LandVest Real Estate Consulting News

Dec

Landowners Maximizing Value Through Conservation
By LandVest

When the housing bubble burst and credit markets tightened most land developers retreated to the sidelines or closed up shop. This created opportunities for public agencies and land trusts to acquire land for conservation purposes. Supply and demand dynamics for land conservation versus land development are often countercyclical. When demand for developable land is strong, land values are high and it is difficult – and more expensive – for conservation buyers to compete. When development pressure is soft – as it has been for the last 3 three years in many locations in the US – land values are lower and there is less competition from developers. As a result, public agencies and non-profits have emerged as some of the most active buyers of land today, largely because of access to public funding approved in previous years and an increase in private philanthropy that supports the conservation of natural resources.

Landowners currently have a unique opportunity to maximize the value of their property and to see their land protected in perpetuity. This can be done through an outright sale of the land or through the sale of conservation easements or agricultural preservation restrictions to conservation groups, public agencies or municipalities. New funding sources have been established to encourage these conservation acquisitions. For example, the Commonwealth of Massachusetts has created a funding program for Landscape level projects with multiple projects exceeding 500 acres or more. The program will pay half the cost of the acquisition plus a portion of eligible expenses. In addition, the Commonwealth has established a tax credit for gifts and bargain sales up to $50,000 per transaction.

LandVest has represented multiple landowners in the planning and sale of land for conservation. When LandVest is engaged conservation buyers know that they have a singular opportunity to get a deal done before the property is sold for other purposes. With land conservation deals appearing to be at an all-time high, landowners can benefit from experienced advisors who know how to negotiate on their behalf and facilitate these kinds of transactions. Recent LandVest projects include:

• 24 acres in Weymouth, Massachusetts, representing the largest undeveloped tract of land left in the town, with sweeping views to Boston and the North Shore. Elected officials unanimously voted for the acquisition of the property which was purchased for full market value, $1,850,000, in August 2011. From start to finish the acquisition process took less than 4 months.

• 228 acres in Ipswich, MA. The Trust for Public Land working in coalition with the town , the state and Essex Country Greenbelt, purchased a Conservation Easement and Agricultural Preservation Restriction for $5,100,000 on one of the largest privately owned agricultural estates off Argilla Road. April 2010
• 80+ acres in Rowley, MA representing a critical inholding within the 8,000+ acre Great Marsh on Boston’s North Shore. The Massachusetts Audubon Society was the buyer. Price: $2,370,000

• 83+ acres in Sherborn, MA purchased by the Sherborn Rural Land Foundation for conservation. Price : $1,500,000 – June 2011

• 115+/- acres in Narragansett, RI purchased by The Nature Conservancy and US Fish and Wildlife Service. Installment purchase occurring in 2011 and 2012.

• LandVest provided consulting services to a major forest landowner in northern California to design and market a CR over forestlands in excess of 8,200 acres with a market value of more than $8.4 million. Funding will be from a combination of public funds and private philanthropy. Dec 2010

• LandVest provided advisory services to a landowner in Sandisfield, MA, who made a gift of a CR over 1,238 acres of forest and farmland valued in excess of $1.2 million to the New England Forestry Foundation, the third largest CR gift in Mass history and the largest in more than 35 years. – Dec. 2010

• A conservation restriction on 155 acres of religious order lands in Petersham, MA purchased by a partnership between the Town and the East Quabbin Land Trust for $400,000 was facilitated by LandVest using a combination of public funding and private philanthropy – June 2010

This blog post has been brought to you by Nick Pratt, Slater Anderson, James Monahan and Keith Ross, Project Managers in LandVest’s Real Estate Consulting Group, specializing in in all aspects of land transactions.

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Nov

TUNE IN: Moultonborough, NH Estate for Sale featured on Chronicle
By LandVest

Indian Portage in Moultonborough

Indian Portage, a spectacular waterfron compound in Moultonborough, NH will be featured on tonight’s Chronicle, Main Streets and Back Roads: Plymouth, NH. Chronicle is on Boston’s Channel 5 WCVB. Tune In!

