Key Considerations When Evaluating a Park
This week, I took my first road trip in three months. My clients have been chomping at the bit to go look at parks, so we donned our masks and hit the road. We drove, flew, walked, hiked, camped, and met a pot belly pig who may become a mascot.
I often have long rides between parks with my clients. This allows some wonderful interaction and the ability to bounce thoughts off each other. This week, my client kept saying to me, "You need to write about this and you need to write about that." This trip he was very adamant on advising buyers how to look at a sellers books.
When someone is selling a park, the adventure has just begun. All of the time, you need to make adjustments to their books. Often times, their books do not reveal what is truly happening.
The reasons are many and varied. Sometimes all their personal expenses are being paid by the park. Sometimes family members are on payroll even if they do very little at the park. Almost always, the owners do not pay themselves on payroll, so replacing their salaries must factor in to what a new owner will be realizing in expenses.
One of the most overlooked items is Goodwill. How will the owners departure effect occupancy? When the owners are tired, worn out and grumpy- a change can result in increased occupancy. However, when the owner or owner(s) are one of THE reasons guests come to a park, change in ownership can have a tremendous influence on current guests and it may take a year or two to overcome the change. Reviews will often tell you if the change is going to be positive or negative in the guests eyes.
Finally, is the park operating in a way that the market demands - or are the owners fighting the market? Most often we see this when a park is screaming to be a transient park, but owners prefer the operational ease of long term guests. Conversely, we have had owners demand to be short term family parks when the market was telling them long term guests would fill their park and generate substantial revenue.
Also, verify the inventory that comes with the purchase. Nothing can be more of a surprise than to show up at your newly purchased park, and the $100,000 worth of equipment you thought came with the park now has to be replaced. That is an immediate kick in the pants and is easily avoided with careful contracts and planning.
All of the above are careful considerations when buying an existing park. One of the reasons I travel with my clients is to review the tangibles and intangibles and to get "Boots on the Ground," in order to make wise decisions. We can do a trip and look and ten parks and maybe only buy one, but the travel is worth the reward when the right site, at the right price, at the right time is finally chosen.