Texas, Here We Come
Qualico Through the Decades – 2000s
The second-largest state in the US is so much more than barbecue, ranching, oil, and honky tonk music. In Texas, life is, well, large. It is home to the fastest road in the US, with a speed limit of 85 miles per hour, has its own dedicated power grid, and boasts the tallest stone column structure in the world. Texas’ economy has also seen consistent growth for several decades, notably in the city of Austin, where an explosion of tech startups has earned it the reputation of being the modern-day Silicon Valley.
The common theme in Qualico’s 70-year history has been, and continues to be, harnessing opportunities to expand into new markets and providing innovative products to fill market gaps. As they say, ‘Go big or go home,’ Qualico fulfilled this vision yet again with an expansion into the Texas market in the early 2000s, making the move the company’s first and only expansion outside of Canada to date.
It was the early 2000s when a group of Qualico executives – including Brian Higgins, now retired Regional Vice-President, Qualico US; Randy Wiebe, former Manitoba Region Controller who passed away in 2009; and Ron Reimer, Executive Vice-President, Qualico – began seeking expansion opportunities into the United States.
Qualico, already firmly entrenched in Western Canada, knew similar markets in the US would present new portfolio opportunities, along with the benefit of currency diversification.
First, there was a spark of an opportunity in Spokane, Washington. But while that spark fizzled, another opportunity appeared in black and white. As history would play out, Qualico’s foray into Texas started with Ron Reimer spotting a print ad in The Globe and Mail advertising that a homebuilding company in Austin was for sale.
Setting Up Shop
Ron responded to the newspaper ad by reaching out and having a conversation with the broker. The broker provided financial and operating information for a homebuilding company that had some early success but was in a position to welcome investors and shake things up a bit. A site visit down to Texas for additional due diligence review would land on the conclusion that the company’s in-house talent and history might offer Qualico an entry into an attractive market.
The homebuilder was an established brand called Reytex Homes – and just like that, Qualico invested as a 50% partner in the company took the leap across the border.
Texas presented itself as a highly suitable location for the business, and after analyzing the Austin market, this high-growth, tech-focused area offered a lot of potential. Austin was a young city; a city that was on the cusp of exponential growth due to the relocation of major tech companies leaving California. The sweet spot Qualico spotted as well was that the homebuilder market wasn’t oversaturated and if timed right, a new homebuilder in town could find its place before the competition became too crowded.
Qualico also knew that the recipe for success as a homebuilder was having control over land supply. This led to the first Qualico branded business unit to be Qualico Communities. For four years, from 2004 to 2008, Qualico worked with the team at Reytex to innovate and grow the business to meet market demand.
Aerial view of Qualico's first community in the US market – Austin's Colony
“In 2006, Austin’s Colony was the first Qualico community where Qualico had purchased undeveloped land and finished lots – allowing the company to start selling these lots straight away,” said LaNelle Deardorf, who today is Regional Vice-President of Qualico US. “These acquisitions jumpstarted our homebuilding operations and helped us get a strong foot-hold in the market."
Timed out with Austin’s Colony’s debut, Qualico introduced their own homebuilder brand, Pacesetter Homes. Pacesetter Homes was a homebuilder brand from Qualico’s operations in Alberta, and in a textbook case study of how to not overcomplicate things, the Pacesetter Homes brand was selected for Austin for one reason and one reason only: the logo had horses in it.
Qualico’s entry to the market was a one-two punch: land development and a niche home product. Leveraging smaller home models with affordable price points from the Alberta market, Pacesetter Homes’ product in Austin’s Colony offered a product that at the time was very scarce.
“Staying focused on the affordable price bands with products to fit on 30-ft. and 40-ft. lots when many other builders were still focusing on the larger lot products exclusively led to our initial success,” said Tom Lynch, who is today’s President & General Manager of Pacesetter Homes Texas. “We do participate on the larger lots as well, but we have been first to market with more affordable products on smaller lots in several areas. Diversification in product and being first to market in specific cases has been a key component of successful growth.”
The exit strategy for the Reytex Homes partnership commenced in 2008 and this timeline collided with the Great Recession in the US market. Faced with a potentially financially burdensome situation of maintaining two brand names in the market, Qualico made the decision that the Reytex brand was no more. To this day, some of the legacy employees of Reytex Homes still work for Qualico, but the Pacesetter Homes brand took hold as the flagship homebuilder brand for Qualico in Texas.
Settling In During an Economic Crisis
If there’s one visual that helps illustrate the growing pains of a startup company’s growth, it’s the initial decision of leased office space and how the team grows into it, or in Qualico’s case, outgrows it. Office space for Qualico scaled from a modest office space to sprawling across hallways and labyrinths of workstation pods. Qualico lined up their expansion to new office digs with one of the earlier phases of Techridge, an income property. While the earlier phases of Techridge were for multi-family apartments, a phase dedicated to commercial office space would be the home for Qualico’s US operations.
The Qualico Austin Regional Office is part of The Lakes at Techridge,
one of Qualico's Joint-Venture Investment Properties
Qualico’s advantageous position when entering the Austin market during the recession allowed Qualico to use its capital to make some opportunistic acquisitions. Looking back, the ‘bust’ worked out for Qualico, with the company gaining market share all the while going head-to-head with the big national builders.
Glynn Hendry, who today is the Regional Vice-President of Southern Alberta, collaborated with the Qualico US team to work on land acquisitions. A notable first large-scale land deal in the Austin market is known today as Sun Chase, one of the largest master-planned communities southeast of Austin, spanning 1,600 acres.