Click for more information on Indian Portage

Chronicle is a newsmagazine show produced at two Hearst Television-owned New England television stations, WCVB-TV Ch. 5 in Boston and WMUR-TV Ch. 9 in Manchester, New Hampshire. It airs weeknights at 7:30 PM on both stations, offering an informative lifestyle, cultural, and news-related magazine format, most often covering a single topic per broadcast.

http://www.thebostonchannel.com/chronicle/29797624/detail.html

For more info on Indian Portage:

http://indianportage.landvest.com/

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Sep

Can Your Land Support A Solar Farm In Massachusetts? LandVest Real Estate Consulting Experts Offer Insight.
By LandVest

Can Your Land Support A Solar Farm In Massachusetts?

Agriculture-compatible solar farm

This entry is brought to you by Slater Anderson and Sandy Olney who advise landowners and their advisors on land planning, appraisal, conservation, management, and disposition services through the Real Estate Consulting Group at LandVest.

As summer winds down, power outages flare up (Irene), and the sun eases into the southern sky, now is a good time to discuss solar energy. As consultants here at LandVest, it is becoming more common to field questions regarding solar as an alternative land use. The traditional subdivision market remains weak, so “highest and best use” considerations for vacant land often now consider solar as an alternative use. So, what’s the deal with solar these days? It’s certainly a greener option for our commodity-strapped planet. Solar has few, if any, needs for water, sewer, road development and produces no noise, traffic, smoke, or effluents. But what makes a good solar site? And what values are being paid for these sites?

For the purpose of this blog, the focus is on the basics of solar farms, or ground-mounted solar panels. However, any time you introduce a fast-changing technology with utility regulation and State and Federal incentives, things tend to get complicated. Although not covered here, it’s important to note that smaller roof-mounted installations typically seen on houses and industrial/commercial roof-tops, also known as micro farms, are a growing segment of the market as efficiency improves, costs come down, and “sustainability” gains a greater mainstream presence.

What makes a good solar site?
The beauty of a ground-mounted solar array is they can sit on challenged sites. Massachusetts has a maximum solar power production cap of 6 megawatts (MW) per site. 1MW will power roughly 1,000 homes if designed efficiently. Typically, a 1MW system requires 5± acres of site area, so a 6MW system installed on 30± acres is considered large – essentially a utility-scale system. Cleared and level sites with southerly exposure are ideal but land with otherwise limited utility is adequate. Slater Anderson and I were recently tasked with developing a highest and best use analysis on one of the finest solar sites in New England – 800 contiguous acres of flat south-facing terrain with limited interior development potential (at one time there was no regulatory solar power cap and the developers envisioned a massive 50MW system). Based on our research with the solar developers, this project had all the key components for a large solar farm but was sidelined based on one factor – distance to adequate transmission lines. In order to carry power to the market, a site’s proximity to a power station or a 3-phase line is critical, not to mention working with the utility company running the lines.

Some Initial Set-up Basics
Solar farms are expensive with regulatory and engineering hurdles. Treasury grants (30% refund) and tax credits help defray costs and accelerated depreciation (50%) on the system is currently available, but financing quickly enters the picture. Rough estimates start at $3.5 million for a 1MW system, but other questions need to be answered first. Is there an off-taker for the power – meaning is there demand in the area for cheaper alternative power, and is the local utility company willing to buy it? A solar developer needs an inter-connection agreement with a utility company (National Grid, NStar, etc.) developed through what is known as a Power Purchase Agreement (PPA). Interestingly, utility companies may not necessarily want to buy cheaper power and essentially view these solar farms as competitors. It’s been said that the higher loads generated by solar can affect the reliability of their lines. However, current mandates require that electricity suppliers serving Massachusetts must acquire a percentage of the power they sell to consumers from renewable sources.

Brownfield Sites
A recent trend in solar farming has been to utilize “brownfield sites”. These sites are a good re-use of land – especially land with environmental problems like capped landfills. Seeing the long-term benefits of a solar installation, municipalities are utilizing these industrial-zoned sites, which often have transmission lines in place, unencumbered ownership, and minimal zoning hurdles. Brownfield sites are also convenient locations for alternative uses simply based on their non-desirable stigma. A recent example of this trend is the newly approved 18-MW solar project on Cape Cod and Martha’s Vineyard, the largest of its type in New England which is expected to power 3,132 homes from an assemblage of brownfield sites (9 sites in six towns). According to comments from the Cape & Vineyard Cooperative, “unlike the controversial 130-turbine offshore Cape Wind farm planned near Cape Cod, this project has won unanimous local support.” A construction date for the $83-million project has not yet been scheduled. Duxbury is another town close to approving a 2± acre solar array (200-300KW) set on a capped landfill. The site, which abuts the transfer station and has otherwise limited utility, is designed to power town facilities like the police, fire, and transfer stations.

