Club West home values could suffer, study says

Posted: January 15, 2020 / Source: Ahwatukee Foothills News



With Club West homeowners slated to hear tomorrow, Jan. 16, a plan to radically change the golf course, a new study indicates they stand to lose an average $60,000 in home value if the site remains closed for the next five years.

“There could be an ‘opportunity cost’ to Club West homeowners of about 15 percent over the next five years following the closure of the golf course,” says a study by Kevin Curran, a Club West resident since 2012 and a retired CEO of Fisher Price, a manufacturer of educational toys. “On an average home in Club West – $410,000 value per Zillow – this ‘opportunity cost’ to each homeowner could be about $60,000 over the next five years.”

An opportunity cost in Club West’s case is the loss of increased home value that would be incurred if the 18-hole course was up and running.


“While prices are likely to continue to appreciate in Club West, they will likely NOT appreciate as much as they would if the golf course reopens or the property is repurposed as an asset that reflects favorably of the lifestyle of the community (i.e. parkland, walking and biking paths,” Curran concludes.

That $60,000 opportunity cost to homeowners also would likely follow any plan to shrink the size of the golf course from 18 holes to make way for residences, he said.

Curran has asked the Club West Community Association board for a chance to discuss the study before it completes its consideration of a plan by four investors to reduce the course to nine holes and build an unknown number of residences in an area that includes four holes, the clubhouse, pond and the parking lot used by golfers.

The four investors have tentatively agreed to buy the course from owner Wilson Gee, who last year put it on the market for $800,000.

Those same four men walked away from an earlier deal to buy the course, stating that their experts during the diligence period had determined it would not be profitable to restore the course, given the lack of ready access to cheaper water. The course is irrigated by City of Phoenix potable water at an annual cost of more than $700,000.

The investors are scheduled to unveil their full plan at the HOA board meeting tomorrow.

Board President Mike Hinz said that once the board studies the plan, it could ask homeowners to vote as early as March to change the course’s covenants, conditions and restrictions to allow the plan’s implementation. Phoenix City Council also would likely be required to vote once the Planning and Zoning Department reviews the plan.

The board has already laid out the steps for homeowners to vote if it approves the investors’ proposal.

Lakes homes lost out 

Curran retired in 2011 as CEO and general manager of Fisher-Price after more than 30 years in business. During his career, he is credited with doubling from $300 million to $600 million the revenues of Rubbermaid’s Little Tykes toy division.

Named CEO of Fisher Price in 2009, he is credited with leading that company into achieving record worldwide profits of $2,3 billion in 2009 and 2010.

He told AFN he had become interested several months ago in the impact of closures of the Club West and Ahwatukee Lakes golf courses on home values in both communities.

So, he examined the history of actual home sale prices posted by Zillow, which obtains its sale data from third-party sources such as the MLS.

Data accumulated by the MLS, or multiple listings service, are used by Realtors to determine home appraisals and other things.

Curran began his analysis with an examination of the impact of Gee’s 2013 closure of the Ahwatukee Lakes Golf Course and began studying data for home sales in both Ahwatukee Lakes and Ahwatukee Country Club during the five years before the Lakes course was closed in 2013 and the five-year period following closure.

Included in his analysis were nine on-course and 23 off-course homes in Ahwatukee Lakes and 29 on-course and 20 off-course homes at Ahwatukee Country Club.

He used Ahwatukee Country Club as a “control group” to provide a benchmark of appreciation under “normal” conditions.

“Despite the golf course closure, a typical home in the Ahwatukee Lakes community appreciated about 7.3 percent annually,” Curran said. “This is good but it is not as strong as the 10.2 percent price appreciation observed in the Ahwatukee Country Club community.”

He said that while that difference in appreciation “may not sound like much, it adds up significantly over time.” 

“It appears homes in the Lakes community appreciate about 15 percent less than they would have without the golf course closure,” he found.

That difference, or opportunity cost, is significant, he says.

“Since the average price of a home in the Lakes community is about $276,000, losing 15 percent in value appreciation over five years costs the average homeowner about $41,000,” Curran said.

Curran then applied the trends he saw to Club West home values, which on aveage are higher than those in Ahwatukee Lakes or Ahwatukee Country Club.

He also developed several options facing Club West in light of the current would-be buyers’ plan.

The buyers declined a request by AFN to discuss their plan prior to tomorrow’s HOA board meeting.

In walking away from the tentative deal with Gee last fall, Matt Shearer, a Club West resident and one of the four investors, said, “Unfortunately, we do not believe the course can be saved as a sustainable jewel of our community.”

