NVR Inc., the nation’s third-largest homebuilder, isn’t making much noise about it, but the company just stuck its toe in the local homebuilding sandbox.
Through its Ryan Homes division, the company is in the midst of building models at Grande Park in Plainfield, with plans to sell and construct some 20 homes at the 884-acre master planned community.
It’s a small step into the market, to be sure, but well-capitalized NVR’s entry, which has been in the works for a year, merits watching. The Reston, Va.-based company has traditionally been thought of as a Mid-Atlantic builder, and in some markets along the East Coast its market share tops 20 percent.
In recent years it has sought to spread its wings. In 2009 it entered Florida. It entered the Indianapolis market that same year by purchasing hundreds of foreclosed, empty lots. The Indianapolis area had been the western edge of its market presence until it settled down in Plainfield.
Its arrival here appears to be like others for the notoriously closed-mouth company — quiet. NVR, which also operates under the names NV Homes, Rymarc Homes and Fox Ridge Homes, doesn’t trumpet its arrival in a market or talk about its future plans. Nor does the publicly held company schedule conference calls with Wall Street analysts or speak at investor presentations. In fact, the company’s home page names 14 states where NVR’s three divisions construct homes, and Illinois isn’t on the list yet.
Some trace its private way of doing business to lessons learned from NVR’s bankruptcy in the early 1990s and re-emergence in 1993.
One competitor that knows it’s here is a distant cousin with deep roots in the Chicago market, William Ryan Homes. Some 50 years ago, Pittsburgh brothers Ed, Jim and Bill Ryan got involved in homebuilding along the East Coast. Ed Ryan founded Ryan Homes, which was sold to NV Homes and became NVR. Jim founded what came to be Ryland Homes. And Bill eventually sold his company to his son, Billy, founder of William Ryan Homes.
William Ryan Homes, which has 11 Chicago-area communities, has no plans to change its marketing and doesn’t think it’ll be confused with Ryan Homes any more than consumers typically confuse one builder with another, said Vice President Deborah Beaver.
“We’re going to continue to focus on who were are, as we always have,” she said. “We’re not going to do anything different.”
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She noted that William Ryan’s closest community to Plainfield is in Joliet, where its homes start in the $170,000 range, compared with the Ryan product, six models that range from the upper-$240,000 range to more than $300,000.
NVR and its Ryan Homes won’t have a local track record to talk about, but what they do have is the best balance sheet in the industry. Part of that stems from a long-standing practice of not buying land outright but options for land. That has meant they haven’t had the write-downs of other builders.
Nationally, NVR last year had residential revenue of $2.9 billion and 10,030 closings, according to Professional Builder, an industry publication. The only builders that topped it were Pulte Group and D.R. Horton, which have a substantial presence in the Chicago market.
“It’s a way for them to test the waters,” said Michael Widner, a Stifel Nicolaus analyst who follows NVR. “They’ve probably gotten most of the opportunity out of the markets they’re concentrated in. If you want to be a growth company and you’ve saturated your local markets, you need to find growth elsewhere.”
NVR almost entered the Chicago market the more traditional way a year ago, via an acquisition, when it agreed to purchase Orleans Homebuilders Inc., which was operating under bankruptcy court protection. However, Orleans terminated that agreement and opted to reorganize.
Widner doesn’t expect NVR’s arrival to threaten overnight the health of public builders here and the smaller independent firms that have weathered the housing crisis.
“It may be meaningful in five to six years,” he said. “History has shown (that organic growth) is pretty difficult.”
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