Apartments...Why??
 

I’ve thought about why this latest generation of the Morses has purposely and callously begin to change the character The Villages, and the relationship with residents it has taken decades to develop. The construction of densely-sited apartments at Brownwood were first. Then the destruction of Hacienda Hills CC and announcement of another large high-rise building, and recently plans to build apartments in the recently-closed resident’s club, Katie Belles. I believe this is just the beginning. I think I know why.

These actions are what is necessary if the Morse family has plans to sell their ownership interests in The Villages or take the business public. The Villages is profitable, no doubt. But it doesn’t have enough consistent, repeatable earnings to maximize it’s value in such a sale. Repeatable less risky earning flows are what financial buyers and the capital markets use to value businesses.

Businesses are valued as a multiple of earnings, whether sold to a single financial buyer, sale to a public company, or as an IPO on the stock market. Yes, The Villages has some repeatable, consistent and growing sources of earnings—rent from all the shopping centers and the town squares retail, the bank, the championship golf clubs. But just not enough repeatable income to optimize it’s value, which is how the capital markets will value The Villages.

Without a stronger source of repeatable, growing income The Villages as a business will be valued as just another home builder. Profits are great so long as the owners keep buying land, building houses, and selling them to new residents. But if they ever stop that cycle, earnings drop dramatically. The capital markets are forward-looking and will ascribe a much lower multiple to the home-building part of the business than to the parts that will be ongoing if the three Morse siblings who currently own The Villages leave or retire. To increase the value of the Morse ownership more retail, apartments, or somehow monetizing their ownership of everything in The Villages not owned by residents will be necessary.

The three Morse siblings are each billionaires individually, according to Forbes magazine. But it’s all “paper wealth”. If they sold their ownership of The Villages, it would be worth nowhere near that amount. They’ve reached an age when they are almost certainly considering retirement. And among the dozens of Morse-Schwartz grandchildren and great grandchildren, there are only a few as talented as the siblings who want to work as hard as they did, or work for The Villages at all.

Selling the business is the only way the siblings can monetize their long, successful careers and retire. And to increase it’s value the business needs more repeatable, less risky sources of earnings. Unfortunately, achieving those objectives will probably require a change in the relationship and trust that tens of thousands of people who have “bought the dream” have placed in them.

I don’t have any inside information, but I did retire after a long career as an investment banker. I don’t want to be a Debby Downer, but what I see are owners that are preparing to “cash out”. It won’t happen overnight, it might take a few years, but don’t think we’ve seen the end of efforts to monetize their ownership by the Morse siblings. There will certainly be more apartments, such as in the new “non-resident” section adjacent to the new school complex and who knows what in the recently-announced 400 acre medical business section in the southern part of The Villages. I think that some of the amenities that have been free until now, will carry a cost in the future.

If you see something differently, post your feelings here. All I’m saying is that we should all remain aware of what’s happening that might change “Florida’s Friendliest Hometown”.

IMO when they sold to districts that should of sealed residential building. IMO the problem is the commercial properties are for most part setting empty. Now what left? turn property into multilevel apartments where it’s more profitable to build up than out and more stable income.

IMO Bottom line It won’t become house resale problem for 10 years out when apartments flood the market. I agree majority that will be moving into apartments probably will use few outside apartment area amenities due to fact they are one step from assisted living or nursing home. IMO as long as there balance in just enough apartments not flood of them and of course age restrictions strictly enforced.

Very interesting

There is nothing left to say but the old saying, you hit the nail RIGHT ON THE HEAD ! The valuation of publicly traded shares, how those stats are determined, etc. etc. Many have wondered for 15, even 20 years when that would happen, you could "see" it coming, though it has a huge downside, the residents "could" gain the same rights as other citizens in "normal" communities, but it would also mean those elements that, as you so clearly explained, create the kinds of income streams stock holders expect. Koo Doo's for "seeing" what the constant stream of "unusual" events, not in the interest of making live more comfortable for the retiree residents, or a better quality community, only a continued march toward those elements many came to escape.

