Florida Clubs’ Comeback Efforts Featured by New York Times

By | November 25th, 2015

The newspaper’s commercial real estate section devoted extensive coverage to a post-recession update on the state of South Florida’s club and course properties, including Boca West CC’s $50 million renovation and Woodmont CC’s expansion beyond golf.

 

An extensive report in The New York Times’ commercial real estate section on the state of the private club and golf course business in South Florida drew a contrast between the “decrepit state” of what was once the Mizner Trail Golf Club and the lively construction activity, just “a short drive away,” generated by the $50 million renovation of Boca West Country Club.

“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,’ ” the Times’ report began.

“A short drive away, however, perspiring construction workers in yellow vests swarmed on a recent afternoon over the emerging structure of a 150,000-sq.-ft. 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,” the report continued.

The “extremes of failure and success” now evident as a new winter golf season begins in Florida, the nation’s leader in courses with more than 1,000, point to “a nationwide upheaval in the sport,” the Times reported. After booming during the peak of Tiger Woods’ popularity, it noted, the club industry has been “roiled by changing tastes and economics, an aging population of players, and the vagaries of the millennial generation’s evolving pastimes.”

As a result, the Times reported, dozens of private and public golf courses in South Florida, like hundreds other around the country, are in transition. “Some courses have sought bankruptcy protection, while others have slipped into foreclosure,” the Times reported. “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 other clubs, however, 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,” the Times reported.

“Some courses are adapting, others are just not,” Paul H. Chipok, a lawyer in Orlando who specializes in land-use and environmental issues, told the Times. “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.”

In Tamarac, Fla., the Times reported, 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 four-and-a-half-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,” Schmidt, who bought the Woodmont property 10 years ago, told the Times. “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, the Times reported, 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.”

At private courses, members may be willing to pay more if necessary “because they expect a certain level of service,” Chipok told the Times. “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, Fla. office of John Burns Real Estate Consulting, told the Times that 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,” Deutch said. “I think it’s just changing.”

In South Florida, where buildable land is fast disappearing, developers see golf courses as wasted space, the Times reported. 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, Fla., 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.”

City officials in Tamarac, Fla. have been dealing for years with turmoil on golf courses, particularly after the closures of the Monterey and Sabal Palm clubs, the Times reported. 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, the Times reported. “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 Billy Casper Golf, which runs about 140 courses nationwide.

Michelle F. Tanzer, a Boca Raton, Fla. 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 Times reported. The industry, Tanzer told the Times, is “doing much better than it’s looked since 2009.”

Boca West Country Club’s heavy investment in its facilities, Ms. 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 CC, 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,” the Times reported. But he operates on a different principle, he added.

“We’re in the people-pleasing business,” DiPietro told the Times. “These people paid a lot to be here.”

In any case, DiPietro added, 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, told the Times that 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 noted, have involved public and semi-private courses that have an active membership program but also let non-members play for a fee.

In 2009, under what Hedge called “the prior economy model,” Marsh Landing Country Club, a private course in Ponte Vedra Beach, Fla., charged a $100,000 initiation fee, 90 percent of it refundable upon resignation, the Times reported, and dues were $6,612 a year. Today, that same membership costs $25,000, but it is non-refundable, while annual dues have gone up to $8,400.

Still, golf clubs are “just scratching out a profit,” Hedge told the Times. “Golf is a razor-thin industry from an investor standpoint,” he said. “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 [and] if you can clear 7, 8, 10 percent, you’re lucky,” Hedge added. “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.”

The Times report noted that one developer who has been known to be bullish on golf is Donald 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, the Times reported, although Trump’s company invested about $20 million in renovations for the course, clubhouse and amenities, according to Hedge.

And Trump invested far more—some $250 million—in fixing up the four-course Doral resort, after buying it out of bankruptcy for $145 million. During a presidential campaign appearance at the resort, which is now called Trump National Doral, the candidate boasted of his negotiating skills in whittling $25 million off the asking price of the property, the Times noted.

“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.”

Steven Ekovich, the golf-course broker in Tampa, was slightly less positive in his estimation of the market’s strength, the Times reported.

“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.”

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