GlobeSt.com: What does the future hold for values of golf courses?

Arimitsu: As a business, so long as fixed expenses such as water, chemicals and labor do not skyrocket, it is an extremely viable business. Baby Boomers are golf's core customers. This is important because statistically, this generation controls a significant portion of our economy's disposable income. But I think that the real value as an investment will be for those owners who are successful in uncovering some of the trapped equity in the real estate.

GlobeSt.com: What factors should investors consider when deciding whether to buy, hold or sell golf courses?

Arimitsu: I think that golf-course investors should treat golf courses as a covered land play. First and foremost, they should look at whether a course can have sustainable positive income. Secondly, they should examine whether or not “golf” is the highest and best use. If golf is the best or only use, then it should be viewed as a business and priced accordingly. If golf is not the highest and best use, then all of the considerations of an adaptive reuse must be vetted (existing zoning, development corridors and physical constraints).

GlobeSt.com: How does investing in golf courses differ than investing in other types of commercial real estate?

Arimitsu: On the surface, golf-course investment is extremely attractive because they have historically been priced as a function of their business value with little consideration of their potential real estate value. For example, last year, a 110-acre golf course was sold in the Los Angeles market for a little under $4 million. Entitled residential land in the same market is currently trading between $1 million and $1.5 million per acre. The challenge with golf-course investing is that golf courses are generally ingrained in communities and are often perceived as perpetual open space. To change even a partial use is generally a monumental political task.

RANCHO SANTA MARGARITA, CA—As more and more cities become built out, cities are now looking at golf-course land as a way to create more infill real estate to meet increased housing and commercial demands, PMRG's SVP of golf-course and land sales Ken Arimitsu tells GlobeSt.com. Arimitsu recently represented buyer SJS Tomorrow LLC and seller Pacific Links International in the sale of the 230-acre Dove Canyon Country Club at 22682 Golf Club Dr. here for an undisclosed amount. The new ownership has selected Steele Canyon Golf Club Corp. as the course operator.

We spoke with Arimitsu about the value of golf-course land and how this will change in the future.

GlobeSt.com: Why has golf course land become more valuable in recent years?

Arimitsu: Golf courses used to be drivers to promote new housing in cities and drive premiums for housing developers. However, as more and more cities become built out, cities are now looking at golf course land as a way to create more infill real estate to meet increased housing and commercial demands.

GlobeSt.com: What does the future hold for values of golf courses?

Arimitsu: As a business, so long as fixed expenses such as water, chemicals and labor do not skyrocket, it is an extremely viable business. Baby Boomers are golf's core customers. This is important because statistically, this generation controls a significant portion of our economy's disposable income. But I think that the real value as an investment will be for those owners who are successful in uncovering some of the trapped equity in the real estate.

GlobeSt.com: What factors should investors consider when deciding whether to buy, hold or sell golf courses?

Arimitsu: I think that golf-course investors should treat golf courses as a covered land play. First and foremost, they should look at whether a course can have sustainable positive income. Secondly, they should examine whether or not “golf” is the highest and best use. If golf is the best or only use, then it should be viewed as a business and priced accordingly. If golf is not the highest and best use, then all of the considerations of an adaptive reuse must be vetted (existing zoning, development corridors and physical constraints).

GlobeSt.com: How does investing in golf courses differ than investing in other types of commercial real estate?

Arimitsu: On the surface, golf-course investment is extremely attractive because they have historically been priced as a function of their business value with little consideration of their potential real estate value. For example, last year, a 110-acre golf course was sold in the Los Angeles market for a little under $4 million. Entitled residential land in the same market is currently trading between $1 million and $1.5 million per acre. The challenge with golf-course investing is that golf courses are generally ingrained in communities and are often perceived as perpetual open space. To change even a partial use is generally a monumental political task.