EX-99.(C)(6) 7 dex99c6.txt DUFF & PHELPS LLC'S DRAFT VALUATION ANALYSIS 08/22 Exhibit (c)(6) -------------- DRAFT DUFF & PHELPS, LLC [X] 2029 CENTURY PARK EAST, SUITE 820 [X] LOS ANGELES, CA 90067 [X] (310) 284-8008 [X] FAX (310) 284-8130 VALUATION ANALYSIS OF [GOTHAM LOGO] GOTHAM GOLF PARTNERS, L.P. August 21, 2001 THE INFORMATION CONTAINED HEREIN IS OF A CONFIDENTIAL NATURE AND IS INTENDED FOR THE EXCLUSIVE USE OF THE PERSONS OR FIRM TO WHOM IT IS FURNISHED BY US. REPRODUCTION, PUBLICATION, OR DISSEMINATION OF PORTIONS HEREOF MAY NOT BE MADE WITHOUT PRIOR APPROVAL OF DUFF & PHELPS, LLC. GOTHAM GOLF PARTNERS, L.P. TABLE OF CONTENTS -------------------------------------------------------------------------------- I. SUMMARY OF ENGAGEMENT II. GOTHAM GOLF PARTNERS - COMPANY OVERVIEW III. VALUATION ASSUMPTIONS IV. DISCOUNTED CASH FLOW ANALYSIS A. PESSIMISTIC CASE - NO NEW COURSES, EXISTING OVERHEAD B. BASE CASE - NO NEW COURSES, NORMALIZED OVERHEAD C. OPTIMISTIC CASE - NEW COURSES - ROLL-UP STRATEGY V. COMPARABLE PUBLIC COMPANY ANALYSIS A. COMPARABLE PUBLIC COMPANY MULTIPLES / ANALYSIS VI. NET ASSET VALUE ANALYSIS VII. OTHER ASSETS VIII. VALUATION SUMMARY APPENDIX A. DISCOUNT RATE ANALYSIS B. SUMMARY OF DIFFERENCES BETWEEN D&P AND GGP DCF ANALYSIS C. CAPITALIZATION RATE ANALYSIS D. COMPARABLE PUBLIC COMPANY DESCRIPTIONS GOTHAM GOLF PARTNERS, L.P. SUMMARY OF PURPOSE -------------------------------------------------------------------------------- PURPOSE OF ENGAGEMENT [_] Duff & Phelps, LLC ("Duff & Phelps") has been retained by First Union Real Estate Equity and Mortgage Investments ("First Union") as an independent financial advisor to the Special Committee of the Board of Trustees of First Union in connection with a contemplated transaction ("Proposed Transaction"). [_] Duff & Phelps has been engaged to determine the fairness of the Proposed Transaction from a financial point of view. [_] As part of the fairness analysis, Duff & Phelps has determined the fair market value of the capital stock of Gotham Golf Partners, L.P. ("GGP" or the "Company"), on a controlling interest basis. [_] The following presentation is Duff & Phelps' preliminary analysis and opinion of fair market value of GGP. DUE DILIGENCE [_] Duff & Phelps has relied on the information provided by Gotham Partners ("GP") and the Company, without independent verification thereof. Duff & Phelps assumed that the information provided fairly represents the results of the operations and financial position of GGP. Due diligence activities carried out as part of the valuation process include the following: 1. Visit to the Company's headquarters in Hershey, PA, and interviews with GGP's management team, as follows: Danny Mays - Chairman Andrew Bonus - Vice President Jon Caporaletti - President Michael Armel - Vice President Allen DePuy - Vice President William Leahy - Legal Counsel Dan Stonionis - Vice President 2. Visit to the Company's selected golf courses, including: Bear Creek Golf Club Lake Arbor Golf Club The Bridges The Links at Challedon Edgewood in the Pines Maple Ridge Golf Club Fairfax National Golf Club Monroe Valley Golf Club Four Seasons Golf Club Montgomery Country Club Fox Hollow Golf Club Mountain Laurel Golf Club Glade Valley Golf Club Robin Dale Golf Club Greencastle Greens Golf Club Royal Oaks Golf Club Honey Run Golf Club West Winds Golf Club - 1 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. SUMMARY OF PURPOSE -------------------------------------------------------------------------------- DUE DILIGENCE (CON'T.) 3. Interviews with William Ackman, CEO of GP and CEO of First Union. 4. Discussions with GGP's auditor, Freidkin, Matrone & Horne, P.A. 5. Review of internal financial statements for the fiscal years ending December 31, 1998-2000; reviewed financial statements for the fiscal year ending December 31, 1999; and audited financial statements for the fiscal year ending December 31, 2000. 6. Review of projections prepared by GGP management for the fiscal years ending December 31, 2001-2005. 7. Review of the Company's strategic business plan. 8. Review of other pertinent Company, industry and economic information. - 2 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. COMPANY OVERVIEW -------------------------------------------------------------------------------- COMPANY OVERVIEW [_] Gotham Golf Partners, L.P. is a full-service golf course acquisition, ownership, and management company that owns and operates golf courses throughout the Eastern United States. [_] GGP specializes in acquiring and repositioning previously undercapitalized and under-managed courses located in areas with favorable demographics. [_] The Company currently maintains a portfolio of 26 golf courses, all of which have been acquired over the past four years. [_] Through its acquisition of 26 golf courses, the Company's management has developed and refined a process for identifying attractive acquisitions, implementing turn-around programs, and profitably managing its operations. [_] The Company has built a seasoned management team, the core of which has worked together for 11 years, with the capacity to manage significant growth. [_] GGP places a high level of fiscal responsibility with its on-site management, staffing each property with an on-site manager who is responsible for the operations and profitability of the golf course. [_] By applying the disciplined oversight of experienced regional managers and experience of the "hands-on" executive management team, GGP has been able to produce and maintain consistently high operating margins. [_] GGP applies a straightforward approach to golf management by investing requisite capital immediately following an acquisition to increase quality and promote round growth. [_] GGP focuses on leveraging the benefits of portfolio size and geography to manage courses efficiently and frequently eliminates or limits existing membership programs to promote daily-fee play and reduce the need to provide low margin services. - 3 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. VALUATION ASSUMPTIONS -------------------------------------------------------------------------------- VALUATION ASSUMPTIONS [_] GGP has a high level of corporate overhead due to the fact that the Company is implementing an aggressive roll-up of golf courses. [_] If operations were to stay at the current level (26 courses), corporate overhead could be reduced by over 50% to approximately $1.5 million, or 4% of revenues. [_] We employed a normalized level of corporate overhead at 4% of revenues in the Base Case Discounted Cash Flow analysis and in the Comparable Public Company analysis. [_] We have assumed that GGP will purchase the 50% interests it does not already own in California Golf, L.C. and Miami National Golf Club, L.C. for $1.35 million, prior to the close of the Proposed Transaction. The purchase price has been included in total debt. [_] In our valuation analysis, we have capitalized net operating income ("NOI") instead of course operating income ("COI"), which is the level of income GGP uses to capitalize. NOI is derived by deducting a maintenance level of capital expenditures (2% of revenues) and cart lease expenses ($1.8 million) from COI. NOI is, therefore, a lower, more conservative level to capitalize. Based on our research, most capitalization rates are based on NOI. [_] We have relied, without independent verification, on management's representation of the fair market value of other assets. The total value of other assets is $8.1 million. The value of other assets included as part of the Proposed Transaction was estimated at $3.2 million. - 4 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. DISCOUNTED CASH FLOW ANALYSIS -------------------------------------------------------------------------------- [_] The Discounted Cash Flow Approach . Based on the theory that the current value of an investment is based on the expected receipt of future economic benefits. . Indications of value are developed by discounting projected debt-free net cash flows to their present value at a rate that reflects both the current return requirements of the market and the risks inherent in the specific investment. . The present value of these cash flows represents the invested capital value (debt plus equity) of a company. Deducting interest-bearing debt from the indicated enterprise value results in an indication of total equity value for the subject company. [_] Primary Components to Value in Using the Discounted Cash Flow approach . The present value of interim cash flows plus the present value of the terminal value (i.e., value at the end of the projection period). . Terminal value, or continuing value of operations beyond the last projection year, was determined by capitalizing the terminal year net operating income. [_] Determination of an Appropriate Discount Rate . The rate of return an investor would require to invest in GGP was the primary consideration in selecting a discount rate. . Alternate investment opportunities with varying risk profiles were considered and compared to the risk of an equity investment in GGP. . Capital Asset Pricing Model, the Cost of Equity and alternative investments were considered in determining appropriate discount rates. [_] Three Scenarios Analyzed . Pessimistic Case . No growth in the number of courses . Corporate overhead is not reduced . Valuation conclusion: $26.6 million to $31.5 million - 5 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. DISCOUNTED CASH FLOW ANALYSIS -------------------------------------------------------------------------------- [_] Three Scenarios Analyzed (con't) . Base Case . No growth in the number of courses . Normalized corporate overhead - 4.0% of revenues . Valuation conclusion: $32.9 million to $38.0 million . Optimistic Case . Roll-out strategy of 5 additional courses per year, starting in 2002 . No adjustments to corporate overhead . Valuation conclusion: $55.4 million to $70.3 million - 6 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (PESSIMISTIC CASE - NO NEW COURSES, EXISTING CORPORATE OVERHEAD) Income Statement Summary
-------------------------------------------------------------- ACTUAL PROJECTED FOR FYE DECEMBER 31, 1998 1999 2000 2001 -------------------------------------------------------------- Total Revenue 19,141,556 25,537,488 30,444,714 35,678,706 Less: Cost of Sales and Operating Expenses 10,918,565 13,169,431 16,910,414 18,146,053 ------------------------------------------------------------- Course Operating Income (COI) 8,222,991 12,368,057 13,534,300 17,532,653 Less: Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 Less: Cart Lease Expense 946,404 1,263,612 1,461,992 1,703,612 Less: Corporate Overhead 1,911,158 2,973,506 3,275,833 4,136,242 -------------------------------------------------------------- Debt-free Pretax Income NA (282,310) (1,631,582) 500,905 Less: Pro-forma Income Taxes at 40% NA 0 0 200,362 -------------------------------------------------------------- Debt-free Net Income NA (282,310) (1,631,582) 300,543 ============================================================== Debt-free Net Income NA (282,310) (1,631,582) 300,543 Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 Maintenance Capital Expenditures NA NA NA (713,574) Hawk Lake Additional Development Cost NA NA NA (800,000) -------------------------------------------------------------- Debt-free Cash Flow NA NA NA 9,978,863 ============================================================== Course Operating Income (COI) 8,222,991 12,368,057 13,534,300 17,532,653 Less: Cart Lease Expense (946,404) (1,263,612) (1,461,992) (1,703,612) Less: Maintenance Capital Expenditures NA NA NA (713,574) -------------------------------------------------------------- Net Operating Income (NOI) NA NA NA 15,115,467 ------------------------------------------------------------ PROJECTED 2002 2003 2004 2005 ------------------------------------------------------------ Total Revenue 38,044,612 39,267,877 40,467,414 41,735,390 Less: Cost of Sales and Operating Expenses 19,122,085 19,521,046 19,920,687 20,317,849 -------------------------------------------------------------- Course Operating Income (COI) 18,922,526 19,746,831 20,546,727 21,417,541 Less: Depreciation and Amortization 11,265,617 11,342,929 11,422,665 11,504,867 Less: Cart Lease Expense 1,737,684 1,772,438 1,807,887 1,844,044 Less: Corporate Overhead 4,343,054 4,560,207 4,788,217 5,027,628 -------------------------------------------------------------- Debt-free Pretax Income 1,576,171 2,071,257 2,527,959 3,041,001 Less: Pro-forma Income Taxes at 40% 630,468 828,503 1,011,183 1,216,400 -------------------------------------------------------------- Debt-free Net Income 945,703 1,242,754 1,516,775 1,824,601 ============================================================== Debt-free Net Income 945,703 1,242,754 1,516,775 1,824,601 Depreciation and Amortization 11,265,617 11,342,929 11,422,665 11,504,867 Maintenance Capital Expenditures (760,892) (785,358) (809,348) (834,708) Hawk Lake Additional Development Cost 0 0 0 0 -------------------------------------------------------------- Debt-free Cash Flow 11,450,427 11,800,326 12,130,092 12,494,760 ============================================================== Course Operating Income (COI) 18,922,526 19,746,831 20,546,727 21,417,541 Less: Cart Lease Expense (1,737,684) (1,772,438) (1,807,887) (1,844,044) Less: Maintenance Capital Expenditures (760,892) (785,358) (809,348) (834,708) -------------------------------------------------------------- Net Operating Income (NOI) 16,423,950 17,189,036 17,929,492 18,738,789
