Case Study: AUnique Master-Planned Subdivision Investment TRANSFORMING FORECLOSED COMMERCIAL PROPERTIES INTO STUNNING, DESIRABLE DEVELOPMENTS.
by Kathy Fettke
he U.S. population is growing, households are forming, and yet, there is a shortage of residential housing. This supply/demand imbalance is driving property values up, creating a unique opportunity for developers. However, builders are still gun-shy after the housing meltdown of 2008. As such, many are avoiding the development of mas- ter-planned communities and instead are opting for one-off parcels or finished lots. It’s not surprising. While master- planned subdivisions can be highly lucrative, they can also be quite risky. It can take as much as a decade to get approvals and permits from the local planning commission. In that time, the economy could well have changed course. Between 2009 and 2012, many build- ers went bankrupt and lost their land to foreclosure after spending years getting their projects ready for the market. This time around, they are being much more cautious. In this case, our company has been able to optimize some highly distressed purchases we made during the Great Recession to take advantage of the strong demand for residen- tial housing. Here is how we did it: T
were often overwhelmed by the massive volumes of distressed commercial prop- erties they had to take back. That repre- sented great opportunity for investors with the wherewithal to buy (and then hold) large swaths of land. In 2011, we formed a syndication and acquired a foreclosed subdivision of 4,200 residential lots just north of Tampa, Flor- ida. We got the land for 10 cents on the dollar, paying just $16 million, down from the property’s 2006 value of $160 million. We also acquired land adjacent to the residential property that was zoned for commercial use, with the under- standing that once the residential community was built, there would be a need for retail and office nearby. We paid $1.2 million for it, down from the $6 million 2006 sales price. Today it is worth more than $9 million. Even though we were able to acquire the land so cheaply, developing it has still been a huge undertaking. We spent millions of dollars on horizontal development, which involves bringing in utilities, roads, and amenities. Any time you purchase undeveloped land, you must expect to have serious outlay in order to develop it even before you begin making your project particularly unique, as we wanted to do. In this project, we decided to embrace both technology and nature in a new
Also sometimes referred to as horizontal improvements. Includes zoning changes, mapping, clearing ground, cutting roads, installing utilities, and paving roads, sidewalks, and gutters.
Crystal Lagoon technology offers attractive, recreational aquatic space for water sports as well as swimming.
Also referred to as vertical construction. Usually used to refer to building design and construction.
property into a tropical oasis. Residents can feel like they’re living at the beach without the fear of hurricanes, stingrays or sharks. They can also step outside their door and immediately have access to a clear-water lake large enough to allow them to enjoy watersports like kayaking and paddle boarding alongside amenities like waterslides and swim-up bars.
way. The property had been previously approved for luxury homes surrounding a golf course, but our team felt there were already enough golf courses in Florida. We opted for something innova- tive, but perfect for the location: a state- of-the-art water feature. We chose a new technology called “Crystal Lagoons.” GROUNDBREAKINGAQUATIC RECREATION, ENGINEERING, AND LANDSCAPING Crystal Lagoons can turn any large
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WE MADE THE RIGHT ACQUISITIONS AT THE RIGHT TIME During the Great Recession, banks
Kathy Fettke is the co-founder and co-CEO of Real Wealth Network. She may be reached at www.RealWealthNetwork.com.
The subdivision is called Mirada. Lot values have quadrupled since the team replaced the golf course with the Crystal Lagoon concept.
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