Crescent Communities to Launch Home-Building Business
Crescent Communities is launching a new home-building business, betting it can compete with major publicly traded builders even as many of the industry’s smaller players have failed in recent years.
Charlotte, N.C.-based Crescent, which is privately held and has $1 billion in assets, develops apartments and office buildings and prepares lots for new homes that it has traditionally sold to other home builders. It enters the market at a time when many private builders have gone bankrupt or been acquired by larger publicly traded rivals.
Crescent’s new company, Fielding Homes, is developing 64 lots near downtown Fort Mill, S.C., with homes starting in the mid-$300,000s.
The move comes six years into a historic bull market for the multifamily-housing industry. Apartment rents have jumped 20% since the beginning of 2010, while supply of new units reached 328,000 in 2014, its highest level in three decades, according to U.S. Census data.
Crescent’s decision to tilt toward single-family construction suggests it is beginning to look at alternatives to the apartment sector.
Last year, real-estate mogul Sam Zell agreed to sell more than 23,000 apartments controlled by his real-estate company, Equity Residential, for $5.4 billion to Starwood Capital Group. Blackstone Group LP and Ivanhoé Cambridge agreed to buy Stuyvesant Town and Peter Cooper Village, a collection of 11,200 apartments, for about $5.3 billion
“Crescent’s belief is that single family has a longer runway and hasn’t recovered to the extent that multifamily has,” said Tyler Niess, the company’s chief marketing office.
The single-family construction market, for its part, has recovered sluggishly since the housing crash, prompting many home builders to turn to the rental apartment market. Crescent executives said they believe they are starting their new business at an ideal moment.
“Although the recovery has been a little more modest than many had hoped, we still think there is a substantial runway for single-family home construction,” said Andy Carmody, president of Crescent’s residential division. “The Millennials are just beginning to buy new homes now and showing up in our sales centers and welcome centers.”
While smaller home builders have struggled, Crescent executives said they have an advantage because the company already owns the plots of land on which they plan to build the homes. It also plans to bring a higher-end design sensibility to markets throughout the southeast and central regions, which traditionally have lagged behind on innovation.
Real-estate consultant John Burns said there is an untapped opportunity in bringing more innovative design to markets outside California, but that strategy remains unproven.
“It’s riskier because that market tends to be full of builders that build entry level housing,” he said.
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