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GOLF Updated July 19, 2012, 11:36 p.m. ET

Fore SaleLuxury golf communities have hit a rough patch. After years of aggressive golf courseexpansion, interest in golf declined just as the market for luxury homes plunged. Now,once-pricey real estate is available at below-par prices. Selling a lot for $1.

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By NANCY KEATES

Debbie Bowers and her husband, tired of life in their cold Ohio town, spent eight yearslooking for a home near a sunny luxury golf course in a Southern state. Everything theysaw was too expensive. Then this past May, they got a call: A lot was available at SouthCarolina's Colleton River Plantation, one of the country's premiere golf communities—forfree.

The seller was even willing to pay the$15,000 club initiation fee and the firstyear of $17,000 annual membership duesat Colleton River, which includes threecelebrity-designed courses (two by JackNicklaus, one by Pete Dye), a Stan Smith-designed tennis center and a new 6,000-square-foot fitness center. Mrs. Bowers,55, met her husband that day at the siteand signed the papers. They're nowbuilding a 3,000-square-foot house thatshould be finished by November.

The past two decades saw an unprecedented boom in the building of high-end golfcourses linked to luxury real-estate communities. Betting that aging baby boomers wouldembrace golf as their pastime of choice, the National Golf Foundation set a goal ofbuilding "A Course a Day" beginning in 1988. Real-estate developers teamed up withtop-name golf-course architects, building exclusive communities adjacent to courses, andrequiring homeowners to pay annual club dues—sometimes even if they didn't play.Then, in a moment of spectacularly bad timing, both the golf industry and the real-estatemarket took a nose-dive at once.

Now, private golf communities are dealing with the fallout. Many sellers are dropping theirprices radically, in some cases even paying people to take their land. Gated communitiesthat once traded on their exclusivity are aiming to appeal to a wider swath of buyers,building family-friendly "village centers" with ice cream shops, hiking trails and bowlingalleys. A few are even "repurposing" by reducing courses to nine holes from 18 andselling off the reclaimed land.

At golf communities near Bluffton, S.C.,like Belfair Plantation, Colleton RiverPlantation and Berkeley Hall, several lotsthat initially sold for at least $150,000 arenow on sale for $1 apiece. Investors whobought but never built on the sites aretrying to unburden themselves of thethousands of dollars—typically $12,000 to$17,000—they still have to pay in annual

Prices at luxury private golf communities are crashing,done in by rampant overdevelopment, the economicdownturn and waning national interest in the sport.Nancy Keates has details on Lunch Break. Photo:Zachary A. Bennett for The Wall Street Journal.

Photo Illustration by Jeff Huang; Zachary A. Bennett forThe Wall Street Journal (Fla.); Justin Winter & Associates

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Golf Houses for Sale

club dues.

At the Mizner Country Club in Delray Beach, Fla., which has an Arnold Palmer golfcourse, a lakefront home with five bedrooms, a pool and a spa is asking $795,000. It soldfor $1.6 million in 2007. A lot in Horseshoe Bay Resort, near Austin, Texas, that soldpreviously for $300,000, is on sale for $39,000.

In Bend, Ore., interior designer Ronda Fitton and her husband paid $500,000 for a lot atPronghorn, a gated community with golf courses designed by Tom Fazio and JackNicklaus, in 2006. A similar-size lot sold for $10,000 earlier this year. Ms. Fitton is hopefulvalues will go up but she says the lot is "worth nothing now. It's a real bummer." (Lotprices exclude membership fees.) Lots at Rams Hill in Borrego Springs, Calif. are alsoselling for about $10,000, compared with $100,000 at the peak.

The housing downturn is partly responsible. But the crash in value has been exacerbatedby a development binge that resulted in too many courses just as the sport of golf beganto fade in popularity.

From 1990 to 2003, some 3,000 new courses were built in the U.S., swelling the totalnumber of courses nationally by 19% and costing about $20 billion, according to theNational Golf Foundation.