Agriculture
Another recent trend in solar farms has been providing duel uses for fertile farm land by using elevated solar panels. In South Deerfield, Massachusetts, the farm run by the University of Massachusetts is experimenting with renewable power while also preserving prime agriculture soils and pasture lands. The angled panels are elevated 10 feet above the soil while also providing adequate shade for grazing livestock. With prime agriculture soils at a premium in parts of the state, the elevated solar option provides a compatible land use. This dual use may also be compatible with shade crops.

Investment Strategy
Once past the infrastructure costs and a utility agreement, solar power is a fairly stable asset – the sun shines and the system generates a predictable amount of power. Once a system is on-line and selling power back to the utility company, lenders and owners can tap into additional returns by using what is known as “clean energy credits”. For solar energy they are referred to as SRECs – Solar Renewable Energy Certificates – and are commoditized and traded much like a stock certificate. The buyer of the SREC, say a corporate entity, can claim to have purchased clean renewable energy as a way to satisfy a state imposed requirement. The upside for solar system owners is to recover their investment by selling their SRECs through long-term contracts or on the open market. There are two main markets for renewable energy certificates in the United States – compliance markets and voluntary markets. Compliance markets vary by state (Massachusetts-yes). Based on estimates from market analysts and given the unpredictable equity markets, the alternative energy sector is projected to grow significantly.

Leasing
Another option for land owners, and far less costly, is a ground lease option where an owner leases out the land. Current estimates value leases at $2,000 per-acre annually based on 25-year terms. So, a 2MW facility on 10 acres would return roughly $20k per year. Solar facilities are estimated to last a minimum 25 years. However, the infrastructure can be decommissioned at the end of the term; the land can then be restored to its original state; or the system could be upgraded with new technology and a new lease agreement.

Prices and Conclusions
There has been some recent activity for solar-specific land in Southeast Massachusetts. Two parcels, each over 50± acres, have flat and cleared land and are already zoned industrial with good access to power. Both pieces are under contract for $20,000 to $35,000 per acre. However, regulatory risk, proximity to power, and efficiency issues make valuations of similar land complicated. Based on the trend of utilizing brownfield sites, buyers may be unwilling to pay a premium when considering development costs. From discussions with industry participants, the key factor is assembling a project development team who can acquire funding and navigate regulations with utility companies and regulators. In Massachusetts, the good news is that the State has very aggressive alternative energy targets (250 MW by 2017) – some of the strongest incentives in the country, but they have only met a small fraction of this goal. Based on what is currently approved and on-line, the State has lots of approvals to hand out to reach this target by 2017.

16-MW solar farm; Davidson County, NC

For more information on solar farming or if you are in need of land planning, appraisal, conservation, management, and disposition services, contact Slater Anderson sanderson@landvest.com or Sandy Olney solney@landvest.com at the LandVest – Boston, MA office. Tel 617.723.1800.

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Sep

Manchester-by-the-Sea Real Estate Sales Increase 36%
By LandVest

Highest residential appreciation in Boston area, year to date, is in Manchester-by-the-Sea as cited in the recent Boston Globe survey. Contributing factors could be the new $55,000,000 Manchester-Essex Regional High School, the incredible beaches and ocean access, the commuter rail access to Boston’s North Station and Route 128…all this and just a 90 minute drive to ski country.

Sandy Hollow - 6.48 acre waterfront compound on North Shore's Gold Coast

Elegant restored home on 2.4 acres has dramatic water views and access to beach and dock

Magnificent Victorian shingle-style home designed by Peabody and Stearns on 1.46 acres with access to a private sandy beach and association dock

For more information about the above properties, contact Lanse Robb (lrobb@landvest.com) at LandVest in Boston, MA.

