Could some of the most in-demand housing markets be cooling off?
The ability to move fast is often a critical element of success in home building. DeLuca Homes — based in Yardley, Pa., but with half its $237 million in 2004 revenues generated from a division in Central Florida — demonstrates how getting things done at double-time enhances the bottom line.
The ability to move fast is often a critical element of success in home building. DeLuca Homes — based in Yardley, Pa., but with half its $237 million in 2004 revenues generated from a division in Central Florida — demonstrates how getting things done at double-time enhances the bottom line. The evidence is on display at Toscana, a 437-unit, high-density in-fill development on an extremely valuable site near the Universal Studios theme park in southwest Orlando.
The 81.59-acre site in Orlando's prestigious Dr. Phillips area, was owned by Universal Studios, which originally thought it might be a hotel site. But recently, Universal decided to sell it to a residential builder/developer, and put out requests for proposals to a select group. DeLuca Homes was on the list, along with a number of the big public builders operating in Orlando.
"We'd done a gated community called Phillips Bay down the street from this site," says DeLuca executive vice president and COO Jim DeLuca. "It was 120 townhouses and 80 condo flats. We used some stone on those elevations, which is not an indigenous building material in Central Florida. But it really looked good and the project sold fast.
"That gained us some notoriety among land sellers in the market. Universal is very interested in the lifestyle environments that surround its park. They liked our architecture, so they put us on the submission list for this site — along with Pulte, Centex, Beazer and several others. We had 30 days to get our proposal together..."
DeLuca has its own in-house architecture department, which worked overtime to develop a concept for a high-density mix of single-family homes, townhouses and condo flats in five-story buildings. The multifamily buildings are isolated, to some degree, along the shores of Spring Lake, with a separate circulation road connecting to Turkey Lake Road (a major thoroughfare). But that circulation road does have a link to the townhouses and single-family homes — which have their own gated main entry off a separate side road.
"We were competing against the big names for this site," says Jim DeLuca, "but we got it 48 hours after our submission reached Universal. I think we won because we are a boutique shop, able to specialize our product by doing location-specific design, and we get every detail right. This site is unusual in Florida, in that it has 30 feet of elevation change. We were able to capitalize on that to create some interesting vistas.
"All of our homes are designed on CAD in 3-D models, down to 1/1000th of an inch," DeLuca says. "We position every building to enhance the overall esthetics of the community. Toscana is married to that site. It reflects the passion we have for design."
DeLuca won't reveal what it paid for the site. "Universal wants that kept private," Jim DeLuca says. "But it was a lot. It's scary what people want for ground in hot markets like Orlando, especially for in-fill sites such as Toscana. That means densities have to go up. 'Four to the acre forever!' is not a motto that will work. That kind of machine-like production building is on borrowed time. Tighter density doesn't mean you can't do great communities, but it does require a lot of thought."
Toscana's overall gross density is 5.4 units per acre; the townhouses are built at 5.8 units per acre.
DeLuca cites the fear that an overheated market can cool quickly as one reason his firm not only moves fast to secure land deals, but also sells fast and builds fast.
"On the production side, we are really a manufacturing company," he says. "We have a completely paperless operation. All of the vital information goes out to everyone in our production system the day we sell a house. It's all on-line. And all a vendor or trade needs to work for DeLuca Homes is a browser — not sophisticated software. They get a schedule and a work order automatically. Vendors, wholesalers, trades — they can all monitor when we cut every check, right on-line. They can get everything from bidding documents to plans to contracts from anywhere in the world."
DeLuca calls this online system "WiseView." It is half custom-programmed and the other half is produced by Mark Systems, a software vendor. "Success is not about being big anymore," says Jim DeLuca. "It's about who has the best systems."
DeLuca says his firm will build out both the 100 single-family homes and 145 townhouses at Toscana in a year or less, using tightly engineered construction processes and just-in-time deliveries of materials and products.
"We use all engineered lumber and headers to minimize shrinkage," he says. "Because of the spans in our designs, all of our roof systems are trussed, as are our floor systems. We have our own truss plant up north, and within the next year, we are looking to bring that technology to Central Florida."
"Quality, durability and consistent delivery are the three factors we value most in a product," says Rob Rosen, president of DeLuca's Southeast division, who presides over Toscana.
"We just moved to Merillat cabinets because we like their quality and the breadth of their lines, and we really value their ability to meet our demands for timely delivery. Getting the product there when we need it is a vital issue."
Jim DeLuca also praises Merillat's distribution initiatives: "They've changed their whole distribution channel. We can now pick up the phone and tell them we need 50 kitchens next week and know they will be there."
Close partnering with vendors brings other benefits: "We use Hanson Nordic Slate concrete roof tile at Toscana," says Rosen, "and they actually designed a custom color just for us. It's kind of a dark rust. We've partnered with them for a long time, and they just stepped up to the plate for us. We didn't pay extra for that service."
Rosen is also enthusiastic about the contribution of Therma-Tru fiberglass exterior doors: "They have the look of stained wood, which really presents well at point of entry."
Because of the site's high land cost, DeLuca reasoned its pricing would be up against a market ceiling for townhouse product in Orlando. "That's one reason we didn't phase construction — and sales — to allow frequent price increases," says Jim DeLuca.
So the firm opened townhouse pre-sales in April, 2004, with prices ranging from $392,990 to $418,990 for four floor plans from 2118 to 2509 square feet. By the time the models opened in May of this year, only the models remained to sell. DeLuca pre-sold all 141 townhouses in the rest of the community.
Marc-Michaels Interior Design of Winter Park, Fla., chose an eclectic mix of model furnishings and accessories to target young professionals and empty nesters — a conventional strategy for a townhouse product line. "We call the style 'transitional,'" says senior designer Nancy Short, "sort of in between traditional and contemporary. And we didn't show any children's bedrooms because families were not part of our target market."
Imagine DeLuca's surprise when families showed up at the top of the buyer profile at 35 percent of sales. Young professional singles and couples account for 25 percent, empty nesters 23 percent and investors 17 percent.
"We were smart enough to plan a lot of flexibility into the floor plans," says Jim DeLuca, "and the families are taking advantage of that. If you look at the Caterina plan, for instance, converting the upstairs loft into a fourth bedroom allows the second floor to be entirely for kids. And the back of the first floor — with the combination of living, dining, kitchen and outdoor lanai spaces — is great for family living and entertaining."
DeLuca builds the townhouses at Toscana for an average hard cost of $78.81 per square foot (materials and labor only).