We single out the builders and suppliers that should make some noise this year.
By: John Caulfield, Builder Magazine
Recessions have a way of separating winners from losers. And as the housing market inches closer to recovery, indications about which companies are likely to survive or fail become clearer.
Some companies are exploiting the economic downturn to strengthen their competitive positions. Others have used the recession to reinvent themselves. And a handful of new builders and suppliers have entered the market either to create new demand or to fill voids vacated by companies that have tripped or fallen. The following list of companies to watch this year includes builders and suppliers that are poised to take advantage of an economic upswing or, at the very least, stay ahead of the pack if the recession lingers.
LGI Homes, Conroe, Texas
ON THE MOVE. LGI Homes’ business model is to convert renters to first-time buyers with aggressive marketing and affordable products. The builder expects to close 600 homes in Texas this year.
Something unexpected happened at LGI Homes in 2009: Its revenue and closings went down for the first time in four years.
The company—which in 2008 was the only builder among the top 200 that reported sales and closings gains—closed 425 homes last year, versus 476 the year before. The problem wasn’t demand, according to president Eric Lipar. “It was just harder to get buyers approved for loans,” he says.
While closings were off, LGI Homes ended 2009 with its sixteenth consecutive profitable quarter. “We made $5 million [in 2009], our gross margins were up, and our costs per sales were down,” says Lipar.
LGI’s business model is to convert Texas renters into first-time buyers. It methodically sends out flyers to apartment dwellers within 30 miles of its subdivisions and keeps its sales offices open for nearly 12 hours each day, seven days a week.
This formula is working again at the company’s newest subdivision, which is also its fourth and is located in South Fort Worth, where LGI Homes picked up 210 completed lots on which Sovereign Bank had foreclosed. The bank not only helped finance that acquisition, but provided $3.5 million in construction loans. LGI Homes also raised $2 million from private equity sources, which Lipar says made that deal possible.
In mid-December, Lipar said LGI Homes had sold 15 homes in South Fort Worth and had 15 others under contract. He’s now projecting 600 total closings for 2010, when his company will have a full year of selling under its belt in that subdivision, and expects to add new neighborhoods in Houston and the Dallas-Fort Worth markets. [Read the entire article.]