- 7 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (PESSIMISTIC CASE - NO NEW COURSES, EXISTING CORPORATE OVERHEAD) Valuation Summary Weighted Average Cost of Capital 12.5% 12.0% 11.5% ---------------------------------------------------- Terminal Year Capitalization of NOI ---------------------------------------------------- Continuing Value (2005) Based on NOI Cap Rate of 11.0% 170,352,625 170,352,625 170,352,625 Present Value of Continuing Value 100,268,029 102,298,138 104,378,711 Present Value of Interim Debt-free Cash Flow 40,666,296 41,055,403 41,451,302 ---------------------------------------------------- Enterprise Value Indication (rounded) 140,900,000 143,400,000 145,800,000 Less: Total Debt as of 4/1/01 (119,825,333) (119,825,333) (119,825,333) Plus: Other Assets 3,155,000 3,155,000 3,155,000 Plus: Cash & Equivalents (clubs only as of 4/31/01) 2,363,225 2,363,225 2,363,225 ---------------------------------------------------- Equity Value Indication (rounded) 26,592,892 29,092,892 31,492,892
------------------------------------------------------------- FOR FYE DECEMBER 31, 2001 2002 2003 2004 ------------------------------------------------------------- Discount Period 0.25 1.00 2.00 3.00 Present Value of Interim Period Debt-free Cash Flows @ 12.5% 4,844,656 10,178,158 9,323,714 8,519,351 Present Value of Interim Period Debt-free Cash Flows @ 12.0% 4,850,054 10,223,596 9,407,148 8,633,960 Present Value of Interim Period Debt-free Cash Flows @ 11.5% 4,855,482 10,269,442 9,491,706 8,750,633 ---------------------------- FOR FYE DECEMBER 31, 2005 TOTAL ---------------------------- Discount Period 4.00 Present Value of Interim Period Debt-free Cash Flows @ 12.5% 7,800,417 40,666,296 Present Value of Interim Period Debt-free Cash Flows @ 12.0% 7,940,646 41,055,403 Present Value of Interim Period Debt-free Cash Flows @ 11.5% 8,084,040 41,451,302
- 8 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (PESSIMISTIC CASE - NO NEW COURSES, EXISTING CORPORATE OVERHEAD) Assumptions
-------------------------------------------------------------- ACTUAL PROJECTED For FYE December 31, 1998 1999 2000 2001 -------------------------------------------------------------- INCOME STATEMENT ASSUMPTIONS Rounds Played 572,387 717,038 839,339 973,730 Average Revenue per Round 33.44 35.62 36.27 36.64 Increase in Rounds Played NA 25.3% 17.1% 16.0% Increase in Revenue per Round NA 6.5% 1.8% 1.0% Cost of Sales and Operating Expenses as a % of Revenue 57.0% 51.6% 55.5% 50.9% Cart Lease Expense as a % of Revenue 4.9% 4.9% 4.8% 4.8% Cart Lease Expense Growth NA 33.5% 15.7% 15.7% COI Margin 43.0% 48.4% 44.5% 49.1% COI Growth NA 50.4% 9.4% 29.5% Corporate Overhead as a % of Revenue 10.0% 11.6% 10.8% 11.6% EBITDA NA 8,130,939 8,796,475 11,692,799 EBITDA Margin NA 31.8% 28.9% 32.8% EBITDA Growth NA NA 8.2% 32.9% BALANCE SHEET ASSUMPTIONS Beginning Original Fixed Assets (excluding land) NA NA 64,400,735 83,615,407 Plus: CapEx NA 15,273,770 27,514,313 0 Less: Assets Sold NA 94,813 3,837,150 0 Less: Depreciation and Amortization NA 8,413,249 10,428,057 11,156,215 Plus: Adjustment NA NA 5,965,566 0 -------------------------------------------------------------- Ending Original Fixed Assets (excluding land) NA 64,400,735 83,615,407 72,459,192 Remaining Years of Life (Original Fixed Assets) 7.5 years ----------------------------------------------------------------------------------------------------------------- New Maintenance CapEx 713,574 ----------------------------------------------------------------------------------------------------------------- Depreciation of 2001 CapEx 10.0 years 35,679 Depreciation of 2002 CapEx 10.0 years Depreciation of 2003 CapEx 10.0 years Depreciation of 2004 CapEx 10.0 years Depreciation of 2005 CapEx 10.0 years ----------------------------------------------------------------------------------------------------------------- New CapEx Depreciation 35,679 ----------------------------------------------------------------------------------------------------------------- Total Depreciation and Amortization 8,413,249 10,428,057 11,191,894 Maintenance CapEx as a % of Revenue NA NA NA 2.0% -------------------------------------------------------------- PROJECTED For FYE December 31, 2002 2003 2004 2005 -------------------------------------------------------------- INCOME STATEMENT ASSUMPTIONS Rounds Played 1,027,168 1,046,201 1,064,334 1,083,311 Average Revenue per Round 37.04 37.53 38.02 38.53 Increase in Rounds Played 5.5% 1.9% 1.7% 1.8% Increase in Revenue per Round 1.1% 1.3% 1.3% 1.3% Cost of Sales and Operating Expenses as a % of Revenue 50.3% 49.7% 49.2% 48.7% Cart Lease Expense as a % of Revenue 4.8% 4.8% 4.8% 4.8% Cart Lease Expense Growth 2.0% 2.0% 2.0% 2.0% COI Margin 49.7% 50.3% 50.8% 51.3% COI Growth 7.9% 4.4% 4.1% 4.2% Corporate Overhead as a % of Revenue 11.4% 11.6% 11.8% 12.0% EBITDA 12,841,788 3,414,186 13,950,623 14,545,869 EBITDA Margin 33.8% 34.2% 34.5% 34.9% EBITDA Growth 9.8% 4.5% 4.0% 4.3% BALANCE SHEET ASSUMPTIONS Beginning Original Fixed Assets (excluding land) 72,459,192 61,302,977 50,146,762 38,990,548 Plus: CapEx 0 0 0 0 Less: Assets Sold 0 0 0 0 Less: Depreciation and Amortization 11,156,215 11,156,215 11,156,215 11,156,215 Plus: Adjustment 0 0 0 0 -------------------------------------------------------------- Ending Original Fixed Assets (excluding land) 61,302,977 50,146,762 38,990,548 27,834,333 Remaining Years of Life (Original Fixed Assets) ----------------------------------------------------------------------------------------------------------------- New Maintenance CapEx 760,892 785,358 809,348 834,708 ----------------------------------------------------------------------------------------------------------------- Depreciation of 2001 CapEx 71,357 71,357 71,357 71,357 Depreciation of 2002 CapEx 38,045 76,089 76,089 76,089 Depreciation of 2003 CapEx 39,268 78,536 78,536 Depreciation of 2004 CapEx 40,467 80,935 Depreciation of 2005 CapEx 41,735 ----------------------------------------------------------------------------------------------------------------- New CapEx Depreciation 109,402 186,715 266,450 348,653 ----------------------------------------------------------------------------------------------------------------- Total Depreciation and Amortization 1,265,617 1,342,929 11,422,665 11,504,867 Maintenance CapEx as a % of Revenue 2.0% 2.0% 2.0% 2.0%
- 9 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (BASE CASE - NO NEW COURSES, NORMALIZED CORPORATE OVERHEAD) Income Statement Summary
-------------------------------------------------------------- ACTUAL PROJECTED For FYE December 31, 1998 1999 2000 2001 -------------------------------------------------------------- Total Revenue 19,141,556 25,537,498 30,444,714 35,678,706 Less: Cost of Sales and Operating Expenses 10,918,565 13,169,431 16,910,414 18,146,053 -------------------------------------------------------------- Course Operating Income (COI) 8,222,991 12,368,057 13,534,300 17,532,653 Less: Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 Less: Cart Lease Expense 946,404 1,263,612 1,461,992 1,703,612 Less: Corporate Overhead 1,911,158 2,973,506 3,275,833 1,427,148 -------------------------------------------------------------- Debt-free Pretax Income NA (282,310) (1,631,582) 3,209,999 Less: Pro-forma Income Taxes at 40% NA 0 0 1,284,000 -------------------------------------------------------------- Debt-free Net Income NA (282,310) (1,631,582) 1,926,000 ============================================================== Debt-free Net Income NA (282,310) (1,631,582) 1,926,000 Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 Maintenance Capital Expenditures NA NA NA (713,574) Hawk Lake Additional Development Cost NA NA NA (800,000) -------------------------------------------------------------- Debt-free Cash Flow NA NA NA 11,604,319 ============================================================== Course Operating Income (COI) 8,222,991 12,368,057 13,534,300 17,532,653 Less: Cart Lease Expense (946,404) (1,263,612) (1,46l,922) (1,703,612) Less: Maintenance Capital Expenditures NA NA NA (713,574) -------------------------------------------------------------- Net Operating Income (NOI) NA NA NA 15,115,467 -------------------------------------------------------------- PROJECTED For FYE December 31, 2002 2003 2004 2005 -------------------------------------------------------------- Total Revenue 38,044,612 39,267,877 40,467,414 41,735,390 Less: Cost of Sales and Operating Expenses 19,122,085 19,521,046 19,920,687 20,317,849 --------------------------------------------------------------- Course Operating Income (COI) 18,922,526 19,746,831 20,546,727 21,417,541 Less: Depreciation and Amortization 11,265,617 11,342,929 11,422,665 11,504,867 Less: Cart Lease Expense 1,737,684 1,772,438 1,807,887 1,844,044 Less: Corporate Overhead 1,521,784 1,570,715 1,618,697 1,669,416 --------------------------------------------------------------- Debt-free Pretax Income 4,397,441 5,060,749 5,697,479 6,399,214 Less: Pro-forma Income Taxes at 40% 1,758,976 2,024,299 2,278,992 2,559,685 -------------------------------------------------------------- Debt-free Net Income 2,638,464 3,036,449 3,418,487 3,839,528 ============================================================== Debt-free Net Income 2,638,464 3,036,449 3,418,487 3,839,528 Depreciation and Amortization 11,265,617 11,342,929 11,422,665 11,504,867 Maintenance Capital Expenditures (760,892) (785,358) (809,348) (834,708) Hawk Lake Additional Development Cost 0 0 0 0 -------------------------------------------------------------- Debt-free Cash Flow 13,143,189 13,594,021 14,031,804 14,509,688 ============================================================== Course Operating Income (COI) 18,922,526 19,746,831 20,546,727 21,417,541 Less: Cart Lease Expense (1,737,684) (1,772,438) (1,807,887) (1,844,044) Less: Maintenance Capital Expenditures (760,892) (785,358) (809,348) (834,708) -------------------------------------------------------------- Net Operating Income (NOI) 16,423,950 17,189,036 17,929,492 18,738,789
- 10 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (BASE CASE - NO NEW COURSES, NORMALIZED CORPORATE OVERHEAD) Valuation Summary Weighted Average Cost of Capital 12.5% 12.0% 11.5% ------------------------------------------------ Terminal Year Capitalization of NOI ------------------------------------------------ Continuing Value (2005) Based on NOI Cap Rate of 11.0% 170,352,625 170,352,625 170,352,625 Present Value of Continuing Value 100,268,029 102,298,138 104,378,711 Present Value of Interim Debt-free Cash Flow 46,970,902 47,420,869 47,878,699 -------------------------------------------- Enterprise Value Indication (rounded) 147,200,000 149,700,000 152,300,000 Less: Total Debt as of 4/l/01 (119,825,333) (119,825,333) (119,825,333) Plus: Other Assets 3,155,000 3,155,000 3,155,000 Plus: Cash & Equivalents (clubs only as of 4/31/01) 2,363,225 2,363,225 2,363,225 -------------------------------------------- Equity Value Indication (rounded) 32,892,892 35,392,892 37,992,892
----------------------------------------------------------------- FOR FYE DECEMBER 31, 2001 2002 2003 2004 ----------------------------------------------------------------- Discount Period 0.25 1.00 2.00 3.00 Present Value of Interim Period Debt-free Cash Flows @ 12.5% 5,633,801 11,682,835 10,740,955 9,854,984 Present Value of Interim Period Debt-free Cash Flows @ 12.0% 5,640,079 11,734,990 10,837,070 9,987,561 Present Value of Interim Period Debt-free Cash Flows @ 11.5% 5,646,391 11,787,613 10,934,482 10,122,526 ------------------------------------ FOR FYE DECEMBER 31, 2005 TOTAL ------------------------------------ Discount Period 4.00 Present Value of Interim Period Debt-free Cash Flows @ 12.5% 9,058,327 46,970,902 Present Value of Interim Period Debt-free Cash Flows @ 12.0% 9,221,169 47,420,869 Present Value of Interim Period Debt-free Cash Flows @ 11.5% 9,387,687 47,878,699
- 11 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (BASE CASE - NO NEW COURSES, NORMALIZED CORPORATE OVERHEAD) Assumptions
