Rating Manual section 6 part 3: valuation of all property classes

Section 455: golf driving ranges

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This section deals with separately assessed golf driving ranges which may also have bar and lounge facilities, retail outlets or other leisure facilities such as themed mini golf, sometimes referred to as “adventure golf”. The latter are a family friendly adventure, often with near life-sized animatronic creatures and water features, which have become increasingly popular. They may exist as a stand-alone attraction or be found within an existing golf driving range or golf course (Rating Manual: section 6 part 3 - section 450) where the mini golf will usually be valued as part of that hereditament unless forming a separate hereditament in its own right (Scat 426 - Pitch and Putt/Putting Greens).

However, the various other facilities on offer will generally be subsidiary to the main use as a golf driving range. Where it is considered that the driving range is ancillary to another use, the valuation considerations which follow may be of assistance to provide a cross check against the preferred method of valuation to be adopted for that class of property.

Many golf courses (SCAT Code 117) have a driving range as an ancillary part of the overall assessment and guidance on the approach to valuation in these cases is provided in Rating Manual: section 6 part 3 - section 450. It is not always appropriate to apply a full stand-alone driving range value to range/practice facilities attached to a golf course which, although superficially similar, are not designed to operate on the same commercial lines as a separately assessed driving range.

This section does not cover pitch & putt and crazy golf (Scat 426) which should be treated as leisure attractions (see Rating Manual: section 6 part 3 - section 1085).

2. Description and special category code

List Description: Golf Driving Range and Premises Primary Description Code: LS2 SCAT code: 118, suffix S

3. Responsible team

This is a specialist class of property, to be valued by Specialists in each Business Unit.

4. Co-ordination

The Golf Course Class Co-ordination Team has overall responsibility for this class and will provide advice as necessary during the life of the Rating Lists. Contact details are available from P/CEO1/Intranet/Reval2017/VP & CCTs. The team is responsible for the approach to and accuracy and consistency of valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers have a responsibility to:

  • follow the advice given at all times

  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team

  • seek advice from the co-ordination team before starting any new work

5.1 Unit of Assessment - let outs

A “golf shop” may be found to be in the separate occupation and control of a third party employed by the operator and capable of separate assessment. Similarly, any catering operation may also be let out to a third party. The individual circumstances of each case will dictate what entries are to be made in the Rating List.

6. Survey Requirements

The quality of driving ranges varies from uncovered, unlit ranges in rural locations, converted at little cost from farmers’ fields, often with an honesty box for payment; up to modern two-tier, floodlit ranges, with pro shops and restaurants, located in or adjoining large urban areas. Between the two extremes lie a wide variety of driving ranges. One thing they will all have in common is that, in addition to the bays from which golfers tee off, they require a large area of land (the ‘range’) into which the balls can be hit.

As well as the range and buildings the hereditament may also include a golf course, typically this will be a 9 hole beginners course. Where the course is more than a beginners course, the range may in fact be ancillary to the actual golf course. In such circumstances consideration will have to be given to whether it is more appropriate to change the description to golf course and premises (SCAT Code 117) and value accordingly having regard to the guidance in Rating Manual: section 6 part 3 - section 450.

The reception, shop area and any cafe facility should be measured to net internal area (NIA).

The following factors are likely to affect the rental value of a driving range and should be noted during the inspection:

a.location and proximity to centres of population;

b.competition from neighbouring ranges and golf courses (particularly pay and play);

c.number of bays;

d.floodlighting;

e.size and quality of ancillary buildings;

f.planning restrictions, limiting either the hours that the driving range may be used (and floodlit), or the activities permitted in the restaurant/bar;

g.car-parking;

h.retail area for golf equipment - golf range operators may let out on lease or licence the retail area to specialist golf equipment retailers, often at rents equivalent to retail warehouse rates per m2. In such circumstances consideration should be given to whether or not this comprises a separate hereditament;

i.mini themed golf attraction such as “adventure golf”;

j.type of tee such as plain artificial turf, automated ball teeing system;

k.number of double bays for example, video coaching bays.

