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A Developing Story

Top 250 newcomer Stanford Carr has learned to diversify his developments.

FRAMEWORK FOR SUCCESS: Stanford Carr's master-planned Hawaii Kai development, The Peninsula, has generated $335 million in revenue. photo: Cory Lum
In 1997, Stanford Carr’s philosophy of calculated risk didn’t appear to add up. In a bottomed-out Hawaii real estate market, his development company, Stanford Carr Development LLC, built four resort model homes in Wailea, Maui, for landowner Shinwa Golf Group and lost $1 million.

“We painfully earned our loss,” Carr says. However, that loss turned into opportunity when Shinwa offered Carr land to build the Wailea Fairway Villas. The 118-unit, multifamily condominium project doubled anticipated sales, earning $40 million in revenue, and turned the earlier loss into realized tax credits.

“I learned we needed to be diverse in our market segments,” Carr says. Companies now under the Carr umbrella include: Stanford Carr Development, Pacific Island Realty, Inter-Island Home Loan, Alakea Design and Inter-Island Home Builders.

Stanford Carr Development makes its debut in the Top 250 based on sales from its housing developments and project management fees. In 2005, Stanford Carr Development had more than $197 million in gross sales, up from $195 million in 2004. Although he’s building about the same number of units in 2006 as he did in 2005, Carr anticipates 2006 sales will range from $175 million to $190 million, depending on the timing of closings.

Founded in 1990, the development company has weathered Hawaii’s volatile economy, surviving the recession and real estate crash of the mid- to late 1990s. During that time, Carr’s company developed successful projects on Oahu and Maui and won awards for design and quality.

There have also been challenges, such as a 1999 legal dispute over an Ewa development. Carr prevailed in the lawsuit, with a $2.8 million judgment in his favor in 2004. The case is on appeal. The company also had cash-flow problems in 2001 after buying a former C. Brewer & Co. development, forcing Carr to refinance and sell off some of his lands.

Carr likes to say he sees these challenges as “journeys,” but he fastidiously monitors economic indicators and has diversified his market segments and real-estate holdings to better hedge against such losses.

“I’ve learned that breaking even can be very fun,” he says. “You learn to be creative, more resourceful and entrepreneurial.”

Carr continues to finance his projects through a mix of debt and equity. He has worked with Goldman Sachs, Lehman Brothers, Hartstone and institutional investors, all of whom required a 15 percent return on investment. However, as real estate has become a hot commodity, those hurdle rates have dropped to 12 percent. Carr usually takes a 10 percent to 15 percent stake in his developments.

Within his companies, Carr owns over 1 million square feet of industrial income property, along with retail, apartment rentals and office space. In residential developments, the company has multiple product types from high-end resort to entry-level housing to mixed-use and master-planned communities.

“These segments are on different economic cycles,” he notes.

Earlier this year, Carr also contributed an undisclosed portion of the $2.2 million infusion in Aloha Airlines to help the airlines reorganize and come out of bankruptcy.

#42 Stanford Carr Development LLC
‘05 Gross Sales $197.1 mil.

‘04 Gross Sales $194.8 mil.

1.2% ^

“We need two airlines,” he says. And although his resort properties have seen a jump in local buyers from 30 percent 5 years ago to almost 60 percent in 2004 at the Wailea Fairway Villas, competitive airfares for Mainland buyers still aren’t bad business for Carr.

Carr says the local business community needs to advocate for high-paying, clean jobs. And one of the impediments to creating those jobs is housing, specifically affordable or “workforce” housing. He is on Gov. Linda Lingle’s Affordable Housing Task Force and is working with Maui Mayor Alan Arakawa to develop a master-planned community in Central Maui, called Kehalani, which includes affordable housing units. There were more than 300 reservations for the first 83 units sold on the market.

“We [the government] did not have much to negotiate with,” Arakawa says. “Stanford was one of the people willing to do it.” The Maui government does help expedite projects through the permitting and planning process and Carr says that, although it’s hard to quantify, the faster construction process is very important. “Timing can be the difference between hitting a market with a successful project or having a loss,” he says.

The Kehalani development is also Carr’s first crack at a complete master-planned community, including a commercial center, parks and a school. His Hawaii Kai development, The Peninsula, a master-planned community without a commercial center, has done more than $335 million in revenue and more than doubled initial homebuyers’ values. The Colony, Carr’s Hawaii Kai condominium development, sold out within weeks of coming on the market.

Anita Bigby, a loan processor for Aloha Aina Mortgage, recently purchased a three-bedroom townhome on the marina in The Peninsula for $760,000. “As far as price, the pricing is really a good value for new construction,” she says. Her purchase parameters required new construction and she was looking for similar quality to her home in a master-planned community in San Diego.

Carr says he learned about master-planned communities from the “school grounds of California” and with the help of Ernesto Vasquez, a founding partner at MVE & Partners, Carr’s consultant on multiple projects, including The Peninsula and Kehalani.

“I saw master-planned communities with high-quality architecture and interior appointments in California and wondered why we didn’t have those in Hawaii,” Carr says.

According to Vasquez, when he met Carr in the late 1980s, “Ideas were plentiful, but there was not much in the pocketbook.” MVE & Partners just opened an office in a space owned by Carr. “What I love about him is his heart,” Vasquez says. “He has a tremendous sense of pride in what he does. He’s building for a legacy.”

“To autograph your work, to be proud of what you do, I got that from my mom,” Carr says. “With her, I developed an eye and appreciation for arts, architecture and interiors, for the choreography of design.”

Although Carr grew up on a farm in Kula, Maui, his mother was an interior designer and his uncle was a flooring contractor. He says he has been on job sites since he was 8 years old and got his general contractor’s license at the age of 20 in 1982.

Stanford Carr Development is currently one of the most prolific developers of residential housing in the Islands, building more than 380 homes in 2005.

B.J. Kobayashi, president and CEO of The Kobayashi Group, a local development company, says Carr’s volume and variety in multiple markets on Oahu, Maui and the Big Island give him leverage with suppliers and contractors to help keep costs down.

“He [Carr] has unique insight into what the local and Mainland markets want in terms of design and finishes,” Kobayashi says. “And that’s a big advantage.”

Carr says he expects to build around 400 homes in 2006, with both resort and master-planned developments on the Big Island and cottages on Maui. He is actively looking for opportunities on Oahu, but is in a “wait and see” mode in that resort market.

“I like to look at three-year horizons,” he says. “I try not to trend too far out.”

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Jan 30, 2013 11:06 am
 Posted by  wmoto

What was the total costs to build the three condos?

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