M.D.C. Holding's Richmond American Homes will swap positions as a minor player in the Dallas and Houston markets for a new dollop of dominance in fast-growing Salt Lake City, where it already ranks as the biggest builder, according to Hanley Wood Market Intelligence.
Richmond American Homes of Utah agreed to buy 467 finished lots and 11 model homes in the greater Salt Lake City area from Salisbury Homes. Terms of the transaction were not disclosed. M.D.C. says the deal, completed March 1, will have no significant impact on its balance sheet, i.e., goodwill, but will serve as a source of additional residential lots for future growth in the 20th–fastest-growing U.S. metro market ranked by starts. Some 60,000 starts are expected between 2005 and 2010, according to market researcher Global Insight. Utah ranks as the fourth–fastest-growing state in the nation.
M.D.C. already has about 6.6 percent of the company's community operations based in Salt Lake, with 23 active communities. The deal with Salisbury adds 10 active single-family home communities in the northern submarkets of Utah County, as well as in southern submarkets surrounding Provo. In addition, the deal gives Richmond American the opportunity to buy as many as 725 more finished lots throughout the Wasatch Front market—including Salt Lake, Utah, Davis, and Tooele counties—which has experienced almost a 40 percent increase in single-family home building permits since 2000.
Boston-based Global Insight forecasts that in the 2005 to 2010 period, Salt Lake will rank 20th among U.S. markets in best economic opportunity related to job expansion and will be 13th during the five-year span of population growth among the homeownership-hungry 25-to 44-year-old population.
Richmond American also has 23 active communities—about 6.6 percent of M.D.C.'s total of 346 active communities in all its markets—in the Dallas and Houston markets, where it has decided to bow out because it's just too hard for its operations to profit in low-barrier-to-entry metros like Texas.
M.D.C. chairman and CEO Larry Mizel says that the company was buying no more lots in Texas because gross profits there are way below the company average. He says they are exiting Texas by not buying any more lots, which frees assets to deploy elsewhere. “We're reallocating assets to such places as Salt Lake City,” he said, adding that the company will continue to make opportune deals.
SOURCE: HANLEY WOOD MARKET INTELLIGENCE
Learn more about markets featured in this article: Salt Lake City, UT.