With Toll Brothers Inc. swooping in on the stalled Rivington project in Danbury, builder appetite could be rekindling for new home construction in Fairfield County, despite continued malaise in the sales market.
Building permits shot up in September in both Fairfield County and Connecticut, as tracked by the state Department of Economic and Community Development. Building and Land Technology L.L.C. completed multiple new residential complexes in Stamford”™s South End and others progressed in the Danbury area.
Despite the seeming renewal of momentum, the National Association of Home Builders recently estimated that Connecticut has a cumulative deficit of 12,700 permits needed to accommodate current and future residents.
Horsham, Pa.-based Toll Brothers paid $24 million for the Rivington property, and says it will soon start construction there.
1,100 homes was in original design
The project was initially developed by Bonita Springs, Fla.-based WCI Communities Inc. to include up to nearly 1,100 residences, townhouses and condominiums, along with a retail village, sports and recreation facilities, and more than 250 acres of parkland. In 2009, WCI underwent a financial reorganization under Chapter 11 bankruptcy protection from creditors, while being taken private. Under that bankruptcy plan, more than a dozen local companies saw contracts canceled for work at Rivington.
The first phase of Rivington ”“ known as The Hills ”“ currently includes 114 townhouses. The neighborhood will be completed by Toll Brothers and will eventually include more than 240 homes. The Home Builders Association of Connecticut estimates that more than 300 jobs are created for every 100 homes that are built.
Rivington is one of just multiple large residential projects in Danbury, which include three others by Toll Brothers: Bethel Meadows, Regency at Newtown, and The Summit at Bethel. In the past two decades, Toll Brothers has completed nearly 40 residential communities in Connecticut totaling more than 1,500 units, with the area drawing other major national builders such as AvalonBay Communities Inc.
“The New England area (has) been strong for us,” said Leo Horey, executive vice president of operations for AvalonBay, in a conference call with investors. “The markets that seem to be showing more recently the most opportunity for us are the New York metro area and the Northern California area.”
Toll Brothers eases building
In his own conference call, Toll Brothers CEO Douglas Yearley Jr. referenced the Rivington deal as indicative of the company”™s plans to continue expanding, while acknowledging the recession”™s impact the past few years.
“We have dialed it back,” Yearley said. “We study every community that we could open, and we have 119 communities right now that are mothballed, which means they (were) either once opened and closed, or ready to open but never did. And so as we study those, if the market is soft, and we don”™t hit a minimum return threshold, then we chose not to open it.
“We don”™t blame our buyers ”“ they are skittish,” Yearley added. “The news out there in the world is negative. The headlines are negative. Our buyers tend to be very tied to the stock market. ”¦ Right now, they are on the sidelines.”
Yearley said Toll Brothers did not appear to benefit from the homebuyer tax credit that expired this year, but added the company is currently offering incentives that amount to $38,000 per home on average nationwide.
As his company scouts for other opportunities, Yearley said the landscape could be significantly changed by mid-decade.
“Crystal ball, if you look out five years, certainly it would seem that there will be some consolidation of the larger players,” Yearley said. “You are not seeing consolidation with the smaller players right now, because there is no point in buying an entire organization when you can pick off the ground in a distressed scenario. But are we a player ”¦ We are not actively looking for consolidation at this time, but again, the industry is fragmented so you think it would happen with some of us over time.”
