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Golf Anyone? Anyone? Developers Reimagine South Florida’s Money-Losing Courses

The Carolina Club, an 18-hole championship golf course in Margate, has served as a qualifying site for the PGA Honda Classic and is known for its fast, well-manicured greens and contoured fairways.

But the semi-private club, built in 1971, isn’t making the cut. Miami-based developer 13th Floor Homes plans to acquire the 140-acre facility and completely transform it into a 350-unit residential community, with single family homes and townhouses.

The proposed homes would cost about $300,000 to $400,000 each, meaning the developer stands to make more than $120 million in total sales. The current owner, J&D Golf Properties, would also stand to profit from the sale. It purchased the club in 2002 for $5.3 million.

The Carolina Club conversion is just one of several planned golf course redevelopments in South Florida, as golf operators weigh the rising expense of maintaining fairways and greens against the diminishing revenue. Couple that with the game’s waning popularity nationwide, and owning a golf course is now a risky proposition.

“Less people play golf, and those who do play are playing less rounds,” said Mike Nunziata, president of 13th Floor Homes. “Operators are having to cut rates to attract players. The industry is now in a place where the revenue just isn’t enough to cover the costs to maintain itself.”

His company has developed a niche business statewide for building residential communities on former golf courses. From the 1970s to the 1990s, the game experienced a rise in golf course construction — spiking in Florida — along with some residential communities nestled alongside. Nunziata said that development far exceeded demand.

Despite several closings, Florida still has the highest number of 18-hole golf courses in the country. And just in Miami-Dade, Broward and Palm Beach counties, there are 177 18-hole equivalent golf course facilities, according to the National Golf Foundation. That’s down from 189 in 2007. But many others are barely hanging on, industry pros said.

“The golf courses were purely being built to sell the homes and support neighboring residential communities,” Nunziata said. “It was really more a real estate play and not so much a strategy that was centered around golf.”

In addition to his plans for Carolina Club, the developer is converting an 18-hole course in Delray Beach into Avalon Trails, a 521-unit residential community geared toward people 55 and older. Other projects in the works include a single-family home community over what are now two 18-hole golf courses in Tamarac.

In Hollywood, the Pulte Group is building 645 homes — including townhouses and single-family homes — at the former Hillcrest Golf & Country Club. The area covers 160 acres, and will rise over the 18- and 9-hole courses.

Atlanta-based Pulte is also developing 152 homes on nine of Woodmont Country Club’s 18 holes. It paid $10.2 million for the property in 2016.

But just as Tiger Woods appears to be on the comeback trail, the game itself has been evolving and companies are adapting to the next generation of fans and players. Topgolf, a Texas-based entertainment and technology-themed firm, has been establishing a presence in major commercial centers around the world, including Miami. At least five Topgolf facilities have either opened or are being planned in Florida. The first opened in Miami Gardens in 2016.

Investors are also considering other uses for all that golf course land. Soccer superstar and entrepreneur David Beckham is considering transforming the Melreese Country Club in Miami into a 25,000-seat Major League Soccer stadium. Beckham and his partners, Marcelo Claure, Jorge and Jose Mas, and Simon Fuller have put the price tag at $200 million.

For Topgolf, facilities are typically three-story entertainment complexes that feature a driving range, restaurant and bar. The golf balls are microchipped so statistics like distance and accuracy can be tracked and translated into points for games.

In some cases, they’re being built on existing courses, as in West Palm Beach. There, a Topgolf facility will rise on the 196-acre West Palm Beach municipal golf course. And while it could be seen as a competitor to 18-hole courses, Topgolf says it works closely with institutions like the Professional Golfers’ Association to help some courses stay open.

Topgolf spokesperson Morgan Schaaf said Florida is a natural place for Topgolf to expand, which the company is doing at a rapid rate. Topgolf is aiming to open seven to 10 locations a year, she said. It’s also going international, with facilities planned for Australia, Canada and Mexico within the next five years. Schaaf added that half its customers are golf novices because the company makes it more accessible than a traditional course.

Despite Topgolf’s popularity, a love for the course is still strong in Florida. Developer Lennar had been under contract to build homes on the 212-acre Ocean Breeze Golf Club in Boca Raton, which shut down in 2016 after having lost money and members for years. But plans skidded into the rough amid opposition from Boca Teeca duffers who were left with no options.

