Even as many land developers struggle and others have closed down, the Dallas-based Huffines Communities is thriving and trying to expand beyond Texas.
"We've wanted to expand for years, and we started looking at expansion markets in '04, but we couldn't make any deals work," said Robert Kembel, Huffines president. "We were having to compete with builders getting into the development business."
But now, with many builders out of the development business and developers out of business, builders are looking to buy turnkey lots from developers again, and Huffines wants to capitalize on that demand in Dallas and in other parts of the country.
"We are out actively looking," Kembel said. "Now is the time to buy." But buying hasn't been easy. Kembel said the company has been looking for the right land to buy at the right price in markets other than Texas for two years now with no success.
"Well-located, quality master-planned communities, the kind of product that we really have liked, they are not available," said Kembel.
But Huffines is pretty picky. It's looking in larger markets where the builders who buy their lots want to be. They are looking for job growth and land that's in good transportation corridors and not too far out. And it favors the Sunbelt, markets like Phoenix, Florida, the Carolinas, and Atlanta.
"There are quite few private equity groups, and we talk to all of them," said Kembel. "We usually have been exclusive once we latch onto a group. We've had three equity groups since the early '90s."
"There's more capital out there looking today than there has been in a long time," Kembel added. "It's just very difficult to get them to make a decision. There's tons of committed capital sitting on the sidelines looking for opportunities."
Whatever land deals Huffines does will be without debt.
"We survived the '80s in Texas," Kembel said. "We've made some mistakes; that's why we are so debt-averse. So we write all of our analysis on an unleveraged basis. It has to work without a debt structure. That keeps us out of a lot of projects."
While it looks for out-of-state opportunities, Hoffines continues the business it knows the best, building master-planned communities in its Dallas-Fort Worth backyard. As the economy tanked nationally, sales continued in Huffines' Providence and Savannah communities in the Dallas area, which came online in 2004-2005.
Lots are still selling in those communities, plus nearby Artesia, for replacement costs plus a margin, while lots elsewhere are selling for less than replacement costs, said Jim Jenkins, a Huffines senior vice president.
"At Artesia, the level of activity is really quite fun," said Jenkins. Because the company has a low land cost for the communities, Huffines can hold the line on lot prices. "We will only begin development when we have the buyers and we can make money."
Huffines is in the process of bringing on two more Dallas-Fort Worth communities. Hebron 121 Station is a 59-acre mixed-use urban development in Lewisville, with 1,700 apartments built around Denton County's first rail station.
A much bigger development called Viridian, a 2,000-acre infill master-planned community, is being developed in partnership with the city of Arlington. Huffines is expected to begin delivering lots next summer with a full grand opening in spring 2012. The project is bordered on the south and east by the Trinity River. The city's $40 million River Legacy Park runs through the development, which will be Texas' first Audubon Gold Standard community.
Learn more about markets featured in this article: Dallas, TX.