Outside the Box
WCI Communities thinks about more than the house when serving its upscale buyers.
At WCI Communities, it's not about the house.
"Some companies characterize themselves as a home builder, a hotelier, or a golf course builder, but we characterize ourselves as being in the lifestyle business," says Al Hoffman, CEO of Bonita Springs, Fla.-based WCI. "When people come to Florida, they go out to eat. They golf. They go to the beach. They go boating. We realize that the common element we're selling is the lifestyle rather than the space between four walls, a floor, and a ceiling."
The result is WCI, a vertically integrated public home builder with a business model unlike others in the industry. Known for its luxury high-rise towers (where units sell for an average of $1 million and up), WCI also operates a traditional home building division, real estate services, and an amenities business that includes golf courses, marinas, and more. It's a unique approach that's also financially rewarding: In 2002, WCI delivered 1,689 homes, generating double-digit profit margins on $997 million in revenue.
Now WCI's model is also an award-winning one. Judges found multiple reasons to honor WCI Communities as one of America's Best Builders, citing the company's innovative and high-design product, appealing floor plans, split high-rise tower and traditional home building business, emerging green building practices, and the strong financials of its diversified revenue streams.
Publicly traded since 2002, WCI and its roots actually reach back to 1946. Founded as Coral Ridge Properties, the Florida development company was later bought and sold by Westinghouse Electric Corp., eventually merging in the mid-1990s with Florida Design Communities, a builder/developer established by Al Hoffman and partner Don Ackerman, who now serves as WCI's chairman. That's the company that soon resulted in Watermark Communities, which was reorganized and renamed before going public as WCI Communities two years ago.
It was not the ideal environment for an initial public offering (IPO)--investors were still sorting through the remains of the burst tech bubble--but WCI, which had already postponed the offering because of Sept. 11, had too many advantages to warrant waiting again.
"They were well-positioned in the state of Florida, which is a very attractive market, and they had a great market share. They were well-positioned from a product standpoint. They had industry-leading profit margins," says Bob Crowley, an executive director at UBS Securities and the lead banker on WCI's IPO. Not to mention a veteran management team consisting of Hoffman, president and COO Jerry Starkey, and CFO Jim Dietz. "They came across as having a good track record and a lot of experience," Crowley remembers. "It played well with investors."
The stock, offered at $19 a share, climbed nearly 20 percent on its first day of trading. Today, the five analysts covering the company all rate WCI, whose target market is active adults and retirees, as a buy or strong buy.
At the core of the company stands its home building businesses, both tower and traditional, which contribute more than 80 percent of WCI's revenue. The two divisions contribute equally to the top line, but the more profitable towers provide more to the bottom line.
Which is as it should be, given the greater financial risks of going vertical. Luxury towers like WCI's cost millions to build, take 18 to 24 months to construct, and appeal to a very specific and affluent audience. To mitigate those hazards, WCI does extensive marketing and presales, requires nonrefundable deposits (typically 10 percent to 20 percent of a unit's sale price) from buyers, and generally begins construction on a tower only when it has enough sales to cover the hard costs. "We don't take risks with the high-rises as some developers do," says Hoffman. "With a tower, that's 100 or 200 units [you have to carry if they are unsold]. You have to finish the building whether you sell one unit or not."
WCI designs and finishes those high-rise buildings with care. "I think WCI really focuses on the floor plans, the quality of specific units, and the overall curb appeal of their buildings," says Rick Dykman, executive vice president of Boran Craig Barber Engel Construction Co., a Naples, Fla., firm that's built 17 towers for WCI since 1989. "They believe in doing things right the first time and not having problems down the road. They are willing to spend the money upfront."
That attitude applies to behind the walls, too. "They spend the money not only in the places one can see," says Fred Pezeshkan, president of Naples-based Craft Construction, which has worked for WCI for a decade, "but also in the places where only the contractor knows the quality going in there," such as in soundproofing and insulation.
