Single-family home developer Melia Homes has launched a new strategy to focus on multifamily and other income-producing assets. The strategy will include the acquisition of existing multifamily units as well as the acquisition of land sites to entitle and develop new multifamily. The impetus of the new strategy is to remain competitive and scale the business even as the cycle matures.
“We know there is a recession on the horizon, and we felt that we needed to be strategic,” Tim McSunas, president of Melia Homes, tells GlobeSt.com. “We are coming to the end of the cycle, and we were looking at how to maintain our staff levels and do something that is relative to our core business. Our CEO decided to move into the income-producing property space. People are our biggest asset, and we really needed to maintain our team. So, we looked at other similar businesses without having to solely rely on for-sale housing.”
The home market has cooled this year in Southern California, and many millennials continue to struggle to achieve homeownership. Melia's new rental strategy aims to maintain current business practices by building housing for the rental audience. “New home sales struggle, so the idea is that we have an income-producing property that we can continue to build or develop in the same disciplines where we have already been active,” says McSunas. “Our strategy is either buying existing homes or raw land to entitle and develop.”
Melia has already started executing the strategy. It acquired the 114-unit Mariner Square from the Irvine Co. The site allows them the ability to either operate it as existing multifamily or transition it into for-sale units. “It is bigger than our core product, but it fits into our strategy,” says McSunas.
In general, Melia is focused on assets ranging from 20 to 60 units in and around Orange County. “We are looking at purchasing properties with 20 to 60, which is similar to our home building operations,” says McSunas. “We typically build homes from 35 units to 50 units, and that is a space that larger companies do not get into. Our initial opportunities will likely be development projects, and it will likely be 18 to 24 months before we get those online.”
As an existing homebuilder, Melia already has established relationships with several cities in Southern California. “We have a good relationship with a number of Orange County core central markets, and that is where we are looking,” says McSunas. “But, we are also open. We typically use an hour drive time from our office, which is Irvine.”
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Kelsi Maree Borland