--------------------------------------------------------------- ACTUAL PROJECTED For FYE December 31, 1998 1999 2000 2001 --------------------------------------------------------------- INCOME STATEMENT ASSUMPTIONS Rounds Played 572,387 717,038 839,339 973,730 Average Revenue per Round 33.44 35.62 36.27 36.64 Increase in Rounds Played NA 25.3% 17.1% 16.0% Increase in Revenue per Round NA 6.5% 1.8% 1.0% Cost of Sales and Operating Expenses as a % of Revenue 57.0% 51.6% 55.5% 50.9% Cart Lease Expense as a % of Revenue 4.9% 4.9% 4.8% 4.8% Cart Lease Expense Growth NA 33.5% 15.7% 15.7% COI Margin 43.0% 48.4% 44.5% 49.1% COI Growth NA 50.4% 9.4% 29.5% Corporate Overhead as a % of Revenue 10.0% 11.6% 10.8% 4.0% EBITDA NA 8,130,939 8,796,475 14,401,893 EBITDA Margin NA 31.8% 28.9% 40.4% EBITDA Growth NA NA 8.2% 63.7% BALANCE SHEET ASSUMPTIONS Beginning Original Fixed Assets (excluding land) NA NA 64,400,735 83,615,407 Plus: CapEx NA 15,273,770 27,514,313 0 Less: Assets Sold NA 94,813 3,837,150 0 Less: Depreciation and Amortization NA 8,413,249 10,428,057 11,156,215 Plus: Adjustment NA NA 5,965,566 0 -------------------------------------------------------------- Ending Original Fixed Assets (excluding land) NA 64,400,735 83,615,407 72,459,192 Remaining Years of Life (Original Fixed Assets) 7.5 years -------------------------------------------------------------- New Maintenance CapEx 713,574 -------------------------------------------------------------- Depreciation of 2001 CapEx 10.0 years 35,679 Depreciation of 2002 CapEx 10.0 years Depreciation of 2003 CapEx 10.0 years Depreciation of 2004 CapEx 10.0 years Depreciation of 2005 CapEx 10.0 years -------------------------------------------------------------- New CapEx Depreciation 35,679 -------------------------------------------------------------- Total Depreciation and Amortization 8,413,249 10,428,057 11,191,894 Maintenance CapEx as a % of Revenue NA NA NA 2.0% -------------------------------------------------------------- PROJECTED For FYE December 31, 2002 2003 2004 2005 -------------------------------------------------------------- INCOME STATEMENT ASSUMPTIONS Rounds Played 1,027,168 1,046,201 1,064,334 1,083,311 Average Revenue per Round 37.04 37.53 38.02 38.53 Increase in Rounds Played 5.5% 1.9% 1.7% 1.8% Increase in Revenue per Round 1.1% 1.3% 1.3% 1.3% Cost of Sales and Operating Expenses as a % of Revenue 50.3% 49.7% 49.2% 48.7% Cart Lease Expense as a % of Revenue 4.8% 4.8% 4.8% 4.8% Cart Lease Expense Growth 2.0% 2.0% 2.0% 2.0% COI Margin 49.7% 50.3% 50.8% 51.3% COI Growth 7.9% 4.4% 4.1% 4.2% Corporate Overhead as a % of Revenue 4.0% 4.0% 4.0% 4.0% EBITDA 15,663,057 16,403,678 17,120,144 17,904,081 EBITDA Margin 41.2% 41.8% 42.3% 42.9% EBITDA Growth 8.8% 4.7% 4.4% 4.6% BALANCE SHEET ASSUMPTIONS Beginning Original Fixed Assets (excluding land) 72,459,192 61,302,977 50,146,762 38,990,548 Plus: CapEx 0 0 0 0 Less: Assets Sold 0 0 0 0 Less: Depreciation and Amortization 11,156,215 11,156,215 11,156,215 11,156,215 Plus: Adjustment 0 0 0 0 -------------------------------------------------------------- Ending Original Fixed Assets (excluding land) 61,302,977 50,146,762 38,990,548 27,834,333 Remaining Years of Life (Original Fixed Assets) -------------------------------------------------------------- New Maintenance CapEx 760,892 785,358 809,348 834,708 -------------------------------------------------------------- Depreciation of 2001 CapEx 71,357 71,357 71,357 71,357 Depreciation of 2002 CapEx 38,045 76,089 76,089 76,089 Depreciation of 2003 CapEx 39,268 78,536 78,536 Depreciation of 2004 CapEx 40,467 80,935 Depreciation of 2005 CapEx 41,735 -------------------------------------------------------------- New CapEx Depreciation 109,402 186,715 266,450 348,653 -------------------------------------------------------------- Total Depreciation and Amortization 11,265,617 11,342,929 11,422,665 11,504,867 Maintenance CapEx as a % of Revenue 2.0% 2.0% 2.0% 2.0%
- 12 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (OPTIMISTIC CASE - NEW COURSES, ROLL-UP STRATEGY) Income Statement Summary
-------------------------------------------------------------- ACTUAL PROJECTED For FYE December 31, 1998 1999 2000 2001 -------------------------------------------------------------- # New Courses 0 Total Revenue 19,141,556 25,537,488 30,444,714 35,678,706 Less: Cost of Sales and Operating Expenses 10,918,565 13,169,431 16,910,414 18,146,053 -------------------------------------------------------------- Course Operating Income (COI) 8,222,991 12,368,057 13,534,300 17,532,653 Less: Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 Less: Cart Lease Expense 946,404 1,263,612 1,461,992 1,703,612 Less: Corporate Overhead 1,911,158 2,973,506 3,275,833 4,136,242 -------------------------------------------------------------- Debt-free Pretax Income NA (282,310) (1,631,582) 500,905 Less: Pro-forma Income Taxes at 40% NA 0 0 200,362 -------------------------------------------------------------- Debt-free Net Income NA (282,310) (1,631,582) 300,543 ============================================================== Debt-free Net Income NA (282,310) (1,631,582) 300,543 Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 New Course Acquisition Cost NA NA NA 0 Maintenance Capital Expenditures NA NA NA (713,574) Additional Development Cost Existing Courses NA NA NA 0 -------------------------------------------------------------- Debt-free Cash Flow NA NA NA 10,778,863 ============================================================== Course Operating Income (COI) 8,222,991 12,368,057 13,534,300 17,532,653 Less: Cart Lease Expense (946,404) (1,263,612) (1,461,992) (1,703,612) Less: Maintenance Capital Expenditures NA NA NA (713,574) -------------------------------------------------------------- Net Operating Income (NOI) NA NA NA 15,115,467 -------------------------------------------------------------- PROJECTED For FYE December 31, 2002 2003 2004 2005 -------------------------------------------------------------- # New Courses 5 5 5 5 Total Revenue 42,770,829 52,911,711 64,848,441 76,872,709 Less: Cost of Sales and Operating Expenses 21,394,505 26,107,843 31,567,472 36,957,624 -------------------------------------------------------------- Course Operating Income (COI) 21,376,324 26,803,868 33,280,969 39,915,085 Less: Depreciation and Amortization 11,490,343 12,026,026 12,583,786 13,165,507 Less: Cart Lease Expense 1,866,112 2,191,112 2,516,112 2,841,112 Less: Corporate Overhead 4,343,054 4,560,207 4,799,142 5,107,667 -------------------------------------------------------------- Debt-free Pretax Income 3,676,815 8,026,523 13,381,929 18,800,799 Less: Pro-forma Income Taxes at 40% 1,470,726 3,210,609 5,352,772 7,520,320 -------------------------------------------------------------- Debt-free Net Income 2,206,089 4,815,914 8,029,158 11,280,479 ============================================================== Debt-free Net Income 2,206,089 4,815,914 8,029,158 11,280,479 Depreciation and Amortization 11,490,343 12,026,026 12,583,786 13,165,507 New Course Acquisition Cost (22,000,000) (22,000,000) (22,000,000) (22,000,000) Maintenance Capital Expenditures (855,417) (1,058,234) (1,296,969) (1,537,454) Additional Development Cost Existing Courses (4,950,000) (3,850,000) 0 0 -------------------------------------------------------------- Debt-free Cash Flow (14,108,985) (10,066,295) (2,684,026) 908,532 ============================================================== Course Operating Income (COI) 21,376,324 26,803,868 33,280,969 39,915,085 Less: Cart Lease Expense (1,866,112) (2,191,112) (2,516,112) (2,841,112) Less: Maintenance Capital Expenditures (855,417) (1,058,234) (1,296,969) (1,537,454) -------------------------------------------------------------- Net Operating Income (NOI) 18,654,795 23,554,522 29,467,888 35,536,519
- 13 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (OPTIMISTIC CASE - NEW COURSES, ROLL-UP STRATEGY) Valuation Summary Weighted Average Cost of Capital 14.0% 13.0% 12.0% ------------------------------------------------ Terminal Year Capitalization of NOI ------------------------------------------------ Continuing Value (2005) Based on NOI Cap Rate of 11.0% 335,204,717 335,204,717 335,204,717 Present Value of Continuing Value 185,882,408 193,400,292 201,293,161 Present Value of Interim Debt-free Cash Flow (16,179,956) (16,444,906) (16,716,264) ------------------------------------------------ Enterprise Value Indication (rounded) 169,700,000 177,000,000 184,600,000 Less: Total Debt as of 4/l/01 (119,825,333) (119,825,333) (119,825,333) Plus: Other Assets 3,155,000 3,155,000 3,155,000 Plus: Cash & Equivalents 2,363,225 2,363,225 2,363,225 ------------------------------------------------ Equity Value Indication (rounded) 55,392,892 62,692,892 70,292,892
---------------------------------------------------------- For FYE December 31, 2001 2002 2003 2004 ---------------------------------------------------------- Discount Period 0.25 1.00 2.00 3.00 Present Value of Interim Period Debt-free Cash Flows @ 14.0% 5,215,750 (12,376,302) (7,745,687) (1,811,641) Present Value of Interim Period Debt-free Cash Flows @ 13.0% 5,227,251 (12,485,827) (7,883,385) (1,860,164) Present Value of Interim Period Debt-free Cash Flows @ 12.0% 5,238,880 (12,597,308) (8,024,788) (1,910,436) ------------------------------------ For FYE December 31, 2005 Total ------------------------------------ Discount Period 4.00 Present Value of Interim Period Debt-free Cash Flows @ 537,924 (16,179,956) Present Value of Interim Period Debt-free Cash Flows @ 557,220 (16,444,906) Present Value of Interim Period Debt-free Cash Flows @ 577,389 (16,716,264)
- 14 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS DISCOUNTED CASH FLOW ANALYSIS (OPTIMISTIC CASE - NEW COURSES, ROLL-UP STRATEGY) Assumptions
-------------------------------------------------------------- ACTUAL PROJECTED For FYE December 31, 1998 1999 2000 2001 -------------------------------------------------------------- INCOME STATEMENT ASSUMPTIONS Rounds Played 572,387 717,038 839,339 973,730 Average Revenue per Round 33.44 35.62 36.27 36.64 Increase in Rounds Played NA 25.3% 17.1% 16.0% Increase in Revenue per Round NA 6.5% 1.8% 1.0% Cost of Sales and Operating Expenses as a % of Revenue 57.0% 51.6% 55.5% 50.9% Cart Lease Expense as a % of Revenue 4.9% 4.9% 4.8% 4.8% Cart Lease Expense Growth NA 33.5% 15.7% 15.7% COI Margin 43.0% 48.4% 44.5% 49.1% COI Growth NA 50.4% 9.4% 29.5% Corporate Overhead as a % of Revenue 10.0% 11.6% 10.8% 11.6% EBITDA NA 8,130,939 8,796,475 11,692,799 EBITDA Margin NA 31.8% 28.9% 32.8% EBITDA Growth NA NA 8.2% 32.9% BALANCE SHEET ASSUMPTIONS Beginning Original Fixed Assets (excluding land) NA NA 64,400,735 83,615,407 Plus: CapEx NA 15,273,770 27,514,313 0 Less: Assets Sold NA 94,813 3,837,150 0 Less: Depreciation and Amortization NA 8,413,249 10,428,057 11,156,215 Plus: Adjustment NA NA 5,965,566 0 -------------------------------------------------------------- Ending Original Fixed Assets (excluding land) NA 64,400,735 83,615,407 72,459,192 Remaining Years of Life (Original Fixed Assets) 7.5 years Capital Improvements as a % of New Course Acquisition Costs 20.0% ----------------------------------------------------------------------------------------------------------------- New CapEx 713,574 ----------------------------------------------------------------------------------------------------------------- Depreciation of 2001 CapEx 10.0 years 35,679 Depreciation of 2002 CapEx 10.0 years Depreciation of 2003 CapEx 10.0 years Depreciation of 2004 CapEx 10.0 years Depreciation of 2005 CapEx 10.0 years ----------------------------------------------------------------------------------------------------------------- New CapEx Depreciation 35,679 ----------------------------------------------------------------------------------------------------------------- Total Depreciation and Amortization 8,413,249 10,428,057 11,191,894 Maintenance CapEx as a % of Revenue NA NA NA 2.0% -------------------------------------------------------------- PROJECTED For FYE December 31, 2002 2003 2004 2005 -------------------------------------------------------------- INCOME STATEMENT ASSUMPTIONS Rounds Played 1,131,924 1,358,680 1,614,339 1,867,590 Average Revenue per Round 37.79 38.94 40.17 41.16 Increase in Rounds Played 16.2% 20.0% 18.8% 15.7% Increase in Revenue per Round 3.1% 3.1% 3.2% 2.5% Cost of Sales and Operating Expenses as a % of Revenue 50.0% 49.3% 48.7% 48.1% Cart Lease Expense as a % of Revenue 4.8% 4.8% 4.8% 4.8% Cart Lease Expense Growth 9.5% 17.4% 14.8% 12.9% COI Margin 50.0% 50.7% 51.3% 51.9% COI Growth 21.9% 25.4% 24.2% 19.9% Corporate Overhead as a % of Revenue 10.2% 8.6% 7.4% 6.6% EBITDA 15,167,158 20,052,549 25,965,715 31,966,306 EBITDA Margin 35.5% 37.9% 40.0% 41.6% EBITDA Growth 29.7% 32.2% 29.5% 23.1% BALANCE SHEET ASSUMPTIONS Beginning Original Fixed Assets (excluding land) 72,459,192 61,302,977 50,146,762 38,990,548 Plus: CapEx 0 0 0 0 Less: Assets Sold 0 0 0 0 Less: Depreciation and Amortization 11,156,215 11,156,215 11,156,215 11,156,215 Plus: Adjustment 0 0 0 0 ---------------------------------------------------------------- Ending Original Fixed Assets (excluding land) 61,302,977 50,146,762 38,990,548 27,834,333 Remaining Years of Life (Original Fixed Assets) Capital Improvements as a % of New Course Acquisition Costs 20.0% 20.0% 20.0% 20.0% ----------------------------------------------------------------------------------------------------------------- New CapEx 5,255,417 5,458,234 5,696,969 5,937,454 ----------------------------------------------------------------------------------------------------------------- Depreciation of 2001 CapEx 71,357 71,357 71,357 71,357 Depreciation of 2002 CapEx 262,771 525,542 525,542 525,542 Depreciation of 2003 CapEx 272,912 545,823 545,823 Depreciation of 2004 CapEx 284,848 569,697 Depreciation of 2005 CapEx 296,873 ----------------------------------------------------------------------------------------------------------------- New CapEx Depreciation 334,128 869,811 1,427,571 2,009,292 ----------------------------------------------------------------------------------------------------------------- Total Depreciation and Amortization 11,490,343 12,026,026 12,583,786 13,165,507 Maintenance CapEx as a % of Revenue 2.0% 2.0% 2.0% 2.0%
