North Shore home builder heads south for new business
The Procopio Companies has been building housing in Massachusetts since 1950, with an exclusive focus on multifamily projects over the past decade. The family-run business, headquartered in Middleton, has ventured into every New England state except Vermont.
This year, it’s planning to venture much farther from its home base north of Boston, all the way to Raleigh, North Carolina.
“We just view it as existential for us,” Procopio Cos. CEO Michael Procopio said. “We cannot limit ourselves to the New England markets. The deals are too thin. There’s not enough yield here.”
Senior executives have been traveling to the Raleigh area since late last year, meeting with residential real estate brokers, contractors, and public officials and scouting potential acquisitions. The company could have two sites under agreement as soon as next month, one of which would be single-family rentals, the other for a potential blend of single-family rentals and multifamily, said Bryan Vitale, vice president of development.
Procopio Cos. leaders say that while they have been interested in the South as a market for years, the sharp increase in construction costs locally prompted them to get serious about expansion more quickly.
In addition to Raleigh, the company is hoping to pick out at least one other Southern market by year’s end. Executives have been looking at places in northern and central Florida, Texas and parts of Kentucky north of Nashville, among others.
“We want to identify some markets that can be another Boston for us, where we can do a bunch of deals,” Procopio said. “We’re not interested in a one-and-done.”
The cost increases in Massachusetts, he said, have been “out of control.” A building design that cost $235,000 per unit to construct north of Boston a year and a half ago now costs upward of $350,000 per unit, according to Procopio. The cost of construction in the South is not only much less, the potential for rent growth in properties there is greater.
The capital partners that Procopio Cos. works with have grown more willing to do business down south, according to Vitale.
“Before, if I brought up a 325-unit deal in Raleigh to some of the New York partners, they would have laughed me off the Zoom call,” Vitale said. “Now, they’re coming to us and saying, ‘Guys, we want to do deals down there.’”
The company landed on Raleigh as its first destination in part because of its swift population growth and jobs gains, executives said. The city is in North Carolina’s Research Triangle, home to Duke University, the University of North Carolina at Chapel Hill, North Carolina State and all of the talent those institutions spin off. There is also an element of familiarity there for New Englanders, they said.
“A lot of people from the Northeast have moved down there. It’s a different feel from further south, right? It’s pine trees, not palm trees. It’s moderate weather. It’s all the things that people love about being south of the mid-Atlantic, but it still feels very New England in a lot of ways,” Procopio said.
Procopio Cos. does not have any full-time employees in Raleigh. Senior leaders like Procopio and Vitale have been regularly flying to the city, and once the company begins work on sites in the area, more project-level staffers will begin making trips as well, Vitale said. One of the biggest challenges, he said, is establishing relationships with contractors. Procopio Cos. handles development, construction and project management work in New England.
The company will likely eventually have boots on the ground in Raleigh full-time, but executives believe that for now, doing business there is not all that different from doing it in Portland, Maine: The drive to Portland is roughly the same as a flight to Raleigh, they said, and in either case, they’re far enough away from Greater Boston to have a different pool of contractors and managers.[Source Article]