Florida's biggest homebuilding machine isn't slowing down. The Villages is preparing to issue nearly $180 million in high-yield debt to keep its expansion going, Villages-News.com reported.
The unrated bond offering will pay for the construction of 3,860 new residential units, a 27-hole championship golf course and more recreation centers.
Part of a bigger push
The new financing is part of a wider effort to grow the community's footprint by roughly 6,670 units, Villages-News reports. It follows a similar deal last year, when The Villages sold about $127 million in high-yield municipal bonds to pay for the first phase of a 2,800-home district.
The numbers behind the community are huge. The Villages has sold about 83,400 residential units to date, including more than 2,100 homes this year at an average price of just under $500,000.
According to an Insurance Journal report by Bloomberg's Erin Hudson, The Villages covers 57,000 acres, is built for residents 55 and older, and sits about an hour's drive north of Orlando. It was one of the fastest-growing metro areas in the country between 2010 and 2020. The bond figures come from a presentation for investors, and the deal was expected to price Oct. 20, the report said.
Long-range goals
The community isn't thinking small. Over the next two decades, it aims to grow from roughly 170,000 residents today to more than 260,000 across 130,000 homes by 2045, Villages-News reports.
To put that in perspective, 130,000 homes would be well over 40,000 more than the 83,400 units sold so far. Reaching that target means building thousands of homes a year for 20 years, along with the roads, utilities, golf courses, recreation centers and shopping that come with every new section of The Villages.
Headwinds
The expansion is moving ahead in a tougher market. Villages-News notes the bond offering comes while the broader bond market is under pressure, with U.S. Treasurys competing heavily for investors. Florida's housing market is also dealing with elevated mortgage rates and high home prices. Existing single-family home sales in the state fell 3.5% in September compared with a year earlier, and net migration into Florida slowed sharply last year after the pandemic boom.
"Unrated" and "high-yield" mean investors are being paid more interest to take on more risk than they would with highly rated government debt.
The Villages has been here before. Last year's $127 million bond deal paid for the first phase of a 2,800-home district, and this year's offering builds on that same expansion effort. Still, the developer is sticking with its long-term plan. Sales of more than 2,100 homes this year at nearly $500,000 apiece show there's still steady demand among retirees for what the developer is selling.
Why it matters for contractors
For contractors across Central Florida, The Villages is one of the most dependable sources of work in the state. A 3,860-unit phase means years of jobs for framers, roofers, concrete crews, plumbers, electricians, HVAC installers, painters, flooring crews and landscapers, plus sitework, paving and underground utilities. The 27-hole golf course and new recreation centers add commercial and specialty work on top of the housing.
The bond money matters because it pays for the infrastructure that has to go in before homes can rise. When financing like this closes, the dirt work and utility installation that follow usually come first, and the vertical construction follows.
The long-range target of 130,000 homes by 2045 tells contractors this isn't a one-and-done project. Firms that build a track record with The Villages now could have work for decades. With the community's population expected to grow by roughly 90,000 people, demand for remodeling, repairs and service work on existing homes should keep growing too, not just new construction.
Keep the headwinds in mind, though. Slower home sales statewide, higher rates and cooler migration can affect how fast new phases sell and get built. Contractors who rely on this work should keep an eye on sales pace and watch for any slowdown in starts before staffing up too heavily.