As Roger Mumford sees it, the writing on the wall had been there so long a builder had to be asleep to miss it -- the chilly climate for development in New Jersey was entering an ice age. And if anyone still needed proof, Gov. James E. McGreevey provided it in an emotional State of the State speech in January.
"It is time to draw the line and say 'no more' to mindless sprawl," the governor declared, and in addressing the state's developers directly, warned: "If you want to build in over-developed or protected areas, we will do everything in our power to stop you."
"We recognized that we had to find opportunities in what was a bleak suburban land picture," says Mumford, president of Matzel and Mumford, based in Hazlet, N.J. "We had to find a niche where we could leverage our expertise."
So in the past few years, Matzel and Mumford -- which was acquired by Hovnanian Enterprises in 1999 -- began to shift its emphasis away from single-family suburban development to urban redevelopment, in effect reinventing its business. The company is upbeat on its prospects: Sales have grown from some $70 million in 1999 to $123 million in contracts for 2003. And Hovnanian owns enough land in New Jersey to support more than five years of new construction, according to Mumford. But he remains realistic: The company must still contend with a brutal environment in which state government opposes development and only gives lip service to redevelopment.
The company's about-face has been gradual but steady. Five years ago, Matzel and Mumford was building single-family homes in new developments exclusively and was typically seen as a builder of higher-end homes. In fact, it did build some high-end luxury product during the mid 1990s. But its pricing position and product size was actually moderate for New Jersey, in the $400,000 to $450,000 range, over the past five-year period. The company deliberately tried to avoid the higher end but was priced slightly over the state's median new-home price of low $300,000s.
Now, when Mumford looks to 2004, he foresees the company delivering 53 percent of its product as redevelopment (about half of which will be active adult), 25 percent as attached/non redevelopment, and 22 percent single family all on redeveloped urban land or in older suburbs, priced roughly in the same price range. The strategy, he says, is consistent with the parent company's approach of "offering a broad product array."
"Matzel and Mumford and Hovnanian Enterprises have quietly and consistently for the better part of a decade been exploring opportunities in older urban and suburban areas," says Patrick O'Keefe, CEO of the New Jersey Builders Association.
Adds David Fisher, Matzel and Mumford's vice president of governmental affairs, "The regulatory climate is so severe that our primary concentration in the future will be to facilitate redevelopment."
It's no secret that New Jersey is one of the toughest places to build. The state government opposes growth and is committed to the acquisition of open space -- and a state guidance document on development is hardening into a set of mandatory restrictions, Mumford says. The approval process is slow and torturous. And with 566 town governments as the final arbiter of land regulation, "there is very little regional perspective," he says.
"What we have in New Jersey is layers of governmental regulations -- town, county, region, and state," Fisher says. "We went from a laborious but predictable approval process, to one that was close to impossible. You might spend years in planning and paying for permits, and a local conservation organization might buy the land out from under you." O'Keefe puts it bluntly: "Our state government is indifferent to housing in older urban areas and hostile to housing elsewhere."
Builders who opt for redevelopment receive little state support for improving antiquated or insufficient infrastructure, few tax breaks, and no help remedying waste sites, also known as brown fields. "The State of New Jersey doesn't understand yet what it needs to do," says Tim Sullivan, principal in charge of real estate services for the Meyers Group, a San Diego-based housing-market analyst firm.
"With all this said," Mumford adds, "[building in New Jersey] is still a viable option for us. Profit margins have grown throughout this period and have consistently exceeded a net of 10 percent."
The builder is looking at New Jersey's high demand for housing to sweeten the experience. Despite a population of 9 million people and growing, the number of permits allowed each year in the state is half of what it was in the 1950s. "Matzel and Mumford have been able to undertake a very sophisticated examination of the possibilities," O'Keefe says. "And they've made a significant investment in just investigating the opportunities."
"Once you've done your homework, typically the market will swoop in and respond very positively," adds Sullivan. "And Matzel and Mumford are hitting it out of the park."
