As Kolter Land Partners inked the deal to buy its first Raleigh, N.C., project April 20, it already had a deal in place to resell it to a start-up builder.
In fact, it was the start-up builder, WinStar Homes, that brought the deal to Kolter, hoping it could provide the up-front capital for the purchase of the remaining 264 lots in Brightwood Trails, a Durham, N.C., development that stalled when the original owner St. Lawrence Homes filed for bankruptcy court protection. WinStar had the land under contract for the past six months.
"These are just the kind of deals we want," said Jim Harvey, president of Kolter Land Partners. Harvey added that WinStar and Kolter opened their books to determine how they could do the deal and make sure each made a decent profit.
"It's a good little marriage," Harvey said of the deal.
Kolter paid $4.5 million for the 264 remaining lots, of which 66 are fully developed, 72 are partially developed and need only roads, and 126 are raw. St. Lawrence had completed and sold roughly 30 homes in the neighborhood previously, Harvey said.
Kolter Land, whose business model is to buy land and supply lots to builders, is based in Florida but recently began diversifying to other Southern states, buying a Levitt active-adult community on Lake Lanier north of Atlanta a couple of months ago and recently closing on land in Charlotte, N.C.
Raleigh's home lot market has begun to heat up in recent months, drawing the large home builders to reinvest and escalating lot prices.
With the state government, universities, and a technical and biomedical industry in place, Raleigh's housing market held up longer and appears to be rebounding faster.
"We think it's a really good development market," said Harvey. So good that the company is actually considering buying raw land "that we think actually makes good sense to develop," he added.
John Schlichenmaier, who started Westfield Homes in the Carolinas and served as Standard Pacific's division president for the Carolinas after the acquisition of Westfield, is president of WinStar Homes.
"Late in 2007, we started WinStar with the idea of catching the down market," Schlichenmaier said. In addition to Schlichenmaier, WinStar has two other former Standard Pacific/Westfield veterans on its payroll--Cindy Morris is vice president of sales, and Martin Beam is director of construction and purchasing.
"We were early," Schlichenmaier said of the business start.
Still, WinStar began building in Renaissance Park, a development near downtown Raleigh, winning some design awards in the process. And it kept looking for land deals.
"We have a stable of experienced racehorses who are used to doing volume, so everybody is pretty excited" about the Brightwood Trails deal, he said.
WinStar is hoping for more deals as well, with plenty of floor plans ready to go.
"I will say that during that time [while waiting for land], we have done a lot of product design for opportunities that we thought we might do and then backed out of them. On the shelf we have got a lot of fresh product."
Schlichenmaier plans to focus on entry-level and first-time move-up buyers. "What we like to do is to give people a look and features that they don't expect in the lower price points," he said.
WinStar, which closed about 30 houses last year, hopes to sell between 120 and 150 homes in 2012.
The company faces some formidable competition from other national builders who have been investing heavily in the local lot market in the past few months, bidding up prices in some cases.
"The lot situation has done a 180-degree turn," said Schlichenmaier. "We have yet to see if the market will follow with actual buyers, but the national builders, everybody, got their million [dollars] from Obama, and they had to put it to work. And all the studies, Forbes and everybody else, there are two cities that keep popping up [as good places to live]. One of them is Austin, and the other one is Raleigh."
Learn more about markets featured in this article: Durham, NC.