At the turn of the century, many golf courses were built without the bottom line in mind. Now investors want to fix that business model.
As the world neared the 21st century, an American real estate marketing trend was taking place: a golf course building boom.
Anticipating the retirement stage of life for the world’s most influential generation – the American Baby Boomer – builders were converting farm land, underutilized business properties and landfills into golf courses of all sorts – but mostly high-end courses with high-priced living communities surrounding them.
Following the recession of 2008, and the (in some areas) slow recovery from that depth, many of those courses have proven to be financially unfeasible as they were constructed. Today, a key real estate marketing trend is the reclamation of those properties by investments firms looking to revamp the business models and revitalize the properties.
“It’s certainly a buyer’s market,’’ said Larry Hirsch, president of Golf Property Analysts. “There are a lot of distressed courses, financing is difficult and most buyers don’t have the ability to write a check.”
GPA, as an example, has worked with more than 2,500 courses in 45 states as well as some in the Caribbean, while also brokering more than $100 million in golf course properties as they are transferred from one owner to another.
The National Golf Foundation reports that there were 157 golf course closings in 2013, with only 14 openings registered at the same time. Another factor is that golf courses that are still operating are not worth what they were worth 10 years ago due to the re-evaluation of property and assets from the recession.
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Yahoo! Finance notes in a report that there are several investment firms who are buying golf properties for the purposes of repurposing them. Concert Golf Partners (which formerly operated Arnold Palmer Golf Management), Fortress Investment Group and Tower Three Partners are financing large reclamation projects at golf courses.
The golf course decline has also attracted foreign buyers, including private equity funds from Luxembourg and Canada.
From 1986 to 2005, approximately 4,200 new golf courses were built in the United States, which represented a 40 percent increase at the time. But that expansion was affected by the unexpected change in retiree behavior away from golf and toward more active leisure pursuits.
Peter Nanula, chairman of Concert Golf, pointed out to Yahoo! Finance that golf courses that were built as incentives to high-end community developments were not managed to make money on their own. “The typical dynamic at a private club is that it is not run with profit in mind but with the idea of making the place fabulous,’’ Nanula said. “”We consistently see clubs that have no rhyme or reason on spending.”
There is a trend among the new golf club owners to make it more family-friendly, responding to the change in behaviors among adult males who no longer leave home Saturday morning to golf and return home Saturday evening. ClubCorp Chief Executive Eric Affeldt told the tale of his home course in Dallas which has relaxed dress codes, updated concessions areas and added non-golf entertainment opportunities to attract families.
“Kids are playing putt-putt golf and running around in their bare feet which grandmas do water aerobics,’’ Affeldt said. “It’s the epitome of a multi-use, multi-generational club.”
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.