- 15 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. COMPARABLE COMPANY ANALYSIS -------------------------------------------------------------------------------- [_] Comparable Public Company Approach . Based on the theory that the value of any company can be estimated based on the public market trading prices for other companies engaged in a similar line of business. . Pertinent financial and market price information of comparable companies that are considered to be similar to the subject company is used as a basis for estimating the value of the subject company. . The subject company is compared both quantitatively and qualitatively to the comparable companies, and the indicated valuation multiples are adjusted to reflect the results of that comparison. . Application of the appropriate market multiples, based on the comparable companies, to the subject company's representative levels of cash flow and other measures. [_] Determination of Representative Levels . Determination of representative levels of the Company's cash flow generating capability going forward, and ensuring consistency with historical financial performance and growth rates. . We have analyzed course operating income ("COI") on both a historical and projected basis. We have selected a representative COI course by course based on when the golf course COI stabilizes. . After determining a normalized COI, we adjusted for normalized overhead (4% of revenues), and cart lease expense to derive a representative level of earnings before interest, taxes, depreciation and amortization ("EBITDA"). [_] Selection of Market Multiples to Apply to Representative Levels . Comparable public companies were used as a guide. . Investment attributes of GGP were contrasted to the comparable companies. . Selected market multiples on a controlling interest basis. - 16 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. COMPARABLE COMPANY ANALYSIS -------------------------------------------------------------------------------- [_] Determination of Value . Applying the range of reasonable Enterprise Value/EBITDA multiples to representative GGP EBITDA results in a range of total enterprise value indications. . Adding cash and other assets to Enterprise Value and deducting interest bearing debt results in indications of fair market value of the Company's equity, on a controlling interest basis, of $22.5 million to $37.8 million. - 17 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. COMPARABLE PUBLIC COMPANY ANALYSIS --------------------------------------------------------------------------------
------------------------------------------------- VALUATION RANGE ------------------------------------------------- Rep Level EBITDA 15,287,275 15,287,275 15,287,275 EBITDA Multiple 9.0x 9.5x 10.0x ------------------------------------------------- Enterprise Value Indication 137,585,474 145,229,112 152,872,749 Less: Total Debt (119,825,333) (119,825,333) (119,825,333) Less: Addition Hawklake CapE (800,000) (800,000) (800,000) Plus: Other Assets 3,155,000 3,155,000 3,155,000 Plus: Cash & Equivalents 2,363,225 2,363,225 2,363,225 ------------------------------------------------- Equity Value (rounded) 22,478,366 30,122,004 37,765,641
- 18 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS REPRESENTATIVE LEVELS Representative Revenue and COI
COI --------------------------------------------------------------------------------- ACTUAL PROJECTED REP 1998 1999 2000 2001 2002 2003 LEVEL --------------------------------------------------------------------------------- MIDDLE ATLANTIC REGION 1998 ACQUISITIONS Edgewood in the Pines 818,974 657,142 710,340 715,434 729,743 744,338 718,506 Lake Arbor Golf Club 631,220 541,348 408,518 567,583 590,853 614,947 567,583 Robin Dale Golf Club 489,868 497,348 333,871 490,616 515,682 541,604 503,149 Maple Ridge Golf Club 598,118 396,163 465,104 486,747 507,281 528,550 497,014 Wild Oaks Golf Club 572,943 540,109 335,670 431,852 444,808 467,643 456,225 Honey Run Golf Club 547,873 628,525 598,065 774,141 803,148 819,211 774,141 Greencastle Greens Golf Club 439,891 484,146 470,278 480,215 508,798 538,691 478,213 The Links at Challedon 505,604 1,137,111 1,130,464 1,122,531 1,152,230 1,182,596 1,126,498 Fairfax National Golf Club 604,620 1,399,461 1,431,054 1,496,957 1,608,803 1,669,646 1,496,957 Fox Hollow Golf Club 472,124 947,310 727,793 778,934 794,513 810,403 778,934 Montgomery Country Club 642,886 1,597,882 1,694,796 1,834,737 1,909,974 1,987,873 1,834,737 --------------------------------------------------------------------------------- 1999 ACQUISITIONS Royal Oaks Golf Club NA 557,931 638,706 796,522 828,035 860,646 828,035 Mountain Laurel Golf Club NA 375,661 533,653 634,035 668,853 693,742 668,853 --------------------------------------------------------------------------------- 2000 ACQUISITIONS Four Seasons Golf Club NA NA 346,301 410,706 426,692 443,231 410,706 Glade Valley Golf Club NA NA 866,513 857,296 905,783 947,862 876,531 Bear Creek Golf Club NA NA 416,897 500,202 530,939 573,901 552,420 Hickory Heights Golf Club NA NA 285,967 705,928 750,130 780,775 765,453 West Winds Golf Club NA NA 269,782 611,900 644,249 678,129 661,189 Monroe Valley Golf Club NA NA 4,374 509,679 551,044 583,884 551,044 The Bridges NA NA (10,075) 833,711 899,598 944,900 899,598 --------------------------------------------------------------------------------- UNDERGOING REDESIGN Hawk Lake Golf Club 463,725 412,083 66,403 147,873 705,500 789,540 747,520 --------------------------------------------------------------------------------- SOUTHEASTERN REGION Miami National Golf Club 670,245 779,053 564,028 736,589 751,321 766,347 736,589 California Golf Club 572,892 641,300 419,283 436,132 464,545 493,964 450,338 Montgomery National Golf Club 192,008 182,577 100,492 191,854 201,126 205,149 191,854 Sapphire Mountain Golf Club NA 592,905 540,995 602,759 620,073 637,785 602,759 St. James Golf Club NA NA 185,030 377,719 408,815 441,475 425,145 --------------------------------------------------------------------------------- TOTAL GGP 8,222,991 12,368,057 13,534,300 17,532,652 18,922,526 19,746,831 18,599,990 =================================================================================
- 19 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS REPRESENTATIVE LEVELS Representative Revenue and COI
COI GROWTH ----------------------------------------------------------------- ACTUAL PROJECTED 1999 2000 2001 2002 2003 ----------------------------------------------------------------- MIDDLE ATLANTIC REGION 1998 ACQUISITIONS Edgewood in the Pines -19.8% 8.1% 0.7% 2.0% 2.0% Lake Arbor Golf Club -14.2% -24.5% 38.9% 4.1% 4.1% Robin Dale Golf Club 1.5% -32.9% 46.9% 5.1% 5.0% Maple Ridge Golf Club -33.8% 17.4% 4.7% 4.2% 4.2% Wild Oaks Golf Club -5.7% -37.9% 28.7% 3.0% 5.1% Honey Run Golf Club 14.7% -4.8% 29.4% 3.7% 2.0% Greencastle Greens Golf Club 10.1% -2.9% 2.1% 6.0% 5.9% The Links at Challedon 124.9% -0.6% -0.7% 2.6% 2.6% Fairfax National Golf Club 131.5% 2.3% 4.6% 7.5% 3.8% Fox Hollow Golf Club 100.6% -23.2% 7.0% 2.0% 2.0% Montgomery Country Club 148.5% 6.1% 8.3% 4.1% 4.1% ------------------------------------------------------------------ 1999 ACQUISITIONS Royal Oaks Golf Club NA 14.5% 24.7% 4.0% 3.9% Mountain Laurel Golf Club NA 42.1% 18.8% 5.5% 3.7% ------------------------------------------------------------------ 2000 ACQUISITIONS Four Seasons Golf Club NA NA 18.6% 3.9% 3.9% Glade Valley Golf Club NA NA -1.1% 5.7% 4.6% Bear Creek Golf Club NA NA 20.0% 6.1% 8.1% Hickory Heights Golf Club NA NA 146.9% 6.3% 4.1% West Winds Golf Club NA NA 126.8% 5.3% 5.3% Monroe Valley Golf Club NA NA 11552.5% 8.1% 6.0% The Bridges NA NA -8375.0% 7.9% 5.0% ------------------------------------------------------------------ UNDERGOING REDESIGN Hawk Lake Golf Club -11.1% -83.9% 122.7% 377.1% 11.9% ------------------------------------------------------------------ SOUTHEASTERN REGION Miami National Golf Club 16.2% -27.6% 30.6% 2.0% 2.0% California Golf Club 11.9% -34.6% 4.0% 6.5% 6.3% Montgomery National Golf Club -4.9% -45.0% 90.9% 4.8% 2.0% Sapphire Mountain Golf Club NA -8.8% 11.4% 2.9% 2.9% St. James Golf Club NA NA 104.1% 8.2% 8.0% ------------------------------------------------------------------ TOTAL GGP 50.4% 9.4% 29.5% 7.9% 4.4% ==================================================================
- 20 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS REPRESENTAUVE LEVELS Representative Revenue and COI
COI MARGIN ----------------------------------------------------------------------------- ACTUAL PROJECTED 1998 1999 2000 2001 2002 2003 ----------------------------------------------------------------------------- MIDDLE ATLANTIC REGION 1998 ACQUISITIONS Edgewood in the Pines 43.5% 38.7% 41.4% 42.5% 42.5% 42.5% Lake Arbor Golf Club 47.6% 44.5% 34.7% 47.6% 48.1% 48.6% Robin Dale Golf Club 47.8% 47.6% 38.1% 48.7% 49.7% 50.6% Maple Ridge Golf Club 31.4% 34.2% 43.2% 45.1% 45.6% 46.1% Wild Oaks Golf Club 48.8% 49.6% 39.3% 46.9% 46.9% 47.4% Honey Run Golf Club 49.3% 52.3% 46.4% 57.2% 57.7% 57.7% Greencastle Greens Golf Club 47.4% 51.7% 48.1% 50.6% 51.6% 52.5% The Links at Challedon 52.3% 60.0% 58.6% 60.8% 61.1% 61.5% Fairfax National Golf Club 48.8% 54.3% 52.2% 54.8% 56.1% 56.5% Fox Hollow Golf Club 64.0% 60.5% 52.3% 59.3% 59.3% 59.3% Montgomery Country Club 43.6% 44.3% 43.8% 47.6% 48.1% 48.6% ----------------------------------------------------------------------------- 1999 ACQUISITIONS Royal Oaks Golf Club NA 53.2% 44.1% 51.1% 51.6% 52.1% Mountain Laurel Golf Club NA 64.3% 53.0% 57.3% 58.1% 58.5% ----------------------------------------------------------------------------- 2000 ACQUISITIONS Four Seasons Golf Club NA NA 51.1% 52.8% 53.3% 53.8% Glade Valley Golf Club NA NA 62.9% 60.4% 60.8% 61.1% Bear Creek Golf Club NA NA 48.5% 48.3% 49.2% 50.7% Hickory Heights Golf Club NA NA 45.0% 46.9% 48.0% 48.5% West Winds Golf Club NA NA 43.0% 43.7% 44.3% 44.8% Monroe Valley Golf Club NA NA 4.3% 49.1% 50.5% 51.5% The Bridges NA NA -85.1% 47.8% 49.1% 49.6% ----------------------------------------------------------------------------- UNDERGOING REDESIGN Hawk Lake Golf Club 53.1% 49.9% 29.3% 65.7% 50.6% 52.4% ----------------------------------------------------------------------------- SOUTHEASTERN REGION Miami National Golf Club 31.3% 40.0% 31.3% 39.0% 39.0% 39.0% California Golf Club 35.7% 44.8% 34.3% 36.3% 37.5% 38.7% Montgomery National Golf Club 25.6% 27.7% 19.9% 35.3% 35.9% 35.9% Sapphire Mountain Golf Club NA 56.2% 50.9% 53.4% 53.9% 54.3% St. James Golf Club NA NA 18.9% 32.1% 33.4% 34.7% ----------------------------------------------------------------------------- TOTAL GGP 43.0% 48.4% 44.5% 49.1% 49.7% 50.3% =============================================================================
- 21 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS REPRESENTATIVE LEVELS Representative Revenue and COI
REVENUE ------------------------------------------------------------------------------------ ACTUAL PROJECTED REP 1998 1999 2000 2001 2002 2003 LEVEL ------------------------------------------------------------------------------------ MIDDLE ATLANTIC REGION 1998 ACQUISITIONS Edgewood in the Pines 1,884,263 1,697,668 1,717,838 1,681,837 1,715,474 1,749,783 1,705,050 Lake Arbor Golf Club 1,324,983 1,215,390 1,177,674 1,191,875 1,227,631 1,264,460 1,191,875 Robin Dale Golf Club 1,025,726 1,044,843 876,405 1,008,012 1,038,252 1,069,400 1,023,132 Maple Ridge Golf Club 1,905,044 1,158,233 1,077,774 1,079,899 1,112,296 1,145,665 1,096,097 Wild Oaks Golf Club 1,174,015 1,090,009 854,553 921,479 949,123 987,088 968,106 Honey Run Golf Club 1,110,596 1,201,164 1,289,819 1,352,461 1,393,035 1,420,896 1,352,461 Greencastle Greens Golf Club 927,750 937,316 978,259 948,425 986,362 1,025,816 954,667 The Links at Challedon 966,237 1,895,201 1,930,136 1,847,409 1,884,357 1,922,044 1,888,773 Fairfax National Golf Club 1,238,247 2,579,241 2,741,193 2,730,215 2,866,726 2,952,728 2,730,215 Fox Hollow Golf Club 737,685 1,564,920 1,390,672 1,313,652 1,339,925 1,366,724 1,313,652 Montgomery Country Club 1,474,153 3,604,135 3,866,081 3,854,275 3,969,903 4,089,000 3,854,275 ------------------------------------------------------------------------------------ 1999 ACQUISITIONS Royal Oaks Golf Club NA 1,049,309 1,448,058 1,558,249 1,604,996 1,653,146 1,604,996 Mountain Laurel Golf Club NA 584,561 1,006,406 1,106,867 1,151,142 1,185,676 1,151,142 ------------------------------------------------------------------------------------ 2000 ACQUISITIONS Four Seasons Golf Club NA NA 677,969 777,206 800,522 824,538 777,206 Glade Valley Golf Club NA NA 1,378,614 1,419,555 1,490,533 1,550,154 1,429,567 Bear Creek Golf Club NA NA 859,697 1,036,644 1,078,110 1,132,015 1,105,063 Hickory Heights Golf Club NA NA 635,108 1,504,155 1,564,321 1,611,251 1,587,786 West Winds Golf Club NA NA 627,813 1,399,229 1,455,198 1,513,406 1,484,302 Monroe Valley Golf Club NA NA 101,526 1,039,036 1,090,988 1,134,627 1,090,988 The Bridges NA NA 11,833 1,744,165 1,831,373 1,904,628 1,831,373 ------------------------------------------------------------------------------------ UNDERGOING REDESIGN Hawk Lake Golf Club 872,630 826,204 226,683 225,000 1,395,500 1,507,140 1,451,320 ------------------------------------------------------------------------------------ SOUTHEASTERN REGION Miami National Golf Club 2,143,807 1,945,654 1,801,935 1,887,281 1,925,027 1,963,527 1,887,281 California Golf Club 1,606,805 1,430,096 1,222,175 1,202,581 1,238,658 1,275,818 1,220,620 Montgomery National Golf Club 749,615 658,726 503,972 543,496 559,801 570,997 543,496 Sapphire Mountain Golf Club NA 1,054,818 1,063,751 1,128,617 1,151,189 1,174,213 1,128,617 St. James Golf Club NA NA 978,770 1,177,085 1,224,168 1,273,135 1,248,652 ----------------------------------------------------------------------------------- TOTAL GGP 19,141,556 25,537,488 30,444,714 35,678,706 38,044,612 39,267,877 37,620,711 ====================================================================================
