Land rush turning into a retreat
sptimes.com
With home sales in an extended slump, builders are selling off land and backing out of some deals, putting plans for new developments on the back burner.
By JAMES THORNER, Times Staff Writer
Published September 28, 2006
Sluggish home sales have put Tampa Bay area builders and developers on a forced diet, so expect a lot less raw land on the menu.
The land boom has enriched ranchers, orange growers and investors the past few years, catapulting undeveloped residential property beyond $50,000 per acre.
But with new homes sales down about 20 percent and industry confidence at a 15-year low, builders and developers are sloughing off property they may no longer need.
The phenomenon extends across Florida. The state's biggest private landowner, the St. Joe Co., recently announced it's backing out of the home building business.
"Many of the large builders have basically entered a no-buy phase," said Beat Kahli, developer of Pasco County's New River development off State Road 54.
A series of busted land deals reflect the new reality:
- Undisclosed developers bailed from plans to buy the 2,000-acre Cannon Ranch in Pasco County for more than $100-million. The land's California owners were left in the lurch, having paid $31-million for the State Road 52 property in 2004. The failed negotiations have postponed a project known as Bella Verde, approved for 6,700 homes.
- Farther north, in Hernando County, Mercedes Homes pulled out of a contract in August to buy 416 acres near State Road 50. Up in smoke went a planned 900-home subdivision. Landowners' representatives said Mercedes cited slumping home sales.
- A contract for the 1,700-acre Kirkland Ranch near Wesley Chapel disintegrated in the summer. Diversified Property Group LLC would have paid the ranching family nearly $60-million but folded the deal in light of an uncertain home market. An earlier contract with national home developer Taylor Woodrow also fell through.
- KB Home, active in about 20 projects in Pasco, Hillsborough and Pinellas counties, is negotiating to shed land in the Tampa Bay area, though the company is mum about exact locations.
For national home builders like KB and Lennar, Wall Street looms large. Their stocks have taken a shellacking this year, and land sales can raise cash and restore investor confidence. Divestment lurks in corporate reports behind such jargon as "managing our land portfolio."
KB exploded onto the Florida market in 2002 with its purchase of American Heritage Homes. A buying spree across the Tampa Bay area planted KB in such projects as Ballantrae and Seven Oaks in Pasco, Sunset Pointe Townhomes in Clearwater and Moss Landing and Harbour Isles in south Hillsborough.
Last week, in a report that spotlighted KB's highest unsold home inventory since 1993, the company sounded a retreat. "We do not expect conditions to improve in the foreseeable future," chief executive Bruce Karatz said.
Large developers such as Newland Communities, the company behind Brandon's FishHawk Ranch, note a diminishing appetite for lots. Newland president Don Whyte blamed a stampede of investors fleeing the market. While Newland is cash rich enough to hold land, the company won't escape completely unscathed.
"It would be foolish not to change our forecast in light of the evidence that the market is going to be slower," Whyte said.
Kahli's experience illustrates the changing fortunes of land sellers. Last year he tried to buy land between Tampa and Orlando and was told to get in line. His was the 27th offer.
He recently got a sheepish call from the same sellers. Would he still be interested in buying the land?
"I said, 'What happened to the other 26?' " Kahli said.
Despite softening demand for homes, prices for raw land haven't slid appreciably. Not yet at least.
Tampa Bay area housing analyst Marvin Rose figures it could take six to 18 months for prices to tumble.
From the prospect of developers, asking prices reached ridiculous heights, leaving little room for profit. At market peak, some landowners, after discounting for wetlands, were demanding close to $100,000 per acre.
"We're still at last year's prices," Rose said.
Optimistic forecasts call for a soft landing through this year and most of next year, with a possible real estate rebound in 2008 or 2009.
That timetable could suit ranchers such as Robert Thomas just fine. Owner of Two River Ranch, Thomas controls 17,000 acres in Hillsborough, Pasco and Hernando counties.
He awaits government approval of plans to build about 8,600 homes. With three generations in the family business, Thomas figures he can wait out the housing blues. "I'm just a cowboy," Thomas said. "I'll be here a long time." |
