By Jonathan Lansner
Epic has 102 contracts worth $1 million each
Homebuilding has become a game of lots.
Take builder New Home Co. in Irvine. It just bought Epic Homes of Denver, making a diversification bet on a new market outside California and Arizona. And Epic founder Chris Presley will remain to head up the new Colorado operations.
Yet the bottom line is Epic owns what’s become hot property: ready-to-go land. That’s 294 lots — plus 102 unfilled sales contracts worth, on average, $1 million each — to add to New Home’s 2,000 lots.
The homebuilding industry is playing catch-up amid a pandemic-fueled homebuying binge. Low mortgage rates and desires for larger living spaces have surprisingly ballooned sales of homes and quickly changed the plans of building executives.
When COVID-19 first hit the economy a year ago, “We thought a big downturn was coming. We were wrong,” said New Home CEO Leonard Miller.
The sales rush has been so swift builders now worry about running out of places to build — just months after another housing debacle was feared.
Now, Miller says, “I’ve never seen a stronger market.”
How hot? New Home’s 520 orders in 2020’s second half were up 75% from a pandemic-scarred first half and 95% above 2019’s second half.
Builders nationwide are compensating for land shortages by acquiring lots — and competitors — as well as raising sales prices and limiting the number of “spec” homes built — those without committed buyers.
Many builders, Miller says, “are doing everything to slow down sales.”
For two years, New Home eyed this smaller Denver builder which targets primarily upscale buyers with homes up to the $1.4 million range. Epic also has one less-expensive project with homes priced from the $600,000s.
Once New Home thought its finances were strong enough to buy — and the initial shock of the pandemic worse off — the dealmaking began late last year and closed late last month. According to SEC documents, New Homes paid $8.4 million for Epic, $24 million to pay off Epic’s debt and another $4.3 million for certain lots.
“It was a unique opportunity,” Miller says.
Read more by Orange County Register here.