This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Vultures Swoop In On Builders' Land

Real estate vulture funds are scouring the U.S. for distressed housing developments and land sites being sold at cheap prices by homebuilders looking to clean up their balance sheets.

These funds, which target internal rates of return greater than 20%, are not betting on any immediate recovery in housing. Instead, they're seeing profit in buying the housing sites today --many of which are selling at 50% or greater below their peak 2005 values -- with the aim of flipping them or selling homes at the projects in two years or more.

"We're seeing plenty of opportunities. The market changed in the last 90 days," says Rich Knowland, a partner with Pacific Terra Holdings, a Seal Beach, Calif.-based fund that is looking for land opportunities on the West Coast.

Land prices over the past year have generally been "sticky" -- meaning prices aren't falling much, if at all, even though housing prices are sliding and public homebuilders are recording massive impairment charges to write down the value of their land holdings.

Now, however, distressed opportunities are starting to emerge in California and other overheated housing markets.

"We see in certain situations where that is loosening up, not by choice. Many deals have debt. Prices have to go down to be moved," says Knowland, who joined Pacific Terra earlier this year after leaving his post as regional vice president of Lennar's (LEN - Get Report) Orange County, Calif., division.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
LEN $47.19 0.00%
NVR $1,345.10 0.00%
TOL $36.80 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs