21 May Refined Designs in Lakewood Ranch
Nelson Homes, Inc.
Press Release: 2011-05-21
FOR IMMEDIATE RELEASE
The master paid a visit to the student last week at Lakewood Ranch. Arthur Rutenberg, nearly 60 years removed from his first home-building experience, was being escorted around a new model home in Country Club East by Derek Nelson, who has just 22 years in the business. But the kid is doing pretty well for himself, Rutenberg admitted.
It helps to pick the right partner. Nelson, an Arthur Rutenberg Homes franchisee, built the Bermuda model in partnership with the elder statesman of Florida homebuilding. such a partnership keeps fresh models coming onto the market at a time when construction financing is hard to get, said Rutenberg.
So, as the elder and younger builders marveled at the ease with which the 10-foot tall, impact-resistant sliding-glass doors opened, and the range hood mounted with a restaurant-style warming light, and the pantry hidden behind a door that looked like part of the kitchen cabinetry, they revealed part of the model home design process.
It is one of constant refinement. the typical ARH client, a luxury-home buyer of means, expects no less when they are paying $640,000 for a house like the Bermuda.
“If you look at a plan and mark changes, you can look at that plan again and it is like you have never seen it before,” said Rutenberg, whose Arthur Rutenberg Homes provides design services for its franchisees. “You will find two or three more things. There is almost no limit to the refinement you can get.”
He said the design process for such a model home starts with two big meetings, the first of which is an all-day “concept meeting.”
“We start out with everything this model is supposed to represent,” said Rutenberg. “Who the market is, who we are building this for. everything about it, every single room, all the details about the interior specifications.”
Attending the meeting: Nelson and one of his salesmen, an ARH interior designer, ARH’s director of design, and a member of ARH’s purchasing staff who is well-versed in the products to be used in the model.
“We talk about the price point, what price per square foot it is supposed to hit,” said Rutenberg. “Everything about it. it is a full day of five or six people in the room. from all of that information, we start with plans. we want it exactly right for the community; that is its purpose.”
A few weeks later, the designers bring their plans back for the second meeting. “Here is what we did, here is what it is going to look like, here are some swatches, here are some samples, the general tone of the furnishings,” said Rutenberg. “We look at the plan, the elevation, where the parking is going to be, the landscaping, the outdoor living space, which is becoming much more important in model homes.”
In the Bermuda model, one big change from the norm is the elimination of the formal dining room. it exists now as an option, adding 200 square feet and $20,000 to the base model. Visitors to Nelson’s first model, which was 1,900 square feet in size, said they did not want a dining room. Nelson listened, and passed that comment along to the designers at the corporate office.
“We took that information and evolved a design that got presented to Art,” said Nelson. “His main concern was to make that eating area somewhat elegant, but that you could use it for everyday living space.”
Rutenberg said, “We move very slowly in the building industry. it takes us a long time to catch up with the public.”
Dining room or no, the design team pores over the refinements, seeking perfection for a product where perfection is “impossible,” said Rutenberg.
“All of that is rehashed one more time, and that is before we even get started on the working drawings. So these model homes represent a huge process. but it all works. we do it lots of times a year – that is the business we are in.”
It didn’t start that way. in 1954, Rutenberg built his first house, a simple, 1,000-square-foot structure with two bedrooms on an $800 lot in Clearwater. he admits he did not know what he was doing.
Rutenberg had never built a house, so he went to the library and checked out a book on carpentry. soon he was a licensed builder. he he had no employees for his first 100 houses, “so I learned how to build a house,” he said.
“The only appliance was a water heater,” he recalled. “High-tech was getting the front door and the side door to open with the same key.”
But his timing was as brilliant as the house was simple. Rutenberg was getting in on the ground floor of a postwar building boom, fueled by young veterans who had been stationed in Florida during World War II, and retirees who wanted warmth, cheap housing and low taxes. he just saw the state as “an easy place to get into the building business.”
Not that Rutenberg built cheap houses. he established his niche in the luxury, semi-custom market, and started selling franchises. he designs; someone else builds.
How many houses have the Arthur Rutenberg name on them?
“I have no idea,” he said. “I could not tell you within five or 10 thousand how many. I have no conception. it is so many years and so many places.”
But the key to his success is the franchise system. There are 31 current franchise holders, at least one of them a single contractor working by himself. Computer software makes it possible; ARH has its own proprietary software for purchase orders and the many other functions of building; he says that is the biggest innovation of his long career.
“The franchise system – you could call it a partnership,” said Rutenberg. “It enables us to use the resources that are available to all 31 franchises and bring them to bear in one franchise. It’s an advantage. but it is a traditional franchise arrangement.
“As far as this model is concerned, what we have decided to do in the last year or two, in order to be sure that our model system stays fresh, is we are building models, we are owning models and leasing them to franchisees. it doesn’t make any difference to the customer. Derek operates it, he uses it.”
The difference with this model in Lakewood Ranch is that ARH has started to own model homes and lease them to franchisees through a sister company, ARH Models LLC.
“We are committed to 15 of these in Florida and throughout our system. that will enable us, in these economic times, to have fresh new model homes, whereas some builders are not going to be up to date, when, contrary to popular belief, these markets do come back,” said Rutenberg.
“Maybe Derek would do one more model than he otherwise would have been able to do. he can use his capital for other things. the banks aren’t able to lend as high of an LTV (“loan to value,” or mortgage amount to selling price) as they used to, so it takes more cash to build a model. it is difficult to get models financed.”
Or sold. the current real estate downturn, “deeper and wider” than any Rutenberg has experienced, has caused houses to sell for two thirds of boomtime prices.
“It is really pretty remarkable that you could squeeze that much money out of a product,” he said.
“It’s a lot of little pieces. the developers have lowered prices on lots, so the land, the biggest component of the home, has come down by a third to a half.
“GE reduced our costs of appliances. Kohler and all the name-brand people have come up with programs to reduce costs. Lumber and drywall has come down in cost. every single piece of the supply chain has squeezed down. but there really is not a huge difference in the product.”
Rutenberg says a change is under way. Earlier this year, prices for new homes started turning upward after years of declines.