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Golf’s $9 Billion Real Estate Market Is On The Upswing: See Where And Why

Red Ledges in the Rocky Mountains did $64 million in sales volume in 2017.

Golf is at the heart of Red Ledges in Heber City, Utah, with an 18-hole Jack Nicklaus-designed course and a 12-hole, par-3 Nicklaus Signature “golf park” in the private Rocky Mountain community about 25 minutes from Salt Lake City.

The community is coming off a record sales year in 2017, with 150 closings and about $64 million in sales volume. After it took close to nine years to get the first 100 homes built and sold at Red Ledges, there have now been approximately 550 sales the past few years and more than 100 more homes are in the construction or design process.

“The pace is kind of staggering,” says Bill Houghton, the VP of Real Estate for Red Ledges, which overall will be 1,100 to 1,200 units with 700 to 800 single-family homes and cottages.

“We’re getting a ton of people who are looking at Park City and just looking at a nice outdoor adventure area and buying into what we’ve got,” Houghton adds. “It’s great that people are buying into the vision that was put in place 10 or 11 years ago by our founders, and that our founders stayed the course and are starting to realize some of that benefit.”

The 12-hole, par-3 course at Red Ledges in Utah.

Red Ledges isn’t alone. The golf course real estate industry has been thriving in certain markets and locations, and the positive momentum has carried into 2018. While the growth is a reflection of the economy overall, it’s particularly encouraging for the golf industry.

The latest U.S. Golf Economy Report was released this week, showing that the game drove $84.1 billion in economic activity across the country in 2016. Included in that total was $9.34 billion in the golf real estate market, including $7.24 billion in new home construction.

By comparison, those numbers were $4.74 billion (golf real estate market) and $3.14 billion (new home construction in golf communities) the last time the Golf Economy Report was released in 2011 following the Great Recession and the financial crisis.

“In the last few years, it’s been a pretty good run of sales in the golf area, with folks wanting to have either views of, or frontage on, the golf course,” says Charlie Hill, the President and COO for DH Investments, developer of the Cordillera Ranch community outside San Antonio.

Cordillera Ranch, which is also home to a Nicklaus signature course in the Texas Hill Country, has topped $100 million in total real estate activity for three straight years. The 8,700-acre master-planned residential community also has six other resort-style clubs in addition to the golf club, offering a wealth of family and outdoor activities.

The par-3 16th at Cordillera Ranch is a memorable one.

“With the array of amenities, that’s one thing we were fortunate to be a little ahead of the curve on,” Hill adds. “When we started thinking about the idea of a private club with a golf course and other amenities, we knew that so many people come to the Hill Country because of the outdoor activities, like floating the Guadalupe River, riding horses, fishing, sporting clays or just being outdoors. So we didn’t just want to be a golf course.”

That’s where the Seven Clubs of Cordillera concept was born.

“We try to market to the buyer who isn’t just looking for a golf course because there are nice golf courses all over the world and a lot of these folks can afford to be anywhere,” says Hill. “We didn’t want these to be token offerings either; we went the extra mile on all those things.”

Fueled by a combination of a special location, unique offerings and/or desirable amenities, it’s a recipe that many other golf communities have followed successfully. Following are a few examples:

Kohanaiki – Kona, Hawaii

Kohanaiki was the first new community built on the Kona coast in a decade.

Kohanaiki is a spectacular private club community spread across 450 oceanfront acres on the Big Island of Hawaii. The property has 1 ½ miles of coastline, a Rees Jones-designed oceanfront course, a beach club and a wealth of outdoor adventure activities for families. With homes that range from $3 million to $22 million, Kohanaiki closed $131 million in sales last year and achieved the most transactions on the Kona-Kohala Coast in 2017. (www.kohanaiki.com)

Reynolds Lake Oconee – Greensboro, Georgia

The Great Waters Course at Reynolds Lake Oconee.

Halfway between Atlanta and Augusta sits Reynolds Lake Oconee, a sprawling resort community that’s home to a Ritz-Carlton as well as 2,500 condominiums, cottages and single-family homes. The property boasts 350 miles of shoreline as well as six golf courses — including two ranked among the Top 100 public or resort layouts in the nation – built by architects such as Tom Fazio, Jack Nicklaus, Rees Jones, Bob Cupp and Jim Engh. Last year, every single spec home that was built was bought and there are currently almost 100 homes under construction. (www.reynoldslakeoconee.com)

Boot Ranch – Fredericksburg, Texas

One of the custom homes at Boot Ranch in the Texas Hill Country.

Boot Ranch is another private club and family retreat in the heart of Texas Hill Country, located less than an hour from Austin. Defined by a mix of luxury and recreation, Boot Ranch has a Hal Sutton-designed golf course, a 34-acre practice area and an executive par-3 course. The property also sold 64 properties valued at $41 million last year, a 23 percent increase over the previous year. The first quarter of 2018 showed similar momentum, with 21 sales, a 30 percent increase from the same time a year ago. (www.bootranch.com)

Clear Creek Tahoe – Clear Creek Nevada

A Coore-Crenshaw design is at the heart of Clear Creek Tahoe.

