouse Expenses Water Expenses Golf Course Renovation EBITDA
Source: PGA Performance Trak 2012 ( survey conducted in 2013)

53,793 18 $2,200,000 350,000 1,179,575 400,000 211,000 60,860 1,000,000 988,356 468,000 300,000 515,356 416,000 200,000 192,922 200,000 $1,000,000

40,198 10 $1,477,085 159,000 732,500 285,000 140,745 42,843 275,000 676,017 288,427 197,000 387,590 272,044 82,710 72,500 80,000 $572,541

32,000 6 $1,000,000 96,000 468,323 205,000 85,236 21,000 62,500 437,507 190,000 100,000 247,507 200,000 25,000 27,463 30,000 $142,406

24,500 4 $650,000 52,944 235,000 131,120 51,698 7,000 16,518 270,000 120,000 71,604 150,000 110,000 7,927 12,000 15,000 $50,000
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Rounds Played Rounds Played: Capacity 96,500 Rounds 23.8% Utilization Industry Average: 49.2%
40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2007 2008 2009 2010 2011 2012 2013
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Barriers to Increased Play

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% No barriers Time Money Anyone to Play With Health Ability Access to Lost Not Course Course Interest Enough too in Game Fee Crowded
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Revenues
1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2007 2008 2009 2010 2011 2012 2013 2014
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NET OPERATING LOSS BEFORE DEPRECIATION & TRANSFERS ACCUMULATED LOSS 2007 - 2014: ($5,256,034)
2007 (100,000) (200,000) (300,000) (400,000) (500,000) (600,000) (700,000) (800,000) (900,000) (1,000,000)
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2008

2009

2010

2011

2012

2013

2014

It

Takes About $1,000,000 in revenue for a course to cover operating expenses and capital requirements

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You Cant Get There The Golf Course Will Continue to Lose >$400,000 Annually
It

Golf Convergence, 2013

GLMA
Start

Technology

Facilities

Customers

1 2
Weather Impact
Uncontrollable

4
Financial Metrics

5 6
Operations
Controllable

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What Is Important to the Rosewood Lakes Golfer

5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00

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You could throw a lot of $$$ at this and not have enough because of the wetlands, irrigation and drainage issues

2013, Golf Convergence, Inc. Golf Convergence, 2013

Who is Your Customer? Gender Age Median Household Income Ethnicity: Caucasian Education Rounds of Golf Per Year Number of Different Courses Played 84.8% Male 53.4 $81,016 89.2% 15.2 38.2 7.9
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The

Do You Need to Lose >$400,000 per year to support the recreational leisure of the upper middle class?

2013, Golf Convergence, Inc. Golf Convergence, 2013

Why Need Does Golf Serve? Recommendations

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Rosewood Lakes: Can You Execute?

Location Layout Conditioning Management Marketing

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Close
9 Holes
(existing land)

Course Has Served It Useful Life

Compounds Original Error

18 Holes
(9 holes existing land, 9 holes across street)

New 9 Holes. Never Generate Positive ROI greater than interest income
2013, Golf Convergence, Inc. Golf Convergence, 2013

RECOMMENDATIONS
Close existing 18-hole golf course Pay off existing bond debt of $1.48 million Repurpose current site Open Space with trails Open Space/wetlands for effluent use Sell property-legal restrictions may apply Commercial use (sale or lease)-legal restrictions may apply

2013, Golf Convergence, Inc. Golf Convergence, 2013

RECOMMENDATIONS
Investigate interest from private business to develop a partnership to design/build/operate golf course north of existing site; options include: Executive 18 hole course 9-holes with teaching area Miniature Golf ($100,000) Chip and Putt ($200,000) Driving Range ($350,000)

2013, Golf Convergence, Inc. Golf Convergence, 2013

Investment Return

Community Asset

Start

Finish

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Start

Finish

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W
Start

hats

mportant

ow

City of Reno

Finish

1
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Thank you

J. J. Keegan, Managing Principal 4215 Morningstar Drive Castle Rock, CO 80108 t 303-283-8880 c 303-596-4015 jkeegan@golfconvergence.com

Golf Convergence, 2013