Does the following report sound familiar?
"Slower home sales have driven residential developers to sell the amenities they once counted on to hasten land sales and raise prices - their golf courses."
That is the lead sentence in a New York Times article...from March 15, 1992. It could as easily be in today's paper. Golf courses and, indeed, entire golf course developments are coming on the market, being sold, and then being replaced by more courses for sale. This is not surprising given the slowdown in the purchase of club memberships and golf community homes as potential buyers find it harder and harder to sell their primary houses. You may recall that the early ‘90s was the last big housing recession in the U.S., and history is repeating itself today (with the extra trickle-down effects of the "sub-prime lending" mess).
That 15-year-old article was authored by Lyn Riddle, who also wrote that, "Many of the distressed golf-course developments are in the South, particularly in Florida and in the Carolinas, where nearly three-fourths of all golf courses built in the last few years were conceived as fixtures for housing developments." That seems to be the case today based on a scan of courses listed by a few national brokerages and consolidators.
One of them, Prime Sites USA , which lists all sort of businesses for sale online, includes 10 courses at its web site, five of which recently sold. Six of the 10 are in Florida, including a resort in the Florida Panhandle listed for $12 million, the highest asking price of Prime Sites' listings.
Coldwell Banker's National Golf Course Sales organization provides a far longer list at its site. We counted 56 courses for sale or under contract, but according to Kathy Bissell, VP-National Golf Sales, as many as 200 are for sale at any given time.
"We have a listing for a nine-hole course for a half million dollars," says Ms. Bissell, and others that range well up into the million. There is a wide range of properties in between, including a central Illinois course for less than $600,000 and another near Raleigh/Durham, NC for around $700,000. These are prices one might expect for a nice home on a golf course, not the golf course itself.
Not every decision to sell a course is strictly financial. "Some are family owned," says Ms. Bissell, "and the owners are just tired of running the course. In other cases, the course is one of many owned by a company and they are just trying to peel off some of their assets."
The reasons people buy courses are equally varied, according to Ms. Bissell. Some people just want to run a golf course and figure they are going to do it better than the people selling it to them. In many cases, these tenderfoots are not prepared for how difficult and complicated golf course operation is, and they wind up selling out in a few years. Others are all about business, like the southern Mississippi group that recently sold a nine-hole course, plus a few attached residential lots, for just under $1 million.
"The group had bought it after [Hurricane] Katrina," she says, "fixed it up over a couple of years and then sold it." She doesn't know what they paid for it originally, but "it must have been very low if they sold it for less than a million."
An investment in a golf course is risky business, especially if the buyer's intention is to plow it over and build housing. Major builder D.R. Horton, which ought to know better, bought the Bay Meadows course near Jacksonville with that intention, and with a nod and a wink from town planners, that they could build homes where fairways and greens once stood. Horton paid more than $3 million for the course, made their application for rezoning and then watched their investment go to pieces when local townspeople rose up as if a Walmart were coming, complaining that an already bad traffic situation on the local highways would be much worse with the increased population. The local mayor, taking the temperature of his constituents, nixed the deal, a $3 million lesson for Horton.
You would think that the weakness of the dollar would be driving offshore investment in U.S. golf courses, and Ms. Bissell says she is seeing some of that, with recent inquiries from South Africa, the United Kingdom and Asia. Foreign laws are also contributing to added interest in U.S. golf courses.
"Korean laws," Ms. Bissell says, for example, "put a cap on the amount its citizens can invest in their own country. Many are turning to the U.S. and our golf courses."
We noted what seemed like a disproportionate number of Florida courses for sale, mindful that there are a disproportionate number of Florida courses to begin with. According to Ms. Bissell, more courses in the Midwest seem to be on the market currently.
"There was a lot of action [a few years ago] in North Carolina," she adds, "but that seems to have died down."
Hedge Fund Millionaires Alert: If you are not content with owning that nine-holer in East Jabip, Coldwell Banker will be happy to set you up with a pair of courses currently on the market in Nevada. Asking price is $20 million, but we bet they'll take $19 million.
I was asked the other day if it made more sense to be one of the first to buy in a new community or to wait for things to take hold. In my answer, I deferred to the buyer's personality: If you have a pioneering spirit, some tolerance for risk and want the lowest possible price, by all means be the first one on the block. But, on the other hand, if a good chunk of your net worth is going into the new home and you want to make sure that amenities promised are amenities delivered, then consider waiting for Phase 2 or beyond.
My wife and I discussed this issue during a nice long walk with the dog this morning. She reminded me that 19 years ago, we faced this very same dilemma during a visit to Lockwood Folly, a community with a nice golf course about 35 miles north of Myrtle Beach. Connie was pregnant with our first child at the time so we were all pumped up with planning for
the future (and maybe pumped with a few hormones as well). But we were also intimidated with the financial responsibilities we were facing in the near term.
