46 | GOLF REAL ESTATE
at the highest level in the US golf development sector. Writing in an article for the Journal of Sustainable Real Estate in 2010, Hueber argues that the golfi ng boom in the US in the 1990s meant that 60% of all the courses built were closely tied up with resdiential property development offering at the same time. This inevitably proved too much to handle.
Consequently: “The infl uential role that real estate developers played in this regard is of particular note, because too many golf courses were built, too much was spent on developing them and, as a result, many of these golf courses are not fi nancially viable enterprises,” he now says. The after-effect of this over- development in the 1990s is becoming apparent. Fundamentally fewer people are playing the game. Research from the National Golf Foundation has found that, over the past fi ve years, the number of Americans playing has fallen by 13%, and the number of rounds played in 2011 dropped by 3.5%. Golf memberships are also down by roughly one million since the early 1990s. The recession has hit the bottom end of the market according to Lou Goodkin, president of Miami-based Goodkin Consulting. “We’re not getting replacements for those people,” he says. “There are fewer golfers, fewer
REPORT
people who can pay the high amounts to buy into a club. There’s going to be a lot more people out there that are challenged in their retirement years than we’ve had in the recent past.” The market is in testing times,
as KPMG’s head of golf advisory practice, Andrea Sartori, also knows only too well. “Clearly, with the combination of continued liquidity problems and lack of confi dence and fi nancing for both developers and real estate buyers, the climate for golf development remains unfavourable,” he says.
“The increasing equity requirements
of fi nancial institutions, the growing cost of debt (especially because of the increased country risk in markets which were previously considered to be relatively safe, such as Greece, Italy, Spain and Portugal), and the increasing expectations of investors in terms of returns, all mean that the market for golf resorts offering residential real estate will continue to suffer for quite some time to come.”
“There are three types of buyers for residencies on golf estates – owners looking for a primary residence, international second home owners, and speculative investors,” Sartori says. “Overall, there are fewer international second-home owners since the economic downturn, and the speculative
investor has virtually disappeared.” In terms of golf real estate, there have been several stories of woe in the last few years in the United States. Hedge fund Paulson & Co., owner of fi ve luxury golf resorts, fi led for bankruptcy last year citing the economic downturn causing their projects to lose two-thirds of its operating revenue.
Club owners and residents have been suing each other at The Club de Cordillera in Colorado as owners claim they have lost $6 million in 2010, while residents are resisting the 50% rise in dues and the cut in amenities. The list goes on. For Goodkin this is a sign of the future. Golf is simply too expensive to operate in a real estate setting in the current market, he says. “There will be a lot more focus on soft amenities - education, fi tness and health programmes - not just playing golf four or fi ve times per week. [Instead] things where there isn’t a lot of physical equipment, land and high maintenance associated with it.” However, maybe it isn’t all doom and
gloom. Over in Cyprus property fi rm S.Z. Eliades is launching Eléa Estates, a Nick Faldo-designed golf development on the island which recently won ‘Best International Leisure Development’ at the International Residential Property Awards. However, despite this, the
www.opp.org.uk | FEBRUARY 2012
Golf in numbers
- Roughly 63 million golf holidays were taken in 2009 with a global value of US$25.3 billion. - IAGTO membership has leapt from 500 members ... by 2012 it now has 1,814. - Turkey received over 500,000 golf tourists in 2011. - Golfers by region: North America: 28.6 million Asia: 18 million Europe: 8 million Oceania: 1.5 million South Africa: 1 million South America: 0.5 million Source: IAGTO
project’s real estate and marketing director, Pierrick Prillot takes a very sober view. “The good years are gone,” he says. “Since 2006 it has been a wake up call for most of the developers, let’s be honest about that.” However, Prillot sees this as just the natural way of things. “It’s still a competitive market. The clearout was needed. There were just too many courses.” And although the effects of this have been felt, the top of the spectrum is holding up. “It’s a complicated economic situation,” says Prillot. “Our residential tourism sector has been affected. But we believe there is still high-end demand for our product.”
Succeeding in today’s golf real estate market is tough...but it is possible. However, you need face the facts. The buyers have the upper hand, so get to understand them, don’t expect miracles … and be patient. “There never is really a bad time [to do golf real estate developments],” Prillot says. “It’s now a client market - they look more at the quality of the product.” “The conversion ratio is longer than
Clear skies | Luxury developments such as Royal Westmoreland in Barbados have not felt the pinch as much as lesser resorts
before, but I don’t mind. We get clear and positive feedback, and we understand the market conditions,” he concludes.
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