Wheelock Capital Lands Raleigh Masterplan Gem
Greenwich, Ct.-based Wheelock Street Capital–which has made headlines in the past 18 months by teaming with home builders as a private equity investor, and has gone solo as a land acquirer in the mode of Starwood Capital–has acquired a coveted 364-acre tract just north of hot Raleigh, N.C., expected to be the site of about 700 homes in the next five years or so.
Wheelock’s power play comes in a Raleigh market that has three things going for it: household formations, jobs growth, and not enough existing home stock. What’s working against home builders there is home builders–there are probably too many of them for everybody to get a piece. In the past 18 months, public Meritage and private Ashton Woods got operations in Raleigh up and running, and it’s said that Ryland Homes has tapped area land acquisitions pro Mitch Huff to establish a beachhead there as well.
The fierce competition may be a minus for the home building company operators, who face blistering rivalries not just for home buying customers but for prime lots, which are in short supply.
One long-time Raleigh-Cary-Durham operator characterizes the land positions in the Research Triangle area of North Carolina this way: “There are ‘A’ lots, and there are ‘D’ lots, and practically nothing in between.
All of this plays well into the hands of Wheelock, which purchased its Traditions at Heritage parcel from local masterplan meister Andy Ammons. Ammons’ family-run company had a hand in the area’s noteworthy communities for two generations. Wheelock’s local partner on the ground, John P. Myers’ JPM South, is a former L. M. Sandler & Sons operative with extensive masterplanned development and market knowledge.
The felicitous timing of plans for Traditions at Heritage is that its opening comes at the tail end of development of neighboring Heritage Wake Forest, a highly amenitized masterplan that has been one of the best selling areas in the Raleigh market through the downturn.
As opposed to picking up the lots through the pipelines of distress many home builders are pursuing right now, this transaction reflects a more normalized land-cost base–with lots in the mid-$50,000s at the lower end of the spectrum, and almost $70k for larger lots, and even higher prices for reservoir-side premium lots.
“This deal was more of a relationship-driven opportunity that we felt works very well for us,” says Wheelock principal and head of land acquisitions Dan Green. “John Myers fits very well into the Wheelock culture of partners and achievers on the ground, the same as we’ve been lucky enough to find in our Florida and Texas investments in the past 18 months. Andy Ammons was looking for somebody who was going to be willing and able to do a good job, leveraging off the great equity and name of the Heritage at Wake Forest community, and who’d be able to close on the deal.”
The land, to date, is entitled and fully designed, Green says, but the lots are undeveloped and groundbreaking will occur early next year, with the first lot deliveries–probably about 150 in the first phase–scheduled for late in 2012.
Here’s some material Myers has distributed to home builders:
Traditions will be a master-planned community of approximately 660 units and offering a mix of attached and detached products covering 5-6 price points. The zoning approvals in place offer flexibility in lot sizes and configurations. The timing of Traditions should coincide with the closeout of the immensely successful Heritage golf course community located across Hwy 98. Seller intends to capitalize on the positive image and momentum of Heritage in positioning Traditions as a logical “next phase” of Heritage. First lot deliveries at Traditions are expected in Q3 of 2012.
Property values will be protected at Traditions by a Master Homeowners Association, with additional sub-associations created where needed. Architectural guidelines will be created and enforced by Sellers.
Per Sellers agreement with the developers of Heritage, residents of Traditions shall have the same access to Heritage amenities as do residents of Heritage. In addition, Traditions will have amenities of its own including a series of manicured parks and an extensive trail system. The immediately adjacent reservoir with its 110 ac lake offers a wonderful amenity to be used by residents of Traditions for fishing, canoeing and hiking.
The Wake Forest submarket has been one of the most active submarkets in the Triangle over the past 5 years. Home to the Triangles top-selling community (Heritage at Wake Forest), the area has seen strong growth in home sales as well as supporting commercial and retail to support the new rooftops.
In addition to impressive unit counts, Wake Forest has one of the highest average prices for re-sales, ranking third in the Triangle (behind Cary and Chapel Hill) with an average of $291,000. Of further benefit to the area will be the opening of New Falls of Neuse Road slated for the end of 2011. This will greatly improve accessibility to I-540 thereby shortening the commute times to RDU airport and Research Triangle Park.
Seller anticipates the following programs to be available at Traditions……..
• 58’ wide single family detached homesites (allow up to 42’ wide product). Home prices expected to be $225-$275k. To be delivered as slab on grade homesites. Total homesites in phase 1 = 50; in project = 170.
• 66’ wide single family detached homesites (allow up to 50’ wide product). Home prices expected to be $275-$325k. To be delivered as crawl space homesites. Total homesites in phase 1 = 45; in project = 125.
• 72’ wide single family detached homesites (allow up to 56’ wide product). Home prices expected to be $325k-$400k. To be delivered as crawl space homesites. Total homesites in phase 1 = 35; in project = 125
• 100’ wide single family detached homesites (adjacent to the reservoir). Home prices expected to be $450k-$650k. Homesites to be delivered as is. Total homesites in phase 1 = 0; in project = 70
• Attached products…….can range from 20’-36’ in width and can be garage or non-garage product. Total homesites in phase 1 = 0; in project = 170
All unit counts are approximate.
PROJECTED BUILDER TERMS
Lot Pricing: For Single Family homesites…….$950 per ff for 58’, 66’ and 72’ homesites. The 95’ reservoir homesites will be priced individually.
For Attached products………$38,000-$48,000 depending on product width and configuration.
Lot Price Escalator: 5% per annum pro-rated daily.
Deposits: Useable cash equal to 10% of price of lot purchase commitment.
Takedowns: Initial takedown to be based on 50% of expected annual absorption; quarterly takedowns thereafter.
Marketing Fee: 1.25% of home sale price paid at home closing. Seller will conduct a communitywide marketing program. Buyers shall manage their own on-site sales programs with the exception of the 100’ lot section which will likely be handled thru centralized sales.
Justin Good with Cassidy-Turley will be helping us market the property and assemble a builder team. He and I will be reaching out to you to set up a meeting in the near future to discuss your interest and answer questions that you may have.