Yesterday's New York Times carried an interesting article about Norman Radow, a "workout specialist" called in by real estate investment firms to fix bankrupt communities.  One of his clients, TriLyn, a Greenwich, CT, real estate investor, owns the troubled Balsam Mountain Preserve near Waynesville, NC.  Balsam Mountain (see my review here) features a mountaintop Arnold Palmer golf course and 400 home sites, only 280 of which have been sold.  Property owners have been trying to raise enough money to come up with $20 million in loan payments.  Developers Chaffin & Light, whose other high-end developments had remained trouble free, are trying to stay involved at Balsam, but given Radow's reputation for tough measures, that does not seem likely.

         Radow and his company, Radco Development Solutions, offer tough medicine to communities on the brink of collapse.  Needless to say, Radow's healthy compensation includes unhealthy words from disappointed owners who thought they were buying into stable communities and suddenly are faced with plunging property values, big assessments, a cutback in amenities (such as clubhouse restaurants) and a private golf club that may have to, ugh, permit some public play.

         Still, as mother told us, sometimes you have to take the bitter medicine in order to feel better.  Of course, she also said an ounce of prevention is better than a pound of cure.  Before you consider a purchase of a home in unfamiliar territory, engage the services of a reputable and experienced real estate agent.  I have worked with and interviewed many of them and can help you make an informed choice.  Please contact me for more information.

         The New York Times article is available here.  If you cannot access it, please contact me and I will email it to you.

Balsam Mountain's breathtaking golf course closed after the developers defaulted on loan payments.  Property owners and a workout specialist hired by the controlling investment firm are attempting to reorganize things.

         An article in Business Week a few weeks ago discussed what many of us who belong to private golf clubs know:  Our clubs are hurting.  Members are bailing out every week or changing the level of their memberships to save money.  Membership rolls are the lifeblood of any club, and below a certain level of membership -- whether 200, 250 or 300 -- proper maintenance of the club and services to members cannot be supported.  As membership rolls erode, funds to keep things shipshape dry up and the club starts to look like the public course down the street (or worse).  Those clubs that can't stem the outflows go into a death spiral from which there is no escape without the pain of assessments or a drastic change in the club's status.

         The problems with the private club industry are the same problems with the real estate industry.  Supply and demand rule

the equations for each.  When golf was seen as the sport for budding executives and their families, clubs could set their initiation fees well into the five figures; many had waiting lists and could be choosy about whom they accepted.  In the face of irrational exuberance, more private clubs formed, especially in planned developments, which created an oversupply even before Lehman Brothers and the stock market plummet.  Suddenly, those budding execs were not so budding anymore, especially if they worked for financial services companies.  Other members who saw their 401Ks hit hard had to make a choice between security and luxury.  Of course, they chose security.

        Today we have way more private club supply than demand, and initiation fees are downward along with home prices, or vaporizing altogether.  One thing clubs cannot reduce, however, are dues, because below a certain point, you can't maintain your golf course and services without a steady flow of cash.  If membership rolls and, therefore, dues drop below a certain critical point, desperate measures are needed.  For clubs with a few deep-pockets members, that can mean large assessments on top of dues.  In other cases, private courses offer themselves for sale to an investor who pledges to keep things the way they are...at least for a few years.  And in a few other cases, the once unthinkable occurs; the course opens for public play.  Once club owners taste the fruit of a steady stream of green fees, it is hard to go private again.

        It is in the natural selection of things that some clubs will go out of business in the next few years.  Their members who can

afford private club charges will find another club in the area; other former members will disperse to the many local daily fee courses, some of which also were opened during the ‘90s boom times and have current issues of their own.  But in a few years, things will settle down, people will go back to work and start feeling confident again, and the upwardly mobile will see private country club membership as an affordable way to provide their families and themselves a means of recreation and socialization.

