In most cases, people who develop land are visionaries.
They have an uncanny ability to project far into the future, weigh the costs of purchasing at today’s prices, mix in the costs of holding the land (interest, taxes, inflation and insurance) and calculate what they think will be a final selling price or an exit strategy.
The project may or may not include a use during the time of appreciation, sometimes left as open fields for years and on other occasions, a profitable business is built with the ultimate goal being to make some money to reduce the overhead until the property can be redeemed for development.
Think in terms of being an investor.
How would you get the most benefit from a major landholding required for a long investment period for uses that are different, yet each requiring significant lead time before the ultimate use is implemented.
In some cases the land might be most conducive for mixed farming, sod farming, nurseries or fruit farming. Regardless, the owner will more than likely not wish to enter into a business that adds to the cost of ultimate goal.
Also consider there are discussions in government quarters to assess a landowner an “idle use” tax which would be imposed on a landowner who simply banks land without developing it.
Enter the golf business.
What a perfect fit for a developer.
They pay a few million dollars to build a course and clubhouse, generate more than enough money over a 25 to 30 year time frame to pay for all costs including the cost of carrying, make a profit and have little if anything in the way of costs to develop.
Talk about an exit strategy.
The only people who oppose these theories are the golfers. Nobody else cares.
When Glenway Golf Club in Newmarket, Ont., was sold for development a few years ago, there was barely a whimper from the patrons. They simply moved to another course. A lot was heard from homeowners who bought nearby land based on the premise that it would be near the course, but little was heard from the golfers.
Ontario Hydro owned some land in Oakville that had been rented to a strawberry farmer. In the 1990s it was leased to Ray Patterson, a PGA of Canada member who built a golf course called Saw-Whet on the property.
Over time, Ray bought the land. Recently, it was sold for development and the patrons moved on. The lost goes on, with York Downs said to be selling for more than $400-million and Glen Abbey reportedly being sold in the near future, among other deals.
What is there to make of all of this?
Quite simply one of two things (or both) has happened.
Either the value of the land appreciated unexpectedly to a level that the owners cannot justify continuing to operate a golf business. Or, basically they outsmarted a lot of golfers who believed that once the course was built that it would remain a golf course forever.
The developers could very easily have coordinated a 30-year plan to buy the land, defer its ultimate use, build a golf course using the profits to pay for the cost of carrying the land and then at maturity, employ the original exit strategy of developing the land.
Golfers who are dissatisfied with their course being sold for development complain to authorities/officials about the loss of green space and a place where good times have been spent with good friends.
They’ll move on to new venues not knowing if their own exit strategy from the course they’ve played for years has been planned all along, but not by them.