How Now Brown Fields
Morris Place has all the makings of a charming town home community. Built on 5 and a half acres in northern Morris County, the development's 76 homes range in size from 1,535 to 1,762 square feet and sell for an average price of $400,000. Before Matzel and Mumford built here, it was the site of George Washington Elementary School and home to what Mumford calls "pretty substantial soil contamination." Even with the cost of cleanup, this brown-field property is prime land in the builder's eyes.
"Brown fields will be the focus despite all the difficulties -- acquisition is complex, and cleanup is difficult and expensive," David Fisher says.
New Jersey builders face the choices of infill and age-restricted development, says Sullivan. "Municipalities don't want children" -- they don't want to deal with school construction and busy roads. "And our population is aging. So our housing needs are changing. Those builders that can look at infill are. But even the publics are trying out how to do this."
Meanwhile, Matzel and Mumford pushes on. In the spring, it opened Spinnaker Pointe, an active-adult community in Sayreville, with 103 ranch-style homes and a number of non-age-restricted town homes. Before its 40 acres were rezoned and designated for redevelopment, the site was a commercial trucking and sand pit area, Mumford says.
Farther south in Monmouth County, Beachfront North is rising on 20 acres of an old single-family oceanfront community in the city of Long Branch. It will have 104 town homes, plus three mid-rise buildings with 179 condos.
Like Beachfront North, not all of Matzel and Mumford's infill properties are brown. And not all brown fields are alike, Mumford says. There are brown fields, and then there are brown brown fields. An example of the latter is a planned mixed-use development in South Bound Brook. It's on the site of the former GAF Roofing factory and contains significant contamination. Mumford says in this case, his company may cap the contamination to eliminate the threat to health, and leave it on site before building 152 town homes and 30,000 square feet of retail and office space.
Such is the demand in New Jersey that Mumford has no doubts that, toxic waste or not, the property is going to be hot. "We're learning as we go along," he says. "With the tremendous imbalance of supply and demand, we've had essentially no problems with anything we've done."
Meet Early and Often
The towns in which the company is building are new at this game, too. That's why any builder interested in infill needs to be "tuned in to local municipalities," according to Sullivan, of the Meyers Group. Other prerequisites include "skill in the entitlement process, a great legal department, and they have to know how to build and market the home." Mumford agrees. Fortunately, "we had people with the necessary background and experience," said Mumford. "We didn't have to re-staff after we refocused."
But the business did change. The new approach requires a more complex management system and more meetings, with increased interaction between its land, design, and construction groups. The builder also works intensively with the municipality. "We try to show them that we can create an economically viable community," Mumford says.
To stay on track, the company follows a comprehensive and indispensable 18-step community building time line. And while more meetings now are held earlier in the process than before, the marketing effort takes shape a little later. You can't put up a trailer on the rubble of an elementary school and expect people to hand you $400,000. "With redevelopment you need to do as much as you can on site to create the value. You need to be able to demonstrate the product," Mumford says.
Infill projects come with their association to the surrounding community. "Many times we find that the market is more local," he says. So the marketing thrust often plays up cultural amenities and the proximity of the location to transportation, as well as the personality of the town."
Still, assessing the market in these older communities is difficult, David Fisher says. "There's nothing to compare it to." With every infill project being a little different, Matzel and Mumford is offering a more diverse array of products. And to maintain its diversity, the company will continue to look for suburban development opportunities.
The focus will remain on redevelopment, but not every site will do -- the builder's infill projects average 100 homes, a size large enough for economies of scale to kick in. So far it's working. "We've been growing consistently," Mumford says. "We're maintaining our margins and customer satisfaction. So our strategy is working."
O'Keefe, of the New Jersey Builders Association, warns that many infill opportunities ultimately may be undone by lack of government support -- from the municipal to the national level.
"Companies like Matzel and Mumford are innovative, adaptable," O'Keefe says. "They're good. But in the end, if the government doesn't do its job, Matzel and Mumford isn't good enough to turn the tide of 50 years of urban neglect. Not by themselves."
Roger Mumford says Matzel and Mumford's transition from suburban single-family home construction to multifamily urban redevelopment projects was aided by the fact that the management team had "the necessary skills and background" to do the job, including long-standing expertise in state regulations. While Matzel and Mumford didn't have to re-staff, its new focus did require making significant changes in how it does business. Among them, according to Mumford: