This month’s issue includes stories about three unfilled market niches that are significant opportunities for builders: culturally aware housing, live-work housing, and Missing Middle Housing.
Movers and Shakers: Spectrum Skanska Hits Highest Price Point
Mitch Hochberg is no day-trader, but he’s riding Wall Street’s bull market to home building nirvana.
|"In the three years before Skanska, I spent 65% of my time looking for financing. Now it’s zero." -- Spectrum Skanska president Mitch Hochberg
Mitch Hochberg is no day-trader, but he’s riding Wall Street’s bull market to home building nirvana. "New Yorkers are making a lot of money. The economy is very strong. A lot of the buyers we see are cashing in stock-market gains," says Hochberg, explaining his success. His firm, Spectrum Skanska, has the highest average sale price in the Giant 400: a lofty $800,000 on 175 units sold, to hit $140 million in total revenue.
At No. 100, Spectrum is a long way from the top of the Giant 400. Still, the Valhalla, N.Y.-based firm wasn’t even ranked a year ago. "In three years, we’ve doubled our volume," says Hochberg, "but we are not intoxicated with our success. We started in the late ‘80s and came through the crash in ’89. We will never get too far extended."
The lifestyle-community developer and builder occupies one of the most lucrative niches in the American housing industry, and with a sugar daddy like Swedish construction conglomerate Skanska to sign the checks, the sky’s the limit for Hochberg.
"I formed Spectrum 16 years ago to build custom, high-end product," he says. "About 10 years ago, we saw an opportunity to do lifestyle communities in the northern suburbs of New York City, the kind of projects that are common in California, Arizona and Florida. No one was doing them here because the land was so expensive, and there just weren’t any parcels to do 500- to 1,000-acre developments.
"We felt that with our local knowledge and contacts, we could find the land and get entitlements for small lifestyle communities of 50 to 100 units rather than 1,000."
Hochberg did exactly that, and the New York economy took off at the same time. But as Spectrum grew, Hochberg found himself spending most of his time searching for equity for his planned communities. "I got in this business because I’m a good developer and builder. I enjoy creating product. I didn’t want to spend my life looking for money."
Enter Skanska AB, a more than 100-year-old Swedish conglomerate that does business in 80 countries (mostly heavy construction) to the tune of $9 billion a year -- $4 billion in the United States. Skanska’s U.S. subsidiary is headquartered 10 minutes from Hochberg’s office. On one of his searches for equity, he paid a call.
"Over the course of a year, Skanska acquired us," says Hochberg. "Spectrum had a great brand name in New York as a builder. Skanska wanted to increase awareness of its brand here in the U.S. Hence the name, Spectrum Skanska. We are now a very small part of their business but disproportionately high-profile. We’ve both benefited.
"Skanska is publicly traded on the Stockholm exchange, and they are mostly owned by Swedish institutions. European money is very patient, much more so than Wall Street. They don’t micromanage us. They let us run our business, and there’s no pressure to grow at any specific rate. On acquisitions, we can move fast, but our checkbook is as big as anyone’s.
"In the three years before Skanska, I spent 65% of my time looking for financing. Now it’s zero," says Hochberg. Meanwhile, Spectrum has taken off. "We can now do larger projects."
Such as Bellefair in Rye Brook, N.Y., the New York market’s first neotraditonal town, on 140 acres next to an airport, a 30-minute drive north of Manhattan. In 18 months, Spectrum sold 235 houses at prices starting at $500,000. "We sold starter houses to young couples for $700,000," says Hochberg. "Most of the buyers came out of the city. They were very worried about not knowing anyone. They didn’t want to live on a 2-acre lot." By selling the town on the higher-density New Urbanist planning concept, Spectrum delivered a sense of community to buyers hungry for an old-fashioned, New England-style village.
Spectrum followed Bellefair with Legend Yacht & Beach Club, a gated marina community in Glen Cove, N.Y. (on Long Island), which has even higher pricing ($850,000 to $2 million). "Most of what we do now is very high-end," says Hochberg. "But we have a 165-home starter community in White Plains (called Valimar) where we had a lottery for the first phase and sold 55 houses in six weeks, at prices between $400,000 and $500,000."
With Skanska behind him, Hochberg is venturing farther from New York to do second-home/resort projects in the Poconos in Pennsylvania and the Berkshires in Massachusetts. "We made our reputation building for empty nesters, and baby boomers are now empty nesters and aging into second-home buyers," explains Hochberg. "We’re now looking on the Jersey shore and in the Catskills."
Hochberg says Spectrum Skanska will hit $200 million in sales this year and $250 million within three years, but he’s getting cautious. "We don’t think the market will support a continuation of exponential growth. Right now, we have nothing in the pipeline that will take us out more than four years."
Also See Movers and Shakers:
Lennar Redefines Bigness
Regis Homes Ups Ante on Quality
Morrison Leads the Charge to TND
Newmark Has New Model for Growth in Roaring 2000s
Brookfield Has Steely Resolve
Estridge Pioneers "First Mile"
Crossman: Quiet but Profitable
ALH: Private Acquisitor Rising