Ten miles from Lake Tahoe and 19 miles from both the Incline Village and Heavenly ski resorts is the private community of Clear Creek Tahoe. The design team of Ben Crenshaw and Bill Coore took a light hand in routing the golf course across beautiful rolling terrain – over hills and through the towering pines of the Sierras. There were a total of 52 sales last year, with an average price of almost $400,000. (www.clearcreektahoe.com)

Magnolia Green – Moseley, Virginia

Magnolia Green is the best-selling community in the Richmond area.

Magnolia Green is central Virginia’s premier multi-generational, active lifestyle residential community, located about 20 miles southwest of downtown Richmond. The community had a record 204 home sales in 2017, with an average sales price of more than $450,000. The 18 percent year-over-year increase came after Magnolia Green invested $10.5 million in resort-style amenities, including a 10-acre aquatic center with four pools and a new clubhouse for the golf course built by Nicklaus Design’s Chris Cochran. (www.magnoliagreen.com)

Timbers Kauai – Kauai, Hawaii

The Nicklaus Signature Ocean course has the longest stretch of oceanfront holes in Hawaii.

Timbers Kauai is a luxury oceanfront residential community that features the Jack Nicklaus-designed Ocean course with features the longest stretch of oceanfront holes in all of Hawaii. As the property gears up for its official opening on June 1, it is already at $50 million in pre-sales and continues to build momentum. (www.timberskauai.com)

Santa Lucia Preserve – Carmel, California

The Tom Fazio Course at the Santa Lucia Preserve feels utterly removed from other courses on the Monterey Peninsula.

Tucked into the Santa Lucia Mountains just east of Carmel, up a long, winding road and behind multiple gates, is a weekend escape with a fantastic Tom Fazio design that’s proven popular with golf course raters as well as buyers from the San Francisco Bay area. There are fewer than 300 home sites spread across 2,000 acres at the Santa Lucia Preserve, with another 18,000 surrounding acres protected in perpetuity by the Santa Lucia Conservancy. There have been 123 finished custom homes, with 11 currently for sale, another 11 in design review and 10 homes under construction. (www.santaluciapreserve.com)

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Extra Space Storage (EXR) Q4 Earnings: What’s in Store?

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Extra Space Storage Inc. EXR is slated to report fourth-quarter and 2017 results on Feb 20, after the market closes . Both its revenues and funds from operations (FFO) are expected to experience year-over-year growth.

In the last reported quarter, this Salt Lake City, UT-based self-storage real estate investment trust (REIT) delivered a positive surprise of 2.73% in terms of FFO per share. Results reflected growth in property-rental revenues and improvement in same-store NOI. Particularly, higher occupancy and rental rates supported growth.

The company has a decent surprise history. In fact, the company exceeded the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 4.46%. This is depicted in the graph below:

Extra Space Storage Inc Price and EPS Surprise

Let’s see how things are shaping up for this announcement.

Earnings Whispers

Our proven model does not conclusively show that Extra Space Storage will likely beat estimates this season. This is because a stock needs to have both – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – for this to happen. However, that is not the case here as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .

Zacks ESP: The company has an Earnings ESP of -0.69%.

Zacks Rank: Extra Space Storage’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Factors That Might Impact Q4 Results

Extra Space Storage is a notable name in the self-storage industry. The company offers a wide array of well-located storage units to its customers, including boat storage, recreational vehicle storage and business storage.
In addition, the self-storage industry is anticipated to experience a solid demand, backed by favorable demographic changes and events like marriages, shifting, death and even divorce. As such, its high brand value and robust presence in key cities serve as growth drivers amid healthy demand in the self-storage industry.

The company has also made concerted efforts to grow its business and achieve geographical diversity through accretive acquisitions, mutually beneficial joint-venture partnerships and third-party management services.

Amid these, in the to-be-reported quarter, the company is anticipated to benefit from a steady demand in the self-storage industry and witness growth in same-store revenues and NOI.

The Zacks Consensus Estimate of $252 million for property rental revenue reflects a sequential rise from the prior-quarter figure of $249 million.

Prior to fourth-quarter earnings release, there is a lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share in the soon-to-be-reported quarter has remained unchanged at $1.08, over the past month. However, it indicates a year-over-year rise of 4.9%.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $283.7 million, indicating a year-over-year rise of 8.7%.

For full-year 2017, the Zacks Consensus Estimate for revenues stands at $1.10 billion, reflecting a year-over-year rise of 10.9%. The consensus estimate for FFO per share is $4.34, reflecting a year-over-year increase of 12.7%. Management expects FFO per share in the range of $4.32-$4.35.

Moreover, shares of Extra Space Storage have lost 5.9% in the past three months, outperforming the 9.6% decline registered by its industry .

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

Host Hotels & Resorts, Inc. HST , slated to report quarterly numbers on Feb 21, has an Earnings ESP of +0.25% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here .

Outfront Media Inc. OUT , scheduled to release quarterly numbers on Feb 27, has an Earnings ESP of +0.90% and a Zacks Rank of 3.

Gramercy Property Trust GPT , slated to release fourth-quarter results on Feb 28, has an Earnings ESP of +2.49% and a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) – a widely used metric to gauge the performance of REITs.

Breaking News: Cryptocurrencies Now Bigger than Visa

The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.

Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.

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Host Hotels & Resorts, Inc. (HST): Free Stock Analysis Report

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OUTFRONT Media Inc. (OUT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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