Are Golf Course Investment Opportunities Coming Down the Fairway?

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© Provided by The Motley Fool Are Golf Course Investment Opportunities Coming Down the Fairway?

It’s no secret that golf participation rates are on the decline. According to the most recent statistics, participation in U.S. golf dropped from 29 million per year in 2006 to 24 million in 2019. That said, interest in living on or near golf courses is on the rise.

According to Sotheby’s Realty, there was a 26% jump in searches for properties with a golf course between January 2020 to February 2021. Not only are golf courses facing participation pressure, but there’s also pressure from developers who see value in underutilized land on or around golf courses.

The catch-22 is that developers need the golf courses to add value to development lots, but the operation of the golf course itself isn’t that interesting. And, community opposition to the conversion of golf courses to subdevelopments is strong.

Opportunity in golf courses

Despite the above challenges, some unique opportunities are arising for real estate investors and developers in golf courses. Here are some highlights of recent developments and transactions that can shed light on some of these trends.

Manufacturing: In 2020, Saxon Partners purchased the 80-year-old Lansing Country Club along the Illinois-Indiana state line south of Chicago. It also got the thumbs up from municipal officials to repurpose the course to create a $160 million campus for research and light manufacturing.

Community Living: In 2012, New York-based real estate investment trust (REIT) iStar purchased the 688-acre Naples Reserve golf community and converted it to a housing development focused around the waterfront and a casual, community-geared lifestyle.

Warehouses: Amazon recently purchased an 18-hole golf course in Clay, New York. The plan is to build a $350 million distribution center. Amazon is also planning a fulfillment center at a portion of a former golf course in Alcoa, Tennessee.

Hospitality: The Hammond Golf & Country Club in Ontario, Canada, recently announced plans to build 50 small cottages on the golf course land to attract short-term rental guests and expand its business model beyond golf memberships and green fees.

Recreation: The Blue Cypress golf course is based in Jacksonville and is making a comeback after being closed. The city has rebuilt a 9-hole portion of the golf course, also adding other recreational facilities like a fishing pier, community center, swimming pool, tennis courts, and athletics field.

There’s a number of ways to breathe new life into the old golf course business model. New attractions, outdoor activities, short-term rentals, warehousing, and the list goes on. For savvy investors who know what to look for, there may be some interesting opportunities in the coming years to optimize revenue models and add new thinking to an old model.

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