A friend of mine, who also is a a long-time investor in commercial real estate, asked me the other day whether I might have any buyers for a golf course he owns in Indiana.
My reply was somthing along the lines of, "I'd really like to sell the fraternity house you own for you! I have people lined up who would love to own that kind of asset."
"I'll bet you do," was his reply, adding that it's not for sale. I swear, the man practically stands by the mailbox once a month waiting on the USPS driver to drop off THAT rent check, so strong is this particular property. But I'm getting away from the topic -- golf courses.
Pete told me there is a trend in the Midwest, and he has seen it in Indiana, that has high-priced golf courses -- many of which previously were farms -- being purchased by farmers and taken back into grain production. Specifically, in a down economy like we have today, not as many people are out hitting the little white ball. I knew this development had been proposed, but I hadn't followed it.
It's true. Over the objections of many, particularly homeowners who built half million dollar houses lining various fairways, golf courses in Illinois, Iowa and Indiana have been plowed under. The golf courses aren't making money, but there is demand for prime farmland (as Will Rogers famously stated, "they aren't making any more of it"), largely driven by spikes in corn futures as a world focused on ethanol from grain continues its juggernaut.
Of course, the moral issue (i.e. unintended consequences) is that the spike in corn prices worldwide has put affordable cornmeal for peoples in third world countries out of reach. Now, the raw materials for tortillas, et al are stupid expensive. But that's a post, a very long post, for another day.
Executive homes overlooking this green, or that fairway, now are worth often times half their earlier value. All because the highest and best use for the land along which they were built is -- a corn or soybean field.
Pete's golf course? It was built in the 1920s as a private country club. He took it public when he purchased it many years ago. Rolling hills, trees -- not the topography best suited for farming. So his golf course is likely to remain a golf course. Too bad. Not a lot of call for golf courses these days unless you can grow 122 bushels of corn an acre off it.
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