7. Survey Capture

In all cases plans and surveys should be stored in the property folder of the Electronic Document Records Management (EDRM) system.

8. Valuation Approach

8.1 Rentals Comparison

Rents, where available, will provide useful evidence of value but will often disregard substantial tenant’s improvements and therefore be unreliable. The analysis of such rents should be treated with caution. Where reliable AVD rents are believed to exist VOs should obtain details of rent and lease terms to ascertain the facts.

Where rental evidence is unreliable or non-existent, the Receipts and Expenditure method is the preferred method of valuation since the market rent is likely to be dictated by the actual or anticipated profit of the business carried on at the hereditament.

8.2 Receipts and Expenditure (R&E)

Where full accounts information is available for the three years prior to the AVD, then the R&E method of valuation may be adopted to arrive at the assessment where it is clear that the driving range is operated on a fully commercial basis. Guidance on the R&E method of valuation is contained within Rating Manual: section 4 part 2.

8.3 Comparative Approach

In the absence of full accounts information the RV should be arrived at using a comparative valuation method applying a rental percentage to the estimated AVD Fair Maintainable Trade (FMT) having regard to the actual gross receipts (excluding VAT). It is likely that this will be the main method of valuation for this class and occupiers of driving ranges are sent FOR VO6030 requesting receipts information.

8.4 Valuation considerations

The primary factor affecting the value of a golf driving range is location. Industry guidance stresses the need to establish the number of customers within 15 minutes’ drive time when considering a new development. It is therefore expected that a range located within or close to a large urban area will be significantly more valuable than one of a similar size located in a rural area.

In addition to the factors referred to in section 6 above, other factors which should be taken into account include: * floodlighting (the absence of which substantially reduces the hours of trading, especially in the winter);

  • whether the number of bays is appropriate given the location and demand (40 or more bays may be required in an urban location, whereas for a rural range 30 may be excessive);

  • retail area;

  • catering facilities.

9. Valuation Support

All valuations should be entered onto the Non-Bulk Server (NBS) under the relevant Scat Code.

Additional support is available through:

  • Survaid.

  • Class Co-ordination Team for Golf.

Practice note 1: 2017: Golf driving ranges

1. Market Appraisal

There are now a wide variety of golf driving ranges in terms of age, location, quality and facilities offered. Those at the bottom end of the market tend to be of basic construction and offer straightforward bays without any cafe or sales facilities. At the other end of the market there are newer ranges and those that have been modernised offering pop up teeing areas, better catering facilities and improved retail areas.

There has been a growth in both outdoor/indoor ranges and entertainment centres offering themed mini golf (sometimes referred to as “adventure golf”) and golf simulators which seek to attract a younger and more family orientated customer. In competition against these the latest driving ranges offer more extensive and higher quality facilities. An example of this is Greenwich Peninsular driving range on the bank of the Thames overlooking Canary Wharf where a state of the art 60 bay two tier driving range shares the site with a high quality restaurant, wine school and a large sports retail shop. The range has flags and holes offering targets on raised greens with each bay having a private entertaining area.

With golf club membership falling and golfers playing 18 holes less regularly it is likely that well located driving ranges with a variety of offers will become increasingly popular.

2. Changes from the last Practice Note

There are no changes from the broad principles followed for the 2010 Rating Lists and the approach therefore is the same.

3. Ratepayer Discussions

Central discussions have taken place with agents acting for and advising the English Golf Union, the Association of Golf Course Owners and ratepayers. The guidance contained in this Practice Notice has been discussed with and sent to the agents who have not dissented in principle from the recommended approach.

4. Valuation Scheme

In the absence of reliable AVD rental evidence and/or full accounts information the RV should be arrived at using a comparative valuation method applying a rental percentage to the estimated AVD Fair Maintainable Trade (FMT) having regard to the actual gross receipts (excluding VAT).

