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Commercial Real Estate
Business Observer Thursday, Sep. 23, 2021 2 months ago

Meet the new guy

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Homes by WestBay, homebuilder with a small-but-mighty mindset, woos an executive from one the biggest competitors in the field.
by: Louis Llovio Commercial Real Estate Editor

The idea is really not that unusual. You work for a huge corporation and deal with the bureaucracy every day. It’s not a bad gig, by any means, but you long for flexibility, to be nimble, to be somewhere where you have a more immediate impact.

You want that smaller company, where you feel like you can make a difference.

Mark Metheny, 47, knew that feeling well.

He was the Central Florida division president for Lennar Homes, one of the largest homebuilders in the country. It’s a good job and he’d been with the Miami-based company, which does some $22 billion a year in sales, since 2006.

But, as he says, the company grew and as it did it became less entrepreneurial, the communication was a little slower, as was the decision making.

So, he started thinking about his options.

Meanwhile, Willy Nunn, president and CEO of Homes by WestBay, was doing some thinking of his own.

At 56, Nunn was beginning to consider succession planning. Despite no immediate plans to get out of the business, he was thinking of who would oversee the company when he did — eventually — leave. He wanted to bring someone in who he could be a partner with, someone who he would “extend the mission and growth of the business.”

Plus, there was the fact that the Riverview-based company had grown so much it needed someone on board who understood the details of a large homebuilding operation and was a strategic thinker. Homes by WestBay had $347.7 million in revenue in 2020, up 29.5% from $268.5 million in 2019. And it's up 172% since 2015, when it posted $127.78 million in revenue. 

As it turns out, Nunn and Metheny knew each other, had for years, and they started talking. When they did, they saw they held similar views of the industry and their sensibilities about working with likeminded people were similar, too.

And, it didn’t hurt, that they were fans of one another.

Nunn says he “can’t think of anyone better than Mark” for the job and Metheny says “WestBay has done some fantastic things in this market — to grow in 12 years to the size we are is really impressive.”

Given all that, the decision, when you look back now, was a simple one.

Mark Metheny, after about 15 years at Lennar, went to work for Homes by WestBay. He was named president of the builder’s land management company, HBWB Development Services LLC and started in July.

“The fact that Willy is looking long-term and wanting to grow the business and continue to expand to other markets is pretty exciting to me,” Metheny says. “This really gives me the opportunity to be involved in something much more entrepreneurial. We’ve got a really nimble ownership team that communicates very well and makes decisions quickly…that’s the main reason this was exciting.”

The boom

Homes by WestBay was founded in 2009 by Roger Gatewood. Nunn, who’d worked as an executive with Bank of America and Centex Homes, was brought on as president early on and soon became majority owner.

While WestBay is a relatively small builder when compared with behemoths in this area like Lennar and Pulte, it's developing 6,000 lots it purchased for more than $160 million over the past three years. And earlier this year, it entered into a $50 million joint partnership with GTIS Partners to develop entry-level homes through its Casa Fresca subsidiary.

'Candidly. A slowdown is not a problem. In fact, we would welcome a little bit of a slow down from the standpoint of being able to operate the business easier.' Willy Nunn, president and CEO of Homes by WestBay

Metheny oversees that operation.

The company currently is active in 15 developments and expects to bring on five to 10 selling outlets soon — some of those will replace existing properties — and be in 20 communities by the end of next year.

Nunn says the company has had consistent revenue growth over the years and decisions made early in the pandemic have helped position Homes by WestBay to capitalize on the current boom in new home sales. 

Nunn says when the uncertainty with COVID-19 was at its peak in May 2020, the company began to believe Florida was going to be the beneficiary of some of the cultural changes wrought by the virus. With that in mind, it began buying and found what Nunn describes as “some large and attractive parcels at what I would call reasonable prices.”

“That laid a foundation for pretty significant expansion and a real need for someone like Mark,” Nunn says. “A good chunk of the land buying we want to do strategically is already in the bag. But there is still plenty of opportunity and plenty of things we’re pursuing.”

Driving the growth — and the optimism — in the entire homebuilding industry is the demand from people moving to Florida as they shift to working from home or move out of congested areas.

According to the Redfin Migration Report, in July the inflow of the website’s users moving to Miami rose to 7,610 from 2,216 last year, making it the top destination in the country. Tampa and Cape Coral also made the top 10, with net inflows rising to 4,315 from 2,778 in July 2020 in Tampa, and to 3,109 from 1,790 in Cape Coral, according to Redfin’s analysis.

With the large number of people coming into the state came the boom in sales. In the second quarter of 2021, home sales in Florida were up 43.3% from last year and prices were up 42.2% when compared with last year, according to Florida Realtors data.

Experts in the real estate industry don’t see this as a bubble like the one in 2005. For one, this market is driven by those buyers flocking to the state, many of whom are finding their purchasing power is a lot higher here than where they came from. And, as the market cools, they say, prices will stabilize.

Also, many homebuilders, including Nunn, expect the influx of people to continue.

“Across the price points there is fundamental demand,” he says. “And the migration we’re seeing is real. Our out-of-state buyer percentage has jumped from 15% historically to 50%. We don’t see that slowing down. In fact, it could be accelerating.”

He attributes that to a growing acceptance of remote work. This all benefits Florida because the weather, tax policy and quality of life help it remain an attractive destination. “We’ve barely begun to see an influx of people from around the world."

That said, WestBay takes a cautious approach to growth.

Nunn says the firm tracks web traffic — “the canary in the coalmine” — carefully and develops homes in smaller phases, breaking developments into more reasonable sizes to avoid becoming overly committed.

“Part of it is just having a lot of equity and…we try to limit the amount of leverage that we use just so we have a real stable capital structure,” he says. “That’s really the key, is to be able to ride through the downturns and really invest through the downturns.”

“Candidly,” he adds, “A slowdown is not a problem. In fact, we would welcome a little bit of a slow down from the standpoint of being able to operate the business easier.”

Tough road ahead

Despite the upbeat analysis, some concerns linger for the builder.

Chief among those is a continued material shortage that has been slowing the construction industry for months.

Nunn expects the shortages to continue for another six months or, possibly, a year. This material shortage, and the higher prices that come with it, are a big problem for builders because a simple piece of piping or lumber could delay an entire project for weeks, creating a backlog of work for other contractors.

The toughest items to get, Nunn says, are appliances and mechanical components needed for items like air conditioners. That’s going to continue to be an issue until ports are fully reopened and people are back to work.

Where it used to take four months on average to build a home, it now takes six months.

The new guy

A couple of months into the new job, Metheny, even with his overall optimism about the Lenar to WestBay shift, says the transition hasn't been a cinch. 

That has to do with the industry itself, with so much going on and the pace. A hot market and continued delays in the supply chains have made the homebuilding industry more difficult. And the market is also making land acquisition, his specialty, tougher, with prices rising daily and the competition fierce.

And then there’s the fact that Metheny took for granted the years of institutional knowledge he had with his previous employers.

“It certainly hasn’t been easy,” he says. “But I didn’t want it to be easy. I was looking for a different challenge, something new and exciting. And it’s been that.”

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