If one development stood alone as the most unique in our Lake Geneva vacation home market, it would be the South Shore Club. When the South Shore Club rose from the ashes of the old Northwestern Military Academy, I wasn’t a fan of the concept, nor the price range. My thinking at the time (2002-ish) was that any buyer who wanted to spend $3MM+ wouldn’t want to share a pool. She wouldn’t want to share a pier, nor would she want to share a tennis court. I figured if a buyer wanted to spend $3MM+, they’d want their own private pier and pool and tennis courts. In 2002, you could reasonably buy a nice lakefront estate in the $3MM range, which I figured would be preferable to those buyers who were seeking a lakefront retreat.
That’s what I thought, but that’s not really what happened. The market took off quite nicely at the South Shore Club, and as of today, only 32 of the 40 lots remain under developer control (according to MLS). The market made significant strides from 2003 to 2007, but 2008 signaled the end of easy street for the South Shore Club. During 2008, not a single lot sold according to the MLS. 2009 was similarly difficult, when the South Shore Club closed on just one previously unsold lot. I’m focusing more on the developer owned lots, because until the development is 100% sold, it’s going to be very difficult for the development to realize any real price gains, even if the broader market improves.
The one lot that sold in 2009 closed for a mere 58% of the asking price. The previous average for the 10 lots listed in the MLS (more lots sold, but many were not entered into the MLS), was 80% of list price. This apparent newfound motivation on behalf of the ownership represents a tremendous opportunity for any buyer looking to own in the South Shore Club. The development fits nicely into the market, particularly now that the sales prices of the vacant land have proven to be more than 40% off previous asking prices. While most of the built inventory (only one home listed on the open market in the SSC as of this morning) hovers between $3MM and $4MM, it’s obvious to me now that buyers would be able to buy a vacant lot and subsequently build a new home on that lot and be all in for somewhere closer to $2MM.
The reason, in my humble opinion, that the existing inventory isn’t selling, has everything to do with the new values of the vacant land. In a buyers mind, if the developer has proven a willingness to sell the remaining lots at a potential 42% discount from list price, then buyers are now able to be in the SSC with a total investment that is far lower than that of the existing owners. In other words, why pay someone $3.5MM for an existing property when you could buy a vacant lot, build new, and be all in for as much as a million bucks less? You probably wouldn’t, and that might be why the existing inventory isn’t selling. Some people mistakenly assume that the SSC is unfairly taxed, but as I wrote here, the South Shore Club actually could be considered a relative low tax haven compared to private frontage.
So what’s on the horizon? If the developers are as motivated as they showed in 2009, we should see a couple of vacant lots sell in the South Shore Club during 2010. The only way I see existing inventory selling is if the sellers reduce their prices to reflect new valuations, something that they have so far been reticent to do. Lot 15 is the best lot left, and there’s reason to believe this parcel may sell for a severely discounted price. Lots located further to the south, and behind the clubhouse and pool, will ultimately sell for even lower prices, creating an opportunity for buyers to be in a finished, brand new, beautiful home for considerably less than $2MM. That’s an entry point that was unheard of just a couple years ago.
The South Shore Club is a valuable asset to the Lake Geneva vacation home market, and at these new prices, I’m a huge fan. I think there’s money to be made here, and I think a buyer with a solid grasp on the market can position themselves for solid gains moving forward. The development has tennis courts, the most fabulous swimming pool on the entire lake, and use of a fleet of high end boats. The SSC is a terrific option for anyone contemplating private frontage, and in 2010, look for the price of admission to get a whole lot cheaper. Now, here’s a blurry video to remind you that summer 2010 will be here sooner than you think.