Considering the developers past behavior I don’t think I ever trusted them. Good, affordable houses yes. Ethics no. Zoning will constrain how many apartments can be built in an already densely built community. And I believe the new commissioners in Sumter will act on behalf of the residents. Part of the vacancy issue is the outrageous rents the developer charges along with sticking his nose into merchants financial statements.
But I think the commercial manager says they have a 90 percent occupancy rate anyway. You are correct that if they want to cash out the business value with be the present value of the business cash flow. With interest rates so low it makes the present value larger so maybe that is why the rush to dump low yielding assets. On the other hand with all the land in Southern Oaks they could make money from just home building to live a comfortable retirement for many years.

You provide a good hypothesis as to the "why" behind the several significant different development trends appearing in the last couple of years. As noted, the developer family has strengthened its future repeating income streams.
I personally would be saddened if the developer leaves us to be saddled with a public corporation which in turn is saddled with significant leveraged debt and only interested in maximizing future short-term cash flows and quick payback to shareowners. Not only that, but a lot of the rights governing our community which we have trusted to the developer would be transferred to the succeeding corporation.

Kahuna,
Very insightful perspective. A bit fuzzy to me at first, but after reading your comments it all appears very logical. A true game changer for TV. We have a lot of talented and well versed folks on this site. To support Kahuna's position, many individual owned entities once run by the Initial owner, next are run by the family, then do go public and are run by accounts to maximize short term gains. I hope your wrong Kahuna but I am afraid you nailed it. Wow

Kahuna,

You are indeed very forward thinking and I agree that you are on to something. There is no way the developers (or should I say their consultants/advisors) would have changed the families business model so abruptly without a valid reason. Why worry about pi$$ing off lots of existing homeowners, who bought into the dream, when their new vision is setting up an exit strategy. I have been racking my brain trying to think of why such an about face on a successful business model would take place in such a short time period. I think I am getting old, have been retired too long, and am loosing my edge, I should have come to the same conclusion as you. As a fellow retired investment banker, thanks for your intuitive perspective (and as an investment banker, I am sure you know what the CFA in tophcfa stands for). Here is hoping that whatever happens, the new business model does not trash what we bought into during the remaining active years of our lifetime. Stay tuned!

Your perspective makes sense to me.

What you concluded makes absolute sense to me. As a resident here for over 15 years, the changes I saw were usually a benefit for those living here. However in the last couple of years, it seems greed is their number one priority and those folks that have purchased their homes by these on going Constructions of apartments are no doubt upset, as they are losing the value of their investments and privacy.

I just hope your musing does not give the developer a thought they didn't have before your post.

As long as we live in a free enterprise system property owners can buy sell develop as they see fit

Thank you, very insightful.
The possibility also is that those who will in the future retire to TV are a completely different demographic group. Less Veterans, less traditional family units.Even less incomes. Look around Florida. There are communities with apartments and or condos in the middle of town squares. Places like Clermont, Melbourne Beach. Naples. Maybe the developers have more insight then we think. Actually would welcome Condos or Townhouses no yard work. Change happens and we can work to be part of it. Heck in 17 years all of a sudden every street corner has an Assisted living , memory care, nursing facility. Now that is preparing for all of us getting very needy. Sure the singal family home will always be the dream,will the economy support that? My opinion is to stay educated to the changes. Find what works for you. Or start the process of where do I want to age out?

The developer seems to be several steps ahead of us all the time.

If this is their direction it has been planned for some time. They must be shaking their head about the Sumter commission election and how it affects their plans.

He commercial properties are empty because they charge too much rent. Just lower the rents and have them filled out and they would be making more money through volume

Which is fine except they seem to be able to change the zoning to whatever they want. It is this ability that scares me. How many apartments could they build on the polo field. The other thing is that we need to stop letting them share amenities and the building of apartments would stop.

Time for storage facilities to be erected, the most income producing per square foot enclosures on the planet. Oh yes, they can be several stories high. UP up and away !!!!

