NJ's Top Homebuilder Just Got Bigger

Hovnanian Enterprises is a legend in NJ homebuilding. Besides putting up one of every 10 homes (multifamily, townhouses, retirement communities and single-family) that have gone up in New Jersey in the last 30 years, the company has also breached the urban housing frontier in cities like Newark.

But the Red Bank, NJ-based Hovnanian has, for some time, had designs on a bigger target–the national stage. The company took a small step in that direction recently when it acquired Matzel & Mumford of Hazlet, NJ for $8.8 million in cash and an undisclosed amount of stock.

Now, Hovnanian has made its imprint on the national residential market with the acquisition of Washington Homes Inc., based in Maryland. Hovnanian will pay $77.4 million in cash or stock, and will assume an estimated $60 million in debt.

The combination of Hovnanian, a $1.2 billion company ranked 17th largest in the country in homebuilding, and Washington Homes, a $470 million ranked 34th, creates a housing behemoth ranked as the ninth largest homebuilder in the US. If the deal passes shareholder and regulatory scrutiny, Hovnanian would push past Beazer Homes USA of Atlanta and the Del Webb Corp of Phoenix into the top 10. The country’s largest homebuilder is the Pulte Corp. of Bloomfield Hills, MI, which last year had gross revenues of just under $3.9 billion.

Hovnanian has long been a key player in New Jersey, New York and Pennsylvania. The company has tried with mixed success to break into the metro DC market, and the acquisition of Washington Homes will very quickly take it to the pre-eminent position there. Hovnanian will also become the largest builder of housing in North Carolina.

“The two companies are an excellent cultural and strategic fit,” according to Ara Hovnanian, president and CEO of Hovnanian, positions he will retain after the merger is completed.

Hovnanian, third generation management in the family-owned company, will share power with Gaeton DeCesaris, Jr., chairman/CEO of the family-owned Washington Homes. Under terms of the agreement, DeCesaris will become president of homebuilding operations and chief operating officer for Hovnanian, and will join the company’s board.