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Friday, Dec 1, 2023

Cisneros Forms New Company to Build Homes

A few years back, former U.S. Housing and Urban Development Secretary Henry Cisneros launched a company dedicated to building affordable homes. One of American CityVista’s partnerships, with Tarzana-based Montage Development Inc., resulted in 109 new homes in Sylmar along with other developments with other builders in California, Texas and Denver. Turns out, that was just the beginning. Now, with a $100 million war chest from California Public Employees Retirement System (CalPERS), Cisneros has formed a new company, CityView, and taken aim at the housing shortage in L.A. along with several other areas in and outside of California. “Our short term target is to get to the point where we’re doing 1,000 homes a year,” said Joel Shine, CEO of CityView. “And I would hope that at any point we would always have a couple projects going in the Valley.” The first local efforts by the company, which is again partnering with Montage, will be in the Northeast Valley, where the company is about 90 days away from securing entitlements to build about 146 new homes in three separate developments. “We have discussions going with two other homebuilders,” to build more units in the Valley area, said Shine, who grew up in the Valley. “We’re looking at some deals in the NoHo area, and at the highest levels of density, we can probably make that work.” CityView acts as a one-stop shop for developers, offering debt and equity financing, assistance with zoning and other permitting procedures and even planning and designing. While some developers may take advantage of many of the services, it is the financing assistance that is of paramount importance to developers like Montage. “CityView is unique in that they provide the equity as well as the debt financing,” said Stephen Ross, president of Montage. “Typically we would have to go to numerous banks,” to put together financing for the land acquisition, construction and sometimes other needs. “So by working with CityView they’re providing us with all the money. That’s a lot easier for us.” Also important, particularly for smaller builders often working with urban infill land like Montage, is the understanding of the development process that CityView brings to the table. Infill development often requires zoning changes and even general plan amendments that can add a year or more to the time it takes for a developer to deliver homes, a timeframe traditional banks are often unwilling to factor into their loan terms. “We’re dealing with sophisticated people that know everything about the real estate process from entitlement and acquisition to the close of escrow,” said Ross of CityView. “We feel that by having a sophisticated, knowledgeable partner it gives us a leg up.” CityView formed in 2003, grew out of another group Cisneros had formed earlier, American CityVista. But that company, a partnership with KB Home, focuses on large residential developments often in suburban or rural areas. The funding from CalPERS came with a directive to build workforce housing in proximity to jobs, marching orders that meant CityView would have to operate in urban infill areas which typically can only accommodate smaller projects. “If we wanted to do workforce housing and focus on infill areas, we had to have a program that could accomplish several things,” said Shine. “We had to be able to do smaller developments and we knew that frequently the smaller developments would mandate the ability to deal with small to mid-size builders. You don’t see stock exchange companies doing $30 million deals.” From that framework, CityView developed a business model that would target the needs of those small to mid-sized builders by providing easier access to financing and offering them more affordable insurance coverage CityView can cut better deals because it has greater buying power than each of its building partners individually. Indeed, one area the company hopes to focus on is condominium development because it offers entry level pricing in urban areas, and the cost of insurance for condominiums has been one of the deterrents to building in Southern California. Despite those efforts, however, costs in Los Angeles continue to be a tough nut to crack. Montage, a company that has focused on affordable housing since its inception in 1997, just a few years ago rolled out its homes at prices around $300,000. Now the company anticipates its upcoming homes will come in at about $400,000. The cost of land in L.A. along with the rising costs of construction will limit some of CityView’s options in many parts of the Valley, Shine conceded. “We want to come in and be one of the most affordable alternatives in the marketplace,” he said, “and there are certain marketplaces we just can never be in.”

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