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Baltimore Business Journal: October 21, 2011

Their office shuttered. The housing market was in shambles.

For a trio of local executives, remaining in the new home development industry meant changing the way it did business when Beazer Homes closed its Maryland office.

In August 2009, Bill Hofherr, Robert Gentry and Alfred Guerieri Jr. pooled their collective experience and, with startup funds from a few investors and a bank, launched Envision Builders. Their business blueprint was simple, if not risky: Identify and buy single-vacant lots in strong Baltimore-area neighborhoods, build moderately priced homes on speculation — and repeat.

It was contrary to what many in the industry were doing. And, while Envision's niche has resulted in the development and sale of several new homes, many homebuilders are still on the sidelines.

Gentry said the difference is large firms have to maintain a certain pace and profit level to justify their existence.

"We're just out here picking and choosing," Gentry said. "In place of an overgrown, trash-strewn lot, you get a new house in a nice neighborhood."

Companies like Envision Builders are the few bright spots in the depressed single-family home real estate market. The latest new single family housing starts data for the Baltimore-Towson metropolitan area isn't encouraging. The number of building permits issued in Greater Baltimore through the first eight months dropped 11 percent compared to the same time in 2010, according to National Association of Home Builders data.

For many Greater Baltimore builders, survival has meant adopting new business models and finding their own niches. For some, it is starting construction on speculation. Others are paring down the size of their developments and homes and shooting for lower selling prices. And in some instances, developers are sinking more of their own money into projects.

Housing change

Greater Baltimore's housing market isn't all doom and gloom. Despite building permits falling by 270 between August of 2010 and August 2011, there is demand for new homes but the dynamics have changed.

Builders recognize the need to scale down projects, both in number and size of homes. For Will Nori, that has meant building fewer homes and introducing a model with just under 2,000 square feet that sell for less than $300,000.

It's a dramatic change for the president of Clark Turner Signature Homes, who is accustomed to overseeing the building of large luxury homes on golf courses in Harford and Cecil counties. Clark Turner's other projects include 3,500-square-foot homes in its Bulle Rock development. The golf course homes start at $579,900.

"We can do so many more but we don't have the buyers," Nori said. "The name of the game is adaptability — in product, price and communities."

Chris Brown was also forced to adjust his business plan. A few years ago, he was building and selling half million dollar, 3,000-square-foot houses in Harford County. Brown's Harmony Builders continued to construct homes — about 12 homes annually for the past several years — but he has lowered their average size to 2,400 square feet. He said there is still demand for entry-level and mid-level houses between $400,000 and $500,000.

"As the market has gone back to where it was eight to 10 years ago, people are building more of what they can afford," Brown said.

Envision Builders launched with the intent of pricing under market value. Its properties have starting prices in the $299,000-$420,000 range. So finding the right locations to buy and build were critical. If a property is located in an in-demand neighborhood, Envision isn't afraid to swoop into an area where others failed.

For example, it bought two lots in the Mount Washington area that had been slated to be a part of a minor subdivision. That project began several years ago and was halted when the original builder went bankrupt. Envision Builders' construction veterans built houses on speculation on those lots and have already sold them.

The company built and sold four houses in 2010. This year, it's on schedule to build 10. It has another 10 area homes lined up for next year. Envision's success has allowed its principals to start drawing salaries and to begin the process of hiring their first employee.

Gentry said the firm is profitable but would not provide specific dollar amounts. Janice Strauss said Envision's strategy minimizes risk even if the rewards aren't as great as they might be for a development with dozens of new homes.

"If you're going to gamble, more builders are doing so on a small scale," said Strauss, of Yerman, Witman, Gaines & Conklin Realty in Baltimore who sold Envision a total of four lots in the Mount Washington area.

Cash conundrum

Financing continues to be a major hurdle to getting projects started. So to get his $8 million Fells Point residential community off the ground, Larry Silverstein used $1 million of his own money.

Merchant Point Homes will consist of 18 new townhomes on the 1700 block of Aliceanna Street, next to the former St. Stanislaus Church. The homes start at $585,000. Silverstein's Union Box Co., a real estate investment firm, leveraged his investment to secure bank loans for land development and construction.

That's becoming more common as banks require lenders to front up to 30 percent of a project's costs to secure a loan, said Susan Songy, owner of Builder's Advantage, a company that coordinates new homes sales and marketing.

With his project started, Silverstein is promoting financial incentives to help sell the homes. Buyers of Merchant Point's $600,000 units receive a five-year, phased-in tax abatement.

Silverstein said the combination of new construction, incentives, on-site parking and one-block proximity to the harbor helps distinguish his properties from the competition. Realtor Trent Waite said one home sold immediately after the townhomes went on sale. A second sold within five months. That's been done without a finished model.

View Baltimore Business Journal Article HERE

Howard/Arundel Report: March 19, 2010
Builder Start-up: Three Former Beazer Execs Form 'Envision'

Three former 'national' builders have gone local, and have identified a first project in Howard County.

The trio of Bob Gentry, Bill Hofherr and Al Guerieri formed Envision Builders about six months ago, after leaving Beazer Homes when it consolidated its Maryland operation into Virginia. Starting "small and carefully" in Hofherr's words, the start-up is concentrating on the Baltimore suburbs.

