Hovnanian and GTIS Expand to $8B Homebuilding Joint Venture
Hovnanian Enterprises, Inc. and GTIS Partners LP have expanded their homebuilding joint venture by combining to invest another $200 million. This takes the value of the JV to a total of $8 billion.
Most of the new capital is coming from GTIS ($150 million), with Hovnanian contributing to the rest. The funds will be used to develop and sell homes through a portfolio of communities.
Currently, the portfolio hosts roughly 907 homes at "closing" across seven communities and five states, according to a statement from the JV. The partners also noted that 125 homes have sold that would rake in about $82 million in revenue, but have yet to close. The types of homes in the full portfolio include low-rise condos, single-family active adult and at-market-rate homes, as well as townhomes.
Hovnanian and GTIS estimate that the build-out costs will be roughly $545 million.
"This portfolio represents a mix of product types, price points, and geographic diversity across seven communities, many of which are follow-on investments to communities we have previously partnered on with Hovnanian," Ed McDowell, partner and head of U.S. Acquisitions for GTIS Partners, said in a statement.
"Because most of the communities are already well into development, we have a clear understanding of current home prices, how quickly homes are selling, and the costs to build them. This gives us confidence that the investment will deliver strong, risk-adjusted returns. Hovnanian has an excellent track record across numerous homebuilding joint ventures together and we look forward to growing our partnership."
The expansion for the JV comes at a time when the U.S. faces a severe housing shortage. The gap differs depending on who you ask. For example, Zillow estimates the shortfall to be 4.7 million units, with McKinsey projecting the shortfall to be much higher, at 8.2 million units in 2023 and potentially expanding to 9.6 million by 2035. Meanwhile, House Republicans are taking it to another level — estimating the gap is already 20.1 million units.
According to Hovnanian, it's one of the largest homebuilders in the country, with presences in various states including Delaware, Florida, Georgia, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, West Virginia, Arizona and California. GTIS manages $4.9 billion in gross assets and is involved in sectors including single-family homes, multifamily, residential, office, hospitality, opportunity zone investments and industrial.
Source: GlobeSt/ALM