Pardee Homes builds homes and communities for the long term. By Alison Rice

When California boomerangs Walt and Chris Vierra returned to the San Diego area after a stint in Ohio, they were more than familiar with Pardee Homes: They'd purchased one condo and one single-family home from the Los Angeles-based builder in the past.

Still, they didn't automatically assume their new home would be built by Pardee. "We looked at half a dozen builders and a hundred existing houses. It was a pretty exhaustive search," Walt says. "We were trying to get down to a sense of what really made us comfortable."

That proved, once again, to be a Pardee home, and in 1999, the Vierras turned into Pardee "three-peat" buyers, purchasing a two-story, 3,500-square-foot home in Carmel Country Highlands, a community in north San Diego County.

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The Vierras' loyalty represents an unexpected level of commitment and repeat business from a home buyer, but, then, Pardee Homes itself has a reputation for steadfastness. Founded in 1921, the company is accustomed to making commitments: to its people, to the communities it creates and the localities in which it builds, and to systems that allow it to manage costs, quality, and customer service efficiently and effectively, regardless of the housing market.

It's not that Pardee doesn't take advantage of a hot market--it closed 1,962 homes in 2001, with projected closings in 2002 of 2,202--but the builder looks beyond, always planning for the future.

"You're not always going to be in a boom market," explains Michael McGee, Pardee's president. "Because of the markets we're in and the time it takes to identify property, get it entitled, and bring it on line, we have to take the long-term view."

Community builder

These long-term attitudes are perhaps most prevalent in Pardee's approach toward land development and the communities in which it builds. "There are just two pieces to developing a master planned community: obtaining the entitlements and holding on to them," says McGee, and Pardee has managed to do both in its territories of Southern California and Nevada.

The company's secret weapon: the careful and continuing cultivation of local officials and community leaders, as managed by Pardee's three-person governmental affairs office in Los Angeles.

Photo: Robert Houser

Michael McGee (left), president; Hal Struck, executive vice president Led by Pardee veteran Len Frank, the office works with the company's regional directors of community development to identify any political obstacles or opportunities at the local, state, or federal level concerning current or future projects.

The spadework begins long before a proposal is submitted for public approval. Pardee gets to know key candidates for public office before they're elected, researching their positions on growth and development and introducing them to Pardee Homes and housing industry issues.

It's an investment of time and effort that stems from Pardee's past and current activities as a master plan developer, McGee thinks. "A lot of times, a builder--vs. a developer--won't build that relationship. A builder will buy his 100 lots, build his homes, and get out."

That's not the approach at Pardee or its parent company, Weyerhaeuser Real Estate Co., which purchased Pardee in 1969.

"Just as it takes years to grow and nurture a forest of trees, it takes years to build trust and reputation as a home builder, and we do it house by house, community by community," says Dan Fulton, president and CEO of Weyerhaeuser Real Estate Co., based in Federal Way, Wash. "Pardee and its sister companies within Weyerhaeuser Real Estate Co. share some core traits: a commitment to safety, a reputation for fair and ethical dealing, a drive to satisfy and exceed customer expectations, a disciplined stewardship of our financial resources, and a recognition that good citizenship is good business."

These traits make a difference, especially in highly controversial projects. After 1,805 acres of Pardee land in San Diego were placed under a growth moratorium, the builder faced a "critical" election in which city residents were allowed to vote on whether Pardee could build on the site.

"Having had a good, constant, positive image with the constituencies--telling them that we were here for the long term, that we were concerned with how the community would build out, that we would work together to create something that was appropriate--[the vote passed]," McGee recalls.

That "appropriate" development turned out to be Pacific Highlands Ranch, an environmentally sensitive and energy-efficient community that will be the first under Pardee's "LivingSmart" program.

Other initiatives are softer but no less effective. For example, Pardee sponsors an annual five-kilometer running race in San Diego, with proceeds dedicated to scholarships.

"It works for the community and it works for us, because the community knows we're not runaway developers," says Hal Struck, executive vice president. "We stay for a long time."

Cost watchers

Pardee's history influences other choices, as well. The company got its start as an entry-level builder--its 1950s Las Vegas homes sold for $10,500--and it has retained that cost-consciousness today, even though its average selling price for single-family homes now hovers around $234,000 in Nevada and $439,000 in California.

