Housing Giants - August 11, 2008 - (Page 26) ceo spotlight lending capacity of the banks.” Drees believes the future may be more in joint ventures with equity partners than in traditional debt financing by banks. “It’s something we’re exploring, something we think may revolutionize the way builders do business,” he says. “We think we have to get equity financing for land deals, and to get into [company] acquisition mode again. There’s a lot more equity financing available than bank financing. The banks are not going to be making money for a long time. Meanwhile, there’s equity out there looking for deals. We have to find a way to structure joint ventures that make it work.” Not BuyiNg LaNd — yet Drees says he’s not ready to start buying land again, but that day may not be far off. “It could be in nine months, but it might be two years,” he says. “The opportunity will come when the lenders have more real estate on their books. They’ll be under a lot of pressure to get rid of it, and we’re waiting for that day.” In the meantime, Drees plans to option lots at the best prices and terms possible for as long as the supply holds up. But he has no intention of converting his company to the NVR model of permanently land- light operations. “We’re a developer in most of our markets. Texas is the exception. We’ve made our best money as a developer, and we’ll go back to it when it makes sense. Controlling the look and feel of a community creates advantages. And of course, when we develop, we have our choice of the best lots. “The NVR model is the rage right now,” Drees says, “but I think the industry will lose its infatuation with it pretty quickly when land prices begin to escalate again.” When the market comes back, Drees thinks we’re going to need a program to identify all the new players. “Not just builders, but developers and banks will be gone,” he says. “The builders who survive will be bigger, and the largest public builders will be stronger than ever,” Drees says. “A lot of home building companies are going out of business, but when recovery comes, some of the senior managers the public companies turned loose will find some venture capital, and you’ll see a surge of new start-ups as well.” Don’t be surprised to find Drees among those larger companies entering new markets via acquisition. HG 26 HouSiNg giaNtS.8.11.08 www.HouSiNggiaNtS.com http://www.housinggiants.com
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