Sunrise-based GL Homes had already acquired the nearby Boca Raton Municipal Golf Course for $65 million. It plans to replace the 27-hole, 194-acre course with a community of 500 homes.

Earlier this month, the city of Boca Raton and its Greater Boca Raton Beach and Park District bought the 27-hole Ocean Breeze course for $24 million. The seller, Wells Fargo, seized the property through foreclosure. The renovated golf course, to be called the Boca Raton National Golf Club, is set to open in late 2019 or early 2020. It is expected to be a costly endeavor, up to $18 million to renovate and about $2.2 million per year to maintain.

“That kind of community effort appears to be an outlier,” said Brent Baker, Pulte’s Southeast Florida division president. “Only two kinds of golf courses will stay open in the future. The first is the one that requires membership fees, and the second is a public golf course that is subsidized by taxpayers, though even those — as seen with the Boca Raton municipal course — have great difficulty staying afloat. The math usually doesn’t add up. To keep a golf courses operating you’re talking hundreds of thousands of dollars, sometimes millions of dollars a year.”

 

Source: The Real Deal

Medical-Marijuana Ruling Put On Hold By Florida Appeals Court

In a closely watched case, an appeals court just agreed to put on hold a circuit judge’s ruling that said Florida lawmakers and the state Department of Health have violated a 2016 constitutional amendment that broadly legalized medical marijuana.

The 1st District Court of Appeal approved a stay of the ruling but also said consideration of the underlying issues in the case would be “expedited.” The Florida Department of Health went to the appeals court in October after Leon County Circuit Judge Charles Dodson sided with the Tampa-based firm Florigrown in a battle about how the state is carrying out the constitutional amendment.

Dodson found that a 2017 law was unconstitutional and issued a temporary injunction requiring state health officials to begin registering Florigrown and other medical-marijuana firms to do business. Dodson’s ruling targeted parts of the law that placed caps on the number of medical-marijuana licenses and dealt with issues such as the creation of a “vertical integration” system that requires marijuana operators to grow, process and sell medical marijuana — as opposed to businesses being licensed to play different roles in the industry.

The case could open the door to more firms doing business in that broadly legalized medical marijuana.Florida’s fast-growing medical marijuana market. Florigrown, for example, filed the lawsuit after being denied approval by the Department of Health.

In arguing for the stay, Department of Health attorneys this month wrote that allowing Dodson’s order to “take effect injects confusion and uncertainty into the implementation of the medical marijuana amendment and the registration of MMTCs (medical marijuana treatment centers, as the firms are known) throughout Florida,” the filing said. “Under the existing status quo, the department may only grant an MMTC license to an entity after vetting its qualifications. In contrast, under the injunction order, it is unclear how the department would determine which entities are qualified to operate as an MMTC, or if any registration process would exist at all. This is because the department’s authority for establishing such rules … would be gone, nullifying the implementing rules already established by the department.”

But attorneys for Florigrown disputed such arguments.

“Contrary to the department’s assertions, Florigrown produced an abundance of evidence establishing the public harm that is occurring because of the Legislature’s unconstitutional limits on the registration of medical marijuana treatment centers,” the firm’s attorneys said in a brief last week. “It also established that sufficient guidelines already exist to protect the public. The department produced no evidence or testimony to the contrary. All the trial court has done is direct the department to allow the ‘registration’ of MMTCs. Once an MMTC is registered, it must still meet other requirements before it can actually commence operations.”

The Department of Health’s appeal of Dodson’s ruling in October triggered an automatic stay. But Florigrown then returned to Dodson and requested that he vacate the stay — which he did in a Dec. 4 order.

Attorneys for the department then went to the appeals court, essentially asking that the stay be reinstated while the appeal of Dodson’s October ruling moves forward.

The Tallahassee-based appeals court granted that request, saying in a one-page order that “The stay shall remain in effect pending final disposition of the merits of this appeal.”

As is common in such orders, the appeals court did not explain its reasoning. But it also said the appeal will be expedited.

With Florida potentially one of the most-lucrative markets in the country for medical marijuana, disputes about licenses have led to numerous court and administrative fights. More than 71 percent of voters approved the medical-marijuana constitutional amendment in 2016.