Click here to view more North Shore Real Estate for Sale

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May

Unique Boston Real Estate Opportunity: Saint Margaret’s Convent for Sale
By LandVest

This entry is brought to you by Nick Pratt who assists property owners and buyers with complex real estate planning, appraisal, conservation, management, and disposition services.

A History of Service in an Urban Enclave
Saint Margaret’s Convent
Roxbury, MA

Tucked out of view off a quiet side street, Saint Margaret’s Convent has been a spiritual epicenter for over a century. The city hums below, but at the top of Fort Hill, in the Highland Park neighborhood of Roxbury, the convent is quiet and serene. To quote the Boston Globe:

“Since the late 19th century, the Society of St. Margaret, an order of Episcopal nuns, has maintained a quiet but steady presence in Boston, nursing the sick, caring for the poor, and welcoming travelers in need of a quiet place to stay, all while keeping a rigorous schedule of prayer and silent contemplation.” Full Article The Sisters have decided to relocate their work to their retreat in Duxbury, where they are building a new eco-friendly center.

The Roxbury convent is being offered for sale and listed by LandVest.

Built around the c. 1840 home of Abolitionist leader William Lloyd Garrison, the Convent has been owned by the Society of Saint Margaret since 1904. The complex of buildings has been expanded over the years, most recently with a major expansion and renovation of the Main Building in the early 1990’s.

The Main Building is comprised of three interconnected buildings which contain a total of 33,550± square feet and features a commercial-grade kitchen, dining hall with an outdoor patio, 34 bedrooms, multiple common rooms for meetings, library, two chapels and a large balcony overlooking the Boston skyline. In addition, there is a separate 2,184± square foot heated Carriage House with a second floor apartment with two bedrooms, a full bath and a kitchen.

The improvements are sited on 1.65± acres, including 240± feet of frontage on Highland Park Street and 338± feet of frontage on Highland Street, and is surrounded by tall trees and quiet outdoor areas, including a lawn with a gazebo.

In a May 14 Boston Globe article by Lisa Wangsness, the Convent was described as being located in a “…tranquil neighborhood, a mix of brick row houses and clapboard multifamily homes, some with lush gardens and flowering trees. Though the grassy peak of Fort Hill lies just a few blocks from the rush of Columbus Avenue, on a recent morning, little could be heard but the wind and singing birds.”

Click for pricing and more information on Saint Margaret’s Convent
View Larger Map

Nicholas R. Pratt                                                  David A. Rosen
617-948-8002                                                     617-357-8955
npratt@landvest.com                                     drosen@landvest.com

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May

LandVest Real Estate Consulting News: Perspectives on the 55 + Senior-Housing Real Estate Market
By LandVest

This entry is brought to you by Slater Anderson and Sandy Olney who advise landowners and their advisors on land planning, appraisal, conservation, management, and disposition services through the Real Estate Consulting Group at LandVest.

As appraisers in the Real Estate Consulting Group at LandVest, we take part in a variety of valuation and land planning projects. A recent assignment required analyzing a permitted 55+ senior-housing development in suburban Boston. Here are some perspectives on this growing segment of the real estate market.

“Age-restricted”, “active adult”, and “55+” are all terms used to describe senior housing developments. Senior communities have been successful for decades in states like Florida and Arizona, but new demand is being driven

Senior communities have been successful for decades in states like Florida and Arizona, but new demand is being driven by the aging baby-boomer generation looking to downsize to “maintenance-free living” in a condominium-ownership scenario.

by the aging baby-boomer generation looking to downsize to “maintenance-free living” in a condominium-ownership scenario. A typical model consists of two-unit townhomes mixed in with higher-density multi-level apartments, and recreational facilities set in a private gated-community. The newest marketing trend emphasizes “active lifestyles” where communities are marketed with access to open space, hiking trails, and health and fitness facilities.