The team’s initial goals were to establish roots in this new market from which Qualico could expand, such as land development, housing, and special projects. Vera Massaro, now Vice-President of Qualico Communities Austin, was brought on to the team in 2008 to work with Glynn on land development, and in 2010, Qualico embarked on a partnership with Ledcor to break into Austin’s income property space.
“After the financial crunch in 2008/2009, Qualico had the ability to take advantage of some opportunities and we did,” said Glynn. “Most of which were on the multi-family income property side. Our roots were then firmly planted in multi-family, single-family and land development.”
The income properties move led to many other successful multi-family projects throughout the following decade, including The Lakes at Techridge – a six-phase 126.6-acre mixed-use project of approximately 2,200 apartment units in the heart of the region’s technology sector – which surrounds the Qualico Austin regional office today.
“We’re quite active in our joint-venture projects with Ledcor and they have been a steady and successful partnership for us,” said LaNelle. “These endeavours have helped establish Qualico as an innovative builder in the area.”
From Zero to One of the Top 100 Builders in the US
While multi-family income properties certainly gave Qualico a head-start in the Austin market more than 10 years ago, Pacesetter Homes has since established itself as a leading single-family homebuilder in the area. As buyers’ needs and lifestyles change, the offered product must stay one step ahead. Pacesetter Homes continues to achieve that goal, growing the company such that in 2020, Builder Magazine dubbed it one of the Top 100 Builders in the US for the fifth year in a row, climbing to #71 thanks to their number of closings each year. Zoomed in on the Austin market, under the leadership of Tom and Lee Whitaker – who is today’s Vice-President of Pacesetter Homes Austin – Qualico would hover around the position of the fifth-largest builder.
“Thanks to Qualico’s unwavering support, we are able to achieve this prestigious and valuable distinction,” said Tom. “This success in growing the company over the years would certainly not be achievable without the incredible contributions and efforts of our Pacesetter Homes employees. We have an exceptional team, second to none in the industry. It’s our people, our team that makes this distinction possible.”
This success is also due to closely watching market price shifts and adjusting building costs to keep homes affordable and hiring only the best in the trades to maintain the highest quality. Innovation of product is also high on the scale of success, and this includes the introduction of QUAD homes – a market first in Austin. Pacesetter Homes’ QUAD series features four courtyard-style homes with a single driveway access, offering comfortable living, a rental unit option, and a focus on community living that provides private outdoor space with less yard maintenance.
Pacesetter Homes Austin QUADs model, a market first in the area
Second Decade in Texas – Time for More Expansion
By 2016, the Austin team was firmly established in the market, achieving annual closings in the range of 500 possessions. The timing was right to expand into another viable Texas market that would add to Qualico’s vision of long-term growth and portfolio diversification.
Pacesetter Homes set their sights on the rapidly growing Dallas-Fort Worth (DFW) market, which is geographically about twice as large as Austin and annually produces more than twice as many housing permits. The Austin management team’s extensive experience and deep-rooted network in DFW would be beneficial in land acquisition opportunities and recruitment of top-notch personnel. With DFW being one of the fastest-growing markets in the US and Qualico already having established operations within driving distance in the state, it wasn’t a difficult decision to move into the area.
The north Dallas region was known to be the hottest part of the housing market and tough for any new homebuilder to take hold, so Qualico made the location their precise target for land acquisition. Starting in early 2017, Qualico acquired development opportunities in the communities of Meadow Run, Stone Creek, Anna Crossing and Aubrey Creek, and hired Blake Friesenhahn, Vice-President, to lead the new Pacesetter Homes DFW business unit.
With an initial goal of closing 50 homes in its first year, it took Pacesetter Homes DFW some time to find its place and turn the corner for success. It was certainly worth the effort to build the business in DFW, and today, Pacesetter Homes DFW is expected to close approximately 300 homes in 2021 and has expanded into more than 10 new communities, with an expected four more to come online by the end of 2022. This success drove the expansion of Qualico Communities into the region in 2021, seeing John Vick, Vice-President, join Qualico with his vast experience in DFW land development and several other major US markets. Pacesetter Homes’ and the Communities’ team growth has more than doubled in their first two years.
“With all of the projects we’ve been working on over the last four years, we’re now seeing everything come to fruition as we continue to build our brand in the DFW market,” said Blake. “Importantly, the realtor community now recognizes who we are and our potential, with our quality of homes and the great locations of the communities we’re building in.”
Ongoing Success and Opportunity
As Qualico looks for new growth opportunities in Austin and the DFW areas, LaNelle believes that the potential and excitement for growth lies in the land development side, but the expertise of the team lays the foundation for continued success.
“The leadership and experience of our senior management team and the strong relationships they have built over time is a key factor to our ongoing success,” said LaNelle. “We have a reputation of integrity and performing on our commitments that makes people want to continue doing business with us.”
The Qualico US Region continues to grow at a rapid pace. Pacesetter Homes is now expected to achieve the range of 620 closings (17 communities) in the Austin market and approximately 300 closings (10 communities) in the DFW market for the end of 2021. According to LaNelle, over the next few years, DFW has the potential to grow to over 1,000 closings annually.
Alongside the excitement of Qualico’s land development and homebuilding growth is the business’ steady joint-venture partnership of income properties with Ledcor. Qualico is looking to expand its apartment presence in the Lone Star State and DFW holds the key to promising new opportunities.
Qualico’s ongoing success in Texas will continue to rely on the same vision and recipe the company has trusted in for over 70 years now: harness land development, trust strong investment opportunities, and deliver innovative products to meet market demand.
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