        I hope folks do a better job of research this next time around, and identify those private clubs that will be prepared for any future blips in the economy.  In my many years of visiting and researching dozens of private golf clubs, I know of only two that have engaged in serious, corporate-style strategic planning.  One is Champion Hills in Hendersonville, NC, and the other is Governor's Club in Chapel Hill.  Governor's Club's strategic planning session included an offsite session with an outside facilitator.  Club membership, according to a friend who lives there, "is off only slightly in the past couple of years." The best news, he wrote, "is that we have not had an operating assessment in the last few years," and they don't expect one this year.

        I'm sure other clubs engaged in contingency planning, but Champion Hills and Governor's Club were proud and upfront about their efforts when I spoke with them.  If you are considering buying a home in a golf community and adding club membership, ask about the club's contingency planning efforts.  Their plans for the future may tell you a lot about what kind of club they are today

        You can find the Business Week article by clicking here.

        My brother Bob, the portfolio manager, wrote the following to me the other day after a triple-digit rise in the Dow Jones Industrials:  "OK, now I'm at least unlocking the door of the doom bunker, so I can be ready to dash in."

        I asked him to hold the door for me. This current stock market is defying the laws of gravity in an environment of massive national debt, double-digit unemployment and a housing market that, despite what the National Association of Realtors tries to tell us, will stumble around for at least a few more years. 

        I am not an investment expert, nor do I play one at this blog site.  But I do have some skin in the game.  This stock market is

scary, and I have begun to pad my own doom bunker with cash.  This hurts because most of those stocks I am cashing out of only made it back halfway from the Lehman Brothers crash last September.  But as we learned last year, half a loaf is better than the alternatives.

        I also don't feel any strong optimism about the housing market in the near term.  There are just too many foreclosures on the horizon and not nearly enough new employment prospects.  But for those who have deferred their dreams of moving to that golf course home (or any place in the southern U.S.), now may be a good time to relocate, assuming you are above water in your current home.   Moving now could actually be a hedge against any badness that ensues.

        My wife and I, for example, are going to sell our primary home in Connecticut in 2011 or early 2012, a year after our daughter

goes off to college.  Let's fast-forward one year, for the sake of argument, and assume our timetable to relocate to South Carolina was next year.  Would the fact that our home's value has suffered a more-than $150,000 loss in the last three years give us pause?  Would waiting another year for the housing market to turn up again matter to us?  The answers are absolutely not.

        We bought our Connecticut house in the early ‘90s and saw its value increase steadily until 2006.  We didn't use the cash in the house as an ATM; we took out a home equity loan along the way, but paid it off in just a couple of years.  Like many Americans who bought their homes pre-2000, we are ahead of the game, with some equity to put to work in our next home.

         We also know that our house is worth what someone will pay for it, not what the Joneses two doors away got for their house in 2007.  (We really do have neighbors named Jones, but we do not try to keep up with them.)  If the average of three appraisals we get on our house comes in at ‘X,' we will expect to get ‘X' as the selling price, no more and, we hope, no less.  As in the stock market, pigs get slaughtered in the housing market.

        It may not seem like much, but the government would give us a $6,500 tax credit if we bought a new primary home before

next spring.  The tax credit, which originally applied to first-time buyers only (at $8,000), is being extended to people who have lived in their primary homes for five consecutive years.  If my Uncle Sam wants to pay for our fancy dining room set or living room furniture, I'm okay with that. (I promise to pump it back into the economy.)

        Also, for those who have good credit ratings and a desire to finance some portion of their dream home, mortgage rates are still as low as 5%, assuming a 20% down payment.  We don't plan to add any debt to our portfolio, but for others, low rates could spell the difference between their dream home or nothing.

        We have a place in South Carolina already, but we plan to live in a city as well.  We are going to rent a city apartment for a while, confirm that we like whatever neighborhood we choose, and keep an eye on real estate prices.  If we see a bargain, we will buy it. That same approach will work for many people considering a home in a golf community or in any neighborhood in a golf rich area.  Some homeowners in southern communities are now desperate enough that they are willing to take the monthly cash flow from a low rent in lieu of a ridiculously low sale price (or foreclosure). 

