Developing a Blueprint for Success : Homes: Larry Webb went from affordable to luxury homes. His first project with A-M Homes involved luck, but his commitment to seeing it through gained high marks.
When Larry Webb was picked to captain A-M Homes’ Southern California division, some industry insiders wondered why the luxury-home builder recruited a man whose most recent experience was with a developer known for low-cost starter homes.
Webb answered the question last month. That was when A-M opened the first phase of its latest development in record time, sold all 22 new homes in one day and cut construction costs by 15% to give the company its biggest gross profit margin of the year without raising prices--which started at $258,000.
Accomplishing that in just five months on the job, in a stagnant, recession-weakened market, undoubtedly won Webb a gold star or two from his bosses.
But his successes also help show what teamwork, timing, luck and a willingness to bend the rules can do.
H. Lawrence Webb, a 43-year-old former high school history teacher from Massachusetts, came to A-M as one of the new breed of executive that is helping reshape the Southland’s ailing residential development industry.
“He is a tremendously bright guy whose background contains all the ingredients you need to succeed in this business these days,” said Philip Bettencourt, a residential development industry consultant and president of the Orange County chapter of the Building Industry Assn.
Nationally, most homes are built by small, entrepreneurial companies that typically build fewer than 50 houses a year. “But here in Southern California, that doesn’t happen,” said Bettencourt.
“The successful builders here are community developers, and to run those companies it is more important to know about infrastructure and public agency requirements and government relations and corporate management. From that perspective, Larry Webb is quite suited to the business,” he said. “He also is a confidence builder for lenders because he looks like he’s cut from their cloth. He comes to them dressed in Ivy League credentials, not coveralls.”
In Webb’s case, the Ivy League reference is literal. He left teaching in 1977 to earn a master’s degree in urban planning at Harvard.
After his graduation in 1980, Webb briefly worked in Washington for a marketing consulting firm. A move to Denver and a new job with a development consulting firm followed, and in 1985 he moved into the marketing director’s slot at the Denver division of the Mission Viejo Co.
In early 1987, Webb moved to the Los Angeles offices of Kaufman & Broad Homes, and in November of that year he was named president of the company’s Orange County and Riverside County operations, headquartered in Anaheim.
He sought the A-M job, he said, because working with a smaller regional company whose majority owner is Australia’s biggest home builder offered him more opportunity for independence and advancement than he saw for himself at Kaufman & Broad, an international, publicly traded firm with sizable operations in California and France.
When he reported to work at A-M’s Newport Beach offices May 8, Webb immediately started reviewing projects.
“To be honest, while I wanted something that would turn us into a good, tight team,” he said, “out of pure self-interest I felt I also needed to pick something that would give us a good success.”
The result not only met Webb’s immediate goals, but showed that involving as many people as possible in the decision-making processes is a management technique that works as well in construction as in a computer plant.
“It is an approach that I am definitely going to bring to all of our other projects,” Webb said.
For his first effort, Webb fastened on a project that was in its initial stages when he started his new job.
A-M Southern California had agreed, before Webb was hired, to buy 25 acres in La Mirada from the ailing J.M. Peters Co.--a Newport Beach luxury-home builder. Although preliminary plans already had been prepared, Webb called A-M’s key people together to reconsider the 144-home development.
The goal was to make the homes more marketable in today’s climate and to do so in a way that would cut construction costs by 15%.
That strategy enabled Webb to maintain profits and still price the homes about $10,000 lower than his marketing people had suggested.
Homes in the first phase, on lots that back onto busy La Mirada Boulevard, ranged from $258,000 for a 1,799-square-foot model with three bedrooms and 2 1/2 bathrooms to $310,000 for a five-bedroom, three-bath model with 2,492 square feet of floor space. A second batch of 19 homes--15 of them sold on opening day--was released for sale Saturday, at prices from $268,000 to $333,000. The company said prices were higher because the homes were on more desirable lots in the interior of the development.
As part of its cost-cutting effort,Webb said, A-M’s purchasing department suggested having the construction and design subcontractors review the plans and offer suggestions for trimming expenses without reducing quality.
“That worked wonderfully,” Webb said. “It gave them a feeling of ownership, so they worked like they really had a part of this project instead of like they were just getting paid to do a job. Their ideas were involved.”
Webb also trashed the development timetable, which called for the models to open in December, and said that the models would be ready 30 days earlier.
“You have to remember, it was mid-May and we hadn’t even closed escrow on the land yet, and this is a company that typically spent five to six months after escrow getting the models ready for the public,” Webb said.
“But our site-preparation people told me they could cut a couple of months from the construction time if they got onto the property soon enough, so we sat down and made a pact with the J.M. Peters people.” The deal let A-M begin grading the property before the sale closed because Webb agreed that A-M would not charge Peters for any improvements if the sale fell through. Had that happened, he said, it would have cost A-M about $250,000 in grading costs.
Webb also hired Creative Design Consultants in Newport Beach to decorate and furnish the model homes and told company owner Dana Eggerts that he wanted her to bring the project in at $23 per square foot--a third less than the $34 per square foot A-M typically spent on its models.
“She not only did it,” Webb said, “she got so involved that she was doing the work herself, and she gave us the $34 look for our $23.”
Eggerts said that Webb’s enthusiasm for the project--his drive to show that the homes could be built faster and for less than any A-M had ever done before--was catching. “I got personally involved in meeting the goals. I really bought into this job because everyone involved was totally committed.”
Even city officials in La Mirada cooperated, Webb said, allowing construction to proceed faster than the city staff could process the paperwork for the final building permits.
“They inspected everything all along the way, and our plans were all approved, but they couldn’t get the permits out fast enough,” he said. “But they were behind this project, too, so they let us keep working. This was a project where absolutely everything went right.”
The upshot was that A-M completed the models in mid-September and opened the complex to the public on Oct. 12--a month earlier than the target date.
Oct. 19, when the company released the first 22 homes for sale, “was one of the finest moments in the company’s history,” Webb said.
And not just because all the homes were sold.
“Even better than the public acceptance,” he said, “was the fact that at 7:30 Saturday morning not only were the normal three sales people and a hostess waiting in each model, but several subcontractors showed up. And so did the heads of our construction, marketing, land development, forward planning, purchasing and land acquisitions departments.”
The executives, one with her 18-month-old son in tow, stayed all day, talking to prospective customers about the development, Webb said.
“And I didn’t ask any of them to show up. They came on their own because they all felt some ownership in the project. They all bought off on the concept that they are better together than separately.”
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