When Greg Lingo started his company, Cornell Ventures, in late 2007, he recalls that obtaining bank financing for projects was like pulling teeth. Early on, he went hat in hand to 20 lenders before finding a receptive one, Omni Bank of Atlanta.
Fast forward 18 months: Cornell Homes (the company’s updated name) is one of the industry’s fastest-growing builders. It sold 42 homes in 2008, about 100 in 2009 (which generated $30 million in revenue), and is on track to sell 150 this year, all in the Greater Philadelphia market. As for the five banks from which his company is currently borrowing, “they’ve been excited to work with us,” says Lingo.
What happened? Lingo, who held several management positions with NVR before starting his own business, admits he’s spending a lot of time massaging his relationships with financiers (which occasionally include private equity firms). “Character has been a big factor lately, and we try to keep all of our commitments.”
Banks, he says, want to see presales, first and foremost, before they start handing out cash. “We can show banks that there is minimal risk with presales that are qualified, and non-contingent with ‘handmoney’ [i.e. deposit dollars],” he explains. “In today’s market, you are only getting strong presales in communities that are in good locations and seen as an outstanding value.”
At one point, Cornell Homes’ 44-condo project in Avalon, N.J., was the best-selling community in the state, he says. Its Hudson Village project recently held that honor in Delaware. When Builder spoke to Lingo in early November, Cornell Homes had just started selling at La Grande, its newest neighborhood in Newark, Del. It had sold eight homes there and expects to have a model on the ground this month.
Lingo says banks aren’t eager to finance land development, which is why he is only interested at the present time in building on finished lots. The one exception was the land for Avalon, which was unimproved, “but only 200 feet from the beach.” In this respect, Lingo is following the lot-acquisition strategy of his former employer, which kept NVR profitable during the recession when other land-heavy public builders were writing down assets and chalking up huge losses.
Cornell Homes is positioning itself as “the builder of choice for developers,” says Lingo. It will continue to focus on markets where there’s little competition, and on “A” properties where it can build townhouses and condos primarily for first-time buyers. (The average price for its condos in Avalon is $350,000, “or about $800,000 less than the average home there,” says Lingo.)
His longer-range ambition is to be among the top three builders in the markets it operates in from New York through Baltimore. Lingo also insists he’s in it for the long haul and isn’t interested in developing his 15-employee company to sell it. “I’ve been in residential construction since I graduated from college, and we’re building this for us, not someone else.”