Know Your Strengths

Buildable residential land is about as scarce in northern New Jersey as it is anywhere in the country. Jay Grant, a second-generation luxury home builder, can attest to this firsthand. He builds in an area halfway between New York and Philadelphia where sheer demographic pressure has resulted in high demand, particularly at the higher end. The area is also home to Hovnanian Enterprises, Toll Brothers and a division of Pulte Homes, among other large builders.

"When I first started in this business, the word on the street was that the big guys would not even look at something less than 50 lots," says Grant, who launched his company in the mid-1980s. "Today they are doing 15- to 20-lot jobs."

If you attended either of the past two International Builders' Shows, you might know Grant for his seminar on how small-volume builders can build an "iron curtain" around their assets and avoid rolling all their net worth into the next piece of land. Building six to 12 new homes per year, Grant has grown his net worth and kept Grant Homes on track as well.

A board member of his state home builders association, Grant is as connected to local officials and land sellers as any builder in the area. In 1998, on a referral, a landowning family in Princeton, N.J., brought Grant a deal that eventually turned into 13 3-acre lots, for about $275,000 each, to be taken down over three years.

The size of the lots and the market area dictated a series of spec homes of 4,500 square feet or more, starting at a high $800,000s price point. This put Grant's community, Mount Rose at Princeton, in competition with a 60-unit Toll Brothers project nearby called Etyl Farms.

The Toll project had a lot of local advantages. While Mount Rose was in adjacent Hopewell Township, Etyl Farms had a Princeton location and Princeton schools. Grant says a saving grace was that Mount Rose was close to a few important private secondary schools and had a Princeton mailing address and Princeton phone exchange.

Grant made a lot of "hard decisions" knowing the Toll project was selling 4,000-square-foot homes at a $700,000-plus price point on 1-acre lots. He also knew he could not build at the same price per square foot, about $155. His best estimate of what he would deliver at that price point was $200 per square foot.

"We were aware of them," says Grant, "and we decided to be exactly who we are, small-volume custom builders."

Grant says interested parties' first question was why Mount Rose was so much more expensive per square foot. He replied that the uniqueness of the lot size was a factor but also pointed out that he was willing to do unlimited customization with the house design and features. That made the critical difference to many buyers.

A subtler factor was the neighborhood. As spelled out in an agreement with the sellers, who retained three of the 16 lots developed, no two houses at Mount Rose would be the same.

"I handle all my own sales at this volume," says Grant, "and our average close in those years was one out of three that I got face to face with."

As homes were built in Mount Rose, Grant says they became calling cards for the community, and soon friends of friends inquired about the remaining home sites. Most buyers in the community are executives at area pharmaceutical companies. Grant was able to increase base prices and prices on options to the point that most homes sold at more than $1 million. Out of the 13 homes, which were intended to be all specs, seven were pre-sales, and another was sold at the framing stage. One home topped out at $3 million.

"They're putting in $400,000 in extras before we put labor in," says Grant. "That buyer's willingness to spend $3 million on my street certainly elevated the entire community, but it was also a statement about what I do versus the big builders. It reinforces that that can never happen on a Toll job. They have pro formas. They're rigid. They're great at it. But something like this can never evolve in their back yard."