Jones Lang LaSalle


In Jersey, a little land is big prize for builders
Hunt for property now full-time job
Tuesday, May 30, 2006
BY PHILIP READ
Star-Ledger Staff

They are land hunters, on the prowl. Poring over tax maps to eyeball a hot prospect. Getting behind the wheel to scout for the next acquisition. Knocking on doors, hoping to find an owner in the mood to sell.

Denis Orloff knows the terrain.

"It's getting harder and harder to find any place to build in this town," said Orloff, who is building two five-bedroom, 4,000-square-foot houses on Montclair's Valley Road. That deal came after he got a tip. He found the seller, quickly, and started talking.

"While I was making a deal and shaking his hand ... his phone was ringing off the hook," Orloff said. "It was unbelievable. I got that one by the skin of my teeth."

From small-time builders to big-time New Jersey developers, from those eking out a living to those making hundreds of thousands of dollars, it's a cat-and-mouse game to see who can get the precious property first in a land-scarce, densely populated state.

Anything that can be developed goes. Vacant lots. Sub-dividable double lots. Single homes suitable to be knocked down. Land next to highways, or train tracks, or some other not-quite-as-desirable locales.

The big players simply advertise: "Do you own land? Talk to K. Hovnanian." But even that doesn't tell the whole story.

"We have a team of people who -- that's their full-time job," said Doug Fenichel, an Edison-based spokesman for the big New Jersey builder. "These people not only have to spot the land and work the deal, they have to work the regulatory system in that community."

But smaller- and medium-sized players also must scout and scour.

"I'm in Orange and Newark and Westfield," said Frank Cretella, whose Jersey City-based Landmark Developers is keen on developments that mix retail and residential. "You have to scout it out. You have to have a comfort level. ... A lot of it has to do with gut feel."

Weekdays, weekends, Cretella's out driving to get "a real sense" of a lot.

"Drinking a lot of coffee," he said.

And even when you find land, there could be problems.

Jack Ferra, a land broker for Weichert New Homes & Land of Morris Plains, has run into the ultimate land-acquisition hurdle.

His territory stretches across northwest New Jersey, pulling in 73 towns in Warren, Sussex, Hunterdon and northern Somerset counties.

Trouble is that's the heart of the Highlands, prime watershed acreage the state has snapped up in the name of preservation. "Most of my territory. ... There's no reason to look," he said.
Further south, Kenneth Schatz of Cohen-Schatz Associates in Cherry Hill knows the scarce-land game.

"There's such limited availability," he said. "Years ago, each builder would have a land acquisition man. Today, they've enlarged those to departments, because they have to find the little bits to keep builders busy."

Finding the property is one thing. Landing it is another.

Developers partner with real-estate agents and try to one-up other bidders. Strategies include enticing a seller with a no-contingency deal that makes for a quick closing, or being able to line up financing faster than a competitor.

Donn McDonald of Macabelli Properties, for one, once found himself in a field of 11 bidders and won. Another time, he was the loser on a property at Montclair's Walnut Street and Midland Avenue.

"They didn't accept our terms," he said of the seller. "They sold it to somebody else." Yet, in this business, deals can turn on a dime. "That actually fell through, and they called us back."
There, he rehabbed a grand old house, subdivided the property and is erecting a six-bedroom, 3 1/2-bath house listed for $1.69 million.

Asked whether he drives around looking for prospects, he said with a laugh: "All day long.
"I've knocked on people's doors before. You can't be bashful," McDonald said. "People sometimes are flattered, sometimes they're annoyed. ... It never hurts to try."

That extends to his enlisted real-estate scout, Barbara Adams of Better Homes USA in Upper Montclair.

"I know what he's looking for. I know what his model is. ... I know what margin he's looking for. I know what location," Adams said. "I pretty much know what a house is for Donn McDonald."
She works with other builders -- in Livingston and Freehold -- and knows first-hand the competitive pressure. "Most of the builders want to find the property before they come to the market. You might get two-dozen builders," she said of the competition. "A lot of times, it will go over asking price. Then it's not very cost-effective for the builder."

Sometimes, the seller actually comes calling.

"In this office, we will get calls, 'I have property,'" said Mary Danielson of the Builders League of South Jersey. It could be about a family home on a half-dozen lots, she said. "They just don't want anybody showing up," she said of their motive for calling a trade association such as hers.
Bill Staehle, whose Montclair-based Classics Reborn LLC does high-end whole-house renovations and bid on eight properties last year and won none, acknowledges that the market can be cruel.

"It's a lot like being a farmer," he said, "because you invest an entire year of labor and a tremendous amount of capital, and you're pretty much at the mercy of the marketplace and other conditions you can't control."

Philip Read covers West Essex. He may be reached at pread@starledger.com or (973) 392-1851.

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