Business Description
We are primarily focused on the Washington, D.C. market (Washington D.C. and
the Northern Virginia and Maryland suburbs of Washington D.C.), which is the
seventh largest metropolitan statistical area in the United States. Our expertise
in developing traditional and non-traditional housing products enables us to
focus on a wide range of opportunities within our core market. We build homes
and multi-family buildings in suburban communities, where we focus on low density
products such as single-family detached homes, townhomes and mid-rise multi-family
buildings, and in urban areas, where we focus on high density multi-family and
mixed use products. For our homebuilding operations, we develop properties with
the intent to sell either as fee-simple properties or condominiums to individual
unit buyers or as investment properties to investors. Our homebuilding products
are designed to attract first-time, early move-up and secondary move-up buyers.
We focus on products that we are able to offer for sale in the middle price
points within the markets where we operate, avoiding the very low-end and high-end
products. We believe our middle market strategy positions our products such
that they are affordable to a significant segment of potential home buyers in
our market.
Our multi-family buildings are developed as rental properties to be held and
operated for our own purposes, converted at some point to for-sale condominium
units or sold on a merchant build basis. When developing rental communities,
we design our products to be readily convertible to condominiums. Our multi-family
communities primarily target two groups: (i) young first time tenants and (ii)
renters by choice.
We believe that our significant experience over the past 29 years within the
Washington, D.C. market provides us with the experience necessary to identify
attractive opportunities in our core market. We believe that our focus in the
Washington, D.C. market, which has historically been characterized by economic
conditions less volatile than many other major homebuilding markets, should
provide us with an opportunity to generate attractive returns on investment
and for growth.
Our land acquisition strategy is designed to maximize potential overall returns
generated by homebuilding operations. We pursue land acquisition opportunities
that generally fit into three categories:
Finished building lots – Whenever practical, we purchase fully
developed building lots from sellers that have secured necessary entitlements
and permits and have completed the land development process. This enables us
to minimize the amount of land we hold in inventory and to time our acquisition
of such lots with the sales of homes to be built on such lots, thereby reducing
the hold time and carrying costs associated with holding the lots.
Entitled building lots – We purchase certain development sites
after the land seller has secured substantially all entitlements, allowing for
prompt development of the land into building lots. This affords us the opportunity
to secure building lots in locations where finished building lots are not readily
available, or where the price of obtaining finished lots is determined to be
unaffordable.
Land options – We contract to purchase certain development sites
in advance of entitlements being secured. This affords us the opportunity to
design the layout of the building lots to fit our home products, while the land
continues to be held by the land seller and minimizes our costs associated with
carrying such land in our inventory while development permits are secured.
With respect to our homebuilding operations, we seek to minimize risk associated
with fluctuating market conditions by primarily building pre-sold units and
limiting the number of “spec units” (units that are not pre-sold)
held in inventory. In each new community that we develop, we build model homes
to demonstrate our products and to house our on-site sales operations. When
practical, we execute sale-leaseback transactions on model homes. We limit building
spec units in locations where there is a demand for immediate delivery of homes
or where a significant number of the units in a multi-family building (such
as townhouses or condominiums) have been pre-sold. We believe that by limiting
the number of model homes and spec units held in inventory, we reduce our exposure
to cyclical fluctuations in market values and minimize costs associated with
holding inventory, such as debt service.
