Phoenix’s Joseph Carl Homes Gets a Strong Starts
We’re staying focused on a very positive story in home building right now. It’s not a big story. On the contrary, it’s rather a small one. Ten new-home sales small.
Still, those 10 homes sales are in four weeks. Multiply by 12 months–if the housing gods smile–and we’ve got ourselves another big builder. That’s the way it’s going to add up, if it does all add up.
Make no mistake, we’re not predicting a rising tide here that will lift all boats. We’re probably more in the camp of those who think like Meritage Homes CEO Steve Hilton, who believes that 2005 to 2015 may go down as new-home building’s “Lost Decade.” We’ll accentuate the positive even knowing there’s plenty of negatives.
The next couple of years may feel like a Red Queen period. You run as fast as you can to stay where you are. All the ingenuity, resilience, and know-how you can muster barely neutralize the headwinds.
But if a start-up builder can record 10 new-home sales in the first four weeks of opening up a brand new-normal community in the Estrella master plan in Phoenix it says something.
Ask Carl Mulac, who’s running the start-up Joseph Carl Homes with a big arm-around-the-shoulder deal with JEN Partners, what it says about the market, and he’ll tell you.
“When Steve Jobs was introducing the iPad, he said there are three things that had to be in place for any product he’s ever brought out: innovation, value, and demand. I figure we’ve had to have those three characteristics to get anything done in this environment,” says Mulac.
Mulac opened the CantaMia neighborhood the week after Super Bowl, and is still doing 490 or so traffic units a weekend. He says that each of his 10 sales associates in CantaMia, selling against 14 models and a lot of pressure, have four or five strong active adult prospects on the line, and they’ve had their first closing.
“We had the perfect combination this past weekend,” says Mulac. “A beautiful Saturday followed by a rainy Sunday. Those are the ones that set you up for great traffic.”
Mulac’s secrets? Well, as we’ve noted, the land-base came out of the wreckage of TOUSA’s Engle division, so the price out of the banks was cents-on-the-dollar for the 643 lots on 215 acres, plus 14 completed sales models.
So, the land-cost base gives him an opportunity to price a solar-and-thermal standard product in a fully “amenitized” community at a price that gives great value vs. a Pulte Del Webb and Shea Trilogy offering.
Still, even with the great jumpstart and the JEN Partners backing, nothing’s a cake-walk. A $2 million vertical construction line from National Bank of Arizona is a start, but not enough to ramp up and become a formidable player in the marketplace. So Mulac’s out shaking the regional and community bank bushes for more, and he’s finding that even with JEN’s guarantee, a sales backlog, and all the terms in the world about pre-sales, it’s not easy to come up with more lending.
Which may or may not account for one of the ingredients of Mulac’s “secret sauce” right now. Practically no overhead. Apart from the sales center at CantaMia, there’s exactly zero office expense for Joseph Carl Homes right now. The whole shebang happens out of his own home, and those of his controller and CFO, who work “mobile.”
“It helps that everybody on the team has worked together in the past, and we know each other through the years,” says Mulac. “So with technology, we can stay in touch on every detail we need to address.”
Even with Phoenix commercial office space offering historically attractive deals for potential tenants, Mulac says that saving $10,000 to $15,000 a month on corporate offices is no small potatoes, given his budget right now.
Still, you don’t pull off virtual overhead by doing everything virtually.
“One day a week, we have ‘no-email day,’” says Mulac. “That means anything you’re going to communicate that day, it has to be with a phone call. Emails sometimes have that unintended emotional tone to them that can distort their meaning. We have to be able to talk straight to one another on some issues.”
We’ll give you that secret for free.