By Pat Curry. When WCI Communities president Jerry Starkey sits down with his morning newspaper, there are plenty of worrisome headlines that could impact his business. The economy. Global political upheaval. Tightening environmental regulations and development requirements. When he finishes reading the paper, though, he knows there are two things that will not change. First, there will never be three feet of snow in February in Florida. Second, he has a land bank of 15,000 fully entitled acres, enough to build more than 28,000 homes.
"We don't employ a field of dreams strategy," Starkey says. "We're developing in places where people have historically chosen to locate. The climate is incredible, there's sunshine year-round, no state income tax, a low cost of living -- relatively speaking -- and great home values. Having 15,000 acres in the best locations is indeed a very handsome asset to have on your balance sheet."
Ranked the no. 2 active adult builder in the country last year, after Pulte's Del Webb division, WCI has built its success by capturing buyers on their first trips to the Sunshine State. WCI develops and runs communities, Starkey says, in the same way a fine hotel serves its guests.
"People come to Florida, they start with a weekend or a week, then a time share, and then a primary retirement home," he says. "They're recreating the whole time. Our business model is to provide those services to them and integrate that into the home experience. We're really not providing shelter; we're providing a full-service lifestyle so they can enjoy their time in Florida."
It's worked. In January, WCI's second age-qualified active adult community, Sun City Center Fort Myers, received the National Council on Seniors' Housing Gold Award for best large, master planned community. The 1,100-acre site, which opened in June of 2001, will have 2,100 homes at build-out. A $20 million amenities package includes a 27-hole golf course, a fitness center, a cyber cafeacute; and business center, a softball complex, and an amphitheater for outdoor concerts and events.
While WCI Communities has only existed in its current form since 1998, the company's history dates back to 1946 with the land-holding company Westinghouse Communities. Tampa developer Al Hoffman Jr. founded Florida Design Communities in 1985; two years later, he took his first foray into the active adult market when he bought Sun City Center, in Tampa, Fla. In 1998, Florida Design Communities merged with and purchased Westinghouse Communities, WCI for short.
The resulting company was named Watermark Communities Inc.; they kept the initials, which were well-established in the industry. Hoffman remains the company's CEO. Ancillary divisions include Prudential Florida WCI Realty, the WCI Design Studio, and mortgage, title, and property management services, providing end-to-end service and community control. In the spring of 2002, they made news when they issued an IPO, the first builder in six years to go public. By fiscal year ending in 2002, WCI had booked 1,666 net new orders for traditional homes and 442 orders for condominium apartments.
Rolling out the Red Carpet
Starkey considers its amenities operation to be one of WCI's differentiators in the market. Crucial in the active adult market, amenities drive the buying decision. But unlike many builders, WCI expects its amenities division to perform. Approximately 15 percent of WCI's revenues -- $71.1 million in 2002 -- comes from amenities, Starkey says. Half of its employees work in the division, which runs the 17 golf courses, five deep-water marinas, and 14 restaurants. Last year, the division posted a 21 percent profit, adding $15 million to the company's bottom line.
"Historically, many builders have looked at this as an activity to subsidize the lifestyle," Starkey says. "We've always looked at it as a profit center. We have a full amenities division with people who have spent their career in food and hospitality. That's probably one of the reasons we can operate that with a profit instead of running losses."
Ken Plonski agrees that the structure of the amenities is unique. Plonski came to work for WCI as its vice president of public relations after spending years with active adult pioneer Del Webb. He's also been active in senior housing organizations on a national level. For example, many builders spin off the golf course, he says. WCI owns and operates its courses, along with nearly all of its amenities.
"If we can manage and operate it, we can deliver one very cohesive product," he says. "It makes a lot more sense for the potential home buyer. Instead of talking to a builder, a developer, and golf course management, he talks to one entity."
Another facet of WCI's business model that makes it somewhat unique among major builders is its significant presence in the luxury high-rise market. The company has built 17 towers in Florida, and plans to introduce at least six more in 2003. Approximately half of the company's home building revenue comes from condominium sales, which average $1 million per unit. The average price for its single-family home is about $340,000.
"The high-rise business, historically, has been good for us," Starkey says. "We focus on the fact that our locations are scarce. We're not focused on chasing numbers of units. Our business model is built on maximizing revenue through amenities and locations."
Rising to the Challenges
WCI's major challenges, Starkey says, are the same as those faced by the rest of the home building industry: acquiring entitled land and facing governmental agencies with a slow or no-growth agenda. While builders in the past shied away from keeping large tracts on their books, WCI still favors buying and locking up a parcel at today's prices, even if development is years off and the assets weigh more heavily on its balance sheets.
"In some markets, land is so scarce, if you can acquire a 200- to 300-acre parcel, it's prudent to acquire it," Starkey says. "I think, in general, if you're operating in an area where entitlements are taking longer, carrying land is a wise decision. It gives big builders a significant advantage over smaller builders. They can garner resources for those purchases."
Since WCI typically builds in coastal areas, the company has also become accustomed to dealing with environmental opposition to its developments. To help minimize the impact of its projects and decrease the time it takes to get approvals, WCI has formed a strategic partnership with the Audubon Society. An Audubon staff member is working full-time with WCI to apply its principles for resource in the design, planning, and construction of 10 communities. The benefit: certification as an Audubon International Sustainable Development.
Get 'em While They're Young
Recognizing the growth of the active adult segment, WCI is aggressively marketing to its leading edge in national publications such as The Wall Street Journal and Coastal Living. Mike Curtin, senior vice president of sales and marketing for WCI, says the most productive marketing for the company is national ads that generate a prospective buyer's interest "before they even get to Florida." Their current advertising generates 75,000 such inquiries for information each year, supported by the company's Web site (www.wcicommunities.com).
Prospective homeowners can tour the golf courses before they visit via CAD drawings on the site, and take virtual tours of the model homes. As a result, buyers who visit after studying the Web site are better educated, pre-qualified, and much further along in the buying cycle.
"Someone in Ohio can pick out a home site, and see the right, left, and side views of the site before ground is broken," Plonski says. "Some people will walk through the front door with the floor plan in hand and say, 'This is the one I want and where I want to live.' "
What's in the future for WCI? Look for more communities geared to capture the leading edge of active adult buyers -- empty-nesters who sacrificed to provide for their children and now have the time and resources to splurge on themselves.