Developer’s largest income stream
 

With the talk of Spanish Springs, it got me thinking, where do you think the Developer generates more income?

Commercial Real Estate Landlord or
Home Developer?

Interesting question.

As a Home Developer he earns profit on approximately 250 sales each month. I have to believe the profit on a single home sale is significantly more than the lease for a single commercial property. Could he own enough commercial property (some multiple of 250 units) to overcome that difference?

Last I saw, they own over 7 million square feet of commercial property. Commercial property leases are their biggest source of revenue by far.

So some WAGs on numbers:

Commercial: 7,000,000sqft * $30/sqftyr = $200M/yr
Development: 3,000homes/yr * $400,000/home * 15%profit = $180M/yr

Using those guesses, commercial wins but certainly not "by far."

no facts just guessing

Yeah, I thought about asking them to show me their books but didn't think I would get very far.

Lacking that, the only information is the number of new homes as reported by Sumter County in their annual budget letter, the number of square feet of commercial space as reported by the Villages in their advertising material, a high average of retail space rent across the country, and a high average of developer profit on new home sales.

Just a wild guess, but if the Developer sells 3000 homes per year and owns 7,000,000 of commercial space, I'd say his single family home sales generate double the profit of his commercial space. $300M vs $150M.

Agree, and potentially the dev 15% is a bit low, being in a monopoly market.
I would use 20% because of the monopolistic backdrop. .

good finance estimates though

If you add the actual businesses that Developer owns to the commercial side I think it might tilt it in that direction. Don’t forget, the Developer owns Villages Health, Citizens First Bank, the golf cart stores, the title company, the Championship golf courses and clubhouse restaurants. They still own the majority of the amenities below 44. I’m sure they have a lot more stuff that I haven’t mentioned. One thing for sure is that the residential feeds the commercial.

Home estimates are low, IMO.

The Developer is earning a "developers profit", a "builders profit" and a "sales commission". More likely, closer to 20%-23% in total ... perhaps higher.

For Commercial Space, I used a blended rate of $23/sq. ft. net. I could be off on that.

Citizens First
 

It’s the bank.

Especially since profit on view lots will be considerably higher.

As reported by Forbes, the Developers are Billionaires but most would say they earned it! Frankly, only they know where the “most” profit comes from. Anything else is anybody’s guess.

My guess is sales, diverting costs, and control amenities/impact frees. :Screen_of_Death:

Trail Fees and Amenity Fees.

If you're paying Trail Fees & Amenity Fees to the Developer, you're getting screwed.

Don’t forget an estimated $2,000,000 for ID changeover for renters every year. $50 each per household renting

The enormous profits the developer earns from running the movie theater in LSL.

And it all comes crashing down, if word ever gets out that the "lifestyle" is just a marketing scam. Because otherwise, there is no good reason to retire to the middle of Nowhere, Florida, two hours from the nearest city, and 12 hours from your kids.

Only HALF of the baby boomers have retired. There is still millions of acres of empty farmland between "Nowhere" and Orlando or Tampa -- and 35 million Boomers left to sell it to.

For their sake and ours, I sure hope the developer's kids are bright enough to realize that a vibrant 30-year-old Spanish Springs is proof that the lifestyle isn't a scam.

I agree with this. .

As far as billionaires, wealth measurements are not income related, but asset valuation related.
So for every billion in assets, there should be about 10 - 12 % gross income and 5-6% net income, being conservative. .

They also own the TV insurance business, and a rental home business.

Looks like you are comparing commercial revenues to development margins...............apples and oranges. :shrug:

Don't forget, grandpa made (Profit) a BILLION dollars selling the land to the districts before he died.


:22yikes:

Two thoughts - as someone stated, the $30/foot commercial is not all profit and I think the profit on the home sales is much higher, maybe approaching 50% in the good years (I base this on info from a friend that used to sell for a major builder).

The commercial real estate isn't just a dollar per square foot figure. The Villages writes their commercial leases so that they get a percentage of the profits. Yes, even Publix. (This was told to me by someone who is close to one of the restaurant lessees at a golf course)

??? It is exactly to the point of the original post.

The sources of the income may be apples and oranges but once received by the Developer it is all cabbage.

I would be shocked to see there was any major builder in the USA, making anywhere near close to 50%.

Typical construction profit margins run in the 7%-15% range.

Development profit runs in the 10%-15% range.

Selling Commissions (using in-house vs MLS) will typically yield 2%-3%.

About the only time you see a major change in profit margins, is when land values go through a period of sudden inflation/appreciation and some landowners are caught on the right side of that curve.

Looks like you are comparing Gross lease revenue to Net development margin.........if that's intent, groovy.

Gross leases is $210mil

Gross development is $1,200mil

According to your numbers.

OP says "income"........with no definition of income.........gross or net.

:wave:

Most profit earning companies will not put all their eggs into one basket and some company divisions will earn more than others in the large mix. It’s not about what you think works it’s what they feel is the best mix to stay profitable and more importantly in business as a business.

Eggs
 

That’s why you own the bank where most transactions close. Losses may matter on the frontlines, but the bank always records a gain at closing time.

They have done a great job building this place and have cashed in on building a better mousetrap.:BigApplause:

There's a word salad if I ever read one.

The OP asked about the Developer's "income" as it relates to (2) things. "Building/Selling Homes" and "Commercial Property Landlord"

He didn't ask about the other businesses the Developer owns, such as banks or mortgage companies.

He didn't ask about "revenue", he asked about "income" to the Developer. "Revenue" is not "income". (Income Definition & Meaning - Merriam-Webster).

It's not that complicated to figure. Developing, building and selling homes in the way the developer does it, should yield between 20%-30%. Maybe a little more, perhaps a little less.

Renting commercial space (retail, office, industrial, etc.) should have a blended yield between $18 sq. ft. - $28 sq. ft., including any "% of revenue" on retail space. Probably not much more, nor any less.

How much of that flows into someone's pocket, is an entirely different question, but it's obvious the Developer is doing fairly well.

On the development side profit seems about right. The largest residential builder - DR Horton reported net income of 18%. Lennar the second largest reported a net income of 11%. Both use their own agents to sell their homes.

On the commercial side they're not making $30 a square foot. They're probably grossing more per square foot but they've got to write off the cost of building, interest, real estate taxes, INSURANCE, common area maintenance, overhead, personnel so their profit margin is considerably less. BUT the profit is like an annuity - comes in year after year building each year as rents are raised and more footage is added. Rent always increases faster than costs since the mortgage (principal and interest) is fixed.

The Developer's income concerns you why?????
 

Just curious, what difference does it make how much and from where the Developers take in their income? My Mom taught me to MYOB when I was very little. I didn't see any of these folks that are so "curious" about the sources of the Developer exposing how much and where they obtained their money over the years.

Because we ALL literally, live around the Developer’s decisions.
We all bought a home the developer originally built and sold to someone
We all use the commercial real estate the developer owns.

And I am sure the Developer makes plenty of $$$ from the bank, insurance, media, etc.

And it’s fun to talk about.

Guess you do not want to call him and ask?:bigbow:

That is an industry standard for commercial real estate...

Only gets the lease agreement costs, but not one probably loosing money.

the developer also makes substantial income from real estate commissions on resale home which are listed with the Developer-owned listing service. They also sold the out-lots of land for commercial development at corners & along major thoroughfares. Plus they may have sold land to local, county & state government for roadways & other public utilities.

And the developer owns The Villages television, radio & newspaper. Also, the tradesmen & new home materials suppliers may pay fees to the developer to be an exclusive supplier. The developer exclusively controls every CCD until 50% of homes are sold.