For several years, builders and other land buyers have been waiting, waiting, waiting for the depressed market to start spinning off home lots at depressed prices.
Finally, some land is starting to emerge from bank portfolios and bankruptcies, only to be pounced on by so many potential buyers that the prices have been bid up beyond what anyone expected.
“I would definitely say that there are more things in the market,” said Jim Harvey, president of Kolter Land Partners, a Florida-based real estate development company that specializes in providing builders with finished lots.
Ironically, but not unexpectedly, builders themselves have joined crush of land bidders, who, along with private equity funds, are 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 idea that having fewer bidders involved will bring the sales prices into line with the reality of the housing market.
“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.'”
One recent partnership involved 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. It also now has a deal to sell the open lots to D.R. Horton on easy terms as the builder needs them.
“They are getting a great value on that,” said Harvey. “You can even make a little money in Fort Myers.”
Kolter also soon expects to sell another chunk of land in Oviedo, near Orlando, Fla., to another public builder.
Because there are more land deals appearing for sale, Kolter has hired additional people for 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,” Harvey said.
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, who will focus on the Northeast and central Florida markets, including Jacksonville and Orlando. Prior to joining Kolter, Iqbal 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. He will focus on Southwest Florida markets, including Tampa and Naples.
Steven Check, who also has more than 20 years of experience as a land acquisition and development executive. Check, who has been a senior manager with several regional and national builders including Ryland Homes, will focus on the 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 involved, that they are significantly outbid.
“There were two Levitt projects that Wachovia was selling where we frankly got overbid by 50%,” he said. Kolter had bid $6 million, with $2 million of that for a Levitt Cascades project in Sarasota 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 complete.
“It’s one thing to be competing against the builders," Harvey said. "Now we are competing against private equity that is hiring builders."
Teresa Burney is a senior editor at BUILDER and BIG BUILDER magazines.