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Multi-Course Feasts:
New owners at Cliffs, Reynolds reset
the table for golf memberships
The smart money new owners at The Cliffs Communities and Reynolds Plantation are betting that an improved economy will reset retirees’ lifestyle expectations and bring back the popularity of multi-golf-course memberships. But to hedge their bets, they have cut prices and added flexibility in their membership plans.
The Cliffs and Reynolds are remarkably similar in the paths they have trod and the customers to whom they appeal. Virtually every amenity imaginable is available in these deluxe developments. Before the recession, both sets of communities, each with six golf courses, charged initiation fees as high as $100,000 and more. Both currently have one golf course in some stage of development: The Gary Player design at The Cliffs at Mountain Park will open the middle of next year; a seventh course was on the drawing board at Reynolds when the financial troubles began, and its future has not been addressed yet by the new owners.
The top membership fee at Reynolds is now pegged at $60,000, effective August 1, 2012, after MetLife and Daniel Corporation purchased the community. The Cliffs multi-course membership was decreased to $50,000 after its new owners, a consortium of landholder SunTX Urbana, developer Arendale Holdings and Cliffs’ residents Steve and Penny Carlile, purchased the communities out of bankruptcy. Having played some of the golf courses at Reynolds and The Cliffs, I can testify that the initiation fees are fair, especially for those golfers who put a premium on variety as well as quality of the golfing grounds (and who can afford the tariff).
Upscale golf communities took a fierce beating during the recession, and the over-spending by the Reynolds and Cliffs founders accelerated both communities toward bankruptcy. It also precipitated dramatic price reductions in their properties, the result of a perfect storm of 1) speculation in the early 2000s; 2) the recession's effect on buyer confidence and spending; and 3) the market’s growing awareness of financial problems at the most upscale communities. In some cases, property sales dropped 50% and more in both communities as some speculators sought to get out from under the obligation of annual dues payments to the clubs, as well as homeowner association fees for land they never intended to own in the long term.
Prices are leveling off now, but some residual bargains will remain until the new managements rebuild confidence among potential buyers. In the case of Reynolds, MetLife certainly has the deep pockets for the long haul, but they also have a reputation as a deliberate decision maker; that kind of corporate culture is perhaps well suited to the insurance business but golf community real estate marketing demands a more spry sensibility. It remains to be seen if MetLife leaves decision-making to Daniel Corp. and the experts at Reynolds.
The situation at The Cliffs, whose founder Jim Anthony once spent $14 million annually on marketing, is different, less about corporate behavior and more about vested interests that must be meshed into a common interest. The three parties that form the decision-making team at The Cliffs represent three distinct business concerns –- SunTx Urbana owns a boatload of land inside The Cliffs, Arendale specializes in land development and management, and the Carliles, who have made a large, personal investment in the future of The Cliffs, want to see the place they call home flourish. For that to happen, they and their partners will need to see their interests as aligned, and pull equally hard in the same direction over the long haul.
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The price of “Cadillac” membership at these two behemoth communities is roughly the same -- $60,000 at Reynolds, $50,000 at The Cliffs -- and grants access to all courses. The following is an outline of the various membership options at Reynolds Plantation. (The Cliffs did not respond by press time to a request for a rundown on their membership plans, which we hope to publish next month.) Dues are monthly.
Reynolds Plantation
Courses: Oconee, National (27 holes), Great Waters, Plantation, The Landing, Creek Club
Platinum Membership -- $60,000
Play at all 6 ½ golf courses, including the strictly private Creek Club; dues $719.00 ($24 per round for cart)
Gold Membership -- $35,000
Access to 5 courses (excluding Creek Club); dues $635 ($24 per round for cart)
Silver Membership -- $20,000
Access to Plantation & Landing courses; dues $512 per month
($24 per round for cart); or $208 per month ($74 per round green fee and cart on any course but Creek Club)
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Simple Math Indicates Golf Communities Rebounding
Many of us are happy to have the silly season of national politics behind us, but I for one was glad to see the comeback of the notion of “basic arithmetic” during the recent campaign. Simple math can explain a lot of things, such as what is happening with property prices in southern golf communities. A process of addition, subtraction and a bit of division -– to arrive at percentages -– shows that prices are up from 2011 in enough golf communities to suggest that the bottom of the market has been reached, and that a rebound is at hand.
