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May 2015

    May 2015

No mandatory fees here

A retired U.S. Army officer returning Stateside this summer asked for my help in finding him and his wife a golf community. He plays golf; she does not. Their requirements are straightforward: 3 bedrooms, 2 baths, single-family home, price range up to $300,000 (actually $280,000), fitness center, pool, tennis and walking trails available, semi-private golf club membership with an initiation fee up to $25,000 if the community has multiple golf courses, much less if it has only one. He also strongly prefers a view of the golf course from his home. And because a military pension is not taxed at all in North Carolina and Florida, he has targeted those states.

I conducted a fairly exhaustive survey of semi-private golf community courses in North Carolina, knowing full well he would not have to pay $25,000 to join a semi-private club. (I'm deferring Florida research for now because they prefer four seasons to two.) For anyone contemplating a vacation or permanent home in a nice North Carolina golf community, these communities offer a nice selection of homes priced under $300,000 and golf memberships that are also reasonably priced -– in some cases, very reasonably priced. In fact, virtually all of these clubs are open to public play since that is, by definition, what a semi-private club does. (Membership fees noted where available.)

Semi-private NC Coastal Golf Clubs

Southport's St. James Plantation's four golf clubs are private but the $15,000 initiation fee, the priciest you will find in this column, is still a bargain for those who play a lot of golf (at least one current listing under $300,000 will include the membership in the sale).

Brunswick Forest in Leland, about 10 minutes from Wilmington, is one of the great golf community success stories of the last decade, having weathered the recession that began in 2008 better than most other golf communities east of the Mississippi. A major part of that story is Cape Fear National, the links like golf course that opened just before Wall Street tanked and didn't miss much of a beat, thanks to great reviews of the Tim Cate layout. Annual memberships are around $2,000 on a course you will want to play every day.

The 27 holes of Carolina National inside the community of Winding River (Bolivia) are the product of Fred Couples, and the layout is as languid as Freddie's golf swing. Golf fees are pretty easy to take as well, with an initiation fee of around $2,500 and dues less than $300 per month.

Semi-private NC Inland Golf Clubs

I have not played the Mill Creek Country Club course in Mebane, located halfway between Chapel Hill/Durham and Greensboro, but one of the owners has become something of a pen pal over the years. Membership initiation fees are just $1,495 whether you are an individual or couple, and dues are just $170 and $190 respectively. (Seniors get a $15 per month break off the individual rate.)

Skybrook Country Club in Huntersville, not far from Lake Norman and, therefore, within a short drive to Charlotte, did suffer during the recession, its owner, who tried to balance five different courses, losing them all. A bank took over Skybrook, which sports a fine John LaFoy layout, and was smart enough to hire Troon Golf to manage the club. Conditions are improving dramatically, and so too are the membership rolls thanks to a $150 per month plan that lets members play all the golf they want for $1 per hole. We're betting there are plenty of $18 Nassaus played on the weekends.

Although I haven't played Salem Glen Country Club in Clemmons, I like it for three reasons. First, it is the only Jack Nicklaus course in the area, and no golf centric area should be without one. Reasons two and three have to do with proximity...to the charming, college town of Winston-Salem (a few decent golfers named Palmer and Strange and others came out of Wake Forest) and to the two courses at nearby Tanglewood Park, one of which was the site of Lee Trevino's dramatic 1974 victory over Nicklaus in the PGA Championship. The 62-year old Sam Snead, who finished third, had a much better weekend than did the 61-year old Richard Nixon, who resigned the Presidency.

Golf at Connestee Falls in the artsy craftsy mountain town of Brevard can't be very much fun December through February but I enjoyed my round there some years ago (it was a balmy spring day, as I recall). The course is cut through the surrounding hills, with some dramatic doglegs that put a premium on shot shaping. There is no premium for membership, however, with annual dues of just $2,000 per couple.

If you would like more information on any of these golf communities, please contact me.


Are Mandatory Memberships
Good or Bad for Property Owners?

Most people I work with generally shy away from those communities that compel new property owners to sign up for a club membership from day one. Their concerns are that when they eventually try to sell that property, the universe of buyers may not be as fond of golf as they are today, just as, according to the media, they are not as fond of golf today as they were just a decade ago. Just this week one savvy customer who owns a lot in one of Hilton Head Island's top communities told me he was undecided about building there.

"I'm a little concerned with long-term value of golf course communities that require membership," he said.

Attachment anxiety of too many memberships

There are a variety of mandatory membership types, but pretty much all of them have had a rough decade. At Colleton River in Bluffton, which features 45 of the best golf holes inside the gates of any coastal community, the joining fees for the club and its Jack Nicklaus and Pete Dye golf courses has always been relatively modest at around $20,000. But in order to keep the golf courses in pristine condition and the clubhouses at a standard its members expect, carrying costs in the community -– most of it club dues –- are nearly $20,000 per year, as they are at neighboring communities Belfair and Berkeley Hall. Consider, for a moment, we are back in 2006, with top golf community properties appreciating as much as 20% per year. A well-to-do businessman from, say, Atlanta, buys a home in Colleton River for $1 million and realizes he can finance it with the appreciation from a couple of lots elsewhere in the community. So he plunks down nearly $1 million for two lots overlooking the marsh; it doesn't matter that $40,000 a year in club dues and carrying costs are attached to those lots because the appreciation on them is running as much as $250,000 total per year.