        Most of us entering our leisure years are going to downsize our living space.  All things being equal, that means our next

home will be comparatively less expensive than our current one, and a lot easier to manage.  But those savings may pale in comparison to cost of living savings if we move from a high-cost state to a low-cost one.  If you live in the Chicago area, for example, and want to move to your dream home next to the classy Thornblade Club in Greer, SC, you'll save 22% in living expenses.  Other savings include:  Philadelphia to The Landings in Savannah, GA, 27%; Boston to Avery Ranch in Austin, TX, 30%; Stamford, CT to Grande Dunes in Myrtle Beach, SC, 38%.  (Data from ACCRA Cost of Living Index)  If you spend, say, $100,000 annually on gas, dining expenses, real estate related expenses, food, utilities, healthcare and the like, you could save as much as $40,000 a year by moving.  In just a few years, you could even make back what you lost on your home's value over the last four years.

         And that can certainly help you keep up with the Joneses.

 

If you are contemplating a move to a golf rich area and want some ideas or a referral to a highly qualified real estate professional, contact me and I will respond promptly. 

Those moving from many areas in the north to southern communities, like Belfair in Bluffton, SC, will save tens of thousands of dollars in cost of living expenses each year.

         Our next Home On The Course newsletter is on the tee and ready to be launched.  This month we consider the benefits -- and the costs -- of private and semi-private club memberships.   With both types of clubs struggling to balance their books, deals are everywhere.  Golfers looking for a place to belong are the big winners. 

         This month's issue of Home On The Course also looks at the exploding auction market for houses.  If you have the smarts and the stomach to buy a home at auction, you could win big.  But is it worth the risk?  We put ourselves on the block in this month's issue.

         Home On The Course is unique, reliable and free.  We do not promote the golf courses and communities we visit, and our observations about golf real estate and related issues are honest, objective and provocative.

         Signing up for the newsletter could not be easier or more secure.  (We never share personal information about our subscribers, ever!)  Just fill in the box at the top left on this page and confirm your subscription after you receive an email from us.  It's as easy as a three-foot -- err, make that two-foot -- putt. 

         Don't miss an issue.  Sign up for Home On The Course now.  And welcome Home.

         With typical Cliffs Community fanfare, developer Jim Anthony and Gary Player announced in 2006 that not only would the legendary golfer design the golf course at The Cliffs in Mountain Park, but also that he would move his business and family to the South Carolina community.  Next month, Player's 8,000 square foot $5 million home at The Cliffs at Mountain Park will be completed -- at least two years before his course is.

         The course was initially slated to have been completed by now, but local environmental groups have thwarted progress.  To date, just three holes are built while Cliffs owner Jim Anthony and his lawyers try to negotiate a

settlement with a range of environmental groups representing as many as 20,000 citizens.  The main issues center on the North Saluda River, over which Player's design would put 15 bridges for cart traffic -- and Anthony would build one more for resident traffic.  The local groups argue that there are better routings for the course that would not affect one of the few substantial trout habitats in the state.

         Golf course completion is now expected to be in 2011, assuming agreements are reached.

         Mountain Park is not the only environmental battle Anthony and The Cliffs face.  The developer's much-ballyhooed High Mountain project, where Tiger Woods is making his American design debut, is also being assailed by local groups for its plan to bury hundreds of feet of the headwaters of trout streams underground.  Some concerned citizens believe such an action will alter water quality downstream.

            Meanwhile, Gary Player and his family are undeterred by the local imbroglios and could spend the upcoming holidays in their new home.  Marc Player, son and CEO of his dad's company, led a local TV station on a tour of the almost-finished home a few weeks ago.  If you want a look, click here.

 

 

Toughest golf course in the world

         In case you missed it, CNN carried a charming story about the only golf course in Afghanistan and its indefatigable owner, Mohammed Afzal Abdul (and, on some days, its only player).  The course, just outside of Kabul, is all hardscrabble and sand, with a little oil mixed in for the putting surfaces.  It has survived challenges no golf course in America has ever had to face, including the Russian and Taliban armies. 

