There were 15,619 golf courses in the United States as of January 2013, after 154.5 courses (in 18-hole equivalents) went off line last year, according to the National Golf Foundation (NGF). In fact, the golf industry continues to retrench after a prolonged pre-recession period of aggressive development.
In recent weeks, reports have surfaced about developers acquiring golf courses with conversion plans that include new-home construction. In New Jersey, Burris Construction stepped forward last month with a plan to use the long-vacant 50-acre Woodbury Country Club for the construction of three healthcare centers and 20 houses. On March 12, the golf course in Montgomery Village, Md., which went into bankruptcy last August, was acquired by Monument Realty, which intends to keep the 147-acre course open for a while longer but eventually transform that real estate to include open space as well as townhouses and multifamily residences.
Monument, through a spokesperson, declined to comment. But its principal, Michael Darby, told The Gazette in Maryland that it would take at least three years to rezone and redesign the lots for redevelopment.
Golf course communities historically have been gold for developers and builders “that realized they could charge a 10-25% premium for houses near courses,” says Ed McMahon, senior resident fellow for the Urban Land Institute. Surveys also show that the majority of people who buy homes on or near courses don’t play golf. (As many as 60%, by McMahon’s reckoning.) Demand for these homes “has more to do with the green space; that’s where the premium comes from.”
Golf-course development accelerated in the late 1990s and early 2000s. But the number of players did not: McMahon cites a Wall Street Journal article of a few years back, which found that while about three million people take up golf each year, just as many stop playing for reasons of cost, health, or time. NGF has estimated that there needs to be 4,000 golfers within a 10-mile radius to improve the likelihood of a golf course’s financial success.
Number of Golf Facilities* (U.S.)
* A facility is a complex that contains at least one golf course Source: National Golf Foundation
Overbuilding inevitably led to course closings. “This has been a natural shakeout, like what happened in retail,” which also got overbuilt, says McMahon, who points specifically to Myrtle Beach, S.C., which reputably had more golf courses than any city in the U.S. at one time, but has seen courses close at a rate of 10% per year.
McMahon says he’s also seeing more communities popping up with vineyards, orchards, even farmland “that have the lifestyle value [for buyers] that golf once did.”
In the Hilton Head, S.C., market, Reed Group, which had developed several golf-course communities over the years, spent $1.2 million in 2004 and 2005 getting a golf course permitted. But then, its CEO John Reed recalls, the company had a change of heart and decided instead to develop the 955-acre property around a 165-acre lake. That Bluffton, S.C., community, called Hampton Lakes, has sold 650 of its planned 900 homes, with prices ranging from $300,000 to $1.5 million. In 2008, NAHB recognized Hampton Lakes as a “Best Community in America.”
States with the Most Golf Facilities*
* A facility is a complex that contains at least one golf course
Source: National Golf Foundation
Reed, who has been developing land for 40 years, tells Builder that this kind of reconsidered development “had to happen. We simply built too many golf courses in this country. And then there was the economic crash.” More important to Reed Group’s decision, though, was its conclusion that baby boomers are simply less interested than their parents in golf and country club living. That’s especially true, says Reed, of women “who make 96% of the home-buying decisions. They are looking for an inclusive, multigenerational, casual, and sustainable place to live.”
Reed Group will probably develop golf courses in the future. But, says Reed, “they won’t be the centerpiece of our communities anymore.”
Builders whose portfolios include golf course communities aren’t blind to current realities, and don’t dispute the statistics or trends. But they insist that golf remains a weapon in their marketing arsenals to lure buyers looking for a certain lifestyle.
Arizona-based Taylor Morrison is developing what would be the first golf-course community to open in Southwest Florida since 2007. That community, called Esplanade at Lakewood Ranch, will include a 400-acre course as well as 1,250 homes on 600 acres. Taylor Morrison is also creating a golf course community in Naples, Fla. (A spokesman told Builder that Taylor Morrison could not comment because it is still in a “quiet period” for its initial public stock offering.)
“From a marketing standpoint, golf is still No. 1 for us,” says Nicola Weston, marketing director for Florida’s London Bay Homes, which in recent years has purchased the remaining lots at Mediterra, a country club community in Naples, Fla.; and at The Founders Club in Sarasota. (Both of those communities had been financially distressed.) London Bay Homes also just opened a 3,380-square-foot model, with a fully furnished price of $1.8 million, in the Portofino neighborhood of the 1,800-acre Miromar Lakes (Fla.) Beach & Golf Club, which has eight neighborhoods with homes ranging from $500,000 to $5 million.
Weston concedes that home buyers in golf-course communities aren’t necessarily craving golf. “You know what you’ll be getting in a golf-course community is beautiful lakes and beautiful views.” And the existence of the golf amenity, she goes on to say, signals for many buyers other amenities such as “multiple places to eat, tennis, bocce, and spas.”
Even land in proxmity to a golf course is still seen as a valuable marketing commodity by builders like NVR, which recently paid $28.5 million to acquire 210 acres in Laurel, Md., that are near the Gunpowder Golf Course. The Baltimore Business Journal reports that NVR intends to build around 400 homes and townhouses on this site.
Last month Toll Brothers’ golf and country-club division paid $9.1 million to acquire The Snowmass Club near Aspen, Colo., from an owner, having gone under contract* last December. Snowmass, with more than 1,000 members, includes a 180-hole semi-private course and a 19,000-square-foot athletic facility.
Toll won’t be building homes at Snowmass, although it does manage one of the development's homeowners associations. And over the past few years Toll has bought two golf-course communities that were partially built and sold, and where the builder is completing homes at each that are “performing extremely well” in terms of sales, says Dave Richey, president of Toll Golf. “People still love living with a million-dollar view that someone else maintains, and in a home that has high property values.” Richey also tells Builder that golf course communities have multigenerational and family appeal, even when relatively few homeowners golf. “Our swim clubs in these communities are a very big thing.”
“But I don’t think the final chapter [about golf courses] has been written,” he says. Toll continues to look at several properties “that would be a home-building/golf division play.”
It remains to be seen, though, to what extent the recent spate of closed golf courses produces redevelopment opportunities. Toll’s Richey notes that many of the courses that have closed around the country were old or “not marquee locations.” Others “outlived their usefulness,” or were owned by municipalities with their own financial difficulties.
In addition, golf courses are “oddly shaped, so they aren’t that easy to redesign; you can’t just drop a Walmart onto them,” says Mike Hughes, CEO of the National Golf Course Owners Association in Charleston, S.C. There are usually rezoning and environmental issues to contend with. And people who buy golf course property often do so for the privacy, the nature, and wildlife. That intrinsic value “goes out the window,” says Hughes, when a course is converted into something else.
John Caulfield is senior editor for Builder magazine.
*Correction: Information about Toll Golf's acquisition of The Snowmass Club has been clarified.