“It’s just a better model,” says Jon Doherty, executive vice president for KB Home’s Phoenix division. SelectBuild is doing 60 percent of his framing and pouring 80 percent of his slabs, and has started offering plumbing in his market. “The more that you can have under one umbrella, the easier it is to manage the process. Right now, [SelectBuild] is doing our slabs and our framing, and there’s value in that. But when you look at what they want to do long term, that’s the real winner. Then, it’s really just them, and having one trade partner that you can call on to manage your business.”
Mike Landgren, president of SelectBuild’s Colorado River Tri-State division, which includes the Las Vegas market, says the firm achieves its value to customers by coordinating the trades it owns as a house is constructed. “In Las Vegas, we’ve got concrete and plumbing. We can dig our underground plumbing and our concrete footers with the same backhoe at the same time.”
Other customers cite SelectBuild’s attention to detail and the influence it has on other trades that come in behind it. “These guys are building some of the highest quality and uniform frames that I’ve seen in my career,” says Bill Mayben, president of the California Central Valley division of Irvine, Calif.–based Standard Pacific Homes. “Every trade that comes in after them sees that and respects it, so they do their best work, too. It becomes infectious.”
It also saves time. On simpler homes, Mayben says SelectBuild can shave two weeks off cycle time by quickly plumbing his houses and erecting pre-built wall panels and trusses.
SelectBuild also has saved money for Salt Lake City–based Woodside Homes. “Even though our operations haven’t been expanded into the full range of what they’re doing in other areas, we’ve seen cost savings of 3 to 4 percent,” says Mike Kitchell, director of construction for Woodside’s Northern California region, where SelectBuild works on 1,100 homes for the firm annually. “We are able to control the rising cost of home construction and have better control over scheduling and time efficiency. That benefits not only us but, ultimately, our homeowners.”
Observers say a remarkable aspect of what BMHC has assembled in SelectBuild is the company’s ability to successfully integrate its acquisitions into the corporate fold. While growing through acquisition can be a stumbling block for firms in any industry, BMHC has been able to acquire key trades in key markets, while letting those tradespeople do the jobs they were acquired to do. When BMHC started courting Knipp Bros., for instance, Landgren was concerned BMHC would try to fix a business that wasn’t broken. “But here’s the magic those guys displayed: You almost didn’t know they were there,” says Landgren. “They allowed the construction pros to do what construction pros do, which was to build. You’d get an e-mail every once in a while or they’d bring somebody by for a tour, but for the most part, they really stayed out of the way.”
The firm also augments its acquisitions with its corporate resources. When he was approached by BMHC, John Volkman, co-founder of Sanburn Construction, says his initial thought was to “arm myself with as many lawyers and CPAs as I could find. You watch too much TV and you start to think these Wall Street guys are going to screw you out of your company.” But soon after the company acquired Sanburn in 2002, re-branding it KBI Norcal, Volkman started leaning on BMHC. “The understanding was that I was going to continue to run it the way I knew it,” says Volkman, now president of SelectBuild’s Pacific division. “Then, I leveraged them and their resources on the HR and financial stuff to strengthen what we were missing on our bench. We’ve worked together ever since.”
Perhaps the biggest key to SelectBuild’s success, though, comes from its systematic, market-by-market approach to the companies it buys. Since buying Knipp, Mahre says, the firm’s strategy has been to identify markets poised for growth among production home builders and then buy the best and most in-demand trades in those markets. “If there is a first-mover advantage to what we’ve done, it’s that we’ve been able to get the best and brightest people on the contractor side of the business, in the best markets, working for the company,” he says.
“When I talk to their competitors, the one comment that always comes back to me is how they’ve gone about it in terms of the local people,” confirms Keith Hughes, a Wall Street analyst who follows BMHC for Atlanta-based investment banking firm SunTrust Robinson Humphrey. “They’ve gone in and developed strong relationships, and strong capabilities, on a geographic basis, instead of going after it all at once from a national perspective.”
