Former homebuilding executive Kevin Carson considered running a coffee shop or buying a bed and breakfast after his employer, John Laing Homes, abruptly closed its doors in 2009.
Carson, a division president with 26 years of experience, got nowhere with online job searches and headhunters both in and outside his field.
“It was a very tough time to be looking,” Carson said.
Today, things look very different. He is running the Northern California division of a nascent company he formed along with other John Laing executives. The New Home Co., which launched from his guest bedroom, has 13 employees, is selling homes in Elk Grove and is putting together deals for more land.
In one of the most difficult times the industry has ever faced, newly formed residential development ventures are emerging under the belief that Sacramento will rally.
“I have no intention of building homes for practice,” said Mike Paris, partner in a new homebuilding company called Black Pine Communities in Woodland. Paris was formerly in charge of supply and procurement for Chicago’s Kimball Hill Homes, which filed for bankruptcy protection in 2008 and eventually was liquidated.
He’s predicting demand will greatly surpass builders’ production of fewer than 2,000 new homes last year in the four-county Sacramento region. Paris says perhaps the more reasonable number is 4,000 units a year, and the new company aims to capitalize on increasing demand. But he says he’s no soothsayer and is cautious about predicting when that might happen.
Kimball Hill, which had a Sacramento division and several new home communities in the region, was one of the country’s first major builders to shut down.
“It was a very sad ending to a very storied company,” he said. “I honestly felt that if we had filed bankruptcy six months earlier, we would’ve made it.”
He realized fairly quickly, however, that he was going to need a backup plan after 10 years with the company. He’d already been successful on his own, with projects including Sacramento’s Quinn Cottages, a transitional housing project for homeless or those recovering from substance abuse. He also built homes in the well-positioned neighborhood of East Sacramento.
He had resumed building there when a recruiter introduced Paris to Jeff Morgan, who owned commercial real estate and mining operations and was interested in breaking into the homebuilding industry. They formed Black Pine Communities and launched a new mining venture as well with backing from GE Capital and River City Bank.
Now Paris is working on designs for Black Pine’s first venture, 84 lots the company purchased in Roseville’s Diamond Creek community. But Paris doesn’t want to rush the plans.
“When we’re ready, we’re ready,” he said.
Another developer with a long background of diverse projects who decided to launch a new venture is Ron Mellon. He worked in production homebuilding with Lexington Homes years ago and lately as a boutique developer of unique projects around Sacramento with his company, Core Realty. Mellon is one of the three main partners behind the large infill project called Township 9 north of downtown that hopes to bring 2,300 new homes as well as thousands of square feet of offices and retail to the riverfront.
Mellon and fellow developers are also behind The Warren, an eight-story condo planned for 16th Street.
But his latest housing effort is on a much smaller scale. He and developer Jeremy Drucker are backing an “alley activation” movement in Sacramento and formed Stitch Development, which seeks to build alley-facing homes on lots around the central city.
They built model homes between Capitol Avenue and L Street that face the alley and the back of coffeehouse Old Soul Co. The idea for alley-facing homes came from Drucker’s 9 on F project, a green project of nine new homes that Mellon was involved in. They were surprised when the first homes sold at that project were the alley homes, which they expected to be the toughest sell.
Betting on Sacramento
Stitch has purchased two other lots in the central city and has an option on the third. But Mellon said it has been difficult to use the model home concept — something buyers are familiar with in a tract home setting, but struggle with in a urban environment. He said people would rather be able to explore the space after it’s been built, so Stitch Development is likely to change course and sell the model homes while building anew at other locations.
“We believe in Sacramento, period,” he said. “We’ll be first to be coming out of the ground because it will become a race.”
For Carson, the transition to creating a new company has allowed him to feel fortunate but also uncertain about when the market will recover.
It was a shock when John Laing closed. It was the 14th-largest builder by sales volume in the Sacramento region and had eight active new-home projects here at the time. Dubai-based Emaar Properties bought the firm in 2006 but shut off funding as the housing recession deepened.
After searching in vain for work, Carson took a call from former John Laing chief executive officer Larry Webb. Shortly thereafter, they had a plan for The New Home Co. The first project in Sacramento was the purchase of 76 lots in Elk Grove’s Madeira community from First Banks Inc., which had foreclosed on the property from Sacramento’s Corinthian Homes. Carson said he and the other founders had to present their personal bank statements to demonstrate they had the money to close the sale.
They went to work on novel designs to catch buyers’ eyes, such as bathrooms and walk-in closets attached to each bedroom, a “valet” area between the entrance and kitchen for backpacks and other items, and outdoor rooms with fireplaces for entertaining.
The project was selling about one home per week. But sales have slowed to about two a month since then, he said.
They also have purchased 17 finished lots in Granite Bay from Wells Fargo Bank, where they plan a custom-home community.
The New Home Co., like the rest of the industry, is not out of the woods, but there is optimism.
“If you look at (the business) day to day, you would never go into it,” Carson said. “Long-term, this region has got so many assets. There are people who want to move and need to move into a new home.”
View original article Sacramento Business Journal, Sacramento homebuilders are picking up the pieces.