Course Correction: In a State with too many golf courses and not enough houses, Toll Brothers sees money in converting fairways to developments
Course correction: In a state with too many golf courses and not enough houses, Toll Brothers sees money in converting fairways to developments
Let’s see: It would seem to make sense for the fairway to become the main road. The cart path could become a sidewalk. The green could be the center of the cul-de-sac. And the clubhouse would make for a perfect community center.
We’re being serious.
After years of building luxury housing units around golf courses, developers are discovering there’s an opportunity to build instead on what used to be a course — or add houses to courses that didn’t have them previously.
The concept of redeveloping golf courses to be housing communities — and, in some cases, only housing communities — isn’t as basic as described above. But it is going on.
Just ask Toll Brothers President Chris Gaffney.
“Generally, in many areas around the country, golf has been struggling,” he said. “When we look around, and the land acquisition guys do their scouting, if they see a golf course that is being underutilized, going out of business, we’ll look at it for an opportunity.”
Repositioning golf courses is only one way in which Toll Brothers intends to stay ahead of the game, President Chris Gaffney said.
Looking into the future, Gaffney said he wants Toll Brothers to find opportunities in municipalities’ affordable housing needs.
“You always need to seek different opportunities,” he said. “The whole affordable housing discussion continues with the Supreme Court of the state pushing things back to the lower courts and counties, from time to time (they) come out with different numbers on the establishment of how many affordables they have to provide in different towns. “That may drive a lot of the demand over the next four or five years.”
In other words, golf going bust could be a boon for housing.
Gaffney said he sees it throughout the country. The demand for golf courses is not what is used to be, he said, leading operators and land owners to seek to get out of the game altogether or find a different use for their land.
And in New Jersey, a state that has too many golf courses and never has enough housing, Gaffney said the possibilities are there as home builders are discovering large areas of land are becoming available.
“Depending on the size, shape, a number of things can happen,” he said.
Perhaps a sand trap can become part of a playground.
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At Toll Brothers, the change in demand for golf presents a change in opportunity, Gaffney said.
Toll Brothers, he said, already has repositioned three different golf courses by adding residential units.
“In Middletown, Bamm Hollow was a failed 27-hole golf course that we are presently building on,” Gaffney said. “Shackamaxon in Scotch Planes was a course that had its troubles, but, there, we were lucky enough to work with someone who was purchasing the course itself. We built 55 high-end, active adult carriages in the center of the course. There, the course was preserved.
“Up in Mahwah and Upper Saddle River, there was a course that failed called Apple Ridge Golf Course, and we were successful in purchasing that course as well.”
In Franklin Lakes, the High Mountain Golf Course — now known as the Reserve at Franklin Lakes — is Toll Brothers’ next venture.
“In this instance, we looked at the course, we talked to the sellers and they were done,” Gaffney said. “They wanted to get out of the golf business, things were struggling, so the best thing we could do is sit down with them and put together a deal that would provide some really nice residential housing.”
Gaffney said Toll Brothers has cleared the site already and has begun installing the necessary infrastructure. The company plans to deliver several housing options: 60 of its signature family homes, 3,800 to 5,000 square feet; 55 affordable homes; and 160 carriage homes, ranging from 2,600 to 3,500 square feet.
It also plans to add walking trails and a large clubhouse to the property.
“This particular course wasn’t doing as well as they had previously done, and they decided it was time to get out of the golf business,” Gaffney said. “It was an 18-hole golf course. We’ve cleared the entire site and we’re in the process of installing the necessary improvements that will allow us to house construction: moving dirt, installing the storm water facilities.
“Eventually, the roads will be installed. We’ve set up our sales trailer to open up for sale in the next month or two.”
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Toll Brothers has been involved in golf for almost as long as it has been involved in housing.
The company, which began doing single-family home building in 1967, has been so involved in the industry that it owns and operates nearly a dozen courses across the country through Toll Golf.
“We now own or operate 10 courses around the country and that’s kind of grown and shrunk from time to time as courses move on,” Gaffney said.
The institutional knowledge of the industry helps the company when it looks at land, he said.
“Anytime we’re looking at an opportunity, and in this instance, it’s a golf course, we have folks on staff that really understand the nuances of running golf, especially in the cost side: What it entails to keep a course up and running, what’s the maintenance,” he said. “All of those kinds of things and your kind of look at that in each and every situation.”
Toll Golf President Maurice Darbyshire said the company’s relationship to golf has been changing since the economic downturn.
Despite the economic recovery after 2008, Darbyshire said golf no longer looks the same.
Darbyshire said attendance and golf memberships have returned to the numbers before the “Tiger Boom,” or before 1998. However, he said, significant construction during the “Tiger Boom” (1998-2005) left many markets overbuilt after the crash in 2008.
“I would say New Jersey and New York are probably oversaturated with golf,” he said. “But they’re not that much different than the rest of the country. I was at a meeting not too long ago where they said the idea that another 250-400 golf courses closing would be a good thing for the industry.
“It’s a very competitive market. I would expect closures to outweigh new build for the foreseeable future, for three to five years.”
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Darbyshire knows the golf boom is over in New Jersey.
But that’s not the case in other places, he said.
Darbyshire said locations in Florida, California and Arizona are markets where the rise in demand has not been met yet. He helps Toll operate and own courses in Virginia, Colorado, Maryland, North Carolina and Florida.
The reason, he said, is easy to figure out.
“They all have something in common: you can play golf all months out of the year,” he said. “When you get into New England area, your season is pretty short. Having the ability to drive rounds through 12 months out of the year instead of seven is more viable from a business standpoint.”
The future of golf in New Jersey looks different, he said. But there is a future.
Darbyshire said the company will opt to adapt alongside the industry and may even introduce “alternative golf” options to help new or existing assets.
“Topgolf, which is sort of a one-sided, large driving range with targets that allow people to play fun games while they eat and drink,” he said. “That has shown to have some legs. It’s a pretty expensive startup, but once they get up and running, they are pretty successful.”
That’s just one possibility, Darbyshire said.
“If you go to Asia, you see a lot of golf simulation,” he said. “There’s actually a golf simulated tour. There’s some movement toward that, where you can dedicate some space inside clubhouses that will allow you to provide a simulated golf environment that might meet some of the demands as well.
“I think you’ll start to see (developers) invest in those sorts of golf assets in their facilities.”
CBD Real Estate Investment LLC 