Going up: Local companies build themselves into top 50

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1 Going up: Local companies build themselves into top 50 By: Tony Brown, Staff Writer May 22, 2014 CHARLOTTE It could have been a convention of Ford F-150, Dodge Ram and Chevrolet Silverado owners. The gleaming pickups were lined up on both sides of the street for a block. The father-son team, of Clark and Joe Stewart, from left, owns Eastwood Homes, which is one of two Charlotte-area homebuilders to make Builder magazine s 2014 list of the country s top single-family residential construction companies. They share a laugh earlier this week at the annual company cookout with Mike Conley, right, their Charlotte division president and the man the Stewarts say deserves much if not most of the credit for the company s successful expansion from local to regional builder. Photo by Tony Brown But this was not a Saturday afternoon truck rodeo at Metrolina Expo. It was a workaday Monday at the offices of Eastwood Homes near Billy Graham Parkway and Interstate 85. The trucks belong to builders for Eastwood Homes, there for the regional homebuilding company s annual cookout. Eastwood Homes and another regional homebuilder based in the Charlotte area, True Homes USA of Monroe, have good reason to celebrate. Both finished in the nation s top 50 homebuilders in terms of sales and revenues in 2013, according to Builder magazine s 2014 top 100 list. In fact, True Homes and Eastwood were ranked right next to each other in the magazine s annual listing. Based on statistics from last year, True Homes came in 44 th with 864 closings, followed extremely closely by No. 45 Eastwood with 862. If you go by revenues, Eastwood edged out True, $175 million to $172 million.

2 For scale, that s far off the national production builders, led by a long shot by D.R. Horton, based in Fort Worth, Texas, at more than 25,000 units and $6.6 billion. The bottom of the list is occupied by builders in the 400 closings and $100 million to $200 million range. Because most of the builders are privately held, most of the figures are self-reported, according to Jennifer Goodman, senior editor of Builder, which is published by Hanley Wood, the Washington, D.C.-based design and construction analysis and media conglomerate. When they say privately held, True Homes which builds in the Charlotte, Triad and Charleston markets means privately in just about every sense. David Cuthbertson, company president, declined to comment for this story, saying his company does not respond to any media requests. But Eastwood officials were happy to tell the success story that is the 37-year history of a company that starts with Joe Stewart. Stewart was an Appalachian State University football scholarship student who went on to serve as a first lieutenant in the U.S. Army and then taught at Gaston College in Dallas, N.C. He built a few homes, teamed up with a neighbor who helped finance their operation and then established Eastwood a name he just came up with. The story has many details that any homebuilder custom guys who consider 12 projects a busy year up to the production builders can appreciate and maybe even learn a few things from. That s because Eastwood operates with a blend of business techniques cherry-picked from high-volume operators such as Horton, PulteGroup of Greater Detroit and M/I Homes of Columbus, Ohio, as well as staying true to the core values of a community-based business. As Stewart, who co-owns the company with his son, Clark, succinctly put it: It certainly wasn t an overnight transformation. Asked to be a little more specific, the Stewarts said the man behind the company s rise was the man to talk to: Mike Conley, whom the company lured away from Ryland, a production builder based in the Los Angeles area. And rise the company did. Eastwood was, as it is today, among the top 10 homebuilders in the Charlotte market when Conley arrived 20 years ago, closing around 100 units a year. The company just missed the Builder 100 list in 2004, but has been a fixture since, rising steadily with steadily being the key, Conley said. I was fortunate, Conley said. It was well-established as a local builder, and with my background I was able to bring the disciplines of a production builder the ability to repeat success in other markets, to have a system. Eastwood reached a peak as many a builder did in 2007, closing 1,300 homes, 700 of them in the Charlotte market. The other 600 were in the company s expansion

