A conversation with Pacific Lifestyle Homes CEO Kevin Wann
Almost two years after a financial crisis froze the region's construction sector in its tracks, Vancouver-based Pacific Lifestyle Homes emerged Aug. 4 from Chapter 11 bankruptcy protection – one of only about a dozen U.S. home builders to do so, according to Grant Thornton Corporate Advisory and Restructuring Services.
In a conversation this week with the VBJ, president and CEO Kevin Wann talked about past mistakes, present challenges and his hopes for the future.
Q: Pacific Lifestyle Homes is one of only a handful of home builders across the U.S. to emerge from bankruptcy. What decisions did the company make to ensure the company survived the Chapter 11 process?
A: The first thing we did, we were able to secure construction financing through our lenders which allowed us to build the existing homes we had and continue to build new ones. And number two was that we were able to take an opportunity to figure out what the customer wants, making our plans slightly smaller and adding in more included features. Today's buyer wants a slightly smaller home, yet they still want a high-quality home.
Q: How has Pacific Lifestyle Homes adapted its business practices during its reorganization to be successful in a depressed new home market?
A: We have adapted the floor plan and included more in the home for a really good value. For example, today's home buyer can get distressed hardwood or 20-inch tile in the kitchen included in the price. They can get updated Alder cabinets, nickel finish or oil varnish. There are things that a few years ago were costing a lot of money to upgrade – today they are included.
Q: Real estate experts cite high levels of housing inventory as one factor in declining home prices across the region. Do you believe excess housing inventory is a concern, and if so, how did those concerns affect your company's business model?
A: Well, I think too much inventory is not a good thing. It feels like things are stabilizing a bit in terms of number of houses coming online. There is steady demand. What we noticed is that after the tax incentives expired, things slowed down for a couple of months, but they seem to be picking up now and stabilizing. Interest rates are at about 4 percent. Even though people are concerned about the economy, the economy is what's making it a great environment to buy. [Excess inventory] is always a concern. At one time we had 120 committed spec homes, today we have 10. We've adjusted our inventory to match today's environment.
Q: How does the company plan to grow its market share in a difficult environment for homebuilders?
A: We are going to continue to do what we're doing. We're providing quality homes at a great price. We're going to continue to help people get a really good price on a lot and build a home from scratch and help them with construction financing.
Q: Looking back at the housing boom and the crash that followed, are there any decisions you wish the company had made differently?
A: Sure. Like anyone in that economy, we got caught up in having to continue to buy more and more lots and build more and more to stay competitive. We are being much more selective in the lots we buy. And today we're actually helping banks and other developers work through their inventory. For us, that's kind of a shift.