In the appeals-court filing this month, the Department of Health said “14 medical-marijuana treatment centers had been registered and licensed and that they operated 72 dispensing locations across the state.”

 

Source: SunSentinel

The Real Estate Trends Expected To Shape Cities In 2019

As industry experts cast predictions of how various smart city sectors will evolve in the new year, one sector is offering a blurry outlook for 2019: real estate.

While commercial activity has been on the rise, particularly from expanding technology firms, shifts in e-commerce, affordable housing and residential demographics have also spurred many questions for how the urban real estate landscape will transform.

The Urban Land Institute and PricewaterhouseCoopers (PwC) has analyzed this real estate forecast and compiled insights in its 40th annual Emerging Trends in Real Estate report. While 2018 promised to be a year of tech adoption and activity among Generation Z buyers, 2019’s biggest trends will likely include cybersecurity risk management and prioritizing resilience.

“Think of this year’s trends as circles in a Venn diagram,” the report reads. “Trends will overlap, indicating that they interact, and over time those interactions (sometimes involving more than just two circles) foster new conditions that can alter either the features of the trend, its relative strength, and even its duration. We aren’t in coloring-book world anymore.”

Hot Markets To Watch

Each year, the Emerging Trends survey — which reflects the views of more than 2,300 individuals, including property owners, real estate investors, homebuilders and developers — highlights areas that rank high for investor interest.

The report authors wrote, “Growth appears to be in vogue for 2019,” noting that survey respondents favored markets with growth potential over traditional “gateway” markets.

Dallas/Fort Worth took the crown as the top market for overall real estate prospects, up from the No. 5 spot in 2018.

The top 20 list includes:

  • Dallas/Fort Worth
  • New York/Brooklyn
  • Raleigh/Durham, NC
  • Orlando, FL
  • Nashville, TN
  • Austin, TX
  • Boston
  • Denver
  • Charlotte, NC
  • Tampa/St. Petersburg, FL
  • Atlanta
  • Miami
  • Salt Lake City
  • Los Angeles
  • Orange County, CA
  • Seattle
  • Fort Lauderdale, FL
  • Washington, DC
  • Indianapolis
  • San Antonio

Seattle — which ranked No. 1 in the 2018 report — came in at No. 16 for 2019, which the authors suggested may be to the blame of the media for its coverage of the city’s real estate market. The authors also noted the list is so vastly different from last year’s list due to the impacts of 2018 tax laws. Overall, however, it is noted there is not a market in the survey that is ranked poorly based on respondent answers.

“The bottom line is that opportunities are available in all markets,” the report reads.

Experiential Retail

The surge of the e-commerce industry has turned retail on its head in recent years, transforming brick-and-mortar stores and shopping plazas into vacant canvases for new development possibilities. The rise of experiential retail will likely shake-up real estate opportunities in 2019, as developers look to “creative solutions” to take advantage of the evolving retail industry — such as combining retail and non-retail offerings into mixed-use properties.

“Over time, cities and suburbs may have the new opportunity to support — through zoning or master-plan amendments — needed development on sites previously dedicated only to retail,” the report reads. “In any given community, new uses may include housing, schools, or any activity for which land availability had been limited. These new uses will, in turn, create new demand for retail goods and services.”

Retail properties, specifically in cities, will also likely see more technology implementation in 2019 to collect consumer data and optimize the shopping experience. The report notes that this trend will become lucrative for the real estate market, suggesting that monetizing data collection of a retail building “might someday generate more income than traditional leases.”

Cybersecurity Risk Management

Cybersecurity scored 3.14 out of 5 on an “importance of issues” scale in the 2018 report. For 2019, cybersecurity is now described as an “industry disruptor” by the report authors, scoring 3.44 out of 5 on the importance scale.

“The increased flow of data and growing use of mobile devices to control facilities are raising awareness about the need for more sophisticated cybersecurity,” the report reads.

The authors list cybersecurity risk management as an issue to watch in 2019, noting that the popularity of internet of things (IoT) technology infiltrating building components has made the overall real estate industry more vulnerable to attacks. An interviewee of the survey noted the need for real estate leaders to establish “industry norms and best practices” to defend against cyberattacks and evaluate the efficiencies and vulnerabilities of such technologies.

Building Resilience

As is the trend for any smart city-related sector, building resilience into the framework of the real estate industry is crucial for long-term sustainability — especially as changes in climate have brought unprecedented destruction to a number of U.S. markets.

