As residential market conditions slow, especially in new construction, developers have been selling lots in bulk to investor-builders.
In the early 2000s, H. Allen Thomason Sr. and Saun Sullivan were selling houses in Ascension and Livingston parishes about as fast as they could build them. After Hurricane Katrina, Thomason and Sullivan sold their operation to D.R. Horton and signed a noncompete agreement, and D.R. Horton has been finishing those subdivisions.
Development in the Capital Region did relatively well until 2008, when market conditions began to slow. Correspondingly, lot sales also began to slow. Now, several bulk sale transactions of note have taken place in neighboring parishes.
In Livingston Parish, Renaissance Forest Park sold 66 lots in Juban Park subdivision to A T Management—represented by Thomason—for an average price of $26,700 per lot. The sale consisted of 50-foot-front lots that had been selling for $35,000 and 70-foot-front lots that had been selling for $45,000.
Autumn Run in Walker also sold 16 lots to A T Management for an average for $28,000. These lots had been selling for $38,900.
In Ascension Parish, A T Management purchased 199 lots in Keystone of Galvez for an average of $38,643. Keystone had listed 50-foot-front lots for $65,000 and 70-foot-front lots for $75,000. Finally, A T Management purchased 37 lots in Acadiana of Ascension for an average of $34,000 from Right or Wrong. These lots had been selling for $76,000 in 2007 and $53,000 in 2009.
There have been other bulk sales at relatively strong discounts in other subdivisions. This sample indicates some developers are ready to take deep discounts to avoid paying interim interest.
A T Management, Vicknair Builders and DSLD have been successful in buying lots in bulk and have been building houses on these lots. A T Management, for example, was willing to purchase the Keystone lots because it had purchased other lots in bulk earlier this year.
It began selling homes in Keystone in February. Since then, 35 houses have sold, an average of 4.3 homes per month. The homes that are selling are in the $145,000-$175,000 range, and it appears that A T Management has hit the price point that generates sales activity.
Baker shopping center sells
Kebett has sold the 89,000-square-foot Brookwood Village shopping center, at Plank and Thomas roads in Baker, for $2.2 million to Plank Road Ventures. Kebett purchased the center 1˝ years ago for $1.5 million.
Chris Pike with NAI Latter & Blum, who brokered the transaction, says the sale took place for a 10% cap rate based upon the current income, and there is an additional 50,000 square feet that remains to be leased. Pike says there has been interest by three tenants for 35,000 square feet.
The center was referenced by Dottie Tarleton at last year’s Trends in Real Estate seminar. She said the property “wasn’t leased, never would be leased, was available for sale and never would sell.”
Investar purchases site
Investar Bank has purchased a 33,000-square-foot site on Range Avenue in Denham Springs from Tom Bradshaw and Steve Noyola for $410,000, or about $12.50 per square foot. The location is just south of the former Blockbuster Video. Pike, who brokered the transaction, says the property has access to the northbound and southbound lanes of Range Avenue.
Essen Walgreen’s sells
Bradshaw also has sold the 15,000-square-foot Walgreen’s drugstore at Essen Lane and Hennessy Boulevard for $2.95 million to NCFE, represented by Sidney E. Coxe Jr. Bradshaw developed the store in 1995 and leased it to Walgreen’s for 20 years.
The square-foot price for this type of investment is immaterial because the sale price is based on the income stream. According to sources close to the transaction, the sale took place for a cap rate of about 8.5%—an excellent return for the store.
Capitalization rates for Walgreen’s fluctuated several years ago from 6% to 7%, and the 8.5% return is one of the highest we have seen for one of its drugstores.