- 22 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS REPRESENTATIVE LEVELS Summary Schedule
------------------------------------------------------------------------------------ HISTORICAL PROJECTED 1998 1999 2000 2001 2002 ------------------------------------------------------------------------------------ Total Revenue 19,141,556 25,537,488 30,444,714 35,678,706 38,044,612 Less: Cost of Sales and Operating Expenses 10,918,565 13,169,431 16,910,414 18,146,053 19,122,085 ------------------------------------------------------------------------------------ Course Operating Income (COI) 8,222,991 12,368,057 13,534,300 17,532,653 18,922,526 COI MARGIN 43.0% 48.4% 44.5% 49.1% 49.7% Less: Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 11,265,617 Less: Cart Lease Expense 946,404 1,263,612 1,461,992 1,703,612 1,737,684 Less: Corporate Overhead (1) 1,911,158 2,973,506 3,275,833 4,136,242 4,343,054 ------------------------------------------------------------------------------------ EBIT NA (282,310) (1,631,582) 500,905 1,576,171 Plus: Depreciation and Amortization NA 8,413,249 10,428,057 11,191,894 11,265,617 ------------------------------------------------------------------------------------ EBITDA NA 8,130,939 8,796,475 11,692,799 12,841,788 Plus: Corporate Overhead (1) 1,911,158 2,973,506 3,275,833 4,136,242 4,343,054 Less: Maintenance CapEx (2) (382,831) (510,750) (608,894) (713,574) (760,892) ------------------------------------------------------------------------------------- NOI NA 10,593,695 11,463,414 15,115,467 16,423,950 ------------------------------------ PROJECTED REP 2003 LEVEL ------------------------------------ Total Revenue 39,267,877 37,620,711 Less: Cost of Sales and Operating Expenses 19,521,046 19,020,721 ------------------------------------ Course Operating Income (COI) 19,746,831 18,599,990 COI MARGIN 50.3% 49.4% Less: Depreciation and Amortization 11,342,929 11,200,000 Less: Cart Lease Expense 1,772,438 1,807,887 Less: Corporate Overhead (1) 4,560,207 1,504,828 ------------------------------------ EBIT 2,071,257 4,087,275 Plus: Depreciation and Amortization 11,342,929 11,200,000 ------------------------------------ EBITDA 13,414,186 15,287,275 Plus: Corporate Overhead (1) 4,560,207 1,504,828 Less: Maintenance CapEx (2) (785,358) (752,414) ------------------------------------ NOI 17,189,036 16,039,689
(1) Rep level based on normalized corporate overhead (4% of revenue according to management and industry statistics). (2) Estimated at 2% of revenue. - 23 - DUFF & PHELPS, LLC FIRST UNION REAL ESTATE EQUITY COMPARABLE COMPANY ANALYSIS AUGUST 16, 2001
------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK PRICE AS ENTERPRISE VALUE AS A MULTIPLE OF A MULTIPLE OF ---------------------- ------------------------ BOOK COMMON EQUITY ENTERPRISE DEBT/ LTM PRO- VALUE STOCK VALUE VALUE ENTERPRISE REVENUES LTM JECTED PER LTM LTM LTM COMPANY PRICE (IN MIL) (IN MIL) VALUE (IN MIL) EPS EPS SHARE EBITDA EBIT REVENUES ------------------------------------------------------------------------------------------------------------------------------------ AMERICAN SKIING CO. $0.97 $30 $599 61.6% $435 NM NM 0.2x 11.2x 78.5x 1.4x CLUBHAUS PLC* 0.32 32 128 76.3% 45 3.9 3.3 0.4 7.0 8.5 2.8 CLUBLINK CORP.* 6.20 125 355 65.4% 106 29.4 18.8 0.6 14.1 22.6 3.4 GOLF TRUST OF AMERICA 8.36 69 336 62.5% 53 NM NA 1.1 9.7 16.1 6.4 CROWN SPORTS PLC* 0.25 63 79 32.6% 4 NM NA 1.0 NM NM NM NATIONAL GOLF PROPERTIES 20.20 264 895 50.9% 121 11.7 6.0 2.2 7.8 11.8 7.4 PGA EURO. TOUR COURSES PLC* 0.47 30 33 11.7% 8 17.9 NA 1.3 14.0 17.8 4.0 HIGHEST 20.20 264 895 76.3% 435 29.4 18.8 2.2 14.1 78.5 7.4 LOWEST 0.25 30 33 11.7% 4 3.9 3.3 0.2 7.0 8.5 1.4 MEAN 5.25 87 346 51.6% 110 15.7 9.4 1.0 10.6 25.9 4.2 MEDIAN 0.97 63 336 61.6% 53 14.8 6.0 1.0 10.4 16.9 3.7 ====================================================================================================================================
GROWTH RATES MARGIN ANALYSIS RETURN ANALYSIS --------------------------------------------------- ----------------------- -------------------------- 3-YR. 3-YR. 3-YR. TERM 3-YR. LTM AVG. 3-YR. 3-YR. LTM CAGR LTM CAGR PROJ. LTM AVG. NET NET LTM AVG. LTM AVG. COMPANY REVENUES REVENUES EBITDA EBITDA EPS EBITDA EBITDA INCOME INCOME ROE ROE ROA ROA ------------------------------------------------------------------------------------------------------------------------------------ AMERICAN SKIING CO. 11.2 34.2 17.8 12.9 NA 12.3 16.4 (8.2) (4.5) NM 1.0 NM 4.9 CLUBHAUS PLC 34.1 36.2 41.6 42.9 NA 40.3 39.3 19.3 24.2 10.0 9.5 6.7 6.2 CLUBLINK CORP. 0.1 44.2 (0.7) 28.6 NA 23.8 27.2 4.4 8.4 2.3 4.1 2.4 2.8 GOLF TRUST OF AMERICA (8.5) 43.6 (33.1) 42.9 NA 65.4 87.4 (0.2) 18.1 NM 7.4 NM 4.8 CROWN SPORTS PLC (0.7) 39.9 20.4 33.1 NA 16.7 18.8 10.7 11.8 0.4 0.4 1.1 3.2 NATIONAL GOLF PROPERTIES 5.4 16.7 5.5 17.7 9.5 95.4 94.8 18.8 17.5 18.5 14.0 6.0 8.4 PGA EURO. TOUR COURSES PLC 11.9 (0.7) 22.0 27.8 NA 28.4 27.1 19.9 16.3 7.2 5.6 6.2 5.1 HIGHEST 34.1 44.2 41.6 42.9 9.5 95.4 94.8 19.9 24.2 18.5 14.0 6.7 8.4 LOWEST (8.5) (0.7) (33.1) 12.9 9.5 12.3 16.4 (8.2) (4.5) 0.4 0.4 1.1 2.8 MEAN 7.6 30.6 10.5 29.4 9.5 40.3 44.4 9.2 13.1 7.7 6.0 4.5 5.0 MEDIAN 5.4 36.2 17.8 28.6 9.5 28.4 27.2 10.7 16.3 7.2 5.6 6.0 4.9 ====================================================================================================================================
------------------------------------------------------------------------------------------------------------ PRICE % ONE CHANGE YEAR IN LLM LTM PROJECTED PRICE AS A MULTIPLE INDEX PRICE AGO PRICE EPS EPS LTM EPS PROJ. EPS ------------------------------------------------------------------------------------------------------------ Dow Jones Industrial Average $10,412.2 $11,176.1 -6.8% $401.3 $505.0 25.9 20.6 S&P 500 1,186.7 1,491.6 -20.4 45.4 52.5 26.1 22.6 NASDAQ Composite 1,964.9 3,849.7 -49.0 ============================================================================================================
* NOTE: FIGURES FOR CLUBHAUS PLC, CROWN SPORTS PLC, AND PGA EURO. TOUR COURSES PLC ARE DISPLAYED IN BRITISH POUNDS (BP); FIGURES FOR CLUBLINK CORP. ARE DISPLAYED IN CANADIAN DOLLARS (CD). Source: Standard & Poor's Compustat Services, Inc., Duff & Phelps, LLC and First Call Corporation. - 24 - DUFF & PHELPS, LLC FIRST UNION REAL ESTATE EQUITY COMPARABLE COMPANY ANALYSIS FINANCIAL PROFILE (IN MILLIONS, EXCEPT PER SHARE DATA) AUGUST 16, 2001
------------------------------------------------------------------------------------------------------------------------------------ CROWN AMERICAN CLUBHAUS CLUBLINK GOLF TRUST SPORTS NATIONAL PGA EURO. GOTHAM GOTHAM SKIING CO. PLC CORP. OF AMERICA PLC GOLF PROP. TOUR COURSES GOLF GOLF ------------------------------------------------------------------------------------------------------------------------------------ BRITISH CANADIAN BRITISH BRITISH POUNDS DOLLARS POUNDS POUNDS Common Stock Price $ 0.97 $ 0.32 $ 6.20 $ 8.36 $ 0.25 $20.20 $ 0.47 Common Stock Price-One Yr. Ago 2.25 0.60 5.70 14.06 0.26 20.75 0.42 PERCENT PRICE CHANGE -56.9% -46.2% 8.8% -40.6% -1.0% -2.7% 11.9% 52-week High $ 2.81 $ 0l.61 $ 6.80 $14.25 $ 0.37 $27.70 $ 0.57 52-week Low 0.75 0.31 5.10 6.56 0.24 19.25 0.26 Indicated Dividend $ 0.00 $ 0.00 $ 0.00 $ 1.00 $ 0.00 $ 1.84 $ 0.00 DIVIDEND YIELD 0.0% 0.0% 0.0% 12.0% 0.05 9.1% 0.0% Book Value Per Share $ 5.20 $ 0.89 $ 10.16 $ 7.59 $ 0.25 $ 9.15 $ 0.37 TRADING ACTIVITY Common Shares Outstanding 30.51 101.04 20.16 8.22 250.22 13.05 63.46 Stock Exchange NYSE London Toronto ASE London NYSE London CAPITALIZATION Market Value of Common Equity $ 29.6 $ 32.3 $ 125.0 $ 68.7 $ 63.2 $263.7 $ 29.8 Plus: Total Debt Outstanding 369.3 97.6 232.0 210.0 25.7 455.8 3.9 Plus: Book Value of Preferred Stock 218.3 0.0 0.0 20.0 0.0 0.0 0.0 Plus: Minority Interest 0.0 0.0 0.0 41.9 0.0 175.5 0.0 Less: Cash and Equivalents 17.9 2.0 2.2 4.8 10.2 0.4 0.5 ENTERPRISE VALUE 599.3 128.0 354.7 335.9 78.7 894.6 33.2 DEBT TO ENTERPRISE VALUE 61.6% 76.3% 65.4% 62.5% 32.6% 50.9% 11.7% ====================================================================================================================================
Note: Adjusted for special items. Source: Standard & Poor's Compustat Services, Inc., Bloomberg L.P., and Duff & Phelps, LLC. - 25 - DUFF & PHELPS, LLC FIRST UNION REAL ESTATE EQUITY COMPARABLE COMPANY ANALYSIS FINANCIAL PERFORMANCE (IN MILLIONS, EXCEPT PER SHARE DATA)
----------------------------------------------------------------------------------------------------------------------------------- CROWN PGA EURO. AMERICAN CLUBHAUS CLUBLINK GOLF TRUST SPORTS NATIONAL TOUR GOTHAM GOTHAM SKIING CO. PLC CORP. OF AMERICA PLC GOLF PROP. COURSES GOLF GOLF ------------------------------------------------------------------------------------------------------------------------------------ AUDITED BRITISH CANADIAN BRITISH BRITISH FINAN- REP POUNDS DOLLARS POUNDS POUNDS CIALS LEVELS LTM FINANCIAL RESULTS Date of LTM Financial Rep Results Apr01 Dec00 Apr01 Mar01 Dec00 Jun01 Dec00 Dec00 Levels Revenues $435.0 $45.2 $105.8 $52.7 $3.5 $120.8 $8.4 $30.8 $37.6 EBITDA 53.7 18.2 25.2 34.5 0.6 115.3 2.4 8.7 15.3 EBIT 7.6 15.1 15.7 20.8 0.4 75.8 1.9 (1.8) 4.1 Net Income (35.7) 8.7 4.7 (0.1) 0.4 22.8 1.7 (9.4) NA Diluted EPS (2.07) 0.08 0.21 (0.18) 0.00 1.7 0.03 NA FISCAL YEAR END RESULTS Date of Latest Fiscal Year End Jul00 Dec00 Dec00 Dec00 Dec00 Dec00 Dec00 Dec99 Revenues $424.1 $45.2 $105.7 $55.5 $3.5 $118.0 $8.4 $25.7 EBITDA 47.0 18.2 25.4 47.3 0.6 112.3 2.4 7.1 EBIT (0.0) 15.1 16.2 29.0 0.4 72.2 1.9 (1.3) Net Income (30.1) 8.7 6.9 5.1 0.4 19.2 1.7 (7.2) Diluted EPS (1.69) 0.08 0.33 0.40 0.00 1.47 0.03 NA ====================================================================================================================================
----------------------------------------------------------------------------------------------------------------------------------- CROWN PGA EURO. AMERICAN CLUBHAUS CLUBLINK GOLF TRUST SPORTS NATIONAL TOUR GOTHAM GOTHAM SKIING CO. PLC CORP. OF AMERICA PLC GOLF PROP. COURSES GOLF GOLF ------------------------------------------------------------------------------------------------------------------------------------ BRITISH CANADIAN BRITISH BRITISH POUNDS DOLLARS POUNDS POUNDS PROJECTED FINANCIAL RESULTS Date of Projected Financial Results 7/31/01 7/31/01 7/31/01 NA NA 12/31/01 NA 12/31/01 12/31/01 EBITDA $21.6 $25.8 $24.5 NA NA $141.4 NA $11.7 $11.7 EBIT (24.4) 22.6 14.9 NA NA 102.0 NA 500.9 500.9 Net Income (45.2) 9.9 6.7 NA NA 43.9 NA NA NA Diluted EPS (1.48) 0.10 0.33 NA NA 3.3 NA NA NA FIRST CALL EARNINGS ESTIMATES Date of First Call Estimates 6/21/01 7/31/01 7/31/01 NA NA 5/24/01 NA Date of Next Fiscal Year End 7/31/01 12/31/01 12/31/01 NA NA 12/31/01 NA EPS Projection -1.86 0.10 0.33 NA NA 3.36 NA Range of EPS Projections -2.12/-1.60 .090/.105 .26/.47 NA NA 3.35/3.36 NA Number of Analysts 2 2 3 NA NA 4 NA Date of 2nd Fiscal Year End 7/31/02 12/31/02 12/31/02 NA NA 12/31/02 NA EPS Projection -1.48 0.10 0.32 NA NA 3.66 NA Range of EPS Projections -1.48/-1.48 .0984/.1010 .32/.32 NA NA 3.62/3.69 NA Number of Analysts 1 2 1 NA NA 4 NA Long-term Earnings Growth Rate NA NA NA NA NA 9.5% NA ====================================================================================================================================
Note: Adjusted for special items. Source: Standard & Poor's Compustat Services, Inc. Duff & Phelps, LLC and First Call Corporation. - 26 - DUFF & PHELPS, LLC FIRST UNION REAL ESTATE EQUITY COMPARABLE COMPANY ANALYSIS HISTORICAL PROFIT MARGINS
----------------------------------------------------------------------------------------------------------------------------------- CROWN PGA EURO. AMERICAN CLUBHAUS CLUBLINK GOLF TRUST SPORTS NATIONAL TOUR GOTHAM GOTHAM SKIING CO. PLC CORP. OF AMERICA PLC GOLF PROP. COURSES GOLF GOLF ------------------------------------------------------------------------------------------------------------------------------------ GROSS MARGINS (%) LTM 25.0 63.2 87.2 65.4 82.9 95.4 89.8 92.3 92.3 2000 22.7 63.2 87.2 85.3 82.9 95.2 89.8 92.3 92.3 1999 29.0 60.5 87.2 89.1 82.2 95.4 89.0 93.2 93.2 1998 37.1 60.9 80.9 87.8 82.2 93.8 89.2 86.0 86.0 Three-Year Average 29.6 61.6 85.1 87.4 82.4 94.8 89.4 90.5 90.5 EBITDA MARGINS (%) LTM 12.3 40.3 23.8 65.4 16.7 95.4 28.4 28.1 28.1 2000 11.1 40.3 24.0 85.3 16.7 95.2 28.4 28.1 28.1 1999 13.4 38.2 23.5 89.1 13.8 95.4 26.1 27.6 27.6 1998 24.6 39.4 34.1 87.8 26.0 93.8 26.9 38.0 38.0 Three-Year Average 16.4 39.3 27.2 87.4 18.8 94.8 27.1 31.3 31.3 EBIT MARGINS (%) LTM 1.8 33.4 14.8 39.5 10.7 62.8 22.3 (5.7) (5.7) 2000 (0.0) 33.4 15.3 52.3 10.7 61.2 22.3 (5.7) (5.7) 1999 (0.5) 32.2 15.3 58.1 7.9 61.3 20.3 (5.1) (5.1) 1998 13.4 30.5 28.2 61.5 21.1 61.3 20.0 NA NA Three-Year Average 4.3 32.0 19.6 57.3 13.2 61.3 20.9 (5.4) (5.4) NET INCOME MARGINS (%) LTM (8.2) 19.3 4.4 (0.2) 10.7 18.8 19.9 (30.4) (30.4) 2000 (7.1) 19.3 6.5 9.1 10.7 16.3 19.9 (30.4) (30.4) 1999 (8.4) 22.0 5.9 20.7 5.0 16.2 17.7 (27.9) (27.9) 1998 2.0 31.2 12.7 24.4 19.8 20.0 11.4 NA NA Three-Year Average (4.5) 24.2 8.4 18.1 11.8 17.5 16.3 (29.1) (29.1) ====================================================================================================================================
Note: Adjusted for special items. Source: Standard & Poor's Compustat Services, Inc., Bloomberg L.P., and Duff & Phelps, LLC. - 27 - DUFF & PHELPS, LLC FIRST UNION REAL ESTATE EQUITY COMPARABLE COMPANY ANALYSIS HISTORICAL GROWTH RATES
