Post-Bubble

Mike Vogel | 11/1/2010

Neal Communities' average sales price is $210,000, down from $527,000 in 2005. Pat Neal says the company is profitable again after losing money in 2009. [Photo: Neal Communities]

In 2007, Pat Neal undertook another of the periodic remakes of the Manatee County-based real estate company he's led for 41 years. Originally a builder, then a land developer who sold lots to builders, he was building more and more homes himself. Now, as the previews for real estate looked grim, he decided he needed a lower-priced product.

Today, Neal Communities' average sales price is $210,000. It even sells a 947-sq.-ft., two-bedroom cottage for $110,990, a price point his company hasn't touched since 1989. At the height of the boom in 2005, the company's average price was $527,000.
His remake paid off. Neal says his company is profitable at an "appropriate rate of return" after losing money in 2009. He expects $75 million in home sales revenue this year, down from $115 million in 2005. He says he will beat his 250 sales goal in 2010 and projects selling more than 300 in 2011.

His buyers: In-migrants from the Midwest, retirees, first-time buyers, women and government employees. Missing: Local move-up and move-down buyers. They're stuck in their existing homes.

Neal, fortunately for him, paid cash for land. While he readily admits he overpaid in 2005, he didn't have to worry about a lender-driven credit crisis. As a developer-builder, he has the flexibility to build in less competitive niches. During the boom, he decided he didn't want to face competition some day from investors reselling his homes, so he put in a contract provision discouraging them. It wound up protecting him from investors' bailing on contracts in the bust.

Neal, 61, is buying land — paying an eighth to a sixth of prior values — to be ready for the retirement of 76 million Boomers. "We are going to have plenty of people moving to our state," says the former state senator. "My goal is to be ready for that."

In September, the Bonita Bay Group completed the sale of its TwinEagles property, including two golf courses, to developer Ronto Group and an investment partner for $11 million. The deal is the latest in a series of asset sales since last year that have included the Bonita Bay Club, The Club at Mediterra, Shadow Wood Country Club and The Commons Club, all in an attempt to restructure the company and avoid bankruptcy. Brian Lucas, CEO, says "our expectations are positive but realistic for the coming season." The company is introducing new builders and offerings in three developments. It's also relieved. In August, a circuit judge tossed out a lawsuit brought by the Florida Attorney General's Office over refund practices for resigning club members.