Natoma Valley subdivision project revived in Folsom
Published Tuesday, Mar. 12, 2013
Construction is set to begin soon on a long-delayed Folsom subdivision, the latest sign of rebirth in the region’s home building business.
The hilly Natoma Valley site, at the corner of Blue Ravine Road and East Natoma Street, was abandoned years ago by Dunmore Capital and has since become an eyesore at an otherwise vibrant intersection.
But the 79-lot parcel in northeast Folsom was recently acquired by national home builder D.R. Horton, for $6.4 million, from Sacramento investor Ethan Conrad, who was a lender on the project and foreclosed on it in 2008.
Horton now is about to start site work on the partially finished lots and put up its first models there “in the next few months,” said Jim Radler, a broker with Land Advisors Organization who represented Conrad in the sale.
Horton officials were not available for comment.
The resumption of activity at Natoma Valley is great news for Folsom, said City Engineer Steve Krahn.
The site had long been neglected, he said, and was covered with weeds and abandoned construction materials – a fact made worse by its presence at a heavily traveled intersection that also includes the Raley’s-anchored Parkway shopping center and the built-out Vizcaya subdivision.
“It was probably the most visible of all the subdivisions” in Folsom where construction had stopped during the downturn, Krahn said, adding: “The city is thrilled to have a home builder own the property.”
It’s the second major acquisition of Folsom lots by Horton; the big, Texas-based company is also building model homes at the 115-unit Turnstone property it acquired last year at Iron Point Road and McAdoo Drive near Highway 50.
“They like Sacramento generally but Folsom especially,” said Greg Paquin, who heads the Gregory Group, a firm that monitors new-home sales.
The deal is further evidence that home building is heating up following the recession, driven by rising home sales and a shortage of inventory of houses and finished lots for new construction, especially in the most desirable residential communities like Folsom, Granite Bay and Roseville.
Paquin’s company recently reported that new home sales rose by 67 percent in the region from 2011 to 2012.
An equally telling figure, Paquin said, is the declining number of regional subdivisions that still have homes available for sale.
That total now is 79, he said, but 21 of those projects have fewer than 10 homes available, suggesting the number of “active” projects could fall to 58 in the next few months.
Even at 79, “that’s the fewest since we began (monitoring new home sales) in the fourth quarter of 1999,” Paquin said.
The scarcity of new home projects has created a scramble by regional and national builders eager to get land for homes they hope to bring on the market this year and next.
Among the biggest deals: Purchases late last year of more than 4,000 home sites in Folsom and Roseville by WestLand Capital Partners LP of El Dorado Hills, and sales of hundreds of lots by Conrad to Lennar Homes, KB Homes and others. In addition, Lennar, Meritage Homes and Horton are said to be close to completing major land deals in Roseville and Lincoln.
The heated competition for lots – and the resulting rise in prices – was evidenced in the interest in the Natoma Valley property.
Eight builders made offers, all close to the $80,000 price per lot paid by Horton.
Another builder actually went into contract on the land late last year but could not complete the purchase, Conrad said.
Horton had the best backup offer and had to pay the full price because two other firms were willing to meet the first price, he said.
“There’s no better way to motivate a buyer than (him) knowing there are two others waiting if he stumbles,” Conrad said.
The sales price was nearly double what the lots would have received only a year ago, said Radler.
This was an uncharacteristic deal for Conrad, who has built a $300 million local real estate empire by acquiring distressed properties at rock-bottom prices and selling, when he does unload assets, at a big premium.
In this case he said he just recouped his investment because he loaned money to the now-defunct Dunmore company at the top of the market.
He expects to do much better on the hundreds of lots remaining from his 2008 purchase of 850 lots from Ryland Homes for $4.5 million, or about $5,000 each.
He said about 54 of those lots in Elk Grove will go on the market in the next week or so, with the goal of investing the proceeds in commercial properties – a sector he thinks remains undervalued. A listing of Fair Oaks lots is planned in about a month.
Of his remaining residential parcels, he said: “I’m going to make great money on them.”