Will 2012 be a great year for sales?

Last year at this time, Jeff Woolson was hopeful that 2011 would be a banner year for golf course sales. The Carlsbad, Calif.-based broker with C.B. Richard Ellis was coming off a great year, and had several deals in escrow in the first quarter of 2011.

“Almost all of the deals did not happen,” he said recently. “We had two large portfolios under contract and the sellers blew them out.”

It was a simple case of greed. The sellers thought they could get more, and backed out of the deals. By the time they came back on market in the summer, the buyers were gone — scared away by negative economic news and the fear of a double dip recession.

“Buyers don’t have the time to be jerked around these days,” said Woolson. “They just move along to the next deal.”

But the raw emotions that were on display in 2011 — from greed to fear — did not make for a stable sales market. In fact, golf course acquisitions slowed considerably after August. There were only 19 transactions with known market data in the fourth quarter, down from an average of 27 per quarter.

But a lot of the buyers and sellers who failed to close deals in 2011, are still in the market. And some experts predict this will be the best the market will ever be for buyers.

“I think this will be a very good year for buyers,” said Steve Ekovich, a broker with Marcus & Millichap. “This is going to be as low as the market gets.”

Ekovich, who closed 16 deals in 2011, believes it is “now or never” for buyers to get great deals.

Eighteen months ago, his firm predicted that the apartment market had reached its low point. Today, apartments are selling at pre-recession cap rates – showing amazing prescience for the real estate investment firm.

Within a year to two years, he predicts, more risky investments like golf will experience the rebound.

“The current economic news does not translate to more rounds and better revenue at the course level for six months,” Ekovich said. “This year, if we do not see an increase in greens fees, we will see an increase in yield maintenance – less cheaper golf and discounting.”

Larry Hirsh, president of Golf Property Analysts in Pennsylvania, wrote recently that profitable courses are selling based on cap rates in the range of 10 to 12 percent of stabilized net income. Courses that are breaking even are selling based on gross revenue multipliers — from one times revenue to 1.5. Courses that are losing money, are selling for less than one times gross revenue.

Hirsh, like others, thinks a rebound is still off in the future — due primarily to the lack of available financing. Woolson said past experience shows it will be at least a few more years. 

“After the 1992 recession, I did not sell my last RTC course until 1997,” he said, referring to the Resolution Trust Corporation that was charged with liquidating real estate assets after the saving and loan crisis. “If this is the great recession, why would we get through this in three years? Everybody got a little too optimistic [this past year].”

Woolson said the economy is more tied to global conditions this time around. Wile the U.S. is rebounding, Europe is expected to struggle with the Greek crisis all year long.

“Buyers don’t want to catch a falling knife,” he said. “But how long can that last?”

Without question, there are a lot of potential buyers in the market. Wealthy individuals, private equity groups and institutional investors are looking at opportunities and are hopeful to close deals this year.

Already, both Ekovich and Woolson report several courses under contract. Of course, many are the same courses they had under contract last year. Now, they just have to hope that buyers and sellers emotions stay in check long enough for the deals to close.


Will 2012 be any different than 2011? Probably not, but I think that it is foolish to characterize golf market in generalized sweeping macro terms. Golf is very much a micro business and every local market is different. There will still be high demand for solid fundamental golf courses that are relevant to their micro market. And Trophy Courses will continue to garner interest. Conversely, courses built in saturated markets or poorly populated markets will continue to struggle. I think the root of the slowdown in sales has just as much to do with Sellers as with Buyers. I disagree with some of the statements characterizing the Sellers as “Greedy”. When it comes right down to it, if the Seller doesn’t have to sell, why should they? In a long- term-hold strategy, so long as the property cash-flows, why would anyone want to sell in this market? New development of golf courses is non-existent, courses are shutting down, thus everything is pointing towards a shrinking supply. In the classic Supply and Demand equation…isn’t this a good thing for owners? Market discipline is back and that’s a good thing. That said, 2012 should be no different than last year, or for that matter any year where irrationality doesn’t rule the roost.

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