Just shy of a week into 2014, home building and development has its first significant strategic land-play closing, a 1,036-acre master-planned community called Rocking Horse, a few miles southeast of Denver in Aurora, Colo. The buyer is a reunited tandem of Wheelock Street Capital and its local operator Oread Capital and Development; the seller is a Lennar Homes-led joint venture named Rocking Horse Ventures.
The deal's surface details and magnitude are impressive in their own right, but beneath the top layer, there are implications beyond the transfer of ownership of a masterplanned community's lot pipeline.
- Single-builder developers of masterplans--a hallmark of the bygone mid-2000s boom that suggested home builders could profit in every facet of the land development, sale, construction, marketing, and merchandising business--may realize they're at a disadvantage in a marketplace that puts more discriminating buyers at the center of the new-home universe.
- A new paradigm for what has been termed "active adult" may be emerging in markets other than Arizona, Florida, and Southern California. The model that appears to be taking shape as evidence in this deal is one in which a fully age-targeted and amenitized community functions in close proximity and total accessibility with non-age aimed market-rate neighborhoods. New 55-plus home buyers are "too active for active adult" in the traditional sense; and they want to be closer geographically to their children and grandchildren ... which makes pairing up the two types of communities in a single broader masterplan make a lot of sense.
The Douglas County parcel, permitted for 1,800 single-family homes--mirrors, to some extent, Wheelock Street Capital's 2011 acquisition of Anthem Ranch, a Broomfield, Colo., a 1,700-acre masterplan to the north of Denver. Like Anthem, the Rocking Horse masterplan divides a roughly equal number of market-rate, non-age-targeted residences and an adjacent active-adult neighborhood.
A press statement issued by Wheelock Street Capital notes:
Like Rocking Horse, Anthem originally had a single home builder in the community and that builder was also the developer. Under Wheelock, four builders are now offering homes at Anthem. “We think it’s important to have a suite of builders offering a wide array of home choices,” Oread principal Jeff Handlin said. “We also think it’s important to provide outstanding amenities that foster connectivity among the residents of our communities.”
Handlin spearheaded the negotiations with the respective partners in the Rocking Horse Partners LLC joint venture, which Lennar had intended to pick up where a highly successful predecessor in the market, Eagle Bend, featured both non-age targeted single-family homes and Lennar's Heritage active adult brand in separate neighborhoods.
What Wheelock Street Capital and Oread have learned particular to the Denver market is that leading edge baby boom buyers interested in the 55-plus show a strong preference for proximity to their children and grandchildren, which makes the intergenerational approach--separately amenitized but integrated geographically--to the masterplan a draw. The marketing mantra developers have focused on has been "to create separation and promote integration."
Indeed, since Toll Brothers came in last year as Anthem Ranch's active adult builder, it's sold at a pace of eight to 10 homes without the benefit of model homes, which open next month.
As the press statement indicates:
Lennar was the original builder offering homes in Rocking Horse and was joined in 2013 by Meritage Homes. The average sales price of homes closed last year was in the low $400,000s. Amenities in place include full-size soccer fields, an inline hockey rink and sport court, tennis courts, a large playground, miles of trails, and neighborhood parks. When completed, the community is to have 323 acres of open space and a 13-mile trail system.
Over the next several years, additional neighborhoods will be developed in Rocking Horse that will be similar to the existing neighborhoods. The community is also planned to include future neighborhoods and amenities specifically for adults age 55 and older.
What appears to be clear is that the days where big builders opted to take on the role of masterplan developer appear to be bygone, as it makes more sense from a place-making view point, to integrate different builders with varying product programs, price points, and optionality for buyers to propel the uniqueness of the location.
Learn more about markets featured in this article: Denver, CO.