Envision's first project in Howard is the six-lot Nicotra property on Savage-Guilford Road in Jessup. The job serves as a blueprint for 12 to 20 homes that Envision wants to build in its first year: homes will be priced slightly under market, likely in the $400's, and targeted at the first-time move-up buyer. Hofherr said Envision will look for subdivisions that are too small to appeal to national builders, then gradually build volume up to about 150 units per year.

The three are using the financing primarily from Eagle Bank in Bethesda while exploring other institutions, and together bring "big-builder" construction, operations and financial backgrounds to Envision.

At Nicotra, Hoffher said the team hopes to begin a first house in June, in keeping with a plan to start one house a month area-wide. Envision is slated to settle its first home soon as a company, in Calvert County, and the settlement could be a good omen, the house traded at $100 over list price. Envision's website is www.envisionbuild.net.

By: Sarah Yaussi
Big Builder Online
December 7, 2009

Everyone needs some good news on a Monday, so let me share with you some of the details of a lunch meeting I had last week. Last Wednesday, I had the pleasure of grabbing soup and sandwiches with Bill Hofherr and Bob Gentry, both former execs with Beazer Homes here in the Washington, D.C.-Baltimore region.

Hofherr had been Beazer's Virginia division president until he was laid off in January 2009 when the company consolidated its Virginia and Maryland divisions. Gentry, the company's regional CFO, was also laid off, although his services were retained until April 2009.

But the purpose of our meeting was not to recap those painful experiences or to share tales of looking for new employment; rather, it was to hear about the launch of Envision Builders, Hofherr and Gentry's new home building venture with another former Beazer executive, Al Guerieri Jr. Guerieri had been Beazer's vice president of operations for the Maryland and Delaware divisions until resigning in August.

The idea of launching a new company first started getting kicked around in May. Hofherr had set up a small consulting shop, and Gentry had been more or less unsuccessfully searching for new employment both inside and outside the industry; both were anxious to get back to buying land, building houses, and selling homes. With the addition of Guerieri, the group felt between the three of them they possessed all the management, acquisition, development, finance, operations, construction, and sales and marketing expertise that they needed to get something small off the ground.

So, they started poking around over the summer to get a feel from the various parties involved in new residential development in and around Baltimore--bankers, lawyers, accountants, architects, engineers, title companies, subs, suppliers, former colleagues, and friends and family--about just how crazy they might be to try to put something together.

Turns out few people thought they were nuts. Least of all their wives, who gave them the thumbs-up to each set down a sizeable chunk of change to get back in the business that had just burnt them. What won over any skepticism on the part of their wives or potential future business associates was the trio's business plan, which essentially revolved around this formula:

Buy affordable lots + Build affordable homes = Make acceptable profit

The plan is anything but a get-rich-quick venture. In fact, it's all about being slow and steady, controlling risk. This is why the new venture has no office space other than what each can commandeer in their own homes and why Hofherr and Gentry make moves based on a worst-case scenario analysis. For example, when I asked them about where their company's sweet spot in the market will be, they said they planned to build homes that would sell 10% below where the resale market was at. At that level, they figure, even if prices take another tumble, they still have a margin to give up, so they could, in a worst-case scenario, sell at cost and still get out of the project without losing any money.

And this is what strikes me every time I talk with intrepid ex-execs-turned-entrepreneurs; they are much more realistic, nay fatalistic, than ever before. They are building into their business model operational strategies that amount to hardly more than escape plans. They don't just talk about making money, but they actually have plans in place to not lose any, or much at any rate. (This of course is something that makes any wife very happy.)

It's a much more complicated process to launch a company these days than during housing's friendlier days. And consequently start-ups like Hofherr and Gentry's have to be much more sophisticated financially than ever before thanks (or not, however, you see it) to tight credit and lending markets. All stakeholders from bankers to lumber suppliers to wives want to know when they'll get their money--and the only acceptable answer is soon. So, management teams at these new companies like Envision are dealing with numerous joint-venture structures to finance land acquisition, and they're finding creative ways to appeal to banks to secure vertical construction financing. Long gone are the days when you brought less than 25% equity to the table to secure credit.

Although this next generation of home building executives are finding where there's a will there's a way to finance, they're finding that their ambitions have to be right-sized. The management team at Envision, for example, has just about 20 lots under contract in its first 90 days of being in business and is focused on doing between 12 and 20 homes in 2010.

But to me, starting small is definitely a survival if not a success strategy for all fledgling companies. It protects management teams from themselves, in a way. The companies being born today are likely to be better built for the long haul than companies born during housing's last run-up because they will have less debt, more skin in the game, and more realistic visions of the future and its pitfalls. In fact, they may even avoid the cardinal sin of every housing cycle--going too long on land. And isn't that a hopeful thought on Monday?

HBAM is the leading building industry advocate in Central Maryland, serving as an information source for media, governmental organizations and the general public - disseminating up-to-date news and trends relating to housing.

In the past several years, HBAM has embarked on a comprehensive community outreach program to educate consumers about home building and the buying and remodeling processes, ultimately enhancing the relationship between the public and members of our industry.

HBAM continually seeks ways to lower the cost of new homes, placing home ownership within the reach of more citizens. HBAM is committed to the goal of affordable housing, and is a long-standing supporter of Maryland's affordable housing endeavors.

"We are proud to be part of such a great organization and look forward to taking a leadership role. We believe in the values HBAM stands for, and its commitment to the homebuilding industry as well as the community we serve." Bill Hofherr - Envision Builders