Upscale Golf Oriented Real Estate Developments

[Lou_Duran]

It has always amazed me how much wealth is spread throughout the U.S.  No matter where I go, there always seem to be pockets of really expensive housing, often in connection with a high-end golf or country club.

Just this past weekend, I had the pleasure of playing three outstanding golf courses in the hill country near Austin, TX.  Twin Creeks (Curly, Schmidt, Couples), Boot Ranch (Hal Sutton/Jim Lipe), and Escondido (Fazio) are all courses many of us (Naccaratto, his gods and his disciples excluded) would die for.  To varying degrees, the three courses were built on interesting terrain by thoughtful, highly competent designers with ample budgets and impassioned, visionary developers.

I hate to guess how many upscale developments have sprung up in Texas recently, but 10 to 20 is probably not a bad number.  I am curious to hear from folks in other areas with reports on their markets.

   

[Steve_ Shaffer]

Lou

One of the top developers in upscale residential golf developments nationwide is Discovery Land Company. www.discoverylandco.com

You are familiar with Vaquero and Spanish Oaks in TX. Their new project in CA, The Madison Club, has an entry level for villas of about 4-5M.

The Philadelphia area is not a hotbed of upscale residential golf development. Toll Brothers did Laurel Creek(Palmer) in NJ and Blue Bell(Palmer) in Montgomery County, PA  about 10 years ago. Pulte is doing Applewood(Nicklaus Design) in Chester County, PA but I wouldn't classify this as upscale. There are new public courses with residential developments- Lederach, Raven's Claw and others but they're not gated nor upscale. Applebrook(Hanse) in Chester County has an upscale residential component but access to the club is not easy.

[Voytek Wilczak]

Flamebait!

But seriously, I am not even a hardcore minimalist, but nothing is a bigger turnoff for me than houses lining every fairway.

Nothing.

Upscale developments are good and fine, but please keep the houses next to the course, not on it.

[BCrosby]

Lou -

If Texas is still booming, Atlanta upscale developments are not. I am hearing that memberships a going begging at a number of new, pricey clubs north of Atlanta.

Bob

[cary lichtenstein]

Lou:

I concur, there are upscale developments all over the country and usually Nicklaus or Fazio are the architects as these 2 tend of create the biggest add on value to the land and housing.

The remoteness of some of these developments also amazes me as well as the pricing. Most require lot and/or homeownership, but there are a few exceptions.

What is most difficult to find, is a Summer cool weather location with a decent sized town together with it amenities together with a great golf course.

We have been searching for that, but we can't find it. If you know of one, please let me know.

[Brent Hutto]

If Texas is still booming, Atlanta upscale developments are not. I am hearing that memberships a going begging at a number of new, pricey clubs north of Atlanta.

Bob,

Are new upscale golf/housing developments still appearing? I'm not convinced that lack of buyers or even bankruptcy for existing developments necessarily discourages the building of additional ones.

[John_Conley]

Man, you're reading my mind.  I played in Huntsville, Alabama and was astounded at the wealth in that community.  The Ledges is a remarkable undertaking.  The golf course was designed by Dr. Hurdzan atop a mountain with 360-degree views.  The housing is even more impressive.  I called for the price of one and it was $3,000,000.

Nobody is surprised when an affluent area like San Diego has a course like Maderas lined with mansions.  But what of Ocala?  The housing surrounding the CC of Ocala is remarkable.

It seems like there is a great deal of money in a lot of places.  Locally, plans call for ultra-high end homes at Bella Colina west of Orlando.  At some point I think the market will be overbuilt.  We'll see.

[BCrosby]

Brent -

Start-ups of new developments are slowing to a crawl.

Many developments coming on line now that started up several years ago are getting a bit nervous, I hear. Too many were built too far outside the city for too much money. I understand they are anxious to cut some surprising membership deals.

Bob

[Tim Taylor]

In my neck of the woods (Northern VA) we have the following over the past decade:

River Creek (Tom Clarke)
Piedmont (Tom Fazio)
Belmont (Palmer)
Dominion Valley (Palmer)

Plus there is Creighton Farms, the Ritz Carlton/Nicklaus collaboration between Leesburg and Middleburg, under construction.

