Now that the home building industry has had a day or two to digest Centex's sale of 8,500 lots to a joint venture led by Dallas-based RSF Partners, it has become clear that at $161 million, the price was paltry. It amounted to roughly 18 cents on the dollar when one backs-in the original land value of $900 million plus.
The question now is, who are these people who are buying this land? RSF includes funds under management by Farallon Capital Management L.L.C., and Greenfield Partners L.L.C. Thanks to the participation of these funds, the JV was capitalized without debt.
Said Chris Mahowald, RSF Partners managing partner and founder, "The land development company we have formed to manage the portfolio acquired in this transaction is now open for business."
Mahowald has bought lots from Centex in the past. When he learned of the auction being put together, he assembled regional partners and is now talking candidly about how the investment team is already busy evaluating offers to disassemble and flip pieces of the portfolio.
Mahowald and other RSF principals have plenty of experience in the analysis, origination, structuring, and execution of real estate deals. But what many in the industry are wondering is whether the JV is sheerly a capital source, or if -- considering the history that RSF has with the Centex, and the fact that both are coincidently based in Dallas --there are operators, even former Centex execs, that may come out of the woodwork in the weeks or months ahead.
A local industry veteran with good insight into the deal said that while no Centex brass is on the other side of the JV, there is a strong likelihood that some members of Centex's former corporate land department are included.
Mahowald said the JV will be putting at least and additional $200 million into development costs associated with some of the properties. He also left the door open by saying he doesn't look for the group to do any of the bricks and mortar work, but that is is "looking at everything," including the possibility of adding a partner. Still, Mahowald said he primarly considers the deal a lot development investment as opposed to a home building investment.
In a conference call with analysts held by Centex executives on April 1, CFO Cathy Smith was reluctant to disclose the location of the 27 communities in which the lots are located other than to say roughly 50% were in California and Arizona. CEO Tim Eller mentioned Florida as well, but since that time, it's come to light that other lots in the bulk package are located in Delaware, Georgia, Illinois, Maryland, Minnesota, Nevada, Texas and Virginia as well.
Though Centex retained an up-front option agreement on 350 lots in the JV, it sounds like the arrangement may be perfectly positioned to continue to feed Centex's newly emphasized focus on a Just-In-Time model for lot takedown across a variety of markets. At the same time, as Eller noted on the April 1 call, the sale enabled Centex to "lighten up significantly to facilitate a possible future exit" from several markets.
This isn't the only deal that underscores the fact that Centex is doing a lot of its big business close to home. The bulk land sale may have been the biggest Centex deal announced this week, it was not the only one.
MacFarlane Capital Partners, also based in Dallas, announced it purchased a bulk package of five second- and resort-home communities that totals roughly 30% of Centex Destination Properties assets. The division has been for sale since last year.
Terms of the deal were not disclosed, but the MacFarlane announcement said that it worked with "a partnership group of investors" and that the portfolio includes 4,000 acres in three states.
These newly acquired properties will become part of the TerraMesa Resorts brand, a resort development and management company formed by MacFarlane. The purchase also includes the acquisition of the Centex Hospitality platform, which directs operations in the communities and also will become part of TerraMesa Resorts.
The specific properties include: The Hollows on Lake Travis near Austin, Texas; The Waters at Horseshoe Bay Resort on Lake Lyndon B. Johnson, near Austin; Pointe West in Galveston, Texas; Bear Lake Reserve in Tuckasegee, N.C.; and South Peak Resort on Loon Mountain, in Lincoln, N.H.