Niches Key Smart Growth Strategy

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Hedgewood Properties' move into smart growth has many antecedents.

December 01, 2002

 

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At Longleaf, in the desirable Buckhead section of Atlanta, Hedgewood Properties is building 49 homes at prices averaging more than $700,000 on 5.9 acres. Managing construction on this tight site requires meticulous scheduling of trades.

 

Hedgewood Properties' move into smart growth has many antecedents. A few years ago, Pam Sessions, Don Donnelly and many of Hedgewood's longtime employees became disenchanted with where volume building was leading them.

"It had a lot to do with our culture," longtime executive Pat Kurek says. "We've always been a design-driven builder. We love great architecture. When our volume went up so dramatically, we had to find a way to deliver all those houses. We went into a fully integrated computer software system that forced us into a centralized organization structure. We started to write procedures that put limits on how things had to be done. We were always product-driven, but we became operations-driven. It didn't feel good. It certainly didn't help us with our customers."

At the same time, Donnelly and Sessions were running into stiff competition in their efforts to acquire the "A" locations in suburbia that their stylish, move-up product lines dictated. "A lot of builders were out there," Sessions says, "all kicking the same dirt."

Political opposition to growth was growing throughout the Atlanta area, too. "It seemed as if environmental issues were in the newspaper every day," Sessions says.

All these factors joined another in Donnelly and Sessions' search for a strategy to solve their problems: As regular vacationers to the beaches of west Florida, they saw Seaside in its infancy and watched with fascination as Andres Duany's traditional neighborhood design movement gained strength and began to influence housing markets throughout the South.

"We used to go to Destin [Fla.] all the time," Sessions says. "We even thought about buying a lot at Seaside. We never could afford it. But we watched it, and we visited Kentlands in Maryland several times. We've been to a lot of the newer TNDs as well. We're always studying what makes them work and not work."

Donnelly adds an interesting perspective: "Everything we do professionally is related to our progress in life - we are always our own target market. We constantly ask, 'Where would we like to live next?' When we first moved to Cumming [Ga.] 20 years ago, we loved the rural life. But then we had kids and said, 'This is crazy. We have to drive them 5 miles to see their friends.' We began to see the benefits of what Andres Duany talks about ' great architecture in walkable neighborhoods with parks where kids can play. Today we're spending more and more time in Atlanta and building in Buckhead," an affluent neighborhood in the city.

 

Shared Responsibility

Builder Scott Jones has been with Hedgewood Properties for three years, coming from a commercial building background. Most of his time with the company has been under the decentralized system, and Jones finds Hedgewood's team approach empowering and effective.

"It was a pretty drastic change in the way we handle everything, from material and trade purchasing all the way to closing a house. Now we've got to negotiate prices on material and get competitive bids from our trade contractors," says Jones, who teams with independent broker Ann Reddick to run Hedgewood's Founders Mill community in Roswell, Ga.

Jones isn't concerned only with construction and Reddick only with sales. Along with their individual duties is a large degree of shared responsibility. Together they meet with buyers, make decisions on product selections and refine pricing, as well as solve problems as they arise.

"It's not just the agent who is responsible for sales," Jones says. "The builder is responsible for sales almost to the same extent the agent is. Because we have so much input on the plans and lots, we do influence sales. So if sales are down or sales are good, the agent is not going to get all the blame or all the credit."

"I like this team system because it gives the builder a lot more flexibility and there's not a big bureaucracy to tie your hands and slow the decision-making process. This is a much leaner, more efficient way of building houses and running a business." - Meghan Stromberg

Eventually, all the pieces fell into place. "We had to get back to our roots as a design/builder," Sessions says. "What we do is really design/build. By going after niche locations in the city and established suburban towns, land with real intrinsic value, we've been able to step away from volume and even get to $1 million pricing. On those sites, people will pay for the design difference that is our unique added value. So our revenues have gone up as our volume is going down. Meanwhile, we've been able to add energy efficiency, healthy house and green building to our value equation."

Their new developments share many elements of TND, a term Hedgewood refuses to use in marketing. For example, Hedgewood recently opened model homes at Centennial in the historic, Civil War-era town of Roswell, Ga., now a north Atlanta suburb. The project has 99 single-family homes (2,200 to 4,000 square feet) and 69 townhouses (2,200 to 2,800 square feet), all on 33.45 acres adjacent to two major public schools. Single-family lots average an eighth of an acre. Many homes have rear-loaded garages. Prices start at $275,000 for the townhouses and run well above $400,000 for the detached homes.

Ridenour in Marietta, Ga., another northern suburb in Cobb County, has 45 detached houses and 24 townhomes on less than 24 acres. Many homes feature detached, rear-entry garages, large front porches, 10-foot first-floor ceilings and classic Southern architecture. Prices range from $300,000 to $500,000-plus.

All of Hedgewood's new niche products benefit from the high-profile success of Longleaf in Buckhead. "Edmund Park in DeKalb County was our first niche product and a learning experience," Sessions says. "We built detached houses there at more than eight units per acre, but the lots were all different, in both size and shape, so every house was literally a custom design, and they were expensive to build."

"At Longleaf, we're building 49 detached homes with drive-under rear garages, at prices averaging over $700,000, on 5.9 acres. But the lots are more uniform. People who see Longleaf and love it but can't afford a $700,000 house are now coming to Ridenour, where they can buy at $350,000."

Then there's Vickery, where construction is just beginning on 575 homes on 214 acres surrounding the original 23 acres Sessions and Donnelly have lived on for 20 years in Cumming. Based on a land plan by Duany, Vickery will include 475 detached homes, 85 townhouses, 40 lofts and 200,000 square feet of retail, civic and office space anchored by a 50,000-square-foot YMCA. The Hedgewood partners soon will have their primary home in Vickery and a second home in Longleaf.

But Vickery never will be marketed as a TND. "There are so many bad communities that use TND as a label," Donnelly says. "People have the expectation that every TND is going to recreate Charleston [S.C.], and nobody's done it yet. Over-promising and under-delivering has given TND a bad name. Weve lived here for 20 years, and we know what people want and expect. We've taken Andres Duany's concepts and massaged them to come up with a plan that will work here, but we won't label it a TND."

With each development, Hedgewood builds on its reputation for quality design and building. Municipalities now join landowners in beating a path to Hedgewood's door.

The niche opportunities are getting easier to find.

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