PHOENIX — Walton, a real estate investment and land asset management company with US$3.39 billion under management and administration, has expanded its Builder Option Land Development Funds (BOLD Funds), with an investment objective of raising capital to acquire land identified by large U.S. homebuilders for near-term residential development projects.
The collective $500 million in BOLD Funds — $250 million U.S. fund targeted at U.S. investors and a separate $250 million offshore fund targeted at non-U.S. resident investors — provide an alternative investment into real estate assets that support the near-term land inventory needs of leading national homebuilders.
The newly expanded BOLD Funds offer investors, both domestic and internationally, the opportunity to participate in the current growth of the U.S. homebuilding market.
According to a John Burns Housing Survey, new home demand is on fire with June new home sales increasing 55% year-over-year (YOY.) Sales improved in all regions YOY, led by 84% in Florida, 59% in Texas and 54% in the Southeast. Exceeding 2018 and 2019 pricing strength, 57% of builders increased net prices in June, while traffic rating was the best it’s been in four years.
Average finished inventory fell 20% YOY as consumers clamored for quick move-ins and 55% of builders expect good sales in the next six months, compared to 36% one year ago.
The BOLD Funds intend to acquire properties identified by large publicly traded U.S. homebuilders for near-term residential development. The land is then expected to be sold to those same builders in phases with an agreed upon takedown schedule and flexible payment terms. The BOLD Funds expect to make distributions to investors as homes are developed and sold by the builders.
The primary investment objective of the BOLD Funds is to preserve capital investment and generate cash flow through the acquisition and sale of land assets. A purchase and sale agreement with the homebuilder is in place prior to each acquisition which defines the take-down schedule and price per phase. Properties are acquired on an all-cash basis and cash flow is forecast to commence within 6-24 months.
“Walton’s BOLD Funds meet the needs of an evolving homebuilding industry by allowing builders to tie up land inventory with option structures that offer a limited amount of capital down,” said Bill Doherty, CEO, Walton Group of Companies. “Homebuilders are able to improve their ROI by better aligning land inventory costs with cash flow from home sales and investors benefit from a diversified source of cash flow.”
The National Association of Home Builders (NAHB) Housing Market Index (HMI) released in mid-June, reported that builder confidence in the single-family new home market jumped 21 points to 58 in June 2020, also demonstrating that housing stands poised to lead a post-pandemic economic recovery. Any reading above 50 indicates a positive market, stated the Index.
“As the nation re-opens, housing is well-positioned to lead the economy forward,” said NAHB Chairman Dean Mon. “Inventory is tight, mortgage applications are increasing, interest rates are low, and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak,” Mon said.
For over 40 years, Walton has researched, planned and structured pre-development land investments located in the major growth corridors throughout the U.S. and Canada. The evolution of Walton has opened the door to offering new products, like its BOLD Funds, creating new opportunities for investors and homebuilders.