Magellan Development, high-rise condo developer and builder, ranked first in home sales in the six counties that comprise Greater Chicago, according to Crain's Chicago Business' annual ranking of leading home builders, which published its results on Friday.
Magellan's revenue grew 36.1 percent in 2007, to $519.8 million, from the sale of 632 home units, which was down from the 780 homes that Magellan sold in 2006. The company's project of the moment is Lakeshore East, a $4 billion multi-building community on 28 acres in downtown Chicago that it started in 2002 and, when completed, will include 4,950 new residences, 2.2 million square feet of commercial space, 1,500 hotel rooms, 770,000 square feet of retail space, and an elementary school surrounding a six-acre botanical park.
The rest of the top five on Crain's ranking of 25 builder/developers-which includes a few property management companies-were:
Pulte Homes, $466.2 million (down 23.3%)
Cambridge Homes, $302.3 million (down 49.4%)
Related Midwest, $246.1 million (up 190.6%)
Ryland Group, $227.3 million (down 37.0%)
Only six of Chicago's top 25 builders reported dollar gains, and only three sold more units last year than they did in 2006. However, one of those was Kimball Hill Homes, which has struggled in recent months to avoid bankruptcy. In Chicago at least, Kimball Hill's unit sales increased by two units, to 470, although its sales were off 30.1 percent to $146.3 million, which represented 16.5 percent of its total revenue for fiscal 2007.
John Adams, Ryland's divisional president, doesn't think that the financial travails of local builders such as Kimball Hill, Neumann Homes, and Kennedy Homes, or the fact that KB Home announced last week that it was pulling out of Chicago entirely, are creating more anxiety among consumers about the overall stability of the market. However, Adams isn't seeing much evidence that customers are ready to get off the fence and start buying again, either.
"January was decent but February was miserable," he tells BUILDER. "We're finding that traffic has been okay, but we're not getting any commitment from consumers until they sell their homes." Unfortunately, sellers continue to refuse to lower their prices. "They aren't buying into what's going on in the market" in terms of home builders dropping prices and offering incentives to move inventory.
The Chicago market is hard to read right now, especially among high-rise and condo builders and developers. Some, such as Magellan and Related, enjoyed sales growth last year, whereas others saw their business trail off significantly, such as Enterprise Cos., which ranked sixth on Crain's list even though its revenue was off 61 percent to $216.7 million on the sale of 474 units. While he couldn't address what's going on with any one company, Adams says that there's still a glut of condos for sale in Chicago's downtown market. "So what it comes down to is price or location."
In a separate list that varies somewhat from Crain's, the Chicago Tribune last week offered its own ranking, which found Pulte inching out Magellan for the top spot, and Lennar and Hovnanian Enterprises' Town & Country division (which ranked eighth and ninth, respectively on Crain's list) replacing Related and Ryland in the top five. The Tribune estimates that the market's 10 largest builders sold 7,200 homes in 2007, a 36.8 percent decline from 2006. Revenue from those sales was off 25.7 percent to $2.6 billion.
Learn more about markets featured in this article: Chicago, IL.