Many clubs have surplus land that they want to maximise but aren’t sure if they should do a JV, sell the land or just keep it for the future without maximising the potential of the land.

We asked Anna Porter of Suburbanite Asset Advisory if she could walk us through the pro’s and con’s of each option, and what club managers need to know before they make this decision.

Anna Porter shared the below ‘snapshot’ of each option with us and what to consider when weighing up the options for your club;

 

Retain surplus land ‘as is’ Pro’s Con’s
No development risk Not generating revenue
Retain for potential future uses Costing money in taxes and maintenance
No due process challenges with changes in land use Not maximising the potential of the asset
Lazy asset on the balance sheet
Dead money tied up in underused land

 

 

Sell surplus land

Pro’s Con’s
Quick way to raise capital Development profit will be passed on to the buyer and the club misses out on that
No development risk Tax and selling cost considerations
Test the market, so the full value should be achieved Reduces asset base for future operational uses
Lose control of the end-use and it could be a competing use (ie: F&B) or undesirable use
Will not help the club by creating reoccurring revenue from the asset, it is one capital injection only

 

Do a JV to maximise surplus land Pro’s Con’s
Club retains land Wrong JV partner can be costly
Potential to make higher profit from the land (development profit) Development risks need to be mitigated and can’t all be removed
More control of the end-use Long process to undertake with selecting a JV partner, legal, DA, etc
Opportunity to create reoccurring revenue from future use Defects risk for any development can fall on the club. *Can be mitigated against but this needs to be considered and managed.
 

Future use could compliment core operations

Mortgage security will often be taken over the club and if the JV partner becomes insolvent the club can be at risk of repossession from the lender. *This too can be mitigated against but needs to be considered
JV partner will have a financial capacity to use the land at it’s highest and best use, maximise site potential & build a project that may otherwise be outside of the clubs reach The project needs to be appropriate for the club and local community to be successful
Possible cost escalation can erode profits