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To the Survivors Go the Spoils of Wrecked Housing Market

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By Duane Marsteller

RISMEDIA, May 14, 2010—(MCT)—Residential developers and homebuilders who survived the housing bust now are feasting on the remains of those who didn’t.

They’ve been on a buying spree, using cash savings to acquire finished, but unbuilt lots and subdivisions that have been stalled or lost to foreclosure or bankruptcy. They’re paying up to 75 percent off peak land prices during the housing boom, and planning to succeed where others have struggled or failed.

“It’s survival of the fittest among the developer set,” said Jack McCabe, a real-estate analyst and consultant in Deerfield Beach, Fla.

Observers say it is happening throughout Florida, but especially in regions where raw land generally is less expensive and in greater supply.

In Manatee County, D.R. Horton Homes, Medallion Homes and Minto Communities have been among the most active buyers.

Horton, a national homebuilder from Fort Worth, Texas, has purchased 170 lots and has contracts or options on 110 more in several developments. Local builder Medallion has paid $9.26 million for finished lots in four subdivisions. And Minto, a subsidiary of a private Canadian firm, has bought an undeveloped condominium project on Perico Island and several lots in Lakewood Ranch’s Country Club area.

All say discounted land prices attracted them, but it was the local housing market’s long-term potential that made them buy.

“We wanted to expand our presence in Florida and take advantage of the lower land costs,” said Mike Belmont, executive vice president of Minto’s West Central Florida region. “Plus, it’s a great place to establish a new market.”

Minto’s Florida operations were focused on the state’s east coast until September, when it paid $8 million for St. Joe Co.’s stalled SevenShores project and $2 million for an adjacent marina property. St. Joe had approval for 686 condo units, but suspended the project, first because of slow pre-sales and later, the housing slump.

Minto is taking its time with its new acquisition: It won’t be taking pre-construction orders until either late this year or in early 2011, Belmont said.

It is moving faster on a dozen Lakewood Ranch Country Club lots it purchased for more than $1.1 million in two separate transactions late last year. Model homes have already been built on the property.

Horton also entered the Manatee market in September, when it paid $165,000 for four lots in the GreyHawk Landing development in East Manatee.

Since then, it’s bought about 170 lots _ and between pending contracts and options to buy more lots, that number could exceed 270. Those purchases have cost at least $3.38 million, according to public records.

All are being marketed, and Horton is about to close on two more deals for another 130 or so lots.

The builder had been eyeing Manatee for a long time, said Darren Saltzberg, sales and marketing vice president for the company’s Tampa-Sarasota region.

“We’ve been up in Tampa for 5 years, but we couldn’t get down to Manatee and Sarasota until last year because of the lot prices,” he said. “Now they’ve come down significantly. We’re trying to take advantage of the market.”

So is Medallion, a local builder since 1984.

In the past year, it has bought more than 350 lots in the area. And it might not be done buying.

“We are cautiously looking for opportunities,” said Pete Logan, Medallion’s vice president. “Right now you’re able to buy a finished lot for less than what it costs to develop it.”

Builders and developers now on the lookout for acquisitions share several characteristics, analysts said.

They survived the downturn by slashing operating expenses, lowering home prices and reducing product sizes. They also adjusted their business plans to target first-time homebuyers, a move that was boosted by the recently expired federal tax credit.

And they conserved cash. With commercial credit and investment still somewhat scarce, only the well-capitalized can finance land acquisitions in the current market, analysts said.

For example, Horton had $1.8 billion in unrestricted cash at the end of its most recent quarter.

“Those who are positioned with enough cash to pick up what is really raw material are doing so,” said Robert Dunham, a real-estate market analyst and certified appraiser in St. Petersburg, Fla. “They’re betting that they’ll be positioned, cost-wise and timing-wise, to be ready to hit the market with a developed lot and home when it picks up. The bigger players are thinking that time must be close.”

McCabe said something else might be driving the buying spree: Amendment 4. The state constitutional amendment would require voter approval of any changes to county and municipal land-use plans.

Developers and builders contend the measure will stifle development, but are hedging their bets if it passes, McCabe said.

“They’re all trying to get in before that door slams shut on them,” he said. “You’re going to see a major rush of developers trying to get their entitlements prior to the vote on Amendment 4.”

(c) 2010, Bradenton Herald (Bradenton, Fla.).

Distributed by McClatchy-Tribune Information Services.

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