You need land to develop. You see a struggling golf course and/or open space. You have heard that the golf industry is over built; many courses are struggling to turn a good profit and some are closing. You decide to purchase a golf course or open space because in your mind it is an opportunity to turn a” lemon into lemonade” win-win-win situation. You take a struggling golf course or open space off the hands of a strapped business or association giving you land to develop with infrastructure nearby and a known market. To cap it off, the City gets the benefit of a new development and bigger tax base. A win-win-win situation that will make everyone happy, right? Hugely uncertain is the answer!
Your win-win-win solution and huge reward may end up being based on the wrong assumptions, take the wrong path or the wrong strategy for that City, neighborhood or specific circumstance. The lack of extensive due diligence will likely cost you time and money. Plus, the wrong path could be fatal!
Buying golf courses and/or designated open space, is not the same as buying raw land. There are multiple constraints to examine. One of the critical items is the question of development rights. What developmental rights and controls do the Seller; Neighboring Property Owners; Home Owners Association; and Governmental Association have?
One answer to the development rights is within local governmental entity approvals. There was a planning and zoning process that approved, designated, ENTITLED, and fully or partially DEVELOPED and SOLD the land as a golf course and/or open space. This may have included some or all of the land around the golf course. To undo, replace or modify those designations requires a similar zoning process to create major revisions to the entitlements. At a bare minimum, the process will require a public hearing and, in most cases, at least one neighborhood meeting. The standard submittal requirements will probably not be sufficient in most instances where the open space/golf course is essentially an infill site. This process must be undertaken to guarantee any sort of development changes can take place.
These changes to development rights that appear straightforward or simple on paper are far more complex when they affect the surrounding property owner’s quality of life, property value, property taxes to local government and especially schools. Neighboring owners even if they have no apparent right to control or affect the proposed development right changes under the CC&Rs and through their HOA still retain the ability to use the governmental process to alter or defeat any filing with the local government. These neighbor stakeholders can easily delay or derail a casual or cavalier path to entitlements. You need these stakeholders for a fourth win, to have a win-win-win-win project.
The possible paths chosen by the open space/golf course owners to develop a golf course include: file and fight, file and negotiate, bankruptcy, and structured negotiations and filing. In all instances, litigation is always the threat all stakeholders have in their hip pocket. Unfortunately, litigation gives up control to courts but comes with the advantage of a decision. Negotiating with large stakeholder groups that are not binding on all is time consuming and reduces but does not eliminate litigation risk. A well negotiated effort does go a long way to creating a favorable political climate.
The point of this is, the prospective purchaser/developer is well advised to assess a host of factors that affect the desired development rights and develop a well-conceived strategy and process. Clearly buying without any contingency for the new development rights is a high-risk decision.
The recommended three-prong due diligence strategy illustrates the type of homework that needs to be done. One prong examines the host of legal property rights connected to the property. Another prong to address the fears of property owners needs to be developed as well. Below is a further expansion on these first two prongs. The third prong, technical studies by professionals, should be completed regarding the project feasibility and impacts both positive and negative and how those will be mitigated or emphasized. Needless to say, the complexity of the due diligence efforts is beyond this article’s short look in to this question of open space/golf course development.
Property Right Examples.
Often there are restrictions on the golf course/open space by contract or regulation. The land could have been granted for golf course purposes only for a set amount of time or by a deed restriction. That was the case for both Black Mountain Golf Course and the Legacy Course in Henderson. Black Mountain was not developed as a Master Planned Community. Black Mountain Golf Course was granted a Patent Easement from the BLM for “the golf site purpose only” (BLM paten) with a private membership entity operating the golf course.
The Legacy is part of a Master Planned Community (MPC) with a master developer but with no governmental designation as a planned development. The Legacy Course is privately owned and operated and contained a 50-year deed restriction limiting the use to the golf course and its ancillary uses. In Las Vegas there is the Badlands, which is part of a MPC with a master developer and governmental designation as a master planned development but the course was not part of the master association. Badlands was privately owned with a 50-year lease that was renewable for 50 more but not deed restricted.
Planning and Zoning Development Entitlements.
The neighbors may also have rights or some entitlement to the golf course or open space use or enjoyment either through Restrictive Covenants (CC&Rs), other agreements or legal mechanisms. The Silverstone Golf Course, located within the City of Las Vegas, has CC&R’s that requires 75% of the homeowners to agree to a change in the golf course. That did not deter a developer from trying to develop the course while embroiled in bankruptcy litigation and with the residential property owners fully engaged.
