Hubbell Realty Co. tossed sticks at the recession to emerge as a dominant player in Greater Des Moines home building.

In this case, sticks are the framework of new buildings, and Hubbell Realty is adding them to the landscape in 36 residential housing developments – the folks at Hubbell call them communities.

Some of these efforts are Hubbell-initiated projects that have been on the books for a couple of years as the company sought approval from various cities in Greater Des Moines to alter development plans in order to meet changing market conditions. For example, in the Waterford Landing neighborhood in Urbandale, Hubbell sought to reduce minimum lot widths. That process began in 2008 and the company started building homes in the area this year.

Hubbell also has been the major player buying and building on properties that were taken over by banks after overzealous developers pursued a build-at-all-costs business model a mere four years ago.

“Hubbell is well positioned to springboard out of this,” said Kevin Crowley, chief operating officer of Iowa Realty Commercial. “They are well positioned to be the dominant player in sticks and land.”

Poised to survive a recession

As Hubbell Marketing Director Rachel Flint points out, the 150-year-old company has survived its share of recessions, not to mention a depression. To come out of the Great Recession, Hubbell has changed some its own development schemes, downsizing buildings where it sees fit and following a business plan that has it buying bank-owned land at less than the sky-high prices that developers such as Regency companies and the development and construction arms of Dave Walters were paying at the height of the home building boom in 2005 and 2006.

In all cases, Hubbell is making concessions to a tight-lending, penny-conscious marketplace.

So far, the company is succeeding on a calculated risk. It has set sales records every month this year, said President and CEO Rick Tollakson.

Year to date ,the company has reached 45 percent of its sales goal for 2010, having sold 47 homes in March and 46 in April.

The federal home buyer tax credit was partially responsible for the spike in sales, said Steve Niebuhr, Hubbell’s senior vice president for construction and management services.

The credit expired April 30, and the true test of the vitality of the Greater Des Moines housing market will come in the months that follow.

“I don’t think it’s going to drop off as dramatically as people think,” Niebuhr said. “People are still going to need homes. We’ll see somewhat of a decline, but it’s not going to fall off a cliff.”

Changing plans

Hubbell is ready to continue its foray into the downtown condominium market, having won approval from the city of Des Moines to alter its original plan for the expansion of Brownstones on Grand, a project that is built out but not completely sold out on Grand Avenue between Second Avenue and Third Street.

The remainder of the project will fill in property Hubbell owns between those completed units and Watson Powell Jr. Way.

To meet changing market conditions, Hubbell won approval from the Des Moines Plan and Zoning Commission to revise its plan, which originally called for 25 three-story row houses within two eight-unit buildings and a nine-unit building.

Instead, the company will build 16 two-story row houses within four buildings and nine three-story row houses within three buildings.

The changes were prompted by the economy, Niebuhr said.

“A little bit of what we learned in phase one is that it’s easier to manage the risk and interest cost by delivering fewer units to market at one time, both because of the lending and the sales environment,” he said.

In addition, some units in the expansion will be sold at a lower price point. The company probably will turn away from geothermal heating, which characterized the homes in phase one, and all of the new residences will feature rooftop gardens.

“The cost of geothermal is almost double a conventional system,” Niebuhr said. “They are wonderful as far as meeting the claims of energy efficiency, and, at a higher price point, it was an attraction to the buyer. At the price point we’re trying to hit, I’m not sure we can offer that.”

The new units will be priced near $200,000, Niebuhr said. The homes in phase one have sold for more than $250,000.

Just across the Raccoon River, Hubbell also is altering its build-out of Druid Hill, a town home project it acquired in its 2007 purchase of properties owned by Clarke Co. Ltd.

The company is building four town homes, with three of the four already sold. Once the fourth is sold, Hubbell will begin construction of four more units that will mark the completion of the project.

“We’ve had a renewed interest and sales surge at Druid Hill,” Niebuhr said. “People have discovered it again.”

One reason it has been rediscovered is that Hubbell has lowered prices on the town homes.

Build-outs

Hubbell also is keeping busy with its own projects. Environmentally friendly conservation communities are being built in Johnston and Altoona. Another residential project is under way in Urbandale.

In Altoona, Ankeny, Grimes, Johnston, Waukee, Urbandale and West Des Moines, Hubbell is finishing projects that were started but not finished by Regency companies and other developers.

In all, Hubbell has acquired 384 properties once held by banks.

“There was a lot of wreckage, but from the ashes there have been some good things that have come of it,” Niebuhr said, noting that Hubbell has been able to put vendors to work who were left with unpaid bills due from Regency and other developers.

“A lot of these projects were very good projects,” Tollakson said. “They needed some modifications to bring them in tune with the market.”

The difference between Hubbell and smaller builders – who have helped fuel a resurgence in home building this year – is that the company has the patience and financial wherewithal to force changes where they need to be made, and to negotiate with banks.

“We have the horsepower to go in and make these kind of changes,” Tollakson said.

He noted that new homes are disappearing from the market, dropping to 750 this year from 2,000 in 2008.

“Ninety-three percent of the work force is still working; interest rates haven’t moved to 6 percent. It’s still a great time to buy,” Tollakson said.

And it has been a great time to negotiate with banks.

Lenders don’t want to be real estate agents or home builders, so they have been willing to listen to Hubbell’s plans to build out and sell distressed properties.

Niebuhr said several banks have approached his company to get ideas for moving the properties into the market and off their balance sheets.

Hubbell’s strategy has been more complicated than simply approaching banks with an offer of a few cents on the dollar for a bad loan.

“If you know the target price for a product, then you back up and determine what percentage you can pay for a lot, then you do an analysis on land and see how many lots you can build. … It really doesn’t make any difference to me what (the banks) had in it,” Tollakson said.

However, in most cases Hubbell offered “significantly less” than what the banks were due from the original developer, he said.