Walton Launches New Homebuilding Fund
The fund will acquire land pre-identified by homebuilders for single-family home development.
“We have $3.8 billion in assets under management and 106,000 acres in North America,” Kate Kaminiski, COO at Walton Global Holdings, tells GlobeSt.com. “That is all existing predevelopment land assets, and a lot of it was acquired before the great recession. Prior to that time, we were seeing a significant amount of large land transactions occurring and builders securing long-term land positions. 2008 changed all of that. We not only saw a substantial amount of finished lot inventory in the marketplace, but also builders and developers were really punished by Wall Street for having that land inventory when the markets crashed, and there were pretty strict restrictions on what they could hold on their balance sheets. As a result, we are seeing a lot of developers uninterested in land that isn’t ready to turn within 24 months.”
While the 2008 financial crisis certainly provided demand for this fund structure, Walton’s search to capitalize on its existing acreage portfolio served as the impetus for the fund. “Two or three years ago, we set out to meet with our end users to discuss how we could move the 106,000 acres that we have under management and find exit opportunities that worked for the builders and our investors,” says Kaminiski. “We were pushing bulk sales, but didn’t receive that reception because most were looking for just-in-time inventory and taking down what they can build on. That request from the builders evolved into this fund, which will take on the land banking and land loan risk. These are pre-identified assets by the builders that they can take down in more of that just-in-time inventory strategy.”
The strategy will help to provide homebuilders with the land sites that they need for development, but it will also help to supply the pent-up demand for single-family housing. “New housing starts are up 16% year-over-year, and there is a general shortage across the market,” says Kaminiski. Single-family housing demand in particular is not being met today. “The reasons for that are vast, from rising construction costs to labor shortages,” Todd Woodhead, EVP at Walton, tells GlobeSt.com. “Mortgage rates are still low, and I don’t think anyone sees those going up with any big velocity in the near term, and with 80 million millennials moving into their home buying years, we see that as a big push for more demand. A lot of millennials are moving out to the suburbs as they start to get married and have kids, and that is already happening.”
The BOLD fund is an equity fund, meaning there will be no debt to service on these acquisitions, and no minimum size requirement. It will focus on projects in the Southern Smile states, as well as Colorado, but is particularly focused on working with homebuilders in pre-determines locations. “A lot of this is determined in collaboration with the builder relationship,” says Woodhead. “We are really looking to rely on the extensive research that the builders have done, and there is a collaborative due-diligence process. These are projects that they are ready to close on, but this offers them a more attractive capital solution than some of the private equity money that they are traditionally using to fund these land loans. We feel this really meets a niche in their markets.”