Stock Development found a luxury niche by building hundreds of speculative furnished homes. Now the firm is ready for more.
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On Aug. 28, Stock Development hit a milestone: It sold $11.5 million worth of new homes in a single day.
Even more impressive was the fact that this total was from the sale of just three homes, including one $7 million sale.
But as awesome as this result sounds, it's not surprising for the privately held development and homebuilding company. Controlled by the Stock family, the company deftly managed the housing bust and was one of the first to recognize the recovery, beating competitors at every turn.
Now, Stock is taking aim at other regions of the state, including Sarasota and Wellington. It's also entering the apartment-development market and it has started commercial construction. “We're going to diversify,” says Brian Stock, the company's CEO.
Part of Stock's diversification effort is to spread the risk away from single-family housing, which has been the company's trademark. But it's also because the run up in residential land prices has forced builders to look elsewhere. “It's getting tougher and tougher to find opportunities,” Stock says. “Land prices have escalated.”
If anyone can spot an opportunity in real estate, it's Stock. “I think they are one of the most adaptive privately held companies that I know of in the homebuilding business,” says Randy Thibaut, a longtime Fort Myers-based land broker and CEO of Land Solutions. “What they've done is they've positioned their company to weather any storm.”
Most recently, Stock has found a niche selling speculative million-dollar homes. It accurately forecast that many luxury homebuyers want a new house they can move in right away without fussing over building plans, amenities and the long wait for construction.
“We'll sell more than 300 homes over $1 million” this year, says Stock. “Our company continues to go after that customer.”
At any given time, Stock has 175 speculative homes under construction, both inside master-planned communities and on scattered lots. “We're starting to build specs on Marco Island,” Stock notes. The company has even started building a few luxury speculative homes in Jackson Hole, Wyo.
In addition, each speculative home is fully furnished because buyers don't want to hassle with furniture shopping. “They want these to move in,” says Stock, who notes that furnished homes show better, too.
Most of Stock's customers buy in the $750,000 to $1.5 million range. “Our average sales price is up 15%” this year, says Stock.
What's more, about 80% of homebuyers of Stock's million-dollar speculative homes pay cash. Stock says some of those purchases may be by buyers who have taken gains from the stock market. “They feel good about a tangible asset,” Stock says.
Customers still come predominantly from the Midwest and Northeast. “We don't get a lot of international buyers,” Stock says. About 65% of buyers are seasonal residents and 35% live in the homes year round.
Banks have financed the speculative construction, a testament to the shrewd Stock management and tight control over ownership. These include Florida Community Bank, Fifth Third Bank, Regions Bank, Wells Fargo and BB&T. “We used bank funding for all of that,” Stock says.
Although banks have become conservative about real estate lending after the bust, Stock says they've been willing to lend to his company because of its track record. “We paid every cent to every bank with interest and on time,” he says. “Our banks appreciated how we handled our business.”
Stock was able to leverage the bank relationships before many others. “When the rebirth of our housing market came about, they had the vision to see a niche in the market for what I call luxury production homes,” says Thibaut of Land Solutions. “They did it when the other builders didn't have the financing and the capital to do that. They dominated that niche.”
Life after Lely
The Stock family, led by patriarch K.C. Stock, made its first land-development acquisition in 2001 with Lely Resort in Naples. The elder Stock had sold his successful construction-supply company in Green Bay, Wisc.
At the time, Lely had 1,200 homes. Today, there are about 4,500 homes and the community will be built out by next year.
Although harder to find at reasonable prices, Stock isn't giving up on Naples because of high land costs. “We've got a piece under contract right now in Southeast Naples,” Stock says, declining to disclose the exact location but saying that it will have room for 300 homes.
More significant, Stock is moving up the coast to the Sarasota area and the east coast, which have a similar profile of luxury buyer as in Naples. It is currently building 10 speculative, furnished homes at Lakewood Ranch priced between $1 million and $2 million. In Wellington, an affluent enclave near West Palm Beach, Stock plans to build speculative homes priced between $6 million and $8 million.
Future residential communities are on the horizon too. “We're going to go into Babcock Ranch,” Stock says, referring to the proposed development on the Charlotte and Lee county line, north of Fort Myers.
Palm Beach Gardens-based Kitson Partners has owned the 18,000-acre Babcock Ranch for 10 years through the downturn and is ready to begin development of a community that will include nearly 20,000 homes and 6 million square feet of commercial space.
Besides geographic diversification, Stock plans to build luxury apartments. The first project is in Estero, the fast-growing area of South Lee County where Hertz is building its global headquarters.
Stock says he's evaluating a condo opportunity, but it's not a priority. “Our preference and focus is single family,” he says.
In a further effort to diversify, Stock is building commercial properties such as shops and offices. For example, it is building shops and offices at Lely in Naples on the last remaining parcels of the property.
Brian Stock's office reflects the activity within the company. Stacks of projects ring the floor of his office just like they did during the boom. Although he chuckles at the similarity, Stock says the pace of new construction is about 60% of what he considers a normal market and most buyers today aren't speculators. “We found the niche in the market,” he says.