Jay McManus had an important role at Westlake Village, Calif.–based Ryland Homes for more than decade. As vice president of sales and marketing for the Houston division, he worked in the division office but also got to spend time out in the field. But as he was in that role, he knew he wanted to one day run his own division.
The Drees Co., the 23rd ranked builder in our latest BUILDER 100 list with 1,648 closings, gave him that chance in September. After establishing a formidable position in the Midwest, Mid-Atlantic, parts of the South, and in Dallas and Austin, the Fort Mitchell, Ky.–based builder decided to move into Houston. For McManus, the opportunity to start his own division was a perfect fit.
"I've been in the Houston market since 1993," he says. "I have a lot of relationships with developers. And I grew up in Houston, so I know the city."
McManus' knowledge of Houston impressed Drees Texas region president David Harbin. "Jay is a strong leader with 20-plus years experience in the Houston market including experience with a couple of large builders in Houston. He has a strong sales and marketing background and is highly respected in the Houston home building community."
The role with Drees gives McManus—who also had stints at Houston-based Village Builders, a division of Lennar Corp., and former Houston builder Royce Homes—the chance to focus on his product type of choice.
"I like to spend more time in the luxury end of the market," he says. "It's what I enjoy doing most. Drees has a fabulous product with the ability to customize and be a little more creative. That was attractive to me."
But despite the good fit, getting that product line out to Houstonians meant overcoming some hurdles.
Before McManus could build luxury homes, he had to get an office up and running. That's often easier said than done, though the Drees Dallas office was a huge help. "When you're starting up a new office, every day brings different challenges," McManus says. "There's always a new problem to solve."
As McManus was getting the office going, he already had a couple of deals under contract.
"They were down the road a little trying to attract and secure vendors and trades," McManus says. "I helped bring it together once I got on board. I brought in trades and vendors that I knew over the years. Between this office opening and the office in Dallas, we've been pretty successful."
Drees was able to leverage some of its developer relationships through its Dallas and Austin market to secure land deals. That was important because in the competitive Houston market, finding land isn't easy. "I think it really helps with the startup of a new division because you're not having to go chase developers down just to try to establish relationships," McManus says, adding that his own connections in the area made things easier.
Right now, Drees is selling in Woodtrace in Tomball, Texas. It has five more communities under contract with four of those opening for sale over the next 90 days; the fifth is a 2016 deal. "We have another half dozen land deals in the pipeline that are being studied," McManus says.
After starting with an administrative assistant and a construction manager, McManus still seeks an operations manager, two builders, and two market managers.
"I'm feeling good about where we are at," he says. "Coming in, my main concerns were being able to attract labor and vendors. But those have actually been pleasant surprises. We've done very well there."
In a market where entry-level homes are in the high $200s and high-end homes are north of $1 million, McManus expects Drees' average price to come in at about $500,000 to $525,000. Houston is a heavy relocation market, which McManus thinks will help Drees in attracting new customers from Florida, the Midwest, and the Mid-Atlantic. For locals, he plans on realtors and developers to help spread the word.
"Face time with realtors and developers is how sales get done outside of the relocation market," he says.
Long Time Coming
Drees has considered moving into Houston for years, but when it acquired Cincinnati-based builder Zaring National Corp., the builder decided to pull back and focus on incorporating that company into its organization.
"We decided to open the Houston office as part of our growth strategy," Harbin says. "Houston was a natural city for us as we were able to leverage off our current operations in Texas. Houston was appealing as it is a very dynamic market with room for growth, our product from our other Texas cities fits Houston, and we felt our strategic positioning of strong design coupled with our customization strategy fills a need in Houston. Other factors about Houston that appealed to us were being able to build on our relationships with the development community that has operations in Dallas, Austin, and Houston."
Houston's resilience through the downturn also was a factor."Houston has been such a hot market," McManus says. "It's suffered very little during the downturn. You can still do pretty good business here."
After Drees opened its office in September, the oil industry hit a bit of a rough patch with oil falling to $40 a barrel.
"It does cause energy sector employees that serve the upstream market some concern, and many are a bit slower in their buy cycles," McManus says. "Downstream producers are helped by the lower prices and much of Houston's energy sector is downstream.
Additionally, Houston's economy has undergone quite a bit of diversification since the last slump in oil prices, and we should weather an oil price slump better than in years past. All in all, most Houstonians would rather be paying $3 a gallon for gasoline."
McManus notes that he thinks there's a long run in the Houston cycle, and he is optimistic about the future. "There's such a friendly business climate in Texas," McManus says. "I think it's probably one of the easier startups to do in the country, especially when you're introducing a product like Drees has to the market."