As opposed to the gallows humor and despondent energy of the
last several years, the 2013 PCBC – staged for the first time in downtown San
Diego – was characterized by a strong optimism, with education sessions now
focused on obtaining land, getting financing, growing your organization and
building for an increasingly multi-cultural population.
At night, besides the Builder Bash co-hosted
by
Builder & Developer magazine, there were so many parties being thrown that it would be
nearly impossible to hit them all.
In
summary, the new dawn for which we’ve all been waiting has clearly risen.
During the show, I had the chance to chat at length with two
builders gearing up strongly for what we hope is an extended industry
renaissance, but these aren’t huge, public builders with operations in multiple
markets.
Rather, they include the first
builder to go public since 2004 (TriPointe Homes) as well as an established
niche player with the financial backing of a large Japanese conglomerate (MBK
Homes).
In both of these cases, growth
is forecast to be steady with the ability to build multiple product types.
In the case of TriPointe, former William Lyon Homes alums
Doug Bauer, Tom Mitchell and Mike Grubbs founded their building firm in April
2009 even though there was little sign of the housing rebound to come. The “tri” comes from the company’s focus to
think, renew and inspire community development by tapping industry veterans with
impressive track records, but it was really two pivotal events which led to the
company’s growth.
In the fall of 2009, when The Irvine Company’s Donald Bren
decided to ignite the local market by hiring fee-for-service companies to
continue building out the ranch, he took a chance on the start-up company due
to his own confidence in the team’s ability to deliver. That success – combined with Bauer’s personal
friendship with investor Barry Sternlicht and his multi-faceted Starwood Capital
Group – led to a $150 million investment which allowed the fledgling builder to
buy its most important asset – land -- often at heavily discounted prices. According to Bauer, their timing was just
right to be making such bets, since most private builders were too heavily
leveraged due to their extensive land holdings, and public builders were busy
keeping up with their regular bond payments in order to remain solvent.
As the company continued to scale up its lot purchases and
over 350 closings per year, it was time for the next step, which for them was
an initial public offering in January 2013 netting $233 million, almost all of
it targeted towards more land purchases and construction costs. Moving forward, Bauer plans to build
throughout California as well as Colorado and other strategic states, with the
ability to develop everything from traditional single-family homes in
master-planned communities to multi-family product in various infill
locations. In each case, TriPointe plans
to include green building products and services as well as ‘memory points,’
which are rooms and design elements intended to spark the imagination of
potential buyers with their own set of tastes and traditions.
In the case of the boutique builder MBK Homes, the story is
one of emerging from a homebuilding hibernation which included diversifying
into rental housing, live/work units and even rehabilitating distressed REO
properties for sale. As one of many
subsidiaries of the global Japanese conglomerate Mitsui & Co., MBK also has
the distinct advantage of being able to finance its activities internally
should it choose to do so.
However, according to long-time president Tim Kane, the
company’s move into rental housing paid two different types of dividends: besides providing cash flow when home
building was almost non-existent, working with Gen Y customers has given it a
marketing edge because they’re now fully aware about their wants and
needs. With the price for land permitted
for condominiums now worth more than those for apartments – which Kane says was
flipped for the last seven years – MBK is again on the hunt for California projects
which would hit that bull’s eye of providing housing within a 30-minute commute
of major employment centers.
In the last 90 days alone, the builder has invested $40
million in locations as diverse as Newport Beach, Stanton, North Hollywood and
San Diego, for which it plans a variety of both single- and multi-family
projects focusing on the high quality and customer experience which has made it
the top choice of homebuyers surveyed by Eliant for three years running. The goal?
To make sure buyers are so enthralled with their new homes that they
won’t even consider a resale alternative.
Please click here to see the edition of BuilderBytes for 6/26/13 on the Web.
