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Are Golf Courses a Potential Gold Mine for<br />

Housing Development?<br />

JUNE 25, 2018<br />

KELSI MAREE BORLAND<br />

California is experiencing an extreme housing shortage, but golf courses<br />

may be one way developers can get affordable land for new construction.<br />

Golf courses may be a potential gold mine for housing development. Assuming that developers<br />

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

new housing construction. The State of California is experiencing an extreme housing shortage—<br />

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

whole golf courses or portions of golf courses into residential housing. Golf courses, which are<br />

operating businesses, are often sold at a discount to development land sites.<br />

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

and managing director of golf and resort properties at CBRE, tells <strong>Globe</strong>St.com. “The golf industry<br />

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

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

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

not because they thought they would successful, but rather as an amenity for residential<br />

communities. That really cannibalized the existing golf courses because the sport had not<br />

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

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

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

the business.”<br />

Private equity capital has been particularly active in redeveloping golf courses as a way to<br />

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<br />

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

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

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

$3 million or $4 million in value.”<br />

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

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

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

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

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

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

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

Resort in Rancho Penasquitos and San Luis Rey Downs in Bonsall. Carmel Mountain Ranch will<br />

soon shut down.<br />

Some more aggressive developers have forced the cities into lifting the restrictions by shutting<br />

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

some ruthless developers are buying these properties and shutting them down,” explains<br />

Woolson. “That has happened at StoneRidge Country Club in Poway and Escondido Country<br />

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

in the community, and when they go to the city and pitch a redevelopment, the city is happy to<br />

approve a redevelopment they previously would have never considered.” This strategy, however,<br />

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

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

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

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

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

lower it, it does help.”<br />

Kelsi Maree Borland ›<br />

CONTACT KELSI MAREE BORLAND

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