WCI has similar quality expectations for its traditional home building division, where the average sales price is in the mid-$400s. "We have a moral obligation to build homes as well as we can," says Michael Greenberg, senior vice president of home building and real estate.
To accomplish that, WCI relies on an extensive quality control program. Each home is inspected five times by varying levels of WCI inspectors, who evaluate the home's construction and performance against a 400-item list. Problems are noted and communicated immediately and electronically to field staff and management, who watch carefully for trends.
Quality encompasses more at WCI than simply preventing defects. The builder also recently launched a green building initiative that includes both home construction and land development at 10 WCI traditional home building communities.
The first of these communities is Evergrene, a 364-acre Palm Beach Gardens, Fla., neighborhood that emphasizes energy and water conservation as well as other ecological practices and materials. Evergrene's centerpiece: "Generation Green" (or Geni G), a WCI model home that recently received a top score from the Florida Green Building Coalition.
But the demonstration home is not just for show. Constructed with more than $75,000 in environmentally friendly options, Geni G shows potential buyers just how green they can go with a WCI home. "This is something that the market has told us is important to the consumer," Greenberg says.
More conventional home buyers get the same quality treatment at WCI. "The attention to product selection, design detail, and the level of customer service it offers to customers is top-notch," says Wally Schwartz, director of national builder sales for Kohler, the kitchen and bath fixture manufacturer.
Regardless of whether a buyer opts for a traditional home or a condo with a view, though, he or she still enjoys the amenity-rich experience that has become a WCI hallmark. Featuring private clubs, fine restaurants, marinas and beaches, and even championship golf courses designed by Greg Norman, these communities reveal WCI's penchant for quality across its operations. "We treat our amenities as a specialized business," says Jerry Starkey, WCI president. "A lot of home builders treat them as a necessary evil or an ancillary business that offsets their margins. We see them as adding value."
It's just one more expression of how WCI goes beyond the "box" of a new home to provide its buyers with not just a new place to live, but a new way of living for the rest of their lives. "We don't want to just build a house. We want to be known for our quality, even at the risk of over-landscaping or over-specifying," Hoffman says. "A lot of communities don't age well. Ours do."
CEO: Al Hoffman
President and COO: Jerry Starkey
CFO: Jim Dietz
Focus: Luxury public builder with high-rise tower, traditional home building, amenities, and real estate services businesses.
Founded: 1946 as Coral Ridge Properties
Web site: www.wcicommunities.com
Notable: Helped establish a private school for low-income children in Lee County, Fla.; contributed almost $5.5 million in 2002 to educational, youth, environmental, and affordable housing programs in six Florida counties where it builds; built 14 Habitat for Humanity homes in two years.
Tips From a Winner: How to Connect Better With Customers
Marketing can be a weak spot for many otherwise strong builders. But that's not the case at WCI Communities, which maintains a sophisticated and intensive marketing program. The Florida builder maximizes every contact with prospects, relying on techniques more commonly used in the hospitality and financial services industries. "What we do is not so revolutionary or unique--it's just fundamental database marketing," says Mike Curtin, senior vice president of sales and marketing. "We just do it a whole lot better." Here are a few of its practices:
1. Make it easy for prospects to contact you. Every WCI marketing piece includes three ways for customers to respond: e-mail, phone, or mail.
2. Hire people who can truly help your potential customers. All the sales representatives in WCI's central call center have their real estate licenses, which means they can offer more advice to prospective buyers than your average call center representative.
3. Know who your buyers really are. WCI's proprietary software system allows the company to pinpoint the city block where interested prospects live.
4. Stay in touch. WCI mails as many as 20 pieces of information, including WCI Living Magazine, to potential customers a year.
5. Respect your customers' privacy. WCI does little "uninvited" direct mail--the vast majority of its prospects contact the builder after seeing an ad in a national or regional publication--but it maintains its own "do not call" and "do not mail" lists.
Learn more about markets featured in this article: Naples, FL.