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Wednesday, Oct 4, 2023

Developers Find Opportunities in Golf Course Properties

Ever-changing business realities for the nation’s 14,000 golf course properties continue to be reflected in San Diego County, in the form of several recent sales, near-sales, closings and pending redevelopments.

Examples include the late July purchase of San Diego’s former Carmel Highland Golf Course by Manhattan Beach-based 33North

Development Group, which plans to develop a new residential community after buying the 114-acre site for $14.5 million. Housing type and other details have not been finalized.

That deal followed closely behind San Francisco-based Bay Club Co.’s purchase of the Fairbanks Ranch Country Club in Rancho Santa Fe from its members, for an undisclosed price. The property will remain open as Bay Club expands on family-targeted programs that give members reciprocal access to all of the company’s properties.

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Also, operators of the Fallbrook Golf Club, which was closed July 26 with all watering and maintenance ceased, are actively seeking a buyer after a pending sale recently fell through.

Residential Development

In Escondido, Santa Monica-based homebuilder New Urban West has recently been gathering input from neighbors of the site that formerly housed the Escondido Country Club, as it plans for a new residential community that will have no golf course. The number and type of planned homes has not been determined, though the builder has created a preliminary concept that includes a 30-acre green belt, a resort-style clubhouse with a gym, pool and tennis courts, and a new on-site restaurant and bar.

New Urban West is in a due-diligence process related to the development, and recently said it has held nearly 40 meetings with more than 350 residents since spring as its gathers results from survey cards. The builder is also seeking to heal wounds created by nasty battles waged in recent years between local residents and a prior developer over the property’s future.

“From the outset, our goal has been to create a plan that would help restore the community pride and prestige,” New Urban West said in a statement sent to San Diego Business Journal on Aug. 12. “Our hope is that we can forge a path that is desirable to residents who live in the community and is financially viable.”

If the builder ultimately decides to pursue a project, a fall 2016 submission of an application to the city of Escondido would initiate a year-long environmental review process.

Industry Challenges

Local real estate observers note that changes in San Diego County reflect a shakeup that has been rippling through the golf course industry for at least the past decade. Even as many U.S. and local courses continue to operate successfully, the industry is dealing with challenges including declines in the number of golfers, as well as rounds being played and time spent at golf properties.

The industry also faces rising costs for water and other maintenance expenses amid drought conditions, and acreage once devoted to rolling greens increasingly looks attractive to developers of homes and other types of money-generating projects in land-constrained places like San Diego County.

According to the National Golf Foundation, the number of U.S. 18-hole-equivalent courses in operation stood at 14,288.5 at the end of 2015, down 1 percent from 2014. During 2015, there were 177 courses that closed permanently, with an additional 49.5 that were temporarily closed for renovation.

Openings lagged well behind closings. There were 17 brand new U.S. courses that opened during 2015, while 45.5 reopened after renovations and 15.5 reopened after other prolonged closures. The foundation projects that similar trends will rule in 2016, with 15 to 25 new course openings, 50 to 100 major renovations, and between 150 and 175 closings.

Tweaking Business Models

While U.S. course closings have become common over the past decade, nationwide operators such as Bay Club and Dallas-based Club Corp. in recent years have been acquiring individual country club properties, tweaking their business models to make them family-friendly hospitality centers where activities and amenities range well beyond golf.

Jeff Woolson, a Carlsbad-based executive vice president with CBRE Group Inc. who represented the sellers in the Fairbanks Ranch Country Club deal — essentially the club’s equity-holding members — said the transaction allowed the sellers to retain their membership and access to the property.

At the same time, those members were relieved of their long-time shared responsibilities in maintaining and operating the club in what has become an increasingly competitive, high-cost industry. Bay Club’s business model allows it to effectively operate its on-site amenities — such as bars and restaurants — throughout the week and throughout the year.

Bay Club’s properties cater to families and their visitors, seeking access to social, dining, swimming pool and golf activities, among other fitness and health-related offerings, in a relatively private setting with flexible access.

“The soccer moms and the soccer dads don’t have hours to spend golfing on the weekend, but they do want to spend some time with their families on the weekends and in other parts of the week,” said Woolson, who is also managing director of CBRE’s U.S. Golf & Resort Group.

Deciding to Sell

Keith Cubba, national director of golf course brokerage services at Colliers International Group Inc., said many U.S. courses are doing relatively well, thanks to location and other factors, but their owners have decided to sell for personal or family reasons.

“Sometimes it’s just a matter of an owner looking to retire, and the course is otherwise doing very well financially,” said Cubba, who is based in Las Vegas and handles transactions nationwide.

Other deals are the result of current owners deciding to sell off properties that had struggled under prior ownership, but now face a more favorable climate. For instance, Cubba was part of a Colliers team that represented owner Textron Financial in the recent sale of the Mt. Woodson Golf Club in Ramona.

According to the magazine Golf Inc., Rhode Island-based Textron entered the golf market in 1991 and was once the most prominent mortgage lender in the industry. Since 2010, Textron has been slowly divesting itself of more than 20 U.S. courses that fell into foreclosure, the last of which was Mt. Woodson.

Mt. Woodson was purchased in February for $1.7 million by former San Diegan Daryl Driscoll, who now resides in Las Vegas and heads Alliance Golf, which builds golf facilities and water features.

The family-run GCP LLC, led by Daryl and son Shawn Driscoll, announced plans for upgrades at the Ramona course that will include improvements to bunkers, tee boxes, landscaping and restrooms, with the addition of a new clubhouse restaurant.


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