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 |