Many of these new courses were inextricably linked to the luxury-real-estate market.About 40% of the courses built during the 1990s were tied to real-estate communities—ashift from the previous decades, when that number was closer to 18% and the vastmajority of golf courses didn't have people living on them. The golf courses were the lureto get people to buy houses: The bigger the name of the architect who designed them,the greater the prestige and the more expensive the real estate.

Soon after, however, the sport started tolose its allure. The percentage of theoverall population in the U.S. that playsgolf is down over the past 10 years, from11.1% in 2000 to 9.2% in 2010, accordingto the National Golf Foundation.

Last year the number of rounds played inthe U.S. dropped to 463 million from 518million in 2000. The number of golfers fellto 25.7 million in 2011 from 28.8 million in2000. A net of more than 350 golf courseshave been closed since 2005. In 2011,more than 150 courses closed, outpacingthe 19 courses that debuted last year.

Compounding the problem: Real-estate developers didn't think about the viability of thegolf courses themselves, says Art West, founder of Golf Course Advisors, a golf-courseconsulting company. Many of these courses designed by brand-name golf-coursearchitects were championship-level, too difficult for the average player. They took a longtime to play and cost millions a year to maintain, pushing up annual dues.

"It was a perfect storm," says David Hueber, former president and CEO of the NationalGolf Foundation, who wrote a paper called " 'Code Blue' for U.S. Golf Course Real EstateDevelopment" stemming from research for his Ph.D. in real-estate development atClemson University.

Across the country, about 2,000 of the 16,000 golf courses are "financially distressed,"according to the National Golf Foundation. Mr. Hueber estimates that 4,000 to 5,000 golfcourses will be in financial danger if they don't change their model.

Membership fees for many clubs have tumbled. The initiation fee at Old Palm Golf Club inPalm Beach, Fla., which was as high as $250,000 in 2007, is now down to $175,000,while the fee at Tiburon Golf Club in Naples, Fla., is now at $50,000, compared with$145,000 at its peak.

In some parts of the country, the premium that home buyers are willing to pay for a houseon a golf course versus a house that isn't on a course has dropped to about 25%, from50% in 2007, says Doug Schwartz, who runs the sales, marketing and homebuildingoperations for WCI Communities, in Bonita Springs, Fla., which currently owns four golfcommunities. Lisa Treu, an agent with the Treu Group in Palm Beach County, sayshomes on golf courses in Southeast Florida could at one time command a 25% premiumover non-golf-course homes; that premium has now dropped to about 10%, she says.(Some areas are still strong, like Palm Springs, Calif., where agents say the premiums

(S.C.); Sienna Homes Inc. (Calif.); iStockphoto (golf ball)

Ken Siebenhar

This house is at Talis Park, formerly called TuscanyReserve, in Naples, Fla., is for sale for $3,295,000.

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are as much as 35%).

"There are a lot of people who would like to get out of here because of the economy,"says Don Davis, who with his wife bought a house in South Carolina's Colleton River for$970,000 in 2001. The couple, who have loved living in the community but want to moveback to Atlanta to be closer to their grandchildren, say it doesn't make financial sense tomove without selling their house because they'd still have to pay the community's annualmembership dues of some $17,000. Their house, listed at $775,000, hasn't had anyoffers in its six months on the market.

Real-estate agent Dick Datz of Carolina Realty Group says Belfair and Colleton River areoffering agents a $5,000 bonus when they sell a $1 lot; otherwise the commission wouldbe pennies. Rob Norton, president of the Colleton River Plantation Board, says houses inthe community are selling and there's lots of new construction. It's mostly the people whobought the land as an investment who are having a hard time, he says.