----------------------------------------------------------------------------------------------------------------------------------- CROWN PGA EURO. AMERICAN CLUBHAUS CLUBLINK GOLF TRUST SPORTS NATIONAL TOUR GOTHAM GOTHAM SKIING CO. PLC CORP. OF AMERICA PLC GOLF PROP. COURSES GOLF GOLF ------------------------------------------------------------------------------------------------------------------------------------ REVENUES GROWTH (%) LTM 11.2 34.1 0.1 (8.5) (0.7) 5.4 11.9 19.8 19.8 2000 33.8 34.1 14.5 (0.6) (0.7) 10.6 11.9 19.8 19.8 1999 (6.9) 40.0 26.9 25.7 47.1 28.0 9.4 34.4 34.4 1998 94.1 34.5 106.3 137.0 87.6 12.2 (20.0) NA NA Three-Year CAGR 34.2 36.2 44.2 43.6 39.9 16.7 (0.7) NA NA EBITDA GROWTH (%) LTM 17.8 41.6 (0.7) (33.1) 20.4 5.5 22.0 21.8 21.8 2000 10.4 41.6 16.9 (4.8) 20.4 10.4 22.0 21.8 21.8 1999 (49.1) 35.6 (12.6) 27.5 (22.2) 30.1 6.1 (2.2) (2.2) 1998 156.2 51.8 108.4 140.6 152.0 13.4 61.4 NA NA Three-Year CAGR 12.9 42.9 28.6 42.9 33.1 17.7 27.8 NA NA NET INCOME GROWTH (%) LTM NM 17.7 (32.3) NM 111.0 38.7 25.9 NA NA 2000 NM 17.7 26.7 (56.2) 111.0 11.2 25.9 NA NA 1999 NM (1.1) (41.1) 6.5 (62.8) 3.8 70.0 NA NA 1998 NM 87.1 97.2 81.4 60.0 17.0 27.9 NA NA Three-Year CAGR NM 29.6 13.7 (5.4) 7.9 10.5 39.9 NA NA ====================================================================================================================================
----------------------------------------------------------------------------------------------------------------------------------- CROWN PGA EURO. AMERICAN CLUBHAUS CLUBLINK GOLF TRUST SPORTS NATIONAL TOUR GOTHAM GOTHAM SKIING CO. PLC CORP. OF AMERICA PLC GOLF PROP. COURSES GOLF GOLF ------------------------------------------------------------------------------------------------------------------------------------ RETURNS ON AVERAGE ASSETS (%) LTM NM 6.7 2.4 NM 1.1 6.0 6.2 NM NM 2000 NM 6.7 2.8 -0.2 1.1 8.4 6.2 NM NM 1999 NM 5.9 2.1 6.6 2.7 8.5 5.8 NM NM 1998 4.9 6.1 3.6 8.0 5.7 8.2 3.2 NM NM Three-Year Average 4.9 6.2 2.8 4.8 3.2 8.4 5.1 NA NA RETURNS ON AVERAGE COMMON EQUITY (%) LTM NM 10.0 2.3 NM 0.4 18.5 7.2 NM NM 2000 NM 10.0 3.3 3.7 0.4 15.8 7.2 NM NM 1999 NM 8.8 2.9 9.2 NM 13.6 6.0 NM NM 1998 1.0 9.8 6.2 9.3 NM 12.5 3.7 NM NM Three-Year Average 1.0 9.5 4.1 7.4 0.4 14.0 5.6 NA NA
Note: Adjusted for special items. Source: Standard & Poor's Compustat Services, Inc., Bloomberg L.P., and Duff & Phelps, LLC. - 28 - DUFF & PHELPS, LLC FIRST UNION REAL ESTATE EQUITY COMPARABLE COMPANY ANALYSIS WORKING CAPITAL RATIOS
GOLF AMERICAN CLUBHAUS CLUBLINK TRUST CROWN NATIONAL PGA EURO. SKIING CO. PLC CORP. OF SPORTS GOLF TOUR GOTHAM GOTHAM AMERICA PLC PROP. COURSES GOLF GOLF CURRENT RATIO 0.2 1.0 1.2 NA 1.0 NA 0.8 0.3 0.3 INVENTORY TURNOVER LTM 33.5 5.0 3.9 NA 2.6 NA 1.9 3.5 3.5 Three-Year Average 23.5 3.7 4.2 NA 3.6 NA 1.5 NA NA RECEIVABLE DAYS LTM 10.0 15.9 7.8 541.1 6.7 60.5 19.8 35.7 35.7 Three-Year Average 6.8 13.3 29.8 507.8 10.9 72.1 15.6 NA NA PAYABLE DAYS LTM 101.8 57.2 211.1 154.6 452.8 927.1 297.7 176.0 176.0 Three-Year Average 80.6 66.7 267.1 603.9 264.8 757.3 301.3 NA NA WORKING CAPITAL AS A % OF REVENUES LTM -30.1 -9.5 12.3 NA 16.5 NA -8.6 NM NM Three-Year Average -21.9 -25.2 8.1 NA -45.1 NA -14.9 NA NA
- 29 - DUFF & PHELPS, LLC FIRST UNION REAL ESTATE EQUITY COMPARABLE COMPANY ANALYSIS DEBT ANALYSIS
GOLF AMERICAN CLUBHAUS CLUBLINK TRUST CROWN NATIONAL PGA EURO. SKIING CO. PLC CORP. OF SPORTS GOLF TOUR GOTHAM GOTHAM AMERICA PLC PROP. COURSES GOLF GOLF TOTAL DEBT TO TOTAL CAPITAL (%) LTM 49.6 52.1 53.1 75.4 28.9 84.1 14.1 79.3 79.3 2000 53.0 52.1 52.5 76.7 28.9 83.9 14.1 79.3 79.3 1999 64.7 47.0 51.8 69.2 48.7 84.1 13.7 94.1 94.1 1998 57.0 28.5 48.9 72.4 51.0 77.3 7.3 NA NA Three-Year Average 58.2 42.5 51.1 72.8 42.9 81.8 11.7 86.7 86.7 FIXED CHARGE COVERAGE LTM 0.1 2.2 1.4 1.0 0.4 2.0 6.3 (0.2) (0.2) 2000 0.0 2.2 1.4 1.3 0.4 1.8 6.3 (0.2) (0.2) 1999 0.0 3.0 2.4 1.8 0.2 1.9 7.0 (0.2) (0.2) 1998 1.0 4.4 8.6 2.8 0.4 2.5 7.6 NA NA Three-Year Average 0.3 3.2 4.1 2.0 0.3 2.1 7.0 NA NA INTEREST COVERAGE LTM 0.1 2.4 1.4 1.1 0.6 2.0 6.3 (0.2) (0.2) 2000 0.0 2.4 1.4 1.5 0.6 1.8 6.3 (0.2) (0.2) 1999 0.0 3.7 2.4 2.1 0.4 1.9 7.0 (0.2) (0.2) 1998 1.3 7.4 8.6 2.8 1.0 2.5 7.6 NA NA Three-Year Average 0.4 4.5 4.1 2.1 0.7 2.1 7.0 NA NA
Source: Standard & Poor's Compustat Services, Inc., Bloomberg L.P., and Duff & Phelps, LLC. - 30 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. NET ASSET VALUE ANALYSIS -------------------------------------------------------------------------------- [_] Net Asset Value Approach . Under the net asset value method, the assets and liabilities of GGP are adjusted to market value as of a current date. . To estimate the fair market value of GGP's golf course operations, a capitalization of net operating income ("NOI") approach was utilized. . To determine appropriate capitalization multiples to use, Duff & Phelps analyzed comparable golf course transactions and the implied NOI capitalization rates. . Applying a range of reasonable capitalization rates to a representative level of GGP's NOI resulted in a range of value indications for the golf course operations. . Deducting the market value of liabilities from the market value of assets results in indications of fair market value of the Company's equity on a controlling interest basis, of $24.4 million to $37.7 million. - 31 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS NET ASSET VALUE ANALYSIS
--------------------------------------------------------- VALUATION RANGE --------------------------------------------------------- Rep Level NOI 16,039,689 16,039,689 16,039,689 Cap Rate 11.5% 11.0% 10.5% -------------------------------------------------------- Enterprise Value Indication 139,475,558 145,815,356 152,758,944 Less: Total Debt (119,825,333) (119,825,333) (119,825,333) Less: Addition Hawklake CapEx (800,000) (800,000) (800,000) Plus: Other Assets 3,155,000 3,155,000 3,155,000 Plus: Cash & Equivalents 2,363,225 2,363,225 2,363,225 -------------------------------------------------------- Equity Value (rounded) 24,368,450 30,708,248 37,651,836
- 32 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS OTHER ASSETS VALUE ASSETS TO BE EXCLUDED Blackjack Bay Golf Club (1) 1,439,873 California Golf Excess Land (2), (3) 360,000 Miami National Excess Land (3) 600,000 St. James Residential Development Proceeds (4) 594,788 Fairfax National Lot Sales (5) 1,400,000 Sale Value of Old Owned Equipment 600,000 --------- Total 4,994,661 ========= ASSETS TO BE PURCHASED Glade Valley Excess Land for 9 Hole Expansion (5) 250,000 Fairfax National Excess Land for 9 Hole Expansion(5) 250,000 Value of Hershey HQ Building (6) 1,205,000 Value of Helicopter (7) 1,450,000 --------- Total 3,155,000 ========= (1) Club was closed in September 2000 and is valued at the amount of debt against the property, which is included in total debt. (2) This parcel of excess land has an estimated net value of $360,000 ($560,000 gross less $200,000 cost to move the maintenance building) (3) 50% owned by GGP (4) Agreement entitles GGP to development payments of $1,500 per lot x 750 lots = $1,125,000 in fees as lots are sold less $300,000 cost of the new clubhouse. Estimated development period is approximately 5 years. D&P assumed that the Company will receive approximately $165,000 annually over the next 5 years and determined the PV of the fees by using the WACC of 12%. (5) GGP Estimate (6) Appraised Value as of 5/7/01 (7) Estimated value from Capital Helicopters Note: Excludes notes receivable of $2.0 million, which will be eliminated prior to the transaction per Gotham Partners - 33 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. VALUATION SUMMARY --------------------------------------------------------------------------------
VALUATION APPROACH EQUITY VALUATION RANGE DISCOUNTED CASH FLOW ANALYSIS: Pessimistic Case - NO NEW COURSES, EXISTING OVERHEAD 26,600,000 - 31,500,000 Base Case - NO NEW COURSES, NORMALIZED OVERHEAD 32,900,000 - 38,000,000 Optimistic Case - NEW COURSES - ROLL-UP STRATEGY 55,400,000 - 70,300,000 COMPARABLE PUBLIC COMPANY ANALYSIS 22,500,000 - 37,800,000 NET ASSET VALUE ANALYSIS 24,400,000 - 37,700,000 --------------------------------------------------------------------------------------------------- CONCLUDED VALUATION RANGE 26,500,000 - 36,500,000 ---------------------------------------------------------------------------------------------------
- 34 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS CALCULATION OF DISCOUNT RATE
------------------------------------------------------------------------------------------------------------------ $ in millions -------------------------------------------------------------------------------- Comparable Company Levered Market Value Book Value Debt/ Estimated Unlevered Beta of Equity of Debt Capital Tax Rate Beta ------------------------------------------------------------------------------------------------------------------ American Ski Co. 0.64 $ 31.4 $369.3 92.2% 40.0% 0.08 Clubhaus Plc 0.46 $ 32.3 $ 97.6 75.1% 0.0% 0.11 Clublink Corp. 0.55 $123.0 $232.0 65.4% 40.0% 0.26 Crown Sports Plc 0.19 $ 63.2 $ 25.7 28.9% 0.0% 0.14 Golf Trust of America 0.53 $ 63.7 $210.0 76.7% 40.0% 0.18 National Golf Properties 0.50 $313.4 $452.7 59.1% 40.0% 0.27 PGA Euro. Tour Courses Plc 0.31 $ 29.8 $ 3.9 11.5% 40.0% 0.29 ------------------------------------------------------------------------------------------------------------------ Low 0.19 $ 30 $ 4 11.5% 0.0% 0.08 High 0.64 $ 313 $ 453 92.2% 40.0% 0.29 Median 0.50 $ 63 $ 210 65.4% 40.0% 0.18 Mean 0.45 $ 94 $ 199 58.4% 28.6% 0.19 ------------------------------------------------------------------------------------------------------------------
Est. Unlevered Tax % % Est. Levered Beta Rate Debt Equity Beta (1) -------------------------------------------------------------------------- 0.19 40.0% 75.0% 25.0% 0.53 Cost of Common Equity: Risk-Free Rate 5.5% 30 Yr Treasury Bond Yield Equity Risk Premium 8.2% SBBI 2001 Yearbook, Ibbotsen Beta 0.53 Comparable Co. Beta Analysis Small Stock Premium 2.6% SBBI 2001 Yearbook, Ibbotsen Company Specific Premium 17.5% Plug to get Cost of Equity to 30%, typical return required by private equity firms Cost of Equity 30.0% CAPM using inputs above % Common Equity 25.0% Cost of Debt: Borrowing Rate 9.8% Marginal cost of debt, based on the last loan (BofA Other Facility 05/00 & 7/00) After-Tax Cost of Debt 5.9% Based on 40% tax rate % Debt 75.0% Based on industry mean and median - altered due to control basis Weighted Average Cost of Capital 11.9% --------------------------------------------- Concluded WACC (rounded) 12.0% ---------------------------------------------
(1) Levered Beta - Unlevered Beta x (1 +((1-Tax Rate)x(Market Value of Debt / Market Value of Equity))) DEBT SCHEDULE (EXCLUDING WORKING CAPITAL LOAN FROM GOTHAM PARTNERS, THE BRIDGES PURCHASE COMMITMENT AND BUYOUT OF OUTSIDE PARTNERS ALLOCATION)
-------------------------------------------------------------------------------------------------------------- OUTSTANDING INTEREST WEIGHTED DEBT COMPONENT AS OF 4/1/01 % OF TOTAL RATE RATE -------------------------------------------------------------------------------------------------------------- BofA Facility A $ 36,804,361 35.3% 8.31% 2.93% BofA Facility B $ 27,362,925 26.2% 8.79% 2.31% BofA Other Facilities $ 11,764,598 11.3% 9.83% 1.11% First Union Facility $ 5,379,865 5.2% 8.75% 0.45% Orix USA Facility $ 12,448,049 11.9% 8.44% 1.01% FMAC Facility $ 1,535,452 1.5% 10.87% 0.16% Textron Facility $ 4,093,442 3.9% 8.56% 0.34% Notes Payable - Wachovia Bank $ 2,200,000 2.1% 7.82% 0.17% Hershey HQ Mortgage - Wachovia Bank $ 868,000 0.8% 7.62% 0.06% GMAC & Waldorf Ford Notes - Vehicles $ 592,764 0.6% 10.00% 0.06% Helicopter Note - Wachovia Bank $ 1,215,877 1.2% 9.25% 0.11% --------------------------------------------------------------------------- -------------- SUBTOTAL INTEREST-BEARING DEBT $104,265,333 100.0% 8.70% --------------------------------------------------------------------------- -------------- Working Capital Loan from Gotham Partners 8,600,000 The Bridges Purchase Contract 5,610,000 Buyout of Outside Partners 1,350,000 -------------------------------------------------------------- TOTAL INTEREST-BEARING DEBT 119,825,333 -------------------------------------------------------------- EXCLUDED DEBT Donohoe, Inc. Facility - Blackjack Bay Golf $1,439,873 8.00%
- 35 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS SUMMARY OF PRIMARY DIFFERENCES BETWEEN D&P AND GP DCF ANALYSIS
-------------------------------------------------------------------------------- ITEM D&P GP -------------------------------------------------------------------------------- Discount Rate WACC of 11.5% to 12.5% for No WACC of 10.45% New Course Scenarios, WACC of 12% to 14% for New Course Scenario. NOI vs. COI Cap Rate Capitalized NOI (COI - Cart Lease COI capitalization Expense - Maintenance CapEx) at 11%. rate of 10.5%. NOI capitalization, rather than COI capitalization, is the industry standard. Acquisition Cost $4.4 million per course. $3.9 million per course. NPV Calculation Discounted using a mid-year Terminal Value convention. Terminal Value is is included in the discounted at the end of the last projected projection period. period cash flow, which results in overvaluation. Net Cash Flow Calculation Debt-free approach, provision for Debt-free approach, income taxes. no provision for income taxes.