Nationally, the respected Case-Shiller index of home prices reported an increase year to year of 2% in August, the month for which they have the most recent numbers. Case-Shiller looks at 20 metro areas to come up with its composite average. Importantly, prices in the Phoenix metro market, which is a magnet for retirees, were up a whopping 18% over August 2011, that market’s fourth consecutive monthly double-digit increase and by far the highest increase of all the 20 markets. And although New York and Chicago had slightly negative price results, Minneapolis and Detroit prices in August were up well over 7% year to year. This uptrend of prices in the north is important to the golf community market because it is likely to compel baby boomers to start offering their primary homes for sale and begin relocating in larger numbers to warmer climates. There is some evidence that is already happening.
Our friends at Local Market Monitor, real estate price forecasting experts, are a little more conservative in their assessments of price rises. Their calculations are pegged largely -- but not entirely -- to employment trends. They see markets like Naples, FL, and Charlottesville, VA, as "low risk" in terms of price appreciation, but express caution for markets like Savannah, Wilmington, NC, Asheville, NC, and Myrtle Beach, SC, where jobs are lagging. Since Local Market Monitor assesses price trends for an entire metro market, it could be that the local golf communities present a more optimistic picture than the overall market (see our comments on The Landings in Savannah below, which seem to run contrary to the overall picture in Savannah). Needless to say, those readers considering Naples and Charlottesville for possible relocation should feel especially optimistic.
The Evidence: More customers, more sales, higher prices
According to my discussions with real estate professionals in the southern U.S. who have been waiting for a re-migration south, their wait may be over. For example, at Glenmore, a 500-acre community with a Scottish accent and a fine John LaFoy golf course just east of Charlottesville, VA, broker Tom Pace reports that house closings this year have already blown past 2011 numbers, 41 to 28. Average prices in Glenmore dropped year to year by just 1.7% but third quarter results in 2011 and 2012 show an average price increase of 15.5%. Tom has a diverse selection of properties for sale at our GolfHomesListed site.
At The Landings on Skidaway Island, near Savannah, overall home sales from all area real estate agencies are up 18% year to year. Officials in the on-site real estate office at The Landings tell us they are selling at twice that rate. The Landings is a nearly 40-year-old community with mostly re-sales remaining in its inventory; because many folks still prefer new construction, the fact that The Landings is selling increasing numbers of re-sales seems like evidence that the buying population is beginning to swell. Landings Realty, which is owned and operated by The Landings property owners association, reports that its 108 buyers through mid-November represent its highest annual total since 2006 –- and the sales year is not quite over.
Our Glenmore and Landings professionals sell properties in their own communities, but Realtors who are working with multiple golf communities also report strong year-to-year results.
Tom Jackson of Gateway Realty in Bluffton, SC, for example, represents buyers for some of the top golf communities in the Low Country, including Colleton River, Belfair and Berkeley Hall. Tom reports that prices are up a little over 3% from 2011 in those Bluffton-area communities but that homes already sold or pending are up 12.5%, from 157 to 177, on a year-to-year basis. Increased sales imply increased demand which, eventually, result in higher prices.
Inventory Shortages on the Horizon
Nationally, inventories of homes on the market have dropped to less than six months, which real estate industry experts consider “in balance.” Inventories in leisure residential communities are somewhat higher owing, in large measure, to all those mega-communities whose land sales dried up during the recession.
“Land prices still don’t justify starting new developments,” says Ken Kirkman, “so we are likely only a couple of years away from an inventory shortage.” Ken is worth listening to, given his combined experiences as an industry veteran, the head of the realty office at Landfall in Wilmington, NC, and the developer behind Carolina Colours in New Bern, NC, where he says traffic to check out the community’s reasonably priced homes is double what it was last year. Since real estate pricing operates purely on the basis of supply and demand, expect prices to begin to accelerate faster in a few years if Ken's prediction about inventories is correct, barring any unforeseen world or national events.
Ken recently provided residents at Landfall with an “annual report” of sales, indicating that median prices this year are up 10% over last year and sales up 20%. He reports what we are hearing from other communities with home prices that stretch into the millions; “almost all the increase,” says Kirkman, “ is in the price-category under $750,000.” Home sales in the $750K to $1 million range and those above $1 million are essentially flat year-to year. Ken expects prices for lots and homes to rise as “the low stuff” comes off the market. We expect a number of bargains to be available in the $1M+ price range for some months to come.