According to Tom Skahen from Primetime Communities, who wrote the Massachusetts research report Prime 50-Plus Report, the 55+ population in Massachusetts will continue to grow (+12% increase from 2008 to 2013). This segment is also attractive for developers because buyers in the 55 to 64 range are considered “able buyers” in that their primary homes are debt free, and they are able to enter their next buying phase in a strong position. The study identified 312 active adult communities in Massachusetts built after 2000, which totals 19,541 home units. As of 2009, there were 37 approved (not built) developments with 13 in the planning process. According to the report, large developers got into the segment early. Pulte Homes, one of the nation’s largest homebuilders, sells 46% of its homes to active adults. From a planning standpoint, without the draw on local resources (schools), permitting for senior housing is generally an easier option. It’s also not uncommon for age-restrictions to be included in the deed, which limits portions of a development for senior living.

Two noteworthy sales of 55+ development sites include a 68± acre parcel in Topsfield, known as English Commons, sold to the developer CP Berry Homes for $5,000,000 in July of 2009, or $92,500 per unit. Listings for two and three-bedroom townhomes are on the market for $650,000 to $750,000. Another 55+ development in Sudbury included a 52-unit development called Grouse Hill on 30± acres that sold for $3,010,000 in January 2007, or $58,000 per unit.

Seton Highlands - a luxury condominium neighborhood for Active Adults at The Pinehills in Plymouth, Massachusetts

Two-bedroom townhome sales in the last two years ranged from $494,000 to $600,000. In both cases, the implied land value “per unit” was 10% to 13% of the finished retail unit price. It should be noted that these sales did not have an affordability component and were sold without final permits. These sales are evidence of a growing development trend where “downsized living” is becoming a more attractive residential choice. As of 2011, this market has slowed. However, the size of this demographic combined with a growing demand for maintenance-free living suggests that the market for 55+ communities will continue to grow in the future.

For more information, please view contact information for Slater Anderson and Sandy Olney, or contact Slater at sanderson@landvest.com and Sandy Olney at solney@landvest.com.

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May

LandVest Real Estate Consulting News: “Rare” Earth Materials an Asset to Some New England Land Owners
By LandVest

This blog entry was brought to you by Norman Brown IV, a LandVest Project Manager who works in both the LandVest Residential Brokerage Division and the LandVest Real Estate Consulting Group. Norman assists buyers and sellers of unique and distinctive real estate holdings throughout the New England region and beyond, with a current concentration on the Middlesex County and Cape Cod markets.

“Rare” Earth Materials an Asset to some New England Land Owners

We hear from time to time about how emerging market countries are profiting from the presence of rare earth materials in their soils. Well, New England has its own “rare” earth materials that many landowners may not know about. Earth materials, such as sand, gravel and stone are vitally important to the economy of Massachusetts. The availability of quality earth materials is a critical aspect of the future of our infrastructure and the construction industry.
Natural earth materials are involved in every major construction project. These materials are used in the proper site preparation for buildings, houses, roads and other infrastructures. Earth materials are also used in the creation of asphalt, concrete and other finished construction materials. As such, adequate availability of these products is imperative. However, the construction industry is seeing the availability of these materials decreasing, especially in areas close to Greater Boston.
The lack of quality earth materials in the Greater Boston area provides an opportunity to landowners, whose properties may contain these vital earth materials. First, those whose properties may have quality earth materials, and whose properties are located relatively close to Boston, will benefit from the lack of local product availability and could reap the benefits financially. The market for quality earth materials is strong, even during times of a slow economy. The right materials in the right area could generate significant income for landowners.
Secondly, landowners outside of the Greater Boston area are beginning to see potential benefit because the market for earth materials is slowly coming to them. The construction industry has seen a spike in earth material prices over the past 5 years or so. The greatest factor giving rise to these price increases is the expanding geographical market for earth materials. As the availability of earth materials within the Greater Boston area decreases, material providers find themselves searching out earth materials further and further from the Greater Boston area. In doing so, the cost of transporting these materials rises, which is turn, directly increases the price of the materials on site. This provides a unique opportunity for landowners, who previously could not find a market for their land rich in earth materials. While landowners in far western Massachusetts, New Hampshire and Maine faced competition from lands rich in earth materials and closer to Greater Boston in the past, this competition is quickly eroding. Suddenly, these landowners are sitting on a desirable asset, and they may find themselves able to benefit financially from cashing in on that asset.
Here at LandVest we can provide consulting services, brokerage services or both to landowners who hope to benefit from the changing market for earth materials. Coming from the earth materials industry, I have a unique understanding of this market and the potential for landowners.

