Virginia-based Stanley Martin Homes, which acquired Avex Homes in 2020, has completed the first 19 homes in Osceola Village Center, but you won’t see them for sale on the builder’s website.
That’s because the builder quietly entered into a contract to sell the 147-home subdivision on Kissimmee’s Lake Tohopekaliga to one of the nation’s largest owner-operators of single-family rental homes.
FirstKey Homes closed the first transaction last November, paying $4 million for nine homes shortly after the county issued certificates of occupancy. A month later, FirstKey paid $2.25 million for another five homes on the same block of Spokane Point. Last week, a third sale closed involving five more homes for $2.26 million, or an average of $452,000 per home.
FirstKey now is marketing them on its own platform at rents ranging from $2,236 to $2,360 per month.
The mixed-use community on U.S. 17-92 also has 200 townhouse lots, which are being developed and sold fee-simple by D.R. Horton; an apartment community by NRP Group; and a commercial center anchored by a new Everest Rehabilitation Hospital.
Osceola Village is one of four new communities in the Orlando market where FirstKey has partnered with a homebuilder to develop the neighborhood as a purpose-built rental community. The other three are all in Polk County and are being developed by Dream Finders Homes. The company also has new-construction homes for rent in South Carolina and Texas.
Private equity firm Cerberus Capital formed FirstKey Homes in 2015. Today, the company manages Cerberus’ portfolio of more than 42,000 homes. FirstKey is one of the largest investor-landlords in Orlando with hundreds of SFR properties. But they’re not the only player in the new construction BTR scene.
Stanley Martin Homes is also selling new homes and townhomes in Simmons Trace as quickly as they can build them to Fundrise, a direct-to-investor real estate platform. The firm has closed seven transactions beginning in the summer of 2022 totaling $22.6 million for 50 units. About 20 units are currently available for rent, according to the community website.
Eric Marks, Orlando division president for Stanley Martin Homes, saw the Simmons Trace location just north of the St. Cloud Commons shopping center as an ideal fit for a BTR community year ago. Back in 2020, when he was still president of Avex Homes, he pursued a BTR concept but ultimately decided to go with a platted subdivision instead. At the time, he thought the BTR model wouldn’t pencil out in Osceola County because of its high impact fees and subdivision standards.
But over the last three years, the Central Florida region has experienced some of the highest rent growth in the nation. That combined with the population growth and high employment in the region has drawn investment in the BTR sector.
Michael Finch, executive VP and principal of SVN/SFRHUB Advisors, forecasted an emergence of BTR subdivisions from production homebuilders in Orlando back in 2019 when he spoke at the I-4 Corridor Conference.
“Orlando is a great market,” he said Tuesday. “It’s one of the top markets for all the BFR investors in the country.”
D.R. Horton was the first to jump on the BTR train in 2021 with Avian Pointe in Apopka. Finch said more builders would have joined before now if not for COVID.
“COVID accelerated the home price appreciation by leaps and bounds, and none of the builders needed to sell,” he said. “Frankly they couldn’t even build fast enough to keep up with the retail market, so they just kind of ignored investors until you know that there was some softening.”
Finch has closed deals with Stanley Martin Homes and Dream Finders for BTR bulk sales, including a 268-home community in North Carolina this month. These deals are extremely profitable for homebuilders because they can move inventory more quickly and save on materials costs and labor. They also pay lower commissions for bulk sales, and they don’t have to worry about administrative or marketing costs associated with retail buyers. “There’s significant savings in every aspect of the vertical construction and delivery process,” he said.
Marks declined to comment on the builder’s recent plan to sell entire communities as purpose-built rental subdivisions. The builder is still marketing and selling fee-simple homes at several former Avex communities in Central Florida. It’s also moving forward with permitting to start construction soon on Brack Ranch, a 721-home subdivision spanning both sides of Jack Brack Road in Osceola County. Stanley Martin Homes paid about $8.5 million in 2022 for the project.
Sovereign Land Co. principal Kyle Sanders, who helped assemble and entitle the project, predicts the builder will incorporate a BTR section in the community.
“The way the community is designed, especially the southern half, lends itself to doing a build-to-rent,” Sanders said. “A lot of builders are doing bulk sales now to these investors. It’s a growing trend.”
American Homes 4Rent entered the market 2020 with a handful of small purpose-built rental communities while also buying larger projects with entitlements already in place. Those include Sky Lakes, slated to open this summer, and Pine Grove. The California-based REIT also partners with homebuilders on bulk purchases, as it did with Lennar Homes and Maranda Homes to close out the Sedona community in Kissimmee.
Greater Orlando Builders Association Executive Director Chassity Vega said the BTR production still makes up a small fraction of new home construction in Orlando, but it is the fastest-growing asset class. “Build-to-Rent is here to stay,” she said.
Atlanta-based ResiBuilt opened and staffed a Florida division based here in 2021 and has four subdivisions in the pipeline in Osceola and Lake counties. Led by former Craft Homes executive Richard Maddalena, the company buys land with entitlements for platted subdivisions and self-develops them.
“We’re going to have a lot come up all at the same time — 2023’s going to be big for us,” Maddalena told GrowthSpotter in 2022.
Meanwhile, a handful of BTR developers specializing in horizontal apartments have also entered the market. They include Curve Development, which has projects in Minneola and Harmony; and Landmark Properties, which is building a cottage community on Narcoossee Road. This year Taylor Morrison Homes launched its own build-to-rent brand, Yadly, and has projects slated for Kissimmee, Eustis and DeLand. And multifamily developers like DeBartolo Development and Mill Creek Residential Trust have BTR projects in development across the region under their own brands.
Have a tip about Central Florida development? Contact me at lkinsler@GrowthSpotter.com or (407) 420-6261, or tweet me at @byLauraKinsler. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.
