Create a Business from Home Builders' Woes
Homebuilders face a "side effect" challenge: a massive land glut. But one savvy entrepreneur is creating a new business from the builders' problems.
CNBC's Diana Olick reported that major U.S. builders including Hovnanian Enterprises, Toll Brothers and KB Home posted $12 billion in writedowns in the last quarter -- with much of that figure attributed to losses on fallow land holdings in regions like California, Phoenix and Florida.
Most notably, D.R. Horton sold a packet of some 7,000 acres for a mere $70 million in November.
And Lennar -- which posted a $1.2 billion loss for the fourth quarter -- sold property across eight states for 40 cents on the dollar.
But Jeffrey Gault, the chief executive of LandCap Partners, sees the builders' losses as a golden -- if long-term -- opportunity.
LandCap has been amassing capital to buy the over-inventoried land and plans to eventually build new homes on the plots -- when the market inevitably bounces back.
"All the builders realize cash is king right now," Gault told CNBC. He plans on biding his time: "It could take a couple of years" before consumer demand is strong enough again.
But Gault isn't just taking advantage of homebuilders' woes -- he's also creating partnerships with a few of the builders themselves, in essence holding their land while they recover.