DECIPHER™ Case Study 12:
Price Optimization, Product Premium Maximization, Investor Reporting
Synopsis
Competitive Analytics utilized their proprietary and innovative DECIPHER PVO model which analyzed: 1) Over 10,000 primary, secondary, tertiary, and analogue comparable properties; 2) Over 250 different value dimensions and value components (i.e. individual amenities, features); 3) Over 150 macro and microeconomic indicators. This model helped NEW HOME realize an increase in their expected pro forma revenue of over $12 million dollars.
Background
The New Home Company Inc. (the “Company”), a Delaware Corporation, and its subsidiaries are primarily engaged in all aspects of residential real estate development, including acquiring land and designing, constructing and selling homes located in California. New Home is a new generation homebuilder focused on the design, construction and sale of innovative and consumer-driven homes in major metropolitan areas within select growth markets in California, including coastal Southern California, the San Francisco Bay area and metro Sacramento. NEW HOME, one of California’s most active homebuilders, became a publicly traded company in early 2014. It is listed on the New York Stock Exchange under the symbol “NWHM.” It is a new generation homebuilder focused on the design, construction and sale of innovative and consumer-driven homes in major metropolitan areas within select growth markets in California, including coastal Southern California, the San Francisco Bay area and metro Sacramento. In 2013 and 2014, NEW HOME was the recipient of “The Eliant” for Best Overall Customer Experience in the Eliant Homebuyers’ Choice Award’s multi-divisional builder segment. Most recently, NEW HOME was recognized as one of the “Best Places to Work” in Orange County by the Orange County Business Journal and one of the “Top Workplaces in Orange County” by the Orange County Register. For more information about the company or its current new-home offerings, visit www.NWHM.com. Meridian is NEW HOME’s signature community, a collection of 79 sophisticated coastal residences in the heart of Newport Beach, Calif. Meridian is an exclusive opportunity and the first, new for-sale residential community in the Newport Center® area in more than 20 years. Located less than a one-minute walk to Fashion Island®, Orange County’s premier open-air retail center, Meridian includes residences ranging from 2,335 to 3,905 square feet. Homes are priced from the high $1,000,000s. NEW HOME launched sales at Meridian earlier this year to strong demand. During the pre-opening period more than 30 of the residences were sold, representing more than $100 million in contracts. Featuring contemporary Mediterranean architecture with expansive windows, Meridian is designed to take advantage of ocean, golf course, garden and city views. Many of the residences overlook the fairways of the Newport Beach Country Club. Community amenities include a concierge, security, semi-private elevators, a clubroom with fully appointed kitchen, state-of-the-art gym featuring Cybex equipment and a Yoga/Pilates studio. The outdoors can be enjoyed on the entertainment terrace, relaxing by the swimming pool and spa, or at the poolside grill and dining area. Meridian’s residences offer an opportunity for original living in the most complete sense. NEW HOME has approached the design of these homes with an understanding that the most sophisticated design is a personal experience for each buyer. Through Meridian’s celebrated and recognized Design Studio, the NEW HOME team takes a hands-on approach in creating an interior experience—through flooring, countertops, appliances, home automation solutions and much more—that is a true reflection of each individual style. “Ease of living is the ultimate luxury at Meridian, where lifestyle is what first and foremost sets the community apart,” said NEW HOME Senior Vice President of Sales, Marketing and Design, Joan Marcus-Colvin. “Meridian offers the finest in luxury living with the freedom of a turn-key residence, minimal attention to maintenance and complete privacy and security. These attributes, coupled with Meridian’s world-class location, are driving our tremendous sales success here.”
Challenge
NEW HOME conducted several in-house analyses and hired three different local “housing consultants” to help identify the appropriate price for this one-of-a-kind luxury community. The problem is that all housing consultants employ out-dated and simplified pricing models that are relatively one-dimensional. Larry Webb, CEO, Joan Marcus Colvin, and representatives from Hillwood Development insisted on taking a more robust analytical approach and engaged Competitive Analytics so that they will be sure they can optimize pricing for every single unit which will maximize NEW HOME and investor’s revenue and absorption rates.
Solution
Competitive Analytics utilized their proprietary and innovative DECIPHER™ PVO model which analyzed: 1) Over 10,000 primary, secondary, tertiary, and analogue comparable properties; 2) Over 250 different value dimensions and value components (i.e. individual amenities, features); 3) Over 150 macro and microeconomic indicators.
Results
NEW HOME realized an increase in their expected pro forma revenue of over $12 million dollars.
Return on Analytics
>1200%
“Homebuilders and homebuilder consultants are still conducting research the same way over the last 30 years. Homebuilders should stop thinking they can pay $15,000 for a generic and static market study and gain insight . . . homebuilders that want a competitive advantage should be using advanced and innovative analytics, namely Competitive Analytics’ services.”
– H. Lawrence Webb, Chief Executive Officer
If you are interested in speaking with a client contact from this company about the work we have done with them, please contact us to submit your request and we will be happy to contact the client for you.