"The most frequent thing I hear when I visit one of our communities is, 'Thank god someone is building new homes in this neighborhood,'" says Henry Cisneros, chairman and CEO of American CityVista.
Launched in August 2000, American CityVista is an urban construction venture involving homebuilder KB Home, Mr. Cisneros, and a handful of other investors. In less than three years the company has sold more than 1,000 homes in five city developments. American CityVista has built or is in the process or building 12 such communities in California, Texas, and Arizona and expects to build 1,400 homes in the year ahead.
Though the company specializes in so-called infill development projects - urban sites that have, in the words of Mr. Cisneros, "been written off" - all of the construction is aimed at middle-market buyers. Prices range from about $75,000 in Laredo, Texas, to more than $300,000 in Sylmar, California.
"It has been very successful. All the developments have either sold out or are on the verge of being sold out," says Mr. Cisneros, a former secretary of Housing and Urban Development and former mayor of San Antonio. Hispanics have accounted for about 70 percent of sales, he adds.
According to the September 2002 issue of Forbes magazine, American CityVista had to that point earned a gross profit of $27 million on revenues of $135 million. Mr. Cisneros says the actual figures are considerably more modest, though he declines to provide specifics.
KB Home owns 35 percent of the company; Mr. Cisneros and his partners own the balance. All told, the venture has seven principals and offices in San Antonio and Los Angeles.
In addition to its own development projects, American CityVista will soon begin building communities in California cities as part of Pacific CityHome, a partnership involving Washington Mutual and backed by the CalPERS (California state retirement fund) investment portfolio. American CityVista was selected to participate from among more than a dozen development firms.
As American CityVista's success demonstrates, building communities in inner-city areas has advantages. To begin with, there is considerable demand for new construction near urban job centers and schools. And local governments often welcome - initially at least - building ventures that promise to alleviate urban blight.
J. Thomas Black, an urban development economist and consultant, says the demand for city housing construction will only increase as baby-boomers age and the number of childless households grows. Prospective homebuyers without children need not worry about schools and playgrounds, and tend to focus instead on amenities such as proximity to work and cultural attractions, he points out.
The U.S. economy's continued reliance on work done in offices also will fuel demand for higher-density urban housing located near such buildings, he says.
"This is not at all new. There was discussion about the need for this sort of thing back in the '70s, and today there are a number of companies that specialize in urban redevelopment," says Mr. Black, citing Atlanta's Post Properties as an example.
American CityVista is unique in two related respects, however. Taking advantage of KB Homes' resources, contractor relationships, and expertise in large-scale construction, American CityVista builds sizeable communities. Each of its development projects to date boasts more than 100 homes, and one - Lago Vista in San Antonio - is expected to have 600, of which 270 have already been sold. In comparison, much urban housing construction is decidedly small in scale.
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