February 1, 2011 - When you think of states hard-hit by the residential downturn, Florida comes to mind.
Yet Starwood Land Ventures—backed by Barry Sternlicht‘s Starwood Capital Group—continues betting big bucks on the Sunshine State’s comeback. The company recently acquired Summerlake, a stalled 557-acre master planned community in Orlando, for about $28 million. Starwood, which paid less than half of the 2005 purchase price, aims to resell the roughly 1,500 home sites to builders who are gearing up for the market’s recovery.
As we’ve written, the Orlando market is healing faster than other hard-hit Florida cities because of its proximity to the Walt Disney World resort and medical-facility construction. Medical City, a 600-acre biotech park and hospital complex near the international airport, is expected to bring more than 7,000 jobs to Orlando in the next few years.
“Is it tough? Yes. That’s a given. But it’s not dead,” said Mike Moser, Starwood’s east regional president. “We’re selling quite a few lots. When we’re selling lots, that means houses are selling.”
To be sure, the number of sales has fallen dramatically from the peak—as have residential values—and there’s much work to be done before recovery officially arrives. “Orlando is still a bad economy,” writes John Burns Real Estate Consulting. Unemployment remains above 10% and median resale prices fell again year-over-year.
Financial services firm Ticonderoga Securities recently visited the city and found “traffic and sales remain rather anemic and sporadic.” Still, analyst Stephen East got the impression that “that traffic has ticked up slightly over the past several weeks.”
In this case, Starwood is clearly betting things will improve down the road. While the deal includes more than 400 developed lots ready for houses, it will likely take several years to develop the complete community. Starwood expects to open a clubhouse, pools and tennis courts next year.
Last year, Starwood purchased Independence, a nearby master-planned development, and has already sold more than 200 lots to several builders. It also acquired the Florida assets of bankrupt builder Tousa and then announced that building-giant Lennar would buy more than 1,400 sites in 25 communities across Jacksonville, Tampa, Orlando and southeast Florida.
“We’ve done very well,” Moser said, adding he has two other deals under contract.