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April 2013

    April 2013

If You Build It…
Here’s What It Can Cost

    You know the housing market is recovering when you read a headline like “Lot Prices Now Hardly Dirt Cheap” in a publication like the Wall Street Journal (April 10, “Money & Investing” section).  The collapse of the market beginning in 2008 cut raw property prices even more deeply than home prices; in some cases, desperate owners of lots in some nice golf communities –- especially those communities with mandatory memberships attached to the lots (see accompanying story) -– sold off their lots for 50% or more than they paid for them just a few years earlier.  But now, as one Arizona land broker put it in the Journal article, “The world has just woken up and said, ‘We need land!’”
    If you have plans to build your dream home in a golf community, you’ll need land too.  I asked some of the real estate professionals we work with in the southern U.S. to offer up an example of one of the highest value lots in their communities, ones with views of the adjacent golf course, and to estimate the cost per square foot to build a home with higher than average fittings (think granite counters, hardwood floors, “professional” style appliances, etc.).  We did the math to come up with the total cost of a 2,500 square foot home on the reasonably priced lot.

   For each community, we provide a link in the "Note" section to a page of current lots and homes for sale at GolfHomesListed.

Belfair Plantation,
Bluffton, SC

Lot:  4/10 acre, $15,000
Cost per sq. ft.:  $165
Home & Land:  $427,500

Note:  Belfair features two 18-hole layouts by Tom Fazio and is just minutes from Hilton Head Island.  Nearby Berkeley Hall and Colleton River Plantations offer sharply priced lots for sale as well.

Brunswick Forest,
Leland, NC (Wilmington)

Lot:  1/3 acre, $130,000
Cost per sq. ft.:  $120
Home & Land:  $430,000

Note:  Brunswick Forest has not suffered a single foreclosure, while golf communities in its area have seen multiple properties taken back by the banks. The community’s Cape Fear National golf course is one of the best new courses in the East over the last five years.

Grand Harbor,
Ninety-Six, SC

Lot:  1/3 acre, $52,900
Cost per sq. ft.:  $100
Home & Land:  $302,900

Note:  This lot was sold last weekend, but others like it are available.  Davis Love III designed Grand Harbor’s unusual golf course, which features replicas of Revolutionary War ruins.

The Landings,
Savannah, GA

Lot:  ½ acre, $112,500
Cost per sq. ft.:  $175
Home & Land:  $550,000

Note:  The Landings, which recently celebrated its 40th anniversary, is just 20 minutes from downtown Savannah and features six immaculately groomed golf courses.

Ocean Ridge Plantation, Sunset Beach, NC

Lot:  1/3 acre, $99,000
Cost per sq. ft.:  $150
Home & Land:  $474,000

Note:  Ocean Ridge features five semi-private golf courses (one under construction), is within an hour’s drive of 100 additional courses and a mere 10 minutes to Atlantic Ocean beaches.

Reynolds Plantation, Greensboro, GA

Lot:  6/10 acre, $249,900
Cost per sq. ft.:  $165
Home & Land:  $662,400

Note:  With MetLife now in charge of the sprawling Reynolds Plantation, the future of the community seems secured.  The new owner is making significant investments in infrastructure and the 6½ golf courses at Reynolds.

Viniterra, New Kent, VA

Lot:  1.07 acres, $225,000
Cost per sq. ft.:  $150,000
Home & Land:  $600,000

Note:  Viniterra is one of the few golf communities that feature a championship golf course (by Rees Jones) and an award-winning winery on its premises.

Wintergreen Resort, Nellyford, VA

Lot:  4/10 acre, $100,000
Cost per sq. ft.:  $170
Home & Land:  $525,000

Note:  Jim Justice, who restored the famed Greenbrier Resort, purchased Wintergreen last year and pumped $12 million into infrastructure improvements.  Devil’s Knob, the mountaintop Wintergreen golf course, will go private this year.


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   I promise to respond quickly. Thank you.
-- Larry Gavrich, Editor



Under New Management:  After carnage of recession,
good news for golf community residents and prospects

    The great recession was like a controlled burn for golf communities; the fires that resulted in some founders of high-end developments losing everything cleared the landscape for reinvigorated growth.  Cruel for some developers, yes, but a potential windfall for others and a victory for residents of many of the larger, more upscale golf communities whose anxiety about their property values in recent years had reached panic proportions.

