Investor makes $150 million bet on luxury rentals in southern Maine
Mark McClure views Maine’s rental housing shortage and high prices differently than most people.
from Maine Shortage of 20,000 units of affordable rentals, including more than 2,000 in Greater Portland, translates into opportunity for the real estate investor and developer. Large developments of 500 or more homes are unlikely to be built in Maine and New England because land costs are high. Smaller ones like his will proliferate for a decade to fill shortages, he said.
“Homes for rent are where the money is right now, especially in appreciation value,” said McClure, managing partner of GenX Capital Partners, which has offices in Portland and Miami. “So we’re going to ride that wave, like any developer.”
GenX Capital Partners has developed 35 luxury cottages and homes in Maine over the past two years. It has over 300 multi-family condos and luxury homes planned. The retail value of the projects exceeds $150 million, said McClure, 54, a native of Cape Elizabeth and a graduate of the University of Southern Maine who splits his time between homes in Falmouth and Miami.
McClure is part of a small growing trend in Maine, where housing shortages and high demand are attracting investors. Institutional investors like McClure accounted for 6% of residential real estate sales here in 2021, a recent National Association of Realtors Report found. That’s less than half the national average of 13.2%, but it’s growing.
It rose the most in Hancock County, from 6% in 2020 to 9% in 2021, according to the report, with smaller increases in Penobscot County at 8% and Cumberland County at 6%. The Association of Realtors defines institutional buyers as companies, corporations, or limited liability companies, which includes family owners.
Prior to the pandemic, McClure funded projects, but that activity dried up. He turned to developing new homes for rent in southern Maine and southern Florida, a business he says has “really taken off.”
He has several other projects in various stages of planning, including a 45-unit mark-to-market apartment development in Cumberland Foreside and 30 duplexes containing 60 townhouses on Hope Avenue in Portland.
McClure’s properties are primarily homes for rent to wealthier clients, although some include units for sale. Others, like the development he hopes to build in Portland, will also contain affordable housing, which the Maine State Housing Authority defines as paying 30 percent or less of annual income for mortgages, rent, insurance and utilities.
His strategy is to build new homes, mostly for rent, in southern Maine because he knows the market well. It also looks at income levels and types of jobs in an area before deciding to invest.
Some communities and residents have rebuffed investors adding developments or buying homes. Many would-be buyers are also concerned that investors will pay more than individuals in multiple bid situations in the tight real estate market.
Tom Landry, an agent for Benchmark Real Estate in Portland, said he has yet to see any investors push back from other bidders in Maine, but it could happen nationwide.
In November, developers canceled a project that would have brought 37 new affordable housing units to a project near downtown Cape Elizabeth. They dropped out after a group opposed to the project successfully asked to send the issue to a public referendum. They said the project was no longer viable to move forward.
A recent project called Maxwell Woods added a combination of luxury condominiums and a pair of four-unit apartment buildings, which is unusual for the city.
Cape Elizabeth judges developments by the quality of the project, not who proposes it, said city planner Maureen O’Meara. Projects must adhere to the city’s subdivision ordinance and consider adequate traffic, storm water, landscaping and utilities.
McClure admitted he was pushed away by neighbors for land he hopes to buy in Cape Elizabeth on which to build 14 townhouses to buy or rent across from the entrance to Portland Head Light and Fort Williams Park. The owner of the 16 acres tries to get the plan approved, after which McClure would buy it.
The pushback adds significant risk to potential projects, which require initial deposits of $10,000 to $100,000 for ownership and planning, he said. The Portland project will cost well over $200,000 for site plans. It is capitalized by personal funds, investors and business partners.
“It’s a risk,” he said. “There are no guarantees.”
the Portland Development would require 25% of units to be affordable under municipal regulations. McClure said that would bite into profits, but the other units would rent at market rates.
Always on the lookout for opportunities, McClure is also seeing strong demand for short-term rentals in southern Maine. He rents out his home in Falmouth through Airbnb from June to August for $40,000 a month.
“It’s $120,000 just for the summer,” he said.