The development rights entitled by the local planning and zoning authority need to be understood. Are the entitlements the same rules as exist today or are they grandfathered or both. Is it standard zoning or is there a planned regulation, PUD or overlay zoning involved that governs? Is there a controlling Development Agreement? Is the project completed or still in some state of development by the master developer?
Altering the Open Space/Golf Course.
Be prepared! A detailed assessment of the development rights by private agreements or public governmental approvals is needed followed by a process and strategy on how to approach the surrounding community and the governmental jurisdictions on altering the open space or golf course.
Typical of questions to be prepared for and that are of interest or concern by elected or appointed Boards and Commissions along with neighboring property owners: What will this do to my property value? What specifically will you build? Have you built this before? What will happen to existing structures features with the proposed development? Are there water features on the golf course? What will happen to them? Are there water rights, agreements or permits and regulations in place regarding those water features? What about flood channels? Will FEMA and the Flood Control District need new or have to alter their facilities? Migratory animals, where are they going to go now that you are changing their water source? Utilities, can you connect to them? Is there capacity for your project? What about circulation; pedestrian and vehicular? Is there capacity on the existing roads? What will your project do to the existing schools? Will it trigger the need for a new school or fire station? Are you willing and able to dedicate new school sites within your development? Will you need to bring in fill to make the site developable or will the site balance itself? What kind of construction impact (trucks, noise, etc.) will it have on the surrounding properties?
Failing to Negotiate.
Expect there to be neighborhood opposition. Even if the neighbors have no explicit rights, they have enjoyed the benefit of open space nearby. They have enjoyed the quiet associated with a golf course and in some cases a view. Many people purchased their homes because there is a golf course nearby. In fact, a recent article noted:
There are 59 golf courses in Las Vegas, Henderson, North Las Vegas and Mesquite, according to Chris Cain, director of UNLV’s PGA Golf Management University Program. Many developers built them with residential communities, not because of local demand for golf but as a lure for homebuyers. (from RJ article dated 07-03-18)
Working with stakeholder neighbors on a proposed altered open space/golf course development (layout, type of homes, amenities, etc.) is vitally important. If you don’t, you could find yourself in multiple delays and lawsuits over your proposed project.
The Badlands Golf Course, in the City of Las Vegas, is a prime example of what can happen when you don’t work with the neighbors. Had the developer been more open and receptive, neighbors might have agreed to some development. Now three years, and multiple lawsuits later, the project is still not approved, and the lawsuits are ongoing. The Legacy and Silverstone courses also followed this path of failing to negotiate.
Neighbors will organize, even if there is not a formal neighborhood association. They will unite for a cause. In Henderson, the neighbors around the Black Mountain Golf Course and the Legacy Golf Course organized themselves to try and save their courses. The Black Mountain neighborhood created an association just to save the golf course. They created social media accounts, held fundraisers, and have been active at all the public meetings. When Legacy homeowners found out when the golf course was sold, they sued the new owners citing the deed restriction on the property. That lawsuit was recently settled in court, and even though the new owners of the golf course re-opened the course, residents kept moving forward with the suit to ensure that the golf course stays open until at least to the end of the deed restriction.
The homeowners of Rhodes Ranch, located in Clark County, do not want any of their golf courses to change. A developer has proposed putting homes on a small portion of their course and as a result neighbors have organized and have started a Go-Fund-Me account to raise money for legal fees to fight it. Southern Highlands Master Plan, also located in Clark County, proposed development on golf course designated land. The developer held neighborhood meetings and revised plans based on the concerns addressed by the neighbors. Ultimately, the plan was withdrawn because of the neighborhood opposition.
The Sienna Golf Club in Las Vegas has taken a different approach, asking the residents for help first rather than selling off to a developer. They went to the HOA and residents and told them of their financial woes, and asked the residents for an additional $12.50 per month to keep the golf course viable. At Lake Las Vegas a small group of residents banded together and bought the golf course.
Leaving out the surrounding property owners as stakeholders will likely result with a project that provides only a win-win-win solution with approval from the governing board but still not be able to move forward due to being tied up in years of multiple law suits. The other result could be that neighborhood opposition is so strong the project gets abandoned or withdrawn, and the belated realization that only three wins of the four may be the wrong strategy. To get the Four Wins requires including all those affected by the proposed alteration to the open space/golf course.
Know the extensive history of the entire project not just the open space/golf course. Exhaustively research the private agreements, marketing/sales, governmental approvals and permits in the due diligence. Identify the stakeholders and anticipate their needs and responses. Have the technical studies needed. Define a structured process that includes stakeholder negotiations within a realistic timeframe and budget and if all else fails have a fallback legal position as a contingency.