Some developers are recasting their golf communities to appeal to a broader swath ofhome buyers, including more families and young people. One example: TuscanyReserve, a 450-plus-acre private golf community in Naples, Fla., which had about $200million invested in its infrastructure, including a golf course designed by Pete Dye andGreg Norman, before it went bankrupt. Florida developer Syd Kitson recently bought thecommunity for $30 million and changed the name to Talis Park, which he thoughtsounded more youthful. Instead of building a clubhouse as planned, Mr. Kitson, will builda "village center" with a cafe, a spa and walking paths. Homes are now expected to be inthe $700,000-to-$2 million range instead of up to $6 million, as originally intended.

"The model of a country club in its current form is gone forever," says Mr. Kitson.

After seeing sharp decreases in its sale prices, Pronghorn, the gated community in Bend,Ore., opened its gates, launching a 48-suite lodge in 2010 and inviting the public to useone of its two golf courses. The Resort Group, a resort operator based in Honolulu,Hawaii, took over in February and announced it will bring in Auberge Resorts to managethe property, turning it into a five-star resort with a spa, three restaurants, two pools,tennis courts and a kids club.

The Cliffs—a group of eight residential developments spread among 20,000 acresbetween Greenville, S.C., and Asheville, N.C., with golf courses designed by JackNicklaus and Tom Fazio—filed for U.S. Bankruptcy Court protection in February, withestimated liabilities between $100 million and $500 million. A planned golf course for theCliffs, designed by Tiger Woods, hasn't been started. According to a 2007 news release,the Cliffs sold 40 lots in the $500,000 price range, and lots at that time couldn't bepurchased below $200,000. Earlier this year a lot sold in one high-end community for lessthan $10,000, according to real-estate agent Justin Winter.

Owners at the Cliffs, who tried to bail it out earlier by putting up $64 million to keep theclub operating, say they are optimistic and are in the midst of a reorganization with CarlileGroup, a diversified company based in Marshall, Texas. Carlile is working with two othergroups.

Owners say the revamped club will have more options for membership. The initiation fee,which was $150,000, is now $50,000. "We are working diligently to find and deliver thebest solution for all members and property owners at the Cliffs," Steve Carlile of CarlileGroup says in a statement.

Golf-course architect Bobby Weed of Bobby Weed Golf Design has been helpingresidential golf communities over the past few years "repurpose"—by compressing theproperties. He is currently working on several proposals to shrink 18-hole courses to nineholes. At the Deltona Club in Deltona, Fla., he helped reduce the amount of land used bythe clubhouse and the golf course to create a separate, 17-acre parcel for development.

The steep decline in prices is a boon for potential buyers, of course. "Now I'm gettingworried I'm going to miss out if I don't move quickly," says Gordon Flach, 44, who hasbeen looking for a golf resort home in Montana, Utah or Oregon for the past three years.Mr. Flach, who is part owner of a resort in the Bahamas, has his eye on a $425,000,3,800-square-foot four-bedroom house in Pronghorn. A similar house was going for $1.1million when he first started looking.

Ron Ruff, a 55-year-old semiretired anesthesiologist, got his lot at Pronghorn free about ayear ago. The seller also kicked in part of the $115,000 reimbursement of his golf-clubmembership initiation fee he got back when he "sold" the land. Mr. Ruff says that he felt,despite the dire climate and other people thinking he was crazy, that Pronghorn has a"magical" feel and that the value would be realized again, just as he had seen happen inother areas before. His house is now complete.


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John Reed, the original developer of Colleton River Plantation, Belfair Plantation andBerkeley Hall, concedes there are too many golf-course communities. "There's a trainwreck in the industry now," he says. "We overbuilt and the market stopped." He had PeteDye and Tom Fazio design a golf course for his latest development, called HamptonLakes, but decided to nix it in favor of a 165-acre freshwater fishing and boating lake.

"The best golf course we ever did is 9 feet underwater," he jokes.

Write to Nancy Keates at [email protected]

A version of this article appeared July 19, 2012, on page D1 in the U.S. edition of The Wall Street

Journal, with the headline: Fore Sale.

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