TAKE A HARD LOOK AT SUCCESSFUL BUILDING EXECUTIVES and you'll find almost all share at least one common trait: They are deeply motivated. For Stanford Carr, president of Honolulu-based Stanford Carr Development, it's a “ghost” that motivates him most. Hanging on his office wall since 1992 is a cartoon depicting a homeless man holding a sign that reads “I will develop real estate for food.” Today, the image elicits a chuckle from Carr, but while he was scrambling to keep his business alive during the lengthy recession that decimated the Hawaiian housing market in the 1990s, its message hit a little too close to home. “That [cartoon] is my ghost,” laughs Carr. “It haunts me. Every day it reminds me of where I don't want to end up.”
If Carr truly has any fears, they aren't apparent. At ease in his floral shirt, the Maui native evokes the epitome of Hawaii's casual way of life. But at 42, Carr has come to understand better than most executives what it takes to survive and succeed in Hawaii's boom-and-bust market cycles. In the process, Stanford Carr Development has not only left a distinctive imprint on Hawaii's new homes, but finds itself uniquely positioned to take advantage of the resurgence in Hawaii's housing arena even as big builders from the mainland continue to muscle into the market.
“Our underlying strategy is to balance risk management,” says Carr. But it's his creative approach to balance that has allowed him to succeed in a niche others have virtually ignored. Born and raised on the island of Maui, Carr knows firsthand about the housing challenges facing hard-working Hawaiians. The son of a farmer, Carr grew up planting zucchini. He began earning a living installing carpet before investing in his first development project. Twenty years later, as the largest builder/developer headquartered in Hawaii, he has come a long way and learned a lot about the nuances of developing property on his native soil. And it's reflected in projects like the master planned community of Kehalani (see “Master Plan in Maui,” page 62). Plans for 2,400 homes on 540 acres include parks and a commercial center at Wailuku in central Maui. But the real draw is the mix of townhouses and single-family homes that are considered affordable: ranging from $200,000 to $1 million to accommodate nearly every lifestyle and income bracket on the island.
Homes For The Homeland While the entire country felt the effects of the housing recession that began in the early 1990s, Hawaii suffered a double blow when the influx of Japanese money evaporated. Unlike other markets on the mainland, Hawaii's housing recession dragged on through the end of the decade, bottoming out in 1998 and 1999. It was then that the flood of dot-com dollars in the second home/resort sector began to buoy the economy and housing market. Since that time, factors such as increasing tourism, low unemployment, and an ever-strengthening economy have contributed to a steady rise in housing starts and prices. “Our prices increased 15 percent [from 2003 over 2002],” says Harry Saunders, president of Castle & Cook Hawaii, “and it is strictly market related.”
Like the other successful builders involved in the Hawaiian market, Carr's business model addresses both primary and resort housing. But where the growth for national builders such as Centex, Castle & Cook, and D.R. Horton's Schuler Homes relies more heavily on the burgeoning resort market, Carr's focus began—and today, remains—in the affordable housing arena, targeting low-and moderate-priced buyers who live and work in Hawaii.
During the bust, Carr kept his business afloat by working in partnership with the state housing commission. “Because they provided the financing, I befriended them and they gave me a chance,” recalls Carr. Awarded his first project in 1992, Carr's firm earned an opportunity to create 1,000 turnkey rental units for the state. “Winning projects of that size gave me the opportunity to seriously bid for others,” he says.
But the trendsetter in Carr was also at work. A result of the state's tight reins on land and limited competition, builders were never forced to provide much architectural interest to consumers. “I was shocked after touring California in the late '80s,” recalls Carr. “It really hit home that we were just offering boxes.”
After studying the success of Southern California's cutting edge products, Carr was determined to elevate the level of design in his homes. Since that time, the firm has been able to stand apart by adapting successful building techniques and product types from the mainland, incorporating regional influences, and continually working to improve processes. “I don't want to compromise on quality,” says Carr. “Hawaii is a small state. If you don't do the right thing, it catches up to you.”
Ten years ago, the firm was widely criticized for giving away too much for the money. Today, Stanford Carr Development is not only the largest builder-developer headquartered in Hawaii, but one which is recognized for building homes with a signature style: a luxurious use of space that blends cultural and historical styles with contemporary tastes.
Founded in 1990, the company has completed more than 2,000 homes, with another 3,300 homes valued at nearly $1 billion on the drawing boards. In addition, the firm controls nearly 800 acres of land in Oahu, Maui, and the Big Island. In 2003, the company recorded more than 400 closings valued at approximately $130 million, doubling revenues over the previous year.
