Dominion Homes, Inc.
Dominion Homes, Inc.
Incorporated: 1952 as Borror Construction Co.
Sales: $175.5 million (1996)
Stock Exchanges: NASDAQ
SICs: 1521 Single-Family Housing Construction; 8712 Architectural Services; 5039 Construction Materials, Not Elsewhere Classified; 5023 Home Furnishings
Headquartered in a suburb of Columbus, Ohio, Dominion Homes, Inc. (known as Borror Corporation until May 1997) is one of the metropolitan area’s largest builders of single-family homes. Builder magazine listed it 53rd among the nation’s top home builders in its 1996 ranking. Borror’s more than 20 percent share of the Columbus area’s housing construction market ranked second only to M/I Schottenstein Homes Inc.’s estimated 25 percent stake. The dominance of these two companies has helped to make the 40-community metropolitan region one of the nation’s most highly consolidated markets. Analyst Ken Danter told The Columbus Dispatch that the competitive structure of the city’s home construction market was unique, noting, “I don’t know of another market where two builders combine for [nearly] 50 percent of the market.”
Family owned until its 1994 initial public offering, the residential construction company built and sold nearly 1,200 homes in 1996. Founder Donald Borror and his three children continued to control about two-thirds of the company’s stock into the late 1990s. A brisk residential construction market saw Borror’s closing rate increase from 708 in 1992 to 1,138 in 1994, but rising interest rates and intense local competition helped push the firm into a $3.5 million loss in 1995. Borror’s 1996 net recovered to a near-record $4 million in 1996. The company planned a major image shift in 1997, moving to phase out the Borror Corporation name in favor of Dominion Homes, the designation of its most popular line of custom-built homes.
In 1996, Borror offered three classes of homes and more than 30 floor plans within its Dominion line. Entry-level Century homes priced from $95,000 to $130,000 made up 60 percent of sales. Move-up homes in the Celebrity class were priced from $125,000 to $180,000 and made up about 30 percent of sales. Tradition homes priced at $180,000 and above constituted about ten percent of sales. Borror’s average sale price stood at $144,900 in 1996, up from $140,000 in 1994.
The company was founded in 1952 by Donald A. Borror. Son of an electrician, Borror was then working for a local building materials company and studying law at Ohio State University. The first house he built was apparently his own, but it was not long before he was putting up five homes per year. By the early 1960s, the Borror Construction Co. had branched out into multifamily developments and even some commercial construction. Its building interests would remain focused on the apartment market throughout the 1960s and 1970s.
Borror pursued dual careers in the 1970s. His namesake company dabbled in everything from apartments and condominiums to advertising, a lumberyard, and West Virginia coal mining. Then, in 1971, Borror was appointed president of Beasley Investments, the real estate division of Beasley Industries, Inc. Named for Fred R. Beasley, the parent company’s interests included remanufacturing of automotive and heavy equipment parts for the Ford Motor Co.; car dealerships; gas, oil, and coal production; warehousing; and home-building. Donald Borror became the head of this $20 million, public company following the death of the founder in the late 1970s. Not surprisingly, the new leader brought Beasley’s construction interests to the fore, concentrating less and less on its other businesses as the years went by. Beasley Homes focused on the entry-level home and condominium market, while the separately held Borror Co. continued to pursue multifamily projects.
1980s Bring Shift in Emphasis
In 1984, Borror acquired a controlling stake in Beasley, took it private, and merged it with his own interests to create Borror Corp. Donald’s son, Doug, joined the family business as general manager of multifamily housing in 1979, having earned a degree in history from Ohio State University just two years before. As Donald Borror told Business First-Columbus’s Melissa Widner in 1986, his son focused squarely on expansion. “The real impetus [for growth] came when Doug joined the company. He’s the one that juiced us up.” The younger Borror spurred an increase in the multifamily segment from $600,000 revenues in 1980 to $20 million in 1985. He advanced to executive vice-president of the parent company in 1985 and ascended to the presidency two years later.
In the meantime, Borror also expanded its single-family residential group under the Beasley Homes division. Early in the decade, the subsidiary established Dominion Homes to build single-family homes in Raleigh, North Carolina. By mid-decade, Beasley also was generating annual revenues of $20 million.
Borror’s generational leadership shift was reflected in a multifaceted corporate transition in the late 1980s. During this period, the company gradually sold off its non-real estate interests, choosing a single industry focus over the counter-cyclical benefits of diversification. The corporation also abandoned its geographic expansion into east coast markets in favor of a concentration on the fast-growing local market. At the same time, taxation and demographic issues fueled a shift in emphasis from the rather limited multifamily segment of the building industry to the larger, faster-growing single-family home segment. As the baby boomer generation moved into the prime earnings age bracket, demand for larger, so-called “move-up” homes grew substantially. In line with this trend, the company phased out the Beasley line of affordable housing by 1989 in favor of entry-level residences under the Dominion Homes trademark.