"At the root of our culture is the need to satisfy the [demand] for first-time housing," McGee explains. "When you start from that point, it's almost like starting with zero-based budgeting. We are constantly questioning our gut, asking ourselves, 'Is this enough to satisfy our buyer? Is this the lowest cost at the highest quality?'"

"We want to put in what the buyers want, but we are not afraid to research to get the best price," says Struck, who says builders too often "order first and ask what the price is later." At Pardee, it asks those questions on a regional and national level. The builder has its own purchasing managers in regional offices, allowing them to develop more sources in the field and get better pricing.

The company also benefits from its affiliation with Weyerhaeuser, which employs a director of supply chain management. Based in Pardee's Los Angeles office, this staffer is responsible for leveraging the volume of Pardee and Weyerhaeuser's three other builders to develop national contracts where appropriate.

The bottom-line benefit? Direct construction costs consistently below the industry target of 70 percent.

Photo: Courtesy Pardee Homes

Pardee Homes, which built more than 2,000 homes in 2002, celebrated 50 years in business last year. Pardee manages its cost exposure in other ways, too. As a master plan developer, Pardee will sell 25 percent of a community's first phase to "guest builders" such as KB Home or William Lyon Homes. Financially, this reduces the asset base for Pardee, but the strategy has other advantages. "It gets the community off to a jump start and validates the place because there are more than Pardee homes there," explains Struck. "There's a synergism with the schools, and the commercial comes along fast."

That's an important selling point for Pardee. "Part of our value proposition is that we're building homes for the way you want to live," says Struck, alluding to the company's tag line. "That means the schools are in place, there are parks and shopping, that the community is near strong transportation corridors. ... Our stuff goes in very quickly."

Standardizing systems

The company moves equally quickly on other issues. Under Pardee's 2-7-14 program, customers who contact the builder, whether by e-mail or telephone, can expect a response in two hours. If they have a service request, Pardee promises to handle it within seven days; complicated problems may take 14 days.

The 2-7-14 solution is simple and effective, the result of Pardee's recent foray into process mapping. "Three years ago, we recognized that the hardware and software we used to run the company were going to become obsolete," McGee says, and before Pardee purchased new computers and software, it wanted to know exactly how things got done. The exercise revealed some inconsistencies among regions. "We'd share what we thought were common processes and found out they weren't quite so common," McGee says.

Pardee is now taking to the next level what it learned with process mapping: Six Sigma, the quality management program popularized by former GE leader Jack Welch. Only a portion of Pardee employees have taken the initial Six Sigma training so far, but eventually the builder plans to apply the principles to departments such as customer service, sales, community development, purchasing, and options, with the goal of providing better problem-solving tools and solutions in those areas.

"For years, we've had embedded in our culture two words: 'continuous improvement,'" McGee says of the Six Sigma initiative. "Life and work are continuous education processes ... we've just tried to provide a better set of tools."

Like so many of Pardee's philosophies, it also reflects the company's orientation toward its future, not its past. "It's about not resting on our laurels, but knowing that the marketplace is rapidly changing--politically, environmentally, and demographically," McGee says. "Knowing that that change is coming, how will you respond?"

Pardee Homes

Los Angeles

501-plus units

President: Michael McGee

Executive vice president: Hal Struck

Focus: Master plan developer and production builder doing product ranging from apartments to luxury custom homes in Southern California and Nevada.

Employees: 480

Founded: 1921

Web site:

Notable: Celebrated 50 years in business in 2002 by building a house in Las Vegas in 50 hours; was honored by the city of San Diego with "Pardee Homes Day."

Key Cornerstones

At Pardee Homes, it takes the long view. This regional builder:

  • Builds relationships with the San Diego community and school system by sponsoring an annual five-kilometer running race, the proceeds of which go to scholarships.

  • Sidesteps the California product-defect liability crisis and addresses the need for entry-level housing by building rental apartments in its developments. Communities get dense, moderately priced housing, and Pardee connects with the next generation of home buyers.

  • Expects all Pardee employees to share challenges and solutions with their colleagues by attending and participating in regular regional meetings.

  • Monitors its customer service performance through a third-party survey (National Survey Systems of Irvine, Calif.) that allows Pardee to benchmark itself against its competitors.

  • Offers buyers customization through flexible floor plans that allow an extra bedroom to become a den, home office, media room, or open floor space, depending on a family's needs. "It's a long way from the early 1990s, when our options were mirrored wardrobe doors and white or almond appliances," says Michael McGee.

  • Has never posted an annual loss in 81 years of business.