Justice for Wintergreen
Marketing can affect pricing and sales volume in communities that have a good story to tell. One such community is the Wintergreen Resort which spans more than 11,000 acres along and atop a section of the Blue Ridge Mountains, 45 minutes west of Charlottesville. The community features both skiing and golf, including a 27-hole Rees Jones layout at the base of the mountain that is open year round, and 18 holes on top of the mountain (closed for the winter). Last year, Bank of America shocked residents by yanking the community’s line of credit after a disappointing winter of snowfall and a falloff in skiing revenues. Community leaders cut back on operations and released some staff to save money, but things still looked dire until Jim Justice, the billionaire rescuer of the famed Greenbrier Resort, stepped in. The mere mention publicly that Justice had purchased Wintergreen and is currently spending $12 million to upgrade infrastructure and golf facilities had to be a factor in doubling third quarter sales this year compared with 2011, from 21 to 41, according to on-site sales professional Steve Marianella. In addition, the average price of homes sold this year increased 7.6%, to $268,000. It also doesn’t hurt that word is out that the most serious golfers at Wintergreen will have the option of private membership at the top-of-the-mountain Devil’s Knob course beginning in 2013.
Jimmy Fuqua, a real estate professional at The Reserve on Lake Keowee in South Carolina, told me recently that housing in the community “bottomed out” last October, that the number of tours he is conducting at The Reserve are well up over 2011, and that the end of the year push to sell real estate is being encouraged with incentives for golf club membership for anyone who purchases a developer home site (prices begin at $80,000). If you are interested in the details of the incentives, please send me a note.
Doubled Sales…and Pushing for More
Reynolds Plantation, the giant golf community on Lake Oconee in Georgia now owned by MetLife, is not being coy about its own sales incentive program. The real estate office there has had an excellent year, even in the wake of a transition to the new ownership. Through August 20, Reynolds had doubled the total number of home sites and homes it sold compared with last year –- 41 to 83. Sales volume increased a total of $13.5 million. But the Reynolds sales arm is pushing hard for more volume between now and the end of the year, announcing an incentive program for those who buy a developer-owned home site. Depending on the cost of the home site, Reynolds will throw in payment of one of the club's three levels of initiation fee, up to a $60,000 value (Reynolds has 6½ championship golf courses).
We don’t know how long such incentives will last, but as budgets are reconfigured at Reynolds and elsewhere in January, expect a flurry of marketing activity to advertise these buyer bonuses and to entice baby boomers into taking the money (on their primary homes) and running south to a new life. By the way, we are pleased to note that Reynolds has signed up to list properties at our GolfHomesListed web site in the coming weeks. In the meantime, if you would like an introduction to Jere Mills, who has been selling properties there for 20 years, please contact me.
Rising economy lifts all ships…and private club membership
A recent article in Sarasota, FL’s Herald Tribune combined the unusual with the trite. In reporting the faintly shocking news that respected developers Taylor Morrison had decided to build not one but two new golf courses in the Sarasota and Naples areas, the writer of the article felt compelled to remind us that the recession took its toll on golf courses and club membership rolls, instead of focusing harder on the real story -– that the confidence of Taylor Morrison and other developers may be an early signal that private club membership could be making something of a comeback.
For fact rather than knee-jerk reaction, we turn to the National Golf Foundation, whose research is geared to help its clients in the golf industry prepare for the near- and longer-term future. In that regard, we’ll trust the NGF over a local reporter whose research appears to have been conducted by reading other reporters' knee-jerk analyses of the golf industry.
Fact, according to a recent NGF survey: A majority of the more than two million private club members in the U.S. continue to see their membership as preferable to playing the local munis. Whatever the drivers – feelings of exclusivity, a short commute from their homes, a better quality of golf course, extra amenities, a family experience, better networking potential or the je ne sais quoi of “prestige” -- those who resigned their memberships in the last decade indicated to NGF that they are considering a return now that their confidence is building in a recovering economy. In fact, 59% of those who left their clubs four to six years ago could very well return, according to the NGF survey, while 48% of those who departed between six and 10 years ago are considering returning to their former private clubs.
Let the golf club membership renaissance begin.
Bowden’s Market Barometer Interviews Me; free copy for you
Bowden’s Market Barometer, a respected newsletter that follows golf industry news, including information about golf communities, features an interview with your editor, Larry Gavrich, in its November/December issue. The interview topic is Florida and its golf communities, with observations based substantially on my two-week trip along the Gulf Coast a couple of months ago.
The Bowden newsletter, which runs to 32 pages, is jam packed with important information about the economy, the housing market, lifestyle trends among baby boomers, updates on golf businesses and golf communities, and important current events in the world of golf real estate. If you would like a free copy of the issue (a $35 value), please ‘Click Here.’ I will be pleased to personally send you a copy. (Please allow a week for delivery since I have cooking and hosting duties over the Thanksgiving weekend.) Happy Holiday to you and yours.
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