Ask Mitch Handman how the economy has affected his company and he won’t sugarcoat it for you. “Business is, I would say … bad,” says Handman, president of Malvern, Pa.–based R.C. Legnini. “The residential side is very, very slow. Our retail work has slowed to a crawl. Our office interior work has stopped.” Ecclesiastical projects are providing a flying buttress for his volume. “There’s lots of church work and some synagogue work,” Handman reports, adding with a laugh: “We keep praying here.” But even appeals to a higher power have their limits. “Last year churches accounted for about $7 million of our business,” he says. “This year, if we’re lucky, they will account for $4 million. We laid off eight of our guys in the last 14 months.”
But the market that taketh away also giveth to those able to spot an opportunity—and Handman sees one in rental properties. “I’ve been actively going after foreclosed buildings,” he says. The same conditions that are hammering residential construction—unemployment, tight credit, and a glut of foreclosed properties—also have created, in his view, the mother of all buyers’ markets. Handman has bought and renovated eight small multifamily properties, all of which are now fully occupied. While residential sales have slowed, Handman observes, rentals remain strong, “at least where we are. The folks who go to work every day—they need a place to live.”
Handman has invested in real estate before, but when values skyrocketed years ago he cashed in his chips, expecting never to get back in. Current prices, though, are too good to pass up. “In our lifetimes, we’re not going to see values like this again,” he asserts. “The only problem is you’ve got to have a fair amount of cash, and there’s not an unlimited supply of that.” But Handman says builders who muster the wherewithal can kill two birds with one stone, building their own portfolios while keeping their crews busy. “People in our business know what a good property is; we know what a good location is.”
While builders everywhere recalibrate their retirement plans, Handman actually may have improved his prospects of a graceful exit by directing resources toward income producing investments. “I never made any money in the stock market,” he observes. “Over the years, I’ve always made money by owning properties because it’s something I know.”
R.C. Legnini; Malvern, Pa.; www.rclegnini.com; Type of business: Custom/commercial builder; Years in business: 38; Employees: 12; 2009 volume: $9.5 million; 2009 starts: 193
