Patrick L. O'Toole, Senior Editor, Professional Builder

Tim Hernandez and Kevin Rickard were home builders on the opposite sides of the street when a mutual acquaintance put them together as potential business partners in 1999. A planner with a master's in business administration from Northwestern University, Hernandez had spent a dozen years at Pulte Homes as a land buyer, mostly in the Chicago division before moving to South Florida. Rickard was a custom home builder with deeper roots in South Florida and detailed knowledge of local buyers.

What set their startup company apart from the outset was their realization that southeast Florida is rapidly running out of land and that soon all residential development there will be urban or suburban infill. Their vision was to deliver new product types in infill locations. The plan was not so much to avoid competition from the Giants but to be a step ahead of them.

Their first project, the Courtyards of Delray, demonstrated their originality. They took a 1.06-acre site, former home to a bank drive-through, and got approvals to build 32 one- and two-bedroom townhomes around two courtyards. One courtyard had a small pool; the other retained a large tree as its anchor. Hernandez says the key to the project's success was its location 200 feet from Atlantic Avenue in Delray Beach, "the hottest entertaining and dining strip in south Palm Beach County."

"Our question was, 'Why wouldn't there be 32 people who would want to live there?'" says Hernandez. "There might not have been 132, but we figured there would be 32 who would pay a decent price for the ability to walk to dining, walk to the beach, walk to the library."

The project sold quickly and bankrolled the firm's next few land buys. More interesting was the highest form of flattery that followed. Centex bought a piece "down the block" and built a similar product. So did Lennar at a nearby project, as well as a few other smaller builders, says Hernandez. The bigger guys, however, bought bigger pieces.

"The big guys have a limit to how hard they want to work for a 30- or 40-unit project," Hernandez says. "But for us that is huge. It is $8 million in revenue. It could be $1.5 million to $2 million in profit for us. That's really a good project for us."

Despite its success with the Courtyards of Delray, New Urban has not built that same product again. Each successive iteration has had a new twist. At another infill spot in Palm Beach County, not situated as well to dining and entertainment, New Urban offered a more affordable mix of townhomes and lofts. At another site that followed soon after, it built a cluster of small, single-family detached homes.

"Pretty soon we noticed there was a lot of townhomes and no single-family," Rickard says. "So we were saying, 'Hey, let's attack that.' We are constantly looking for a niche that is underserved."

New Urban had zero closings in 2000 and 40 in 2001. Last year the firm left the small-volume ranks, shooting up to 124 closings. But the lessons from its small-volume success can apply anywhere.

If Hernandez and Rickard find a piece of land that is too big for New Urban, they do a joint venture or sell the remaining lots to another builder. In 2001 they bought 500 lots in Jupiter, Fla., and sold 400 of them to Centex. Fifteen lots went to another builder, and they kept the rest.

True head-to-head competition with Giants is rare for New Urban, but last year it did compete with DiVosta Homes, a unit of Pulte Homes, at a master-planned community called Abacoa. DiVosta was the only other builder in Abacoa and offered two-story townhomes and detached single-family. New Urban matched DiVosta's all-concrete construction, added a few dimensions and offered a three-story townhome with balconies.

"They're very successful, and they offer great, quality-built homes," Hernandez says of DiVosta. "So we offered more choice and a slightly different product, and we captured 90% of the market."

Rickard attributes New Urban's early success to being out front with ideas. "Our goal is not so much to compete with somebody else," he says. "Our goal is to make them compete with us. In other words, we try to turn the tables a little bit. And there is a little bit of a lag time. If you're going to do something new, as long as it's something the market wants, you can be on to the next thing before they catch on."

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