Things at The Federal Club, a financially beleaguered Arnold Palmer designed golf course just outside Richmond, VA, are going from bad to worse.  The former private club in a planned golf community, whose course cost $9 million to build, was considered one of the most promising projects in the area just five years ago. 

        But after trying just about everything, including opening up for public play and declaring bankruptcy for the purpose of reorganization, The Federal Club is once again on the ropes, according to the Richmond Times-Dispatch.  Its major creditor, Essex Bank, is asking the court to remove the club from protection in order that the bank may take it over.  The bank charges that the club’s owners have used cash from the club’s meager operations to pay other creditors. 

        The owners say the bank had a plan from the moment bankruptcy was filed to take over the club. They say they have added 20 new members recently by offering joint club membership with another local course.  The court will rule later this month.

        I am taking requests for the month of March.  Having landed last night in Pawleys Island, SC, just south of Myrtle Beach, I am ready to take care of business -- and a little relaxation -- for the next few weeks.  My scheduled travels will take me to Jekyll Island, GA, for a collegiate golf tournament the weekend after next, and then to the Marine Corps base at Camp Lejeune in Jacksonville, NC the last weekend of the month for another college golf tournament (my son is scheduled to compete).  I'll be checking out a few golf communities along the way.

         I will also have time in the Myrtle Beach area to play a little golf and visit golf communities in which my readers may be interested.  Just contact me and let me know if I can put a community through the paces for you.  I’ll also be talking with a few local real estate agents about the state of the market along the South Carolina coast, and will report here what I learn.

        Our March issue of Home On The Course details how one golf-community homeowner and his wife manage to spend three months a year in a “second home” without paying taxes or any of the other upkeep associated with vacation home ownership.  Instead, with lots of research (fun for them) and a little bit of bargaining, they wind up renting $2 million dollar homes for less per night than they would pay at a Holiday Inn Express.  Learn the details in our March edition, coming in a few days.  We also list a few homes currently for rent in some of our favorite golf communities.

        Signing up to receive our free monthly newsletter is easy.  Just fill in your name and email address at the top left of this page; then confirm your subscription when you receive an automated message (we do that to protect against spam).

        That’s all there is to it.  In a few days, you will know what other subscribers do; how to live in two homes during the year while owning just one.

        I was conducting a little research for a client today on Landfall, an expansive and well-established golf community near Wilmington, NC.  The community features 45 holes of golf, including 18 holes by Pete Dye and 27 by Jack Nicklaus.  Homes there are expensive, relative to most other golf communities I have visited and surveyed.

        Notes about Landfall at the popular real estate site Trulia.com stopped me in my tracks.  Here is what Trulia said about Landfall sales:

        “The median sales price for homes in Landfall…for Nov 09 to Jan 10 was $287,500 based on 28 sales. Compared to the same period one year ago, the median sales price decreased 63.5%, or $500,000, and the number of sales increased 75%.  Average price per square foot for Landfall was $171, a decrease of 35% compared to the same period last year.”

        Residents of Landfall would be shocked to learn that their homes had lost so much value so quickly.  The fact is, they haven’t.  Homes generally sell in the mid- to high-six figures in the community.  And Trulia’s own following words contradict their earlier data about Landfall.

        “The average listing price for homes for sale in Landfall was $1,060,317 for the week ending Feb 24, which represents an increase of 6.3%, or $62,926, compared to the prior week.”  Against a median sales price of less than $300,000, you can bet Landfall owners would not be listing their homes for over $1 million. 

        Confusing indeed.

        Owners at The Cliffs are on the horns of a dilemma or, more aptly, on the tines of Morton’s Fork.  Sir John Morton, Lord Chancellor of England in the late 15^th Century, figured out a diabolically brilliant rationale for collecting taxes from everyone in the kingdom.  Subjects who lived in apparent luxury, Morton decided, obviously had the means to pay their taxes.  On the other hand, all subjects who did not spend much money and appeared to live frugally, Morton reasoned, should have saved enough to pay their taxes.  The term Morton’s Fork emerged to define those situations in which you have two choices, both bad.

        I thought of Morton’s Fork today as I considered the dilemma Cliffs Communities property owners face.  Founder and developer

Jim Anthony is waiting to hear if they will front him a total of more than $60 million to complete two golf courses and other projects at his High Carolina (Tiger Woods design) and Mountain Park developments (Gary Player).  The minimum individual bailout is $100,000, for which the return is 12% annually over seven years.  In the world of investment, that’s a great rate, two points better even than what Bernie Madoff was paying.  But Cliffs owners would gladly forgo the impressive interest income in lieu of those heady days of yesteryear when they considered Anthony a visionary able to pay for his vision.

        Owners could be forgiven for thinking they might get skewered no matter what they decide.  If they deny Anthony the loan, he has indicated he will go to “Wall Street” to borrow it at much higher interest rates.  In the case of a default on the loan, the bankers would own The Cliffs, and you don’t have to be a visionary to understand what that could do to property values.  Anthony’s case to the owners is that if they lend him the money and he defaults, the property owners’ will acquire a rich consolation prize, direct ownership of The Cliffs’ amenities.