At first, the long term won out. Lockwood Folly had a sleek golf course I had enjoyed playing, a spanking new clubhouse overlooking the marsh, a few model homes to show, and prices that seemed the most reasonable on the Grand Strand. (We had done our homework.) The salesman was enthusiastic in a non-pushy way, and as we toured what would eventually become a community, we were impressed with the combination of live oaks and marshland and the promise of a beautifully landscaped Low Country home. It seemed like a great investment. We left a deposit on a lot.
We backed out, without penalty, two weeks later, really just a simple case of cold feet. We rationalized the decision on the basis that we weren't going to build for at least a decade; in a new community, we'd basically be holding a non-appreciating asset and paying taxes to boot. We also reasoned that Lockwood Folly would be forever at the far north end of the Grand Strand and, therefore, more remote than two kids from suburbia could tolerate. Connie is a beach lover and the community was a good 20 minutes from the nearest sand. But to be honest, we were simply nervous about being one of the first to commit to the community.
Eleven years after that decision, after several vacation stays in the Pawleys Island area, which is well over an hour south of Lockwood, we bought a new condo in Pawleys Plantation. At the time, the community was about 90% built out and regarded as one of the best and most stable in the area. We opted for what we knew, not the unknown.
Over the last 19 years, we have wondered how Lockwood Folly turned out. I had liked playing the golf course, but it is rarely mentioned in the top rank of the Myrtle Beach area's 120 courses. A few years ago we were driving up Highway 17 in North Carolina and wound up outside the entrance to the community. We drove in and were pretty bummed out by what we saw. Houses were sited close together in most of the neighborhoods, many yards seemed a bit overgrown, landscaping in the common areas seemed indifferent and the entire effect was of a community that maybe hadn't been planned all that well.
We looked at each other in relief and congratulated ourselves on backing out of the deal those 19 years ago. We acknowledged, though, that the decision was more dumb luck than good sense. There are dozens of communities my wife and I visited early in our marriage that we would be the richer for having been first in - and I mean "richer" both literally and figuratively. Kiawah Island near Charleston, SC, comes to mind as having real estate that has appreciated maybe 10 times in 20 years.
But we are still happy with our decision to buy in Pawleys Plantation, mindful that luck plays a big part in making the correct purchase decision (or not making it). With apologies to the oft-quoted Yogi Berra ("It ain't over 'til it's over"), the moral of this story is that, sure, you can always make a better choice, but you can always make a worse one as well.
My wife and I discussed this issue during a nice long walk with the dog this morning. She reminded me that 19 years ago, we faced this very same dilemma during a visit to Lockwood Folly, a community with a nice golf course about 35 miles north of Myrtle Beach. Connie was pregnant with our first child at the time so we were all pumped up with planning for
If you have a pioneering spirit, some tolerance for risk and want the
lowest possible price, by all means be the first one on the block.
At first, the long term won out. Lockwood Folly had a sleek golf course I had enjoyed playing, a spanking new clubhouse overlooking the marsh, a few model homes to show, and prices that seemed the most reasonable on the Grand Strand. (We had done our homework.) The salesman was enthusiastic in a non-pushy way, and as we toured what would eventually become a community, we were impressed with the combination of live oaks and marshland and the promise of a beautifully landscaped Low Country home. It seemed like a great investment. We left a deposit on a lot.
We backed out, without penalty, two weeks later, really just a simple case of cold feet. We rationalized the decision on the basis that we weren't going to build for at least a decade; in a new community, we'd basically be holding a non-appreciating asset and paying taxes to boot. We also reasoned that Lockwood Folly would be forever at the far north end of the Grand Strand and, therefore, more remote than two kids from suburbia could tolerate. Connie is a beach lover and the community was a good 20 minutes from the nearest sand. But to be honest, we were simply nervous about being one of the first to commit to the community.
Eleven years after that decision, after several vacation stays in the Pawleys Island area, which is well over an hour south of Lockwood, we bought a new condo in Pawleys Plantation. At the time, the community was about 90% built out and regarded as one of the best and most stable in the area. We opted for what we knew, not the unknown.
Over the last 19 years, we have wondered how Lockwood Folly turned out. I had liked playing the golf course, but it is rarely mentioned in the top rank of the Myrtle Beach area's 120 courses. A few years ago we were driving up Highway 17 in North Carolina and wound up outside the entrance to the community. We drove in and were pretty bummed out by what we saw. Houses were sited close together in most of the neighborhoods, many yards seemed a bit overgrown, landscaping in the common areas seemed indifferent and the entire effect was of a community that maybe hadn't been planned all that well.
We looked at each other in relief and congratulated ourselves on backing out of the deal those 19 years ago. We acknowledged, though, that the decision was more dumb luck than good sense. There are dozens of communities my wife and I visited early in our marriage that we would be the richer for having been first in - and I mean "richer" both literally and figuratively. Kiawah Island near Charleston, SC, comes to mind as having real estate that has appreciated maybe 10 times in 20 years.
But we are still happy with our decision to buy in Pawleys Plantation, mindful that luck plays a big part in making the correct purchase decision (or not making it). With apologies to the oft-quoted Yogi Berra ("It ain't over 'til it's over"), the moral of this story is that, sure, you can always make a better choice, but you can always make a worse one as well.
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