Houston's a veritable home builder's hive of action thanks to the 100,000 new jobs created there in the past 12 months. The latest major play is a north-of-$50 million deal--funded with an $80 million investment account from Toronto-based Tricon Capital Group--that landed Johnson Development Corp. a 2,046-acre tract a virtual stone's throw from masterplannned community mother-of-them-all, The Woodlands.
Let's look at the "Camp Strake" deal from a few angles and see what we can tease out that might be helpful to home builders and residential developers beyond the sizzle and pop of Houston's jobs-fueled juggernaut.
Topline: From 40,000 feet, Tricon's investment behind Johnson Development Group signals that selectivity, and laser focus--even in robust markets that appear as "rising tides that will lift all ships"--will filter out winners from losers in the critical acquisition and development sphere of the game going into 2014 and 2015.
Zeroing in: the deal aligns strength with strength, fitting of a 2,100-acre parcel whose worth could be $1 billion all in. Johnson Development is developing 9 MPCs in the Houston hotbed, including Riverstone, Sienna Plantation, Wood Forest and Cross Creek Ranch; four of the U.S.'s top 20 best-selling master-planned communities.
Tricon's U.S.-market residential development investment, its third with the Johnson Development Group in the Houston MSA since April 2012, has also backed two deals with The New Home Company, and one with Shea Homes' Trilogy active adult program in Phoenix's Vistancia West neighborhood. Tricon's assets under management in the U.S. residential market now total $1.7 billion, a 53% increase since December 2012.
Here's the Tricon recap of the strengths of the Houston "Camp Strake" deal from a press statement:
- Property is located in Montgomery County, the second fastest growing county in the Houston Metropolitan Area; Montgomery County and the City of Conroe have already approved a tax incentive agreement to support development of the project.
- This investment will represent Tricon’s third investment in the Houston MSA since April 2012 with the Johnson Development Corp.
- Houston remains the number one housing market in the United States as measured by new home permits; Houston has generated over 65% more new home permits in 2013 than any other U.S. city.
- Houston leads the nation in employment growth with approximately 100,000 new jobs created in the last 12 months (ending in July 2013), a 3.6% growth rate (as compared to the national job growth rate of 1.6% over the same period).
"We're delighted to be partnering once again with Larry Johnson and his team," Tricon Capital chief financial officer Margaret Whelan told us. "It's a vibrant market, and this location, considering the build-out of The Woodlands, could not be better situated. Net, net, for Tricon, it's good timing, a very strong market in Houston, and a great partner in Johnson Development."
Here's access to the most recent third-quarter analysison the Houston market from BIG BUILDER sister unit Metrostudy's Houston area regional director David Jarvis.
The Houston new home market continued to surge in 3Q13, with builders starting construction on 7,900 new homes, the fastest pace in over five years. Representing a year-over-year gain of 23%, Houston hasn’t seen this many new homes started through the first three quarters of the year since 2007. On an annualized basis, starts stand at 27,802, 24% above 3Q12, and the strongest rolling four quarters since 3Q08. “The growth in the pace of starts continues to follow a measured linear trajectory as lot supply constraints have prevented Houston builders from ramping up construction more quickly,” said David Jarvis, Regional Director of Metrostudy’s Houston Market. In 3Q13, area builders closed 7,044 new homes, bringing the annualized total to 24,919.
Look for an update on this story later today.