Prices so low they are practically giving them away

And then Lehman Brothers collapses, the recession begins and discretionary spending on second homes dries up and, overnight almost, those lots are worth next to nothing -– but their owners still face a $40,000 a year obligation to pay club dues. What was a speculator to do? The answer, in many cases, was to virtually give away those lots. Colleton River is still working through its inventory of $1 re-sale home sites. (This week, I counted 13 of those $1 lots for sale among Colleton River and its high-end neighbors, Belfair and Berkeley Hall.) And these are mostly nice, buildable lots, some with views of water and golf course.

Mandatory memberships before 2008 came in different packages. The Cliffs Communities' vaunted full-golf membership program, which included access to the wellness center and all other amenities and was priced as high as $125,000 immediately before the recession, was technically "voluntary." But the membership was attached to the lot that Cliffs owners purchased; for example, if a couple purchased a lot and opted not to join the club, they could never join the club unless they purchased another developer lot and elected membership at the closing. When it came time to sell the home on that first lot without membership, they could only sell it to another couple not interested in ever becoming members. There was no customer flexibility in the program; by the time recession and lack of customers caused original developer Jim Anthony to consider modifications to his membership program, he was gone.

More flexibility in Cliffs memberships

Today's owners at The Cliffs have a much more rational approach to membership; you must sign up for some kind of membership when you buy a property or home at The Cliffs, but that membership can be either upgraded or downgraded over time, depending on circumstances. In other words, just because you can't play golf anymore doesn't mean you need to move to another place where you won't feel guilty about paying for something you don't use.

These horror stories of the past, and many others like them, generate considerable angst among those searching for their perfect golf community. But if you step back from the drama a bit, and consider mandatory memberships from the selfish point of view of the member, they make some sense. First is the issue of golf club maintenance. Outside the gates of private golf communities, many private clubs have deteriorated because of declining memberships during the recession. Without the "obligation" of membership, dues are the first things to be eliminated in a family's budget when the economy turns the wrong way. And unless a club has a policy to forgive an interruption of a few years membership, the price to return to the club after getting the family's finances in order could be a new initiation fee.

Mandatory memberships also inspire a greater sense of vested interest in the club, literally and figuratively. That may be a bit of a mixed blessing in that passions can run high over how the greens are (or aren't) cut, whether the director of golf is doing a good job, the quality of the food in the clubhouse, and all the other legendary reasons for involved members to go to battle with each other. But the alternative is likely to be apathy and membership flight during the trying times. For most who have invested years in the club, passion trumps apathy every time. And mandatory memberships tend to stabilize membership rolls.

Mandatory membership might increase real estate values

Mandatory membership can also have a salutary effect on real estate prices over time. In one private golf community on the Carolinas coast where club membership is totally optional, there is constant tension between club members and non-member residents. The issue is essentially over how much financial support the homeowner's association should grant to the club. The non-members, of course, believe the members should pay to play, and that the non-members should have no obligation to help the club financially. That, of course, seems reasonable; why should those who don't play golf subsidize those who do? The members counter that the golf club inside the gates is fundamental to the wellbeing of the community; they even commissioned a study some years ago to demonstrate that. The study compared real estate prices in their community to those in other golf communities in the area that enjoyed the support, if not the dues, of all members of the community. The results showed that homes in their own community were selling for $40 per square foot less than in communities where, members maintained, residents supported the golf club. (None of the comparison communities had mandatory memberships, however.) In short, a golf club perceived to enjoy full support of residents, even if not everyone is a member, can generate higher sales prices. With mandatory membership, there is no debate on that score.

In the end, all about the lifestyle

As a customer I helped find a home in the South Carolina Low Country pointed out to me recently, there is one other important consideration in whether to be intimidated or not by mandatory membership fees. My customer bought a lot and built a home in one of the high-end Bluffton, SC, communities a couple of years ago.

"Our decision to buy and build in a full equity club was not taken lightly," he told me. "We were willing to assume the potential risks of significant dues increases, assessments or a cutback in standards, but believed the common interest of the owners to maintain a top-quality private club at a reasonable dues level greatly exceeded the risk."

He went on to explain that because he was able to purchase a lot at about 1/10th its original price and build a home for a reasonable price per square foot, he further reduced the risk if he and his wife had to sell.

"Having a home attached to a full equity membership is not an investment," he added, "it's a lifestyle decision. In South Carolina, it's a pretty good deal; our club dues and taxes are about $20,000 per year.

"Try finding that in a mid-Atlantic or New England metro area!"

And now, a a few words about
non-equity memberships

If the "mandatory" style of golf club membership still seems a little daring to you, there is always the plain vanilla, standard issue non-equity membership that has served folks well since golf clubs became private domains in the early 20th Century. Indeed, the straight-up payment of an initiation fee, with no promise of any of it being returned at a later date, saved many people a considerable amount of money during the recession. (Equity memberships are always the most expensive because of the payback feature.) Members who signed up for equity memberships that promised a full or partial refund sometime after resignation from the club are still waiting for their money years and, in some cases, more than a decade later. Virtually all of the refunds were pegged to new members replacing those that left the club; in many cases up to four new members were required to join in order for the former member at the top of the waiting list to be repaid. Of course, in an era of declining memberships, best of luck to the most recent of those to resign. It is not surprising that the number of refund-based memberships is now down to a precious few.

The choice of membership does indeed come down to a choice of lifestyle. If, say, Colleton River or one of its mandatory-fee neighbors offers you everything you want in a community -- the golf is undeniably excellent -– and you can afford the tariff, go for it. But if a semi-private club is good enough (see sidebar) and you want the peace of mind of knowing that you can cancel your membership whenever you feel like it, with no explanations necessary to anyone, pay that initiation fee...and relax.


   Larry Gavrich, Founder & Editor




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