Custom Made

Custom Made

Charley Hannah and Mike Bartoletta have struggled like all homebuilders, but their conservative approach is helping them prepare for a stronger market.

HOMEBUILDING by Dave Szymanski | Tampa Bay Editor

The homebuilding market is not dead. It has a pulse, albeit a weak one. Naturally, that has deeply affected Hannah-Bartolleta Homes, a Tampa-based custom home builder.

As demand fell, HBH cut 60% of its staff. Like other builders, it adjusted prices and slowed building.

But it made a wise decision in retrospect: During the big real estate run-up, it was careful to not buy too many vacant lots. So when the market turned, it wasn't holding a lot of real estate for which it paid too much.

"Many people were buying a lot of property," says Charley Hannah, partner in Hannah-Bartoletta Homes. "We didn't get as greedy as other folks."

It also was careful about where it went. Since it was a custom homebuilder, it chose upscale developments like Tampa Palms, Fishawk Ranch, Mira Bay and Lakewood Ranch - places where people would pay $500,000 to $2 million for a home.

These moves helped prepare Hannah-Bartoletta for a healthier market, says Marvin Rose, president of Rose Residential Reports, a Tarpon Springs firm that studies and advises the residential construction market.

"In this is category of homebuilding, I don't know what else you can do," Rose says. "Cut overhead as much as you can. Keep your eyes open for any opportunities. I don't think any are pulling the trigger on the opportunities yet."

The veteran builders, like HBH, should be able to use their market knowledge and insights to their advantage.

"It will be a slow turnaround," Rose says. "That's what I expect. They'll be no switch turned and it's 2004 again. We're still going through price adjustments."

High-end homes

One of the main ways Hannah-Bartoletta has succeeded is that it has built attractive, high-quality homes, Rose says. It is in some of the best communities in the Tampa Bay area.

"Those are high-quality communities," Rose says. "They are one of the most expensive builders, if not the most."

Its chief competitor is Clearwater-based Arthur Rutenberg Homes, which has similar quality and pricing.

HBH has a unique partnership in its founders Hannah and Mike Bartoletta.

"Charley Hannah is a high-profile guy," Rose says. "He's a larger-than-life guy, literally and figuratively. He's kind of the front man. Mike is a construction-oriented guy, very capable as well."

Even though it has higher prices, that hasn't necessarily been a negative in this market.

"Both ends are doing better than the middle now," Rose says. "First-time buyers don't have a house to resell. For those looking at homes with an average price of $800,000 to $900,000, those buyers are not as affected as the rest of us. But the whole market is slow."

Football lessons

Hannah, 53, grew up in Georgia and Alabama and is known on the Gulf Coast for football almost as much as homebuilding. He played for the Tampa Bay Buccaneers and for the Los Angeles Raiders in the National Football League in the late 1970s and 1980s.

A self-described "small town guy," Hannah lived partially in the shadow of his father and brothers who played football at the University of Alabama. His brother, John Hannah, is in the pro football hall of fame.

He views his college and professional sports career as a good preparation for the competition in the business world. The lessons included preparation, dedication, discipline, hard work, teamwork, enthusiasm and playing smart. He played for the legendary Paul "Bear" Bryant at Alabama, a taskmaster who only had one losing season in 38 years.

"It was a very tough, demanding experience, something very good for me," Hannah says. "You learn a lot about yourself. It builds confidence. It's a teamwork effort. I look back sometimes and think of so many things I've taken with me. It was very life shaping."

Hannah was small for NFL lineman standards, at around 260 pounds, so he had to overachieve. Filling in for other players, he had to learn different positions. And he had to adjust to rules changing on how lineman could block.

His small-town roots led him to return to Tampa after living in Los Angeles. He saw Tampa grow and knew he had to plan a transition to business. Players then did not command the salaries of today. He made $30,000 to $40,000 a year with the Bucs.

"There was no question you needed to make a living after football," Hannah says. "If I played today and lived within my means, I wouldn't have to worry about a second career."

Besides football, a work experience at his father's agricultural supplier business motivated him to finish his business education and become an entrepreneur.

After injuring his knee, he went back home to work with his father, who assigned him a job his father thought suited him: unloading trucks, carrying 100-pound bags.

"It was honest work, but it seemed demeaning to me," Hannah says. "Maybe it was better that I got away from Alabama. In the long run, it was a better option. I would accomplish more."

Starting the company

Hannah, who returned to college to finish a business degree at the University of South Florida in the off seasons, started "piddling around" in real estate more than 20 years ago.

Through friend Ed Andrews, Hannah met Mike Bartoletta, an engineer who graduated from Michigan Tech.

In 1988, Hannah and Bartoletta became business partners and began their custom homebuilding business. But it wasn't a great time for homebuilding with the Resolution Trust Corp. and changes in tax laws making headlines.

A major downturn hit in 1988, part of the homebuilding cycles that change every five years, Hannah says. Every 15 to 20 years, there are big downturns, he says. But 1988 became a blessing in disguise for Hannah-Bartoletta because it provided the young company a chance to get good deals on lots in upscale communities, such as Tampa Palms.

"We ran into Tampa Palms, avoiding the stampede, and got a toehold," Hannah says. "We bought a few lots, built a few custom homes."

The market actually worsened in 1989, but Hannah persevered. Communities such as Westchase and Riverhills eventually started calling the homebuilder to come into their subdivisions.

Current decline

The current downturn in the market started affecting Hannah and other builders in 2005. That's when the market crested and started to go down. It's been slow the past three years.

"No one anticipated the depth of the decline," Hannah says. "New construction is down 30% to 50%, depending on your geographic area. Higher-end homes got beat up worse. They depend on people to sell a home and move into a bigger, better home. It's been difficult for those folks to get uninvested."

But things are slowly changing. So far this year, Hannah-Bartoletta has surpassed sales it had last year.

"The start of the year was dismal," Hannah says. "But there has been pleasant news, especially locally. Our market started recovering."

But Hannah is still being careful, limiting the company's risk by buying only the lots it needs in proven neighborhoods. Not everyone is optimistic.

"A lot of friends in the industry believe their companies will survive in shell form or won't exist anymore," he says. "A lot of it happens quietly."

The economy has turned residential real estate into a buyers market. In Mira Bay, a customer flew in from Washington State and bought a Hannah-Bartoletta property for a second home. He saw a house and closed three days later.

Another customer from England wanted to take advantage of the exchange rate. He bought a waterfront lot on Mira Bay and paid less than half of what he would have three years ago, Hannah notes.

"It's a buyers market, not good for shoppers and lookers," he says.

Moving ahead

Hannah is ready to build a custom home for a buyer, but has slowed its building down. It is building a model home in Lakewood Ranch. On a daily basis, it is mainly putting a great deal of effort into re-examining processes, so when the market returns to health, it will be a better company. It is looking at entering three more communities on the Gulf Coast.

"We've laid the groundwork," Hannah says.

Hannah likes to repeat a quote from well-known investor Warren Buffet, when talking about a long-term view in the residential real estate market: "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

That contrarian logic, for Hannah, means keeping an eye on different properties. "We need to be watchful for communities with unique competitive advantages attractive to a luxury buyers," he says.

REVIEW SUMMARY

Company: Hannah-Bartoletta Homes

Industry: Custom homebuilding

Key: Finding the right communities for customers who want custom-built homes.