I agree and I am so glad I am out of there I seen this happening now the Villages is no longer the place to live
And the siblings that are ruining it I wish them bad luck for destroying there parents dream

What were your assumptions in order for the family to cash out with a billion each?? 10% return on apartments, 90% occupancy, five times earnings, etc. Jus wondering. My quick and dirty indicates it would be over 100,000 apartments. They have less than 1,000 apartments now. I don't think the sky is falling in my lifetime.


Please share...............we bean-counters need facts.

This I can comment upon ........ Southern Trace used to have a small, very good, local jeweler. Their rent was increased causing them to look for another property. The store is still empty. A great little family business has relocated out of TV.

I'm sure the developer has researched all this and knows what they are doing. If there wasn't a demand for apartments, they wouldn't build them. Many older people here, and that means the Spanish Springs area, can no longer keep up their homes and don't want to move away. An apartment meets their needs.

Interesting thoughts! Thanks for sharing them

OP, you have made some good business points. However, for residents to believe that building a few apartments inside the bubble will somehow “destroy” The,Villages as we know it is a stretch in my opinion. Simply put, the Developer saw a need for apartments and it was a good business decision to build them. Building the Lofts was a good decision as it brings more possible business to Brownwood. I am told there is a waiting list for the apartments. Crossing Rt 44 also is an enhancement for the Developers money outlay for their Brownwood investment. I don’t see what is happening in Southern Oaks area (south of 44) as making much or any traffic concerns for the northern half of The Villages. As far as Katie Belles and Hacienda Country Club being turned into apartments, time will tell on these projects. In short, when there is no longer a demand for upscale apartments within the bubble, they will cease to be built. I don’t see any of these recent “business decisions“ affecting my lifestyle here in The Villages. “You can’t unring the bell.” Anonymous.

Why? Simple ......... $$$$$$$$

Not sure I agree on BBC two fronts.

First: The space occupied by the original club is not practical for traditional homes as they could only fit a few. An apartment complex on the other hand will allow many more living spaces especially one 3 floors or more. I think this is more of a density issue and how to maximize the return on the space that is there.

Second: the family already has a very substantial income from commercial property they are renting; the championship golf courses and numerous other places where they seem to have their little hands.

I do not think ‘cashing out’ is what they have in mind. I do think that maximizing the opportunity and increasing the revenue stream are what they are looking for as with each generation there are that many more of ‘them’ to turn into billionaires. I think we should be prepared for them to do thinking outside the box so to speak looking for additional ways to use this space to their best advantage.

Only time will tell.

Your crystal ball may be accurate but certainly not anytime soon. The Villages south f 44 will ultimately be larger than that north with 10-15 years of growths even if no more land is purchased.

I see little change in direction when apartments/condos will mak up 1% of the residents. Frankly I’m surprised that the early multi family buildings in Spanish Springs and Glenview weren’t carried forward over the last 20 years.

I have lived here for 19 years and have heard all this for 19 years. It's nothing new, yet it has not happened yet and probably never will. When we moved here we were told there would never be any assisted living facilities here, that residents would move back home when they needed help to live, well guess what, when the developer saw a need 100,000 people later who didn't want to leave here as they got older, they changed their minds and built assisted living facilities within the Villages. Good for the developer and good for us who live here and don't want to leave. This benefits them and us. Now the developer is building apartments for those who do not want to maintain a home, but are not ready for assisted living. Again, a move that benefits us and the developer. People were up in arms when the developer started building family sections. This was to draw top doctors, dentists and other professionals to this area for the residents. When we moved here there were very few doctors here and they were terrible, you had to go to Ocala, Leesburg or farther to find a decent doctor or dentist, now because of great family housing and a top notch school you have many good doctors and dentists to choose from. People complain about a few empty store fronts, when we moved here there was only Spanish Springs, nothing else, you had to drive to Ocala or Leesburg for shopping, no Lowes, no Home depot, nothing. The developer has a 20 to 30 year plan, always did and it keeps extending out. So many posters have only lived here a short time and don't have a real idea of the changes here in the Villages and how they have profited the developer AND the residents. As far as the family, they have always seen to it that their children are educated in ways that will further the family business. Those who say they are greedy are crying about some slight they see that doesn't fulfill their own wishes. Through the 19 years I've lived here I see all the things we now have that enrich our lives, all done by the family to enrich their pockets which have also enriched our lives. The sky is not falling, enjoy the years you have left.

