- Clayton Properties Group buys Oakwood Homes in a deal that closed Monday, July 3.
- Oakwood is Clayton's 4th acquisition of a site-build home building operator, and the largest by far, of the deals, as well as the first one outside the Southeast region.
- Oakwood, under founder and principal Pat Hamill, has been one of the more technologically innovative top 50 private home builders, adopting BIM and factory-panelization as core business model processes to deliver home buyers high quality, care, and satisfaction in fiercely competitive Front Range Colorado and Utah markets.
- Oakwood owns 3,000 to 4,000 lots, but has control of 18,000, which allows for continued accelerated growth with the capital access the Clayton deal will provide.
- In Oakwood, and with Pat Hamill and his team continuing to run and grow the company, Clayton sees a strong cultural fit as well as a company that can help it on its strategic mission to expand its buyer universe with a price-range sweet spot between its $150,000 top price for its manufactured homes, and prevailing entry-level single-family price points, which tend to exceed $225,000.
With the addition Denver-based Oakwood Homes, the BUILDER 100 No. 39-ranked builder based on 2016 closings, Clayton Properties Group's ongoing pursuit of a culturally sync-ed portfolio of site-build firms has just kicked it up a notch on the impact and implications scale.
The combination--with Berkshire Hathaway unit Clayton announcing today its acquisition of Oakwood, a 26-year-old private home building firm whose founder and principal Pat Hamill plans to stay on and continue to build the company to at least its next level of growth--is a bellwether deal on at least two levels.
First, while it's worthy to mention that as a Colorado-Utah regional-power player, Oakwood is, by far, the largest of Clayton's home building operator purchases, it also must be noted that it classically reflects the Warren Buffett-Berkshire Hathaway mode of investment in people and culture first.
"When we began chatting with Oakwood some time ago, we were struck by how well our cultures lined up; they're a smart, strong, innovative culture, and they do a magnificent job executing," Clayton Properties president Mike Rutherford told me as we discussed the purchase yesterday. "That's what takes time as we continue to look for potential additions to our plan; you have to find those cultures."
In Oakwood, Clayton's Rutherford and Keith Holdbrooks, president of the Clayton home building group see a superbly-run operator--which generated $474 million in revenue closing 1,277 homes in 2016-- with room aplenty to grow, similar to the three home building companies acquired starting in October 2015--Summit Homes in Kansas City, Mo., Goodall Homes in Gallatin, Tenn., and Chafin Communities in Atlanta, Ga. They see a firm whose path up to now has been constrained almost exclusively by the time, effort, and expense of accessing acquisition and development capital to keep a project pipeline growing ahead of their operational capacity.
Here's how Oakwood's Hamill summarizes the cultural kinship:
- Both firms profess a culture of transparency;
- Both firms spotlight learning and growth;
- Both firms self-identify as extremely humble;
- Both firms are 'hungry' to excel, improve, and dominate, and critically,
- Both firms are bent on disrupting the status quo customer home buying process.
Another way Clayton's Rutherford and Holdbrooks like to phrase it is that it's their job after an acquisition to take out the pain points of running a home building operation, the financial tight-rope walk and the deal-making with manufacturers, materials suppliers, etc., and leave the rest--the hard work, the fun, and the creative secret sauce that makes it a good company.
"What Pat does such a great job of at Oakwood is that he focuses on the team member experience which translates directly into the customer experience, and that sets them apart," says Holdbrooks. "What's great about this deal is that Pat's in his prime, and he wants to keep running his business, improving it, and growing."
And this is the second level of significance in the pairing. For Clayton Properties, whose principle business is as a manufactured home builder and marketer, the fourth of its site-build purchases--Oakwood--is closer than most builders in many respects to the Clayton factory model.
For one, Oakwood is one of the rare and pioneering single-family residential builders who've adopted building information modeling end-to-end in its selling, design, specification, purchasing, construction, options, management, and warranty processes. What's more, Oakwood produces panels and house components off-site in two manufacturing plants in the pursuit of quality construction and speed.
