At least seven namable species of oak grow native to Texas Hill Country, which reminds many people of Tuscany, and makes them feel they've stumbled upon a little bit of heaven on earth. There's the Blackjack Oak, which like the Spanish Oak (also thriving in Hill Country), is part of the Red Oak family. There are White Oaks with exotic names like Chinquapin, Lacey, Post, and Shin. In another class, altogether, there's the Live Oak, or more precisely plateau live oaks (Quercus fusiformis), which keep their leaves through the winter, pausing for a quick "leaf exchange" in March, which happens fast enough for most to believe they're evergreens.
Live oaks play a starring role in one of the summer's more colorful major nine-figure residential land acquisition and development deals, to be announced publicly this morning. Dallas-based developer Terra Verde Group has teamed up with Wheelock Street Capital to buy Boot Ranch, a 2,000-acre golf and vacation Mecca, just north of Fredericksburg, Tx., in the heart of the heart of Hill Country.
The seller: Lehman Brothers' real estate fund, which has been patiently and opportunistically finding takers for dozens of big and small residential land deals as it works through its array of assets toward and eventual wind-down.
Terra Verde founder and partner Craig Martin, speaking about the deal, can not tamp down a rhapsodic affect as he describes the area's topographical virtues, its verdant elevations and contour, its ponds and creeks, its blend of vastness and intimacy, and, perhaps above all, the majestic crowns and sleepy sweep of its live oaks. Hill Country is Hill Country and there's nothing like it, Martin says, essentially. You have to see it to believe it.
For Terra Verde, a master plan developer whose projects include the award-winning North Dallas Windsong MPC, the goal now is to appeal to a specific niche of wealthy buyers who want a superior golf-oriented second-home retreat--a kind of Aspen or Jackson Hole for duffers and those desirous of Hill Country's unique brand of serenity and epicurean splendor.
At stake, selling home sites whose land-base cost tallies to north of $225 million, and whose total value--after vertical development of estates, "cabins," "Sunday House" time-shares, and possibly some new product and price segments, all of which come with membership privileges to a newly-entitled Top 10 golf course in the nation--could reach or exceed $1 billion. If they succeed, the new owners' plans to build out and sell lush Tuscan-influenced homes with broad, dark-wood beams, and stone massing would be redemption for a project conceived at the tail-end of housing's last boom in 2006. It hit the skids after Lehman Brothers' bankruptcy in 2008, and went into foreclosure. Still, Lehman invested more than $100 million into the golf course, horizontal development, and club house amenities, etc. during the last several years as the project awaited a new owner and master developer.
"All within a four-hour drive of Fredericksburg, you've got Houston, Dallas, Austin, and San Antonio, which is about 15 million people," Martin explains, as he discusses the opportunity and challenge to sell just shy of 400 homes to a particular customer segment looking for higher-end vacation and retirement homes.
"The second-home market spiked 57% in 2014 over 2013, and the numbers aren't in yet for 2015, but it could be even better growth this year," says Martin. "We're very excited about this property because it's truly a unique and exclusive ranch experience in a town with great food, terrific young chefs, a vibrant culture, and an unbelievably beautiful natural amenity."
Wheelock principal Dan Green concurs, saying that the deal is a bit of an anomaly for Wheelock in that potential buyers of these rarefied home sites do not include a lot-hungry herd of big home builders.
"The risk profile here is a bit different for us," says Green. "But, the one-of-a-kind nature of this project made it pencil for us, and we're working with great partners in Terra Verde."
Challenges? Sure, especially as the Texas market continues to brace for repercussions of the global glut in energy supply and its economic shocks. What comes into question as every large asset transaction takes place from this moment forward is, "where are we in the cycle?" And, "will the market trajectory support this risk?"
The next couple of months will go far to answering those directional challenges and questions, both for the high-end market and the other side of the market bar-bell, the first-time buyer. Industry observers are keen to know whether it continues to be "grow-time" vis a vis land acquisitions, or to shift into more of a monetization mode.
But, to us, this project looks like it's right down the center of the fairway.