A million-dollar home going up fast in an upscale neighborhood in East Costa Mesa marks the start of a big infill development push in Orange County by Ron Simon’s RSI Development LP.
The Newport Beach-based company’s homebuilding division, which operates under The New House by RSI name, was started by cabinetmaker Simon in 2009. His goal: making home buying more affordable for buyers through a streamlined homebuilding process.
The New House builds homes using manufacturing techniques first honed by Simon at his RSI Holding LLC, the holding company for a maker of household cabinets.
He’s adapted those techniques to homebuilding. Walls, floors, roof trusses and other parts of The New House’s homes are made at a factory in Mira Loma and assembled at project sites. The houses are built a fraction of the time a typical builder requires.
An early project in the Inland Empire yielded strong sales. A 103-home project in Menifee, located east of Temecula, sold out in about nine months earlier this year. The homes sold for $143,500 to $210,500, and ranged in size from 1,232 to 2,401 square feet. It was one of the region’s top-selling home developments over the past year.
RSI has since started up a few other projects targeting first-time homebuyers in the Inland Empire. It’s also linked up with local housing agencies to put up affordably priced homes in Santa Ana and Buena Park.
The company has built about 130 homes in total.
“We saw how desperately the country needed housing that’s affordable,” said Simon, who also is one of OC’s top philanthropists. His Simon Foundation for Education and Housing helps provide scholarships and housing for work force families
“We’ve brought new people into the (home buying) market,” Simon said of his latest venture
Now the company is eyeing a different strategy in Costa Mesa, where it owns a handful of individual lots and has eyes on a few dozen more, according to Eric Vanderheyden, a spokesperson with RSI Development.
Upgrades
The company plans to raze older homes, and put up its own, higher-quality houses. It expects to sell them at prices well below what’s typically seen for a new home construction.
The company also plans to offer its services to homeowners who are looking to upgrade their homes or fill a vacant lot.
The infill development program “gives a homeowner the ability to make a profit on their land” if they decide to sell at a later date, Simon said.
In the case of older, but highly-sought neighborhoods like East Costa Mesa, “if they replace their old house and spend $250,000 or $300,000 (on the new house), then they could have a million-dollar property,” he said.
Affordability is expected to be a big drawing card for the company’s infill program, as is speed of construction, which minimizes the time an existing homeowner would need to relocate.
The house on Broadway in East Cost Mesa has an asking price of a little less than $1.1 million, which works out to about $412 per square feet.
That’s among the lowest per-square-foot prices seen for any new or existing single-family home on the market in the neighborhood, which runs along the Upper Newport Bay.
The company said it expects the infill homes to be built in less than eight weeks, from foundation to finish. The shell of the Broadway home went up in under two weeks, with a crew of just four people and minimal amount of waste or excess materials, according to Vanderheyden.
“We’re cost-conscious, and waste-conscious,” he said.
The region’s infill development housing market is potentially huge. Simon estimates there’s some 500,000 homes 40 years old or older running from Costa Mesa to Long Beach and Lakewood. A sizeable chunk of those homeowners aren’t carrying mortgages and can afford a property upgrade.
Simon said he doesn’t expect to see too much competition from traditional, established builders, either for the infill product line or other developments.
“Homebuilders don’t have the core competencies we have,” Simon said. “We come from a manufacturing environment. We look at our houses as a commodity—homebuilders make their money on land.”
The business takes a page from Simon’s cabinet business, RSI Home Products, which has been able to compete with Asian rivals with lean, efficient manufacturing.
“New homes are the only consumer product that’s never had foreign competition, which drives efficiency,” Simon said.
In 2008, Simon sold half of RSI Home Products to Toronto-based private equity investor Onex Corp. for $318 million.
He then invested $100 million to start The New House.
“Tall Mountain”
The company is getting close to profitability, he said, and has the ability to ramp up to build several thousand homes annually.
“While RSI Development has an established track-record as a homebuilder, our newest innovation, the infill program, has not established a level of credibility—yet,” Simon said. “However, we believe our infill concept will be a homebuilding game-changer.”
“Like climbing a tall mountain, we knew it wasn’t going to be easy (starting the company)” Simon said. “We’re not at the top yet, but we’re getting closer.
“We’re trying to revolutionize an industry. We’re bucking old customs.”
