MILLVILLE —  An Atlanta hedge fund has purchased more than 440 acres of land in Millville By The Sea, a master-planned community once marketed as Delaware’s next great beach town.

Brokered by Delaware Land Advisors, The Ardent Companies of Atlanta bought the residential community 5 miles west of Bethany Beach for an estimated $13.5 million, according to county land records. The seller was listed as Millville Town Center, a limited liability company created in partnership with investment firm IHP Capital Partners, developer Miller & Smith and homebuilder The Christopher Companies.

The property was an asset to the California Public Employees Retirement System (CALPERS), according to Delaware Land Advisors. The sale closed in September 2020, according to land records.

Ardent Companies expects to develop the land in partnership with a yet-to-be named national homebuilder into another 1,300 lots for a total yield of 2,000 residential units.

“When you see hedge funds purchase residential property like this, it’s usually to take the project through the entitlement phase and then take it to market for a substantial profit,” Delaware Land Advisors President Stephen Ferrandi told the Delaware Business Times.

Millville By the Sea was first proposed by developers in 2005 as the state’s largest-ever-approved development, with 3,000 homes built on 756 acres over 12 years. After a year of proposals, meetings and hearings, it broke ground at the end of 2006.

IHP Capital Partners, headquartered in Virginia with connections in California, signed with CALPERS as the project’s underlying investor. When Millville By The Sea was master-planned, IHP Capital Partners eventually partnered with Miller & Smith and The Christopher Companies to build homes.

The first community, the Sand Dollar Village with 197 homes in five styles, was completed in 2008. As the years passed, other phases continued construction, with Ryan Homes and The Christopher Companies buying the 400 lots to be built. Eventually, a 17,000-square-foot campus opened, with a pool and pool house, a fitness center and a crab shack pavilion overlooking a 6-acre lake.

But as the recession hit the housing market hard, home-buying slowed down over the years, which eventually extended CALPERS’ plan to sell its stake in the endeavor, Ferrandi said.

Because of the available land and its proximity to the beaches, land in Sussex County is a hot market for hedge funds and developers, Ferandi added. Regional builders may not have the money to take raw land through the entitlement process with local governments, utilities and other entities.

“This amount of raw land is something you wouldn’t see in other markets. Typically what you see is 100 to 200 lots, but in D.C. and Baltimore, it can be as small as 50 to 75 lots. Where the interest lies is that taking it through entitlement raises the price of that raw land,” he said. “For example, you can take farmland that may be worth $4,000 per acre. After entitlement, it will be worth $20,000 per lot and each acre having three lots minimum.”

The Ardent Companies’ local partner on the project will be Rod Hart, who previously served as Delaware and Maryland division president for both Beazer Homes and Lennar.

Ardent is no stranger to Sussex County, having invested in the 119-lot Solitude at Whites Creek community in Ocean View. The hedge fund backed that project through a joint venture with local homebuilder Schell Brothers, acquiring a bank-owned portfolio of assets that included the 40 acres of land adjacent to White Creek in a short sale. That community has seen all of its lots purchased, according to Schell Brothers.