CINCINNATI - David Drees was battered by the worst economic storm of his life.
But the homebuilder wasn't blown off course as he watched his family's business get sliced in half.
"We kept our best people, kept our management team in tact. We did not retreat from any of our market areas because we considered that our growth platform going forward," said Drees, a third-generation steward of one of Cincinnati's biggest family-owned companies.
In an exclusive interview with WCPO Digital, the Drees Homes CEO detailed his new plans for growth and talked about how he kept his family enterprise alive through what he calls "the housing depression."
To some degree, Drees Homes can be viewed as a bellweather for the rest of the economy, since many believe the nation won't fully recover until the housing market is healthy again.
"For every single-family home built, we estimate there are three permanent jobs created," said Dan Dressman, executive director of the Home Builders Association of Greater Cincinnati. "Every new single family home generates about $90,000 in government revenue."
Not impressed yet?
Dressman has more. The home building industry's national trade group estimates builders will construct 763,000 homes this year, but there is demand for more than 1.7 million. So, just filling the industry's pent up demand could create 3 million new jobs.
"You can't have a real sustained expansion unless your housing sector comes back," said Nick Sargen, chief investment officer for Fort Washington Investment Advisors Inc. A Stanford-trained economist and expert on global economic trends, Sargen said housing is crucial to the U.S. economy because of the manufacturing and construction jobs tied to it. Neither have recovered to pre-recession levels. Beyond that, Sargen said housing has a profound impact on the nation's financial system and U.S. consumer confidence.
"Think of the average American," he said. "You know, most Americans don't have large savings in financial assets. Their home is their biggest single asset. That drives their net worth."
Sargen said the economy is coming back "slowly but surely," a trend that will accelerate as homebuilders ramp up to address a huge pent up demand for new housing.
"The evidence now is definitely there that the housing sector has turned and it's got legs to it," he said.
Drees Business Sliced in Half
Drees said his company is more conservative than in the years leading up to the recession, but he is convinced the nation's nascent housing recovery is for real. His long-term goal is to return the company to its pre-recession sales volume above $1 billion annually.
"It's going to take time," he said. "This industry has a lot of capacity constraints. Land is in short supply. Land values have increased significantly and terms have gotten very tough. Our vendor base has shrunk tremendously. Until they're able to ramp up the size of their operations, as an industry, we're not going to be able to meet the huge increase in demand."
Before the recession, Drees Homes was Cincinnati's largest privately-held company, peaking at $1.2 billion in revenue and 1,096 employees in 2006. By 2010, it was less than half that size, with revenue falling to $490 million. Employment bottomed at 452 in 2011.
Looking back, Drees is thankful that the company entered the recession with relatively low debt of $364 million. He's also thankful that its Texas markets in Dallas and Austin stayed active through the recession. The company sold land at a discount to generate cash flow and reduce debt to $125 million by March, 2013.
Drees also found ways to operate more efficiently during the recession, starting an online sales team and converting to a paperless record system that allows Drees supervisors to monitor multiple construction sites with all building and site plans retrievable on their iPads.
'Doesn't Happen Overnight'
Now that growth has returned to the industry, Drees is ramping up in its nine major markets: Dallas and Austin, Tex., Nashville, Tenn., Raleigh, N.C., Jacksonville, Fla., Manassas, Va., Indianapolis, Ind. and Cincinnati/Dayton/Northern Kentucky.
"One of our challenges as an organization today is to change the mindset from shrinking, from what we can't do to growing and what we can do," Drees said. "It doesn't happen overnight."
David Drees expects the company to reach $629 million for the fiscal year that began April 1. Employment now stands at 476, with 25 open positions.
"Our growth strategy is not to grow into new markets but to invest our capital in existing markets and energize our team to get that done," he said. "There's a lot of pent up demand out there that has not been addressed in the past five, six years. Buyers are slowly forming new households and coming out and buying new homes or renting apartments."
New Line of Homes Lures Buyers
Last year, the company launched a new line of homes called the Clarity Collection, starting at $280,000. It is luring back customers.
The Clarity product features an outdoor family room with an optional fireplace and an organizational room where families can store backpacks, coats, shoes and recharge phones and laptops. The Clarity product was launched in Indianapolis last Spring and Cincinnati last fall. Now expanding to Cleveland, Clarity is available in five of the 10 cities where Drees competes.
"The Clarity Collection is designed for a new way of living. We re-proportioned the space and put in fresh details through out the house so when you walk in one of these homes you just feel like, Wow, this is something that's just not available by anybody else," Drees said. "In those cities where we've introduced this product, it accounts for 25 percent of our sales."
See a 3-minute Drees YouTube video walkthrough of a Clarity home:
As the company celebrates its 85 th birthday, David Drees' optimism is in a recent hire.
Alexa Drees, 24, is the CEO's daughter and the first member of the family's fourth generation to join the homebuilding company. The Miami University graduate worked in Atlanta for two years before joining Drees Homes' design department in April.
"It feels really good," David Drees said. "We've got a great company, a great culture. We think we've got a great future."