Housing bust’s survivors feast on losers’ remains

Published 7:31 pm Friday, May 21, 2010

MANATEE, Fla. — Residential developers and homebuilders who survived the housing bust now are ready to capitalize on the unfinished work 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.

In Florida’s Manatee County, D.R. Horton, a national homebuilder from Fort Worth, Texas, has purchased 170 lots and has contracts or options on 110 more in several developments. Medallion Homes 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.

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.”

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 5½ 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.”