Saw the same thing happen with Independent, Assisted and Memory care units. You are spot on. In 2010 I was looking to move my mom into assisted living. There were a number of new facilities all on the outskirts of the Villages. All of a sudden we had a flurry of new facilities built inside the Villages.

Really, an enterprise the size of the Villages has consultants and investment bankers feeding them every possible option. It’s just which options the current generation of decision makers pursues.

You are absolutely correct, within zoning constraints of course. But it needs to be added that the “as they see fit” part can vary greatly depending on their time horizon and end game plan.

Very interesting although I would expound on it. The Morse’s have equity interests in the contractors who service this placeThe Morse’s also receive a royalty fee for every business who rents from them as well. They also built a design center where the house add ins are marked up 300-500% also utilizing their equity own contractors They purchased the water company and the residents through increases indirectly paid for the purchasing costs. Along with other revenue streams too long to mention here notwithstanding the medical stream, exploring possibility of an IPO might open their financial and legal dealings to scrutiny.not just financials but their business practices and legal expenses. If they go public, the residents may become very unhappy because they know they have to pay dividends and meet projections. Translated into real life the expenses to live here will skyrocket due to going public. It’s also possible they want to monetize their shares to bring in outside investors.

I do think something different. And if the worst happened and they sold it? Well I am sure you are more than a dozen years older than when I first read you on this Forum. We can't change the future and we really don't have as much of it to enjoy as we did some years ago.

I trust in the integrity of Jennifer, Tracy and Mark. I see no reason not too. I see what I perceive as a recent rather organized attempt to discredit them that I really think is in part political.

So I disagree. I have very few good qualities but I will admit being vain about my judgement on people's character. I am not wrong too often.

Wish some of those apartments were sold as condos, or they had villas that included all exterior maintenance. We’d like to downsize and not have to worry about yards, exterior painting, etc., but I don’t like the idea of paying thousands a month in rent.

The density equation should be considered when building any high rise apartment building. When a relatively small amount of land normally used for single family homes is replaced with a 'high rise', the density increases immediately; the amount of people, golf carts, visitors, etc. Large concentrations of people in a small area must be carefully calculated as to the comfort of the people already living here versus the profit motive.....unfortunately the profit motive almost always wins out. The Villages as we know it will also change.

Agree. Just like when Walmart went public. OH WAIT. Walmart is the cheapest place to shop. Hmmmmm. I guess I disagree.


The sky is falling, the sky is falling.


:1rotfl:

Ohiobuckeye
 

Since the Morse’s are in the business to make money, I’m making a big guess but Katie Belle’s probably isn’t making money for them. So renting or selling apartments is money always coming in. Kahuna, I know TOTV doesn’t want me to talk about anybody or bad mouth a political party. Maybe TV sees the writing on the wall & thinks if a certain political party wins the election & they do get away with what they say they are going to do. It could lose a lot of profit for TV or even bankrupt them. So who know why Morse’s are doing something else with Katie Belle’s but all most of us know it has to have something to do with money! If Katie Belle’s was making a profit Morse’s wouldn’t be doing what they are doing. Believe me Morse’s have made more money than you or me in 4 life times. They built & sold 120,000 plus home & pretty much own TV. They probably see the writing on the wall about where our country is headed. Good post, Kahuna!

Two or more ways to think about the issue.

One the specific of how does what is going on affect me and my lifestyle?

How does the issue of apartments affect TV overall?

My opinion....... the overall scheme/concept of TV the addition of a few apartment buildings within the thousands of acres and among hundreds of thousands of residents will have very little impact (unless you live within sight of the complex).

