A stiff upper lip

A stiff upper lip

BUILDERS by Jean Gruss | Editor/Lee-Collier

Morrison Homes, part of a British homebuilding company, is moving into the Southwest Florida market in the midst of the downturn. Here's how it plans to build for the rebound.

Do the British know something we don't?

Morrison Homes, part of London-based George Wimpey Plc, is entering the Southwest Florida residential homebuilding market at a time when many builders are retrenching.

In a move that some might find counterintuitive, Morrison has staked out a strategy of entering a depressed market with homes for the move-up buyer. It's doing that by keeping close tabs on expenses, speeding up construction times, limiting wasted materials on the job sites, arranging most of the financing for customers and luring buyers with standard features that are considered options elsewhere.

Although Morrison was a late entrant into Southwest Florida residential market during the boom times, it started operations from Fort Myers in December 2005 just as the market was beginning to turn. Inventories in Morrison's price points are at some of the highest level in years, according to market trackers.

"You really need to build for the future," says Sal Simonetti, the 46-year-old regional vice president of construction. Simonetti expects the turning point in the market will come in 2008. "We're at the bottom," Simonetti says. "You can't get any lower."

Watching expenses

One of the benefits of the slowdown in construction is that there has been a noticeable decline in labor and materials. Simonetti, who previously was an executive with luxury homebuilder Toll Brothers in Fort Myers, says he's seen declines of 25% to 35% in labor and materials over the last six months. "We can probably get another 15%, depending on petroleum prices," he says.

Simonetti says Morrison constantly bids out work to get competitive prices from subcontractors. "You never stop bidding, he says. "No sub ever had the upper hand." The company works with more than 100 subcontractors, which it calls "trade partners."

As a result of squeezing those costs, Simonetti says Morrison has been able to lower prices on homes by between $50,000 and $75,000, depending on the model.

"Lot prices haven't come down yet," he cautions. "Sellers think the market is still great." Still, he believes that lot prices will come down later this year.

Morrison has secured nearly 200 lots in Charlotte and Lee County communities. High impact fees and regulatory hassles are keeping Morrison Homes out of Collier County, however. To build in Collier, Simonetti says, "something would have to fall out of the sky that was fantastic."

Materials prices have come down, but it's still essential to make sure little of it goes to waste. Morrison Homes returns unused tiles, lumber and other materials to the supplier for credits.

Speed = money

Cutting down the time it takes to build a house also helps cut costs. The builder gets paid faster and doesn't have to carry the cost of inventory for as long.

Typically, a home takes five months to build. But in an effort to find ways to cut down on time, Simonetti instituted a program to build a model home in under one month.

Called "The Great Build," Morrison pledged to build a house in 30 days or less. For every hour that they come in under deadline, the company donates $1,000 to a local charity.

Simonetti recently brought together about 50 subcontractors and a private home-inspection company for the first Great Build (county inspectors would drag the project out too long). They timed the construction scheduled down to the hour to build a 3,306-square-foot model home and swimming pool in the River Hall community in eastern Lee County. They completed the home in less than 29 days on Feb. 16. Simonetti says they'll take the ideas they learned from the Great Build and apply them to the other homes they build in an effort to cut down on construction time.

Bringing the customer

In order to meet its goal of selling 400 to 500 homes in the next five years, Morrison Homes has been putting the bulk of its marketing resources into Realtors. When the company is designing a model home, it gathers feedback from Realtors about what sells.

Morrison pays a 5% commission to Realtors. When the market had reached its peak in 2005, many builders paid as little as half that amount.

To make sure buyers have the financing necessary to buy the house, Morrison Homes has created its own mortgage company called Morrison Home Funding. About 85% of buyers get a mortgage for their new Morrison home with the help of a company broker.

Morrison Homes doesn't offer many discounts, preferring to include many features as standard rather than options. "You want to bring a customer on the positive side," he says. These features include crown molding, Corian countertops in the kitchen and tile flooring.

Morrison doesn't spend a lot advertising in newspapers and magazines. However, motorists can easily spot Morrison's bold purple billboards in both Charlotte and Lee counties.

Simonetti says he's seen sales pick up recently. A recent model-home event drew 200 people, including 30 Realtors. "Going through 2008 will be the turning point," Simonetti forecasts.

REVIEW SUMMARY

Industry. Homebuilding

Company. Morrison Homes

Key. Morrison Homes is ramping up its operations in Southwest Florida in the midst of a residential downturn.