As the Florida home market plunged two years ago, Central Florida developer Beat Kahli, CEO of the Avalon Park Group, decided to diversify his business to Austin, Texas, where there appeared to be no recession.
In December 2008, a subsidiary of Avalon Park Group, Avalonpark Texas, bought a 62-acre parcel of raw land inside the North Austin city limits and starting work on entitling the land.
In those two years the recession never really arrived in Austin, as Kahli had hoped. Median home prices are actually higher than they were in 2007. But entitling land was more difficult than the developer had expected.
Austin, said Richard Kunz, principal and project director of Avalonpark Texas, is a tough place to get land entitled. The process of gaining permission to develop 151 home sites at the community, named The Springs of Walnut Creek, took almost the whole of the two years.
“It was a little miracle,” said Kunz. “The whole process has been complicated.”
Getting the financing to develop those home sites was no slam-dunk either, Kunz said. Texas bankers weren’t interested in lending money for the site development.
“Nobody doubted the project,” said Kunz. “It was more about, ‘Who are you?’” since the Florida-based developer didn’t have established relationships with the Texas bankers.
Urban Trust Bank in Lake Mary, Fla., which has done business with Avalon Park, came through with a $2.2 million loan to develop the lots, most of which are already under contract to be bought by Houston-based builder David Weekley Homes, who also builds in Central Florida. Weekley has agreed to take down 109 of the 151 lots. The remaining lots are slotted for a second phase of multi-family homes, said Kunz.
Site work is underway, and Weekley is expected to have models up in about three months. Prices will range from the high $100,000s to the high $200,000s.
While Austin’s strict development policies made gaining development approvals difficult, those policies will now likely work in favor of Avalon Park because it’s in an area of Austin where there has been no new home construction options for years, and it’s unlikely there will be any more competition anytime soon, said Kunz.
“It’s probably the only one in the next two and a half years that are going to be entitled and developed,” said Kunz.
Avalon Park developers are shopping for more land in Austin, but the pickings are slim since they are not the only developers to notice that Austin has been nearly untouched by the housing market collapse.
The large national builders and some investment funds have bought many of the large distressed projects in town.
Teresa Burney is a senior editor for Builder magazine.