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Scripps Ranch Investment Firm Sees Housing Market Adjusting

Presidio Residential Capital, a housing development and management firm based in Scripps Ranch, had a stellar year in 2022, closing on 811 homes – up from 572 in 2021.

Don Faye
Principal
Presidio Residential Capital

“That was a record number of homes we closed,” said Presidio Principal Don Faye.

“We picked partners that operated in markets that they knew really well and then we evaluated the projects. We made sure they had the capability to do well in good times and in not so good times,” Faye said. “Anybody that says there isn’t a little bit of luck involved in the business, I don’t think is completely honest with themselves.”

With interest rates still rising and inflation persisting, Faye said that he’s expecting a reasonable performance in 2023, but not as strong as 2022.

“I don’t think we’ll avoid some pain,” Faye said.

Closing the sale on 600 homes would make it a good year, given the circumstances, Faye said.

“We’ve essentially adjusted our business plan,” Faye added. “We still like the market. We closed on three of four deals in the last 90 days or so.”

Presidio’s portfolio includes 3,300 homes and lots for sale, under construction, or in the entitlement of development process. The company has 19 communities with active sales.

In 2022, Presidio did particularly well in the Central Valley, closing on 618 homes.

“Our goal this year, I think we’re probably looking in the 400s,” Faye said.

Despite the current downturn in the overall housing market, Faye said it doesn’t compare to the Great Recession of 2008 and 2009 when the bottom fell out of the housing market.

“The last one wasn’t a recession, it was a depression,” Faye said. “The whole industry, the building industry built way too many houses, developed too many houses, and supply and demand was out of whack.”

Lenders then were virtually giving money away to buyers who had little or no proof of income.

“It’s not happening this time and we don’t see that happening. We see a slowdown, prices are coming down, concessions are going up,” Faye said.

One indication that Faye follows is the number of sale offers being canceled, which he said picked up in June and July but have since dropped. In February, only three of 42 sales were canceled  in developments where Presidio has invested, he said.

“The market is adjusting, at least the market we’re in,” Faye said, adding that Florida has been a strong market for housing investment.

“The Bay Area, San Francisco, boy that is struggling. That’s overpriced and prices went up way too high and you’ve got a lot of Silicon Valley impacted negatively. Sacramento has slowed. That’s an OK market. We’re in that market. Orange County is slowed. L.A. is generally slow,” Faye said.

Presidio Residential Capital

Founded: 1998
Headquarters: Scripps Ranch
Employees: 10
Business: Real estate development management
Website: www.presidioresidential.com
Contact: 619-573-1806
Notable: Presidio has infused more than $2 billion into the economy to capitalize on the housing industry. It targets builders in Arizona, California, Nevada, Idaho, Colorado and Utah, with current committed capital of $250 million focused on 25 plus projects.

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