National homebuilder Lennar plans 140 homes in Clark County
Sunday, March 17, 2013
• What: A national, publicly traded homebuilding company. Its local subsidiary is Lennar Northwest Inc.
• Corporate headquarters: Miami.
• 2012 net earnings: $679.1 million.
• Stock symbol: NYSE: LEN and LEN.B.
• Lennar homes in Clark County: Falcons Nest in Vancouver, Green Gables in Ridgefield and Lakeridge in Camas.
National homebuilder Lennar Corp. is establishing its first Clark County foothold, having all but completed two of the 140 single-family houses it plans for communities stretching from Camas to Ridgefield.
The company's presence could be good news for area homebuyers, as the nation's third-largest homebuilder brings new designs and cost efficiencies to the market. It may also help boost the workload for local subcontractors and suppliers, who are creating homes for established real estate agents to market and sell. However, Lennar's entrance brings big competition to Clark County's largely homegrown building industry, as the deep-pocketed national builder positions itself to ride the county's next growth wave.
Questions remain about whether Lennar's wealth and national business model will erode the business of local homebuilders, some of whom are still smarting over the fact that the Miami-based company's subsidiary, Rialto Capital, acquired numerous Clark County developments by purchasing assets of the failed Bank of Clark County. Under terms of Rialto's deal with the Federal Deposit Insurance Corp., those properties couldn't be sold to Lennar.
Respected local builders harshly criticized Rialto for its hardball tactics in renegotiating repayment plans for construction loans, with some borrowers losing millions of dollars worth of unfinished projects.
Now Lennar has quietly entered the local housing market in subdivisions where it is building homes alongside the same builders who lost land in the Bank of Clark County's 2009 collapse, said Paul McGraw, president of the 535-member Building Industry Association of Clark County. He has received no complaints from local builders, who are taking part in the industry's rapid rebound this year.
"They (Lennar) are definitely here to be low key," McGraw said. He added that, despite its recent activity in the area, the national builder has not reached out to McGraw's association about becoming a member.
"No (association) member has said, 'I have a problem with Lennar,'" McGraw said.
Still, while the housing slowdown left many local builders unable to take on the debts associated with production building, Lennar has begun building in three Clark County subdivisions on construction-ready lots the company snapped up at cheap prices. One of them is Green Gables, a Ridgefield subdivision that was partly built out when the downturn hit.
"This is our jewel," Chris Ingraham, the company's designated broker, said during a tour of Green Gables, a large housing community on the northwest corner of Pioneer Street and 45th Avenue. Lennar expects a late April opening for its model homes. The subdivision contains one- and two-story houses that face tree-lined streets, punctuated by wetland buffers and a central play park.
Starting at $250,000
Ingraham expects the site to become one of Lennar's hottest communities, where it will sell at starting prices of around $250,000. Part of the company's competitive strategy includes offering about a half-dozen floor plans that can be built with three different exteriors, including French, English and American craftsman style.
"They have different exteriors on the outside, but the same lifestyle on the inside," said Ingraham. He will oversee the sales staff in Lennar's Welcome Home Center sales offices in at least four subdivisions throughout suburban Portland and Clark County.
He said "good luck" played a big role in Lennar's entrance into the Portland-Clark County market.
"We've always wanted to be a part of this market. It's where people are buying homes," said Ingraham, a 16-year industry veteran who previously held a similar position with a local homebuilding company.
McGraw said Lennar has carried the local hiring practice to the upper-most staffing levels of its Northwest operation, starting with its 2011 hiring of Clark County homebuilding veteran Ryan Selby as division president. Selby, who was division president at national builder D.R. Horton for many years, was not available to speak about his role in buying up distressed finished homesites to help launch Lennar's Northwest operation.
But McGraw said Selby has helped the company establish credibility with local builders.
"Lennar is not some strange truck driving in with Tennessee license plates," he said. "It's a local guy with a local face, whom we know."
Other experts see benefits in Lennar's local presence, as well, according to Art Castle, executive vice president of the 8,000-member Building Industry Association of Washington, based in Olympia.
"Being corporate builders, they have access to capital that the smaller builders don't have," Castle said.
He added that big builders also are gaining market share across the nation. "This is not isolated to Clark County," Castle said.
Companies such as Lennar have the capital reserves to buy up the inventory of existing lots, which has allowed such so-called production builders to command at least 50 percent of the national market, Castle estimated.
"About 25 years ago, they (production builders) had about 25 percent of the market." said Castle, who has worked in the housing industry since the 1980s.
Recent housing data show the nation's housing market is strengthening over time, although it has faltered somewhat in recent months. The National Association of Homebuilders' recently released builder-confidence report rose one point to 60 in the West, five points to 41 in the Northeast, declined seven points to 44 in the South and remained unchanged at 46 in the Midwest.
The association expects new home sales nationally to rise to a new normal this year at about 448,000 new homes sold, which is up about 2 percent from 2012, although down from around 800,000 to 900,000 homes sold during the market's peak years, according to the association.
Meanwhile in Clark County, the housing industry gained substantially through much of 2012 and has continued through the start of this year, despite ongoing headwinds of economic uncertainty.
Construction starts for single-family houses, as measured by permits to build houses, showed a marked year-over-year improvement in unincorporated parts of Clark County in 2012. That year, homebuilders took out 577 permits for projects valued at approximately $182.7 million, according to the county's Community Development Department. The permit total represented a 66 percent increase over the 348 permits for single-family homes, worth a total of $118.8 million, in 2011.
While many smaller home contracting companies are either out of business or holding back, Lennar is now poised to catch hold of the housing upswing once again.
Ranks third nationally
Among the nation's top homebuilders, Lennar Corp. ranked third in sales and production, according to the publication Professional Builder, which annually publishes its list of "Housing Giants" in May. Lennar had $2.6 billion in total residential revenue and 10,845 individual sales in 2011. Its sales were topped only by PulteGroup, which generated $3.9 billion in revenue, and D.R. Horton Inc., which drew $3.6 billion. Pulte has a presence in Portland, and Horton is active in Clark County.
Lennar representatives wouldn't say whether the company is eyeing additional Clark County locations to supplement its 38 single-family home lots in Ridgefield, 88 homesites in the Orchards area and 14 homesites in Camas.
"We cannot speculate at this time on our future volumes or strategies, as it is a dynamic market and ever-changing." Luci Fuller, Lennar's marketing manager stated in a written email response.
But Castle said the giant company could increase its local investment if new-home sales rise in Clark County. Conversely, Lennar could just as easily bring its work to an abrupt end in the area.
"When the lots run out, Lennar is going to have the same challenges that all the other builders have," Castle said.
But unlike the smaller builders who can survive by finding a niche market in which they build and sell one house at a time, Lennar's business model depends on the efficiency of mass production. It is a practice that relies on a consistent supply of ready-to-build housing lots in the pipeline.
"As the inventory of lots dries up, a local builder isn't going to go elsewhere," Castle said. "But a corporate builder may go to where they have a large concentration of lots."