Ain't I Tough Enough?

A private home builder's existential question. Ask them, and they'll give you the answer.

Dan Ryan, founder and CEO of one of the Washington, D.C., metro area's most powerful home builders, Dan Ryan Builders. Photo: Chris Volpe

In the wake of early April's Pulte-Centex display of competitor elimination pyrotechnics, home building's longest-running debate only intensifies. Will public home building companies weather the ravages of the next 12 months better and jump out further ahead in market dominance when real estate shows its first signs of strength in the next year or so?

Or will more entrepreneurial, privately capitalized companies come out of housing's 100-year storm with the stuff to retake home building's landscape market by market?

It'd be a tough call to give private companies an edge in today's economy, reliant as they are on the nation's battered, besieged, and very, very stingy money center and community banks.

What's left of legions of once-proud local, regional, and multi-regional private powers is a smattering of Teflon wonders whose survival instincts raised financial conservatism, flint, and character building to a new level.

Not to be left out of the “what's next?” scenario are a few dozen pros who have played their noncompete clauses like violins during the market swan dive. And, finally, there are those who have and will financially reconstitute themselves like crabmeat you'd see in the frozen seafood section of the grocery store—call them NewCos. for lack of a better term.

In the following BIG BUILDER Private Builders '09 report, we've canvassed the nation, trying to take the pulse of the private home builder community to give you a sense of the spectrum of prognoses for survival.

As you well know, resilience and obstinacy are in no short supply, although credit where credit is due is nowhere in evidence. We've put together a mosaic of voices and stories—about survival, about cleverness, about wile, and about patience. “We're here to stay” is the mantra. We hope so.

Most veterans attribute an ultimate triumph among privates to residential real estate's first—but oft-forgotten—rule: All real estate is local.

SURVIVAL STORIES: On the following pages, BIG BUILDER talks with a diverse group of private builders from across the nation about what they're doing to keep their businesses afloat during the economic downturn.

Dan Ryan, founder and CEO of one of the Washington, D.C., metropolitan area's most powerful home builders, Dan Ryan Builders, puts the rule a slightly different way, and it's a way that offers insight into why never to count private builders out of the running. “Home building,” Ryan reminds us, “is a people business.” Land sellers, subcontractors, lenders, and yes, home buyers are each in and of themselves marketing and capital partners that make home building profoundly local. Local skin in the game, local intelligence, and local fulfillment of local promises give local home builders at least an opportunity to win, if not better odds.

The Pittsburgh-rooted Ryan family, one of home building's royalty, also offers an example of why never to underestimate the power of the private home builders, even though lenders have most of them groveling on their knees, begging for time.

Here's the Ryan story, and it's about almost getting beaten, but not.

Chances are Frederick, Md.-based Dan Ryan Builders will make it. If all goes as planned, even the current headwinds in the market will only haircut a little more than 30 percent of his single-family new-home volume from peak through this calendar year.

He can thank being in some decent locations in the D.C. metro market for some of that fortune.

But that's not all.

He knows adversity by heart. In the early 1990s, as another home building company we've all heard of—NVR—was hurdling into bankruptcy, the fact that the “R” in NVR stood for the company founder, Dan's uncle Ed Ryan, couldn't save young Dan his job.

When he tells the story, he says, “I left NVR and started my own company in another tough moment for housing, during the downturn of the early 1990s.” Then he catches himself. “They fired me,” he confesses. “That was a difficult moment.”

So difficult for Dan that he went over to the home of his father and mentor Jim Ryan—Ryland Homes founder in 1967—for solace and direction. They sat out on the patio of the father's home, and each of them looked out into the forest to the southwest. Dan tells his father what he's been told in a sensitively handled exit interview. He says, “Dad, they said they didn't want to let me go because they really like me; they just didn't think I was ready to run a profit center.”

“Dan, you know that in a downturn, a good company like NVR doesn't let go of their ‘A' players,” Jim Ryan tells his son. “They don't think you're an ‘A' player, Dan.”

That's what Dan Ryan got for comfort the day in 1990 when he got fired from his $65,000 a year job. He didn't talk to his father for a week or so from that moment, and his father got to thinking maybe he'd been a little too candid with his son. Jim recalls the moment in his own career in home building in the mid-1960s, when his own brother Ed gave him a pay cut of $5,000 a year—which prompted Jim to leave Ed's company and go start his own.

So, fast-forward to 2007, when Dan Ryan Builders nets a profit of $35 million, and both father and son know in their heart of hearts that brutal honesty was what the moment called for.

In fact, after his father told him that NVR hadn't regarded him an “A” player, Dan went for a public speaking course and a business leadership course à la Dale Carnegie and started the job of turning his shyness into the warm magnetism you'll see in him today.

“You've got to be strong to be good; it's something you'll hear my dad say often,” Dan says.

What doesn't kill private companies makes them stronger. Ultimately, private, locally financed companies will again dot the new-home landscape, where fewer not-too-big-to-fail publics will be around to compete with.