While homebuilders have been shifting from land-first to land-light strategies, South Florida-based BTI Partners has been plugging along, setting up master-planned communities for the long haul to sell lots to those homebuilders.

BTI isn’t a land-bank spinoff of the homebuilders. It has been developing residential real estate in Florida since the late 1950s. In August, it paid $93 million for 3,200 acres in Clay County, which neighbors Jacksonville, adding another master-planned, mixed-use community to several large ones throughout the state.

BTI is now exploring housing hotbeds beyond the Sunshine State, notably the Denver metropolitan area.

D.R. Horton, Beazer Homes, David Weekley Homes, Lennar, and Meritage Homes are among homebuilding firms that have bought lots from BTI to build within the planned communities.

Contributing writer Richard Lawson visited over Zoom with Justin Onorato, the company’s chief investment officer, to discuss BTI’s latest acquisition, its plans, and its perspective on projections that the U.S. may be heading for its first-ever population decline.

Richard Lawson

BTI Partners has only operated in Florida up to now. What can you tell us about the new project in the Denver area?"

Justin Onorato

We're under a confidentiality agreement. I can't say where it is, but it would be comparable to the pieces we buy in Florida that have thousands of residential units and mixed-use along the interstate — a master planned community with some commercial center. We can’t talk too much about Denver. We appreciate the market, and we are looking at making a significant investment in the homebuilding strategy in that market."

Richard Lawson

How does it compare with your recent deal in Clay County or BTI holdings in Florida in general?"

Justin Onorato

It's similar to the tracts we acquired in Florida. We acquired about 4,500 lots on the 3,200-acre site. We already own the 3,300 acres to the north. The way we look at it is it's almost 7,000 acres and about 9,000 future residential lots on a contiguous piece of property. We typically buy about 4,000 future lots. We own about 25,000 lots in Florida."

Richard Lawson

How many of those lots have you bought from homebuilders?"

Justin Onorato

We generally do not acquire land that they already own and then hold it for them. We look at that as more land banking. Substantial private equity funds will do that at a scale of billions of dollars at a time. What BTI focuses on is acquiring large land tracts in the fastest-growing markets in the country."

Richard Lawson

Beyond Colorado and Florida?"

Justin Onorato

Historically, we have been focused on Florida, but as we alluded to earlier, we have focused on other markets as well, as far West as Colorado. Texas is definitely a key market in homebuilding. So, we look to acquire the tracts that have population growth, job growth, and availability of land because people's ability to obtain a home is challenging in some markets.

Most of [our customers] in our communities—our homebuilders—are focused on selling homes to first-time homebuyers and potential move-up homebuyers. Given the scale of our operations and the number of lots, especially in Florida, most of our communities have a portion that would suit an active-adult community, typically the 55-plus type. We try to do as many of those communities as we can as part of our strategies to help solve the lack of housing.

Since homebuilders generally are our customer who buys land from us, we're looking to be in the best home building markets that have the strongest resiliency to cycle changes. We're in a higher mortgage rate environment. Obviously, that has an impact on how much home and how much people can pay, and so we're mindful of all of the variables. And markets like Tampa, Orlando, and Jacksonville have been quite strong for BTI for the last 15 years that we've been active in those markets. We have done things in Sarasota and Naples. Those markets are strong today. They are expensive. But I would say our bread and butter has been that corridor from Tampa up to Jacksonville."

Richard Lawson

Jacksonville is one of the more affordable places to live in Florida."

Justin Onorato

It's tough to find a new home in Florida for less than $500,000.

Jacksonville is affordable and attainable. We see a lot of people from South Florida, Orlando, and Tampa moving to Jacksonville. We expect Jacksonville to keep growing for the foreseeable future because of this in-state migration.

In Clay County, our communities have pricing that starts in the $400,000s, which is an attainable price point for most working folks with one or two incomes.

Florida has always had a growing population. People want to move here for attainable housing and no state income tax. Of course, we’ve got pretty decent weather most of the time. We're very bullish on Florida and Jacksonville, which is evident in our recent acquisitions."

Richard Lawson

There is talk that the U.S. population may decline this year for the first time. Florida, South Florida specifically, benefited from international migration, as have other areas around the country. That’s been curtailed considerably. How have you guys been thinking about that possibility?"

Justin Onorato

That’s an interesting one. Florida outpaces most states, if not all, for continued growth. If immigration were to slow, you would probably see some slowdown in Florida as well. We believe these markets in Florida are more resilient than most of the other markets in the country. Texas has some robust markets, particularly Houston, San Antonio, and Austin. We think those areas will continue to grow. Real estate generally tends to be very localized. And so what we continue to see is our markets have new job growth and positive population growth. We do feel strongly that that trend will continue for the foreseeable future."

Richard Lawson

More domestic migration?"

Justin Onorato

I live in the city of Miami, and the Miami MSA has historically had population growth. When you peel into the numbers, historically, that's been foreign immigration and domestic. You're adding more people through foreign immigration, but actually losing domestic ones. They're actually moving out. If you consider high-cost areas like Miami, with a population of 7 million, those residents will also continue to seek places with more jobs and more affordable living. Orlando, Jacksonville, and Tampa have proven to be popular destinations for people to relocate to."

Richard Lawson

Short term, there could be a blip, but you're on an extended play with real estate development and can ride it out with patient capital."

Justin Onorato

Before I joined BTI in 2017, during the Great Financial Crisis, BTI and its partners acquired a bunch of distressed Community Development District bonds in Florida. By 2013 and 2015, all of those same distressed opportunities recovered.

To your point about the long haul, we buy our land all cash. We do finance improvements through CDDs on a very modest basis.

However, it's interesting how many people are somewhat nearsighted and focus on the next six to 12 months, which is essential. When you're building out a small city, we have a 10-to-15-year view of things. It can be difficult in 2025 to put on 2035 glasses and think what it will look like in 10 years. It is a big component of what we do."

The only reason I bring that up is that BTI was opportunistic in the past, recognizing there were opportunities to acquire the highest quality sites in Florida. Then it was a two-to-three-year type of recovery, and all of a sudden, homebuilders didn't have any land, and they needed land. So, we see sometimes the ebb and flow of cycles, where they don't want land. But we own it for the long term, so we'll be here when they do want to buy it."