Builders and other land buyers have been circling for several years, waiting for the depressed market to start spinning off home lots at depressed prices.
Finally, some land is starting to pop out of bank portfolios and bankruptcies, only to be pounced on by so many potential buyers that the prices are bid up beyond what they all had hoped for.
"I would definitely say that there are more things in the market," said Jim Harvey, president of Kolter Land Partners, a real estate development company that specializes in providing builders with finished lots.
A problem has been that the builders themselves have been in the crush of land bidders, along with private equity funds, driving the prices up.
"Getting these deals to close and getting the right price is still a challenge," said Harvey. As a partial solution, Kolter is working to form partnerships with home builders interested in particular parcels with the hope that fewer bidders on land will lower land sales prices.
"We have strengthened relationships with the public [builders]," said Harvey. "We're trying to keep them a little bit at bay and not having them bid up deals. We would like to tell them, if you really like something, call us because we probably already know about it, and we've probably been on it. Let's do something together."
A recent example of a partnership that worked out was a condominium project in Fort Myers, Fla., that Kolter bought from Key Bank last summer. The project had 102 townhome lots with eight completed townhomes. Kolter was able to sell the completed units for $800,000, recouping its initial investment, and has a deal to sell the unbuilt lots to D.R. Horton on easy terms as it builds them.
"They are getting a great value on that," said Harvey. "You can even make a little money in Fort Myers."
In addition, the company is on the brink of selling a chunk of land in Oveido, near Orlando, Fla., to another public home builder.
Because there are more land deals appearing for sale, Kolter has hired more people to do due diligence. "It takes tons of follow up, and you've got to be there every day, and we're geared up now to do that. We want to make sure that we will be in front of that opportunity."
Kolter has hired three new vice presidents, all who have held senior management positions in the past with publicly traded home builders' Southeastern divisions.
The three new vice presidents include:
* Anas Iqbal will focus on the Northeast and central Florida markets, including Jacksonville and Orlando. Iqbal has spent more than five years acquiring and entitling residential and commercial land in central Florida, including negotiating and underwriting the purchase of more than $200 million worth of residential land for one of the largest home builders in Orlando;
* David Langhout, who has more than 20 years of real estate experience and who was vice president of land acquisition and development for Taylor Woodrow homes, was hired to focus on the Southwest Florida markets, including Tampa and Naples; and
* Steven Check, who also has more than 20 years of experience as a land acquisition and development executive and who was a senior manager with several regional and national builders including Ryland Homes, will focus on Atlanta and other Georgia markets.
"The proven track records of these three strong industry players will help us to accelerate our acquisition of developed and partially developed lots through direct purchase or joint ventures with land owners or banks," said Harvey.
Harvey said Kolter has averaged closing one deal a month, and it has several pending now. But there are times when the competition gets so intense, especially with private equity capital out shopping, that they are significantly outbid.
"There were two Levitt projects Wachovia was selling that we frankly got overbid by 50%," he said. Kolter had bid $6 million, $2 million for a Levitt Cascades project in Sarasota, Fla., and $4 million for lots in World of Golf near St. Augustine, Fla.
A local private builder bought the Sarasota project for $3 million, and York Capital Group, a private equity investor, paid $6 million for the World Golf Village land, which it plans to hire builders to build out.
"It's one thing to be competing against the builders, now we are competing against private equity that is hiring builders," Harvey lamented.