        Not to mix our metaphors, but becoming the owners of those lush and expensive amenities would be a Pyrrhic victory if ever

there were one.  The cost of maintaining such an inheritance would have the twin disadvantages of burdening Cliffs property owners with higher maintenance fees since Anthony has been subsidizing them himself, and lower property values, since the “most comprehensive club membership in the world,” as Cliffs advertising has touted, could very well become the most expensive.

        The Cliffs property owners are smart people -- I know some of them personally -- but even they will have trouble choosing between the two alternatives their developer has presented.  They are on the horns of a dilemma, between the devil and the deep blue sea, and in a predicament of which only Sir John Morton could be proud.

        New England is often referred to as “The Land of Steady Habits.”  Apparently one steady habit in the northeast states is to commit to government employee pensions without the means to pay for them.

        Nationwide, states’ pension liabilities were unfunded in 2008 to the tune of about $450 billion, according to a study by the Pew

Center for Research.  If you add retiree healthcare plans and other benefits, the difference is $1 trillion.  In my home state of Connecticut, the difference between commitment and funding for pensions alone is about $16 billion.  The Pew Center indicates that a ratio of 80% funding to liabilities, or higher, is considered healthy.  Yet Connecticut, New Hampshire, Massachusetts and Rhode Island all come in below the 70% mark.

        Dealing with unfunded pension liability is not the sexiest of campaign platforms for a gubernatorial candidate, but at a Connecticut fundraiser this past Sunday for Nelson “Oz” Griebel, the Republican candidate made it clear it was among his top priorities.  And although there was not a wet eye in the house, at least one baby boomer in the crowd was thinking, “What if they can’t pay the bill in a few years?”

        Anyone with equity in their northern home and a desire to move has lots of good reasons to head south.  Climate is one obvious reason.  As I’ve indicated many times before, overall cost of living improvement is another.  Add to that an expectation by demographers of a continuing migration north to south, with the consequent higher price appreciations in home values in the south.  But now, with the economic stress many states are enduring, state funding for such commitments as pensions becomes another good reason to consider a move south sooner rather than later.  It may be unthinkable to consider a state like California or Connecticut going bankrupt, but if a state can’t pay its bills, the consequences will trickle all the way down to home values.

         In the southeastern U.S., South Carolina, Alabama and Mississippi are only a notch better than the New England states cited above, with between 70% and 78% of funding accounted for pension liabilities.  But Tennessee, North Carolina, Georgia and Florida are demonstrably more stable when it comes to funding their own state pensions, with 91% to 107% of their liabilities “in the bank.”

 

If you are contemplating a move south, even if it is years away, contact me and I will be pleased to help you consider all the criteria that are important to consider in making the move.

        Since his much ballyhooed apology, Tiger Woods has faded (again) from sight, leaving those associated with him to command some of the headlines.  Cliffs Communities developer Jim Anthony is still waiting for his property owners to respond to his request for up to $100 million in financing to help finish what Anthony and Woods started at High Carolina, site of the fallen star’s first American golf course design.  Meanwhile, inevitable skittishness that follows a developer’s financial problems is starting to work its magic on The Cliffs’ property values; we have spotted a number of “short-sale” properties in the Cliffs at prices 40% off their original listings, and one as low as $79,000.

        Then, a few days ago, Gatorade swallowed hard and severed its ties with their main spokesperson.  Now today comes word via an online Business Week article that the resort that hosted Woods’ apologia has gone bankrupt.  The owners of the Marriott Sawgrass Resort, which has access to more than 85% of tee times at the famed TPC Sawgrass golf course next door, have filed for Chapter 11 bankruptcy.  Such filings give a firm an opportunity to reorganize but, with vacation and convention traffic not expected to rebound until next year, major debt-holder Goldman Sachs could wind up as majority owner of the resort.

        The Pete Dye designed TPC Sawgrass golf course and its famed island green 17th hole is not owned by the bankrupt firm, but some golf villas, as well other resort facilities, are included in the filing.  There is no word if a value has been attached to those ugly dark blue drapes that served as such an appropriately somber backdrop to Woods’ recitation.

 

From the back of the editor's condo in Pawleys Plantation to the 18th hole beyond in mid-February.

Winter golf in Carolinas defies expectations

        I arrived at our vacation home in Pawleys Island, SC, on Friday February 12 expecting to get in either my first round of golf since last fall, or at least some practice on the Pawleys Plantation range.  I awoke the next day to find five inches of snow on the ground, the most in the area south of Myrtle Beach in about two decades.

        Disappointing, yes.  But to adapt what Mark Twain once said of New England’s climate, “If you don’t like the winter weather on

the Carolinas coast, wait a minute:  It’ll change.”  By mid-afternoon, the snow had begun to melt, and by late afternoon, the most dedicated golfers at Pawleys were on the course, mushy patches of un-melted snow adding an additional hazard to the ponds, marsh and sand that characterize the Jack Nicklaus course.

        In virtually all of the Carolinas, even in the foothills of the mountains, golf courses remain open year round, and it is possible, for those of a particularly active nature, to ski in the morning and then hustle down the mountain to get in a leisurely nine or a biathlon-type 18 holes in the afternoon.  Under a heavy sweater, the golf may not be the most comfortable round you ever play, but you can just about guarantee it will be one of the fastest.  The faster you grip and rip, the warmer your hands remain.  And there is no better incentive on a cool day of golf than that roaring fireplace and a bracing beverage in the clubhouse at the end of the round.

         Cheers.