If you believe your land is rich in earth materials and you hope to benefit by selling the land or earth materials located thereon, please contact Norman Brown at LandVest at (617) 357-8958.

Click to view Norman Brown’s contact info

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May

LandVest Real Estate Consulting News: Appraising the Environment, Part 1: An Overview
By LandVest

This entry is brought to you by Slater Anderson who advises landowners and their advisors on land planning, appraisal, conservation, management, and disposition services through the Real Estate Consulting Group at LandVest.

LandVest has traditionally assisted landowners and their advisors in making informed decisions about their real estate assets. For four decades we have specialized in providing advisory services related to land valuation, development options, disposition plans, and timber management and sales, as well as the use of conservation easements as a means to protect land, generate tax benefits, or provide cash from the sale of development rights.

Today, landowners, investors, conservation organizations, and government entities are grappling with the opportunities and risks associated with the emerging real estate value dynamics related to ecosystem services (aka natural capital, environmental commodities or eco-assets). Ecosystem services are the multiple benefits people derive from the natural environment.

Examples include fresh water, nutrient removal, clean air, carbon storage, reduced greenhouse gas emissions, recreation, erosion control, pollination, biodiversity, and protection from natural hazards, to name a few. These services have often been ignored or undervalued by traditional real estate valuation techniques which typically focus on the income potential of real estate from traditional sources such as residential, commercial, and industrial development, as well as farming, forestry, and other extractive uses. The emergence of the US and world economies from the global economic downturn will have a significant impact on the demand for natural resources and the services they provide which will in turn likely drive up the value of environmental commodities of all kinds.

As the markets for these non-traditional environmental commodities and services gain broader acceptance, the valuation implications are significant. In a recent Boston Globe article entitled “The $100 Million Pond” Pavan Sukhdev, study leader of the UN-sponsored report on The Economics of Ecosystems and Biodiversity, was quoted as saying, “The value that nature delivers to us is economically invisible. Effectively, we pretend that it’s zero.” Traditional appraisal practice typically relies on “as of right” uses under existing zoning or reasonable amendments to zoning to determine the “highest and best use” and ultimately the market value of a given property. In many cases, natural features are considered a limitation on utility and value. The emergence of natural capital markets is beginning to change the scope of some appraisal assignments such that alternative non-traditional uses and values must be addressed and analyzed.

Governmental Intervention

In some ways, the greatest catalyst to the evolution of these markets is government policies and incentives. These policies or incentives include development mitigation requirements, alternative energy portfolio standards, tax credits or charitable deductions for conservation or preservation easements. The anticipation of government regulations can also create a market where one may not have existed otherwise. The contentious climate change debate and evolving regulation of greenhouse gases is a significant recent example of this dynamic where a “pre-compliance” or “voluntary” carbon credit market has emerged in anticipation of (or speculation about) federal “cap-and-trade” legislation that has yet to be enacted. The rapid flow of financial and intellectual capital into carbon and other emerging ecosystem markets in recent years is significant.

Appraisal Implications

From the appraiser’s perspective, as these markets gain regulatory certainty and greater capitalization, the typical “highest and best use” analysis that the appraiser undertakes as part of the appraisal process will necessarily have to consider the market value of the environmental commodities associated with the real estate assets. Of course, like any potential use of real property, there are established appraisal criteria for determining the highest and best use that include legal permissibility, physical possibility, financial feasibility, and maximum productivity (i.e. most profit). As environmental markets mature, certain non-traditional uses of land may move from “speculative” to “reasonably probable” in some cases.

Inevitably, additional (new) real property value will be realized through these rapidly emerging markets as they evolve and correct earlier failures. Fundamentally, these markets are driven by the need for additional services of a growing global population and by international, federal, state, and local incentives and mandates.

