Big Gainers - Learning from the nation’s fast-growing builders

Two thousand eleven may not have been a particularly banner year for the home-building industry, but, as our first annual list of Big Gainers suggests, there were plenty of firms that made significant strides in revenue growth last year. Of the 186 builders that reported two years worth of financial data for our annual Housing Giants report (published in the July 2012 issue of Professional Builder), 82 companies (44 percent) saw a gain in revenue from 2010 to 2011. Moreover, an incredible 76 percent of Housing Giant firms are projecting double-digit revenue growth in 2012.

Our 2012 Big Gainers list features the top 30 firms in terms of year-over-year revenue increases. The list includes relative newcomers like Denham Springs, La.-based DSLD (our 2011 Builder of the Year) and Columbus, Ga.-based Grayhawk Homes, as well as firms that have survived countless recessions and downturns. We reached out to a handful of builders on the list to have them share their successes and strategies for growth. Here’s what they had to say.

LGI Homes – The Spec-Home Specialists

For The Woodlands, Texas-based spec-home builder LGI Homes, the downturn certainly presented challenges, but even more opportunity. Using capital raised through private sources, including “friends and family” funding, the builder was able to snatch up finished lots throughout Texas at a discount. As a result, LGI was able to more than double its community count from four in 2010 to nine last year.
With the increased inventory, LGI then concentrated on building great product and applying its highly successful sales and marketing model in the new communities.

“We put a lot of manpower in our offices, so our closing volume per community is one of the highest in the country; We averaged a little over seven closings per community per month last year,” says Eric Lipar, LGI’s CEO. Each sales office has at least four reps at all times, and the builder invests heavily in advertising, targeting renters who may be looking to buy and need to move within 30 to 60 days.

The quick move-in is a huge selling benefit for LGI, as is the generous amount of “included upgrades” in its homes, like granite countertops, a covered back porch, tile floors, upgraded kitchen cabinets, and having all appliances included.

“The industry sentiment is that you can’t make as much margin on specs,” says Lipar. “Our belief is that specs command a premium, because when you have people calling that want to move in the next 30 to 60 days, that’s a premium, not a negative.”

As the land market in Texas begins to tighten, Lipar and his team are looking for opportunities elsewhere. Late last year, LGI closed on its first property in Phoenix and plans are in the works to acquire lots in the Tampa market by the end of the year.

EYA – Investing in Talent and Brand

Like most builders, Bethesda, Md.-based EYA was not immune to the effects of the housing downturn, even with its strong position in the relatively stable Washington, D.C., market. The slowdown forced the urban-infill builder to cut its staff size in half to 55 as sales slowed. However, in doing so, EYA president and co-founder Bob Youngentob made a crucial decision that is now paying dividends as the housing market bounces back — he kept his most experienced and valued team members on the payroll. 

“It was hard to carry the overhead through that period of time, but we felt it was something we had to do because of the cyclical nature of the business,” he says. As the market started to turn, EYA had the team in place to execute complex urban rowhome and townhome developments, which typically have unique site and design challenges, as well as long, intricate entitlement and permitting processes.

EYA also took advantage of the downturn to increase awareness of its brand though advertising, social media, and a new website. “We spent a lot of money on advertising in our metro system, buying ads on kiosks and metro cars to create buzz around the concept of being able to walk from metro stations to your house,” says Youngentob.
EYA’s strategic moves during the downturn resulted in the builder bouncing back to its pre-recession performance, thanks to 24 percent growth in revenue last year.

Looking forward, Youngentob says growth strategies include getting into more public-private partnerships, expanding its multi-family business, and looking for nontraditional sources of land. “For instance, we’re in the process of converting an existing office building to high-end multi-family,” he says.