For Price Conscious,
Experienced Developer Says
Golf Community Resales the Way to Go

Ken Kirkman has three decades of experience developing some of the most successful golf communities on the east coast.  They include Bald Head Island, Landfall (Wilmington, NC) and his latest project, Carolina Colours in New Bern, NC, which opened in 2005.  He is still called upon by numerous planned communities to offer advice and guidance as those large communities assess and respond to changing market trends, especially in the wake of the 2008 recession.

When I have a question or need advice about the golf community market, Ken is my go-to contact.  As we begin a new decade, I thought it would be a good idea to ask him, based on his experience at the North Carolina communities, for his views on the current state of the industry and what he sees ahead.  Here is an edited version of our conversation about Landfall and Carolina Colours.

 Landfall has always struck me as a rather conservative, almost formal golf community.  Is that impression accurate?

Not anymore.  It may have seemed that way 30 years ago when, for the most part, residents were mostly New England retirees looking for an ultra-private enclave.  But around 2000, things began to change.  Members purchased the golf club from the developers and attempted to run it as a traditional, very private club.  But after a couple of years of financial shortfalls, the Club realized it needed to seek members from outside of Landfall, while at the same time more and more local young successful people, many of them entrepreneurs, were moving in.  The younger group was more causal in orientation and as their percentage of membership increased and the original members aged out, the Club became more and more informal.

It was essentially the “formal” club members versus the “casual” ones?

Precisely.  The older group had certain expectations of what a country club should offer in the way of services and decorum and that didn’t match the trend toward more casual.  The older people eventually moved on, the younger ones moved in, and today about 30% of residents are working locally.  Those young families were only 10% back in 2000.  Few want a formal club in Wilmington or elsewhere anymore.

Have you seen a change in country club membership with the change in demographics?

Yes.  Back in the 1990s, at the peak of golf course community development, about 60% of Landfall’s residents were active golfers.  Today, that number is about 30%, and the drop-off is one reason why you are seeing relatively few new golf communities built across the country.  To support a private golf course, you need between 1,200 and 2,000 homesites.  [Editor’s note:  Thirty percent of 1,200 is 400 families which, most golf course officials indicate, is the proper number of members for viability.]

So size matters when it comes to building a private golf course?  Was that a factor in opening Carolina Colours as a semi-private club?

Exactly.  With only 200 homes at Carolina Colours and a maximum of 1100 homesites when built out, there is no way we could support a private club, at least not until near build-out.  We added 35 new homes last year, and golf membership remained at just 130, and that includes some local people from the New Bern community.  A few things confirm we made the proper decision.  Half of our annual rounds of golf come from members, half from outside play, and the total number of rounds was up about 20% in 2019, to a total of 17,000 annually.  Our men’s golf association added 14 members last year.  [Editor’s note:  The cost for property owners to join the Carolina Colours golf club is an equity contribution of $6,000.  Monthly dues are $198 per couple and $175 for an individual golfer.  Ken estimates that the initiation fee will be made up in “free” golf within three or four years.  Some members, he told me, play five times a week.]

With 45 holes of golf — Jack Nicklaus and Pete Dye — how is Landfall’s country club doing?  The costs must be significantly higher than at Carolina Colours.

After the recession, the club dropped its initial equity contribution from $50,000 to $20,000.  That, and the new, more casual atmosphere drove an increase in membership to the point that there is now a waiting list for new members in the full-golf category.  Dues for full golf membership run around $700 a month.

Are non-golfing retirees taking up golf?

Our pros at Carolina Colours teach a beginner’s class every spring, as well as a refresher course for those who want it.  The beginners class has up to 12 participants each year and, out of that group, two or three become golf members.  About a dozen of our 130 full-golf members actually took up the game after retirement.

With baby boomers still retiring at an impressive rate, and a slowdown in the new construction of golf communities, I have been reading a lot about an inventory crisis in some golf communities.  Is that true at Carolina Colours?  And if so, what is your advice for those currently considering a golf community home?

We don’t have that inventory issue at Carolina Colours.  Everything is pretty much in balance.  But like other golf communities with lots for sale, we do have something of a cost crisis because roads and other infrastructure costs are going nuts.  Those costs add as much as $40,000 in hard and soft costs to the preparation of each lot, and that is without land cost.  The $40k in costs is up from $15,000 per lot just 10 years ago.  The spread between the cost of a resale home and an identical new one has widened today, from the historical 5% to 10% to as much as 15% or more.  All in all, new homes, including the price of a lot, are about 25% more expensive than they were just five years ago.

If I were going to retire in the next three years, I would determine the premium I am willing to pay to get a new home, built to my specifications as compared to a home on the resale market that comes close to what I want.  If the spread is too great, go with the resale.

Is Landfall going through a similar situation?

No, it is a totally different set of circumstances.  First of all, 2,000 homes are already built at Landfall, which was initially developed in the late 1970s.  There are only a handful of lots remaining.  Second, Wilmington has become a popular place to live for both retirees and young professionals.  Out of those 2,000 homes, only 54 are currently on the market, which is the lowest percentage in the community’s history by about 30%.  Therefore, on the one hand, virtually all properties for sale at Landfall are resales, which would normally provide more value than new construction.  But the historically tight inventory is propping up resale prices.  The average price of a home at Landfall is currently around $750,000.  (Editor’s note:  The average spec home price at Carolina Colours averages around $375,000, but national builder D.R. Horton is offering some homes just under $300,000.)

Thanks Ken.

Please see accompanying sidebar for notes on both Landfall and Carolina Colours.

Larry Gavrich
Founder & Editor
Home On The Course, LLC