Golf Inc - Summer 2012 - (Page 11)
Sales & Finance
With commercial real estate confidences up, is golf close behind?
By STEVE EKOVICH he golf industry tends to look at golf through a very small window in the clubhouse. We tend to think what is happening to us is unique and that we are the only ones that have to deal with the type of issues we are faced with. That could not be further from the truth. Most people in golf become blinded by their passion for golf and forget it is an investment vehicle. As we know it today, golf is not unlike other investment vehicles that have the same characteristics as a hotel, apartment, office or industrial building. It has a revenue stream, expenses that service and help create that revenue stream, in many cases debt service and NOI/EBITDA. Consequently, it is in competition with the other investment classes for investment dollars. So is golf behind the wave or in front of the wave? Non-core real estate like golf, self-storage and hotels tend to lag behind core commercial assets. They tend to go into the recession later and come out later. Apartments, office and retail went into the financial meltdown long before golf, so as they emerge today we may not be far behind. Before we look at golf value, we need to look at other asset classes. The fourth quarter National Real Estate Investor Magazine/Marcus & Millichap Investor Sentiment Index showed that despite economic and political headwinds in the summer and fall of 2011, Investor sentiment remained at an
all-time high for the last four years. The latest NREI/Marcus & Millichap Investor Sentiment survey shows only a slight decline in investor sentiment from the height of 164 that was recorded in the second quarter of 2011. It is important to note the current investor sentiment matches the 142 recorded in the fourth quarter of 2010, which at the time represented the highest level the index had achieved since the survey began in 2004. Investors have remained relatively steadfast despite being bombarded by a wave of macroeconomic and political troubles, including the ongoing debt crisis in Europe, the political logjam in Washington and the downgrade of the U.S. credit rating. Despite the Dow Jones Industrials hitting 13,000 for the first time since 2008, 73 percent of respon- Commentary dents agree that commercial real estate offers favorable returns relative to other investment classes. In addition, only 8 percent say it would be better to invest in the stock market compared to 71 percent who do not agree with that assessment. Apartments are currently the hot investment class and are selling at pre-recession yields. Every core asset class and some non-core classes are seeing tremendous buyer activity so far this year.
So what about golf?
CommerCial real eState inveStor Sentiment inD
0 2004 2005 2006 2007 2008 2009 1Q10 3Q10 4Q10
We recently completed a study for Bloomberg News. The research indicates that the median price of a golf asset through 2010 was almost half of what it was in 2006 (See chart on Page 12). However, in 2011 the median sale price went up. The caveat is that the data was not complete and full sales reporting is always six months behind, so the increase in the median could be an aberration and prices could go down further. If you look at the average price (the mean average), the mean is down in 2011 (again we don’t have final data), but the percentage was only 2.5 percent, which tends to indicate we may have leveled off and are at or near the bottom. By drawing some conclusions from both the median and the mean average, one would say the turnaround has happened, or at the very least we are at the bottom and the turnaround is right around the corner. It is true there are still a lot of foreclosures to come to the market, but it is also true in the last two to three years there have been a
Summer 2012 www.GolfIncMagazine.com 11
Table of Contents for the Digital Edition of Golf Inc - Summer 2012
Golf Inc - Summer 2012
Table of Contents
Hiring Right: The First Step Toward Great Customer Service
New EPA Regulations Will Increase Turf Equipment Costs
Britain’s Greenkeepers Association Makes Operational Improvements, CEO Says
What the Future of Golf Could Look Like
Textron Financial, Capmark Put Golf Portfolios Up for Sale
With Commercial Real Estate Confidences Up, Is Golf Close Behind?
The Evolution of Donald Trump
Tasmania’s Coming of Age
Largest Management Companies
Renovation of the Year
Bald Head’s Logistical Challenge
The State of Technology in the Golf Industry
Britney Spears as Golf Spokesperson?
Golf Inc - Summer 2012