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Review of Briar Chapel market analysis

By Lynn Monson Hayes
Posted Thursday, June 9, 2005

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I. Scope of RCL Analysis

This 2002 analysis uses the greater Raleigh-Durham-Chapel Hill statistical metropolitan area and does not compensate for any differential in market appeal and absorption within the metropolitan area, which includes Knightdale, Zebulon, and Garner as well as Chapel Hill, Carr-boro, Durham and Chatham County. This broad-brush approach does not provide an accurate picture of the potential market opportunity for Briar Chapel. For example, the average cost per square foot of new homes between $225,000 and $320,000 in Wake and Durham Counties is about $108; in Orange County that figure is $122.

II. Comments on RCL’s Conclusions

The analysis correctly concludes that homebuyers in our market have a strong desire to live in master-planned communities, and they suggest that homebuyers will pay a premium to live in a “green” community. However, in Chatham County there will be a great deal of competition from communities that are even greener.

The analysis indicates that Newland has planned a town center at the core of the community with a pedestrian orientation that has “proven to result in greater contribution to the environment and economic growth.” However, the town center will not be at the core of the community, rendering the neighborhood less walkable and therefore less desirable (see section III below).

The analysis also recommends two different types of communities: the Fam-ily/Park Village adjacent to nature trails and parks, and the Traditional Neighbor-hood Design (TND), which features “housing that is concentrated within a five-minute walk from gathering places like a town center, or village green where residents can socialize and interact with one another.” This is the kind of community exemplified by Meadowmont and Southern Village, both with town centers that include restaurants, as well as community centers and recreation areas. The Briar Chapel plan is very attractively laid out and demonstrates a creative use of green space (provided by wastewater spray fields), but it does not offer these amenities that would make for a more walkable community. Combined with a location that is further from employment centers, this will be a less attractive option than other communities in more conven-ient locations and with more amenities such as shopping, golf, country club, etc.

III. Inappropriate Comparison to Meadowmont

The analysis compares Briar Chapel to Meadowmont, and recommends a pricing structure that is 25% lower than that found in Meadowmont to position Briar Chapel as a “value to Meadowmont,” which RCL justifiably terms the “best performing residential community in the Raleigh-Durham market.” Meadowmont cannot be used as a comparison to Briar Chapel for many reasons, including the following:

1. The superb location of Meadowmont near the I-40 and Hwy 54 intersection provides easy access to all major em-ployment centers including UNC, Duke, RTP and points in Raleigh and even Greensboro. The location of Briar Chapel in northern Chatham County limits residents desiring easy access to UNC and Chapel Hill employment locations. Other major employers in the Raleigh-Durham MSA, such as RTP, Duke University, and offices in Raleigh and Cary are at least a 30-minute drive away.

2. Meadowmont is in the Chapel Hill school district, the best school system in the state. Newcomers to Chapel Hill are willing to pay significantly higher prices to send their children to Chapel Hill schools, or to be able to offer the school system for resale purposes.

3. Meadowmont offers homes built by local custom builders, not large production builders such as are proposed for Briar Chapel. Custom builders can typically command a higher cost per square foot.

4. Prices in Meadowmont are further increased by the community requirement that builders incorporate “healthy house” features recommended by the American Lung Association, including individually designed HVAC systems supervised and tested by Environ-mental Quality Control, a local com-pany specializing in environmental air quality and energy efficiency.

5. Meadowmont offers, within walking distance of all homes in the neighbor-hood, six restaurants, a large Harris Teeter grocery store, a state-of-the-art Wellness Center, and a town center with boutiques and shops. Briar Chapel does not offer this.

For all of these reasons, using Meadowmont pricing as a benchmark cannot be justified. See section V below for an analysis demonstrating a more realistic pricing strategy.

IV. Absorption Potential

RCL’s analysis states “the better com-petitive communities in the local market were averaging sales paces ranging from 120 to 205 annually, with fewer number of product types and points of sale offered than what is recommended at the subject property.” The analysis proposes that Briar Chapel could sell 425 units per year in the family park village and 345 units per year in the traditional neighborhood design village, for a total of 770 units sold every year. That is particularly surprising in light of Figure #1 in the market analysis, “New For-Sale Housing Demand 2001-2006” which projects a demand of 11,300 households over that five-year period, or roughly 2260 units sold per year. RCL’s projection assumes that Briar Chapel captures 34% of the housing market for the entire Raleigh-Durham Metropolitan area!