Analysis of the available evidence indicates that the rental percentage bid range should generally fall within 12% to 16% of the FMT. Various receipts may be identifiable such as range income, retail equipment sales, catering sales and the single rental percentage adopted should reflect this range. However, consideration could be given as to whether different rental percentages should be applied to each individual income stream to reflect its likely profitability.

Where the driving range operator receives a franchise income, for example from an equipment shop in the hereditament, then this should be excluded from the FMT figure to avoid double counting.

Franchise income should be valued at a percentage within the range of 25% to 50% depending on the level of the rateable occupier’s expenditure. This will be at the higher end where the receipts involve the rateable occupier in minimal expense, and at the lower end where the rateable occupier is responsible for all repairing liabilities, provision of services or significant non-rateable items. The resultant figure should then be added to the RV for the main part of the hereditament to produce an overall RV to be entered into the Rating List.

If forming part of, and in the same occupation as, the golf driving range any mini themed golf facility, such as “adventure golf”, will be valued as part of that hereditament by applying the rental percentage bid applicable to the driving range facility to an estimate of the FMT (gross receipts excluding VAT) for the mini themed golf at the AVD.

However, it is essential that a stand back and look at the final figure is carried out and that, where appropriate, full regard is had to the different revenue streams within the hereditament.

Where the mini themed golf is a stand-alone facility any rent passing is unlikely to reflect the many improvements made by the tenant. In such circumstances the RV should generally be arrived at by applying a rental percentage, in the range of 12% - 16%, to the estimated FMT (gross receipts excluding VAT) at the AVD.

Practice note 1: 2010: Golf driving ranges

1. Co-ordination

This is a split class with Southern Specialist Rating Unit being responsible for those golf driving ranges in London Central, London North and London South Groups and Groups having responsibility elsewhere. Responsibility for ensuring that appropriate co-ordination takes place lies with the Groups and Southern SRU. Co-ordination responsibilities are set out in RM Section 6: part 1

For R2010 Special Category Code 118 should be used. The suffix letter should be G or S as appropriate.

As there is likely to be limited rental evidence and the valuation ‘location’ will be extensive, it is important that Groups co-ordinate across boundaries with adjoining Groups. Each Group has a “golf” class co-ordinator in place and there is a National Co-ordinator for the wider geographical area.

2. Scope of Practice Note

Many golf courses (SCAT Code 117) have a driving range as an ancillary part of the overall assessment and guidance on the approach to valuation in these cases is provided in RM Section 6: pt 3 It is not always appropriate to apply a full stand alone driving range value to range/practice facilities attached to a golf course, which although superficially similar are not designed to operate on the same commercial lines as a separately assessed driving range.

This Practice Note deals solely with separately assessed golf driving ranges. Whilst such properties may have bar and lounge facilities, retail outlets or other leisure facilities, these will generally be subsidiary to the main use as a golf driving range. Where it is considered that the driving range is ancillary to another use, the valuation considerations which follow may be of assistance to provide a cross check against the preferred method of valuation to be adopted for that class of property.

3. State of the Industry

Very few new golf driving ranges have been built since 2003. However, operators of the more profitable units have been continually modernising and updating their premises including the introduction of automatic pop-up teeing facilities, better catering and improved golf equipment retailing.

4. Central Discussions

Central discussions have taken place with agents acting for and advising the English Golf Union, the Association of Golf Course Owners and ratepayers. Views were sought on improvements which could be made to the approach adopted for the 2005 lists. The guidance contained in this Practice Notice has been discussed with and sent to the agents who have not dissented in principle from the recommended approach.

5. Valuation Factors

The primary factor affecting the value of a golf driving range is location. Industry guidance stresses the need to establish the number of customers within 15 minutes drive time when considering a new development. It is therefore expected that a range located within or close to a large urban area will be significantly more valuable than one of a similar size located in a rural area.

