Unique Bank Deal Fuels Texas Home Builder Expansion

Conroe, Texas — On July 1, 2009, LGI Homes closed on 210 finished lots in south Ft. Worth, Texas marking the Houston-based builder’s expansion into the DFW housing market. The lots were purchased from Sovereign Bank in a seller-funded structure that included a construction financing line of credit in addition to acquisition financing for the lots.
Though banks are foreclosing on more properties, very few transactions are taking place with the builders and investors that are hoping to acquire assets. That’s because, in most cases, the seller is not willing to value these projects at the distressed prices that buyers are willing to pay.
“This is the type of structure that works in the industry today,” said Eric Lipar, CEO of LGI Homes. “We have a clean record with our banks and a successful track record of generating sales. We’re a profitable operation and that’s where banks want to lend.”
“We don’t have to pay .30 cents on the dollar here and it’s still a great deal because the bank is giving us financing. We’re able to pay Sovereign a price that’s palatable for them and we still make our margins. It’s a real win-win.”
According to Carl Fite, senior vice president at Sovereign Bank, this type of structure should, and probably will, become more prevalent in the future. “It’s a real opportunity for a bank to work with a company like LGI. They’re experienced and have the wherewithal to make us comfortable.” Fite also stressed that in a declining market environment, doing deals like this have benefits that reach beyond the bank’s ability to move REO off the books. “It re-activates the community, it maximizes the value of the lots, it creates a tax base for the city. It even creates jobs.”
LGI is scheduled to begin operations in the DFW market immediately. The company will start construction on July 8th and will open sales August 15th. Lipar anticipates closing on homes in the community by September 15th. Homes in the Deer Creek subdivision will be priced from $130,000 to $190,000.
LGI Homes has found success in the first-time home buyer market by focusing on converting apartment renters into homeowners. The company appeals to the basic entry-level buyer with a distinctive sales and marketing program that focuses on the monthly payment. Homes sell in the $110,000 to $190,000 price range.
Despite the downturn, the company just recorded its best month of 2009 in June with 40 closings. LGI annual sales have increased consistently through the slow-down. LGI Homes active communities are located in Rosenberg, TX, at Sunrise Meadow; at Creekside Village, in Spring, TX, and in San Antonio, TX at Canyon Crossing.

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ABOUT LGI: LGI Development started with its first home site community in Magnolia, Texas in 1995. Since then, LGI Development has grown from a respected local land developer, into a nationally recognized corporation that includes affordable new home construction and mortgage lending services. LGI Homes started their first community in 2003.

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