It seems somehow fitting that Kenneth S. Balogh, the incoming CEO of Ashton Woods, was born about the same time retiring CEO Tom Krobot was getting into the home building business some 39 years and several real estate cycles ago.
"I'll miss [the business]," said Krobot. "But I'll be 64 next February, and I've been in it for 39 years. I think it's critical to have someone in place who is willing to execute the [company's new five-year] plan from start to finish."
Besides, said Krobot, he'll be leaving Ashton Woods, where he has worked for 15 years, in good shape at what is hopefully the bottom of the real estate cycle and well positioned with a new capital structure in place and a plan to deploy it to grow the company's footprint just in time for the next market upswing.
"We made money last [fiscal] year, and we made money in our first quarter," said Krobot. "We're off to a good start in Raleigh, N.C., with our first project having a grand opening.
"We have a very, very aggressive and viable five-year business plan, and we've obtained funding," he added.
The last step to leaving the company in a good place, said Krobot, "is a successor for me."
Balogh, now Ashton Woods' COO, will start his new job Jan. 1. Krobot will stick around as a senior advisor until his official retirement in May 2011. Then he plans to spend some time traveling with his wife of 42 years to places they haven't seen and at their new home on 100 acres with a mile of riverfront in northern Georgia.
"It's been a very well thought-out transition," said Balogh of the CEO handoff. Balogh had been hired at Ashton Woods in September 2009, shortly after losing his position at Centex after its merger with Pulte. Balogh had worked 16 years for Centex and had been in charge of its Eastern U.S. region before the merger.
Balogh said he wasn't hired to be Krobot's successor, but "I think really from day one the opportunity was that Tom had wanted to bring in someone who could potentially be a successor. Tom is a very strong operator and has a very high standard and obviously had to make sure that whomever he brought in would be the right person to run the company."
"Working with Tom has been an incredible experience," Balogh added. "The way he positioned Ashton Woods to not just survive, but to thrive, during the downturn has been outstanding."
For one thing, the company was light on land when the downturn began, leaving it with no legacy assets and, with the help of its Canadian owners and investors, financially positioned to take advantage of land deals.
Last March, Ashton Woods moved into Raleigh and now has two neighborhoods on the ground and two more under contract. Balogh credits Hampton Pitts, the company's division president in Raleigh, for how swift the company was in securing land positions in the market. Pitts had been Centex's division president in Raleigh, "We were able to pull him away from some other opportunities he was looking at," including opening his own home building business, Balogh said.
Austin, Texas, is the next move for Ashton Woods, which has one deal under contract and is close to nailing down another, Balogh said. The company hired Chris Werth, another former Centex executive, to be Austin division president last week.
However, the company is also buying more land in its core markets.
The company bought more land in the Atlanta area than any other builder in recent history, about 375 "well-located" lots, Balogh said. At the peak, the lots were planned for homes that would sell in the upper $400,000s to low $600,000s. The low lot prices will allow Ashton Woods to price homes on the same land in the low $300,000s.
Balogh is confident the new land is being bought in "relatively healthy markets" at prices that will hold up even if the market's rebound is further delayed.
"We are not going after deep, long positions that potentially expose us to worse market conditions," he said. "Our crystal ball doesn't work in terms of [predicting] exactly when the market is going to turn around."