The Ryland Group, Inc.

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The Ryland Group, Inc.

11000 Broken Land Parkway
Columbia, Maryland 21044-3562
U.S.A.
(410) 715-7000
Fax: (410) 715-7196

Public Company
Incorporated: 1967 as The James P. Ryan Company
Employees: 3,200
Sales: $1 billion
Stock Exchanges: New York
SICs: 1521 General Contractors Single Family Houses; 6162 Mortgage Bankers and Correspondents; 6159 Miscellaneous Business Credit Institutions; 8370 Construction & Related Industries; 5250 Telecommunications Systems; 8120 Retail Banking Services

The Ryland Group, Inc., is the third-largest home building and mortgage-finance business in the United States. A company with sales of over $1 billion in 1992, Ryland is unusual in its geographical range and diversity, building homes in seventeen states and in over forty markets. The firm’s two principal divisions, Ryland Homes (RH) and Ryland Mortgage Company (RMC), service all of the prospective home buyer’s needs, from home building to mortgage loan assistance. Since its founding in 1967, the company has built well over 100,000 homes, with current prices ranging from $60,000 to more than $500,000.

The company was originally named after its founder, James P. Ryan, an energetic real estate entrepreneur who established the James P. Ryan Company in Columbia, Maryland, in 1967. Columbia was a new, planned community of 220 single-family-homes situated mid-way between Washington, D.C., and Baltimore, Maryland. Ryan created the name “Ryland Homes” when he chanced upon a sign that was supposed to say “Maryland,” but on which the first two letters had been covered; “Ryland” struck him as the ideal name for his homes.

Operating in a dynamic and highly volatile housing market, Ryland developed a marketing strategy targeted toward the middle class or up-and-coming middle class: homes were built with only brand-name construction materials and appliances and sold in the middle range, starting at $20,000. Ryland sought to be a highly focused home building business rather than a development company speculating in land dealing or the development of “raw” land. In its first year of operation, the company concluded forty-eight sales and made a modest profit of $12.7 million.

In 1971 the company went public and changed its name to The Ryland Group, Inc. That same year Ryland broke ground on another planned community, Peachtree City, outside of Atlanta, Georgia. Here Ryland Homes, with their careful attention to detail, frequent inspections at crucial phases of building, and use of only premium brand name materials and appliances (Anderson windows, Armstrong floor coverings, Owens Corning Fiberglass, General Electric stoves and refrigerators), struck a balance between cost, quality, and choice that was extremely popular with consumers. The customer could select from fifteen different floor plans and from a variety of different housing styles that often reflected regional tastes. Ryland also was building a variety of homes, from single-family dwellings to townhomes (the “townhome” concept was pioneered by Ryland) to condominiums, just as the last was growing in popularity. Ryland’s building venture prospered, and more than 75 percent of its employees became stockholders.

The next several years saw further expansion into Texas. Ryland manufacturing centers, initially called Ryland Building Systems (later integrated into the Ryland Homes division in 1992), were also constructed at this time, providing preassembled, factory supervised home building components to the home site. By 1977 Ryland had penetrated the Midwestern market as well as the Philadelphia area, and had completed its 10,000th home. A mere eight years later, in 1985, Ryland celebrated the completion of its 50,000th home.

The purchase in 1978 of Crest Communities in Cincinnati, Ohio, launched Ryland’s mortgage operations, modestly begun through Crest’s subsidiary Crest Financial Services. From there Ryland Mortgage Company grew to become one of the nation’s largest mortgage-finance companies, offering a full range of mortgage financing with branches in eighteen states. In 1981, with the acquisition of Guardian Mortgage Company, RMC introduced full loan servicing. By the early 1990s, RMC was handling more than $2 billion in mortgage loans on an annual basis. In 1982 RMC formed Ryland Acceptance Corporation (which became a wholly owned subsidiary of RMC in 1987), an administrator and distributor of mortgage-backed securities.

During the 1990s Ryland entered the booming Florida and California home building markets. In the latter, the M. J. Brock Corporation, with divisions in Los Angeles and Sacramento, was acquired in 1986. Ryland homes were marketed in California under the Brock or Larchmont Homes labels, and by the early 1990s 40 percent of the company’s business derived from southern California. At that time, however, the savings and loans scandal and the recession of the early 1990s struck California especially hard and moderated returns from land investment in the Golden State.

Fortunately, at the same time Ryland was expanding in California, it was also vigorously penetrating markets in Arizona, Colorado, Georgia, and North and South Carolina. In 1987 Ryland crossed the $1 billion mark in revenues; that same year founder James P. Ryan retired from the board of directors. In 1989 Ryland established the Cornerstone Title Company, a wholly owned subsidiary of RMC in Columbia, Maryland, that administered real estate closings.

Market analysts gave Ryland credit for its geographical diversity, which enabled the company to compensate for difficulties in California and other local markets experiencing periodic difficulties. Ryland expanded into the Midwest as well as expanding its activities in the Southwest.

With mortgage interests declining during the recession, Ryland Mortgage Company had record profits, derived largely from entering the “spot loan” origination market. The savings and loans crisis, which culminated in the federal government taking over the ailing financial institutions and selling off their assets one by one, also became and advantage for RMC. Ryland’s powerful mortgage servicing division, one of the largest in the country, benefitted from the federal government’s assumption of mortgage servicing contracts when S & L home mortgages were taken over by the government; by the early 1990s, they comprised approximately 50 percent of RMC’s mortgage servicing portfolio.

With the worst of the recession over by 1993, the company was stronger than ever. The housing market had recovered completely, with the exception of California and Florida. Thanks to Ryland’s geographical diversity and its conservative business philosophy, it had not only weathered the recession (earnings climbed a phenomenal 191 percent between 1991 and 1992) but, unlike many of its competitors, company finances were in the black. Annual revenues still topped $1 billion. The company’s four manufacturing centers, which produce the basic materials (lumber and trim) for all Ryland homes except those in the western states, were working over capacity. Ever attuned to the marketplace, the company shifted its marketing strategy in the 1990s to larger homes that do not necessarily cater to first time home buyers. The average price of a Ryland home has climbed to over $150,000, with resulting larger profit margins.

In February 1991, Ryland Homes was asked to build single-family housing units in Israel because of that country’s massive influx of immigrants from Russia. Unlike Israeli stone houses, which take an average of eighteen months to build, Ryland homes could be assembled in a matter of weeks. Eventually, 1,300 housing shells were carefully packed in crates for assembling in Israel. In so doing, Ryland became the biggest American manufacturer of Israeli homes, earning a profit of $13 million, and currently has the strongest overseas market base among its domestic competitors, the two biggest being Centex and the PHM Corp.

Also in 1991 the company formed a new subsidiary, Ryland Trading Ltd., to specialize in building Ryland homes for the overseas market, with a particular eye toward market opportunities in Eastern Europe and the former Soviet Union. The federal government even contributed $400,000 in two grants to Ryland Trading Ltd. to encourage it to study housing-market opportunities and the construction of housing factories in the former Soviet Union.

The result was the first U.S. housing project in newly renamed St. Petersburg, Russia, which had not seen the completion of new private housing in over seventy years. In 1992 Ryland, in a joint venture with Russian companies, began a housing settlement outside of the city consisting of American-style homes priced at $150,000 and up. The homes were targeted toward the increasingly large contingent of foreign businessmen and women in Russia. In a very short time Ryland Trading Ltd. had also expanded its joint-venture portfolios with Mexico, Spain, Turkey, and Senegal.