Globe Street GOLF Article

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Are Golf Courses a Potential Gold Mine for

Housing Development?

JUNE 25, 2018

KELSI MAREE BORLAND

California is experiencing an extreme housing shortage, but golf courses

may be one way developers can get affordable land for new construction.

Golf courses may be a potential gold mine for housing development. Assuming that developers

can get around potential deed restrictions, these large pieces of land could be potential fodder for

new housing construction. The State of California is experiencing an extreme housing shortage—

and an affordability crisis—as a result, there has been a new trend of developers redeveloping

whole golf courses or portions of golf courses into residential housing. Golf courses, which are

operating businesses, are often sold at a discount to development land sites.

“One of the bigger trends we are seeing is the repurposing of golf courses,” Jeff Woolson, EVP

and managing director of golf and resort properties at CBRE, tells GlobeSt.com. “The golf industry

got way overbuilt by the year 2000. The National Golf Foundation (NGF) published a report in the

late 1980s that projected ‘a course a day’ needed be built for the next ten years to meet the future

demand of baby boomers. That turned out to be false, but developers kept building golf courses,

not because they thought they would successful, but rather as an amenity for residential

communities. That really cannibalized the existing golf courses because the sport had not

expanded, yet the number of golf courses grew dramatically. Now, it is just the opposite. There

are more golf courses closing every year for the last several years than opening, and developers

are trying to repurpose a lot of the golf courses that are closing. That is a huge trend right now in

the business.”

Private equity capital has been particularly active in redeveloping golf courses as a way to

monetize portions of the land and create more value. “Part of their strategy is to look at the golf


course and find ways to monetize parts of the property,” says Woolson. “They may not be able to

completely repurpose or redevelop the property, but a lot of golf courses have small pieces of real

estate that can be monetized. That might mean taking out a driving range and putting condos on

the property or rerouting a hole to put three or four homes on the property. That could give you

$3 million or $4 million in value.”

The trend is really only available to deep pocketed capital that understands the golf business. Golf

courses are often on deed restricted land, and that is a major development challenge. “As a

development opportunity, that real estate is probably worth twice what it sold for as a golf course,

but you have to find golf courses that you can convert and it is very hard,” says Woolson. “Some

older golf courses don’t have any zoning, so you have to find out if the golf course is deed

restricted or if it is part of open space and density balance. ”Some golf courses in San Diego have

been closed with plans to convert the land to a higher and better use, like the Doubletree Golf

Resort in Rancho Penasquitos and San Luis Rey Downs in Bonsall. Carmel Mountain Ranch will

soon shut down.

Some more aggressive developers have forced the cities into lifting the restrictions by shutting

down the golf course and creating a community eyesore. “To get around the deed restriction,

some ruthless developers are buying these properties and shutting them down,” explains

Woolson. “That has happened at StoneRidge Country Club in Poway and Escondido Country

Club, plus other coursers in Rancho Mirage and Las Vegas. The developer creates so much pain

in the community, and when they go to the city and pitch a redevelopment, the city is happy to

approve a redevelopment they previously would have never considered.” This strategy, however,

won’t work everywhere. “Some areas won’t get redeveloped at all. Orange County and some

areas of San Diego won’t be redeveloped no matter what the developer proposes,” adds Woolson.

Golf courses could be a major win for the housing crisis by providing a more affordable land option

to developers, but it wouldn’t solve every problem. “A lot of the housing crunch is because of

labor,” says Woolson. “If you can take one part of the equation, which is the price of land, and

lower it, it does help.”

Kelsi Maree Borland ›

CONTACT KELSI MAREE BORLAND

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