Hoffman Estates, Ill.-based Lakewood Homes got it's start in the Chicago market in 1990 by offering entry-level housing and including a focus on customer service–an unusual concept at the time. Today, by virtue of others that have recently failed, Lakewood is the largest private builder active solely in Chicago. In June, senior editor Lisa Marquis Jackson spoke with president Buz Hoffman about his current efforts to restructure the business and how being a Star Trek fan has been an integral part of his life in work and at play.
BH: The plan is to do 280 homes with revenues between $65 million and $70 million if we hit the 280. The 1,700 was probably the opposite of a perfect storm. Everything came together between close outs, and we got a couple of projects started sooner than we expected. So, though we were delighted, we didn't fool ourselves either.
BB: How will your strategy have to change to outlast the downturn?
BH: Even though we would like very much to stay an entry-level builder, when this thing turns around, we are going to have to go closer in to the city. That entails a different product, if for no other reason than land price. And they are going to have to be much smaller.
BB: Has the buyer group you serve added additional risk to your mortgage business?
BH: I stayed away from subprime like the plague. We only made one subprime loan over the last five years and that was to an employee who wanted one. It's not that I was smart enough to see the subprime problem coming, but because I am not a technical expert on the mortgage side–and they were messy loans–I just said, "Don't make them." Even in this environment, our mortgage company is remaining profitable.
BB: You are in the midst of restructuring. Have you hired a professional to work with you through the process?
BH: We have a consultant that is helping guide us through this. We are in the process, as is everybody, of restructuring every loan we've got. So far, the restructuring has gone better that I expected. I hope to have everybody on board [by mid-July]. That leaves me the cash to operate.
BB: Are you getting rid of some undeveloped holdings to clean up the balance sheet?
BH: As part of our restructuring we will give some back in lieu of foreclosure, and we will sell some. It really is very dependant on the status of the piece. Is it zoned? What do we think value is? In some cases, if a bank is willing to take a piece back and release me, [I'd do it] in a heartbeat!
BB: How would you qualify your interest in Stark Trek? An admiration? A hobby?
BH: In college, I became a nut for it. Yes, Shatner was my hero.
BB: How have the characters inspired you?
BH: In 1980, NAHB appointed me as the chairman of [what was then] the Conventional Mortgage Finance Committee. I was terrified. Rates were at 17.5 percent on end loans. So I kept in my briefcase a picture of Kirk and Spock on the bridge [of the Starship Enterprise]. ? When the meetings would get a little loud or nasty, I would open up my briefcase as if I were looking for something to respond to the crowd. What I was really doing was looking at this picture and saying to myself, "If they can save the universe, I can run this meeting."
BB: I think that picture might prove inspirational today, too, given the current environment.
BH: I have several of them hanging on the walls in my office.
