Optimism at 2013 PCBC: Builders both Old and New Plan for the Future

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.