Fischer, based in Crestview Hills, Ky., is one of many companies filling a niche that formed in the aftermath of failures in the U.S. real estate market.
“There’s a whole group targeting busted deals. They go in and they try to finish the projects,” said John McIlwain, senior research associate at the Urban Land Institute in Washington, D.C.
In the Dayton area, Fischer is also finishing the Renaissance in Middletown, near the new Atrium Medical Center, while regrouping after Springboro rejected its plan to restart development in The Springs, a planned community in Springboro that was abandoned five years ago with only 19 of 500 homes built.
Virginia-based Ryan Homes has taken over as builder in the Villages at Winding Creek, a 746-home development on Ohio 48 in Clearcreek Twp.; and Indiana-based RCS Holdings is seeking concessions from Clayton city officials on a 67-acre mixed-use development left unfinished by previous developers.
These developments have received mixed reviews, particularly from homeowners who built before the new developers assumed control.
Anxious about their property values and skeptical whether pools, clubhouses and other promised amenities will ever be built, original residents said they weigh whether to stay and fight attempts to change plans for the neighborhood, or to sell and move.
“The new developer has to decide how to make this project work in a totally different market,” McIlwain said. “They can’t deliver the same amenities and the same design that was promised by the original developer, even if what that original developer had promised made sense.”
The national trend to develop distressed properties is hottest in Florida, New England, on the West Coast and in Las Vegas.
“This is not uncommon unfortunately,” McIlwain added. “The housing markets in general have been very bad. They have been particularly bad for these bigger, outer-edge developments.”
The Villages at Winding Creek straddles the Montgomery-Warren county line. In February 2008, Atlanta-based Beazer Homes pulled out of the 610-acre development and 14 other planned communities in the Dayton area.
In December 2009, Clearcreek Twp. trustees granted concessions to the new developer, a holding company headed by local businessman David Oakes. He formed it to continue building at Winding Creek.
Since then, some residents, who had homes built by Beazer, have watched with concern as Ryan Homes has resumed construction.
Mary and Russell Elliott said Ryan designed some homes in the subdivision to appeal to families, although their section was originally marketed as a place for “empty nesters.”
“Given the choice between the changes and life in an abandoned development, I would have chosen nothing. So would others,” Russell Elliott said.
As a Ryan employee, Tarasa Hurley said she sold homes in Faircreek Ridge in Fairborn and Valley View in Dayton, two developments abandoned by Beazer. For nearly two years, her family has lived in Winding Creek.
While she said she understands the residents’ concerns from the Beazer period, Hurley predicted residents might wind up better off.
“It’s a little scary,” she said. “In the end, it’s going to raise the property values. There’s nothing that deters people more than an empty community.”
Hurley and Elliott both expressed frustration at the absence of a pool and clubhouse four years after the first homes were built by Beazer. “That is something we’re really waiting for as residents,” she said.
Under a 2009 modified agreement, the pool is to be completed within a year of the issuance of 35 percent of zoning permits for single-family homes. So far, the developer has obtained permits for 108, leaving about 150 to go, according to township records.
Unfinished subdivisions
“There are whole bunch of unfinished subdivisions out there,” said Doug Harnish of Market Metrics, a land-use consulting firm in Dayton.
From 1998 to 2008, 15 million homes were built for 8 million new U.S. households, Harnish said.
The collapse of the housing market and mortgage-back securities used to finance some residential developments led to a range of other problems.
“One result is too much partially developed land,” Harnish said.
Today, the new home buying market requires up to 20 percent down; and since financing is much tighter, some potential buyers are unable to afford as much a house, he added.
“The people that are coming out are coming out with less equity than they expected. They don’t have the dollars to leverage into the higher-value homes,” he said. “Everybody is expecting lower priced and smaller homes in the future.”
Unless a new developer picks up the projects, local governments could face liabilities to complete roads and other improvements in plans with bankrupted developers, Harnish said.
“That’s actually one of the newer issues,” he said. “There could ultimately be a public liability hitting jurisdictions at the worst possible time.”
The financial risks
Middletown Planning Commission granted Fischer concessions to resume developing the Renaissance — a stalled mixed-used development on Ohio 122 near Bishop Fenwick High School and the hospital. Though the commission voted 4-3 for the concessions, they acknowledged Fischer’s financial risks in light of failures by others.
“We are confident that our Renaissance community in Middletown will become another success story for The Fischer Group, the City of Middletown and the existing residents as we move forward and implement our plan,” Todd Huss, president of Grand Communities, an affiliate of Fischer Development, said in an email.
In Springboro, city officials rejected an agreement to complete the Springs — a section of the Settlers Walk planned community abandoned five years ago — after hearing residents’ objections.
Huss declined to discuss Fischer’s next move in Springboro as a result of recent rejections after six months of meetings and negotiations.
“Ultimately the existing residents are in a tough spot,” McIlwain said. “Their choice is really between an unfinished planned unit development or one that is very different from one they have bought into. There just isn’t the money for the one they bought into.”
To succeed, Fischer develops housing options that allow “the community to generate a sales velocity that is necessary to create a successful community,” Huss said.
Fischer develops prices and home designs styles “so that we protect the investment we have made in the community and be sensitive to the existing homeowners,” he added.
Myron Rheaume, a Springs homeowner a leader of opposition to Fisher’s plan, said they recently hired a land planner to develop alternatives.
“We understand there need to be some changes made. We need to be protected in some degree,” Rheaume said.
Experts predict developers, including Fischer, will continue picking up where other developers failed.
“It’s here until the market rebounds or until all of the unfinished projects get finished,” McIlwain said.
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