Could some of the most in-demand housing markets be cooling off?
George S. (Geoie) Writer jr. has been to the mountaintop, and he's also seen the valley.
George S. (Geoie) Writer Jr. has been to the mountaintop, and he’s also seen the valley. He was PB’s pick as 1977 National Builder Of The Year, a remarkable comeback after the credit crunch of 1974 nearly buried his company. After a decade of rapid growth, Writer Corp. peaked at $61.7 million in revenues in 1985. But then the late 1980s meltdown of the Colorado economy hit Writer Corp. with another haymaker.
The company’s stock, which once traded at $19 a share, bottomed at 30 cents. Writer opted out of the 1990s boom in Denver, favoring instead a slower, more modulated growth rate. Today, Geoie is reaching for what he sees as a profitability "sweet spot" at a production rate of 500 homes a year. But he keeps a wary eye on downside risk. Still, his projected 1999 volume of $80 million in revenue, on sale of 400 homes, will be a new, all-time record for Writer Corp.
PROFESSIONAL BUILDER: Does it surprise you that the current economic expansion and housing boom in Denver has gone on as long as it has?
GEOIE WRITER: Nothing surprises me anymore. But Lee Evans saying, "If you stay in this business long enough, you’ll go broke," always haunts me. I have a lot of respect for Lee, and I know any number of builders who did very well in this business and still had that happen to them. It nearly happened to me twice.
Nash Phillips comes to mind. He lived this business. He’d call me up at 11 o’clock at night just to let me know he was working harder than I was. And look what happened to N/PC. (Austin, Texas-based Nash Phillips/Copus Inc., once the largest privately-held home builder in America, became the largest bankruptcy in Texas history when the late 1980s Texas housing market crash felled the firm.) No matter how strong the market is, we always want to have a fall-back position, a contingency plan for a downturn. This industry seems to have a collective memory of about three years, but mine is a lot longer than that.
After coming back slowly through this decade, you’re now growing faster again. Why so?
Last year, we had 50% increases in sales, from 200 to 300 houses, and in earnings. (Writer Corp.’s 1998 gross profit of $12.5 million on revenues of $64.1 million bested 1997’s $8.3 million on revenues of $44.1 million.) We had been stuck at 200 units a year for a few years. I always had the goal to get back to 500 units a year. I thought that would be easy, but with the increase in competition in Denver, and the constrained entitlements, it hasn’t worked out that way. Trades are also really tight. Our plan this year is to do about 400 houses. We’ve expanded into another market, Ft. Collins, and done real well up there. We’ll get 50% of our increase this year in Denver, and the rest in Ft. Collins.
Do you fear another recession is coming?
Not really. We are fiscally conservative, but we’d like to have three or four specs in every community, for people who move into Denver and need a house right away. Realtors and transferees don’t like to wait. But right now, we’ve only got four specs beyond drywall stage company-wide. We are also working to regularize our production and get our product mix into better balance. We always want to meet the market that’s there. It’s just smart to know that it won’t always be there in the same volume as today.
Right now, our backlog is about 225 houses. And we’re about 60% townhouses, which is what we’re known for in Denver. We really pioneered attached product in this town. But the overall market is about 70% detached. We’d like to get to 60% detached and 40% townhouses. That’s why we’re buying land now, and developing more land. We’re trying to return to being a real community developer and get more single-family locations.
What’s your debt-to-equity ratio?
It’s been about 1-1, but with all the recent land buys, it’s now more like 1.25-1. But the new land is all "A" locations. We believe that if there’s a downturn, the "A" locations will continue to sell and "B" locations will become "C" and just sit there. I was worried last year that we were not going to be able to get enough "A" locations to stay viable in a downturn. We’ve had a lot of out-of-town national builders swarming into Denver. So we put a lot more land on our books. But we’ve been able to get a lot of it on rolling options.
How did you get so heavily weighted toward attached?
A lot of master plan community developers asked us to come in and build attached, because we’re recognized as the best townhouse builder in town. They forget that we’ve always been a great single-family move-up builder.
We’re not a manufacturer of houses. To compete with the big boys, we need to develop land so we can add that value. We now have about 2000 lots equally distributed between attached and detached, and we own about 50% of those lots outright. We have a total of 17 locations, but our run-rate is about 12. Some of the new stuff will be coming on stream just as others are winding down.
What makes you think there’s a profit sweet spot at 500 units?
For us, 200 units is a dead spot. At 300, it’s OK, and at 400, it’s a lot better. At about 250 units of production, you have to add a level of management. In our case, we added a chief operating officer. Beyond 500 units, you’ve really got to go to separate divisions. But at 500, we’ll have just the right volume to support the management we have in place.
We already have a division in place in Ft. Collins, so we are already preparing for life beyond 500 units. We have five people up there. They’ll do about 60 units this year and 150 in 2000. That’s a flat, lean structure, and they’re really running well. I guess that’s because they are right at 100 units of annual production now, which is the level Chuck Shinn (consultant and president of Lee Evans Group) says is most profitable.
You are approaching traditional retirement age. Will you ever take that step?
At some time, I’ll have to face the math. I just turned 64. We’ve got a great senior management team in place. I haven’t got it figured out yet how we’ll handle the transition. But if we continue to grow and improve our performance, we’ll have a lot of options. We could sell, merge or just continue to grow on our own.
|DOSSIER: George S. Writer Jr.|
|Company: Writer Corporation, publicly-held home building firm headquartered in the Denver suburb of Englewood, Colorado, will have 1999 revenues of $80 million, on sale of 400 homes. The firm now ranks 14th in metro Denver new home sales, according to Genesis Marketing Group, a local research firm which tracks the Denver housing market. Writer is 4th in Denver’s attached market, with a 5.3% share of that sub-market. At presstime, Writer shares were trading in a range of $2 to $2.25.
Personal: Geoie and wife Judy have been married for 37 years. They have five grown children--Wendy, Becky, Jeff, Andrea and Katie--and four grandchildren. Geoie is extremely active in Denver and Colorado Front Range community affairs, as well as national industry affairs. He has served as a director and officer of NAHB, and as a director of the Denver Chamber of Commerce. He served three terms on the residential council of Urban Land Institute, and as task force chairman of the Colorado Front Range Project. He was a co-founder and director of the growth committee of The Colorado Forum, which is struggling with the challenge to maintain both economic growth and quality of life along the Front Range.
Just For Fun: Defying his advancing years, Writer maintains a sports-centered social life that would exhaust most men 30 years his junior. He is an avid sailor (J-24 sailboat racer), tennis player, skier, mountain hiker, cyclist, and distance runner. When not in rapid motion, he is also an avid reader.