Kolter Homes Blog

For two years, Kolter Land Partners has been scouting the Charlotte region for distressed residential developments. For two years, the price hasn’t been right.

Now, however, sellers and their lenders are ready to make deals, and the Florida real estate company has begun a potential buying spree.

Kolter Land Partners recently purchased the Hampden Village community in Concord in a $1.6 million short sale from Huntersville-based Metro Development Group.

The community, at the intersection of Roberta Road and Farmwood Boulevard, includes 47 fully developed home sites and 116 partially developed sites. Kolter has contracted with home builder D.R. Horton to buy all of the fully developed lots and start selling homes ranging from $120,000 to $190,000 this spring.

“For this kind of community, which is an entry-level, first-time home-buyer community, we feel like pricing has bottomed,” says Jim Harvey, president of Kolter Land Partners.

The company, an affiliate of The Kolter Group of West Palm Beach,Fla., is under contract to purchase a development in Union County next month. And it’s in negotiations on fully or partially developed communities in Mecklenburg, Gaston, Iredell and Cabarrus counties that are in varying degrees of distress, says Bill Rice, a former executive with The McAlpine Group, who is a consultant for Kolter on its purchases here.

The arrival of new investment money is a positive sign for the local residential market. But experts caution that a real recovery is likely a couple years off.

According to data recently released by Market Opportunity Research Enterprises, total sales in the eight-county Charlotte region grew 10% in the fourth quarter. On a trailing 12-month basis, that was the first quarterly increase since the first quarter of 2007, according to the Rocky Mount-based research firm. But Bernard Helm, president of MORE, says the fourth-quarter activity was likely tied to the first-time home-buyer tax credit, and he expects the numbers to decline this quarter.

In January, the number of closings in the Charlotte market was up 8.3% from a year earlier but down 10.7% from December, according to the Charlotte Regional Realtor Association. The average sales price in January was also up, rising 6.1% from a year earlier to $200,592. But that was down from December, when the average price was $211,705.

Todd Gaylord, a principal with McCauley Street Partners, says his firm began noticing an increase in activity among investors in the fourth quarter, and a narrowing of the gap between bids and asking prices. McCauley Street is a boutique firm that advises banks on the sale of distressed real estate loans and properties. Gaylord says entry-level developments such as Hampden Village are attracting interest from potential buyers.

“That’s where we’re seeing deals get done,” says Gaylord, who opened his firm last year with Jim Barber. “That stuff is really picking up and moving well now.”

The Hampden Village acquisition is the first in the Carolinas for Kolter Land Partners, which had been looking to diversify beyond Florida. The firm recently bought an active-adult community on Lake Lanier, north of Atlanta. That project had belonged to Levitt and Sons, a developer that went into bankruptcy in 2007.

While Kolter has done large, master-planned communities in the past and even some home building, it is now focused on providing lots to third-party builders. Harvey expects sales in the Charlotte market to remain “anemic” through 2010, with things picking up in 2011 or 2012. The firm is making its purchases with cash.

“Luckily, we were able to keep some dry powder to take advantage of the market downturn and be in a position to buy,” Harvey says.

That smooths the discussions with distressed developers or their lenders, which in some cases now own the properties Kolter is interested in. And Rice says it’s an advantage in what is becoming a more crowded field of bidders. “There’s not a single site that I’m looking at that other people aren’t looking at too,” he says.