INDIAN RIVER COUNTY – Ironshore Capital LLC, a Fort Lauderdale-based private equity firm, is relaunching the River Club development in Indian River Shores, looking to sell the remaining 75 custom-home lots over the next five to seven years.
Island businessman Jack Rodgers, the Ironshore executive in charge of the project, says his company’s timing and experience acquiring and recapitalizing distressed real estate, along with River Club’s inherent virtues as a well-designed development in an ideal location, will enable the company to offer “fine, handsome homes at very competitive prices.”
Created by well-known Vero Beach developer Mason Simpson about a decade ago, the subdivision has 179 lots spread across 120 landscaped acres stretching from A1A to the Indian River Lagoon.
Public records show Simpson, operating as River Club at Vero Beach LLC, acquired part of the property for $10.7 million in 2001. He later relinquished control of the development to Bank Atlantic after more than half of the homes had been sold.
“My knowledge of the history of the project is second-hand,” says Rodgers. “But as I understand it, Mason Simpson originally built it – and did a terrific job of designing it – then had a joint venture with a small community bank that was acquired by Bank Atlantic.
“Bank Atlantic ended up taking the property over in some fashion and trying to run it for a while. They tried to build and sell themselves, and then they tried bringing in local builders, but the market was going in the wrong direction. A magician couldn’t have made it work at that time, going into 2008 and 2009, and the bank essentially shut it down and just sat on it.”
That meant the 100 or so existing homeowners had to keep the development up themselves, paying for services, maintenance and repairs to roads, club houses and other infrastructure while the development was in limbo.
“In June 2010 the Bank Atlantic auctioned off a big pool of assets,” Rodgers says. “We acquired this and several other assets from them as part of that auction. There was more than $30 million in debt on the property but we paid considerably less than that.”
The competitive advantage that Rodgers sees for River Club as it relaunches stems from that discounted purchase price.
“Many communities would have to operate at a loss to sell homes of River Club’s quality at comparable prices,” he says. “Because we acquired and recapitalized River Club in 2010, we can profitably offer a quality product priced for a post-bubble market. River Club offers the assuredness of financial stability, relief from the legacy issues that plague many communities and an amenity and infrastructure package that could not feasibly be duplicated if you started from scratch today.”
In developments that were started during the boom and continued without foreclosure, each lot has to bear a share of the high cost of land and construction that prevailed at that time, making each new home more expensive than it would be if the land was bought and community amenities built at today’s prices.
“We can build a beautiful 2,800-square-foot home – build it, finish and sell it – for $600,000 and do it profitably,” Rodgers says. “In developments based on costs that prevailed from 2004 to 2007, they would lose $100,000 on the same house.”
Rodgers, who has lived in Ambersand Beach with his wife and two children since 2007, brings a long career as a real estate financer to the River Club project, which he says is a small deal by Ironshore’s standards.
Born and raised in Reston, Va., across the Potomac from Washington, D.C., Rodgers got a degree in business and finance at Old Dominion University in Norfolk, Va., and ended up – in his words – becoming “a serial entrepreneur.”
“Kyle Meyer, the Ironshore Capital CEO, and I have been in business together off and on for 25 years,” Rodgers says. “We started a company called American Finance in Fairfax, Va., in 1991 with five employees. By the time we sold the business in 2000, after taking it public as Mortgage.com, we had nearly 1,000 employees.
“After that, we spent seven or eight years in private equity, financing real estate development all around Florida. We set this business up specifically to acquire distressed property when the economy began its epic downturn. We work with some of the largest private equity hedge funds in the country and put money to work in opportunistic real estate ventures.”
Equity funds turn that money over to Ironshore, which sets up a separate LLC for each venture. Rodgers and his partners commit their own capital alongside co-investors, structure the deals and run the projects, splitting the profits with investors. Rodgers says no debt financing is used.
“Builders or developers who need to go to the bank to get financing can’t operate right now,” he says. “We have the advantage of being a well-capitalized firm with access to the money we need to do deals like the one at River Club.”
“We don’t throw money around willy- nilly, obviously,” he adds. “We have a team of analysts and economists in our Fort Lauderdale office that is world class. We think we have modeling and analytic capability that is as good as or better than anybody anywhere in the business.”
Those analysts liked the look of the deal at River Club at the price Ironshore paid for the unsold land and other project assets. The company, which has offices or assets under management in Virginia, South Carolina, Georgia and Florida, gained clear title to the land in the spring. Since then it has been working with local banks and insurance companies to set up an avenue for buyers to finance and insure new homes.
Palm Coast Development will be the real estate broker and exclusive builder.
“Ironshore selected us as the exclusive builder in part because we a fully integrated design-build firm with an in-house design center,” says Palm Coast Development President Bob McNally. “That is important in this market, which is primarily a custom home environment. We perform many services for our clients up front with no initial costs, including planning the project, from floor planning, elevation creation, décor and structural engineering, to site evaluation and landscape layout. This affords our clients the ability to make all selections of products, materials and design elements in one setting.”
Ironshore has contracted with Palm Coast to build a 2,800-square-foot model home that will be used as a sales office. It is scheduled for completion in late fall or early winter.
“We will sell lots and then buyers will contract with Palm Coast for the type of home they want,” says Rodgers. “It is a simple efficient way to do business.”
McNally says the prevailing architectural style will be Bahamian/Bermudan, but that a wide variety of variations on that basic theme will be available in six floor plans ranging in price from $600,000 to $2 million or more, depending on what buyers want.