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Lifestyle Homes: Redefined by Design Today, Lifestyle builds approximately 30 houses a year and has margins around 3%. If it sounds like a story of slow failure, it's not. In a difficult market where the big players have left the field, Lifestyle has hung on with gritty determination, redefining itself and carving out an entirely new niche. Compass on Business spoke with Braun, a Colorado Business Leaders Confidence Index® panelist, about how he came to be involved in the company, how Lifestyle adapted to a new housing environment and where the firm is headed. COB: Why did you decide to leave banking to take on development? Greg Braun: I got caught up in all the mergers and acquisitions going in the 1990s. I was working for a bank that was bought by another, so I started my own mortgage and construction company. I then sold it and I was about to go to work for another bank in 1995 when David Clarkson, Lifestyle's CEO, offered me stock ownership in the company. I've headed the finance department ever since then. COB: What was it like in the early years? GB: By the time I got there, about seven years after the company opened, we were very robust. We were building in 14 different subdivisions. We were all over northern Colorado. At that point, we were building about 220 homes a year and we had 11% of our market, which is Weld County. By comparison, we're building about 30 homes a year now and have approximately a 1% market share. COB: You've been working through what you've termed a three-year contraction in the market. When did you realize that it was beginning to change? What were some of the economic and market shifts you experienced? GB: Ever since 9/11, we've been on an absolute downhill slide. A lot of it had to do with the fortunes of other companies. Hewlett-Packard and other high-tech firms had major layoffs. In addition, Richmond American and U.S. Homes, two major homebuilders, flooded the market. Lots were overdeveloped and we had almost a 10-year supply on our hands. They were also giving huge incentives, like an $80,000 payout or free landscaping. They needed to get rid of their homes, so they overstated values and made these special offers. All we could do was cut back. We've gone from 29 employees to six. COB: How did you deal with the changes? GB: We started looking more critically at the styling and price points of our houses. At one point, when you built it, people bought it. Everything sold because the housing need was so strong. When the market changed, people became more selective and price conscious, so we started building everything from entry-level to $1.5 million homes. But what really helped us figure out a direction was an educated public. People were becoming more aware of the benefits of more efficient and environmentally friendly homes, especially with climbing fuel costs. So, we got into the ENERGY STAR and Green Built programs. Under these programs, our homes are tested for their energy efficiency and environmentally friendly standards using a number of measures (see "Building to a Greener Spec" box to learn more). Now, when we go to closing, the homeowner is given the ENERGY STAR test results and a Green Built certificate. 
COB: So what has the move done for Lifestyle? GB: First, it costs us more to do it this way, which has affected our margins. The added cost is somewhere in the neighborhood of $3,000 to $4,000 for a standard 1,350-to 1,400-square-foot home in the low $200,000 range, to $7,000 to $8,000 on a custom 3,000- to 4,000-square-foot house. On the upside, it keeps us ahead of the competition. It gives us an edge on the sales side. Anyone can sell a home with oak floors, because you can see the floors. But we can push the things that have a little more meaning. You may not be able to tell that your furnace is 90% efficient and that your appliances will save you energy over the long term, or that your Low-E glass windows save energy, but you'll appreciate the consistently lower utility bills. It's also easier for ENERGY STAR and Green Built homeowners to qualify with lending institutions at a lower rate, so they end up with more spendable income when buying the house. COB: Are you seeing any signs of improvement now? GB: We are seeing a little more activity on the part of buyers. The big builders have all pulled out because they can't build 250 houses in this market. U.S. Homes is pulling out and Richmond has already pulled out. COB: Where do you see Lifestyle headed next? GB: We're still in the throes of recreating ourselves as far as products and markets. We now do almost everything on presale, and almost nothing on spec. If we do, it'll be in a subdivision where there's already activity. We're also looking to get into higher-end, custom homes. For example, we're building a home for the Home Builders Association of Northern Colorado's Parade of Homes. There are five homes in the parade, all about $1.5 million and up. The home we're building is 5,764 square feet, fully custom, with a four-car garage and even a small, attached garage for a golf cart. Of course, it's ENERGY STAR-qualified and Green Built-certified. It's a different direction for us, but we know that we have to keep exploring new possibilities if we want to move forward. So far, we've been able to swim in the tough tide and we want to stay afloat when the market turns around. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of Compass Bank. August 2007 |
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