Other factors which should be taken into account include:

  • competition from neighbouring ranges and golf courses (particularly pay and play);

  • floodlighting (the absence of which substantially reduces the hours of trading, especially in the winter);

  • whether the number of bays is appropriate given the location and demand (40 or more bays may be required in an urban location, whereas for a rural range 30 may be excessive);

  • size and quality of ancillary buildings;

  • planning restrictions limiting either the hours that the driving range may be used (and floodlit) or the activities permitted in the restaurant/bar;

  • car-parking;

  • retail area;

  • catering facilities.

6. Valuation Method

6.1 Rentals Comparison

Rents, where available, will provide useful evidence of value but will often disregard substantial tenant’s improvements and therefore be unreliable. The analysis of such rents should be treated with caution. Where reliable AVD rents are believed to exist VOs should obtain details of rent and lease terms to ascertain the facts.

6.2 Contractors Basis

The Court of Appeal held in its decision in Garton v Hunter (VO) 1969 RA 11 that all evidence of value is admissible but the question is the weight which should be attached. Although evidence of current costs of construction may be available in respect of individual driving ranges, the contractors basis method is not thought appropriate for this class. Where rental evidence is unreliable or non existent, the Receipts & Expenditure method is the preferred method of valuation since the market rent is likely to be dictated by the actual or anticipated profit of the business carried on at the hereditament.

6.3 Receipts & Expenditure (R&E)

Where full accounts information is available for the three years prior to the AVD, then the R&E method of valuation may be adopted to arrive at the assessment where VOs are satisfied that the driving range is operated on a fully commercial basis. Guidance on the R&E method of valuation is contained within RM Section 4: Pt 2.

6.4 Comparative Approach

In the absence of full accounts information the RV should be arrived at using a shortened valuation method applying a rental percentage to the estimated AVD Fair Maintainable Trade (FMT) having regard to the actual gross receipts (excluding VAT). It is likely that this will be the main method of valuation for this class for R2010 and occupiers of driving ranges have been sent FOR VO6030 requesting receipts information.

Analysis of the available evidence indicates that the rental percentage bid range should generally fall within 12% to 16% of the FMT. Where the driving range operator receives a franchise income, for example from an equipment shop in the hereditament, then this should be excluded from the FMT figure to avoid double counting. Franchise income should be valued at a percentage within the range of 25% to 50% depending on the level of the rateable occupier’s expenditure. This will be at the higher end where the receipts involve the rateable occupier in minimal expense, and at the lower end where the rateable occupier is responsible for all repairing liabilities, provision of services or significant non-rateable items. The resultant figure should then be added to the RV for the main part of the hereditament to produce an overall RV to be entered into the Rating List. However, it is essential that a stand back and look at the final figure is carried out and that, where appropriate, full regard is had to the different revenue streams within the hereditament.

This property is valued using the non-bulk server. The manual can be accessed here.

7. IT Support

The development of a new facility on the Non Bulk Server will enable the input of factual data to achieve valuations that follow the recommended approach.

Practice note 1: 2005: Golf driving ranges

1. Co-ordination

Golf Driving Ranges are a Group co-ordination class and as such, responsibility for ensuring that appropriate co-ordination takes place lies with the Groups. Special Category Code 118G should be used for Reval 2005 purposes.

As there is likely to be limited rental evidence and the valuation ‘location’ will be extensive, it is important that Groups co-ordinate across boundaries with adjoining Groups.

A significant number of golf courses (SCAT Code 117G) have a driving range as an ancillary part of the overall assessment. Responsibility for valuation of these also lies with the Groups. It is normally not appropriate to apply a full stand alone driving range value to range/practice facilities attached to a golf course (particularly members clubs), which although superficially similar are not designed to operate on the same commercial lines as a separately assessed driving range. Refer to RM : V5 : S450 for guidance on the approach to valuation in these cases.

2. Scope of Practice Note

This Practice Note deals solely with separately assessed golf driving ranges.

Whilst such properties may have bar and lounge facilities, retail outlets or other leisure facilities, these will be subsidiary to the main use as a golf driving range. Where it is considered that the driving range is ancillary to another use, the valuation considerations which follow may be of assistance to provide a cross check against the preferred method of valuation to be adopted for that class of property.

