Golf course community back from the brink

With club back on solid footing, residential development revived

Steve Bergsman
Inman News®

(Author’s note: Early in the year, I traveled to Missoula, Mont., for a winter vacation, but a contact put me in touch with a few people in the real estate industry and much to my surprise I came away with a couple of interesting stories. This column is the second of two. Read Part 1.)

Back in 1869, Gaspard Deschamps wandered into the Montana territory, eventually settling down on rolling hills near the mining town of Hellgate. The mining town would eventually be known as Missoula and Deschamps’ enterprise would become a sizeable ranch.

Fast forward to the 21st century and Missoula-based The Washington Companies developed the old Deschamps property into a new kind of project for Missoula, a golf course residential development. Called Phantom Hills, the 600-acre property boasted a gorgeous clubhouse and course surrounded by middle-class homes of boxy, Montana style.

Then in what can only be called the worst timing ever, another local developer acquired the development in 2007, just as the housing bubble began to burst. Now called The Ranch Club, the development struggled through the recession, eventually failed, and ended up back in the hands of its lender.

It’s here where my story begins. Actually, it’s here where Jon Pinardi’s story begins.

Pinardi, whose card reads general manager of The Ranch Club, actually works for Austin-based Touchstone Golf LLC. Pinardi’s job isn’t to fix the problems of the residential development. His specialty is stabilizing the private country club/golf operations.

"I was brought in to put the club on solid footing," he tells me from The Ranch Club’s handsomely appointed dining room, "and to help with the marketing, branding and membership sales. This is my specialty; I’ve been in the club business for years."

In the decade leading up to the recession, anything that was built with value-add amenities such as golf courses and smacked of hoity-toity, instead of hoi polloi, sold like Callaway clubs at a golf shop sale.

Then the recession hit and investors bogeyed. By 2010, the National Golf Foundation was reporting 15 percent of the 4,400 private clubs nationwide were facing serious financial challenges.

As Roland Bates, executive vice president of Southworth Development LLC told me last year ("Selling a golf community is not about golf"), if you had infrastructure and amenities in before the recession began, you were probably OK. But if you were still permitting through 2006 and started infrastructure development in 2008, you were dead.

Golf communities front-end the massively expensive, course/clubhouse development, so without ongoing residential sales, these projects collapse under debt load quicker than a Tiger Woods slice.

By 2007, the new owners of The Ranch Club had dumped a lot of money put into facilities. The clubhouse was expanded, fitness amenities added, swimming pool laid in, and an event barn was built for parties. Good ideas, but at the wrong time.

When the lender took over, it wisely decided to split The Ranch Club situation into two parts, residential sales and club management. For the latter, it hired Touchstone Golf, specialists in this little-known sector of the distressed real estate world, in July 2012.

"The majority of our golf management agreements are for distressed properties," says Pinardi. "When the economy changed, our phones started ringing off the hook. This was a niche that no one was really filling — just managing the club part of a golf course community."

Touchstone currently manages 23 clubs in five states.

My immediate thought about the golf course at The Ranch Club was, why bother? Why not just let the golf course go dormant until residential sales start picking up again?

It was obvious I hadn’t been on a golf course in a very long time.

This is the reason why golf club management is important and why lenders bring in companies like Touchstone: When someone is looking to purchase real estate in a residential golf community, they want to know, even if they will never be a club member, that the club is a successful enterprise. The presence of a successful club adds value to the homeowner’s investment in that particular community.

"It’s critical to stabilize the club/golf course," Pinardi emphasizes.

Nationwide, only about 30 percent of people who live in a private, residential community are members of the club, says Pinardi.

"Yet, they still want to have it. Not only for the aesthetics, but it’s a value-add to their residence."

The Ranch Club is no different. Of its current 200-plus membership, only about 60 are residents of the development.

"When we come in, the first thing we have to do is get the house in order," Pinardi explains. "Sometimes clubs are well-managed, other times not. If it isn’t well-managed, you need to get your arms around the facility and get the right staff in place. You have to let the members know you are there to create a better atmosphere. Hopefully, you get to a point where they are advocates of the club and bring referrals."

The Ranch Club was in good shape physically when Pinardi arrived. The most important thing at first was to separate the real estate operations from the club operations.

"The real estate was dragging the club down," says Pinardi. "With the real estate separated we could focus on the club."

There was another benefit, Pinardi adds: Members "felt much better that their dues weren’t being spun off to go toward real estate subsidies, that their dues were only being used to support the club."

With the club stabilized and the Missoula economy improving, the residential part of the development has started to make progress again. In 2012, there were a number of home sites sold and five homes began to rise from the former grasslands.

"We are starting to see signs of life," says Pinardi.

It was in January when I met Pinardi. The temperature outside The Ranch House dining room was 8 degrees and the only signs of life were groundskeepers clearing snow from the pond so people could ice skate.

Montana. Winter sports. Party on.

Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, "The Death of Johnny Ace," is now available for sale on Amazon.

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