GTIS Partners and Hovnanian Enterprises Announce the Expansion of their Homebuilding Joint Venture Portfolio to $1 Billion of Equity to Build 12,600 Homes Valued at $6 Billion

Rhea-AI Summary

GTIS Partners and Hovnanian Enterprises announced expanding their partnership, investing $1 billion in equity to develop 12,600 homes across 15 joint ventures, valued at $6 billion. The latest venture includes 8 communities with 1,392 homes across 4 states, involving a capital investment of $115 million.

Positive

• Partnership totaling $1 billion in equity across 15 joint ventures in high-growth markets.

• Expansion to over a decade's successful joint venture partnerships between GTIS Partners and Hovnanian Enterprises.

• Diverse portfolio with different product types, price points, and geographic locations.

• Strong working relationship between the two firms across multiple business cycles.

• Excellent visibility into current home prices, absorption, buyer demand, and reduced development risks.

Negative

• None.

Insights

Real Estate Investment Analyst

The joint venture between GTIS Partners and Hovnanian Enterprises to develop 1,392 homes across various states represents a strategic move to capitalize on housing demands in high-growth markets. The investment amount of roughly $115 million, with a larger stake by GTIS, suggests a strong confidence in Hovnanian's operational capabilities. The projected buildout costs of $800 million reflect the scale and potential profitability of the venture, given the current favorable market conditions. The geographic and product-type diversification should mitigate risks associated with regional economic fluctuations and buyer preferences. Nonetheless, it's critical for investors to consider the cyclical nature of real estate, the impact of interest rate changes on mortgage affordability and the potential for market saturation with a large influx of new homes.

Market Research Analyst

The expansion of GTIS Partners and Hovnanian's joint venture addresses a key factor in real estate development: buyer demand. With a mix of townhomes, condominiums and single-family homes, the venture is positioned to attract a broad demographic. The detail that several communities are already selling and delivering homes provides immediate revenue generation, a positive sign for investors. The initiative could stimulate local economies through job creation during the construction phase. However, it's important to monitor housing market trends, such as shifts towards remote work and urban vs. suburban living preferences. This joint venture's success hinges on maintaining an alignment with consumer trends and economic indicators.

NEW YORK, May 2, 2024 /PRNewswire/ -- GTIS Partners ("GTIS"), a global real estate investment firm with a focus on residential and industrial/logistics investments, and Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, today announced that they have expanded their partnership to develop, construct and sell homes in a new joint venture of eight additional for-sale homebuilding communities. To date, the partners have invested in approximately 70 homebuilding communities through multiple joint ventures.

The eight newly added communities comprise 1,392 homes located across New Jersey, Florida, Delaware, and South Carolina. In addition to being geographically diversified, these communities are diversified by product type, consisting of townhomes, condominiums and both market-rate and active adult single-family homes.

Approximately $115 million of capital will be invested in the joint venture, with Hovnanian contributing 30% of the capital requirement and GTIS Partners providing 70%, with total build out costs projected at approximately $800 million. Hovnanian will manage the day-to-day operations of the venture.

Tom Shapiro, Founder, President and Chief Investment Officer of GTIS Partners, said, "We are very pleased to announce a further expansion of our existing relationship with Hovnanian. With this transaction we have a partnership totaling $1 billion in equity across 15 joint ventures in high-growth markets across the United States, representing approximately $6 billion in total project costs across 12,600 homebuilding units. Hovnanian has proven to be a tremendous partner and we are thrilled to continue working with such a highly-experienced homebuilder."

Ara Hovnanian, Chairman of the Board of Directors, President and Chief Executive Officer of Hovnanian Enterprises, Inc. also commented, "This addition marks the expansion to over a decade's worth of successful joint venture partnerships and a strong working relationship between our two firms across multiple business cycles. GTIS' deep industry expertise and homebuilding investment experience has made them ideal institutional partners to collaborate with to grow our homebuilding portfolio."

Ed McDowell, Partner and Head of US Acquisitions for GTIS Partners, added, "The addition to the portfolio represents a mix of product types, price points, and a unique geographic diversity across eight communities in four states, many of which are follow-on investments to communities we are already invested in with Hovnanian. This dynamic, combined with the advanced development stage of several of the communities within the portfolio – many of which are already selling and delivering homes – provides excellent visibility into current home prices, absorption, buyer demand, and construction and development costs, and reduces the risks typically associated with development to generate strong risk-adjusted return for both parties."

About GTIS Partners

GTIS Partners is a global real estate investment firm in the Americas, headquartered in New York with offices in São Paulo, San Francisco, Los Angeles, Atlanta, Charlotte, Phoenix, Dallas, Houston and Munich. The firm was founded in 2005 and is managed by President and Founder Tom Shapiro and seven other partners. The firm manages $4.5 billion in gross assets and is active across a wide range of real estate sectors including single family and multifamily housing, office, industrial/logistics and hospitality as well as opportunity zone investments. The firm invests at various points in the capital structure including credit, common equity and structured equity. In the US, GTIS has invested in over 215 assets across 45 unique markets including growth areas such as Miami, Phoenix, Dallas, Houston, Denver, Atlanta, Tampa and Charlotte. In Brazil, GTIS is among the largest real estate private equity firms with holdings including office, residential, logistics, and hospitality investments. Marquee assets developed by GTIS Partners in São Paulo include the Infinity office building and Palácio Tangará, a five-star resort style hotel. For more information, please visit www.gtispartners.com.   

About Hovnanian Enterprises

Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Matawan, New Jersey and, through its subsidiaries, is one of the nation's largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. The Company's homes are marketed and sold under the trade name K. Hovnanian^® Homes. Additionally, the Company's subsidiaries, as developers of K. Hovnanian's^® Four Seasons communities, make the Company one of the nation's largest builders of active lifestyle communities.

Additional information on Hovnanian Enterprises, Inc. can be accessed through the "Investor Relations" section of the Hovnanian Enterprises' website at http://www.khov.com. To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.

Media Contacts
Mary Beth Grover / Keely Gispan
ASC Advisors
(203) 992-1230
mbgrover@ascadvisors.com / kgispan@ascadvisors.com

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SOURCE GTIS Partners

FAQ

How many homes will be developed in the joint venture portfolio?

12,600 homes across 15 joint ventures.

What is the total value of the project costs across the 12,600 homebuilding units?

Approximately $6 billion.

Where are the newly added communities located?

Across New Jersey, Florida, Delaware, and South Carolina.

How much capital will be invested in the joint venture?

Approximately $115 million.

Who will manage the day-to-day operations of the venture?

Hovnanian Enterprises.

What is the percentage of capital contribution by Hovnanian and GTIS Partners?

Hovnanian: 30%, GTIS Partners: 70%.