A changed landscape

When Starwood Land Ventures and Vanguard Land Co. formed in the wreckage of the last decade's housing boom, each focused almost exclusively on buying distressed land at rock-bottom prices to sell to homebuilders at a profit.

But nearly a decade and one Florida housing recovery later, both companies have had to shift focus and are increasingly developing sites and communities themselves — sometimes in partnership with the very builders from whom they once sought to generate profit.

Much of the switch has stemmed from the builders, who, since 2011, have leveraged access to public capital markets to bank land for future use.

“We thought that coming out of the recession the big builders would in time come back to land buying, but we didn't think it would happen as fast as it did,” says Mike Moser, CEO of Lakewood Ranch-based Starwood. “They've circumvented buying opportunities for companies like ours, so our business plan has had to continually evolve.”

For Vanguard, that evolution includes partnering with builders and developers in the West Villages, a cluster of four communities in southern Sarasota slated to contain 20,000 residences and as much as 3 million square feet of commercial space, as well as The Concession, a luxury golf community in Manatee County.

In all, Vanguard has completed 18 acquisitions from Tampa to Naples since forming in 2008, but CEO John Peshkin says these days opportunities are found mostly in deals big homebuilders aren't willing to take on.

“What makes us unique is that we seek out properties with complications,” says Peshkin, the former head of English builder Taylor Woodrow's North American operations.

“Larger companies don't have the appetite for that,” he adds. “We're really able to get under the hood, as it were, and others aren't as flexible or as fast acting as we are.”
At Watercrest, for instance, a Venice community slated for more than 300 homes, Vanguard acquired land via a judgment equity firm Colony Capital had obtained.

At The Concession, Vanguard became essentially a lender to developer Core Development Inc. Today, only 20 lots in the tony community east of Lakewood Ranch remain, out of 113. Many of the one-acre lots have sold for more than $200,000 each.

“We knew it was a question of not if land sales in Concession would come back, but when,” says Kevin Daves, Core's president. “So with Vanguard and John, it's been a good relationship on both sides.”

Starwood, an affiliate of Connecticut's Starwood Capital Group, has invested tens of millions into buying lots in Lakewood Ranch's Country Club East and other communities throughout Florida, Arizona and Colorado.

In all, the company has acquired roughly 18,000 lots at a cost of about $250 million. Many of its deals have generated robust returns. From its purchase of nearly 5,500 lots from the bankrupt Tousa Homes Inc., a scant 50 lots remain unsold, Moser said.

At Country Club East, where Starwood has partnered with master developer Schroeder-Manatee Ranch on some 800 home sites, Starwood last year sold nearly 300 lots for a total of $46 million. It became involved in the community three years ago, through a $30 million investment.

But unlike past deals, like Tousa, Starwood at Country Club East has become a developer, investing millions into landscaping, amenities like clubhouses with state-of-the-art fitness centers and kid-friendly swimming pools, all the while paving the way for builders like Neal Communities and WCI.

“We've found that right now this is so much more cost effective for us because a lot of the backbone of the community at Country Club East was already there,” Moser says. “It was an easier task than starting from scratch.”

But the shift of focus has prompted the addition of staff, as well. Starwood has doubled in size to 15 employees; Vanguard now has a staff of seven, twice as many as it did when it started.

“In 2009, we focused exclusively on acquisitions,” Moser says. “Now, we're an investor and a fee manager, and I see that role continuing for the foreseeable future.”

That's in part because lot and home prices are continuing to rise. At Country Club East, the average home in 2015 sold for $750,000 — a six-figure increase from the year before.

“Most of our communities are selling lots at a premium to what they sold for in 2006,” Moser notes. “And that's because at a 4% interest rate vs. a 7% interest rate, it makes a big difference for consumers. So I tend to believe we have a really good runway of opportunity for the next two to three years, at least.”

Peshkin, too, is optimistic about Vanguard's future.

“We have the luxury of being selective,” he says. “We're not going to be forced to buy anything, but for the right partner, we can step in and help so it can be mutually beneficial.”

- K.L. McQuaid