The Reinvention of the Golf-Course Sector

Woolson: “More golf courses have been torn out than built over the last eight years.”

RANCHO SANTA FE, CA—Overbuilt going into the recession, often member-owned golf-course properties are being sold, sometimes to residential developers for repurposing , Jeff Woolson , EVP and managing director of CBRE ‘s golf and resort group, tells GlobeSt.com. Woolson recently represented the owners of Fairbanks Ranch Country Club , a private, member-owned club in Rancho Santa Fe, CA, for an undisclosed price to the Bay Club , a California-based active lifestyle corporation with more than 20 locations across multiple campuses throughout California. The Bay Club acquires established golf and country clubs in proximity to its existing locations; it will offer members reciprocal privileges at its sports resort in nearby Carmel Valley and has committed $6 million toward swim and fitness facilities at Fairbanks Ranch. We spoke exclusively with Woolson about the transaction, what makes golf-course and country-club transactions unique and what’s happening within this sector today. Globest.com: What was unique for you about the Fairbanks Ranch Country Club sale? Woolson: Besides the fact that it took two years to complete—this got held up because the City owned the leased land, and the City was focused on the Chargers and other issues—the lease was originally set up for members to own this club. What was unique compared to other properties is that a lot of times we sell properties for the developer of a master-planned community , and we often get brought in by lenders , but the growing trend now is representing member-equity clubs , where members own the club and decide to sell through a third party. This property was struggling in the market. Rancho Santa Fee is a high-end market, but it has a lot of competition. The owners hired a consultant to show them what to do to be more competitive: add a pool and add a fitness facility. They needed to upgrade the facility for a certain cost that either members could pay or they could sell the club. The support was overwhelming to sell the club. They did this ahead of the curve, since membership was starting to dwindle—sometimes it’s too late, and the death spiral happens very quickly. They saw it early and so had enough staying power to complete the transaction. We’re seeing more of these transactions occur because numbers are dwindling a bit. The country-club market, quite frankly, is suffering; those people are Baby Boomers , and it’s hard to add new members. We’re seeing more of these member-equity clubs sell because the cost to upgrade amenities to get more members is too great and requires too much effort. Plus, the board of directors, every time they go to the bar, have some guy barking at them about dues, and they don’t want to deal with it; they want to sell. It used to be very prestigious to own your own club, and a member-owned club is typically a non-profit. They’re just looking to cover their costs. But the employees get bonuses each year, and salaries are way out of whack with what is normal in the market. GlobeSt.com: What else is different about country-club and golf-course transactions versus other product types? Woolson: I was trained in industrial , which is different, but the country-club and golf-course sector is a business opportunity. It’s different than most real estate because it is an ongoing concern. It’s also a business opportunity that uses large chunk of land to do its business, so you have all the complications of selling the business, plus the land issues: easements, encroachments, environmental mitigations , etc. It’s rather complicated. GlobeSt.com: What types of buyers are interested in this sector? Woolson: They’re varied; it’s a very fragmented market. Buyers of these properties are either very small, single golf-course owners who are high-net-worth individuals , golf-management companies or corporations backed by private-equity companies . Some of the most recent owners or buyers of golf courses are looking to repurpose them into something else, and these are usually residential developers. GlobeSt.com: What else should our readers know about the country club and resort market? Woolson: There are very few companies that own large numbers of these golf courses—there are only 15,000 of these courses in the country—so there’s room for consolidation, but there are a lot of courses you wouldn’t want to own. The business itself is fairly flat as far as playing golf goes. During the recession , everyone cut golf out of their diet. Too many golf courses were built. It was an amenity to sell residential housing, but then the financing dropped out. More golf courses have been torn out than built over the last eight years. We may be in year 10 of this phenomenon.