That is extremely optimistic, particularly since RCL’s Exhibit 1 to the market analysis, Summary of Competitive Communities from November 2001, lists six-teen communities in the MSA with ab-sorption rates between 25 and 158, with a high of 205 for Meadowmont, which is incorrect (see Section III above).

My own more recent research has found that comparative absorption rates for similar communities are as follows:

Brier Creek by Toll Brothers, in Raleigh, offers a variety of housing types as well as a golf course/country club, swim and tennis pavilion with waterslide, 40,000 sq. ft. clubhouse with steam rooms and fitness center, and all at the intersection of Highway 70 and Alexander Drive at the heart of Research Triangle Park and adjacent to North Raleigh. Exhibit 1 specifies a total of 1500 homes and an absorption rate of 81 per year; statistics from the sales office show an average sales rate of 183 per year.

Cary Park is probably most similar to Briar Chapel in that there is no town center, no golf course, but there is a shopping center planned that is adjacent to the community and there is a community lake and recreation club. Although there are a few custom builders, the homes are primarily offered by production builders, which will also be the case in Briar Chapel. There will be a total of 1000 homes, and since 2000 there has been an average sales rate of 116 per year.

Wakefield Plantation, although somewhat larger, is also similar to Briar Chapel in that it is located in an outlying area of Raleigh that is further from employment centers. It encompasses 2200 acres but offers superior amenities such as a golf course and country club, several lakes, shopping center with restaurants and grocery stores, and THREE school campuses: for elementary, middle and high schools. The total number of homes will be about 3,500 – the absorption rate per the sales office has been 216 per year.

Carpenter Village is five minutes from RTP on the Morrisville side of Cary, of-fering six different home types from townhomes to estates on large lakefront lots. Amenities include the Village Marketplace, with restaurants and shops, walking distance from all homesites, as well as a recreation center, 22 acre lake and walking trails. There are an expected total of 575 homes, with an absorption rate of 57 per year since 1997.

Bedford is located just off I-540 in north Raleigh. Bedford offers a traditional neighborhood design community with several different housing types, in a loca-tion that is extremely convenient to the new Triangle Town Center mall as well as Raleigh employment centers. There is a recreation center and parks throughout the community. With a total of 1850 homes, the sales rate has been about 154 per year.

Conclusion: Considering that the BEST PERFORMING of these neighbor-hoods, with more amenities and better locations, are selling at a rate of 180-215 per year, RCL’s conclusion that Briar Chapel will sell in the 770 units per year range cannot be justified. Briar Chapel will be competing with communities al-ready approved such as Powell Place, Strowd Mountain, Heartland Grove and Chapel Ridge, not to mention additional communities that are waiting in the wings. A more realistic expectation would be 100-200 sales per year.

V. Expected Price Ranges

RCL has stipulated twelve different housing types in the Family/Park village, and thirteen different types in the TND village. Their pricing calculations for the lower end product are in line with what the market in Chatham County will bear; however, the price per square foot targets are overly optimistic compared to the competition in similar communities and in Chatham County.

A. Homes priced from $140-200,000

The RCL market analysis estimates condominium prices between $127-133/sq. ft., and townhomes from $117-125/sq. ft. townhomes in Chatham County are currently selling in the range of $90-125/sq. ft., and only townhomes with garages are priced at the upper end. These prices seem somewhat high unless up-market townhomes are planned.

The cottage housing proposed is in great demand in Chatham County and the Chapel Hill area, and the prices noted in the market analysis are easily achievable.

B. Homes priced from $210-370,000

RCL suggests a price per square foot of $130-135 for park-oriented homes up to $370,000; however, competitive properties in this price range in similar neighborhoods are selling for less. This is a price point that would sell well in Chatham County since we are not oversaturated in this price range if the prices are not set at an overly optimistic level.