On their own, the numbers don't reflect the company's influence on Hawaii's residential market. “By emphasizing high-quality, master planned, environmentally friendly projects, Stanford Carr Development has set a higher standard for builders in Hawaii,” says state Governor Linda Lingle. The approach has garnered both local and national recognition for the firm, including five western national awards from the PCBC and numerous local awards and even the grand award, from the Hawaii Building Industry Association's Annual Parade of Homes event.
Recognizing Resort Although 75 percent of Carr's business addresses primary housing, the resort market in Hawaii can't be ignored (see chart, page 62). Other big builders agree. “Resort and [primary] residential are interrelated in this market,” says Castle & Cook's Saunders. “The key factor to success here is to establish a large land base and have pockets deep enough to get you through entitlements.” That, observed one mainland home building CEO, and connections to the island's inner governing circle.
As in many markets, land is scarce—with only 5 percent being held by private owners. And entitlements often take six to eight years to secure. But faced with skyrocketing land prices in some areas of the mainland, prices of $200,000 to $400,000 an acre can seem like a bargain. According to Carr, that's the draw for national builders—and he encourages more to come.
“The state of Hawaii will soon lose its status as one of the best kept secrets in the housing industry,” said Anthony Botte, Hearthstone senior vice president for the western U.S. “While construction costs are higher, the key to the state's competitive success is its cost of land, which remains significantly lower per acre than some of the pricier regions of the U.S., including Southern California.”
Carr seems prepared for the new wave of competitors. A self-professed “index freak,” Carr is always manning the radar—watching a multitude of compelling indices from interest rates and population growth to visitor counts and hotel room occupancy rates. “We want to build where the market is today, not where I anticipate it will go,” says Carr. As a result, his long-term plan is to stick to his company's roots. “I got into the resort market eight years ago to diversify my portfolio and take advantage of the money coming in from the west coast. I see it as a cyclical opportunity that we'll continue to fill as long as the demand exists,” he says.
Master Plan In Maui Stanford Carr Development's current offerings include the 2,500-home master planned community of Kehalani. Through a joint venture deal announced in March, San Francisco-based Hearthstone is committing $34.3 million to the 540 acre agricultural-zoned project in Wailuku (central), Maui—enabling the company to add a new collection of 83 single-family units and 132 townhomes. “Stanford Carr has demonstrated a keen eye for every element impacting his state's housing market,” says Anthony Botte, Hearthstone senior vice president for the western U.S.
When completed, Maui Farms at Kehalani is expected to be one of the largest developments on the island of Maui. Single-family homes are expected to be priced from $370,000 to $500,000, offering five floor plans ranging from 1,407 to 2,280 square feet, with an estimated aggregate retail value of $36.1 million. Townhomes are expected to be priced from $207,000 to $242,000, offering three floor plans ranging from 1,000 to 1,224 square feet, with an estimated aggregate retail value of $29.6 million. Amenities will include a clubhouse with a pool, an exercise/fitness room, and meeting space.
Targeting local buyers has already proved successful in the neighborhoods of Maunaleo and Olena. The townhouses and single-family homes that range from $200,000 to $1 million sold out in record time.
Prior to the November 2002 official opening of the sales office at Maunaleo, cars lined up along the road. Within the first day, 300 reservations were taken for 83 homes. Because of the response, when Olena opened in September 2003, reservations were taken via the Web site—with no advertising or publicity. Within two days, 100 reservations were secured for the 32 single-family homes ranging from $320,000 to $370,000. “This isn't mainland based,” says Carr. “Most are local buyers—some even first-time buyers.”
Hawaiian Housing Heats Up With ideal weather conditions, strong job growth, and one of the lowest unemployment rates in the country (4.2 percent), government officials are confident that Hawaii has all the makings of a bright economic outlook. Here's a quick look at the elements at play in this hot market:
The state's new-home sales alone have increased 73 percent since 2000.
A 17-percent surge in construction spending is predicted for 2004.
Once considered to be among the highest priced markets in the country, Hawaii now ranks at No. 11, according to Harry Saunders, president of Castle & Cook Hawaii. “It's perceived as a relative value now.”
Under the administration of Governor Linda Lingle, construction is recognized as a key factor to ensure a vibrant economy. Lingle Administration officials emphasize that they are working to eliminate unnecessary governmental regulations and decrease fees when appropriate. In addition, they are exploring new methods to coordinate permitting requirements with cities and counties
Billions of federal dollars are flowing into the state for military housing construction and restoration projects—up to $10 billion over the next 10 years. Following that, the 50-year maintenance contract that is in place should help support the economy.
The increase in construction ects is creating a large demand skilled construction workers. To address the need, the Department of Hawaiian Homelands is working with several trade unions to develop apprenticeship programs.