The first four are big developments with everything from town houses to multi million dollar homes. Creighton, well if you have to ask you can't afford it.

Tim

[PjW]

Lou:

In Hawaii we have Nanea Golf Club (Kidd), Kukio Golf Club (Fazio), Hualalai (Nicklaus/Weiskopf), Hokuli`a (Nicklaus) and hopefully next year we will start Kukui`ula on Kauai (Weiskopf).  High end is definitely still selling here in Hawaii.

Phil

[Tiger_Bernhardt]

Lou, it seems Texas, California, Arizona and Florida have pretty deep pockets for what you describe. I think Montana or Oregon has what Cary is looking for. There are alot of baby boomers looking for retirment locations wher ethe weather is good.

[Lou_Duran]

Voytek,

What I am seeing as the rule is that these developments get it regarding making sure the lots and eventual homes are not too intrusive on the course.  I don't know how much control Fazio, Nicklaus, Jones, et. al. have on the developers, but these designers are well versed in what drives quality (sorry Tommy) and value (sorry again), and developers can be shown that cutting X number of lots can result in greater net revenues.  BTW, my favorite course in Texas is Brook Hollow GC, a classic design much tamer than most by Tillie, and without sight of a single home.

Cary,

The developer of Escondido is looking at a deal east of the SF Bay Area, closer to the Nevada border.  If it gets done by him, it will have a Fazio course, another by an archie I am not at liberty to disclose, along with counter-seasonal skiing.

Another area that you may wish to consider is Bend, OR though I am not sure about the summer temperatures.  Pronghorn has a great Nicklaus course, and I think the Fazio course may have opened or is ready to.  I think I heard that Tom Doak may also have something coming out of the ground.

Tiger,

My recent experience in CA has me thinking that the real estate market there will collapse in no small way.  Of course, this has been forecasted forever, and prices have continued to escalate largely without interruption.  One thing for sure, as long as tax policy (deductibility of mortgage interest, and real estate and state/local income taxes) has such a big impact on the real estate market, we will never see the substantial change that some of us believe are necessary to continue growing the economy (not meant to be a political statement).

In Orange County where a 2-2 condo is $600,000+ and very ordinary homes (or mere shacks a few blocks from the ocean in beach towns) run more than $1MM, I just don't know how incomes can support the debt structure.  I know a professional couple in SoCal who are in the top 1% of earners and they can barely cover the mortgage, car payments, and the necessities of the lifestyle demanded by the work they do.

The golf developments I am talking about seem to have different financial underwriting, most likely based on created wealth rather than current and future earnings.  I suspect that many of the lots are purchased with cash.
 

[ForkaB]

There are about 1.1 million houesholds in the US with a net worth of over $12.5 million, which is not a bad number for the market of people with the ability to spend $3 million+ on a home along with the associated life-style costs.

How does that relate to the current supply of these McMansions?

[John_Conley]

There are about 1.1 million houesholds in the US with a net worth of over $12.5 million, which is not a bad number for the market of people with the ability to spend $3 million+ on a home along with the associated life-style costs.

That is astonishing.  It goes a long way to explain things.  Where did you get that statistic?

[David_Tepper]

This should not surprise anyone who is a regular reader of LINKS Magazine. 1/3 to 1/2 of the mag is adverts and promo articles for Upscale Golf Oriented Real Estate Developements.

Our esteemed president's tax cuts didn't make those 1.1 million households any poorer. That is for sure!

[Lou_Duran]

David,

The horror that our government lowers tax rates with the intent that some people will keep a bit more of their own money, and lo and behold those same people end up paying more taxes than before!  Damned trickle-down, vodoo economics!

BTW, I like Links magazine, though for some reason I am no longer on their comp list.  A couple of years ago they had an issue that explained the various classical holes (Redan, Biarritz, Alps, Short) which should be required reading for aspiring gca aficionados.  The pictures are also pretty.

Rich,

Can you please share your U.S. wealth distribution source with me?  The number you note sounds high, though I think I read or heard somewhere that a little over 10% of American families with a net worth of a million or more.  That number doesn't sound right either.  