- 36 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS CAPITALIZATION RATE ANALYSIS INDICATED SOURCE CAP. RATE RANGE -------------------------------------------------------------------------------- 1) GOLF TRUST OF AMERICA - DISPOSITION OF ASSETS SOLD ANALYSIS 10.51% . First Union analyst report indicates an implied cap rate median of 10.51% on courses sold (20 to date) by GTA. Implied cap rate was based on GTA's projected 2001 NOI, as estimated by First Union. . First Union analyst projects the remaining assets to sell for a median cap rate of 11.75%. 11.75% 2) NATIONAL GOLF PROPERTIES - NET ASSET VALUATION ANALYSIS 10.0% - 11.0% . Merrill Lynch analyst estimated the net asset value for National Golf's properties using cap rates ranging from 10.0% to 11.0%. Analyst stated that National Golf would generally look to acquire assets generating an initial yield in the 10.0% to 11.0% range. 3) GOLF FINANCING & INVESTMENT SURVEY 10.85% . Investor survey results for both daily fee and private golf courses for Spring 2001. . Survey indicated that the overall cap rate increased to 10.85% in Spring 2001, which was an increase of over 125 basis points from the survey's 1998 low indication of 9.6%. . Indicated cap rates for survey ranged from 5.0% to 26.0%. . Average overall cap rate for the Fall 2000 was 10.65%. 4) GOLF TRUST OF AMERICA - VALUATION ANALYSIS FOR FAIRNESS OPINION 11.1% . Banc of America Securities (BAS) rendered a fairness opinion in connection with the liquidation of Golf Trust of America on February 25, 2001. . BAS' comparable single property sales analysis indicated a mean cap rate of 11.1% based on historical and projected income and cash flow figures. 5) OFFERS AND PURCHASES ON GOTHAM GOLF PARTNER GOLF COURSES 5.7% - 14.3% . On March 16, 2001, GGP entered into agreements with Dartmouth General Insurance Company to sale the California Golf Club, Miami National Golf Club, and St. James Golf Club (sale was subsequently terminated). Duff & Phelps' analysis indicated an implied cap rate range of 5.7% to 10.4% for the properties. . On August 23, 2000, GGP entered into agreement to purchase The Bridges Golf Club for $5.5 million (GGP agreed to lease property with the option to buy). Duff & Phelps' analysis indicated an implied cap rate of 14.3% for the property. 6) GOLF COURSE SALES/ CAPITALIZATION RATE REPORT 10.5% . Golf course sales report, which was published by Crittenden Magazines, Inc., is a compilation of specific golf course purchase prices and capitalization rates, as well as other information, for years 1999 through 2001. . Indicated median capitalization rate for golf course purchases during 2000 and 2001 with available capitalization rate data, was 10.5%. DUFF & PHELPS' CONCLUDED CAP RATE RANGE 10.5% TO 11.5% ---------------------------------------------------------------------- 1) Source: First Union Securities, Inc., Analyst Report, August 9, 2001. 2) Source: Merrill Lynch, Analyst Report, April 20, 2001. 3) Source: GVI Consulting / PriceWaterhouseCoopers, Golf Financing & Investment Survey, Spring 2001. 4) Source: Golf Trust of America Schedule 14A, Definitive Proxy Statement, April 10, 2001. 5) Source: Sale and Purchase Agreements dated March 16, 2001 and August 23, 2001. 6) Source: Crittenden Magazines, Inc., 2001 - 37 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS, L.P. GOLF COURSE SALES REPORT CRITTENDEN MAGAZINES, INC. CAP RATE ANALYSIS
ACQUISITION DATE/ # OF GREEN SALE CAP COURSE NAME HOLES FEES ROUNDS CITY, STATE SELLER BUYER PRICE RATE ------------------------------------------------------------------------------------------------------------------------------------ 2000 - 2001 ----------- Feb-01 Macquarie Links Int'l Golf 18 NA NA NA Monarch Investments ClubCorp NA Dec-00 Canyon Springs G.C. 18 NA 40,000 San Antonio, TX NA ClubCorp NA Nov-00 Cascata G.C. 36 NA 40,000- Boulder City, NV Park Place MGM Mirage 60.0 50,000 Entertainment Nov-00 Hamilton Mill G.C. 18 $75 35,000 Dacula, GA SMG Development Ass. Heritage Golf Group 9.0 Nov-00 Royal Meadows G.C. 27 $34 38,000 Kansas City, MO National Golf Properties Proformance Golf 3.0 Nov-00 San Ignacio G.C. 18 $60 44,000 Green Valley, AZ Fairfield Homes IRI Golf Group 5.5 Nov-00 The King & The Bear G.C. 18 $175 30,000 St. Augustine, FL Scratch Golf Co. Honours Golf 28.8 Nov-00 The Slammer & The Squire 18 $160 NA St. Augustine, FL Scratch Golf Co. Honours Golf 28.8 Nov-00 The Tradition at Windsor 18 $40 32,000 Windsor, CT New Millbrook Golf Coastal Club 3.8 11.0% Oct-00 Talega G.C. 18 $125 40,000 San Clemente, CA Talega Associates Heritage Golf Group 21.0 10.0% Sep-00 Cimarron Hills G.C. 18 NA NA Georgetown, TX Phil Coffin Paloma Development Group 9.2 Aug-00 Hell's Point G.C. 18 $58 40,000 Virginia Beach, VA Virginia Beach Golf Club Carl M. Freeman Golf 8.2 9-10x EBITDA Aug-00 North Carolina National G.C. 18 $29 28,000 Statesville, NC Lennie Yountz North Carolina National R.E. 2.7 Aug-00 Pebble Creek C.C. 36 $40 NA Taylors, SC ClubCorp LinksCorp 5.1 10.0% Aug-00 Piedmont G.C. 18 $11 32,000 Haymarket, VA ClubLink ClubCorp 11.0 Aug-00 Willowbend G.C. 18 NA 43,000 Wichita, KS ClubCorp LinksCorp 1.9 Jul-00 The Bay Club 36 $59 52,000 Berlin, MD Bob Haley Carl M. Freeman Golf 8.9 8.5%+ Jun-00 Greatwood G.C. 18 $70 46,000 Sugarland, TX Terrabrook ClubCorp 15.0 8.0% -10.0% Jun-00 Lansbrook G.C. 18 $59 60,000 Palm Harbor, FL Lansbrook Development Crown Golf Properties 5.0 Jun-00 North Ukes G.C. NA NA NA Brisbane, Australia Lend Lease Dev. ClubCorp NA Jun-00 Plantation Oaks G.C. 18 $40 35,000 Alachua, FL Jay Johnson Dick May/Dennis Thompson 3.0 Jun-00 Sabal Point C.C. 18 $35 33,000 Longwood, FL ClubCorp Meadowbrook Golf Group 3.5 Jun-00 The G.C. at Cinco Ranch 18 $61 40,000 Katy, TA Terrabrook ClubCorp 15.0 8.0% -10.0% Jun-00 The Tradition at Wallingford 18 $49 35,000 Wallingford, CT Redstone Development Coastal Club 5.3 11.5% May-00 Northgreen C.C. 18 $36 37,000 Rocky Mount, NC KSL McCumber Golf 1.5 10.0% May-00 Rickenbacker G.C. 18 $36 36,000 Groveport, OH LinksCorp. Whiteford Valley II 2.0 11.0% May-00 Tuscawilpa C.C. 18 $59 48,000 Winter Springs, FL GATX Capital RDC Golf Group 5.5 10.0% Mar-00 Regents' Glen G.C. 18 $50 NA York, PA Wilmac Corp. Victor Posner Enterprises 20.0 Mar-00 Southerness G.C. 18 $58 30,000 Stockbridge, GA International Golf HPG, Inc. 3.5 Feb-00 Canoa Hills G.C. 18 $65 55,000 Green Valley, AZ NA National Golf Properties 3.5 12.0% - 13.0% Feb-00 Polo Golf and C.C. 15 $50 40,000 Cumming, GA Fairgreen Capital Heritage Golf Group 8.8 Feb-00 Skybrook G.C. 18 $55 35,000 Huntersville, NC Stuart Frantz Legacy Golf Management 5.0 Jan-00 Bridgeview G.C. 9 $28 25,000 Columbus, OH Gary Grube/ Marlynn Greene Columbus State C.C. NA Jan-00 Charlotte Golf Links 72 $44 148,000- 160,000 Charlotte, NC Charlotte Golf Services IRI Golf Group 24.0 Jan-00 Divide G.C. 72 $44 148,000- 160,000 Matthews, NC Charlotte Golf Services IRI Golf Group 24.0 Jan-00 Hunters Creek Plantation 27 $40 40,000 Greenwood, SC LinksCorp. Sam Randazzo Family 3.9 12.0% Jan-00 Le Triomphe Golf & C.C 18 $55 32,000 Broussard, LA Nichiei Acadiana Golf 8.5 12.0% ]an-00 Stone Harbor G.C 18 $45 25,000 Cape May Ct. -$95 House, NJ Jersey Devil Crown Golf Properties 4.0 Jan-00 Tradition G.C. 72 $65 148,000- 160,000 Charlotte, NC Charlotte Golf Services IRI Golf Group 24.0 Jan-00 Waterford G.C. 72 $40 148,000- 160,000 Rock Hill, SC Charlotte Golf Services IRI Golf Group 24.0 ------------------------------------------------------------------------------------------------------------------------------------ Range: High 13.0% Low 8.0% Median 10.5%
- 38 - DUFF & PHELPS, LLC GOLF TRUST OF AMERICA DISPOSITION OF ASSETS ($'S IN MILLIONS)
EST. 2001 FIRST NOI (less UNION'S ACTUAL GROSS IMPLIED DATE INITIAL $6.2M in PROJECTED SALE PRICES CAP RATE # OF BUILT/ PURCHASE CAP in G&A, CAP RATE ON SOLD ON 2001 COURSE NAME HOLES CITY, STATE REDESIGNED TYPE PRICE FEE prorata) ON 2001 NOI PROPERTIES NOI ------------------------------------------------------------------------------------------------------------------------------------ Legends Resort 54 Myrtle Beach, SC 1990 Resort 43.1 10.47% 5.0 11.75% 89.4 10.74% /92 Heritage Golf Club 18 Myrtle Beach, SC 1986 Resort 16.8 10.47% 2.0 (incl. above) (incl. above) Oyster Bay 18 Sunset Beach, NC 1995 Resort 17.1 10.43% 2.0 (incl. above) (incl. above) Tiburon Gulf Course 27 Omaha, NE 1999 Daily Fee 6.0 10.51% 0.6 (incl. above) (incl. above) Royal New Kent 18 Williamsburg, VA 1986 Daily Fee 16.7 10.47% 2.0 10.8 37.96% Stonehouse Golf Club 18 Williamsburg, VA 1996 Daily Fee 16.3 11.20% 2.1 (incl. above) (incl. above) Black Bear Golf Club 18 Orlando, FL 1995 Daily Fee 4.8 10.50% 0.4 35.60% Bonaventure 36 Ft. Lauderdale, FL 1970 Daily Fee 24.5 9.50% 2.3 18.65% /78 Silverthorn C.C. 18 Tampa, FL 1994 Private 4.7 9.75% 0.4 4.3 9.41% Olde Atlanta Golf Club 18 Atlanta, GA 1983 Daily Fee 7.6 10.47% 0.8 7.8 10.26% Northgate S.C. 27 Houston, TX 1993 Private 12.6 10.47% 1.5 11.75% The Woodlands 18 Gulf Shores, AL 1994 Resort 6.0 10.47% 0.7 6.4 10.94% Innisbrook 72 Tampa, FL 1970 Resort 70.0 9.63% 8.9 12.50% /98 Eagle Watch Golf Club 18 Atlanta, GA 1989 Daily Fee 6.4 10.20% 0.6 5.9 10.26% Lost Oaks 18 Tampa, FL 1970 Daily Fee 5.9 9.75% 0.5 11.75% Club in the Country 18 Kansas, KS 1980 Private 3.1 10.00% 0.2 2.7 7.52% Stonehenge Golf Club 36 Columbia, SC 1974 Private 10.5 10.50% 1.0 11.75% /97 Mystic Creek Golf Club 27 Dearborn, MI 1996 Daily Fee 10.0 10.00% 1.0 12.50% Emerald Dunes 18 W. Palm Beach, FL 1990 Daily Fee 22.4 10.00% 2.4 11.75% The Links at Polo Trace 18 Boynton Beach, FL 1989 Daily Fee 12.1 9.50% 1.1 11.75% Cypress Creek C.C. 18 Boynton Beach, FL 1964 Daily Fee 4.2 10.00% 0.3 11.75% Sandpiper Golf Course 18 Santa Barbara, CA 1972 Daily Fee 33.0 9.00% 3.1 11.75% Persimmon Ridge G.C. 18 Louisville, KY 1989 Private 7.5 9.76% 0.7 5.2 13.46% Eagle Ridge Resort 63 Galena, IL 1977 Resort 46.9 9.45% 4.5 11.75% /97 Tierra Del Sol C.C. 18 Albuquerque, NM 1982 Daily Fee 3.6 10.50% 0.3 12.50% Raintree Country Club 18 Akron, OH 1992 Daily Fee 4.6 10.50% 0.4 (incl. below) (incl. below) Ohio Prestwick C.C. 18 Akron, OH 1972 Private 6.4 10.00% 0.6 10.7 9.39% Osage National G.C. 27 Lake Ozark, MO 1992 Daily Fee 11.2 10.00% 1.1 8.0 13.75% Sweetwater C.C. 18 Orlando, FL 1980 Private 4.8 10.00% 0.4 (incl. below) (incl. below) Wekiva Golf Club 18 Orlando, FL 1975 Daily Fee 6.5 10.00% 0.6 10.0 10.00% /83 Cooks Creek 18 Columbus, OH 1995 Daily Fee 6.1 10.00% 0.5 1.75% Brentwood Golf & C.C. 18 Detroit, MI 1957 Daily Fee 7.1 10.20% 0.6 2.6 23.08% Palm Desert C.C. 27 Palm Springs, CA 1957 Daily fee 5.8 10.25% 0.5 4.1 12.25% Metamora G.C. 18 Metamora, MI 1957 Daily Fee 5.9 10.25% 0.5 4.9 10.14% The Pete Dye G.C. 18 WV 1957 Resort 10.0 10.50% 1.0 11.75% ==================================================================================================================================== Total 846 45 courses 480.2 50.6 172.6 ----------------------------------------------------------------------------------------------------------------------------------- Median 10.20% 11.75% 10.50% -----------------------------------------------------------------------------------------------------------------------------------
Source: First Union Securities Analyst Report, August 9, 2001 Note: Due to outlier indications for cap rates (for projected cap rates and implied cap rates), Duff & Phelps utilized a median indication for its analysis. - 39 - DUFF & PHELPS, LLC GOTHAM GOLF PARTNERS IMPLIED CAPITALIZATION ANALYSIS PROPERTIES OWNED BY GGP
SALE SALE STABILIZED IMPLIED ASSET DATE PRICE NOI* CAP RATE SOURCE ---------------------- ----------- ----------- ------------ ----------- ----------------------------------------------------------- Selling Golf Courses: (SUBSEQUENTLY TERMINATED) California Golf Club 03/16/01 3,900,000 364,957 9.4% Purchase/Sale Agreement with Dartmouth Gen. Ins. Co. Miami National Golf 03/16/01 5,850,000 608,254 10.4% Purchase/Sale Agreement with Dartmouth Gen. Ins. Co. Club St. James Golf Club 03/16/01 5,750,000 329,303 5.7% Purchase/Sale Agreement with Dartmouth Gen. Ins. Co. PURCHASE PURCHASE STABILIZED IMPLIED ASSET DATE PRICE NOI* CAP RATE SOURCE ---------------------- ----------- ----------- ------------ ----------- ----------------------------------------------------------- Buying Golf Courses: The Bridges Golf Club 08/23/00 5,550,000 792,425 14.3% Currently leasing with the option to buy.
