Florida investors buy into N.C. tracts

What sounds like a train wreck to some -- a credit crunch pinching would-be homebuyers, crimping builders' demand for dirt, dragging down land values -- is music to the ears of others.

A group of Florida investors, enticed by buying opportunities created by the lending crisis, is partnering with a Raleigh land developer for a $100 million buying spree in the Triangle and Charlotte.

Landquest of Raleigh and Bradenton, Fla.-based Starwood Land Ventures are offering cash for homebuilders' untouched subdivision lots or expansive tracts held by land developers. They also plan to offer equity and loans to other developers, and buy debt from lenders who want to quickly reduce residential real estate exposure.

The joint venture, called LStar, illustrates how the national housing bust has arrived at the doorstep of the Tar Heel state.

While much of the U.S. has slogged through a housing slump for almost three years, the Triangle and Charlotte have felt the effects for only a year.

Home values have held up here, relative to other parts of the country. Still, builders are scaling back even in lightly hit areas such as the Triangle to make up for their losses elsewhere.

"A lot of these problems don't have to do with the Carolinas," says Kyle Corkum, Landquest's president. That is why LStar is tempted by North Carolina in the first place. LStar expects people to continue to flow to the state in the next decade, and it predicts that the housing market here will rebound more quickly than elsewhere.

And because the partnership is buying with cash, it has a big advantage over like-minded investors -- especially those who have to persuade banks, still leery of real estate bets, to finance deals.

"It's much more powerful to say, 'We can close in three weeks,' than to have to go through the process of someone else's underwriting," Corkum says. "We can just say, 'We're ready to stroke a check. Let's do it.' "

Starwood is an an affiliate of private investment behemoth Starwood Capital Group of Greenwich, Conn., which might explain its end of the deal: $100 million. Landquest is adding an undisclosed sum. But its value lies in its local expertise. Starwood has formed seven such partnerships throughout the country.

Last week LStar made offers totaling $100 million, Corkum says. He declined to be more specific, but offered hints:

"The objective is to buy properties that people want to live in tomorrow," he says. " ... This is not a land bank. This isn't buying land in the boonies and in 10 years civilization reaches there."

Land banking has been Landquest's forte for eight years.

The company has primarily been a land developer in New England and the Carolinas. Its business has been buying large tracts from farmers or other willing sellers, preparing the land for residential development by getting planning approvals, building infrastructure, and dividing lots before selling to builders.

But a year ago, as the nation's mortgage mess began to seep into the Triangle, Landquest decided to pay down debt and walk away from several hundred acres in land options -- going against critics who advised that this region would avoid the ill effects of the bust. Predicting a lending pullback, the company began searching for the bottom of the market.

The Starwood deal began taking shape in the spring.

"Things have been a lot worse than we expected," Corkum says. "We feel really, ridiculously lucky we're on the right side of this."