Private Golf Course Living on the Rebound
If golf course real estate development were a comatose patient the past four years, the prognosis for this part of the golf business has suddenly turned upbeat. The patient is awake! At least that's the mood at many golf course communities throughout America.
To be sure, this patient is by no means going to ever resemble its former self from the go-go golf days of the 1990s, when real estate development sparked a spate of 4,500 new courses from 1986-2005 - an average clip of 225 new courses each year. However, many golf course communities are far from dead, and the industry's general condition seems to be upgraded from serious to stable.
The continued absorption of excess course supply - 2011 marked the sixth consecutive year more courses closed than opened in America - certainly helps matters. For example, the golf industry saw an overall net reduction of 2.4 percent 18-hole golf course equivalents from 2006-11, according to National Golf Foundation senior vice president Greg Nathan, reversing an unhealthy net gain of 44 percent new golf courses during the previous 20 years.
Indeed, just as America's overall real estate industry is stabilizing and starting to become healthier by most accounts, there is life back inside the gates of golf. And the positive news is not tied to any one asset class or region. Basically, increased real estate and membership sales activity is being reported at several semi-private clubs along the Eastern Seaboard and Sun Belt locales to moderately priced resort-style communities in the Midwest to ultra high-end private club developments near tony Lake Tahoe, Calif.
Following is just a sampling of some private golf course communities on the rebound and making the turn toward a robust golf future:
- The Villages, Fla. - This massive golf course retirement community about 45 minutes northwest of Orlando was the top-selling master-planned community in the nation last year, according to a report recently released last week by John Burns Real Estate Consulting. Spanning parts of three central Florida counties, the Villages and its 37 mostly daily-fee golf courses had an astonishing 2,307 new-home sales last year. And that was on the heels of recording 2,208 sales the prior year.
- The Woodlands, Tex. - This Houston-area community, home to the prestigious 36-hole Club at Carlton Woods and seven other courses, was the country's second-most successful master-planned community last year, registering 945 property sales.
- Kiawah Island - Renowned Kiawah Island has roared back with its in-house real estate division reporting 29 properties under contract and 16 properties closed as of mid-first quarter. Of these 29 properties, 12 are homes priced at more than $1 million. These numbers indicate sales momentum on Kiawah has obviously shifted and optimism is growing thanks to Kiawah's prized Ocean Course recently playing host to the 94th PGA Championship several weeks back.
- Tullymore Golf Resort, Stanwood, Mich. - Ever since a new well-capitalized group took over at this 36-hole semi-private resort-style community near Grand Rapids and invested $50 million in infrastructure and new $7 million clubhouse, Tullymore has come alive with 12 new single-family home sales and three condo sales in the last 6-7 months compared with no sales the previous two years combined. Memberships are also climbing back, according to the owners.
- Reserve at Lake Keowee, Sunset, S.C. - Despite the highly publicized bankruptcy of nearby Cliffs Communities, Lake Keowee and its Jack Nicklaus-designed golf course is experiencing its strongest real estate and membership sales activity to date. For instance, 36 new families moved into the community last year, nine existing Reserve Members purchased additional property, 29 new homes are under construction and 660 new Legacy Memberships have been sold since January 2011. Meanwhile, the Reserve at Lake Keowee, managed by Greenwood Communities and Resorts, is projected to achieve balanced budgets on its club side and within the Property Owners Association for the first time ever this year.
So how are so many golf course communities managing to not only survive but thrive in today's luxury golf course real estate market? For starters, introducing innovative and flexible golf/social club membership programs and pricing property at pre-recession valuations, is proving to be a winning formula. That's two big reasons Lake Keowee broke even last year for the first time in club history with dues and usage fees generating enough revenue to support the operations without any developer subsidies.
The club has been operating in the black thanks to more than 660 new multi-generational members - extended family members of current Reserve Members - that took advantage of the club's new Legacy Membership Program since it was introduced in January 2011. The Legacy Membership allows existing Reserve at Lake Keowee members to extend membership benefits and privileges to their adult children, parents, grandparents, and grandchildren without additional cost, confusing fine print, or complicated red tape. Also, through the coordinated "Share the Legacy Program," members receive special incentives on available real estate and are rewarded through their referral of new club members.
"The club has seen its largest participation ever," says Chuck Pigg, Vice President of Greenwood Communities and Resorts and Community Manager of The Reserve at Lake Keowee. "Coupled with the strict fiscal discipline and accountability of our club manager, Frank Santoro, the club is projected to reach a balanced budget for the first time in its history, with no food and beverage minimums."
At Michigan's Tullymore Resort, chief executive officer Terry Scheiber credits his developer's unique "home buy-back" program for sparking his community's dozen sales. As Schieber describes it, instead of discounting Tullymore property, they are willing to buy anybody's home at current market appraisal if they agree to buy a new home at Tullymore.
So far, residents from Toledo, Ohio, several nearby Michigan cities and one Florida transplant have taken advantage of the unique marketing scheme. Another big incentive driving Tullymore property and membership sales is the average lot now sells for $45,000 - down from the peak of $70,000 several years ago - and comes packaged with a full $20,000 club membership.
Throw in the infusion of new capital at many golf club developments whether it be through the sale of new shares in the club/development company (Keowee Reserve) or arrival of a brand new developer/owner (Tullymore), and it's easy to see why many club operators/owners are positive about the future of golf behind the gates.
"With regular media reports about a struggling economy and a real estate market that is slowly making a comeback, the excitement of our recent share offering and successful capital raise is a very bright moment for the Reserve," Pigg wrote in a recent state of the club letter. "The Reserve is as strong and viable a community as ever."
The same can be said for an increasing number of golf course communities nationwide.