BTW, what I am talking about is a few steps beyond the McMansion (very large homes on small lots side-by-side).  Some of these projects are selling estate lots.  At Boot Ranch, there are lots of 10 - 20 acres.  I am told that most owners are members elsewhere and maintain one or more other residences.    

[Bill_McBride]

If the bulk of a $1 million net worth is in residential real estate which is taking much longer to sell at the top end, those net worths are quite illiquid.  Liquidity should be the true measure of high net worth individuals.

[mike_beene]

A lot of people with money live much more modestly than a lot who dont.During my years of law practice it never ceased to amaze me how broke a lot of people with huge incomes and homes are,and the amount of money people will borrow for homes,trips,planes,cars,etc.By the way,did Marshal Ranch,where Player was building a course north of Austin,go under?

[peter_p]

Paul Krugman today: "This week, Toll Bros., the nation's premier builder of McMansions, announced that sales were fsr off, profits were down, and the compnay was walking away from already-purchased options on land for future development."

NYT graph basd on the sale of standard existing housing, not new construction, to track th value of housing as an investment and factoring out the effects of inflation.Using 1890 as the 100 base line.
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif

[Lou_Duran]

Mike Beene,

You are so right.  I believe that was the thesis of "The Millionaire Next Door".  However, there appears to be a significant number who live large and have considerable net worth.

Dallas National, though not a residential real estate play, has done remarkably well.  As far as I know, Vaquero and the TPC at Craig Ranch are progressing at or ahead of plan.

All in all, don't you think that the DFW area and Texas for that matter are in a much stronger position than back in 1984, 1985 before our major real estate, oil & gas, and financial collapse?   Are you bullish about the future of the golf industry here?  

[Jeff_Brauer]

From last weeks Dallas Morning News Financial Columnist Scott Burns:

2004 Wealth Scoreboard (all figures in thousands)

Age   Top 1%   Top 5%   Top 10%   Top 25%   Median

80   $3,349     $1,170      $1,149     $536       $188
70   $9,198     $1,945      $1,106     $489       $183
60   $10,188   $3,075      $1,522     $699       $232
50   $9,554     $2,333      $1,180     $570       $188
40   $4,710     $1,297         $746     $353       $113
30   $1,971        $451         $272     $121         $39
20      $607        $206         $103       $30          $6

Note:  Approximately 100 Million Tax Returns filed in US in 2004, so top 1% is about 1 Million Households, etc.

I agree with Mike Beene that our true wealth doesn't justify all the $700,000 and up houses springing up.   If you read the book, "the Millionaire Next Door" you will find that most have very modest homes.  If you spend as much as you make, you aren't wealthy.  

The true measure of wealth is how long you could go without working (or trying to be a golf course architect! )  A high precent of Americans can't make it to the next paycheck, and even those who appear to be middle class are often in hock to their eyeballs.

I once met a former superintendent from Iowa who got in the DFW real estate game and managed to get a few quick commissions and started living it up.  Later, everything was repossessed and his comment was, "How did I know it was going to end." I visited his house during the boom times, and among the large screen TV's, gourmet kitchens and suits, I noticed he was line drying three pairs of boxers.  He didn't have dryer or any more underwear, living under the motto, "If it don't show, I ain't spending money on it."

I would hate to be unloading a huge house upon retirement to the next generation, because I think our generation will go down as one overly enamored with spending lavishly, especially on huge houses.

Back to architecture......

[mike_beene]

Lou,I think golf here is on the upswing.My reasoning,though a little haphazard is as follows:Much more diversity economically than 80s,more corporate population,more population in general,PGA tourneys,especially the Nelson have become mega events,wait lists on most clubs,good redos of municiple courses,central Texas boom,no state income tax.These things combine for a certain momentum.Santa Fe is real nice,but it is appealing to drive to a second home.Computers open up a lot of remote work opportunities.Besides,its all cheap compared to Aspen.

[mike_beene]

Jeff what did Randy Quaid say in "Christmas Vacation"?If I just had all that money I gave that TV preacher back.

[John_Conley]

Jeff:

Thanks for sharing that data.  It helps people understand, "How am I doing?"

What to make of someone who buys rims and puts in a fancy grille?  Oh, never mind.

[John_Conley]

Jeff, your story about foreclosure numbers around Grapevine Lake is relevant.  Southlake?