The investor making a $150M bet on luxury rentals in southern Maine
Mark McClure sees Maine’s rental unit shortage and high prices differently than most people.
Maine’s 20,000-unit shortage of affordable rentals, more than 2,000 of them in greater Portland, translates into opportunity for the real estate investor and developer. Large developments of 500 homes or more are not likely to be built in Maine and New England because land costs are high. Smaller ones like his will proliferate over a decade to fill shortages, he said.
“For-rent homes are where the money is at right now, especially from the appreciation value,” said McClure, managing partner of GenX Capital Partners, which has offices in Portland and Miami. “So we’ll ride that wave, like any developer.”
GenX Capital Partners has developed 35 cottages and luxury homes in Maine over the past two years. It has more than 300 multi-family condos and luxury homes planned. The retail value of the projects tops $150 million, said McClure, 54, a Cape Elizabeth native and University of Southern Maine graduate who splits his time between homes in Falmouth and Miami.
McClure is part of a small but growing trend in Maine, where housing shortages and high demand are attracting investors. Institutional investors like McClure made up 6 percent of residential real estate sales here in 2021, a recent National Association of Realtors report found. That is less than half the national average of 13.2 percent, but it is growing.
It increased the most in Hancock County, from 6 percent in 2020 to 9 percent in 2021, the report found, with smaller hikes in Penobscot County to 8 percent and Cumberland County to 6 percent. The realtors’ association defines institutional buyers as companies, corporations or limited liability companies, which includes mom-and-pop owners.
Before the pandemic, McClure was financing projects, but that business dried up. He switched to developing new homes for rent in southern Maine and southern Florida, a business he said has “really taken off.”
He has several other projects in various planning stages, including a 45-unit market rate apartment development in Cumberland Foreside and 30 duplexes containing 60 townhouses on Hope Avenue in Portland.
McClure’s properties are primarily for-rent homes for wealthier clients, although some include for-sale units. Others, like the development he hopes to build in Portland, also will contain affordable housing, which the Maine State Housing Authority defines as paying 30 percent or less of annual income to mortgages, rents, insurance and utilities.
His strategy is to build new homes, primarily for rent, in southern Maine because he knows the market well. He also looks at income levels and the types of jobs in an area before deciding to invest.
Some communities and residents have pushed back against investors adding developments or buying homes. Many potential buyers also worry that investors will outpay individuals in multiple bidding situations in the tight real estate market.
Tom Landry, an agent at Benchmark Real Estate in Portland, said he has not seen investors push out other bidders in Maine so far, but it might be happening nationally.
In November, developers canceled a project that would have brought 37 new affordable housing units to a project near Cape Elizabeth’s town center. They gave up after a group opposing the project successfully petitioned 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 town.
Cape Elizabeth judges developments by the quality of the project, not who is proposing it, said Town Planner Maureen O’Meara. The projects must meet the town’s subdivision ordinance and account for traffic, stormwater, landscaping and adequate utilities.
McClure admitted he is getting pushback from neighbors for land he hopes to purchase in Cape Elizabeth on which to build 14 townhouses for purchase or rent across the street from the entrance to Portland Head Light and Fort Williams Park. The owner of the 16 acres is trying to get the plan approved, after which McClure would buy it.
Pushback adds big risk to potential projects, which require upfront deposits of $10,000 to $100,000 for the property and planning, he said. The Portland project will cost well over $200,000 for site plans. He is capitalized through personal funds, investors and business partners.
“It’s a risk,” he said. “There are no guarantees.”
The Portland development would require 25 percent of the units to be affordable under city regulations. McClure said that will bite into profits, but the other units will rent for market rate.
Always looking for opportunities, McClure also sees high demand for short-term rentals in southern Maine. He rents out his home in Falmouth through Airbnb from June to August for $40,000 per month.
“That’s $120,000 just for the summer,” he said.