Frank Jermusek, President of Northco Real Estate Services in Minneapolis, revealed that he was expanding the Golf & Hospitality division of his company. Originally spanning Wisconsin and Minnesota, his golf course real estate business will now head into other Midwestern states. Mr. Jermusek explains the reasoning for this expansion is on a large part due to a significant increase in sale and acquisition activity over the past year.
the 1031 market has definitely heated up. Two month ago Northco sold semi-stabilized multi-tenant office building [exchange] and a put piece of development land under contract [reverse exchange]. Client wanted a coupon clipper. Looked at a bunch of NNN deals across the country. Good ones were flying off the shelves at sub 6 caps. Northco finally found a good Midwest location Walgreens — 6.25% cap —- 18 year lease —- $317k in cash flow. Northco closed the transaction last week. Need to move fast if you are looking.
Let Jermusek & Davies know if you need legal help during any step of the acquisition, disposition, financing, or 1031 process.
On a phone interview with Dennis Mccan at golf magazine WisGolfer, Frank Jermusek confirmed this statement. Frank deliberated that the prices of golf courses have become more reasonable, and additionally that buyers are finding increasing and more appealing options to make a purchase. A recent development of financing for this type of deal, and new sources of funds have attracted buyers into the Golf & Hospitality market.
The same reasons the market is good for buyers make it a tough one for people or holding companies that previously owned these courses and properties at a much higher value. While recently they have essentially been a steal for anyone who can afford to make the investment (keep in mind all those financing options), many of the owners of the properties are taking a real hair cut.
As an example, in today’s market, a high-value course, which a few years ago was valued at upwards of $10 million in this market is about 15% of its value, at $1.5 million. This is just the type of value investing that allows savvy investors to greatly increase their wealth from such types of smart purchases. As long as you’ve got an eye out for it, like Frank Jermusek, you may just get in at the time, years from now, we all wish we did.
Frank Jermusek just made a recent acquisition of a Twin Cities course for $1.6 million. While that sounds like a lot up front, that isn’t how he financed it. Though $1.6m might have been the original downpayment at the course’s higher valuation, Jermusek only had to pay 10% of the $1.6m cash down, and the rest was covered by the newly available sources of financing from bank and Small Business Administration loans.
If you were holding a golf course or similar recreational property before the past few years, you might have just lost a bit of your assets. If you weren’t however, and are interested in a real estate investment, now might be the time to look.