[Schaumburger]

I haven't been to The Villages since last October. I stopped at Brownwood today -- wow, has it grown since my last visit -- Ricciardi's, Scooples, Gator's Dockside, Five Guys and MVP Athletic Club all open since my last visit. Las Tapas restaurant and Dunkin Donuts are listed as coming soon. And Brownwood is not quite two years old. Pretty amazing how much it has grown since the fall of 2012 when Brownwood opened and more to come!

[Villages Kahuna]

Originally Posted by Schaumburger

I haven't been to The Villages since last October. I stopped at Brownwood today -- wow, has it grown since my last visit -- Ricciardi's, Scooples, Gator's Dockside, Five Guys and MVP Athletic Club all open since my last visit. Las Tapas restaurant and Dunkin Donuts are listed as coming soon. And Brownwood is not quite two years old. Pretty amazing how much it has grown since the fall of 2012 when Brownwood opened and more to come!

It'll take awhile to fill out completely. There's still a whole lot more finished space awaiting lease up than storefronts that are occupied. It'll be slow going getting that space leased until a whole lot more of the new houses in the south end and in The Villages of Fruitland Park are built, closed and occupied. We're a long, long way from that though. Clearly, The Villages has a leasing business model and a rent structure that they won't vary just to fill up the unoccupied spaces.

Having managed commercial real estate lending for the largest U.S. bank, I find their strategy almost unbelievable. I don't think I've ever seen new construction get out that far ahead of demand for space, both commercial space as well as spec-built houses. As a banker, I would not have financed such speculative loans secured only with mortgages on the property. Normally, the lender wants to see the space occupied and paying rent (reducing the amount that has to be borrowed to service the loan) as quickly as possible. I can only assume that there is no bank-funded financing that permits this strategy to proceed...that it's all Developer equity financing. Personally, I think that's admirable. The Developer is putting his own money at risk and deserves to earn whatever profits he can. Sure, the infrastructure can be funded with the issuance of bonds. But everything else, golf courses, rec facilities, houses, villas and all the commercial space, looks like it's financed with the Developer's equity...very little with OPM (other people's money).

The possible explanation might be that some bank financing comes from Citizens First Bank, where the Developer is the majority shareholder. But the Bank is nowhere near large enough to fund the amount of development we see going on. Even then, the bank has to comply with both state and federal bank regulations and examinations and the "build speculatively way ahead of demand" business model would certainly draw criticism and be stopped. Those regulations have gotten significantly more rigorous with the passage of Dodd-Frank a couple years ago. A possible exception might be that Gary Morse and/or The Villages provides an iron-clad guarantee of such loans.

But it is interesting to see this unusual business model work so well.

[tippyclubb]

Too bad I didn't know you were there I would have come to meet you. I live close to Brownwood and can be there in 4 minutes. Let me know if you go back and we can meet up.