5 Great Land Decisions Home Builders Made in a Troubled Market

This article first appeared in the PB February 2009 issue of Pro Builder.

Sidebars:
Bella Sole
Alexan Downtown Littleton
Ute Lake Ranch
Valencia
Whisper Valley

If you think great land decisions can't happen in this market, think again. It's more than possible, and as proof we've assembled five of the best.

What makes these decisions great is that they didn't just happen. Someone had the smarts to recognize an "A" location whether it had the makings of a waterfront enclave or a commuter hub.

What's also apparent is that great land decisions take a lot of backbone nowadays. It's hard to bring a vision to life; scrap a plan and start over; sell off pieces to stay afloat; or hang tough because of a once-in-a-life opportunity.

Whatever the particulars, a great land decision is where it all starts. Here are five examples.

Bella Sole

Land on two canals in Florida was originally zoned for big lots and estate-style homes. The parcels were cut in half and the homes were downsized to lower prices and attract buyers.

Who: Developer: Camlin Home Corp.; Land planner: BSB Design, Tampa; Builder: Signature Homes, Bradenton

What: The 20-acre Bella Sole development had 18 estate-size waterfront lots that were re-platted for 37 home sites. The challenge was to reconfigure the lots around infrastructure that was already in place while maintaining water access for each home's site.

When: The land for Bella Sole was originally purchased in 1993 as part of a 400-acre deal. About 70 percent of the entire tract is built out. In January 2008, the developer decided to cut the lots at Bella Sole in half. Sales opened there in August 2008.

Where: Home sites are on two deep-water canals connected to the Manatee River in Bradenton.

Why: The developer, Camlin, had been successfully selling large waterfront estate homes at its other communities until the market turned. Camlin had tried to sell large lots at Bella Sole for a year without success.

How: Lots were cut from 95 feet wide to 45 feet wide. Homes were reduced to about 2,500 square feet from 7,000 square feet. Starting home prices fell from about $1.5 million to the mid-$500,000s. Homes still have high-quality design, construction and landscaping, and even after downsizing, each home still has a dock that accommodates a 70-foot boat. A model is under construction, with two sales so far and a list of 78 potential buyers.

Lessons Learned: "We were able to think outside the box and do something that made more sense for the market," says developer Ken Keating at Camlin Home Corp. "People are looking for value. We were able to offer a smaller place with the same amenities as a waterfront estate."

Upside: More affordable product

Downside: Had to re-do plans

Bottom Line: Generated buyers

Alexan Downtown Littleton

An environmentally troubled site near Denver was cleaned up for a new apartment complex of nine buildings and 350 apartments.

Who: Developer: Trammell Crow Residential, Denver; Land Planner: Kephart Community Planning Architecture, Denver

What: Trammell Crow assembled three parcels totaling 13 acres. The main site had been occupied by an iron foundry for about 50 years. The seller cleaned the site, and Trammell Crow bought the land. Trammel Crow also purchased two small adjacent parcels so a connector road could be built to the west. The land had previously been somewhat isolated because it only had access on one side.

When: Trammell Crow purchased the land for $8 million in July 2008. Construction started this past December.

Where: The project is located in downtown Littleton, a suburb of Denver. The area has light industrial and retail buildings. The site is situated between the two big employment hubs of downtown Denver and the Denver Tech Center.

Why: Trammell Crow recognized a winning location even though the land had environmental damage and poor access.

How: The property seller conducted the cleanup and obtained a state certification stating the land was suitable for any use. Trammell Crow did its own soil testing after the cleanup and found no hazards. The company also bought an environmental insurance policy in case residents make claims in the future.

Lessons Learned: "This property had a lot of challenges," says Scott Nguyen, managing director at Trammell Crow Residential. "Other developers looked at it and couldn't make it work. But we did."

Upside: Untapped location

Downside: 18-month entitlement process

Bottom Line: Property value boosted

Ute Lake Ranch

A sweeping site in northeastern New Mexico with a huge, one-of-a kind lake is being transformed into a resort community for baby boomers and their kids.

Who: Developer: Carma Developers, Denver; JV Partner: Ute Lake Ranch Partnership; Land Planner: Nuszer Kopatz Urban Design Associates, Denver; Builder: Resort Custom Builders, Centennial, Colo.

What: The 25,000-acre site features a 13-mile long lake — an unusual asset in the desert West. Water and electric service had to be brought to the site. The first phase of 900 acres includes a Jack Nicklaus-designed golf course, a marina and 800 home lots. Positioned as an affordable resort community, Ute Lake Ranch features detached homes on the golf course frpm $400,000 to the mid-$600,000s.

