During a question and answer session at a recent industry conference, a home builder asked Moody’s Analytics chief economist Mark Zandi for his thoughts about the labor
The Table: Leaders of the Pack
The residential construction industry as a whole is a huge and fragmented one, with literally hundreds of builders recognized as leaders in their respective markets and niches.
The Round Table
Jim Cimbalista (left) is the custom home director for DeLuca Homes, custom division, out of Warminster, Pa. Launching only three short years ago, the custom division will build around 10 homes this year in the $1 million-plus range throughout Eastern Pennsylvania and the upscale suburbs of New York.
As President of London Bay Homes in Naples, Fla., Mark Wilson (back) expects his business to grow by about 30% this year, as it has the last two. This translates into nearly 20 homes in the $2 million to $7 million range.
Donna Pedersen (front) started Epiphany Creators, Pleasanton, Calif. two years ago. She and her three partners have built two elaborate, multi-million dollar spec homes in that time.
Jordan Saper (right) is co-owner of Pemberwick Development Corp. in Greenwich, Conn. One of the largest spec builders in the Greenwich/Long Island, N.Y. markets, they have built 20 spec homes with an average sale price of around $5 million.A honed stone floor brightens the kitchen and defines its boundaries. With both an island and a snack bar, counter space is abundant in this key area. Countertops are made of honed granite, the custom cabinetry is cherry and the ceiling is tongue-in-groove maple.
The residential construction industry as a whole is a huge and fragmented one, with literally hundreds of builders recognized as leaders in their respective markets and niches. And with the economy and real estate holding at such strong levels the past several years, some might think forming a successful building company would be an easy thing to do. You and I both know that just isn’t the case.
Yes, the economy has been cooling but staying strong, and high-end construction has traditionally been able to weather minor economic storms better than most industries, but anyone who has tried their hand at luxury home building knows it is far from easy. It takes a special blend of attributes and talents to successfully house this nation’s wealthy.
The four builders and developers responsible for the homes featured in this issue may not be the four largest luxury builders in the country, as that’s a specious yardstick when you consider the nature of the business—one house for one client. But these people are representative of the cream of the high-end building crop. They produce spectacular products for each of their clients and they do it efficiently, professionally and profitably. And they’re willing to share their recipe for success.
"We’ve set up our company like you would any business," says Mark Wilson. "We have to be able to handle the different facets of production just as any manufacturer of a product does. We have people to handle construction, scheduling, operations, marketing and finance."
That may seem like an obvious point, but as Donna Pedersen states, there are still some luxury builders out there who don’t handle the business end of things very well. Pedersen got into this industry two years ago after representing herself and winning in litigation against her general contractor.
"It brought home the point that a custom builder with a good business sense can go far," says Pedersen. "It’s hard to have both the creativity and the business sense. I don’t have both, so we’ve assembled a team of people who have all those skills among them."
Jordan Saper couldn’t agree more. He says developers who have both the creative passion and the business sense to manage the process are rare. The skill sets are so different that they are often mutually exclusive.
"I don’t have both skill sets, and neither does my partner. But we complement each other in that I can brainstorm on creative design details, and he keeps me in check to make sure they’re economically feasible. He’s got the passion for the business end of things," says Saper.
Quick and Efficient
Jim Cimbalista has the unique luxury of having a long-established parent company in DeLuca Homes to utilize as an operations model and source of support. This includes an in-house design and engineering team that most custom building operations do not have.
"This really streamlines the entire design process for us. We can respond to the diverse needs of every one of our clients quickly and efficiently, which is a key in building custom homes," says Cimbalista.
This rapid response is a result of having a sound business model and efficient operations, and can be the difference between success and bankruptcy when carrying the risk of a multi-million-dollar land deal or spec project. Even if you don’t have an in-house design team, Cimbalista says a sound business model with an emphasis on information flow will provide similar results.
"I would recommend that custom builders stay on the leading edge of technology in that respect," says Cimbalista. "Set up a computer system so that information goes directly from the design table or CAD station to the correct people in the purchasing, scheduling and construction departments, and to anyone else who may need it."
This type of communication results in cost reductions and efficiencies beyond the simple avoidance of misunderstandings and delays. It can also dramatically shorten the planning and approval processes.
"By communicating in a businesslike manner and making sure everyone is prepared, you can spend most of your time on the actual construction of the house," says Pedersen. "This was instrumental in putting our most recent project through approval in only 45 days."
Obviously approvals processes vary widely from city to city, but one constant is a builder’s need to push the process as much as possible.
"These high-end products can often be too much for a builder to carry through a long approvals process," says Saper. "We got it down so that the entire predevelopment process - from identification of the land to final approval - takes us about six months, and then we can spend the next 12 months focusing on crafting the home."
Relationships are Key
Paramount to this information flow, regardless of whatever system you may have in place, is a strong relationship with all the supporting professions and trades. Architects, designers, planners and trade contractors are as much a part of the team as the president or any or the partners.
"We work with about six different architects," says Wilson, "but we work with them often enough so we know each other’s style and we get things done quickly to keep the cycle moving continually forward."
Jordan Saper says his gratitude and respect for his tradespeople has won him the right to be a hands-on developer. "They know how we like to work, so they let us monitor the progress of the home on a daily basis without feeling like they’re ‘being watched,’" says Saper.
Cimbalista notes that while the trust among team members is what allows them to build a beautiful home, it is the client’s trust in the company that allows them to stay in business.
"When your company is running smoothly, that comes through to potential customers. And when your team works well and makes the process enjoyable for the buyer, then your confidence and reputation are enhanced," says Cimbalista. "It’s a self-feeding cycle of success."
While all these builders recite many of the same secrets of their success in some degree or another, each credits at least one attribute unique to them. Saper counts the ability to visualize the entire project and intuition as one of his major strengths. Pedersen relies heavily her entrepreneurial spirit and willingness to do any task - even clean the jobsite in the rain. Wilson credits his dedication to putting the client first. Cimbalista draws upon his background as an architect and his affinity toward design.
Whatever you may name as your keys to success, be they the same as those listed here, similar or even wildly different, there is one universal component for any success. Especially in home building.
"It takes a burning passion and ambition," says Wilson. "Because at the end of the day, it’s still a hell of a lot of hard work."