Feb 29, 2012
McMansions may be gone, but Orleans is back
The Philadelphia Inquirer
By Joseph N. DiStefano, Business Reporter
Orleans Homebuilders Inc. is back from bankruptcy, with veterans of the long suburban home-building boom replacing the three generations of the Orleans family who ran the Bensalem-based builder for more than 90 years before the publicly-traded company filed for Chapter 11 protection in 2010.
No longer publicly-traded - the company is now controlled by buyout investors and creditors Strategic Value Partners of Greenwich, Conn.; Anchorage Capital, New York; and the distressed-debt desk of Bank of America - Orleans isn't following rival Toll Bros. in building apartments in Brooklyn, Center City, Seattle and other urban renewal centers.
Instead boss George Casey, a veteran of Horsham-based Toll Bros. and Berwyn-based Realen Homes, among others, plus aides like newly-hired Lee Darnold, who headed a business unit at Nokia Mobile Phones before going into the homebuilding industry during the boom years, are now building out old Orleans tracts in Chester, Bucks, and Gloucester Counties and down South, enticing buyers from "higher-tax school districts" further up I-95.
"The core of this business is stuff that's selling for between $250,000 and $600,000, and a little luxury stuff, $1 million an dnorth," Casey told me.
"I want to be the Trader Joe's of homebuilders. Neat. Quirky." Flexible floorplans. "We're listening to the way people live." The McMansion is dead? "People are now storing their bikes and kayaks in the old dining room. They eat in the kitichen and the TV room. The living room is the playroom for their kids. Nobody wants a two-story foyer anymore."
Casey and Darnold have experience buidling big master-planned communities. The action now is "infill," smaller developments of up to 40 houses, Casey says.
It's back to the '50s, in some respects: "We're trying to create coherent, neat little neighborhoods. We're trying to spend a lot of time doing social infrastructure. How do you get the folks in the neighborhood doing things together, so they're not just coming back to their rcave at night. There's high value to the elimination of loneliness." So, Valentine's Day candy exchanges. Barbecues. An Orleans homebuyers' group at Reynolds Mill, near Raleigh, N.C., who voted for a new-style dog-walking park, instead of an old-fashioned swimming pool.
"Orleans did all that stuff when they built Northeast Philly," Casey told me. "They'd buy a block, put up rowhomes. The corner homes were wider than the rest, that's where the store went. The rest, they sold to people who had 40 percent down. They rented some to own. The rest they sold to Korman, and Korman rented 'em out. That store was the place where you congregated, that and the front steps.
"But then we went wide. Big lots, big houses. Detached from everything. This is the trend now: going back to basics. One of the basics is the desire to have social conections. Maybe 30 percent of people want to be hermits. But the other 70 percent want to connect. If you think of yourself as just a homebuilder, you're so confined to thinking about the walls of a house. We're also neighborhood creators. A place with strong social infrastructure will sell at a premium." How much? "Five or 10 percent. That fairy dust, that has great retail value."
Won't the buyout firms look to sell Orleans for a quick profit? "Orleans is older than Betty White," Casey says. "It's a 94-year-old start-up, with cash flow. We've got the archives of what made great places to live. We're doing it again."