Next month, Foursquare Builders, a custom-home and project-management company based in Austin, Texas, expects to break ground on a model home that will represent its re-entry into production homebuilding.
At press time, Foursquare and its partner, the Florida-based developer Avalon Park Group, were in the final stages of negotiations to acquire around 100 lots within Howard Ranch, a planned community west of Austin, where Foursquare—under a new production banner Foursquare Homes—plans to build detached single-family houses that range from 2,400 to 2,700 square feet and would be priced between $300,000 and $400,000.
Wes Wigginton, Foursquare’s owner, tells BUILDER that he would be “ecstatic” if this new venture were able to build and sell 50 homes by August of next year. He is hoping to increase that velocity to between 100 and 150 homes in his second full year of business, and to between 300 and 350 homes per year eventually.
Since its inception nearly 30 years ago, Foursquare Builders has been remarkably agile. In the early 1980s, it developed subdivisions in the Houston market for affordable manufactured homes that Wigginton says were the first in that area to meet the criteria necessary to secure 30-year mortgages through Fannie Mae. The company has also played at the other end of the spectrum as an “owner representative” for time-strapped executives looking for land on which to build second or third homes, sometimes in fairly remote areas. Foursquare locates the property, finds the builder, and manages the construction process. “We were known as the bad guys with the smile,” he says, holding contractors’ feet to the fire to make sure projects move forward on schedule and within budget.
Wigginton says his owner representation business was successful enough that his company didn’t have to get involved in the actual construction. But in 2004, he was hunting for land in the Orlando market when he met investors who said they’d be willing to put up the capital for the property if Foursquare would build the houses. Thus began Foursquare’s second foray into production building until the ensuing housing recession forced Wigginton and the investors to shut down their land bank in 2007. (It recently sold its remaining 50 or so lots, in a development called Cypress Point, to D.R. Horton.)
Last year, Foursquare built one custom home, a $3 million project. In the first quarter of 2010, it has six construction contracts, ranging from $300,000 to $1 million. One of its recent clients was Richard Kunz, a partner with Avalon Park Group, which opened its first development in the Austin market, The Springs at Walnut Creek, about 18 months ago. Avalon Park contracted with David Weekley Homes to build 110 single-family homes there over the next two years.
But Kunz observes that big builders like Weekley are either going after already finished lots or are looking to develop lots themselves. “We also realized that there are a lot of half-finished developed lots on the market that can’t be sold because the owner or the bank has too much equity in them.” Kunz saw a business opportunity, as he concluded that the only way these distressed lots would be sellable was to put houses on them. So he approached Wigginton about Foursquare getting back into the production arena.
“We found ourselves really aligning,” recalls Wigginton. And the houses he’s planning to build “aren’t that much different from what we did in Florida.”
Howard Ranch’s owners originally envisioned a high-end community whose first 55 lots featured Southern Living-style ranchettes priced in the $800,000 range. However, the market for homes at the price point withered, and Kunz says he’s been able to negotiate a 40% discount from Howard Ranch’s owners on the 91 one-acre lots that Avalon and Foursquare would control. Their initial takedown will be 22 lots.
Kunz says he’s looking for other land deals that would allow Avalon and Foursquare to take down 20 to 30 lots at a time. “Our goal is to present the owner/bank with a solution” in terms of making their subdivisions and lots marketable again.
The Avalon-Foursquare alliance could present each company with a range of opportunities. For example, both have engaged in commercial development projects, which could give them negotiating leverage with land owners. In addition, all of FourSquare’s employees are LEED accredited professionals, and Wigginton says his production homes will follow green building standards. That being said, Howard Ranch is already designed, so Foursquare’s contemporary plans will need to be overlaid on the subdivision’s existing “Americana vintage” design, says Wigginton. “As a builder in a production environment, you’re at a little bit of a disadvantage if you’re not the developer as well.”
To facilitate his company’s return to production building, Wigginton says he’s tapping the reserves of skilled unemployed manpower that the recession has created. Foursquare Homes’ purchaser/estimator comes from Centex; its interior designer worked for Shea Homes.
Wigginton isn’t sure yet how much business his company can corral as a production builder. At The Springs at Walnut Creek, Avalon controls another 52 lots on which it plans eventually to put townhouses, which Foursquare might build. The new company’s success will depend, in part, on finding land deals that make sense financially for both the seller and buyer. But when asked whether their new venture might expand its production activities into Florida, where Avalon is already a presence as a developer, Kunz replied “the sky’s the limit.”
John Caulfield is senior editor for BUILDER magazine.