Article Courtesy of The Palm Beach
Post
By Nick Madigan
Published December 13, 2015
BOCA RATON -- Weeds, crabgrass and fallen palm fronds cover the wildly overgrown
greens of what was once the Mizner Trail Golf Club, its decrepit state
emblematic of the fate of hundreds of golf courses around the country, many of
them derisively known as “rabbit patches” or “goat farms.”
A short drive away, however, perspiring construction workers in yellow vests
swarmed on a recent afternoon over the emerging structure of a
150,000-square-foot activities center, part of a $50 million renovation of the
44-year-old Boca West Country Club, home to some 6,000 residents, where fairways
are newly planted and houses sell for as much as $5 million.
With the winter golf season beginning in Florida — the nation’s leader in golf
courses with more than 1,000 — the extremes of failure and success point to a
nationwide upheaval in the sport. It was booming when players like Tiger Woods
reigned, but has since been roiled by changing tastes and economics, an aging
population of players, and the vagaries of the millennial generation’s evolving
pastimes.
There are about 4 million fewer players in the United States than there were a
decade ago, according to the National Golf Foundation. Almost 650 18-hole golf
courses have closed since 2006, the group says. In 2013 alone, 158 golf courses
closed and just 14 opened, the eighth consecutive year that closures outpaced
openings. Between 130 and 160 courses are closing every 12 months, a trend that
the foundation predicts will continue “for the next few years.”
Dozens of private and public golf courses here in South Florida, and hundreds
around the country, are in transition. Some courses have sought bankruptcy
protection, while others have slipped into foreclosure. Many are under
construction, with single-family homes and condominiums going up on land once
dotted only with pin flags, sand traps and water hazards. Others have gone to
seed as they await resolution of legal and zoning disputes.
Many clubs have survived by lowering sign-up fees and other costs, reducing the
number of playable holes, and offering family-friendly amenities and activities
that go far beyond hitting a ball with a 9-iron.
“Some courses are adapting, others are just not,” said Paul H. Chipok, a lawyer
in Orlando who specializes in land-use and environmental issues. “It costs
$100,000 a month to operate an 18-hole golf course — mowing the grass,
fertilizing, regular maintenance. And that’s not including capital improvements.
You need a lot of green fees to cover that.”
At private courses, members may be willing to pay more if necessary “because
they expect a certain level of service,” Chipok said. “But courses that are open
to the general public may not have the money to keep up their maintenance, and
with less maintenance, the courses look worse and so they have to charge less to
play on them. It’s a vicious cycle. This is the correction phase we’re going
through now.”
Lesley Deutch, a senior vice president in the Boca Raton office of John Burns
Real Estate Consulting, said the “old model” of private golf clubs with high
initiation fees and “very exclusive” memberships is in decline.
“I don’t think the industry is over,” she said. “I think it’s just changing.”
In South Florida, where buildable land is fast disappearing, developers see golf
courses as wasted space. Vast swaths of land that were once pristine courses in
the middle of residential communities are becoming highly exploitable territory
— prime opportunities for profits much greater than what fairways and putting
greens can provide. As a result, the fallout of the downturn in the sport has
been felt most keenly by residents of communities where the holes are no longer
being played, primarily because the value of their homes often drops markedly
once the course has closed.
“There are big issues, and they’re being fought and litigated,” said Steven M.
Ekovich, a broker based in Tampa, Florida, who represents sellers of golf
courses. “Homeowners paid a 20 or 30 percent premium for a golf-course lot, and
suddenly a developer comes in and wants to build in front of them. There are big
fights over that.”
A few miles south of here, in Tamarac, the owner of the Woodmont Country Club,
Mark Schmidt, faced stern opposition from some of the club’s homeowners to his
plan for the course, which involved reducing the 36 holes to 18, putting up a 4
1/2-acre commercial center, and building 152 single-family homes — in addition
to the 1,900 houses already there. The plan was ultimately approved last year,
but city officials have since balked at the owner’s proposal to build a 120-room
hotel on the site.
“There’s always resistance,” said Schmidt, who bought the Woodmont property 10
years ago. “The cost of operating a golf course today is very difficult, so the
land is being put to better use. As much as some people lost their views, others
have gained better views. No point in allowing the land to remain fallow.”
Like other golf club owners who foresee an upside in expanding their offerings,
Schmidt said he was building a new clubhouse and fitness center, as well as a
new swimming pool. “Without these adjustments, golf would be in desperate
trouble,” he said of the industry in general. “This is an absolute necessity.”
