Demographic Trends Are Taking a Toll on the Economics of Palm Beach Country Club Living (Part 2 of 2)
December 10, 2013 § Leave a comment
Most Palm Beach area country clubs lowered entry fees and annual dues during the economic downturn, so from a financial planning perspective now is a good time to join. Lower costs leave you with more money to invest for your retirement years.
Unfortunately, the economic outlook for country club memberships is not that simple. Major demographic trends are changing the long-term prospects for these luxury communities, and it’s important to take this into account when comparing the communities that dot wealthy Palm Beach County.
Many Palm Beach country clubs offer equity memberships: For a large advance outlay you earn the right to take a share of ownership in the country club once the housing community is filled out. Like any investment, whether you gain or lose on the eventual sale of your shares depends on how well the club does financially. So you need to gauge the economic prospects of each club before deciding which one to join, especially if you are buying an equity membership.
The good news is that demand is starting to rise again for homes in luxury golf communities such as BallenIsles, PGA National, Mirasol, Bear’s Club, Ibis, Old Palm, Frenchman’s Reserve and Frenchman’s Creek in Palm Beach, West Palm Beach, Palm Beach Gardens, Jupiter, Tequesta and other surrounding towns.
“Demand decreased in 2008 but is growing again now. These clubs aren’t struggling like they were,” says Michael Robinson, one of our veteran HighTower financial advisors who was an assistant golf professional at BallenIsles from 1996 to 2003 and now plays at PGA National. “That will place upward pressure on home prices and, eventually, club revenues.”
The bad news is that an aging population has slowed the growth of golf-oriented country clubs and likely will lead to consolidations and even potential failures among Palm Beach County’s famous luxury golf communities.
“As residents age and they can no longer play golf, that has a great impact on the stability of the club,” Michael says. “If your rounds are down, the courses are not generating as much money.”
In addition, members of younger generations are not playing golf as enthusiastically as did their parents. Men and women in their 40s and 50s tend to spend more time with their children and get involved in sports that will improve longevity, such as cycling and tennis.
So you have to look carefully at each club, and the community you would be joining, from a financial planning perspective. If the majority of members are in their 60s, this will put pressure on the financials down the road. Also, some clubs have loosened certain standards, such as attire, or are charging lower membership fees in order to attract the younger generation. But that may make it more difficult to raise prices, and therefore revenues, in the future.
Looking over the cost structures of the northern Palm Beach County clubs, we believe the best deals right now are Ironhorse in West Palm Beach, Jupiter Country Club in Jupiter, Eastpointe Country Club in Palm Beach Gardens, and Turtle Creek in Tequesta.
You can play golf at Turtle Creek for a $5,000 initiation fee and annual dues of $9,400 so the first year is $14,400 for a full golf membership. In comparison, Jonathan’s Landing in Jupiter, a much larger facility, charges a $41,000 entry fee, and annual dues of $12,350, for an initial outlay of $53,350.
There are many reasons prices differ, starting with location. Ironhorse, for instance, is a little off the beaten path compared to the other clubs. And the newer Jupiter Country Club is driven more by home sales presently than by club memberships.
Buying a home, or a second home, in a beautiful Palm Beach retirement community can be a spectacular reward for your hard-earned success. As with any high end purchase, look at it from a retirement planning and wealth management perspective before making your final choice.