When: Carma bought a 50 percent interest in phase one for $10 million in August 2007. The developer made its purchase after the entitlement process was finished, saving Carma about three years of work with local officials. Sewer and electric service should be complete in early February. The first 180 lots; sewer and water; nine holes of the golf course; and a temporary club house should also be finished by then.

Where: About five hours from Denver and 90 miles from Amarillo, Texas. Tucumcari, N.M., on old Route 66 is about 20 miles away.

Why: The lake is a big draw for empty-nesters and families seeking a remote getaway with a desert feel. The site offers fishing, water skiing, golf, horseback riding and mountain biking.

How: After several banks backed out of construction loans because of the weak market, Carma invested $30 million of its own equity to improve the land. Though it's a big investment, the property won't be taken back by a lender.

Lessons Learned: "This property comes along at the right time from a demographics standpoint," says Tom Morton, senior vice president at Carma in Denver. "Baby boomers are looking for places like this."

Upside: Exceptional water amenity

Downside: Today's weak market

Bottom Line: A long-term play

Valencia

A wise land purchase years ago provides a regular flow of development with good margins.

Who: Developer: T.W. Lewis, Tempe; Land planner: LVA Urban Design, Tempe; Engineer: Sage Engineering, Phoenix; Landscaper: R.H. Dupper, Tempe; Grading contractor: Rummel Construction, Scottsdale, Ariz.

What: T.W. Lewis is developing the Valencia project on 240 acres in Chandler, Ariz. The land price was negotiated seven years ago, and Lewis has been slowly building out the project, which has 405 lots in six gated subdivisions. The lots are large by Phoenix standards at about 70 feet by 130 feet. Valencia has about 290 single-family homes to date. Prices start at about $650,000.

When: The land cost was negotiated in 2002 before prices skyrocketed. The actual closing took place in December 2004 after final engineering and plat approvals were in place.

Where: Chandler, Ariz., a Phoenix suburb

Why: During the building boom of 2004-05, Lewis decided to restrict the number of homes sold per month. This was done to make sure the homes were built with quality and also to conserve the land supply. Lewis made a strategic decision not to chase land deals but to methodically work what it already had. For three years, the company didn't buy land.

How: The final land purchase in 2004 came in at $78,500 per acre. Comparable land at the height of the boom sold for $375,000 an acre. Lewis plans to build about 30 homes at Valencia this year.

Lessons Learned: "Our land costs are still well under today's prices," says Pat Adler, vice president of purchasing acquisitions and development at T.W.Lewis. "Everyone was paying crazy amounts for land. But there was no reason to move with such speed."

Upside: Low land costs

Downside: Fewer homes built

Bottom Line: No unnecessary risk

Whisper Valley

A master-planned community is being created on 2,000 acres on east side of Austin, Texas — a growth area in a fairly good market.

Who: Developer: Taurus of Texas, North Richland Hills, Texas; Land planner: Nuszer Kopatz Urban Design Associates, Denver; Engineering: Bury + Partners Engineering Solutions, Austin, Texas; Drenner & Golden Stuart Wolff attorneys, Austin. Texas; Consultants: Insight Real Estate Strategies, North Richland Hills, Texas

What: Whisper Valley will have 7,500 residential units, including single-family detached homes, attached homes and rental apartments. Average home prices will be about $200,000. Selected builders can buy land or finished lots. The property will also feature 2 million square feet of office and retail space. Buildings will be clustered in a series of high-density villages with connecting open space and walking trails.

When: Taurus of Texas purchased the land in 2005. The land plan is currently being finalized. Infrastructure building should begin in sim months to a year. Home building starts in 2010.

Where: Property sits about eight miles from downtown Austin along new state highway 130. This parcel represents the first major development on the east side of the fast-growing city.

Why: The city of Austin has designated the east side along the new highway as a preferred development area. Most of the city's growth has previously taken place to the north and south. The west side sits on aquifers, which have made development there expensive and difficult.

How: A year-long entitlement process has included weekly meetings with a team of city planners. A special property improvement district had to be created to help fund the $100 million infrastructure package.

Lessons Learned: "The city's vision was similar to our own," says Douglas Gilliland, president at Taurus of Texas. "We took our vision and the city's and melded that together and came out with a plan that works for us and the city."

Upside: Growth market

Downside: Highly complex

Bottom Line: Worth the effort

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