* Competitive homes in Cary Park are selling for $105-116/sq. ft.
* Competitive homes in Wakefield are selling for $92-124/sq. ft.
* Competitive homes in Carpenter Vil-lage are selling for $90-125/sq. ft.
* Competitive homes in Bedford are selling for $110-128/sq. ft.
* Competitive homes in Chatham Forest are selling for $95-115/sq. ft.
* Competitive homes in Powell Place are expected to sell for $95-100/sq. ft.

Consequently, a more realistic price expectation for these homes would be in the $95-120 range.

TND homes in this price range include the garden homes and small lots 1 and 2. The RCL analysis estimates square foot prices in the $123-140 range which seems appropriate when considering the market competition in Governors Village and elsewhere.

C. Homes priced from $375-550,000

At this price point we begin to see much more competition, both locally and across the Triangle. RCL suggests a price per square foot in this price range of $137-140, which is still high since pro-duction builders will be used for these neighborhoods. Production builder prices are considerably less across the Triangle:

* Competitive homes in Cary Park are selling for $115-150/sq. ft.
* Competitive homes in Wakefield are selling for $113-132/sq. ft.
* Competitive homes in Carpenter Village are selling for $128-140/sq. ft.

Briar Chapel will be competing with new neighborhoods in Chatham County such as Heartland Grove, where custom homes on one acre are selling for $135-140/sq. ft. Consequently, a more realistic figure for these homes is in the $120-140/sq. ft. range.

D. Homes priced from $500,000 - $1,500,000

This portion of the RCL analysis com-pletely overstates the price potential of Briar Chapel in these price ranges. The analysis uses a lot value range of $100-120,000 for medium size lots in the TND village, and $90-110,000 for “large lots” in the Park Village. Yet The Preserve, complete with golf course and clubhouse, is selling in the $90-110,000 range for half-acre lots. The RCL analysis estimates a price per foot of $154-182, yet new homes in The Preserve (the only compa-rable property in Chatham County) are selling in the $136-180 range with more amenities and larger lots.

Homes in this price range will be com-peting with golf course communities and large lot neighborhoods in Chatham County such as Chapel Ridge, Strowd Mountain and Heartland Grove, as well as others that will continue to arise. A more realistic expectation is that “large lot” (1/3 to ½ acre) homes in Briar Chapel will sell in the $135-175 range per square foot.

Additionally, the market analysis recommends home sizes up to 8,500 sq. ft. In the entire Triangle, the maximum size of homes in this price range is 7,500 sq. ft., with a median of 4,000 sq. ft.

VI. Conclusions

Each of the communities in the Raleigh-Durham Metropolitan Statistical Area has a different appeal to the home buyer. Raleigh has always attracted the suburban homebuyer looking for value, good schools and convenience to shopping, museums, nightclubs and restaurants. Cary has attracted the more upscale out-of-town buyer looking for family amenities such as parks and recreation, excellent schools, and a well-planned town appearance. Durham has attracted buyers who seek value and a diverse community, and Chapel Hill has attracted those who want the very best schools with a small town atmosphere.

Chatham County has traditionally been the destination of choice for those wanting to leave a more hectic pace behind and live on a little more land than that which is available elsewhere. Like Orange County, Chatham has offered acreage at relatively reasonable prices, for which homebuyers were willing to drive longer distances to their workplace. More recently, the eastern segment of Chatham County has become a bedroom commu-nity for Cary and RTP, and we are seeing this trend continue with Colvard Farms and Heritage Pointe.

The success of Briar Chapel will depend upon a tremendous number of families moving into the county. In the past twelve months there were 539 sales in the entire county, up from the 375 sales per year we had experienced for several years prior to that time. Over the next few years there will be 300 homes built in Powell Place, 700 homes in Chapel Ridge, 450 homes in the Homestead, as well as other communities yet to be approved. To entice homebuyers to travel to Chatham County, the pricing structure must be competitive with other neighborhoods that offer more amenities.

A change in the pricing structure proposed by Newland will significantly alter the fiscal analysis


Lynn Monson Hayes has a NC real estate salesman license 1982-1990, NC real es-tate broker license 1990-2004. She is a Chatham County resident and active real estate broker.

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