But one source familiar with their plan said it tracks closely to the one outlined in an anonymous letter that had been hand-delivered in November to 73 homes around the four holes that would be closed to make way for residences.

That letter – whose author has never been disclosed – said the plan involved reducing the 18-hole course to a nine-hole executive course; demolishing the current clubhouse in favor of a new one closer to Chandler Boulevard.

It also calls for building some kind of housing on four holes as well as on the areas where the pond and clubhouse are currently situated.  The kind of housing – single-family, condominiums, townhouses or apartments – remains a mystery.

In announcing tomorrow’s meeting, the HOA board in a mid-December letter to residents said:

 “The potential buyers are the same group as the last escrow and appear to have resolved many of their challenges. We do not know the exact closing date. We have been told that they want to close by early March.”

“They are preparing a presentation and will communicate their plans to us,” the announcement stated. “All plans require an approval of the board and vote of the community.”

“There will not be a vote about the plan at this meeting nor a scheduled Q and A,” that announcement stated. 

“We will have a lot of questions as a board and expect questions from the attendees,” the board said, telling residents they will be able to fill out forms with questions and comments that will be addressed before its Feb. 20 meeting.

It went on to say that at the Feb. 20 meeting, the board will decide whether “to present the buyer’s plan for the course to the community or request a revised plan based on additional input from the board.”

 

“The board vote is only the first step in the approval process,” the announcement went on to say. “If the board decides the buyer’s plan is not ready for a community vote, the buyers will be required to submit a new plan based on the board’s and community’s concerns and inputs. Any new plan would require a new open meeting presentation, preparation and a vote etc.”

The board said that if it approves the plan, it would then schedule a special meeting where homeowners would have to be present to cast ballots on the investors’ plan.

Unlike the requirements for changing the CC&Rs governing the Ahwatukee Lakes Golf Course, a majority vote of all Club West homeowners is not required to change their course’s land use regulations.

Club West’s board in late summer adopted new rules require only 31 percent of the ballots must be cast for a simple majority vote to change the CC&Rs.

That means that if the Club West HOA board follows through with a special meeting to vote on the investors’ plan, it could pit the 357 owners of homes adjacent to the course against the rest of Club West’s approximate 2,400 homeowners. 

9-hole course questioned

In his analysis, Curran echoes a conclusion on the likely profitability of a nine-home course that was given by Club West resident Jim Lindstrom.

Lindstrom four years ago had assembled a team of experts to analyze the issues surround the golf course’s restoration and operation. He then tried to get homeowners to buy the course and run it as an 18-hole field, but failed to garner enough support.

Both Lindstrom and Curran said that while a smaller course would require far less water, its location and format would likely not entice enough golfers to make it profitable.

“Expenses might be slightly lower for a smaller course, but player demand and revenues would probably fall a lot more than expenses, resulting in course closure again,” Curran said. 

He said existing homes located near new homes on the course “would probably lose 10 to 20 percent of their value immediately and then there would be a value ‘ripple effect’ hurting property values across the entire community.

“The community would likely be right back to where it is now, suffering from a closed golf course and negatively affected property values,” he added.

While any change in use would require approval both by Club West homeowners and ultimately the Phoenix City Council, Curran said Lindstrom’s original plan or converting the course into a “walkers parkland” might have a more positive impact on home values in the community.

His plan outlines six different options for the course’s future, including waiting for a buyer, allowing homes on the course and suing Gee to restore the course – all three of which, he says, will result in a $12,000 “opportunity cost” for home values in five years,

His other options call for a one-time investment by each homeowner ranging from $1,500 to buy the course and have the HOA run it or $665 to buy the course for $1.8 million to turn it into a park. That last option would involve “some ‘opportunity cost’ plus $200,000-$300,000 maintenance annually” at a cost of $100.

Although not in his study, Currant told AFN a seventh option would be having each homeowner pay a one-time cost of $500 to contribute to the $1.2 million construction of a pipeline that would bring cheaper water to the golf course from the Gila River Indian Community, reducing annual water costs from $700,000 to $200,000. 

Curran said such a reduction might persuade Gee to restore and continue operating the Club West course.

 Ahwatukee businessman Rande Leonard has put together the pipeline plan, which has been stalled by uncertainty surrounding the Club West.

But Curran added that Gee may find it more profitable not to worry about Club West so that golfers instead can use his nearby Foothills Golf Course. Club West has essentially been closed since 2016 except for a brief period in late 2017 and early 2018, when the Inter Tribal Golf Association tried to run it.

https://www.ahwatukee.com/news/article_fd66449e-3704-11ea-8244-379ea26914fa.html

 
 
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