K. Hovnanian Homes appears to have moved out of the Southwest Florida market, selling off its last big chunk of lots in Lee County just four years after acquiring them with the purchase of First Home Builders of Florida at the heady peak of the housing boom.
In late August, Hovnanian sold 1,409 scattered lots in Lehigh Acres for $4.19 million, roughly $2,974 a lot, to Lehigh Investment Group, according to Lee County, Fla., property records. A local real estate broker who represented the buyers told the Fort Myers News-Press that the purchasers were a group of Czechoslovakian investors.
Jeffrey T. O’Keefe, Hovnanian's investor relations director, said the company couldn’t comment on leaving the market because it is in the middle of a tender offer. However, the company’s Web site no longer includes Southwest Florida in its list of markets. Property tax records in Lee County list only seven lots under K. Hovnanian First Home’s ownership.
The Red Bank, N.J.-based builder bought itself a dominant position in the Fort Myers market when it bought First Home, the top builder in Fort Myers-Cape Coral at the time, for an undisclosed amount of cash in August 2005. Property records show it paid $139.4 million for 2,593 lots predominantly in Lehigh Acres and Cape Coral, averaging $53,764 a lot.
K. Hovnanian sold its more desirable 812 Cape Coral lots, which are close to the Gulf of Mexico, in late 2007 for $16.24 million, or $20,000 a lot, to Deltona Corp.
The Fort Myers market continued to fall after that, taking an even heavier toll on the values of Hovnanian's remaining scattered lots in Lehigh Acres, which is well east of Interstate 75 and a good 30 miles from the coast. The average of $2,974 each was close to what the property appraiser assessed the lots for this year. The seven lots remaining under Hovnanian’s ownership are in Lehigh Acres, and the five vacant ones are appraised for tax purposes at between $2,800 and $5,500 each. In 2008, the property appraiser valued them at between $11,000 and $8,000 each.
Averaging out the purchase and sale prices per lot for the two sales, Hovnanian received $0.17 on the dollar for its investment.
Hovnanian moved into Fort Myers in 2005 with high hopes. The company had been on a buying spree the entire year. It had bought Cambridge Homes in the Orlando area as well as Town and Country Homes, which had operations in Florida, Chicago, and Minneapolis, as well as Oster Homes in Ohio.
“First Home Builders has an excellent reputation as a high-quality home builder and a strong track record of financial performance,” CEO Ara Hovnanian said in a press release issued after the purchase.
Teresa Burney is a senior editor at BUILDER and BIG BUILDER magazines.