Delray Beach, Fla. city commissioners hired real estate services company CBRE to market a portion of the 18-hole Delray Beach Golf Club to a developer. In exchange for the land, the developer would contribute money toward restoring the Donald Ross-designed course. The work would cost at least $10 million.
For almost a decade, Delray Beach, Fla. city commissioners have heard complaints from regulars about the declining condition of the 18-hole Delray Beach Golf Club: The fairways and greens are terrible; the tee boxes are collapsing; other public courses are in much better shape, Boca Raton magazine (Boca) reported. Successive commissions, however, determined that Delray Beach had more pressing needs.
At their April 19 meeting, commissioners tried a different approach. They hired real estate services company CBRE to market a portion of the course to a developer, Boca reported. In exchange for the land, the developer would contribute money toward restoring the Donald Ross-designed course. The work would cost at least $10 million.
Delray Beach is making this effort under the state’s public-private partnership (P3) law, Boca reported. It allows local governments to lease or sell property to private interests to pay for improvements. The law sets out conditions to prevent local officials from giving sweetheart deals.
Under Delray Beach’s contract with CBRE, the company will get a $7,500 monthly retainer to market the property. CBRE boasts that its database includes 1.1 million investors, Boca reported. If CBRE brokered a deal that the commission approved, the company would get a success fee based on a sliding scale. For any project up to $10 million, CBRE would get 3.5 percent of the amount. That would be $350,000 for a $10 million deal.
For anything higher, the percentage would be lower. A project in the $20 million to $30 million range would get CBRE 2.5 percent, Boca reported. A project $100 million or more would bring a fee of 0.95 percent. The developer also would reimburse the city for CBRE’s retainers.
Company representatives estimate that it will take between seven and nine months to determine developer interest, or lack of it, Boca reported. One said the site has “strong value potential.” Commissioners asked the company to speed up that schedule.
The commission has not decided how much of the course – and where – might be developed, Boca reported. Early discussion focused on roughly six acres, Boca reported.
“We’re going to wait and see what comes back,” Commissioner Ryan Boylston said. The proposed site, he said, might require moving one or two holes.
Two developers, Boylston said, sent letters of interest after the commission informally stated its interest in such a partnership, Boca reported. “I believe that the proposal will be for the entire amount that we need” to renovate the course.
CBRE cited the deal it brokered for Related Group of Florida to build a condo on public beachfront property in exchange for the company building a new community center and park and paying rent to the city for 99 years, Boca reported. Residents, however, overwhelmingly opposed the deal. Critics noted that the city relied heavily on CBRE for those optimistic revenue projections, even though the company stood to make a $1 million fee if the commission approved it.
To get the course residents want, the P3 may be Delray Beach’s only option, Boca reported. The city is using all of its American Rescue Plan money just to balance this year’s and next year’s budget. A possible capital improvement bond does not envision money for the course.
Even if the proposals justify Boylston’s optimism, the city will need to charge players rates that provide enough money for operating expenses, Boca reported. Otherwise, even a renovated course after two decades could need work that the city couldn’t afford.
Though the real estate market is cooling, Boca reported, “I am 100 percent confident,” Boylston said, that the city will receive a good proposal.