* Estimated by Duff & Phelps. Calculation assumes the subtraction Of maintenance capex and golf cart lease from COI for each respective course. Assumption: Maintenance capex at 2.0% of course revenues; Golf cart lease at 4.8% of course revenues. All calculations based on representative levels of revenues and COI. - 40 - DUFF & PHELPS, LLC COMPARABLE PUBLIC COMPANY ANALYSIS ================================================================================ AMERICAN SKIING COMPANY Symbol: SKI Exchange: NYSE Close: 0.97 Date: 08/16/01 BUSINESS OVERVIEW American Skiing Company (ASC), formed in 1997, is a holding company that, through various subsidiaries, operates in two business segments, ski resorts and real estate development. ASC owns and operates the following ski resorts: Sugarloaf/USA and Sunday River in Maine, Attitash Bear Peak in New Hampshire, Killington, Mount Snow/Haystack and Sugarbush in Vermont, The Canyons in Utah, Steamboat Ski & Resort Corporation in Colorado, and Heavenly Valley Ski & Resort Corporation in California/Nevada. The Company performs its real estate development through its wholly owned subsidiary, American Skiing Company Resort Properties, Inc. (Resort Properties), and Resort Properties' subsidiaries, including Grand Summit Resort Properties, Inc. (GSRP) and Canyons Resort Properties, Inc. The Company owns and operates resort facilities, real estate development companies, golf courses, ski and golf schools, retail shops and other related companies. The Company's resort business is derived primarily from its ownership and operation of nine ski resorts, several of which are among the largest in the United States. The Company currently has at least one resort located in each major skiing market in the United States. During the 1999-00 ski season, its resorts generated approximately 5 million skier visits, representing approximately 9.6% of total skier visits in the United States. The Company's resort revenues are derived from a wide variety of sources and include lift ticket sales, food and beverage sales, retail sales including ski rentals and repairs, skier development, lodging and property management, golf and other summer activities and miscellaneous other sources. Lift ticket sales represent the single largest source of resort revenues and produced approximately 45% of total resort operations revenue for fiscal 2000. ---------------------------------------------------------------------------- ($ IN MILLIONS) ---------------------------------------------------------------------------- INCOME STATEMENT LTM 2001 FY 2000 SUMMARY --------------------------------------- -------------------------- Revenue $435.0 $424.1 GOLF COURSES: 5 EBITDA 53.7 47.0 HQTRS: Bethel, Maine EBIT 7.6 (0.0) CEO: William (B.J.) Fair Net Income (35.7) (30.1) MARKET CAP: $29.3 million Diluted EPS (In $'s) ($2.07) ($1.69) EV / EBITDA: 11.2x [GRAPH] - 41 - DUFF & PHELPS, LLC COMPARABLE PUBLIC COMPANY ANALYSIS ================================================================================ CLUBHAUS, PLC Symbol: CHA Exchange: London Close: 0.32 Date: 08/16/01 BRITISH POUNDS BUSINESS OVERVIEW Clubhaus owns and operates leisure businesses and facilities located in both the United Kingdom and Continental Europe. The company retails its own brands of golf equipments and clothings. With twenty-one clubs across the United Kingdom, and in Germany, France and Spain and with more than 26,000 members, Clubhaus is one of the largest pan-European owners and operators of golf and health and fitness clubs in Europe. The company's clubs are located near majority cities and towns across Europe with the resort locations situated in areas of natural beauty including London and other key business and population centres. As well as providing the company's members and visiting guests with access to a variety of courses, the company also provides a full range of golf-related services. Golf merchandise is available from pro shops located at each of the company's twenty-one golf clubs. "The Collection", the company's mail order catalogue, includes a broad range of golf merchandise, including its private label IKARUS brand of clubs, bags, gloves, clothing and accessories. The company also caters specifically to corporate golf outings. Other activities and facilities offered at a majority of the courses include driving ranges, practice areas, equipment rental, golf lessons, and conference and banqueting facilities. Clubhaus Health & Fitness Clubs are establishing a reputation within the industry for offering state-of-the-art facilities offering a comprehensive range of equipment linked to the very latest Member Motivation tracking system. Each of the facilities is built to the highest standards of the Club's existing character and offers a unique combination of motivation and relaxation activities and services. The Clubs are adult oriented, but are committed to providing a welcoming environment for Member families and guests, including supervised childcare centres. ---------------------------------------------------------------------------- ($ IN MILLIONS) - BRITISH POUNDS ---------------------------------------------------------------------------- INCOME STATEMENT 2000 1999 SUMMARY -------------------------------------- ----------------------------- Revenue $45.2 $33.7 GOLF COURSES: 21 golf clubs/ EBITDA 18.2 12.9 courses EBIT 15.1 10.9 HQTRS: London, UK Net Income 8.7 7.4 CHAIRMAN: Robert Bourne Diluted EPS (In $'s) $0.08 $0.07 MARKET CAP: $32.3 million EV / EBITDA: 7.0x [GRAPH] - 42 - DUFF & PHELPS, LLC COMPARABLE PUBLIC COMPANY ANALYSIS ================================================================================ CLUBLINK, CORP. Symbol: LNK Exchange: Toronto Close: 6.20 Date: 08/16/01 CANADIAN DOLLARS BUSINESS OVERVIEW ClubLink Corporation ("ClubLink") is Canada's largest owner, operator and developer of high quality golf course and resort properties driven by golf. ClubLink is a public company, traded on the Toronto Stock Exchange (Symbol: LNK). Since it commenced operations in 1994, ClubLink has built a significant portfolio of 30 18-hole and seven 9-hole golf courses at 26 locations in Ontario and Quebec, and five resorts in Muskoka, Ontario. These include Glen Abbey Golf Club, the top ranked premium public course in Canada and home of the 2000 PGA Tour Bell Canadian Open, and the Curtis Strange/Doug Carrick-designed King Valley Golf Club, the 12th-ranked course in Canada. ClubLink owns development sites for eight more golf courses. ClubLink has ownership interests in GolfNorth Properties Inc. of Cambridge, Ontario, which owns and operates 10 golf courses in southern Ontario. The Corporation also has investments in courses located in Virginia, South Carolina and Georgia. ClubCorp. Inc. of Dallas, Texas and ClubLink established a strategic alliance in January 1999. ClubCorp, the world's largest owner and operator of golf courses and private clubs owns 26 percent of ClubLink's shares. ClubCorp's international collection of clubs includes Mission Hills Country Club, Indian Wells Country Club, Firestone Country Club, and Pinehurst Resort, the world's largest golf resort. ClubLink Members have reciprocal privileges to more than 230 ClubCorp properties worldwide, ranging from premier country clubs and world-class destination resorts to outstanding city clubs, athletic clubs and exceptional semi-private golf courses. ClubLink is focused on growth based on strategic acquisitions and development of golf properties which are complementary to existing or targeted markets. ClubLink's unique marketing programs, operational expertise and financial strength make it the leader in consolidating the golf industry. A strong management team has built a solid foundation for the significant growth that lies ahead--the building of our membership, the development of loyal daily-fee guests at your public facilities, the development and acquisition of new facilities, the honing of operational procedures, the development of our people, the building of key strategic alliances, and the continual strengthening of our balance sheet. ---------------------------------------------------------------------------- ($ IN MILLIONS) - CANADIAN DOLLARS ---------------------------------------------------------------------------- INCOME STATEMENT LTM 2001 FY 2000 SUMMARY --------------------------------------- --------------------------- Revenue $105.8 $105.7 GOLF COURSES: 30 EBITDA 25.2 25.4 HQTRS: King City, Ontario, EBIT 15.7 16.2 Canada Net Income 4.7 6.9 PRESIDENT: Bruce Simmonds Diluted EPS (In $'s) $ 0.21 $ 0.33 MARKET CAP: $127.0 million EV / EBITDA: 14.1x [GRAPH] - 43 - DUFF & PHELPS, LLC COMPARABLE PUBLIC COMPANY ANALYSIS ================================================================================ CROWN SPORTS PLC Symbol: CSP Exchange: London Close: 0.25 Date: 08/16/01 BRITISH POUNDS BUSINESS OVERVIEW Crown Sports, formerly known as Golf Club Holdings PLC, operates and provides golf club, leisure and health facilities. As of December 31, 2000 the company operated 33 health clubs and 8 golf clubs, with 65,000 members in the United Kingdom. Crown Sports Clubs provide a friendly and comfortable environment where members can maintain good health and enjoy life to the full, whether it be in the gym or pool, participating classes, playing golf or socializing. The company was officially admitted to the UK Listing Authority in February 2001, and the company's stock began to trade on the London Stock Exchange (FTSE). The company's seven core golf clubs grew to 4,637 members in 2000 from 4,268 in 1999. The handover of the Lambourne Club was successfully completed with the club being managed to the end of the contract period December 2000. Continued significant investment occurred in the seven core golf clubs with particular emphasis on course improvements. The successful purchase of Dragon added some 31,000 members and 15 health clubs to the company's Club Division. The company recently announced the acquisition of four Axis Health clubs to add to the Dragons network. The company also announced the acquisition of the management contract business of Fitness Express to add a further 15,000 members to the Clubs Division. Fitness Express, manages 14 contracts mainly in hotels. The company believes the sports, fitness and golf markets look set for continued growth as consumers' interest in healthy living, sports and fitness activity rises in tandem with disposable incomes. The company's golf clubs include Broke Hill Orpington in Kent, UK, The Chases Cannock, in Staffordshire, UK, the Vale in Evesham, UK, Wickman Park in Fareham, UK, Vale Royal Abbey in Northwich, UK, Batchworth Park in Rickmansworth, UK, Eccleston Park in St. Helens, UK and South Winchester in Winchester, UK. ---------------------------------------------------------------------------- ($ IN MILLIONS) - BRITISH POUNDS ---------------------------------------------------------------------------- INCOME STATEMENT 2000 1999 SUMMARY ------------------------------------- ------------------------------ Revenue $ 3.5 $3.6 GOLF COURSES: 8 golf courses/ EBITDA 0.6 0.5 clubs EBIT 0.4 0.3 HQTRS: London, UK Net Income 0.4 0.2 CHAIRMAN: Jeff Chapman Diluted EPS (In $'s) $0.00 ($0.01) MARKET CAP: $63.2 million EV / EBITDA: Not Meaningful [GRAPH] - 44 - DUFF & PHELPS, LLC COMPARABLE PUBLIC COMPANY ANALYSIS ================================================================================ PGA EUROPEAN TOUR COURSES PLC Symbol: PGA Exchange: London Close: 0.47 Date: 08/16/01 BRITISH POUNDS BUSINESS OVERVIEW PGA European Tour Courses own and develop flagship golf courses around Europe. It is our aim to provide both the professional and amateur golfer with an outstanding experience. The company began life in 1987 as PGA European Tour Properties. In 1992 it combined with the International Management Group to create PGA European Tour Golf Courses (IMG) Ltd. It was in 1996 when the reverse take-over of Union Square PLC led to the creation of PGA European Tour Courses PLC and a listing on the London Stock Exchange. In 1999, the company fought off a takeover bid by Golf Club Holdings, which is now currently named Crown Sports PLC. The company mission is to own and operate courses on which professional events are hosted under the auspices of the European Tour. The company's golf courses include, Golf and Country Club Fleesensee in Germany, Kungsangen Golf Club in Sweden, PGA Golf de Catalunya in Spain, Quinta do Lago, Portugal, and Woburn Golf and Country Club in England. Working on projects all around Europe, often with joint venture partners, the company develops flagship golf courses. The company oversees the design and construction stages, and then open and operate the club. From conception to operational maturity is often a lengthy process, but there are now 5 PGA European Tour Course venues. Currently the company is looking at development potential and investment opportunities for peripheral land across all the company's facilities. ---------------------------------------------------------------------------- ($ IN MILLIONS) - BRITISH POUNDS ---------------------------------------------------------------------------- INCOME STATEMENT 2000 1999 SUMMARY ------------------------------------- ------------------------------ Revenue $ 8.4 $ 7.5 GOLF COURSES: 5 EBITDA 2.4 2.0 HQTRS: Uxbridge Middlesex, UK EBIT 2.0 1.5 CHAIRMAN: Neil Coles Net Income 1.7 1.3 MARKET CAP: $26.3 million Diluted EPS (In $'s) $0.03 $0.02 EV / EBITDA: 14.0x [GRAPH] - 45 - DUFF & PHELPS, LLC COMPARABLE PUBLIC COMPANY ANALYSIS ==============================----============================================== GOLF TRUST OF AMERICA Symbol: GTA Exchange: NYSE Close: 8.36 Date: 08/16/01 BUSINESS OVERVIEW Golf Trust of America, Inc., incorporated in 1996, is a real estate investment trust (REIT) formed to capitalize upon consolidation opportunities in the ownership of upscale golf courses in the United States. Since inception, the trust's principal business strategy has been to acquire high quality golf courses and then lease them to qualified third party operators, including affiliates of the sellers. Against a backdrop of challenging business conditions for the golf course industry characterized by a supply and demand imbalance and difficulty in raising debt and equity capital several of GTA's tenants defaulted on their leases over the past few years. Based on recent financial information provided to the trust by other lessees, financial conditions at their golf courses are deteriorating to hi point where they are not generating sufficient cash flow to cover their rent obligations. As a result, after a review of strategic alternatives begun in February 2000, the stockholders approved to liquidate the company. The company is currently selling its golf courses at the best prices obtainable in an orderly liquidation pursuant to the plan of liquidation. As of August 10, 2001, the company holds participating interests in 18.5 golf courses and direct controlling interests in 7.5 golf courses, 22 of the 26 Golf Courses are owned by the Company. In connection with the Plan of Liquidation, the company entered into a sale agreement with Legends Golf Management, to sell to the affiliate up to 12.4 Golf Courses leased by Legend. On July 31, 2001, the company closed on the sale of 6.5 golf courses to Legends, including the Myrtle Beach courses, for $89.4 million, consisting of cash, a redemption of 3.7 million shares/OP units valued at $44.7 million and a release of obligations to pay the company of $6.6 million for obligations under working capital loans. As of August 10, 2001, the company has closed on the sale of 21.0 Golf Courses for gross sales prices totaling $158.6 million, resulting in a net gain of $31.1 million. In addition, the company has obtained signed letters of intent to sell an additional 10.5 golf courses for an aggregate of $95.4 million. ---------------------------------------------------------------------------- ($ IN MILLIONS) ---------------------------------------------------------------------------- INCOME STATEMENT LTM 2001 FY 2000 SUMMARY ---------------------------------------- -------------------------- Revenue $52.7 $55.5 GOLF COURSES: 26 EBITDA 34.5 47.3 HQTRS: Charleston, SC EBIT 20.8 29.0 CEO: Bradley Blair II Net Income (0.1) 5.1 MARKET CAP: $68.0 million Diluted EPS (In $'s) ($0.18) $0.40 EV / EBITDA: 9.7X [GRAPH] - 46 - DUFF & PHELPS, LLC COMPARABLE PUBLIC COMPANY ANALYSIS ================================================================================ NATIONAL GOLF PROPERTIES, INC. Symbol: TEE Exchange: NYSE Close: 20.20 Date: 08/16/01 BUSINESS OVERVIEW National Golf Properties, Inc., which commenced operations on August 18, 1993, is self-administered real estate investment trust (REIT) specializing in the ownership and acquisition of golf course properties with strong revenue and cash flow growth potential, and leasing them to experienced and creditworthy operators. National Golf is currently the largest publicly traded golf course properties REIT, with a portfolio consisting of 145 golf courses (the Golf Courses) in over 130 separate locations in 23 states. The golf course also owns one participating mortgage loan, collateralized by a mortgage on the golf course. In order to maintain qualification as a REIT, the company's income must be derived from real property-related sources, including rents from real property and generally excluding income from the operation of a golf course. Accordingly, the company is generally precluded from operating golf courses and, as a consequence, leases the Golf Courses to experienced and golf course operators. All but four of the Golf Courses in the company's portfolio are currently leased to the company's sister company, American Golf Corporation (AGC), pursuant to long-term triple net leases (the Leases). Recently, the company's stock fell over 20 percent in a two day span after the company announced (Aug. 14, '01) that sister company, AGC, had suffered a significant loss in the first half of the year and was technically in default on its debt. As a result, National Golf was also put in default on its credit line. As reported on Bloomberg News, the drop in the company's shares highlights the risks REITs take when they lease most of their properties to one tenant. Company management has indicated that American Golf's financial difficulties were related to stormy weather, continued economic weakness, and excess supply in certain markets. News of the technical default led Merrill Lynch to downgrade the company's stock from a "Buy" to "Neutral" rating. CSFB continued its "Hold" rating on the stock after the news. AGC currently manages and operates 271 golf courses and related facilities in 29 states. In addition, AGC, through its subsidiary American Golf (U.K.) Limited, manages 36 golf courses and related facilities in the United Kingdom. AGC operates a diverse portfolio of golf courses for a variety of golf course owners including municipalities, counties and others. Including the Golf Courses, AGC manages 235 daily fee golf courses and 94 private club courses. AGC oversees the management and operations of championship golf courses throughout the United States and manages municipal golf courses for such cities as Atlanta, New York and San Diego and for the County of Los Angeles. ---------------------------------------------------------------------------- ($ IN MILLIONS) ---------------------------------------------------------------------------- INCOME STATEMENT LTM 2001 FY 2000 SUMMARY --------------------------------------- --------------------------- Revenue $120.8 $118.0 GOLF COURSES: 145 EBITDA 115.3 112.3 HQTRS: Santa Monica, CA EBIT 75.8 72.2 CHAIRMAN: David Price Net Income 22.8 19.2 MARKET CAP: $327.7 million Diluted EPS (In $'s) $ 1.73 $ 1.47 EV / EBITDA: 7.8x [GRAPH] - 47 - DUFF & PHELPS, LLC