Cashing in on the failure of others  

   Development companies with cash at their disposal have stepped in to buy up struggling but established golf communities for mere pennies on the dollar.  The debt that drove into the arms of others such high-end golf communities as The Cliffs, Reynolds Plantation and Balsam Mountain Preserve in North Carolina had been taken on to develop fully formed rosters of high-end amenities as a justification for high land prices.  Now, the new owners of these amenities-laden communities can concentrate their investments on generating real estate sales, not building additional facilities, and this is helping them to pay down debt faster and ratchet up their marketing efforts –- although some of the big names like The Cliffs and Reynolds have been a bit conservative in their marketing efforts under the new ownerships.

    With confidence from an improving economy and significant regrowth in their retirement portfolios, the large cohort of baby boomer buyers have reemerged in force through the gates of some of the southern U.S.’s biggest name golf communities.  Even those communities that did not change hands during the economic carnage have reevaluated their pricing on both memberships and real estate, knowing full well that their competitors, hungry to sell off their large inventory of properties to help pay down debt and create steady ongoing profits, may soon be marketing as aggressively as ever. 

Texas-sized Challenge

    Texas-based Challenge Golf Group is one of a number of companies that saw a big opening created by the recession.  Challenge had spent most of its 30 years managing a string of profitable east Texas golf courses, plus a couple of golf communities.  But with growth on their mind, Challenge developed a deceptively simple but rational business model to target distressed golf communities with low debt, an existing membership base, and plenty of surrounding real estate yet to be sold. 

    Balsam Mountain Preserve near Waynesville, NC, and Grand Harbor on Lake Greenwood in South Carolina, though completely different in look and price points, fit the Challenge model.  In 2010, Challenge purchased Grand Harbor, which features homes beside Lake Greenwood and around the unique Davis Love golf course, and Balsam Mountain in late 2011.  According to Challenge Vice President of Marketing Bruce Fine, the company’s model is working just fine.
    “From four sales in all of 2010,” says Fine, “we made 33 sales last year at Grand Harbor.  And at Balsam Mountain, which had just two sales in 2011 before we took over, we sold 27 properties in 2012 and have 13 already in the first quarter of 2013.”  Grand Harbor current homes for sale range from the low $300s; outstanding mountain-view lots at Balsam Mountain can exceed $300,000.

    The strong uptick in real estate sales has allowed Challenge to pay down the $4.5 million in debt it inherited at Grand Harbor to $2.9 million, and the $6 million in debt at Balsam Mountain to just $2.2 million.  (Note:  The pay down at Balsam includes proceeds from a tax credit for a conservation easement Challenge granted on 75 lots at the extreme edge of the huge development.)  Fine says he expects the full debt at Balsam will be paid within 18 months and at Grand Harbor within 24 months; the more accelerated pace at Balsam is a result of its substantially higher price points on properties and, therefore, higher expected total revenues to apply against the bank notes. 

Upscale Memberships Get a Revamp

    Although opportunistic developers are scooping up golf communities for pennies on the dollar, they understand they must sell real estate in order to pay back their investments.  Before 2008, it almost didn’t matter what a multi-club community like The Cliffs charged for its membership -– it reached $125,000 just before the economy and The Cliffs went sideways; there was plenty of money chasing luxury amenities at that time.  Communities like The Cliffs and Reynolds Plantation appealed to the vanity of their buyers; choose to live with us, their marketing materials implied, and your friends will be jealous and your family proud.  And, of course, you will show the world just how successful you are.
    The recession drove that out of all but the most image-needy buying prospects.  Although many would-be purchasers have recouped much of their portfolio losses and still retain their executive incomes, the upscale buyer post-recession is much more wary and focused on value and options provided by the revised high-end club membership plans.
    New owners of formerly struggling golf communities have retooled membership plans to fit the new expectations.  For example, MetLife and Daniel Corporation, new owners of Reynolds Plantation, have expanded to four the number of membership plans available to homeowners.  The top “Platinum” plan offers all 6 ½ golf courses to members, including the private and dramatically laid-out Creek Club course.  (Note:  Some play on Reynolds’ other private clubs is permitted for guests of the on-site Ritz Carlton hotel, but not at the Creek Club.)  The initiation fee for the Platinum membership is $60,000, not outrageous for more than six exquisitely conditioned golf courses and the other full range of amenities offered at Reynolds.  Monthly dues on the Platinum plan are $719. 