The LandVest Role

As with many rapidly emerging markets there is risk. This risk along with rapidly changing markets and regulations requires cautious and well-advised decisions by landowners. LandVest can assist its clients in realizing the additional economic value from these emerging markets while also mitigating risk. Through sound planning and proper sequencing or partitioning of land management initiatives, it may be feasible for a landowner to access the value of ecosystem services along with other traditional real estate values and land uses, resulting in the maximization of real estate asset value, income generation, and/or tax benefits. However, the “stacking” of environmental values is a controversial aspect to these emerging markets and must be carefully evaluated. The value implications of these growing markets are significant for owners of mid-to-large real estate holdings. To assist these landowners, LandVest can:

Evaluate the potential applicability of these emerging markets for client properties
Advise clients about potential value opportunities as well as risks associated with participation in a particular program
Undertake field studies to establish baseline inventories
Value alternative land management and/or use models
Continue to provide the highest quality land planning, appraisal, project management, consulting forestry, and brokerage services

Future parts of this series with address items touched on in this blog in greater depth with contributions from our experts in the Real Estate Consulting Group and Timberland Division.

For more information, please view contact information for Slater Anderson or contact Slater at sanderson@landvest.com.

LandVest advises clients and their advisors in land planning, appraisal, management, and marketing of their homes, farms, and timberland. Our practice has grown over our forty years well beyond our New England roots to a national and international practice. This unique perspective allows us to intelligently partner with clients who may own multiple properties, from Florida and Coastal New England to farms and timberland from Maine to California.

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May

Real Estate Appraisal News: Evaluating the New England Golf Club Market
By LandVest

New England Golf Course Real Estate Market

This entry is brought to you by Slater Anderson and Sandy Olney who advise landowners and their advisors on land planning, appraisal, conservation, management, and disposition services through the Real Estate Consulting Group at LandVest.

Photo Credit: Sterling National Country Club

As appraisers in the Real Estate Consulting Group at LandVest, we take part in a variety of valuation and land planning projects. A recent assignment required a highest and best use analysis of a semi-private club with an 18-hole golf course, pool, and tennis courts. The scope of work included a bulk sale comparison (golf course sales) and a projected income feasibility study by a national golf consultant. The performance metrics used in the income analysis accounted for “capacity”, which includes rounds played, hours of daylight, weather, drainage, course conditions, layout, and golf cart accessibility. These components are factored into an analysis of a club’s operating expenses and projected revenue. After analyzing nine recent golf course sales in Massachusetts, Rhode Island and New Hampshire, we want to share some perspectives and conclusions from our research.

In New England, golf is a seasonal, luxury amenity. With a weak economy, sports like golf are adversely affected due to the discretionary nature of the expense revealed that player rounds are down while high operating costs remain the same or higher. A course needs to be in top playable condition whether there are 4 rounds played per day or 50. With approximately 30 million golfers as of 2005 and 27.1 million as of today, memberships have dropped by as much as 30%. Based on our research of nine sales going back to 2007, prices ranged from $1,100,000 to $5,000,000, or $14,000 to $52,000 per gross acre. Sizes ranged from 54± acres for a 9-hole course to 243± acres for an 18-hole course. All of the comparables included amenities like clubhouses and restaurants. It’s also worth noting that the $5,000,000 sale was for the historic PGA course, Pleasant Valley, in Sutton, MA that was sold in foreclosure. This trend in golf courses being sold in foreclosure at auction is not uncommon. Recent figures indicated that an estimated 15% of the nation’s 4,400 private golf clubs were in financial distress. In all, our research from eight courses in Massachusetts and southern New Hampshire indicated that over 1,000 acres have sold in the last three years for a median price of $23,000 per acre.

It’s also worth noting that based on weak demand from new golfers, there has been a shift away from member-only

Photo Credit: Black Swan Country Club

clubs to a more revenue-driven semi-private model. These clubs are set up to capture annual revenue from members, but are open to public use. Other options being explored are changing the utility of the land by introducing residential development. In one scenario, a suburban Boston club was facing foreclosure and altered their plans to develop half of the course for a 55+ senior housing development. This development model is currently being tested in Middlesex County.

In summary, the high capital costs of creating a golf course during a stagnant real estate market with an aging demographic has combined to make the golf course market a difficult investment option in today’s New England real estate market. As evidence of this ongoing dynamic, the 180± acre Lakeville, MA Country Club is the latest golf course going to foreclosure auction scheduled for October 2011.

For more information, please view contact information for Slater Anderson and Sandy Olney, or contact Slater at sanderson@landvest.com and Sandy at solney@landvest.com.

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