Ron Simon will stick to what he and his Newport Beach-based RSI Holding Corp. does best: making things.
That means stepping away from any role as a developer and focusing on making RSI Development LP a “super-sub” for homebuilders, developers and real estate investors.
“Now we’ve gotten traction, but we don’t want to be in the land business,” said Simon, chairman of RSI Holding, which has estimated annual revenue of $500 million, and founder of RSI Development.
“We are not interested in competing with big homebuilders,” Simon said. “We want to build for them.”
Next Step
It’s a next step for RSI Development, a company that grew out of Simon’s cabinet-making background three years ago, found a proving ground with a couple of developments under The New House in the Inland Empire and discovered new opportunity in the rugged aftermath of the recession.
The latest turn came after RSI Development saw sales stall at one of The New House projects, a 77-home development in the Riverside County town of Beaumont. The company had already sold out a 103-house project in nearby Menifee, helped along by prices in the $143,500 to $210,500 range—kept low in part by RSI Development’s manufacturing processes.
The New House Beaumont generated strong demand, according to Simon. But it opened to sluggish sales as potential buyers in the area—where the unemployment rate is around 13%—had trouble qualifying for mortgages.
The New House responded with a program that gives prospective homeowners and tenants the option to buy, lease or rent a brand new single-family detached home. The effort led the company to examine other possibilities in the current marketplace, where houses are at their most affordable levels in some years but many would-be buyers have trouble getting financing. The apartment market, meanwhile, has been hot for the past several years.
Simon said those market forces—combined with the success of the rental program in Beaumont, and the company’s ability to build high-quality, energy-efficient homes quickly and affordably—led RSI to explore the possibility of delivering stand-alone, single-family houses for rent at a price that made sense for developers.
Simon said the approach is ideal in certain markets, such as Texas, where the company is partnering with the developer of a 300-home rental community.
RSI Developments builds homes with the same “precision-built” manufacturing techniques first honed by Simon at RSI’s Professional Cabinet Solutions, a leading producer of household cabinets.
He said a number of other big homebuilders have started talks with RSI Development and toured its factory in Mira Loma, where it makes highly engineered and fully integrated panelized components that are trucked to project sites for fast assembly.
Replacement Homes
RSI’s new approach as a contract builder, or super-sub, comes alongside another line of business for The New House: replacement homes for owners of older houses who want to upgrade or fill a vacant lot. The company plans to replace older homes and put up its own, higher-quality houses at prices well below what’s typically seen for a new home construction or remodeling.
Affordability and the cost-certainty that comes as a byproduct of the manufacturing process are major selling points. So is the speed of construction—reducing the time an existing homeowner would need to relocate. The company said it expects the infill homes to be built in less than eight weeks, from foundation to finish.
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 sizable chunk of those homeowners aren’t carrying mortgages and can afford a property upgrade.
The infill development program also takes RSI Development out of land buying, which suits Simon. He’s made his point with the developments in the Inland Empire. Now he’s focused on the company’s move to work with homebuilders, developers and real estate investors.
“Buying land is a whole other business, and we’d need an entire department to do it well,” he said. “We’re going to do what we know how to do best.”