Rising interest rates, a scarcity of prime lots, and a tight lending market helped force Borror to form an allegiance with key competitor M/I Schottenstein Homes Inc. in the late 1980s. While remaining independent of one another, the two companies would continue to cooperate where feasible in the years to come.
The 1990s and Beyond
Despite industrywide challenges, Borror managed to more than double its sales from an estimated $37 million in 1987 to $93.8 million by 1992, as closings on houses increased from 452 in 1989 to more than 700 in 1992. Douglas Borror advanced to chief executive officer of the company in the latter year. Under his leadership, the firm placed a strong emphasis on customization. In 1992, the company set up a decorating shop so that customers could choose carpeting, cabinetry, flooring, and other finishing touches. Later in the decade, the company began to offer homes especially designed and equipped for persons with disabilities. The company also made home-office and cable wiring standard equipment in all new construction.
As it had in the past, demography continued to drive Borror’s strategy in the 1990s. With the baby boomer generation moving into “empty nest” stage, Borror re-entered the condominium market in 1993, after a seven-year absence.
Although 1994 was the nationwide single-family housing industry’s best year since 1986, rising interest rates, which increased by 2.5 points over the course of the year, and intense competition helped to burst Borror’s bubble in 1994. Sales increased nearly 73 percent from $93.8 million in 1992 to $161.9 million in 1994, but the builder’s net slid almost 63 percent, from a high of $5.4 million in 1993 to less than $2 million in 1994. Regional competition was so hot that Ryland Homes, the country’s third largest home builder, announced that it would begin to phase out its Columbus operations. Borror’s stock declined more than 57 percent over the year, from its initial public offering of $11.50 to $5 at December 1994. Although these were admittedly steep declines, some analysts gave the company credit for sacrificing profits to maintain its market share.
The local situation worsened in 1995, when rising costs and competitive discounting continued to batter Borror’s bottom line. Although the builder’s revenues rose ten percent to $178.1 million, it recorded a net loss of nearly $3.5 million on the year. Not surprisingly, the company’s stock price slid as well, declining to a low of $3 during the year. In an effort to return to productivity, Borror reduced its inventories of land and speculative (not under contract) housing, and embarked on a cost-cutting program. A key element of the corporation’s efficiency efforts was its adoption of a single corporate identity, Dominion Homes. The image shift allowed it to concentrate marketing, advertising, personnel, and purchasing on a single brand identity rather than diffusing these efforts. Aided by the single-family housing industry’s best year in a decade, Borror’s net recovered to $4 million in 1996 on record unit sales of more than 1,300 homes and condos.
“We will be concentrating all of our efforts on offering the Best of Everything –in innovations, product, locations and people. At Dominion Homes, we believe enjoying the best of everything is what home is all about.”
Prospects for the future remained mixed, however. U.S. Housing Markets, a trade analysis group, cited projections that new household formations would increase over the waning years of the decade in its forecast of “a period of relative prosperity for the home-building industry.” But Standard & Poor’s predicted that rising interest rates would drive down nationwide housing starts by more than eight percent in 1997. The Ohio Company, a “market maker” in Borror’s stock, noted that cost controls and debt reduction boded well for the company’s performance in 1997.
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——, “Model Suited to Disabled,” The Columbus Dispatch, August 27, 1994, p. 5C.
“Borror Corporation: Company Report by The Ohio Company,” The Investext Group, October 15, 1996.
Lilly, Stephen, “Home Market Moderates as Interest Rates Increase,” Business First-Columbus, October 10, 1994, p. 27.
——, “Tighter Credit Hammers Market for Real Estate,” Business First-Columbus, October 15, 1990, pp. 1, 40.
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Standard & Poor’s Industry Surveys, New York: Standard and Poor’s Corporation, October 31, 1996.
U.S. Housing Markets, “U.S. Home Builders Match Production to Household Growth; Period of Steady Construction Seen for Next Five Years,” http://www.housingUSA.com/ushm/pr/hhpr0196.html.
——, “Weather Cools 4th Quarter Housing Construction, But Records Fall,” http://www.housingUSA.com/ushm/pr/flash496pr.html.
Widner, Melissa, “The Book of Borror,” Business First-Columbus, January 27, 1986, pp. 3S, 6S.
Wolf, Barnet D., “Rising to the Top: Borror Customizes Empire To Keep Up with Consumer Demands,” The Columbus Dispatch, August 16, 1993, pp. 1S, 2S.
—April Dougal Gasbarre