The New Home Co. has inked a deal to build an upscale housing project in the Phoenix area, its first development outside California.
The Aliso Viejo-based homebuilder, one of the most active builders of high-end homes in Orange County in the past few years, is under contract to buy a 68-home site in Paradise Valley, a suburb near Camelback Mountain.
The project is on land that once held the long-shuttered Mountain Shadows Resort north of Phoenix.
New Home Co.’s development is expected to hold a mix of detached homes and condos with average selling prices in the $2 million range, according to Larry Webb, chief executive of the builder, which went public last year after raising $86 million in an initial public offering.
The project is expected to be similar in many respects to New Home Co.’s Meridian project in Newport Center, in terms of design and buyer profiles, according to Webb.
The 79-unit Meridian project, which opened about a year ago next to Fashion Island, had all but seven units sold at the end of September, according to regulatory filings.
Its luxury condos have been selling for an average of $3.3 million, the company said.
Another similarity: Ross Perot Jr.’s Hillwood, the Dallas-based development firm that’s a co-investor in Meridian, is partnering with New Home Co. on the Paradise Valley deal, Webb said.
Terms of the Paradise Valley land sale haven’t been disclosed; other lots in the immediate area traded hands for $575,000 per lot as of last year, according to local reports.
A similar per-lot price would put New Home’s purchase at about $39 million.
Seller
The land is being sold by Irvine-based Crown Realty & Development Corp., which is redeveloping the former Mountain Shadows resort—which closed in 2004—into a mix of homes, a boutique hotel and a golf course.
Crown Realty has been working on the project for over seven years. The site’s development costs have been estimated at nearly $200 million.
The project faced its share of recession-related delays, and the developer only began selling land to homebuilders last year, according to local reports.
New Home’s land deal represents the last portion of the high-profile former resort site that’s available for housing development, according to Webb.
He said other deals in the region are expected.
“We’ve been looking at the Phoenix market for over two years,” Webb said. “There’s a real opportunity for a builder who focuses on infill sites, in particular on the move-up side of business.”
Most builders in that market are buying land in more affordable, outlying parts of the city, he said.
New Home recently hired Pat Moroney, the former president of Irvine-based Standard Pacific Corp.’s Arizona operations, to run its Phoenix division. Standard Pacific recently combined its operations with Ryland Group Inc. and and now operates as CalAtlantic Homes.
Next Steps
More deals in other select West Coast locations are possible for New Home in the near term, according to Webb.
He said Seattle is a possible destination, as is the Summerlin master-planned community near Las Vegas.
“For now, though, I’d say our focus is expanding in the markets where we are already in,” Webb said.
More than half of New Home Co.’s home sales last quarter were in Orange County, including projects in Newport Coast, Irvine and San Juan Capistrano.
Fee-Building, Projects
In addition, a bulk of the company’s active fee-building business is for Irvine Company developments in the area.
New Home is acting as a fee builder for hundreds of homes planned for Irvine Co.’s new Eastwood Village community in Irvine, which will open early next year.
The company also has projects under way in Los Angeles County, Sacramento and the Bay Area.
The company had a market value of about $230.7 million late last week.
Analysts, in New Home Co.’s latest quarterly earnings call earlier this month, pressed the company about its growth plans, coming in a market that’s seen several big housing deals of late—including the recent combination of Standard Pacific and Ryland Group.
“We will look at other Western U.S. opportunities,” Webb told analysts. “But we’re not running around helter-skelter.”
“We know how to grow an organization,” he said.
Sale?
The company’s executive team also knows how to sell its business at the right time.
Webb led Irvine-based John Laing Homes and helped orchestrate that company’s peak-market sale to Dubai-based Emaar in 2006 for nearly $1.1 billion.
He said last week that New Home would appeal to a national builder looking for a better position in California’s pricier housing markets, but at this point “we haven’t been open” to a potential sale.
“The best thing for us right now is to focus on making us a better company,” Webb told the Business Journal.
“That said, we would talk to anyone.”