        Words of advice to the owner of the course, now that he has been on CNN worldwide:  Copyright and put your "Kabul Golf Club" cap up for sale on eBay.  You'll make enough to plant grass greens.  Watch the CNN piece by clicking here.   Read a related article at CNN's web site (click here). 

                                                         * 

The 6th hole of the Ocean Course is one of 72 fine golf holes at the Amelia Island Resort.

Another golf resort files Chapter 11

        Amelia Island Resort, a perfectly nice golf and ocean resort near Jacksonville, FL, never garnered quite the attention as a buddy golf destination as did its northern competitors of Hilton Head Island and Myrtle Beach, nor the upscale cachet of a Kiawah or Sea Island.  When I visited the resort, I thought its golf courses well designed and laid out, but their turf pockmarked by uncaring traveling golfers who fixed neither divots nor ball marks.  I also thought the service around the bag drop was chaotic, the attitudes of the staff a bit brusque and the practice green between the clubhouse and first tee at one of the courses a joke -- enough room there for about four golfers at a time.

        When times are good and golf resorts crowded, such niggling criticisms don't much affect the revenue stream.  But that has changed since 2006, and this week, Amelia Island Resort's owners ran out of time, at least under its current organization.  The group filed for Chapter 11 bankruptcy, which gives it some breathing room to reorganize.  A local investor group reportedly is injecting money into the venture.  Here's hoping Amelia comes back healthy and stronger after a bit of pruning.

                                                         *

One rock forward, hundreds back

         We wrote here a few days ago about a recent rockslide near Asheville, NC, that took out a portion of Interstate 40.  As if on cue, work crews in Tennessee were removing one large boulder from Highway 64 this week, and videotaping their work, when tons more of rocks and trees slid onto the roadway.  Fortunately, no one was hurt, and the boulder crushing machine was safely removed before it was pulverized.  It makes for compelling video, which you can watch by clicking here.

        The Internet is the most efficient way to gather information about golf community homes.  Done properly, online research provides a lot of basic information about golf communities before you visit.  Pricing information, of course, is most helpful; if you can't afford to live in a place, then why waste your time with further investigation, no matter how great the golf community looks or how good the golf course seems?

        I scan golf community related websites often and subscribe to some newsletters that provide information about golf communities.  One I particularly like is the Golf Course Home Network, but I take what I read there with a lump of salt.  Like virtually all media devoted to golf communities, Golf Course Home Network promotes its clients' developments.  Every reference to them is great, and they all sound like paradise and great investments.  Of course, in reality, none are perfect.  (Note:  We have chosen a different model here, never charging fees to anyone -- developer or homebuyer -- in order to maintain our objectivity.  We go so far as to pay our green fees when we play a community's golf course.)

        Golf Course Home Network, which provides specific information about communities and wraps it all in a positive package, is typically accurate and timely.  I was surprised, therefore, to note last week an unusual faux pas.  The Network's newsletter and website announced that an upscale condo development in Charleston, SC, called Reverie on the Ashley River, was offering, with the purchase of some of its condos, free golf memberships at the exclusive and expensive Briar's Creek on nearby John's Island.  I visited Briar's Creek earlier this year and was impressed with the course, the clubhouse and the elegant but understated nature of the place.  Briar's Creek had just dropped its initiation fees to a still robust $100,000, so my curiosity was piqued by the Reverie offer.

        But when I went to the Reverie website, I saw no mention of the offer.  I love a good investigation, and I decided to conduct a Google search for further information.  I found an August press release announcing the free membership deal -- that expired nine days before the Golf Course Home Network newsletter arrived in my inbox.  Alas, too good to be true.

        As Emily Latella of Saturday Night Live fame used to say after being advised of a malaprop, "Never mind."

Rees Jones' sleek design for Briar's Creek takes advantage of the Low Country's landscape, marshes and live oaks.