The Pellucid Perspective - August 2018 - 4

GOLF
DEVELOPMENT

didn't go over very well with the homeowners on several dimensions:
*

*
*

With the course now closed and minimal maintenance
being performed, the current views and "curb appeal" of
homes fronting the golf course is going to degrade significantly
For the lot premium homeowners, their manicured, natural habitat view and extended back yard is now likely going to be someone else's patio, grill, fence etc.
For the subdivision as a whole, the unknown factor of
an adjacent development (when, how many homes, what
quality of homes etc.?) is going to depress buyer interest,
prices or both for however long the process plays out

Here's where the homeowners and local residents get caught
in a Catch-22 in this evolving pattern. First, they have no legal
claim, interest or control over the use or redevelopment of the
land. In a number of these cases I've followed, the only leverage
the homeowners have is to raise a stink with the governing municipal body about things like protecting greenspace, recreational
accessibility for the general population, etc. The homeowners
can fight redevelopment on the grounds of urban planning and
whether more housing is needed in this particular location. The
land development companies are discovering that they have the
leverage of controlling the property, time and the indirect eco-

4 The Pellucid PersPecTive

nomic impact to the homeowners. And so the fight is joined...
As an interesting variation on this theme, I'm seeing a number
of situations where an investor buys the course, attempts (some
more vigorously than others) to turn it around and run at a profit
(but rarely succeeds) and then, using lack of economic viability,
petitions the municipality for zoning change due to non-viability
as currently zoned. It appears to me that there is at least one investor/investment group out there running this play across multiple acquisitions with the help of one of the more established
management companies. There is considerable debate in the golf
trade and consumer media regarding whether the management
company is purposely losing money as a willing and knowing accomplice but I'll simply say there's a very fine line between malicious behavior and ineptitude (both inside and beyond the golf
industry).
Returning to Crickentree for the current epilogue to the story,
one of the quoted industry veterans offers up the suggestion of
the homeowners buying the course out of foreclosure as a solution seen elsewhere in the industry. This is also suggested by
the Crickentree homeowner featured in the story as a potential
option. I don't think however that either party did the numbers
in their head before suggesting this as a happy ending. First, the
homeowners would have to come up with the financial backing to make the purchase at whatever reasonable price could be
negotiated (challenging but nowhere near impossible). Second,
they would have to figure out how they would pick up the operations and re-open the course. This could either be someone
from the local community with credentials and interest in taking
on the "turnaround" or it could be a professional management
company (not difficult but the management companies are being
more selective these days and taking on only a limited number
of turnaround situations in my observation). Third, they're likely
going to need to raise annual money to cover the likely operating
losses in Years 1-3 of, say, $250K. Let's see, if we estimate 250
homes, that's the equivalent of an annual $1K per homeowner
special assessment to keep the golf operation solvent in order to
protect their property values from either new homes or vacant,
unmaintained land.
I'm not seeing any easy, win-win options in these situations
as they increase in frequency as part of the natural market course
correction. In the majority of those I've reviewed, the finance entity and their developer partners where they exist generally have
the upper hand in that their ownership and rights to the land is
unencumbered by homeowners or residents and they have more
flexibility to just delay and stall and let time work in their favor.
For the homeowners, hopefully the lessons learned from the pioneers of "let's just buy the course and protect our interests" will
guide their decision-making (the closest I can come to saying
"Don't do it" without outright saying it). Given these machinations and complexities of trying to redevelop a single golf course
in SC, it now makes sense to me why we're only closing courses
at the gross rate (before offsetting openings) of around 175 per
year. Regardless of those cold, hard facts, we've got to find a way
to accelerate that closure rate if we hope to have any chance of
seeing supply/demand equilibrium again in my lifetime (which is
about another 25 years, God willing).
n
August 2018
https://www.turfkeeper.com
Table of Contents for the Digital Edition of The Pellucid Perspective - August 2018
