By Lew Sichelman. Can two competing home builders that have similar product lines successfully come together, plan, and develop a 1,500-home master planned community? McGuyer Homebuilders Inc. (MHI) thinks they can. That's why MHI asked David Weekley Homes to join in as a partner in developing the 563-acre tract in Fort Bend County in Southwest Houston.
Indeed, an association such as the one the two builders have formed at Grand Mission may prove to be the only way private regional builders can go up against their larger, better capitalized competitors, says Jim Zimmerman, general manager of land for MHI.
"We're a home builder; we prefer to buy lots," says Zimmerman. "But over the last few years, the deals have changed pretty dramatically. Developers want significantly higher earnest money and less of the risk. So we decided that if we have to do all that, why not just be the developer?"
Besides, adds David Weekley, the two companies go head-to-head with other builders all the time, so developing raw ground together shouldn't be all that difficult. Moreover, the partnership gives them the unusual chance to pick their own competitors.
"We've worked with numerous builders in other communities over the years," Weekley says. "We know those who we want to partner with and those who we want to stay away from. We've worked with the folks at MHI for 15 to 20 years. We know their business model and their concern for quality, and we're comfortable that we'll be good competitors together."
The two builders had been looking at an adjoining property when the Grand Mission tract suddenly became available. MHI said it had its eye on the piece for the past three years and was prepared to move ahead on its own, but it decided to cut Weekley in on the deal on a 50-50 basis. "Our attitude is we'd rather have half of two deals than all of one," Zimmerman says. "Sometimes you have to team up to compete with large public companies which have Wall Street money behind them. The days of going it alone are long gone; it's just too expensive. This gives me the opportunity to find other deals and bring in partners, which mitigates our risk and gives us geographic diversity."
The two builders are still working out how best to structure the development entity and divvy up the lots. But Zimmerman says they are leaning toward forming a development partnership and selling half the lots to one company and half to the other. The lots will probably be split on a rotation basis, with one builder dividing the 1,500 sites in half and the other then choosing which half it wants for its own program. Lots may also be sold to other builders.
At this writing, plans call for three different lot programs -- 50-foot, 55-foot, and 65-foot fronts -- with prices ranging from the low $20,000s to about $35,000.
The property is likely to be marketed under another name. But no matter what the partners decide to call it, they say they expect the community to be a fast seller. Already popular with buyers working in Houston's energy corridor on the west side of town, Zimmerman says he believes the area will blossom when the new Westpark Tollway is complete. A major east-west thoroughfare, the freeway "should do for this part of town what the North Dallas Tollway did for Plano," he says.