City officials in Tamarac have been dealing for years with turmoil on golf
courses, particularly after the closures of the Monterey and Sabal Palm clubs.
Three city commissioners were charged with receiving bribes from developers who
sought to build houses on the properties, and there were numerous complaints
that interlopers on motorcycles and all-terrain vehicles were racing around the
weed-covered greens. Developers were eventually permitted to build hundreds of
homes on the two former golf courses.
To prevent similar headaches on another property in Tamarac, the 275-acre Colony
West Golf Club, the city itself bought the course in a 2011 short sale for $3.3
million. “We wanted to control the real estate,” Michael C. Cernech, the city
manager, said of the championship course, which opened in 1971 as host to the
PGA Tour’s Jackie Gleason Classic, now known as the Honda Classic. Under a
five-year contract, management of the course was turned over in 2013 to the
Virginia-based firm Billy Casper Golf, which runs about 140 courses nationwide.
Michelle F. Tanzer, a Boca Raton lawyer who represents resort developers and
owners and sits on the board of the National Club Association, has helped
country clubs adapt to what she said is growing demand for fitness facilities,
resort-style pools, water parks and improved dining choices in places where
previously only golf was the norm. The golf industry, she said, is “doing much
better than it’s looked since 2009.”
The Boca West Country Club’s heavy investment in its facilities, Tanzer said,
“is a perfect example of adapting” to the changing economics of golf. “They’re
spending a fortune on making the place family-friendly,” she said. “It’s a home
run.”
At Boca West, where it costs new members $70,000 to sign up, Jay DiPietro, the
club’s 78-year-old president and general manager, suggested that the troubles
besetting some of his competitors could be blamed on poor management and on
their focus on “the business of selling houses.” But he operates on a different
principle, he said.
“We’re in the people-pleasing business,” he said. “These people paid a lot to be
here.”
In any case, DiPietro said, the golf industry was vastly over-supplied with
courses. “It was just waiting for a recession to knock the hell out of it,” he
said. “The recession separated the boys from the men.”
Oliver K. Hedge, who appraises golf course properties for the real estate
brokerage firm Cushman & Wakefield, said the golf industry had “made great
strides” in shaking off underperforming courses in the last few years.
“A lot of clubs that have closed really should have closed,” Hedge said.
“Florida is a good microcosm of the nation because we’re so dense with golf
courses.”
Many of the closures, he said, have involved public and semi-private courses,
the latter a reference to clubs that have an active membership program but that
let non-members play for a fee.
In 2009, under what Hedge called “the prior economy model,” the Marsh Landing
Country Club, a private course 300 miles north of here in Ponte Vedra Beach,
Florida, charged a $100,000 initiation fee, 90 percent of it refundable upon
resignation. Dues were $6,612 a year. Today, that same membership costs $25,000,
but it is nonrefundable, while annual dues have gone up to $8,400.
Still, golf clubs are “just scratching out a profit,” Hedge said from his office
in Orlando. “Golf is a razor-thin industry from an investor standpoint. I hardly
ever advise investing in a golf course. You’ve got to really know what you’re
doing, and you’ve got to have a razor-sharp pencil. You might spend $20 million
to $30 million to build a private country club — if you can clear 7, 8, 10
percent, you’re lucky. There are huge fixed costs. You could have a club that’s
doing $10 million in revenue, but you’ve spent $9.9 million to get there.”
A developer known to be bullish on golf is the ubiquitous Donald J. Trump, who
in 2012 added to his portfolio of 14 courses by purchasing two more in Florida,
the Ritz Carlton Golf Club and Spa in Jupiter and the Doral Golf Resort and Spa
near Miami.
The price of the Jupiter resort — now known as the Trump National Golf Club —
was not disclosed, although Trump’s company invested about $2 million in
renovations, according to Hedge.
The developer invested far more — some $250 million — in fixing up the
four-course Doral resort, after buying it out of bankruptcy for $145 million. On
Oct. 23, during a presidential campaign appearance at the resort, now called
Trump National Doral, the candidate boasted of his negotiating skills in
whittling $25 million off the asking price of the property.
“The key to the success of these ventures was the broader market timing,” Hedge
said, referring to the two Trump resorts. “I assume they saw the luxury golf
market returning, which it has done.”
Ekovich, the golf-course broker in Tampa, was slightly less positive in his
estimation of the market’s strength.
“Revenues are up a little bit, and so are rounds,” said Ekovich, who noted that
during the years of the recession the price of some golf courses had “cratered”
to about half their former value. “Things are moving in the right direction, but
they are by no means meteoric rises.” |