The golf housing bust

[Howard Riefs]

Wall Street Journal describes an ugly environment:

Luxury golf communities have hit a rough patch. After years of aggressive golf course expansion, interest in golf declined just as the market for luxury homes plunged. Now, once-pricey real estate is available at below-par prices. Selling a lot for $1."

Seems they could have written this article 4+ years ago. If they didn't already.

http://online.wsj.com/article/SB10001424052702303703004577474563368632088.html?mod=djemLifeStyle_h#articleTabs%3Darticle

[David_Tepper]

"Seems they could have written this article 4+ years ago. If they didn't already."

Howard R. -

Thanks for the link to the article. It is not too surprising an article like this one is showing up now rather than 4 years ago. It typically takes high-end real estate prices several years to soften up after a financial panic like we saw in 2008-09. 

For the first year or two after a financial collapse, people (i.e. developers) are in the "denial" stage, where they really can't accept what has happened and they figure they can ride the storm out without having to cut prices sharply. It is not till 3 or 4 years after the event that they realize prices are not going to rebound any time soon and their lenders start leaning on them really hard to raise cash by liquidating their inventory. It also takes several years before loans default, properties are foreclosed upon and the banks & lenders start gearing up to sell off the foreclosed properties at discounted prices.

DT

[William_G]

The golf courses were a lure for the real estate in oh so many speculative deals that I think it contributed to the current decline in golf participation.

The golf courses became 2nd or even 3rd fiddle and not the focus of the development.

When that happens in any industry/game/hobby the game will suffer.

The golf architecture suffered at these developments and thus the game suffered.

As mentioned in the article referenced here by Howard, Pronghorn has a nice Fazio course where most of the hole run North/South just so the homes could face west and have the best views.

Business people abused the game of golf but it will survive.

Thanks

[David Lott]

Colleton's going to survive just fine, though some (nest)eggs will be broken in the process. The most accurate barometer is foreclosures, and I don't think Colleton has many of those. But selling lots is extremely tough, endless they are very prime locations. Most of those were built early. The solution, as always, is lower prices. However, right now in the Low Country the cost of building can exceed the value of the housing once it's built. Only when the price of existing housing recovers somewhat will the land sales issue start to improve.

That said, this is a affluent person's problem. There are still too many in the low country who can not afford to buy or retain modestly priced housing. Those are the real tough times.

[PThomas]

The golf courses were a lure for the real estate in oh so many speculative deals that I think it contributed to the current decline in golf participation.

The golf courses became 2nd or even 3rd fiddle and not the focus of the development.

When that happens in any industry/game/hobby the game will suffer.

The golf architecture suffered at these developments and thus the game suffered.

As mentioned in the article referenced here by Howard, Pronghorn has a nice Fazio course where most of the hole run North/South just so the homes could face west and have the best views

they should have picked a better example, because that Fazio course is pretty damn good!

[Tiger_Bernhardt]

I assume based on these comments that none of us develop golf course real estate.  We have a few contributors that do. However each project is different in cash to debt radio, where the project was when 2008 hit, who owns the lots not built on, the relative financial strength of the developer/ same for primary bank. The complete BS put forth to the current homeowners to keep them paying dues etc and so on.

[Wayne_Kozun]

How many golf course developments can provide a decent return on risk without having a real estate angle?  It seems to me that when a course costs $10 million+ to develop that golf operations alone cannot provide enough money to give a decent return on equity.  You need that property value uplift for homes to really make a golf course work as a profitable investment. 

[Tom_Doak]

How many golf course developments can provide a decent return on risk without having a real estate angle?  It seems to me that when a course costs $10 million+ to develop that golf operations alone cannot provide enough money to give a decent return on equity.  You need that property value uplift for homes to really make a golf course work as a profitable investment. 

How many golf courses that you like were built with the intention of being profitable investments?

I suppose you can include the courses at Bandon Dunes, even though Mr. Keiser knew he would be lucky if they wound up being more than modestly profitable.

[Wayne_Kozun]

How many golf courses that you like were built with the intention of being profitable investments?

I suppose you can include the courses at Bandon Dunes, even though Mr. Keiser knew he would be lucky if they wound up being more than modestly profitable.

Of the courses here in Canada built in recent years:
Cabot Links (continuing with the Keiser theme)
Coppinwood
Osprey Valley
Muskoka Bay
Rocky Crest
Taboo
Bigwin Island
Eagle's Nest
Angus Glen
Cobble Beach

[Tom_Doak]

How many golf courses that you like were built with the intention of being profitable investments?

I suppose you can include the courses at Bandon Dunes, even though Mr. Keiser knew he would be lucky if they wound up being more than modestly profitable.

Of the courses here in Canada built in recent years:
Cabot Links (continuing with the Keiser theme)
Coppinwood
Osprey Valley
Muskoka Bay
Rocky Crest
Taboo
Bigwin Island
Eagle's Nest
Angus Glen
Cobble Beach

I don't know much about any of those.

How many of them were built by rich guys who just wanted to build a cool golf course, and could afford it if they weren't profitable? 

How many of them have actually been profitable?

[Ted Cahill]

I agree with the guy in the article who still invested in a lot at Pronghorn- I played the Nicklaus course there and very much enjoyed it- the environment there is very peaceful.

I wonder how Tetherow is managing financially?  Didn't see any homes yet built when I played there last year- based on the course- I won't be returning.....