    At the other end of the array of Reynolds membership plans is a social membership, ideal for occasional golfers, that provides for 12 rounds of golf annually on any of the courses but the Creek Club, as well as access to all the community’s facilities, for an initiation fee of $10,000 and monthly dues of $125.  The other two plans -– Gold and Silver -– offer different combinations of access to the golf courses (other than Creek Club) and two dues levels for each; the higher dues level provides access to all courses (again excepting Creek Club) for payment of just $75 each time you play (includes cart fee).  The permutations are many and prospective buyers may want to pull out an abacus to figure out the best plan for them, but at least Reynolds offers options to accommodate all levels of play and budgets.

Signs of Commitment

    Most residents of communities like Reynolds Plantation and The Cliffs certainly consider themselves lucky that new owners have stepped in to take over operations.  The trick for new owner/developers of formerly troubled developments, though, is to impress prospective residents with their deep pockets and commitment to the community.  The deep pockets part is easy for a company like MetLife, one of the largest and most consistently successful financial services companies in the world.  They have already begun to make improvements to the infrastructure and golf courses at Reynolds.  It is a little tougher for a stitched-together group of owners like Silver Sun Partners at The Cliffs, composed of major Cliffs landowner SunTX Urbana, golf community developer Arendale Holdings and Cliffs property owners Steve and Penny Carlile.  Because they are a new and unknown quantity and cannot have the deep pockets of a MetLife, The Cliffs owners need to be aggressive, and visibly so, in demonstrating that they are not afraid to commit their money to following through on some of the commitments founder Jim Anthony made to residents.  Wisely, the new group announced lower priced full-golf memberships and that the Gary Player golf course at Mountain Park will be completed by this fall.  Just as wisely, they have said nothing about the prospects for the Tiger Woods designed golf course that was planned for the Cliffs’ High Carolina development.  It will likely take a few years of robust real estate sales at The Cliffs before any serious discussion of completing that venture is likely to take place.

Why Some Golf Communities Make Membership Mandatory

    It is possible that some upscale golf communities owe their survival to the institution of “mandatory” golf club memberships.  While clubs with discretionary memberships found their dues income shriveling during the recession, the mandatory clubs were, by and large, able to weather the storm.  Of course, golf community residents who paid six-figure initiation fees for upscale-club memberships can be forgiven for a strong case of buyers’ remorse now that new owners of some upscale communities have rationalized their membership programs and lowered prices, in some cases by more than 50%.  
Communities like The Cliffs, Reynolds Plantation and Balsam Mountain Preserve still require that new owners become club members at some level or other.  (Note:  At Balsam Mountain, you can upgrade or downgrade at any time since the $30,000 initiation fee is identical for any category of membership; only the dues are different.)
    Mandatory membership requirements sometimes catch buyers by surprise.  Here is how a salesman-customer dialogue about club membership might transpire in an upscale community with a mandatory program that ties membership to the property -- forever.

Salesman:  OK, congratulations, you’ve picked out a beautiful mountain-view lot.  I know you are going to be very happy, especially after you build your new dream home.  Now, which club membership would you like?


Couple:  We’d like to think about membership while we decide when we are going to build.

Sales:  Oh, well, I’m sorry, but we require all new owners to choose one type of membership at the time of closing.

Couple:  Really? Well, okay, why don’t we take the membership with the lowest initiation fee to start, and then when we are here for good, we’ll upgrade to a full-golf membership?

Sales:  Geez, I’m sorry, but we can’t do that.  Whichever membership you choose now is the one you will have as long as you are a member here.

Couple:  Wow.  You mean we can’t upgrade and pay a higher dues rate later?

Sales:  No, sorry, but there may be a way we can get you a full-golf membership later on.

Couple:  Really.  Please tell us how.

Sales:  Well, when you build your house and are ready to move here full time, you can buy one of our lower priced lots for $100,000 –- with just a boring wooded view –- and take out a full-golf membership attached to that property.

Couple:  But that $100,000 lot, which we don’t want or need, is even more than the initiation fee for full golf membership!

Salesman:  Full-golf membership now sure looks pretty good, doesn't it?


If you are in the early stages of searching for a golf home, or just thinking about where you might want to relocate in the next few years, contact me and I will be happy to answer your questions and provide some initial ideas of which golf communities best match your requirements.  Better yet:  Please fill out our online questionnaire; once we receive your information -- always in confidence and never shared without your permission -- we can start the process to find you your dream home on the course.  Click here for access to our Golf Home Survey.


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