The report estimates natural disasters in 2017 — including Hurricanes Harvey, Maria and Irma — cost an estimated $306 billion in the U.S. These and impending natural disasters have put a heightened focus on resilience in real estate.

Two particular factors — an increase in risk and the potential for decreased property values — are driving much of the focus on resilience. Nearly 25% of the National Council of Real Estate Investment Fiduciaries (NCREIF)’s Property Index value is in cities among the 10% most exposed to sea-level rise, according to the report. Such flood risk has caused property values to decrease in some areas, particularly in flood-vulnerable regions on the East Coast; properties in such regions of New York, Connecticut, New Jersey, Florida, South Carolina, North Carolina, Virginia and Georgia had lost $14.1 billion in value between 2005 and 2017, according to the report.

The report authors suggest embracing resilient design (both of real estate properties and surrounding infrastructure) to enhance protection of at-risk markets. Such investments in resilience are said to not only benefit properties in the long run, but make them far more attractive to investors.

“Investing in resilience may also become an effective part of a community engagement strategy and help limit local opposition to a project,” the report reads.

 

Source: SmartCitiesDIVE

Report: After Strong Growth, Industrial Development Slowing Slightly Nationwide

The number of industrial buildings coming online nationally slowed slightly in the first nine months of 2018, after several years of strong growth.

A total of 237 million square feet of new industrial space was delivered across the country from January through September, down slightly from 243 million square feet year over year, according to a new report by Avison Young.

The slowdown follows a major growth period for industrial development across the country, with 1.5 billion square feet of new space coming online since 2012, the report said.

“The surge in deliveries in previous years left many markets struggling to absorb the new space, and developers unwilling to start new projects,” Avison Young principal Erik Foster said. “As the existing space is filled, new projects will start getting launched.”

Markets like Los Angeles and Chicago have been leading the way in industrial market growth, and developers have benefited from record low vacancy rates and strong rent growths. But after years of growth, even those markets slowed this year.

Chicago saw 10 million square feet of new industrial space in the first three quarters of 2018 — a steep drop from the 22.6 million year over year, according to Avison Young. Los Angeles saw 5.4 million square feet of new industrial space through three quarters, which is about 77 percent of the way to its 2017 total of 7 million square feet.

In Chicago, the drop in deliveries caused vacancy rates to continue falling, with the 5.7 percent vacancy in the third quarter a 20 basis point drop year-over-year. That’s not the case in Los Angeles, where vacancy in the Inland Empire area increased to 4.9 percent but is still near record lows.

While deliveries are down so far in 2018, they won’t be for long: More than 337 million square feet of new industrial space is under construction across the country, the report said.

New Jersey has already eclipsed its 2017 industrial delivery total, with 10.3 million square feet of new space coming online through three quarters of this year, compared with 9.7 million square feet delivered all last year.

In Miami, demand for warehouse space has pushed vacancy rates to a record low 2.7 percent in the third quarter, falling 33 basis points year-over-year. But more than 4 million square feet of industrial space under construction will increase the supply.

“Secondary markets across the country are now benefiting from the same economic factors that caused a surge of industrial development in larger markets,” Foster said.

Growth in e-commerce is leading companies to increase the amount of industrial space needed for productive storage and delivery. Columbus, Ohio, for example, has seen 4.3 million square feet of industrial deliveries so far this year, eclipsing 2017’s year-end total of 3 million new square feet. In Greenville, South Carolina, 2.8 million square feet has been delivered through the end of the third quarter, eclipsing 2017’s total of 2.3 million square feet of new development.

 

Source: The Real Deal

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Fed, Highlighting Asset Bubble Dangers, Red Flags Rising Commercial Real Estate Prices

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A report just released by the Federal Reserve warns that soaring commercial real estate prices across the country could harm financial markets, according to the Wall Street Journal.

The warning came from the Fed’s first-ever financial stability report, which cited “elevated asset prices, historically high debt owed by U.S. businesses and rising issuances of risky debt” as factors posing the biggest problems for the country’s financial system. The report also pointed to asset bubbles, and not inflation, as the impetus for the past two recessions.

Fed Chairman Jerome Powell spoke about the subject  at The Economic Club of New York on November 28th.

 

Source: The Real Deal