Positano Developer Struggling to Stay Afloat
Positano is a gorgeous community nestled in the rolling hills of Fallon Village in Dublin, CA. Positano’s developer, Braddock & Logan, has recently shown signs that they may be having a cash crunch as a result of the tough economy and tight mortgage lending market:
- Braddock & Logan recently sold their remaining 40+ lots and development rights for the Cantara at Positano project to home building behemoth KB Homes.
- Braddock & Logan sold a portion of the Maranello project land and development rights to D.R. Horton. This parcel of land acts as a buffer between the planned Maranello development and the Dublin Ranch Golf Course.
- The City Council voted to save Braddock & Logan millions of dollars in construction costs by changing the Positano affordable housing requirements. This was in response to Braddock & Logan’s implication that they would not be able to continue building at Positano without the change.
- The City of Dublin recently stepped in to pay for traffic median landscaping improvements that Braddock & Logan had initially planned to install along Fallon Road.
Braddock & Logan had received bids for the Cantara development rights from KB, Lennar, D.R. Horton, and other national home builders. Braddock & Logan’s sale of the remaining Cantara project is a positive step forward that will help ensure the build out of Positano in Fallon Village. The new parks and elementary schools planned in Dublin will depend on the impact fees from all these new homes.
KB renamed their 40+ lot community “Cantara Place” and has initiated an interest list for buyers. Model homes for Cantara Place have not been built.
KB’s purchase of the remaining Cantara development rights is part of a trend where large publicly-traded home builders are snapping up projects at discount prices from smaller privately-held regional players that are running low on cash and lack access to the credit markets.
KB is one of a handful of national home builders that recently received most of the $33 billion homebuilder bailout that was signed into law on November 6th, as part of the Worker, Homeownership and Business Assistance Act of 2009. One could argue that KB was able to purchase the Cantara property using proceeds from the taxpayer bailout.
7:45 PM on January 10th, 2010
Yes it can be argued that the taxpayer bailout is helping to fund KB’s purchase here. What would have happened to KB if that $33B had not been given to them by Washington? They probably would not be snatching up projects like this… interesting to see how the government’s reach can affect so many…
7:55 PM on January 10th, 2010
That may be a good news. Stop building too many houses. The market can’t absorb all the inventories fast enough to stabilize the housing price.
12:06 AM on January 12th, 2010
In my personal opinion, the headline of this article is at a minimum really, really unfair and in fact could be libelous to conclude that a developer selling a portion of a project to another developer means that they are “struggling to stay afloat”. Developers sell portions of projects all the time in both good economic times and bad for a variety of reasons, all in the ordinary course of business. For instance, during slow times, it’s prudent business management to not be greedy and mitigate risk by reducing exposure to one particular project or area by selling off a portion of development.
I’m not in any way involved with Braddock & Logan. I just happen to live near this project and I visited their sales office for myself because I like looking at model homes to get design ideas. It appears to me that they are adapting to this challenging market by building simpler, more affordable homes and only starting construction once buyers have signed purchase contracts. There were construction workers working on the weekend to get homes completed which says to me that while they may not be thriving, they certainly show absolutely no signs of “struggling to stay afloat”.
4:49 AM on January 12th, 2010
Hi Greg – thank you for your comment. As I recall, you’re in construction finance so you are an expert in these types of matters. Have you heard any specific information about how Braddock & Logan are doing from a financial perspective? We’ve heard that their project in Millbrae is struggling and that they’ve only sold a handful of units. Do you know if that is true? From a construction finance perspective, could Braddock & Logan be selling off land at their more successful Positano project to offset cash shortages on projects elsewhere?
Thx, John Z.
6:16 AM on January 12th, 2010
Hi Greg – another item that occurred to me is that Braddock & Logan has been telling the City and residents that they are struggling to keep building at Positano. Case in point was last year when the City voted to save Braddock & Logan millions of dollars by changing the affordable housing requirements at Positano. Here is the article:
http://www.arounddublinblog.com/2009/06/dublin-developer-to-save-millions-of/
I may add references to this article, so readers may better understand all the facts.
Thx, John Z.
8:56 AM on January 12th, 2010
Hi Greg,
Thank you for your comment and feedback regarding our headline for this particular article. The Around Dublin Team would like to point out that our publisher John is not affiliated in any way with Braddock and Logan or any of its competitors. We would also like to add one more point in support of what John has already written. According to the Mayor’s Report for the week of December 5th, 2009, “there is one stretch of the median that went undeveloped” near the Fallon Sports Park “that the developer was going to do. The developer is near bankruptcy, so the city has stepped in and said that we’re going to take on that patch and complete the median landscaping.” The Mayor’s discussion of this item started at 3:47. The specific quote here came from the video segment between 4:01 and 4:18.
Although Mayor Sbranti did not name a specific developer, Braddock and Logan is currently the only developer who is building near Fallon Sports Park. In light of the other observations John has made, the conclusion that the unnamed developer “near bankruptcy” is Braddock and Logan seems reasonable. Thank you again.
10:56 AM on January 13th, 2010
Hi John – Thank you for providing Mayor Sbranti’s clip. I had not previously heard this report and it’s disappointing that the mayor would characterize the developer’s either unwillingness or inability to complete those improvements in those terms by using the words “near bankruptcy”. He could have simply said the developer was “financially unable…” unless it’s widely known that they are clearly near bankruptcy. When you’re in a leadership position such as mayor, you need to be cognizant of the power of your words.
It wouldn’t be too hard to figure out who he was referring to by simply checking with the city to see which developer was responsible for the section of median he references. It may even be in the staff report prepared for council when they made the decision to complete this median.
Since I drive by Fallon Sports Park every day, I’m glad the city is getting it completed. I just hope that people in positions of power use care with their word choices.
11:02 AM on January 12th, 2010
OK, I’m in. I have no visibility as to B&L’s current business model. However, the days of sitting on acres of developed lots may be over for some time. For most of my life, developers did not tackle 1500 homes at a time because they could not service the debt on such huge projects given the pace of sales and the need for a ‘balanced building process’. It is fortunate that there are other firms (regardless as to where they got their money) to assimilate some of this debt in this radically different housing market.
B&L and our Staff put together a terrific proposed Fallon Village Community and I for one applaud all of those who made it happen and to those who keep this project moving forward.
Further speculation on any developer’s financial situation is simply that. We need solutions and the Mayor, City Council, and Staff are doing everything they can to meet our goals of a sustainable vibrant community. For me, it is a time to hang together folks.
Thanks to John and team for providing this forum.
Bill
11:11 PM on January 20th, 2010
B&L should be ashamed of themselves by going from using a union electrical contractor to build homes in Dublin ranch to a nonunion contractor that doesnt even provide the basic benefits to survive.
They might as well build the homes in china and assemble them here for all that I care whats the difference, Corporate greed at work!
11:57 PM on March 17th, 2010
i don’t see union to be competitive in labor cost and they are one of the reason to bring down our big 3 motor companies in US. Union = corruption= high cost= no job.
4:28 PM on January 24th, 2010
YUK, KB Homes? the Walmart of homebuilders like Citation Homes. Too bad not Shapell, Shea or Centex. Dissappointing.