3 markets of Greenville, S.C. (added in 2001), the Triad (2003) and Charleston, S.C. (2005). Then, as everybody in the business knows too well, came the housing bust and the recession. Eastwood took a hit like everybody else, but survived relatively unscathed. The worst that happened was that the company had to pull out of Myrtle Beach, S.C., where Eastwood had made an attempt to get established on the eve of the bust the worst possible time, Conley said. I ve seen downturns, but nobody alive has seen anything like what the homebuilding industry has just been through. The abortive Myrtle foray aside, the company s organic growth is what insulated it from the worst of the worst times. Our growth was completely organic, nothing is mortgaged; we took the conservative approach, and that has paid off, Conley said. When things were ripping and roaring, we never wanted to be the biggest builder; we always let quality drive the expansion. When things are a little good, builders tend to try to be everything to everybody. Over-extending has created so many problems for so many people. We stuck to our core product in every market. That product is in the 2,200- to 2,400-square-foot range with a price point in the $130,000 to $300,000 range, depending on the degree of customization, which is offered in option packages. (True Homes has similar ranges with the exception of its higher-end models, which can go up to $800,000, according to its website.) Coming out of the recession, Eastwood was in a position to start expanding again, into Raleigh in 2010 and Richmond, Va., last year. Looking toward the future, as Clark Stewart incrementally takes over more the business from his father, Conley said the company would like to continue to expand, both in its existing markets and in new ones. Charlotte now accounts for nearly half of Eastwood s closings, but Conley would like to see that trimmed back to about a third as the company expands its footprint in other markets. Much of that effort will be in Raleigh, which like Charlotte is in fast-growth mode. Charleston is our most difficult market, Conley said, because of factors ranging from soil and climate to aesthetics: Charleston has its own color palette.

4 But there are roadblocks the company will have to surmount not just in Charleston but in each of its markets. Enemy No. 1 for a company like Eastwood, which depends on land developers, is finding desirable lots. In Charlotte, builders generally say that means within the Interstate 485 loop or not much more than a mile beyond it. Land it s been a brutal year, Conley said. It s not so much that there s no dirt, but that acquiring and developing it in a timely and affordable manner is much more complicated post-recession, Conley said. The traditional development loan system actually a series of loans, each one granted as a development became more valuable in terms of being collateral, gaining value as it went from raw land to land with infrastructure to ready-to-build lots was decimated, Conley said. Now it s whatever it takes to make it happen, Conley said. Each deal depends on the developer you re with and the lender. Banks are out there saying, We re doing development loans but... and... Asked to name the company s most valuable trade secret, Conley said: It s the people. At Eastwood, he said, that means earning the loyalty of subcontractors getting the roofers and carpenters to show up and work by doing things like paying them weekly instead of making them wait until the end of the month to recoup their costs. And it means providing the company s superintendents Eastwood calls them builders, who account for 30 of the homebuilder s 141 employees with what sounds like a bunch of little stuff, but it adds up, Conley said. From the time they are hired, everything is ready for them to start work, Conley said. Instead of Who is it that you report to? we have their up and running how else are they supposed to communicate? and you can only be as good in this business as your communication. In exchange for that help from the company, the superintendents can do customerfriendly things like build a full week into their construction schedules for workers to fix the items on homebuyers punch lists. That s one way Eastwood earns its A-plus Better Business Bureau listing, according to customer reviews on the BBB website. Eastwood has nine complaints listed on the BBB website, fewer than any other top-10 builder in the Charlotte market (including True, which has an A rating and more than 30 complaints).

5 That s what Monday s cookout was about: Showing the people out in the field the guys who are doing the work the company stakes its reputation on, Conley said a little appreciation. You happened to come on a great day to see that, Conley said, motioning with his arm toward a large white tent outside, where the crowd of builders stayed long after the cookout was supposed to end. This is not the exception; this is typical of us, of this company. You can say, It s the people and many companies do. But it s another thing to actually mean, It s the people. Business is booming, and Eastwood, along with True, is showing the country how well Charlotte can boom. That goes a long way toward explaining not only why all those pickups were lined up and down the road, but also perhaps why they gleamed.