For three years, as the housing recession raged on, TerraLargo lay sleeping, its sales office closed, the agents gone. Yet, unlike the many other communities mothballed during the era, it remained preserved—the grass cut, its pool sparkling, the fitness center spotless, the entry fountain splashing.
So when Kolter Land Partners bought the gated community in Lakeland, Fla., in October 2012, there was little to be done before opening the 644-acre project except divide the 500-plus lots among two home builders vying for them, says David B. Langhout, vice president of land acquisition for Kolter.
“Avatar ceased new-home sales [in the community] in 2009, but it did an admirable job funding the deficit to keep the homeowners association and club operating at sufficient levels,” Langhout says. (Avatar is now AV Homes.) Five months later, new-home models were open and K. Hovnanian Homes and M/I Homes—who had agreed to buy lots from Kolter before it closed on TerraLargo—were each selling about four or five houses per month.
Almost as unusual as the community’s post-recession condition was the cooperative nature of K. Hovnanian and M/I. Rather than one builder choosing the 50-foot-wide lots and the other taking the 70-foot-wide lots to differentiate their offerings, they divvied up both lot sizes among themselves. Kolter gave one builder the ability to make two equal portfolios of lots and the other the chance to pick the one it preferred.
The builders built their models next door to each other and split costs for a shared parking lot, an advertising campaign, a Realtor event, and a grand opening. David Park, M/I’s vice president of sales and marketing, notes that this made for an “equal playing field.”
Meanwhile, the builders were just happy to be able to buy lots in a community with rolling topography, mature landscaping, and high-end amenities already in place. Nothing lost value during the recession, Park says, and some things even got better.
Situated between Tampa and Orlando, Lakeland is easily commutable to each, offering a solution for couples with jobs in either city. Homes in Lakeland sell for $50,000 to $60,000 less than what they would cost in the larger cities.
Both builders agreed to keep in place the higher-end Tuscan design architectural fixtures originally established by AV Homes, including paver driveways and tile roofs.
“Kolter did a good job of getting us lots that we could afford to add those extra costs to,” said George Schulmeyer, Hovnanian’s Florida regional president.
Home sale prices have even increased since the homes started selling as consumer response has been strong. K. Hovnanian started selling first and had sold 13 houses by the end of May. Three or four of those houses were from before the models opened; the others sold afterward. M/I sold 10 homes a month in its first two months. Executives had expected only one or two sales a month for the first six months at TerraLargo.
With both builders having essentially the same lot offerings, how do they differentiate themselves?
M/I’s homes include more standard features and sell for more per square foot than K. Hovnanian’s. An 1,800-square-foot house by K. Hovnanian starts at $190,000, while one by M/I starts at $210,000, Park says. He adds that M/I targets a different buyer: “We are catering to either that very successful first-time buyer or somebody who is looking to get little more included in the price.”
The two builders say they are selling equally well. “It’s in the best interest of all of us” to do well, Schulmeyer says. “If one of us undercuts the other it’s going to cut Kolter and it hurts us.”
Teresa Burney is a senior editor for BUILDER magazine.