Tampa Bay Business Journal: (April 2019) Golf real estate expert update – Five minutes with Steve Ekovich
National Golf Foundation this year says the degradation in golf participation has stopped and after years of leakage, the numbers are up for the first time since 2012. Why? We went from 23.8 to 24.2 million golfers. With the margin of error, it’s hard to tell why, yet. What’s really interesting is now, we are now counting off course participation in the total participation numbers. It was 9.3 million. Because we are very confident from surveys that off-course driving ranges, a la Topgolf, BigShots, Drive Shack – the last two are the newest entries in the golf world – they are now creating interest in migrating to green grass golf courses, and so we should be counting them in our participation numbers. When you look at Topgolf, if you think about it, people are out there whacking balls in cement holes. At some point, if you are a competitive person you say, ‘I want to see if this works on a green grass golf course.’ So that’s where we see them as kind of a feeder league. By the way, we are not going to mistake Topgolf as being a real traditional golf experience. It’s more about food, entertainment and alcohol. But it does drive people’s interest.
How are things going on the ownership side? Golf is still a struggling industry. It is because we have more supply of golf courses than we have to take those up. We had 199 golf courses close in 2018, nationally. For the last five or six years, we’ve been closing roughly around 200 golf courses a year, net. That’s closures minus additions. So we think we have somewhere between 500 to 1,000 yet to close until we are in supply and demand balance. It could be three years, it could be five years, but no one has the crystal ball. But, we have the Tiger effect. Tiger [Woods] is out there creating interesting golf which is going to drive more participation, which he did when he was playing previously. I have a course under contract right now. It’s losing $900,000 a year in Florida. There are golf courses that are still distressed on the market, and it’s going to take some time to get through that. Now, these golf courses that are closing, a fair amount are being repurposed.
Where do people see opportunity? The hottest product in the industry is non-golfers buying golf courses. Typically you will see between four and 10 times the value of the golf asset. Most of it has been single family. Because you have such a large palette and you’ve got 150 acres. The problem is, and most guys don’t understand, because I get private equity guys calling me all the time, ‘Hey Steve, I have this brilliant idea. I want to buy golf courses for golf course price. I want to put housing on it and make millions and millions.’ I’m like ‘Dude, you are 10 years too late.’ Everybody thinks they are brilliant. The problem is, most golf courses are deed- or zoning-restricted and they already have houses all around the holes and it just doesn’t work for the developer. We’re having a real struggle on one down in South Florida. The community is against it. They organized against it. They hired a PR firm. The HOA board is against it and won’t bring it up at any meeting. They have been denied twice by going to the zoning department and county commissioners. It’s not an easy process for anybody. The developer has spent half a million dollars going through that process and that’s wasted money. The answer is, either you can try another developer or try a different type of development or the owner is stuck. He has a piece of land with no golf course. No revenue that he still has to cut.
When it comes to repurposing, any novel or creative approaches? A few years ago, one of our clients, he closed the course and sold the dirt to the freeway commission to use as landfill. And then the dirt that was dug out of the golf course became ponds and the homeowners could have ponds. The value of the dirt was worth more than the golf course. You have to do it the old fashioned way with lots of lawyers and lots of money and arm-twisting. It is not an easy process. Some people win and some people don’t.
Alexis Muellner Editor T a m p a B a y B u s i n e s s J o u r n a l