The founder of Emerge Homes Inc., Michael Hill, has put the remnants of his homebuilding business up for sale after a five-year hiatus, but is pitching his vision for a new homebuilder model because he thinks it is what consumers want, and what the oncoming market recovery will need.
“We put the brakes on a $300 million project and put everything else on ice when the collapse happened, but now the market is ready,” he says. Now, Hill seeks to join one of the national homebuilders to launch a luxury division within the framework of an existing company.
In his press release pitching his idea, he reiterated his confidence in the weak housing sector, saying:
“It is a matter of choice; given the choice, people will always choose distinctiveness over monotony; the tighter the market, the more important product differentiation is,” he said. “Everyone has seen community after community on vast tracts of land consisting of the same house over and over again, irrespective of the name on the street sign at the corner. What I am offering is a way of mitigating the costs of product differentiation through technology and using that technological advantage to provide consumers with a compelling value proposition, like getting a Lexus for the cost of a Hyundai."
Hill founded Emerge Homes Inc. in 2002 to target the upscale housing market, particularly the niche between luxury builders like Toll Brothers and elite custom builders. He applied computer technology, panelization, and other production building techniques to build remarkably unique homes that were priced competitively with high-end production homes. His homes won multiple awards, including the Maryland National Capital Building Industry Association's Custom Builder Awards of Excellence.
Hill saw what he called a divergence of two market segments in housing: a class of consumer that could afford more and wanted more than the cookie-cutter product, but that couldn't afford the custom products that were superior.
“The industry is bloated, paper-oriented, and totally stuck in the systems of the baby boom era, despite the fact that so much of the work is brainwork that lends itself to automation and efficiency improvements,” he said.
When he applied his skills as a computer scientist to homebuilding, he was able to grow Emerge Homes at an average annual rate of 317 percent and had gross profit margins exceeding 50 percent.
Emerge had just secured Wall Street financing to expand nationally when the nation faced the greatest collapse of the housing market in history.
“Because of where we were in our growth path and how severe the collapse was, it just made more sense to wait it out, but the Emerge business model is as viable today as it was then, perhaps more."
Now, Hill is shopping for a new birth for his vision of all-custom communities at a price within reach of existing market tolerances. He continues, "I am looking for a national that wants to take on Toll Brothers and control of the upscale housing market."
Hill has reached out to a number of national homebuilders including NVR, Inc., Hovnanian Enterprises, Inc., Beazer Homes USA Inc., D.R. Horton Inc., Ryland Group Inc., KB Home, Standard Pacific Corp., M.D.C. Holdings Inc., Lennar, and Toll Brothers Inc. He has also been discussing possibilities with various private equity sources. No telling how this plays out for Hill, but it might be worth monitoring the segment of the market he’s focused on going forward.