Rich, Famous ... and Growing

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Private builders can’t grow as fast as publics but are posting unprecedented numbers.

April 01, 2004

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Shea Homes, the largest privately owned home builder and, at No. 13, a Master of the Universe, last year became the first private builder to top $2 billion in annual housing revenue. But we expect No. 22 David Weekley Homes, No. 24 Kimball Hill Homes and possibly No. 26 The Drees Co. to join the $1 billion club this year. ThatÆs remarkable when you consider that Shea became the first private builder to crack that level only five years ago.

The big private companies are concentrated among the Rich and Famous, and most probably are destined to re-main there because private financing forces them to adopt slower, more modulated growth than the public builders. But thereÆs a lesson to be learned:

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If you hone your craft and build your team, your company can enjoy unlimited growth. Accessing the public capital markets is just one way to build a huge company, not the only way. Shea has an $850 million credit line through 16 banks, and Kimball Hill nearly matches that with $815 million through four banks.

Morrison Homes, a public builder, tops the Rich and Famous at No. 21 with $988.2 million in 2003 housing revenue. But glance down the ranks, and youÆll spot some of the most famous names in housing, including current PB Builder of the Year and California design leader John Laing Homes (WL Homes LLC) at No. 29, fast-growing G.L. Homes of Florida at No. 31 (up from 41) and Atlanta move-up maven John Wieland Homes & Neighborhoods Inc. at No. 35.

The higher the ranking, the harder it is to make a quantum leap in position, yet among the Rich and Famous are some of the biggest movers, including three based in the

hot housing state of Florida. Transeastern Properties Inc., based in Coral Springs, jumped from No. 65 to 43 on a revenue increase from $260 million to nearly $483 million.

Melbourne-based Holiday Builders Inc. moved from No. 75 to 60 on sales of 2,750 detached, entry-level homes for $336.4 million. Daytona Beach-based ICI Homes (Intervest Construction Inc.) hit $313 million on 972 closings in the luxury market to jump from No. 87 to 68.

California-based builders also made big moves, led by Young Homes LLC in Rancho Cucamonga. Young made the biggest jump of any company that appeared in the 2003 Giant 400, rising 168 places from a Striver at No. 281 to one of the Rich and Famous, at 113. Young did it by closing 617 detached, mostly entry-level homes for $182.1 million in 2003 revenue, compared with 285 houses for $57.8 million in 2002.

YoungÆs entry-level product averaged 1,800 square feet, priced at $250,000, but the company also sold move-up houses as large as 3,000 square feet and $450,000 in price.

Principal John Young says the biggest obstacles he faced in meeting burgeoning demand for homes in the far inland markets along Southern CaliforniaÆs San Bernardino Freeway (Interstate 10) were red tape associated with land entitlements and the still-smoldering liability insurance crisis.

This year, Young also is concerned about the availability of building materials. ôWe can deal with price increases by locking in forward commitments from vendors,ö he says, ôbut if our vendors canÆt get the materials because of industrywide shortages, that will shut us down. There are huge costs associated with those kinds of slowdowns in production.ö

Perhaps the most interesting move of all among the Rich and Famous belonged to Chicago condominium king MCZ Development, which jumped 139 places from No. 197 to 58 by closing on $340.5 million worth of high-rise condo sales in the city.

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