Even as the foreclosure crisis continues rattling South Florida and home prices slide, a handful of developers have decided now is the time to build new projects and jump-start those that have been waiting.
Developer John K. Markey has an eye toward the housing market’s recovery as he plans a residential project west of Boynton Beach. GL Homes, one of the nation’s top homebuilders, bought lots at the unfinished Equus project in Boynton Beach and is now selling homes there, and is planning The Bridges, a new 500-unit project in Delray Beach. And Related Group has launched preconstruction sales for Hollywood’s 22-story Apogee Beach oceanfront condominium tower, and is making other moves in Broward County, as well as planning a new condo tower in Miami’s Brickell area.
Markey’s Boca Raton-based JKM Developers plans to build 171 single-family homes, 37 multifamily units and 13 estate homes on its 121-acre site along Jog Road, just south of Hypoluxo Road. A July groundbreaking and January sales launch are planned for Osprey Oaks. Markey said home prices would start at $125 a square foot and range from the mid-$200,000s to $450,000.
Markey said he studied the success GL Homes has had with its west Boynton Beach communities, so he believes there is plenty of demand for homes in that price range. He would not recommend building in all parts of Florida, as only certain areas can attract homebuyers willing to pay enough per square foot to cover the cost of construction. He said construction costs should be about $55 a square foot.
He said he is not worried about competing with foreclosed homes and short sales.
“We found that new home buyers aren’t necessarily the same as existing home buyers,” Markey said. “It’s a lot different buyer pool. Some people prefer a new home.”
He will ask buyers to put down 5 percent – significantly less than the 10 or 20 percent deposits required during the real estate boom. He said buyers are hesitant to put down large deposits because they remember how people lost deposits on unfinished homes during the meltdown.
Markey said he will complete a significant number of homes to show buyers that he has the resources to complete the community.
JKM affiliate BR Osprey Acquisition bought the site in August for $6 million – a 75 percent discount on the $23.6 million mortgage Bank of America used to foreclose on the previous developer. Markey was familiar with the site because he had worked for the previous developer, EB Developers, although he was not a guarantor on the problem loan.
Markey would not say exactly where he got his financing for Osprey Oaks, but said it was from a large private firm that took an equity stake in the development company. The construction funding will come through its equity partners, rather than a construction mortgage, he said.
GL Homes – whose projects west of Boynton Beach including the Canyon series, the Canyon Town Center retail complex and Valencia Reserve – plans to build on more than 70 vacant lots at the equestrian-themed Equus project, which other developers did not complete.
GL Homes also plans to launch The Bridges in the first quarter of next year. Unlike some of its other projects, GL Homes does not plan to target the active elderly, Division President Jill DiDonna said.
She said traffic at its current projects is strong, even if the majority of buyers may not be able to buy because of challenges in getting financing. Some do not have the 10 percent deposit required to buy, while others have blemishes on their financial histories, including bankruptcies and short sales. Despite the challenges, GL Homes is making moves based on the expectation that strong demand will continue going forward.
“Several of our communities are certainly selling at levels that indicate that there are pockets of demand in the market that are strong,” DiDonna said.