Seeking Stability, MBK Diversifies With Rentals
By: Lindsay Machak
Tim Kane panicked. As the economy got worse, the MBK Homes president wasn't sure how to secure the future survival of the Irvine-based home builder.
Tim Kane, MBK Homes
"At that time, we were thinking that this was not part of our worst-case scenario," he says. "[Company leaders were saying] this is much more severe than we thought. This was much more severe than we had anticipated. It was really after 2009 when we started thinking about how we are going to prepare ourselves [in the future] if something happened again."
That's when Kane and his management team decided they needed a new strategy. The company spent time rehabbing distressed REO properties and contemplated getting into single-family rentals. But those business lines presented their own challenges.
"There have been no institutional buyers for single-family rentals," he says. "One of the questions was 'what's the exit strategy?'. Say you own 1,000 rentals. At what point do you get your capital back?"
After pouring over research and talking to consultants, the leadership team decided that multifamily rental housing would be the company's future stabilizer.
"The rental market does not have the same ups and downs as the [single family] housing market," he says. "The two businesses together are complementary because the more steady approach on rental is a complement to the more erratic housing approach."
The goal is to have a company with about 50 percent of the business coming from either side of the market, with the ability to switch gears and ramp up one side or the other depending on the economy. Kane hopes the company will be fully integrated within the next five years.
Less than two years ago, the company invested in the San Diego market with their first for-rent project. Ocean Air Apartment Homes, located in Torrey Hills, Calif., broke ground in June and includes 100 townhomes and luxury flats. The company's second rental community, Palisades at Sierra Del Oro, broke ground in Corona, Calif. in November, another testament to Kane's vision.
"I'm proud," Kane says. "I'm proud of what we've accomplished."
Posted on December, 19th 2014