Dive Brief:
- Undeterred by a turbulent economy at home, Chinese homebuilder Landsea has announced plans for a 550-home development in Orange County, CA, further solidifying its intentions to build a formidable U.S. business, the Los Angeles Times reported.
- Landsea’s development features both single-family homes and townhouses that range from 1,300-square-feet to 4,000-square-feet, with many hillside homes overlooking Catalina Island. The homes — ranging in price from the low $400,000s to the low $1 millions — will be complete in four years, with the first going on sale in the second half of 2016.
- Landsea is one of the first Chinese companies to enter the U.S. single-family homebuilding market and has pledged a $1 billion investment in the market, the LA Times reported.
Dive Insight:
Landsea’s entry into the U.S. housing market comes at a time of industry consolidation, beginning with the Ryland/Standard Pacific merger earlier this year. The Taylor Morrison/Orleans Homebuilders deal soon followed, with the M/I Homes/Hagen and Clayton Homes/Chafin Communities deals not too far behind.
Landsea has projects underway in Southern California, the San Francisco area and other states, but the Orange County development is its largest to date in California. John Ho, chief executive of Landsea’s U.S. business, told the LA Times that the project will help the company with its goal of a "robust in-house development team," as it provides a large basis for recruitment.
Mike Margolis, an attorney for Chinese developers, said most Chinese companies have not faltered on U.S. plans. "The outlook is positive," Margolis told the LA Times. "Nothing that has been reported about the Chinese economy has diminished that optimism and projection of growth in the U.S."
Rhodium Group economist Thilo Hanemann said the U.S. means safety and better returns when it comes to Chinese investment. "The slowdown in the Chinese economy further reinforces the motive to diversify assets globally," he said.
The U.S. economy, according to Ho, is particularly attractive because the relatively slow growth of home prices of 5% is more sustainable than the wild growth of prior years, even though many areas in California consistently beat that average price increase. Ho indicated that Landsea, therefore, had a long-term U.S. strategy.
"This is not 'Let's do one project and leave,'" Ho said. "It's 'Let's do multiple projects and let's invest for the future.'"