Club land sales – the short term fix that costs clubs millions
In most cases land earmarked for sale by clubs is more valuable for its contribution to the development potential of the main club site than the value received when the land is sold separately.
We recently advised a club that had sold land a few years ago to stave off financial pressure. By the time we met the board nearly $2m of the money received from the sale had been used to prop up operations and the club was back in the same position it was prior to the sale. Fortunately, new management had realised that selling property assets wasn’t good for the long term financial health of the club and asked us to map out the path to a secure and sustainable position.
Another club we know of is now in the unenviable position of needing to buy back land they had previously sold in order to take full advantage of the development potential of the main club site. That situation could have been avoided if the club had had a well prepared development strategy that identified the importance of the land before it was sold.
In our many years of advising clubs we have rarely come across a scenario where it was beneficial for a club to sell its land.
The key for a club is to know the value of the development potential of its land. That’s for two main reasons:
To know if the development potential is more valuable than the amount the club will receive for the land if it was sold separately.
So that the club knows what the development potential is worth before negotiating with any external parties, such as a potential development partner.
Negotiating over land or the development potential of the land without knowing beforehand what it’s worth is like putting your car on a car sales website without knowing what your car is worth and just accepting one of the offers that come in. Who in their right mind would do that?
In most of the cases we’ve seen, selling club land simply defers the club’s funding problem rather than fixing it. There are better ways to generate cash, ongoing revenue and long term value for the club, and those ways have the added benefit of protecting the reputation of the board and management, now and in the long term.
To learn more about how we can help you get the most out of your club property please contact us on 02 9966 8898 or email us at admin@augustaadvisors.com.au.