JUN 4, 2020
LEXINGTON BUILDS ON ITS OWN SUCCESS
Ronald Benach`s fortunes in home building hit bottom 14 years ago when he was fired from 3-H Building Corp., the company he had founded, shortly after it was purchased by the national housing firm U.S. Home.
At least it seemed to be a low point.
It was a tough blow for Benach, who had built 3-H into one of Chicago`s top builders with about 1,000 units constructed during 1972, his last full year there.
Although the housing industry was on the precipice of what up until then would be its worst postwar recession, Benach`s response was anything but passive. He founded Lexington Homes, which has grown into the Midwest`s largest home builder. During the same period, U.S. Home has faded from the Chicago market.
With help from two other former 3-H executives, William Maybrook and Peter Bianchini, Lexington Homes launched its first project in northwest suburban Schaumburg in 1974.
They came up with a new product for Chicago--the coach home--in a suburb that was on the verge of being catapulted from a sleepy hamlet to a bustling urban center.
''We sold 160 units during the first year,'' Benach said of the Lexington Green development, which, like the company, borrowed its name from the nearby custom house development of Lexington Field Estates. Lexington Green eventually grew to 480 units.
As Schaumburg has grown from fewer than 20,000 residents in the 1970s to an estimated 62,000 today, so has Lexington Homes grown to prominence in the Chicago housing market.
Housing sales during 1987 are projected to top 1,000 units with revenue of about $130 million. Another $43 million in revenue is projected from commercial developments that include apartments, office buildings and retail centers.
Lexington has 255 employees, including its own staff of 200 tradespeople engaged primarily in carpentry and dry walling.
The four principals in the firm are Benach, 54, president; Maybrook, 54, executive vice president of marketing and sales; Bianchini, 56, executive vice president of operations; and Wayne Moretti, 40, executive vice president and chief financial officer. Moretti was the chief operating officer of Harry F. Chaddick Realty, which Lexington Homes recently acquired.
The Lexington Homes success story was unlikely, considering the company got started when the postwar housing boom was headed for a steep slide during the 1974-75 recession when an estimated 160 Midwestern home builders went out of business.
For Lexington Homes, it was a classic case of having the right product in the right place at the right time.
''We learned something at the time that we didn`t expect,'' Benach said.
''We found a new market.''
Maybrook said that the Lexington Green development was intended to provide a low-cost alternative to the single-family detached home.
''We had tapped into a market that was a function of sociology at the time,'' Maybrook said. ''It was something that people in housing did not understand.''
Instead of the entry-level home buyers Lexington had expected, it found its product selling to single working women, who were just beginning to overcome lenders` prejudices against giving them mortgages, and a new market segment that wasn`t to be named until a couple of years later--the ''empty-nesters'' whose baby-boom children had struck off on their own.
After a year-and-a-half of selling homes in Lexington Green, the company found that 40 percent of its buyers were single or divorced professional women.
''It was the unfortunate proliferation of divorce that took one household and split it up into two,'' Maybrook said. ''We started doing business with a segment of the market that was just coming on stream. We never had many young families with children in Lexington Green.''
The first coach homes in Lexington Green had base prices of $28,900, but within three days they had proven so popular that prices were raised by $1,000.
''That was a spectacular success,'' Maybrook said. ''Considering the success we had coming out of the blocks, it unquestionably gave us our start. We had established a name.''
Benach said that the coach home was a hit because it contrasted with the typical popularly priced four-plex homes of the day that lacked privacy or
''curb appeal''--the exterior appearance.
''These looked like a large Colonial manor,'' Benach said. ''And they had a green belt in the rear that the homes looked out on. It became a widely copied product. We`re still building them today. It`s like a little home, not an apartment.
''That was sort of the cutting edge of the market in those days,''
Maybrook said. ''Often buyers could compare those to the four-plex or mid-rise structures that were very apartment-like.''
Lexington continued to grow after its initial success, with homes sales reaching 246 in 1976, 379 in 1977 and 530 in 1978. During that time, revenue rose to $30.5 million. By 1979, interest rates began climbing out of reach of many home buyers and the market set a new standard for recession.
