Success Strategies: Build What Your Customers Can Afford to Buy
Multifamily infill has become California Home Builders’ forte.
Next year, California Home Builders (CHB) will celebrate its 20th anniversary. Over those two decades, this Canoga Park, Calif.-based builder/developer has survived in the land of giant builders by its willingness to shift gears ahead of changing markets.
The company, says its owner and CEO Shawn Evenhaim, started out building custom homes. But within two years of its launch on Dec. 19, 1994, CHB was into production home building, with a focus on infill projects that have been the foundation of its business model ever since.
In the mid 2000s, when other builders in California were looking to monetize their houses for all they were worth (and then some), Evenhaim and his team concluded “prices didn’t make sense. People were buying mortgages, not homes.” So his company shifted again to building lower-priced houses that included condos that it could sell or rent.
CHB, which self finances most of its projects, kept building during the housing recession, partly because that was the only way to add value to lots it had purchased in previous years but could not sell.
Evenhaim, who came to the U.S. from Israel, has strong opinions about the importance of housing to the U.S. economy. And he chides builders that couldn’t figure out how to keep their businesses running in tough times. CHB didn’t lay off any of its employees during the last recession because, he explains, “we were willing to make little or no money at the time to keep building.” At its jobsites the company hung banners that read “Keeping America Working.”
Even though CHB has only about 25 employees, it has offered healthcare benefits to his workers for many years. “I am a true believer that employees need the right health benefits. I think they should have a pension and medical,” Evenhaim recently told the L.A. Daily News in an article about small businesses and the Affordable Care Act.
Selling to Investors Having survived the housing downturn, CHB has picked up steam. Over the last two years, it started purchasing land again, to where it has about 300 lots for single- and multifamily construction in its portfolio.
Last year, CHB closed 130 multifamily units and 60 single-family homes. It recently completed two multifamily projects of 81 and 41 units, respectively, that it sold to investors who are renting them. Evenhaim says his game plan calls for selling larger multifamily projects to investors “who are paying about the same as [individual] buyers”; and selling his single-family homes and smaller multifamily projects to home buyers.
He projects about 60 single-family closings this year, increasing to 100 single-family and 200 multifamily closings in 2014.
Evenhaim currently has 11 projects in varying stages of development, all of them in markets surrounding Los Angeles and all of them scheduled to open within the next 12 months. Evenhaim says he’s content to confine his company’s growth to this area, and why not, given that he served on that city’s mayor-appointed reform committee that unclogged the entitlement process. That reform is particularly expeditious for builders like CHB that specialize in the kinds of infill projects that many big builders either eschew or enter into through partnerships with companies like CHB “that takes land from A to Z: we buy, entitle, build, and sell,” says Evenhaim.
For the foreseeable future, CHB will focus on building homes and apartments in the 1,500 to 2,000 square foot range. The for-sale stuff starts in the low $300s. “Buyers want something they can afford,” says Evenhaim. “They don’t want the big house and the big yard.” Some of the lots that CHB builds on are as small as 3,000 square feet.
The company also recently completed the first project in Los Angeles where solar panels were standard features. Evenhaim says he’ll include solar on most of his construction from here on in, which is cheaper than offering it as an option.
His building and developing companies generate about $50 million in annual revenue. Evenhaim recently got an offer from a big builder that was interested in purchasing his company’s entire land portfolio. But while he admits that deal was enticing, Evenhaim isn’t ready to sell yet, and believes there is still a place for small and midsize builders. “We’re the marathon runners, not the sprinters,” he says. “And I didn’t build this business to sell it to a public company. It’s my company, and I have an obligation to my employees.”
John Caulfield is a senior editor for BUILDER.