Ryland HOmes Chief r. chad dreier is returning to los angeles and taking the company with him R. Chad Dreier is coming home. The native Angeleno has decided to move the company he heads, the Ryland Group, from Baltimore, where it was founded, to its new headquarters in Calabasas Park Centre. California, says the chairman, president and CEO of the $1.96 billion homebuilder, is where industry trends start, where the opportunities are greatest and where the company hopes to increase its efforts. Dreier, who joined the company in 1993 from Kaufman and Broad Home Corp., led Ryland through a record year in 1999. The company, which holds the No. 6 position in the industry, posted earnings of $66.7 million in 1999, a 65 percent increase over 1998. Last year, Ryland closed sales on 10,193 homes, up from 8,994 in 1998. In spite of rising interest rates, Dreier believes he can improve the company’s revenues by 10 percent in the coming year. Ryland currently operates in 21 markets and, this year, expects to begin construction on 121 homes in the upcoming Playa Vista development. Question: Why did you select L.A. to relocate the company? Answer: A lot of people think Southern California leads the nation in housing product, sales and marketing and merchandising techniques, and new technologies. Second, and this may be more important, is that California in general and Southern California specifically, is one of the great growth areas of the United States. And as we look at the demographic trends of California and what we want to do and the kind of housing we provide, we thought that it was a perfect market. Third, Ryland does about 1,500 homes in California, and we’d like to do more. By being headquartered here, it would give us an opportunity to build a bigger business in California. Q: In what ways is California at the forefront of the building industry? A: Most people come to California to look at new product or floor plans. California was one of the first places to have the “great room” concept, or the open family room and kitchen all open together. They were the first ones to have more windows and light and open space in the house and the big bonus rooms, and the first place to have islands in the kitchen. Q: Did you consider any other areas to relocate the company? A: We looked at Phoenix, Denver, Chicago, Dallas and Atlanta. We’re homebuilders, and the homebuilding industry is a huge industry in Southern California, and I think that’s good for us. At the end of the day, I’m not kidding anybody, the tiebreaker is where the CEO wants to live and I’m from Los Angeles. And frankly, the weather out here is better and I think there’s a better quality of living. Q: What differences did you find living back East? A: In California, everybody wants to go to the next new big thing, whether it’s a new restaurant or a new movie. In the East Coast they’re more into the history of the Civil War and the founding fathers. I got into hot water back there once because someone asked me about the Civil War. I just never thought about it. Back there, people are still fighting the Mason-Dixon line and the flag issue in South Carolina. Those are big deals back East. Q: What did you miss most about being away from L.A.? A: One day after this (move) got announced, my wife and I went out to dinner, and we both said at exactly the same time: “God, we can’t wait to get back to good Mexican food.” We’ve gone out five nights a week for Mexican food lately. And frankly, I missed the Lakers and the Dodgers and I missed UCLA and USC. I mean, Maryland and Duke is a great rivalry, but my wife and I kind of like the UCLA and USC rivalry better. Mostly we missed our friends and our family and stuff like that. Q: Most people here think land is scarce and that limits commercial opportunities for companies like yours. How do you see it? A: While there’s no more land left in downtown Los Angeles or Manhattan Beach or San Fernando, the fact of the matter is, there are huge opportunities as you go farther out in both Southern California and Northern California. So it’s sort of a matter of degree, but I think there is lots of opportunity in California. Q: Do you think that California’s regulatory environment makes building more difficult here? A: I think California is more complex than a lot of places, but it’s not more complex than Maryland and it’s not more complex than Chicago, and if you know what the rules are, you know how to deal with it. If you said to me, “Is it easier to get a permit in Dallas than California?” Absolutely. Is that why we should put our headquarters there? I don’t think so. If you live here, that’s just part of the price you pay, and to real estate developers it’s also why real estate becomes so valuable. It’s hard to get supply through the system, but once you get through the system, there’s such huge demand, you make a lot of money. I wish California wasn’t so complex, but hey, you can’t have everything. Q: How do you think the rise in interest rates will affect your business, both homebuilding and the Ryland Mortgage Co., in 2000? A: Conventional wisdom is, housing starts on a macro national basis will be down about 5 or 6 percent. That’s what they said for the last three years, and they’ve been wrong for the last three years. But I would guess with the rise in interest rates that may be true now, but that’s on a macro basis. From my point of view, because of the advantage of size we have, and capital, I think we can continue to grow. We use our mortgage company solely to make mortgages to Ryland homeowners. So for us, it only impacts our home sellers. I’m not making light of that. So far, the rates now are about 8.25 percent for a 30-year fixed. Hey, that’s not such a bad rate, so it doesn’t appear to have much impact on home sales yet. With (Federal Reserve Chairman Alan) Greenspan and the Fed continuing to imply they are going to raise rates, that makes people nervous, and when people get nervous you don’t usually buy a house. Traditionally, though, more people do variable-rate mortgages when the rates go 8.5 or higher, so until rates get to 10 percent, I don’t think it’s too much of a problem. Q: Have you begun house-hunting yet? A: I have a house in Santa Barbara, so I’m living up there. I’m probably going to either look for a house or more likely a townhouse in Conejo Valley. I understand housing prices pretty well, although even for me, (I have) sticker shock. It’s not 1992. Q: What attracted you to the industry? A: It’s an entrepreneurial business that if you do well gives you a chance to make a lot of money. And every transaction is different. What I really liked is, you created a product. At our company you start with nothing and two years later, there’s people living in houses and kids riding bikes, and that just appealed to me, as opposed to being a service-oriented accountant. I always wanted to do real estate, and I think that’s part of growing up in Southern California. It’s in everybody’s blood.
