Stock Development isn't waiting for confirmation of a recovery in housing.
The Naples-based development company is spending an estimated $100 million to build new residential developments in Collier County, banking on what it views as pent-up demand from second-home buyers.
“We're hiring people again,” says CEO Brian Stock.
Stock recently paid cash for lots in two communities that were taken over by lenders after previous owners defaulted. The company paid $60,000 a lot for a total of 118 lots in two communities in north Naples, about a 70% discount from peak prices.
Pricing the land correctly is the key because customers continue to be sensitive to costs, says Stock, 41.
“We've got to compete with the resale market,” he says. Besides lower land costs, Stock is benefiting from lower labor and building materials that have cut the cost of building a new home by 25% to 35%. Collier's recently reduced impact fees (taxes on new construction) have also cut $9,000 from the cost of building a new home.
Stock says homebuyers in or nearing retirement feel better about their investment portfolios and sense that the housing market has stabilized. About 70% of buyers pay cash for the homes and many have been waiting for the housing market to show some stabilization before buying, leading to pent-up demand. “A lot of these people do have money,” Stock says. “Demand will pick up and pricing will be higher at the end of the year.”
Several more undisclosed land acquisitions from banks are in the works, including one for a multi-family project. Stock says banks that have foreclosed on distressed property owners are more eager to dispose of real estate because they've already taken the write-downs on the values. “Now that they've taken their hits, they're starting to sell,” Stock says.
Besides new communities, Stock plans to build more homes in existing projects at Lely Resort in Naples and Paseo in Fort Myers. For example, at Lely, Stock plans to develop the remaining 242 acres where it plans to build 149 homes in a community called Lakoya. Homes in Lakoya are expected to cost between $350,000 and $650,000.
Altogether, Stock Development projects sales of $120 million this year, up 36% from last year's $88 million. “We want sales velocity,” Stock says.
Stock says the land acquisitions are being financed with his family's money and some bank loans. Currently, Stock says he's working with Fifth Third Bank, Regions Bank, CNL Bank, Wells Fargo and BB&T. “We're getting calls from other banks that want to lend to us,” Stock says.
Brian Stock and his father and chairman, K.C. Stock, 73, started the Naples development company in 2001 after the elder Stock sold his successful construction-supply business in Green Bay, Wis.
While Stock was hurt by the downturn like other builders, executives recognized the housing bust earlier than less-fortunate competitors and slashed prices by 35% in 2007 to reduce inventory, and they trimmed staff. They sold the country club at Grandezza in Lee County in October for $7 million, a community they recently finished selling out.
But don't look for Stock to immediately jump into decade-long residential projects. The company is now scouting for existing lots in Collier that it can sell out within a three-year period. Developing raw land is too expensive because of the uncertainties of government regulations and difficult permitting bureaucracies.
Companies like Stock that can gain control of well-located lots have an advantage because excessive regulations have limited supply. “There's not an abundance of good locations,” Stock says.