The golf course investment market has undergone a significant change over the past two years, with industry professionals reporting improved fundamentals and a notable shift in investor perception. What was once considered a high-risk asset class is now attracting renewed attention from capital sources seeking opportunities in specialized real estate sectors.
Keith Cubba, Senior Vice President and National Director of Golf at Colliers International, has witnessed this evolution firsthand. His entry into golf course brokerage came through an unexpected path during the financial crisis, when he was handling investment sales in Las Vegas and a bank client took back a golf course through foreclosure.
“I was always open to looking at something else,” Cubba recalls of his transition from traditional commercial real estate. “There weren’t very many people in the country who did golf course brokerage, but the people who did it worked nationally, which meant I could get out of state and cross state lines.”
The golf course sector has experienced what Cubba describes as a “confluence of events” that fundamentally changed its risk profile. The industry gained significant momentum during the pandemic, but underlying trends were already in motion.
“Golf course cap rates would be 16 or 17 percent, when office cap rates were six percent,” Cubba explains. “There was this big spread between the two that wasn’t commensurate to the risk.”
This demographic shift, with increased participation, led to improved financial performance across the sector. More importantly for investors, the market has undergone a natural consolidation process that has strengthened the remaining assets.
“The courses that were in areas that couldn’t make it because of the population or the demographics – they’re gone,” Cubba notes. “They were converted to alternative use or they just closed. So we’re in a state now where the courses that are existing are pretty much doing well.”
Golf courses trade on multiples of EBITDA rather than traditional cap rates, creating a unique pricing dynamic. Historically, golf properties traded at much higher cap rates than core commercial assets, reflecting their perceived risk.
“Golf course cap rates would be 16 or 17 percent, when office cap rates were six percent,” Cubba explains. “There was this big spread between the two that wasn’t commensurate to the risk.”
The market has seen compression in these spreads as fundamentals have improved. Golf course cap rate equivalents have moved down to the 12-13 percent range, while traditional commercial assets now trade around seven percent. This narrowing gap reflects the reduced risk profile that investors are beginning to recognize.
Current market conditions strongly favor sellers, though not necessarily through premium pricing. Instead, the advantage comes from severely constrained supply meeting steady demand from an expanding buyer pool.
“It’s a seller’s market in that there aren’t a lot of assets out there in the pool for buyers,” Cubba observes. “While the buyer pool is deeper than it’s ever been in the past, it’s not as deep as multifamily or retail, it’s just a smaller asset class.”
The scarcity of available properties has created competitive dynamics that benefit existing owners. However, the market faces one significant constraint that prevents even stronger seller conditions.
Despite improved fundamentals, golf course financing continues to present challenges that limit transaction velocity. Traditional commercial lenders remain cautious about the sector, requiring higher equity contributions and personal guarantees.
“It’s still hard on golf to get more than 50 percent leverage,” Cubba explains. “Maybe you can get 60 percent, but you need a personal guarantee. A lot of banks still aren’t doing it.”
Some lenders initially treated golf courses as Small Business Administration candidates due to their operational nature, though this is gradually evolving as institutions recognize the improved risk profile. The financing constraint represents the primary limitation preventing an even stronger seller’s market.
One of the most underutilized aspects of golf course investment involves favorable tax treatment that many buyers and even existing owners fail to fully understand or implement. The IRS provides particularly generous depreciation rules for golf course assets.
“You can depreciate the greens, the tee boxes, the bunkers, irrigation system, the equipment, the clubhouse,” Cubba explains. “Once you’ve cost segregated and have that set up, the difference on a net basis versus a property that doesn’t allow so much accelerated depreciation is fairly significant.”
This tax advantage requires professional cost segregation analysis but can substantially improve investment returns. Many current owners remain unaware of these benefits, suggesting additional value creation opportunities for sophisticated investors.
Cubba’s success in the golf course sector stems partly from his approach to national coverage through local expertise. Rather than attempting to serve all markets directly, his platform leverages local Colliers brokers in each market to provide ground-level knowledge.
“My platform was I had 16 or 17 guys spread out nationally, and if I got a listing in Memphis, I brought in the local expert from the Memphis office,” he explains. This addresses a common weakness in specialized asset classes where brokers may lack intimate market knowledge.
The golf course investment market appears positioned for continued strength, supported by improved fundamentals, limited supply, and growing recognition of reduced risk profiles. While financing constraints continue to limit transaction volume, gradual improvements in lender attitudes suggest this barrier may diminish over time.
For investors seeking opportunities in specialized real estate sectors, golf courses present an interesting proposition: an asset class that has undergone significant fundamental improvement while maintaining pricing that may not fully reflect these changes. Operational improvements, demographic tailwinds, and underutilized tax benefits create a compelling investment thesis for those willing to navigate the sector’s unique characteristics.
The market’s evolution from distressed asset class to stable investment opportunity reflects broader trends in specialized real estate, where patient capital and sector expertise can identify value in overlooked segments of the commercial property market.
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