By 2025, David Weekley wants his Houston-based private home builder to produce $5 billion in revenue. Last year, the company generated $1.3 billion. So there’s a lot of ground to cover in what Weekley calls his company’s Noble Journey.
The fuel behind Weekley’s ambitious growth plan is expansion. While this cycle generally has seen publics roll into markets, Weekley, the second-largest private builder on the 2015 BUILDER 100 with 3,168 homes closed in 2014, recently moved into a number of new metros—including Indianapolis, Chicago, and Nashville, Tenn. As Weekley (which builds in 20 markets and 12 states) continued to look northward, Minneapolis was an obvious target.
“Minneapolis seems to have a lot of great demographics and it wasn’t too crowded,” Weekley says. “There aren’t a lot of major builders there and the market has our same culture and ethics—it’s a Midwestern salt-of-the-earth kind of market.”
But to understand that market, Weekley needed help. That’s where Ian Peterson enters the picture. If Peterson is successful in Minneapolis, Weekley is that much further along on the company’s Noble Journey.
An alum of Centex, Pulte, and Ryland, Peterson has two decades of experience in the Minneapolis market. Melding his knowledge of the market with Weekley’s efficiencies and culture would seem to be a recipe for success. But when a Texas-based builder moves into the North Star State, there are bound to be challenges along the way.
An Obvious Choice
Though Indianapolis isn’t Minneapolis, Weekley hopes his success there can be a model in the Twin Cities.
“We’ve done well there and the folks have liked our homes,” he says of Indianapolis. “We feel as though we’ve learned how those northern markets react and how we need to adjust our product line and our business methods.”
As David Weekley Homes scouted Minneapolis, the staff polled industry sources to find a suitable candidate to run its Twin Cities operation. Peterson’s name kept coming up in those discussions.
“He was very well recommended by high-quality people in the marketplace,” Weekley says. “When you get folks you’ve done business with for a long time—lenders and developers—come up with the same name, it’s encouraging.”
Once Weekley learned more about Peterson, the choice to lead the Minneapolis division was obvious. “He has been up there most of his life, knows the market, and has great experience there,” he says.
For Peterson, the idea of working with Weekley was a welcome change. “Going to a private home builder was very interesting and very different from what I did in the past,” Peterson says. “It was actually very refreshing.”
Perfecting the Product
Usually when a builder enters a new market (without buying another company), the growing pains center around things like land and labor. Finding the land and securing the trades can be difficult for the new kid on the block.
But Peterson says that hasn’t been a problem in Minneapolis. He already has two or three deals under contract and has made a number of hires.
“Most of the land deals I did in the past were based on relationships,” Peterson says. “So carrying on with that was a natural fit.”
Labor presented a different challenge, but relationships helped there as well. “There is a bit of a labor shortage in the Twin Cities,” Peterson notes. “Unemployment is so low. We have a sophisticated trade base. I’ve known a lot of those people for a long time as well.”
The bigger challenge is coming up with a signature product for Minnesotans. Both Weekley and Peterson know that they can’t just roll out the Texas builder’s plans in Minneapolis.
“We’re designing all new product—Minnesota-specific stuff,” Peterson says. “Getting the product right that we’re going to offer has been the biggest challenge. We need to make sure we’re not the Houston builder that came to Minneapolis and put a basement under the house we build in Houston.”
The company also is learning that what works in other northern markets may not necessarily fit in the Twin Cities. “From the number of garage stalls to mudrooms, Minnesota homes are different from ones in Indianapolis and Chicago,” Peterson says, noting that he had to explain the purpose of a mudroom to the staff.
There were other differences as well. In Minnesota, master bedrooms typically are upstairs, but Weekley is going to experiment with master bedrooms and second bedrooms on the main floor.
“We’re going to bring some things from the south into the new models and see how it goes,” Peterson says.
David Weekley Homes also is importing its high-density product to Minneapolis—a market that anticipates more transit-oriented development growth with its planned Southwest Light Rail Transit project.
“We’re looking at [high-density] opportunities and have some good things coming in 2016,” Peterson says. “In some situations we’re trying to partner with apartment developers.”
Minneapolis and Beyond
The company was slated to begin construction on its first Minneapolis homes, The Cove at Lake Minnetonka, in September. Four more communities in Plymouth, Chanhassen, Minnetonka, and Maple Grove also should come online this year.
“In Minneapolis, we want to be about smart strategic growth and always focus on the customer,” Peterson says. “Our land pipeline for 2016 is looking great with five new deals in the works through our developer relationships with a great mix of traditional single-family homes and high-density infill sites.”
As the Minneapolis market ramps up, Weekley will continue to explore more metros as his firm continues to expand. He says the company currently is evaluating a number of areas, but has no firm plans yet.
While Weekley leaves some room to maneuver on where he’ll go next, he’s adamant that wherever the company goes, it will be a private entity. The builder has tapped into public-market capital, leaving some to speculate that it eventually could be an IPO candidate.
But the company’s founder leaves no doubt where his loyalties lie.
“We plan on staying private for next 100-plus years,” Weekley says. “We want to have longer-term thinking than it seems that some of the publics have and not be so stock market sensitive. We’ve been fortunate that we’ve been able to access the capital to do that.”