Sales dipped to 410 in 1979 and reached a low of 250 in 1982. Revenue dropped by one-third to $19.5 million.
But Lexington, unlike scores of competitors, was able to weather the storm and by 1983 was on its way up again. The company sold 382 units in 1983, 478 in 1984, 729 in 1985 and 980 in 1986.
If projections hold true, 1987 will be its best year for housing sales.
Most of Lexington`s developments have been in the northwest suburbs, with Schaumburg containing the most. The 2,345 units Lexington Homes has built or has under construction in Schaumburg represent about 10 percent of the homes built in the booming suburb since Lexington went into business.
Other northwest suburban construction has taken place in Wheeling, with 1,196 units; Buffalo Grove, 984 units; Prospect Heights, 650 units; Hanover Park, 628 units; Streamwood, 553 units; and Lake Zurich, 422 units. Lexington also has 96 units in west suburban Wheaton, for a total of 6,874 units in the Chicago area.
The company also has 1,539 units in Florida.
Besides home construction, Lexington has converted 134 units to condominiums in north suburban Glenview and 61 in north suburban Wilmette. The company has 430 rental units in Wheeling and 179 in Schaumburg.
Among the local projects under development are:
-- Arlington Club in Wheeling, with one- to three-bedroom attached homes ranging in price from $82,490 to $118,990.
-- Sparrow Ridge in Lake Zurich, with three- and four-bedroom detached homes ranging from $112,990 to $141,990.
-- Old Farm Village in Buffalo Grove, with one- to three-bedroom attached homes ranging from $74,490 to $110,990.
-- Country Grove in Schaumburg, with three- and four-bedroom attached homes ranging from $150,990 to $183,490.
-- Willow Pond in Schaumburg, with one- to three-bedroom attached homes ranging from $78,490 to $109,490.
Benach said that he always expected Lexington Homes to be a success despite the recession that hit almost as soon as he started.
''Housing cycles come on so quickly, it`s hard to plan for them,'' Benach said. ''When you go into a new enterprise, you don`t dwell on the possibilities of failure. It never occurred to me.
''Even in 1981, which was probably the most horrendous thing I can remember in this business, we survived well enough to embark on a dramatic growth curve.''
Benach and Maybrook said the key to riding out the recession was to cut the amount of homes the company had to carry after many buyers who could not secure acceptable financing backed out of deals for units under construction. In one Schaumburg development, Lexington Homes changed to slightly less expensive material and features for the finishing touches on the homes, cut its profits to almost nothing and was able to sell units for up to 15 percent --about $15,000--less than listed. It sold the 20 units it otherwise might have been stuck with.
''The thing that killed builders back then was carrying large inventories,'' Maybrook said. ''We learned something that most retailers have always known: If you`ve got excess merchandise, you cut the price and move it out.
''We did not reduce the apparent values of those homes. We were very careful of not changing a smidgen on the outside.''
Despite having a solid reputation among home buyers and a management team that is considered tops within the industry, Lexington Homes is not immune to failure.
Witness a multi-family development Lexington Homes has in Orlando, Fla.:
Sales were so poor that the company stopped building at 50 units instead of the projected 185.
Benach said he misread the market there, where attached homes do not sell well.
''Let`s call it a learning experience,'' Benach said.
Single-family developments have done well for Lexington Homes in Florida, but Benach said the semi-autonomous operation is not a major contributor to the company`s operations.
''It`s mildly profitable,'' he said. ''It`s not going to be a heavy hitter for us.''
Benach said he prefers to concentrate on construction in his home territory, where he and other company executives can get on site often to monitor construction and can keep tabs on marketplace developments.
''The ego in this business is driving through a development and feeling good about it,'' Benach said. ''Long after we`re gone, some other builder will go through there and say, `These guys knew what they were doing.`
''We as a company have a fairly high degree of moral fiber. We care about our people and we care about our customers.''
As Lexington Homes moves toward the 1990s, Benach said he is embarking on a land acquisition effort to expand the company`s market base. His plans also include getting into higher-priced housing and into additional commercial construction, including industrial property.
Housing, however, will always be the mainstay of Lexington Homes, he said.
"Mary Corbett and John Meyer were my closest contacts at Lexington Homes during the construction phase."