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November 2018

Recession Resuscitation

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Troubled golf course properties see new life with economic upswing

By Scott Kauffman

During the 2008 financial crisis and ensuing recession, some of the biggest names in business went broke. And private golf and resort-style communities certainly were not immune from the colossal downturn that decimated real estate developments worldwide.

Among the high-profile golf properties that went under during the fallout of the financial crisis were Reynolds Plantation and Sea Island in Georgia and the Cliffs Communities in the Carolinas. However, as the age-old business adage goes, for every crisis, there’s an opportunity.

Indeed, at a time when many golf developments struggled due to declining demand and scarcity of capital, numerous bankrupt properties traded hands for dimes on the dollar and got reborn by wealthy individuals and capital-rich ownership groups the likes of MetLife (Reynolds Plantation), Anschutz Corp. (Sea Island) and Arendale Holdings (Cliffs). Today, buoyed by a record U.S. economic recovery now in its eighth year of expansion, many of these newer golf course owners are reaping the benefits of their timely acquisitions as golf real estate markets continue to post strong sales data from coast to coast.

Tom Page of iStar Financial, a publicly traded real estate investment trust that acquired Magnolia Green at a foreclosure auction in May 2009, is emblematic of the benefits of being on the right side of boom and bust cycles. Page’s firm gained control of the Richmond, Virginia-area golf development when the original developer defaulted on a $96.9 million loan after completing just 10 holes of the Jack Nicklaus-designed course.

Less than 10 years later, the renamed Westham Golf Club is completed with a new 15,000-square-foot clubhouse, and the community also features a 10-acre aquatic center with four swimming pools – a Junior Olympic-sized competition pool, a children’s splash area, an activity pool and a lounge pool. All told, iStar Financial reinvested more than $18 million in new and completed amenities.

Property sales and construction activity have been soaring ever since the new owners rescued the 1,896-acre development. For instance, Magnolia Green had a record 204 home sales in 2017, an 18 percent jump from 2016 when the semi-private property had a record 173 sales. The average 2017 home sales price: $456,748.

Page, vice president of iStar, says his Magnolia Green development team will continue to expand the  “robust amenities,” highlighted by an indoor golf instruction facility, tennis center with eight lighted courts, and a new Charleston Club clubhouse with pool and bocce ball courts for age-targeted neighborhoods. Page is not surprised by the progressive turnaround at Magnolia Green, which is zoned for 3,550 homes.

“We knew there was pent-up demand [coming out of the recession] because nobody was buying anything,” Page was quoted as saying four years ago after assuming general manager duties at the development. “(Magnolia Green is) a huge deal for us.”

From coast to coast, many upscale golf communities are also reporting similar sales success stories: 
 PGA Village Verrano in Port St. Lucie, Florida, a Kolter Homes development in the heart of the PGA of America branded master-planned PGA Village, traffic and sales activity is up 20-30 percent, according to a  PGA Village Verrano spokesperson. Overall, Kolter reported 100 home sales through June 30 with an average price of “well over $400,000,” and an additional 100 homes under construction.

  On Hutchinson Island in Stuart, Florida, Sailfish Point, an exclusive 532-acre oceanfront private golf and marina development with a Nicklaus Signature course, reported a surge in fiscal year 2017 home sales with almost $69 million in transactions.  Average price: $1.53 million per home. Since 2015, Sailfish Point generated $245 million in real estate sales with fiscal year 2018 off to a fast start with 13 transactions totaling nearly $17 million.

 Cordillera Ranch, an 8,700-acre development in Boerne, Texas, has $300 million in real estate sales activity since 2015 with historically low levels of inventory in 2018. Through June 30, Cordillera sold 28 homes at an average price of $1.06 million, a 28 percent increase since 2017, and had 47 lot sales at an average price of $236,000.

 Not far from Salt Lake City in Heber Valley, Utah, Red Ledges recently announced record sales for the first half of 2018. According to Bill Houghton, the private club community’s vice president of sales and marketing, sales transactions or closings increased 30 percent in the first six months of 2018 and total dollar volume jumped 70 percent to $30 million. And that’s on top of a record 2017 when the Nicklaus-designed golf club community sold 115 properties for nearly $64 million.

 Red Ledges was developed by Tony Burns and Nolan Archibald, longtime Fortune 500 chief executive officers with deep roots in the region (the property was held in Burns’ wife’s family for generations).  The vision and dedication by the Burns and Archibald families allowed Red Ledges to persevere through the depths of the downturn.

Through all the real estate trials and tribulations, the co-developers couldn’t be closer.

“Well, people say you should never go into partnership with a friend,” Nolan Archibald says on the Red Ledges website video that chronicles the community’s story. “And we’re better friends now than we were when we started.”

Red Ledges and so many other top golf club communities are in a much better place today, too.

Scott Kauffman is a golf business writer and the managing director of Aloha Media Group.

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