Job Switch Turns Builder Into Home Shopper : Real estate: Chad Dreier, who left Kaufman & Broad, is working to increase profits at the Maryland-based Ryland Group.
The chief executive officer of the nation’s third-largest home builder knows what it’s like to be a home shopper.
Chad Dreier did plenty of house hunting after leaving Los Angeles-based builder Kaufman & Broad Home Corp., where he was second in command, to take the helm of Ryland Group Inc. last November.
He searched for a new home on weekends while renting a condominium in downtown Baltimore, mixing business with what he says is pleasure.
“I love the business, so going out on a Saturday and looking at homes is half hobby and half work,” explained the 46-year-old Dreier, who eventually bought a house in Ellicott City, just outside Baltimore (no, it wasn’t a Ryland home.)
Ryland Group hasn’t been nearly as lucky, however.
Last year, the company lost $2.7 million, or 34 cents a share, due largely to a $45-million charge it took for falling land prices, mostly in Southern California. Revenue totaled $1.47 billion, compared to $1.44 billion the previous year, with home building accounting for $1.2 billion and financial services and other subsidiary activities accounting for the rest.
Net income was flat for the first quarter of this year, with Ryland earning $6.2 million, or 36 cents a share, compared to $6.6 million, or 38 cents per share, last year. Revenue totaled $332.5 million, up from $295.6 million.
The main challenge for Dreier is to increase Ryland’s profits and persuade investors to continue giving the company money to finance developments. Time is of the essence.
“My experience is that you want to sell homes as fast as you can because markets can turn and you don’t want to get caught,” Dreier explained. “I don’t know if you want to be in a position holding land more than two years.
“I almost think we’re more like a retailer. Lots are a component of our product, and you have to turn it out fast.”
Dreier is a tall, jovial guy-next-door type, the father of two college-age children. He enjoys sports, but concedes he’s more of a spectator than he would like to be. At work, however, colleagues and industry analysts describe him as fast-moving and direct.
Dreier wants to accomplish three things at Ryland: Return the company to a leadership position in the home-building field; maximize the benefits of its mortgage operation to help sell homes and make profits; and improve investor relations.
He says Ryland homes will become more open, with family rooms adjoining kitchen islands, more master bathrooms, more “great spaces.”
Analysts like what Dreier is doing so far. Lawrence Horan, who follows Ryland for Prudential Securities, says he expects the company to earn $2.20 a share in 1994.
“He’s doing several things to enhance gross margins,” Horan said. “First off, he’s changing the way they buy land, trying to buy it better. That means to turn it more quickly, get faster asset turnover.”
Horan said Dreier also plans to centralize the purchasing of materials and refocus on entry-level housing, some of the same strategies Kaufman, Dreier’s former employer, adopted to deal with the falling Southern California market.
Salomon Brothers analyst Ivy Schneider said Ryland stock had been trailing in the home-building industry for several reasons, including poor marketing.
But Schneider says she expects the company to earn $1.95 a share in 1994 and has issued a “buy recommendation” for the stock, citing the improving housing market and Dreier’s turnaround program.
Ryland stock hit a 52-week high of $25.625 a share in early February on the New York Stock Exchange. It has been trading in the $20-per-share range lately.
Schneider predicts Ryland will trade in the mid-$30s in the next few months.
“He’s (Dreier) going to be implementing several strategies, and I think it’s just going up from here, hopefully no more on the downside. It’s just a matter of when that happens,” Ms. Schneider said. “I think it’s an opportunity from an analyst’s perspective. The stock has good valuation, because it’s been a dog relative to the group.”
Ryland built 8,000 homes last year in 48 markets spread across 18 states. The company’s main markets are in the Middle Atlantic, Midwest and Southeast states and in Southern California. The company also has an international division.
Although Ryland has a strong presence in the mortgage business, originating 28,000 loans last year, Dreier said he knows his job is to return Ryland to a leading position as a home builder.
“If you were on Wall Street and invested in this company, that’s what you would invest in,” he said.
