When John Ho was given direction to launch Landsea Homes the operation didn’t have so much as a company computer.
It was 2013, and one of China’s largest home builders, Landsea Group, felt it was the opportune time to expand. Executives at the public company began examining the U.S. market in 2011 when the country was working its way out of the depths of the Great Recession. Ho, who worked for a real estate consulting firm in the U.S. before joining Landsea Homes, says the choice to open operations in the Western Hemisphere simply made sense.
“The two largest markets in the world from a home building perspective are China and the United States,” he says. “And then there’s everybody else.”
While China never slipped into a recession like the U.S., executives at Landsea Group, which was founded in 2001, began to see signs of a slowing Chinese economy around 2011. The Nanjing-based company’s founder and chairman, Tian Ming, wanted to diversify the Landsea portfolio, as China’s boom period began to relax. “The competition is more fierce in China and the opportunities there for growth are more limited as the overall economy starts to slow down and mature,” Ho says.
After a couple years of due diligence, Landsea Group decided 2013 was the right time to enter the U.S. So that’s what Ho, the company’s CEO, did. But first he needed to buy a computer.
The Launch
And after the computer he needed other essentials, like an email hosting provider and office space. “It doesn’t seem like a lot but if you started a division at an established home builder you’d have a lot of legacy systems and support,” Ho says.
Landsea Homes is headquartered in Irvine, Calif. and builds a variety of products, from condos and townhomes to 4,000-square foot single-family homes, in four states – California, New Jersey, Massachusetts, and New York. The firm now has more than 100 employees.
When asked why Landsea Homes, still a young company, currently builds in four states on both coasts Ho says it all boils down to familiarity and accessibility. Cities like San Francisco, Los Angeles, Boston, and New York are well-known and each have international airports, which is key for a Chinese-owned company.
Also, when Landsea was looking into a U.S. expansion, it hired U.S. consultants. Those consultants have offices in these major cities and were a helpful resource before and after Landsea Homes launched, Ho says. The major U.S. cities are also where Asian banks and capital sources have offices, and Landsea has used its existing relationships in China to help its new U.S. venture.
The company has completed 12 communities, eight of which are in California and three of those as master planned communities. It is currently building out Iron Ridge, a 543-home development in Orange County, Calif., that will feature five distinct neighborhoods. Construction started in 2016 and the first models are slated to be finished by the end of 2017.
In summer 2017, it also acquired Sanctuary Village, a 78-acre master planned community located in the East Bay city of Newark, Calif., that will be comprised of 386 single-family homes designed in four traditional neighborhood villages, each featuring two-story detached homes.
John Ho
The division is still getting its operation fully up and running, Ho says, but it has made big strides over the years to be in a position where it can acquire large pieces of land at a time. Ho says he can’t discuss closings because Landsea Homes is a wholly-owned subsidiary of a public company.
The Approach
Since languages, laws, and business practices are different in China, Ho explains, Landsea Homes had to create all its practices from scratch. “When we set up our U.S. business there wasn’t anything that we could transfer in terms of knowledge or experience, even things like accounting systems or HR policies,” he says.
From the start, Landsea and Ho wanted to hire people from U.S. home building companies to shape its operation from the top down, so Landsea Homes’ employees have worked for some of the biggest builders in the U.S.
“We hire locally and we recruit from the best builders in the business, whether it’s Lennar, Toll, KB, or New Home,” Ho says. “Those are the people that bring in relationships to help us continue to expand here,” he adds.
And although its parent company is several time zones away and conducts business differently, Ho says having a home building company as Landsea Homes’ capital backer is an advantage. “Even though there’s not a lot of technical things that we can transfer, because what we build in China is much higher density than what we build here in the United States, there’s at least that understanding of what it takes to be a home building company,” he says. “The way that you approach investments and the way you approach running a business is more from a home building perspective than a private equity investment perspective.”
Ho says his company isn’t afraid of building a higher density product or taking on master-plan projects that involve land development. In fact, the diverse portfolio is part of his plan. Looking forward, Ho adds, the company is planning expanding into other areas, including the Northwest, Southwest, and Mid-Atlantic.
Ho says Landsea Homes will continue to look to offer more products in its existing markets “that hit different price points and hit different stages of the customers’ lives.