3. Background and State of the Industry

Construction of golf driving ranges underwent a boom during the early to mid 1990’s, at a time when approximately 100 new golf courses were also coming onto the market annually. 75% of existing UK driving ranges were built from 1990 onwards. There are in excess of 800 in the UK as a whole, though 70% of these are attached to full length golf courses. The remainder are either stand alone, or have a short course attached to them.

Given the growth in the market since 1990, particularly in the provision of ranges attached to golf courses, it is inevitable that whilst new developments in urban areas may be performing well, some existing ranges, or new ones deficient in one or more important aspect (eg. poor location, lack of floodlighting), will have struggled to compete.

4. Central Discussions

Central discussion took place with agents acting for ratepayers and advising the English Golf Union and the Association of Golf Course Owners. Views were sought on improvements which could be made upon 2000 list approach. It was appreciated that whilst levels of value would depend on local evidence, the class would benefit from central guidance as to approach for 2005.

The guidance within this practice note is consistent with views expressed and whilst it cannot be taken as a formal memorandum of agreement it is expected that the majority of ratepayers agents will not seek to challenge the content of this report and valuation approach.

5. Valuation Factors

The primary factor affecting the value of a golf driving range is location. Industry guidance stresses the need to establish the number of customers within 15 minutes drive time when considering a new development. It is therefore expected that a range located within or close to a large urban area will be significantly more valuable than one of a similar size located in a rural area.

Other factors which should be taken into account include:

  • competition from neighbouring ranges and golf courses (particularly pay and play)

  • floodlighting (the absence of which substantially reduces the hours of trading, especially in the winter)

  • whether the number of bays is appropriate given the location and demand (40 or more bays may be required in an urban location, whereas for a rural range 30 may be excessive)

  • size and quality of ancillary buildings

  • planning restrictions limiting either the hours that the driving range may be used (and floodlit) or the activities permitted in the restaurant/bar.

  • car-parking

6. Valuation Method

6.1 Rentals Comparison

The approach to valuation should wherever possible be on the basis of rental information.

VOs should make every effort to obtain details of rents and lease terms, although care should be taken when analysing such lettings, as they may be on favourable terms, possibly as low as agricultural value, and typically will not include the value of tenant’s improvements.

Where rental evidence is limited locally, comparison with other driving ranges in a wider area may be the only practical method of valuation. In order to derive a basis of comparison it is advisable that VOs obtain details of receipts, and analyse useful rents in relation to those receipts. In this way, it may be possible to show a relativity between rental levels and receipts, which can be applied to other driving ranges where there is an absence of rental information.

In the absence of sufficient receipts information on which to base a comparison method, it is suggested that rents are analysed, and valuations expressed, as a price/bay, reflecting the presence of the land, with ancillary buildings valued on a price/m2 ITMS, adopting the levels of value applied to similar buildings within golf course assessments locally.

6.2 Receipts & Expenditure

Where available, modern and reliable rents are the best evidence. However, in the absence of these (bearing in mind that the valuation ‘location’ for this class is extensive, and it is appropriate to co-ordinate with adjoining Groups in respect of rental evidence), if full accounts are produced by the ratepayer, a full receipts and expenditure valuation may be undertaken (see guidance contained within RM : V4 : S6).

A full R&E approach will only be appropriate for operations which are run on fully commercial lines, VOs will need to be satisfied that this is the case, and that the receipts fairly represent those likely to be earned by the hypothetical tenant. A stand back and look will also be necessary to ensure consistency of valuation across the class.

6.3 Contractors Basis

The Court of Appeal held in its decision in Garton v Hunter (VO) 1969 RA 11 that all evidence of value is admissible but the question is the weight which should be attached. Although evidence of current costs of construction may be available in respect of individual driving ranges, the contractors basis method is not thought appropriate for this class. Where rental evidence is unreliable or non existent, the R & E method is the preferred method of valuation since the market rent is likely to be dictated by the actual or anticipated profit of the business carried on at the hereditament.