SEP 13, 2013
Success Strategy: Build Where Big Builders Don't
Chicago's Lexington Homes expects to double its closings in 2013 by building infill projects.
Close-in Construction. In its latest iteration, Lexington Homes is focusing on suburban and urban infill opportunities in Greater Chicago, so it doesn't bump heads with public competitors. Photo Credit: Lexington Homes
The latest incarnation of Lexington Homes is the Benach family’s fourth home building venture in 40 years. Over that period, those businesses have built more than 40,000 homes. And their remnants form the basis for some of the competition Lexington faces today in Greater Chicaqgo.
Lexington's successful survival strategy is building close-in suburban and urban infill projects that other national and regional builders in Chicago don’t seem interested in.“If the nationals want those big subdivisions in the suburbs, they can have them,” says co-principal Jeff Benach, who points out that while land might be cheaper in the ‘burbs, home prices remain stagnant.
Once Chicago's Big Builder
Ron Benach started the original Lexington Homes in 1973, and grew that business into one of Chicago’s largest builders. He sold the company to Westinghouse Electric in 1989, a year when Lexington closed 1,400 houses. Six years later, Westinghouse sold the business to Cambridge Properties, which in turn was acquired by D.R. Horton in January 1999.
Westinghouse replaced Benach as Lexington’s president in 1991, and one year later he launched Concord Homes, which was Chicago’s largest builder when Lennar acquired it in August 2002.
Benach and his son Jeff ran Concord for Lennar for a few years, during which Jeff says they noticed that the company had developed an expertise in building close-in suburban and urban infill projects. Infill became the business model for a new company called Lexington Homes that the Benachs, along with CEO Wayne Moretti and CFO Max Plzak, started in October 2006. Jeff Benach says that Illinois’ arterial highway Route 53 essentially forms the border within which Lexington currently confines its land acquisitions and new-home construction.
This year, Lexington expects to double its closings to 60 homes, and Benach says that velocity would be much higher if his company had more land to build on. “We need to start buying land more aggressively,” he says. At the moment, however, Lexingtion is narrowing its focus on purchasing smaller parcels, no more than 100 lots.
In September it opened three subdivisions, two of which are in the Palatine, Ill.: Lexington Hills, with 41 units; and Lexington Oaks, with 15. That same month, the company opened the second phase of single-family homes and third phase of rowhouses at its Lexington Square community in the south end of Chicago’s Bridgeport neighborhood, eight blocks from U.S. Cellular Field, the home park of the Chicago White Sox. Lexington will offer 20 single-family houses ranging from 3,000 to 3,600 square feet and starting at $472,500, and 21 two-story rowhouses ranging from 2,216 to 2,507 square feet and starting at $369,000. The rows also have a three-story option with extra bedrooms and bathrooms.
More Modest Growth Ambitions
Lexington Homes is revving up its construction at a time when Chicago’s housing market is resurgent.
In a post dated July 24, Metrostudy estimates that new-home starts in the 12-county Chicagoland region for the 12 months ended June 30 rose 33.5 percent to 4,264 units.
Perhaps more significant, the supply of finished and vacant inventory was stuck at 3.4 months for single-family attached and detached homes during the second quarter of 2013. “Not only is the amount of new home inventory low, but the low levels of resale supply will continue to bring buyers to the new home market,” said Chris Huecksteadt, regional director of Metrostudy’s Chicago market.
Huecksteadt projects between 4,500 and 5,500 housing starts for Chicagoland in 2013. (Metrostudy is the housing research company of Builder’s parent Hanley Wood.)
Benach says that he and his 81-year-old father no longer have a burning desire to turn Lexington Homes into a behemoth. “We want a nice, manageable company that’s building 200 to 300 homes a year in four to seven subdivisions.”
The company is in good shape financially, he says, with bank relationships that allow it capitalize projects “before a shovel goes into the ground. That’s unusual for most builders these days.” And his company is agnostic when it comes to the kinds of homes it will build. “We’ll do single family, multifamily, midrise, even rental if opportunities present themselves.”
Headquarters: Arlington Heights, Ill.
2012 Closings 30
Home Price Starting from $279,900 to $469,900*
Markets Served Chicago, Ill.
Success Strategy Suburban/Urban Infill
*Lexington has custom home division called Portfolio Homes that has one community, Woodleaf at the Sanctuary Club in Kildeer, Ill., where homes start at $799,900.
"They did not fall short of my expectations."
- Narayanan Subramanian