There was something missing in Shea Homes’ announcement this week that it is launching its first Texas division in Houston.
It announced when it plans to start selling homes in Houston: 2014. And it announced who will lead the new Texas division: Keith Luechtefeld, Darling Home’s former Houston division president. But nowhere did it say where it is going to build in Houston.
That’s because the lots are yet to come, Shea CEO Bert Selva told BUILDER. Rather than buy an existing builder to give the company a jump-start, Shea is starting an operation from scratch.
“We did look at a builder (to buy in the area),” Selva said. “But it didn’t work out, which is OK because we have been very successful with startups.”
Selva has experience in the process. He started local Colorado divisions for both Shea and KB Home from his own house. And he’s spent a lot of time lately in Houston, scoping out the market and meeting with land sellers.
“It’s the No. 1 market in the country,” Selva said. “It was a natural next step for us. I think it’s a great long-term opportunity.”
And finding the lots is not a worry. Shea has the skills to do startups and it has Luechtefeld on the ground now. He became available after Taylor Morrison recently purchased Darling Homes.
While there are benefits of buying a turn-key business in a market, there also can be downsides, including the baggage that can come with existing builders such as product liability and cultural differences. “Sometimes an acquisition is a lot of work and a lot of re-work,” Selva said.
Plus, in a hot market like Houston—and others around the country—the cost of buying builders has begun to climb, he added.
“We look at the highest and best use of our capital,” Selva said. “We can be players (in the builder buying market) if we want to be. The issue is the cost benefit. There is a premium paid to get in the market right now.”
The memories of the recent past when many builders got caught up in the acquisition frenzy and paid too much for access into markets are still fresh, according to Selva. “We feel that just being through the last four or five years it’s important to be disciplined.”
In addition, Houston is a market where there are plenty of master plans built by developers who Shea already has relationships with in other markets. And those developers have been receptive to the idea of selling lots to Shea, Selva said. Shea, whose Spaces home designs turned production home design on its ear a few years ago, has some new plans coming for the Houston market.
“We are excited about respecting the local product in Houston, but we are thinking about some new twists to it,” Selva said.
Teresa Burney is a senior editor for BUILDER.