Slow Florida Mortgage Demand in Tampa Forces Builder to Unload Land
Due to a sluggish Florida housing market and a glut of vacant land in some areas, KB Home, one of the nation’s largest home builders, trying to unload land in three Tampa Bay area counties.
A St. Petersburg development and acquisition company, The Cypress Co., is poised to purchase seven of KB’s undeveloped subdivisions in Hillsborough, Pasco and Polk counties, said Blake Whitney Thompson, Cypress’ vice president and general counsel.
Los Angeles-based KB isn’t the only builder finding that it overestimated demand for new homes in some markets. Thompson said he is in talks with several other major builders that want to shed land. This could mean less expensive homes and property for Florida mortgage loan borrowers and developers who have been used to dealing with high prices in recent years.
“It’s a very poor market in Florida right now,” said Greg Gieber, an analyst with A.G. Edwards & Sons in St. Louis. He covers KB and other home-building companies. “Builders have too much land and aren’t in the position to hold on to it for very long.”
Cara Kane, a spokesperson for KB in Florida, confirmed the contract with Cypress but said she couldn’t answer specific questions because of a confidentiality agreement.
Kane said a housing slowdown in some markets, including the Bay area, has pushed KB into re-evaluating its building plans. That means shedding excess land in some areas of the region, she said. The company still plans to grow, however, and may purchase land in other local markets, she said.
KB is developing or has built 20 subdivisions in the Tampa Bay housing market since it entered the market in 2002.
During the most recent real estate boom, builders stockpiled land due to rising Florida home prices and a short supply, said Joseph Narkiewicz, president of the Tampa Bay Builder’s Association. Now that market conditions have changed, some of the planned subdivisions no longer are profitable, he said.
Cypress Deal To Close On June 1
“Builders are evaluating their holdings; some are trading sites, selling some and buying others,” Narkiewicz said. “Some may want to shake loose lots, because you can only hold on to so many lots and build so many houses.”
The Cypress deal is expected to close June 1. The land is vacant and has been given subdivision names such as Legends Point and Freedom Ridge. They include four in Hillsborough, two in Pasco and one in Polk County. Cypress did not provide locations but said some of the subdivisions are in the Riverview and north Tampa areas.
As a result of the deal on the land, he said, Florida mortgage seekers will benefit through less expensive homes. Cypress teams up with Adams Homes of Northwest Florida to build single-family homes. Cypress would develop the lots, put in sewer and utility lines, and then sell them to Adams Homes, a private builder that plans to build about 1,000 homes priced from the high $100s to the low $200s, Thompson said.
Thompson said his group can afford to offer lower prices because it can take its time building. “If it normally would take two years to develop an area, we can afford to double that,” he said.
The Cypress Co. is an acquisition and development company and has a private equity arm for real estate and corporate investments. The company is active in eight states. Some of its projects include the Walker-Whitney Plaza, a 56-unit condo building in downtown St. Petersburg and 325 single-family-home sites in South Carolina.
‘This Is Good For Consumers’
The KB contract doesn’t surprise some analysts, such as Gieber of A.G. Edwards and Paul Puryear of Raymond James & Associates in St. Petersburg.
Sales of new homes nationally fell sharply in February to the lowest level in almost seven years. The supply of unsold homes climbed to the highest in 16 years, the Commerce Department said last month.
KB said recently that it suffered a loss in its fiscal fourth quarter. KB Home posted a loss of $49.6 million, or 64 cents per share, after a profit of $304.4 million, or $3.44 per share, during the fourth quarter of 2005.
“All the home builders are trying to sell off excess land, without exception,” Puryear said. “This is good for consumers who are trying to buy.”
SOURCE: Tampa Tribune
