Land Rush

The rush is on.

Two recent land deals in Lee and Collier counties confirm the housing recovery is fully under way in Southwest Florida as developers and investors secure land for future construction.

“Suddenly, there's insatiable demand for raw land,” says Ross McIntosh, a land broker in Collier County.

In Collier County, Canadian residential developer Minto Communities announced it would buy 2,300 acres from Collier Enterprises for a community called Sabal Bay near Naples for undisclosed terms. In Lee County, Fort Myers real estate investor O.J. Buigas, through his firm Private Equity Group, plans to buy 5,200 acres from Alico near Florida Gulf Coast University for $10 million.

“We typically seek the larger, well-positioned properties where we can create a signature community,” says Michael Belmont, the Florida president of Minto.

Minto plans to start developing Sabal Bay early next year and open model homes in late 2013. Eventually, Minto plans to build 1,600 homes there.

Buigas, through a spokesperson, declined to discuss the transaction or his plans for the property. Alico officials couldn't be reached. However, the Fort Myers deal still reflects the financial distress of the last few years. Alico says its tax basis in the property is about $65 million; the sale will generate a loss of $55 million.

In fact, both parcels were under contract to other developers during the boom years. WCI Communities planned to build a golf course community in Sabal Bay and Orlando developer Bobby Ginn planned to develop the Alico land until the agriculture company foreclosed.

“Over the last six to 12 months, there have been a lot of new players in the market,” says Randy Thibaut, president of Land Solutions, a brokerage firm in Fort Myers that worked with Minto and others.

It's little wonder that builders are trying to secure land today. That's because the new-home supply in the region is dwindling.

“Southwest Florida is beginning to come back and the large builders are starting to understand that,” says Michael Rosen, a longtime homebuilding executive who is now with Special District Services, a Palm Beach Gardens company that helps developers create and manage taxing districts.

Rosen says it generally takes two years for a developer to buy land, obtain permits and start development before the first home is built. “In two years we need to get land in place,” he says.

According to Metrostudy, which tracks home sales and lot inventory in master-planned communities, the supply of vacant developed lots and homes is dwindling. For example, the supply of finished, vacant new homes in Collier County has fallen 11% in the past year and is down to just 159 homes. This compares with nearly 900 homes in 2007.

“Everybody's expecting that trend to continue as long as the general economy doesn't have a double dip,” says Patrick Utter, vice president of real estate and club operations with Collier Enterprises. “Naples is an early indicator of the market.”

McIntosh says builders started to worry about the decline in inventories last year. “Suddenly, there was an awareness that there were no longer any finished lots left,” McIntosh says. “There seemed like a lifetime supply and then it was gone.”

In addition, builders saw rivals' success. For example, GL Homes is building 850 homes on 640 acres at Riverstone, a new community it's developing off Immokalee Road near Interstate 75 in Naples. “They are selling a significant number of homes in the $500,000-plus range,” says McIntosh. “They've proven it's doable.”
Still, McIntosh is cautious about the future. “The current land prices assume some fairly significant home prices and velocities that we may not achieve,” he says. But he says builders are forging ahead, worried that they may miss opportunities if they're not aggressive.

As for the Alico parcel, some surmise that the land's proximity to Florida Gulf Coast University could make it suitable for Buigas to build student housing and perhaps some commercial buildings. But the land is located in an area that politicians have said is an important source of groundwater, and it's not clear how much of it can be developed. “He bought a risky property, but for the right price,” says Thibaut.