OMG! I should have thought of this. All of your logic fits! I've had experience taking very large public companies private - and large private companies public - and - you nailed it. How did I miss that? My thoughts were buried in the weeds. Thanks for sharing...

Some of the the responses to your thoughts are typical of this site. For example, in what way do you thoughts "discredit" the Morse family? They don't. Most billionaire family's at some time do things to make it easier for family members more flexibility in their longer term investments. The Walton's is a great example.

I'm also recognize that there are consistent contributors who resent any negative thoughts shared. To me - that is so naive, and not very "democratic" in the logic. For example - on the one hand, I thank God every day that I was born in the United States; I thank God everyday I found The Villages by accident. I thank God every day that my early career foundation began at Johnson & Johnson. HOWEVER, none of those are perfect - and by a God given ability to apply "critical thinking" - I constantly questioned lots of things they did. Frankly, the Founding Fathers of our country deliberately set up our form of government precisely to insure "HEALTHY TENSION" - because without it, you have less optimal results.

Therefore, with all due respect, those who want to be ostriches... defend the Morses on every challenge anybody has - enjoy the darkness. And for everybody who sees the Morses as the enemy of the people, hopefully that agony is fulfilling in some way.

To me - some of the Morse's approach (process) I've witnessed in the past year especially is disappointing. A society is not purely based on "if I own it - I can do anything I want" which is such a naive view of how societies work and function. (PS: the father of capitalism - Adam Smith - didn't even believe that!)

In summary. The original post sheds some extraordinarily insight hypothesis on the "drivers" behind recent decisions. The hypothesis is just that - a "best guess" - BUT - it is a very plausible best guess - which is why I find it interesting, whether true or not. I dislike some of the strategic decisions the Morse family has made - and as importantly - how they communicated them - and the perceived attitude of arrogance they demonstrated. For me, that means a) I trust them less, b) I'm less likely to refer friends and family to move here - or - be even more careful where in The Villages they move, but c) I personally still find this to be by far my best option for living the rest of my life on this earth. I don't find any of that incongruent. But in the "black and white" thinking society we live in, I'm sure that some reading this post think it is intellectually incongruent.

When does a Billionaire retire?
 

If all of The Kids are in fact Billionaires, Why even live here? Among all the hate and discontent.

I doubt anyone, outside The Family, has any real idea of their Net Worth. I do know that The Family has made Billion $ at risk investments multiple times over the decades in the development of farmland in the middle of nowhere. Cows outnumbered humans in these counties.

So, what should be the reward for being All In on a dream many years ago. And then double down over and over? Some real history: The Villages, Florida - Wikipedia

Every one of us made it here by making many choices, many decisions. Some good, Some not so good. None of us had the Brains or guts to attempt a Dream this Grand. 1960's Laws against selling land by mail. 1980's Savings and Loan debacle. 2000's dot.com crash. 2008 Market "correction". Not one guarantee of success. Many times and reasons to bailout. Plenty of crushed Florida Developments. [PDF] A Brief Florida Real Estate History - Free Download PDF Starting on page 22 to 31.

This business, The Family, is doing exactly what all businesses do. Respond to Change. To economic forces, Laws, customer expectations (market forces, competition, labor costs etc), a Pandemic and not declaring bankruptcy. No nefarious plan to ruin our lives.

Would the vitriol be as intense if any group from this list ran the show? The World’s Largest Public Real Estate Companies 2020

The only Constant is Change. If you had stayed in your last town, it has changed. If you stay here long enough, The Villages will change. Will it be for better or worse? That depends largely on our ability to adapt to the changes or continue with a This Sucks outlook.

Is this place perfect? Far from it. Is there a better place to be? Feel free to post the address.

Another very interesting and insightful post. Having to open up their books by going public could open up a huge can of worms. However, that could be avoided by selling to a private equity firm that would be the only party privy to the books. After a period of time the private equity firm could take the enterprise public to cash out. Not saying that’s what will happen, but it’s certainly a possibility?