Boca National Golf Course Cash Flow Analysis

Other contributors to this article: Joe Panella, Jack McWalter.

The Situation with Golf in Boca 

This article is a high-level comprehensive view of the Boca National Golf Course cash flow projection based on BocaFirst analysis.

Using a 25-year time horizon (2018 – 2042) and merging all the estimated revenues and costs, the result is a net loss of almost $46 million.

In 2018 the City of Boca Raton (City) contracted to sell the Boca Raton Municipal Golf Course to GL Homes.  The deal has not yet closed. The Greater Boca Raton Beach and Parks District (District) pursued building Boca National Golf Course on the defunct Ocean Breeze golf course. For an explanation of the Boca National proposal, see our Boca Matters interview with PGA Teaching Pro Rick Heard. For additional background on the situation with golf in boca, see our article “Boca National – Where do we go from here?” 

BocaFirst Analysis

The objective of the City and the District is to provide services to the residents. There are various financials available from the different parties. Our consolidated “resident view” is below for comparison to others. 

The analysis was done using information from the City and District. That information was then merged into a single study. Only actual and estimated financial information that is in the public record was included in the BocaFirst analysis. This article  is not advocating for or against developing Boca National Golf course. We have tried to be objective in presenting the financial information.

We will continue to monitor updated financial information on the Boca National golf course project and update this analysis when credible data is presented in the public record.

The following chart is a summary of our calculation of what the proposed Boca National Golf course will cost. Using a 25-year time horizon (2018 – 2042) and merging all the estimated revenues and costs, the result is a net loss of almost $46 million.

Legend

Gross Margin – This is the revenue from golf course operations less cost of sales. Included are revenues from greens fees, driving range, lessons, merchandise, food and beverages and rentals. Cost of sales are the variable costs associated with the revenues¹.
East Property Cost – This is the cost to purchase the east section of the Ocean Breeze property in 2018².
West Bond Principle – Since this is a cash flow analysis, the cost to purchase the west section of the Ocean Breeze property is included as 15 annual payments on the bond principle³.
West Bond Interest – This is 15 annual payments on the bond interest⁴.
Design/Construction Costs – The District has spent approximately $2M for design services and the construction costs are estimates to get the Boca National golf course to the point where the items in the Cash In category can start to be realized^5,6.
Operations Costs – These costs are the fixed costs necessary to realize the items in the Cash In category⁷.
Contingency Costs – These costs are applied to construction and operations costs⁸.
Net Income – This is the net present value of the difference between cash in and cash out. This calculation is required because cash outflows and inflows over 25 years will be worth less than today⁹.

References

1. Projected Cash Flow Analysis Boca National Golf Club, Boca National Golf Club Proposal, Greater Boca Beach and Parks District, February 2019, Page 44.
2. Craig Ernst Presentation to Boca Raton City Council Workshop, June 10 2019.
3. 2018 Revenue Bond, Approved Budget City of Boca Raton, October 1 2018. Page 288.
4. 2018 Revenue Bond, Approved Budget City of Boca Raton, October 1 2018. Page 288.
5. Design, $2M, Craig Ernst Presentation to Boca Raton City Council Workshop, June 10 2019.
6. Construction, $28,000,924, Estimated Project Construction Costs Boca National Golf Club, Boca National Golf Club Proposal, Greater Boca Beach and Parks District, February 2019, Page 47.
7. Projected Cash Flow Analysis Boca National Golf Club, Boca National Golf Club Proposal, Greater Boca Beach and Parks District, February 2019, Page 44.
8. Projected Cash Flow Analysis Boca National Golf Club, Boca National Golf Club Proposal, Greater Boca Beach and Parks District, February 2019, Page 44.
9. Discount Rate is the 30 Year Treasury Bill rate as of August 6, 2019. This is the City’s assumed cost of capital.