Do It Again

REVIEW SUMMARY

Company. WCI Communities

Industry. Residential construction

Key. Builders with lots in place have the advantage if the economic recovery takes hold.

Tim Oak always keeps a spare pair of shoes in his car in case he decides to muck about construction sites.

But over the last few years his shoes have stayed shiny clean. “We haven't started a home for three years plus,” says Oak, senior vice president of WCI Communities.

Now Oak is itching to get his shoes dirty again to show visitors around new model homes under construction at Pelican Preserve in Fort Myers. One year after it emerged from bankruptcy reorganization, Bonita Springs-based WCI is building again. Oak will oversee the effort.

“We have a chance to do a do-over,” says Oak. He and a staff of about 40 employees have re-engineered every aspect of the way the company built and sold homes, down to the fonts they use in the marketing materials.

For the 49-year-old Oak these last few years have been brutal. He was forced to lay off hundreds of employees, many of them veterans of the homebuilding industry. Oak, who at an imposing 6-foot-4 lives up to his name, gets visibly emotional when discussing that unenviable task.

Al Hoffman, the successful Tampa developer, hired Oak in 1989. Hoffman's company, Florida Design Communities, turned around Sun City Center, the massive retirement community in South Hillsborough County. Hoffman eventually acquired the residential development arm of Westinghouse Communities in 1995, forming WCI Communities. He took the company public in 2002 before retiring in 2005 to become U.S. ambassador to Portugal. “I was one of the first guys transferred to Westinghouse,” Oak recalls.

But the subsequent real-estate bust sent WCI into bankruptcy reorganization. Although it emerged in September 2009, most industry observers didn't expect the company to start building homes again and instead believed that creditors had ordered the gradual liquidation of the company's assets.

Now, however, WCI sees new opportunities to build homes in well-established communities. “It was a huge shot in the arm for my group,” says Oak.

Of course, Oak hasn't forecast a return to WCI's heyday, when it built thousands of homes a year. The company is starting to build homes in five of its 19 communities, including four on the Gulf Coast: Venetian Golf & River Club in Venice, Pelican Preserve in Fort Myers and Tiburon and Manchester Square in Naples.

Oak says he doesn't want to hire more people prematurely and is cautious about spending money. “I want to be sure we have the demand,” he says. At Pelican Preserve, for example, Oak says he's hoping the community will sell about 15 homes a month.

Starting from scratch

WCI grew so fast during the boom that it had five division presidents who oversaw hundreds of employees building across Florida and the Northeast. In 2005, WCI built 2,346 traditional homes and 1,870 condos.

As customers flooded its sales centers during the boom, WCI offered 300 floor plans with thousands of options. Its homes ranged in price from $150,000 to $10 million.

With so many choices, WCI became inefficient in its administrative and homebuilding operations. “It was a product of the environment,” Oak says.

In the downturn, when homebuilding came to a halt, Oak's team revisited every facet of how the company does business. “We had the time to reflect,” Oak says. “We're trying to be smart about where we spend our money.”

For starters, WCI consolidated its five home-building divisions into one. It trimmed the number of options so it could leverage material purchases with vendors while still giving customers choices to customize their homes. It simplified customers' selection process by packaging options instead of selling them individually.

WCI now has fewer floor plans and it simplified the designs so the homes can be built more quickly, saving labor and material costs. For example, homes have smaller windows, consistent ceiling heights and straight lines that replaced curved walls.

The administrative side of the business has also become more efficient. The company grew so fast during the boom that it had separate sales contracts for each of its communities. Oak and his team also redesigned the sales materials to be consistent with the brand image. The same font is used today, for instance.

Oak has the challenge of re-establishing ties with subcontractors while keeping a lid on costs. “Everybody in this market understands the drill,” he says.

Cautious Buyers

WCI plans to continue to sell homes to the same market it targeted before the boom: retirees, second-home and move-up buyers.

But because of the decline in value of their personal assets, these customers aren't as likely to buy homes over $1 million, though Oak says some high-priced lots have sold at Tiburon in Naples. “This isn't an impulse buy,” Oak says.

Oak and his team have picked out communities such as Pelican Preserve in Fort Myers, where there's not as much competition from re-sales of existing homes or foreclosures. What's more, the community is well established with a golf course, clubhouse and other amenities. WCI has sold about half of the 2,000 lots at Pelican Preserve since it opened in 2000 and it didn't see the influx of investors during the boom that proved disastrous in other communities. “We're really selling a lifestyle,” Oak says.

That lifestyle, of course, comes cheaper than it has in a decade.

For example, Homes at Pelican Preserve that today cost from $150,000 to $350,000 sold for twice that during the boom. “Everything just got out of whack,” Oak says.

To restart sales, Oak says WCI is boosting marketing and has launched a public-relations push. “We've got to let people know we're back,” he says.

At least many of WCI's customers buy homes with cash, so financing is less of an issue for them. “We're not slugging it out with the first-time homebuyer,” Oak says.

To a large extent, however, the success of WCI's homebuilding renaissance will depend on the national recovery. “For our customers, they need to see a little more clarity in the economy,” Oak says.

And if this selling season is successful, more WCI communities may see building activity resume.

After all, Tim Oak's business card includes the word “tower” in his title, a suggestion that condo cranes may one day return to Florida. “We're not ruling it out,” Oak says with a grin.