"They have 41 plants, we have two," Pat Hamill told me in a conversation yesterday. "We're one of the only major private builders out there trying to learn everything we can to minimize what goes on on-site so that we can focus on quality and speed. We certainly have a lot we can learn from Clayton's factory systems; they're Berkshire Hathaway; they're the gold standard."
Clayton strategic management tends to play down the significance of its home building acquisition binge as a preface to an imminent plan replace what goes on on subdivision job sites with factory construction operations.
Instead, the Clayton home building plan's focus is on meeting more of the market, expanding its already-No. 1 marketshare of home deliveries. The company sells seven of every 10 new homes delivered for less than $150,000 in the U.S. It's now taking dead-aim on a sweet-spot of need in the $150,000 to $200,000 price range, and its single-family site-builder acquisitions are each strategic stepping stones to get there.
Meanwhile, don't doubt that off-site factory construction--where distribution of materials and manufactured products, assembly systems, and lean manufacturing processes add productivity and velocity, and subtract weather, topographical, and other physical challenges of building on-site--is on the minds of all key players.
"When you get all of these business owners in a room after we've all taken a closer look at how each of them operates at their separate level of excellence, the ideas that start emerging are awesome," Clayton's Rutherford says. "What Pat Hamill's Oakwood platform is accomplishing is definitely something we're able to consider for our other home building platforms, and vice versa."
A win-win mentality comes through in Oakwood chief Hamill's observation:
"One of the neat things about this combination with Clayton is that they can help improve our factories to the next level or two," Hamill says. "We're piloting a concierge process whose goal is to take as much pain out of the home-buying experience as we can for our buyers, something better technology will help us do. With Clayton, we're now going to have the gold standard as a resource to build improvement into our processes not just for us and our profits, but for our home buyers. This business is so ripe for disruption. It's the final frontier industry sector. "
Here's the meat of the transaction statement from Clayton:
MARYVILLE, Tenn., (July 6, 2017) – Clayton Properties Group, a division of Clayton, a Berkshire Hathaway company and one of America’s largest homebuilders, today announced it has acquired Oakwood Homes, Colorado’s largest privately held homebuilder* and community developer, and the approximately 18,000 lots it owns and controls, effective July 3, 2017. Oakwood Homes is the fourth homebuilding acquisition for Clayton, who also owns homebuilding companies in Missouri, Tennessee and Georgia.
“Oakwood Homes has an impressive history of homebuilding innovation, and practices a relentless commitment to quality and service for its customer base,” said Keith Holdbrooks, president of Clayton home building group. “Oakwood’s self-sustaining operating model, company culture and core values align well with Clayton’s, which is paramount when we acquire a company. We look forward to working together with Oakwood to improve the homebuyer experience while providing greater cost-saving opportunities for homebuyers.”
Founded in 1991 by CEO Pat Hamill, Oakwood Homes builds modern, distinct communities throughout Colorado and Utah that are recognized for their innovative designs, energy efficient homes and highly customizable building processes. The company sold 1,200 homes in 2016 alone, which represents a 20 percent increase from 2015. Oakwood Homes differentiates itself through its commitment to both customer and team-member experiences.
“After more than two decades of building beautifully functional new homes in Colorado and Utah as a privately held company, we are excited to join forces with Clayton,” said Hamill. “This partnership is part of our strategic vision to continue our steady growth and to provide a very high standard of customer service for our loyal consumers, all while keeping our existing leadership team.”
What Pat Hamill added in his conversation with me yesterday was telling.
"I woke up this morning, and for the first time in 26 years I didn't have any debt. Now, I can focus on our team and their growth and our customers and what they need."
For Clayton's now fast-growing stable of site-build home building operators, expectations mount for an eventual, inevitable pivot toward lower-cost, higher quality homes and communities for those who can pay $200,000 or less. No doubt, technology and data's blend with people, talent, and culture will enable that pivot. As Pat Hamill says:
"This business is so ripe for disruption."