Lifes a Beach for Builder

With the Super Bowl behind it, Walters Group sales are hot again in southern Ocean CountyBarnegat

What real estate bubble? The only home-buying slow-down Edward Walters Jr. has seen is the one he feels every year between Christmas and the Super Bowl.

“Right now everyone is predicting the home-building industry will take a hit,” says Walters, 43, who is a founder and partner of the Barnegat-based Walters Group, a mid-sized builder that has been developing homes in southern Ocean County for more than a decade.

Walters sees a major difference between now and when the industry sank into the 1989-1990 recession. “Back then, there was a huge supply of building lots,” he says. “Today, demand outdoes supply, especially in New Jersey. There may be a decrease in sale prices in some regions, but that is in markets that are overbuilt. In New Jersey, we are just not at that point. The whole supply-and-demand curve has flipped around.”

The Walters Group is seizing the moment. It has carved out a profitable niche producing single-family homes in an 8,500-lot development called Ocean Acres. The huge tract, which sits in both Stafford and neighboring Barnegat, is some six miles west of Long Beach Island.

The Walters Group owns 800 of the 1,350 buildable lots on the Barnegat side of Ocean Acres. There it has been building 100 pre-sold homes a year and selling them for $400,000 to $450,000. The company plans to maintain that pace for a decade.

“We are currently buying new lots and always adding to the inventory,” Walters says.

This project comes after the Walters Group built and sold 400 homes from 1992 to 1998 on the Stafford side of Ocean Acres. The parcel contains 6,500 lots, 1,000 of which are restricted from building by environmental laws.

“Ocean County, and Ocean Acres in particular, is a double-edged sword,” says Walters. “It is highly regulated, making it difficult to get land approved [for building]. But when you do get approvals, it ends up being a real asset since land is in such short supply.”

This has worked out fine for the Walters Group, which had $35 million in single-family home sales last year. The company had another $30 million in sales from its commercial and multifamily real estate, says Timothy Regan, CFO and a partner for the Walters Group.

But the firm’s main thrust is Ocean Acres. It is a unique development that was subdivided in the late 1960s and early 1970s but wasn’t built on for 30 years. In the 1960s people paid as little as $200 for vacant 75 ft.-by-100 ft. lots. They were cheap because there were no roads, sewers or other infrastructure at the site.

At one point, a company that began building infrastructure went bankrupt, Walters says. Some owners held on to their lots until the 1980s, when they sold them for $5,000 to $6,000. Property values skyrocketed when the towns finally added sewers—Stafford in the early 1990s and Barnegat two years ago. Now the vacant lots sell for $90,000 to $100,000.

Walters buys these lots individually. Prices for the four-bedroom, two-and-a-half bath, Colonial-style houses it puts up start at $400,000.

Since the lots must be acquired one-by-one, large developers have stayed away from Ocean Acres, allowing the Walters Group room to make its mark. Most other builders working in Ocean Acres are small firms that put up 15 to 20 homes a year.

The Walters Group was designated to build the development’s infrastructure—including roads and utilities—at a cost of about $50 million. The company pays for the work and recoups some of the cost from other developers.

The Walters Group currently works with the Pinelands Commission and Barnegat to protect rare plants and endangered animal species like the pine snake. About 40% of the the Barnegat side of Ocean Acres will remain in its natural state, the company says.

Ocean Acres’ easy highway access and proximity to the beach have been a hit with buyers. “The fact that we are just off the Garden State Parkway means that people can move their families here from Staten Island or other urban areas and still commute to work in central and northern New Jersey,” Walters says. “We even have homeowners who commute to New York.”

The company “is very cooperative with the township and they have even contributed to charitable projects,” says Veronica Jasina, Barnegat’s acting township administrator. “When we were building a playground, they came over with a construction crew to help. They clearly value having a good reputation.”

In addition to single-family homes, the Walters Group has built and manages three apartment complexes, one in Barnegat and two in West Chester, Pa. The company also built Barnegat Village Square, a 70,000-sq.-ft. shopping center anchored by a Genuardi’s food market.

The Walters Group is negotiating with Stafford Township and the Pinelands Commission to cap a 60-acre municipal landfill in Stafford, about a half-mile from Ocean Acres. The company would pay an estimated $40 million for 320 acres, including the capped landfill, where it would develop 560 single-family houses, 100 low- and moderate-income apartments and 650,000 sq. ft. of retail space anchored by big-box stores.

The company wants to begin the capping project this spring and begin construction in 2007 on the mixed-use project it calls Stafford Park. “We’re entrepreneurial and when an opportunity comes along with a commercial component, we are not going to shy away from it,” says Regan, the Walters Group CFO.

Walters was a 22-year-old graduate of St. Joseph’s University in Philadelphia when he started as a carpenter for a company building custom homes on Long Beach Island. In 1991 after the recession of the late 1980s, he teamed with his brother, Greg Walters, and Regan to build homes in Stafford’s Ocean Acres.

“When we moved off the Island and built our first houses in Stafford, I was still framing houses,” Walters says. “We built a model and established a new home information center, and we sold 20 houses in eight weeks. The Walters Group was born and it was then I knew it was time to go full-time.”

E-mail to sgoldstein@njbiz.com

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