Archive for September, 2011

Part I: The History of Fidelity

Posted September 22, 2011 By Fletcher Groves

The chronology of Fidelity Homes, from its start-up in June 2000, through the “From The Ground Up” series of feature articles in Professional Builder ending in March 2002, until Fidelity ended business operations in November 2008, provides context.

Context, for what?

From one perspective, Fidelity is just another casualty of the Great Housing Recession, notable only in the attention it garnered from the PB audience. There have been many casualties since this debacle began in 2006; no doubt, there will be more before it all ends. Nothing new or noteworthy, in that. But, from a different perspective, chronology is the context of circumstances and decisions that provide insight for the business lessons that ought to be learned – and for matters more important than the best business lessons can ever teach.

Fidelity started in the middle of a business investment-led recession. “Things were a battle”, said David Hunihan, who had started Fidelity, along with best-friend Todd Menke. Then came 9/11. “Our bank actually decided to not loan us money on a project due to close within 30 days, as they thought one of us might get Anthrax poisoning.”

They had started Fidelity with a vision/dream, and little else. Some experience. A little bit of money. “The truth is, I hadn’t really thought about owning my own company until Todd and I left our previous employer”, David recalled. Involvement in “From The Ground Up” provided expertise and resources, but it also required time and attention. The start-up financial pressure continued more than a year past 9/11, requiring additional infusions of capital from investors and requiring David and Todd to periodically forgo their salaries.

The company’s financial situation stabilized by the end of 2002, when David and Todd decided to pursue separate paths. “The company was healthy and viable, but I wanted to pursue opportunities in real estate development, and David had plans to expand the company in other directions”, explained Todd. By the account of both David and Todd, the parting was difficult emotionally, yet amicable, beneficial, and agreeable to both of them. They started as close friends, they parted as close friends, and they remain close friends.

David’s dad purchased Todd’s share of the company; he was Fidelity’s largest investor anyway, and now also found a role in the company’s operations.

Fidelity went on to successfully complete its two initial projects, and acquired subsequent projects. The company had adequate cash flow, but that cash was pulled in different directions, both as working capital and as equity in project acquisitions. “It was the beginning of the run-up, we had had some moderate success, had good cash flow, and we needed places to go”, said David. In terms of project selection, the business model was opportunity/deal-driven, not particularly strategy-driven.

In all, Fidelity built 160 homes between 2001 and 2008. “We were active in the boom, but it affected us differently”, David said. “We started with very little cash, so we were still working on generating capital through our start-up years. Our only means of buying land and acquiring projects was to borrow [the money].

“Ultimately, the debt – and the fact that [one] development got delayed by almost three years and then [another] by 18 months – is what sunk us. We presold over 50 homes in [the first], but couldn’t start them when our costs were running up, due to governmental delays, then we had problems closing them when the water was held up in approvals. That caused us to wait on pre-sales [in the other]; we had over 4000 leads, but kept telling everyone to wait until it was platted. By the time we opened, it was the end of 2006, and we had missed our window.

“From that point, sales diminished, until we had nothing coming in. We managed cash the best we could from our WIP and were able to finish all our homes. I went without a salary or other income from the Company for almost two years, and my CFO did the same. I will never be able to repay him.”

The company had expanded from two employees at the start, to 23 at its peak; then came the three sets of layoffs. Of the final group: “Most of them kept working for a [period] after I let them go; they couldn’t bring themselves to leave. I finally told them they couldn’t stay anymore and had to move on. I did my best to find them all other employment. The last few . . . were with me almost until we closed our doors.

“The biggest problem was that no one knew how long the recession would last; we kept holding on a little longer, waiting, hoping.”

Next: Factors and Circumstances

Fidelity Homes: The "From The Ground Up" Project, Ten Years After

Posted September 20, 2011 By Fletcher Groves

Theirs was the dream of winning a National Housing Quality award. The genesis of the idea and the enthusiasm of best-friends David Hunihan and Todd Menke to form start-up Fidelity Homes occurred in 1999, during that year’s Benchmark management conference, but the chronicling of that effort occurred later, between March 2001 and April 2002.

The basic proposition that emerged from Benchmark was that Bill Lurz, then a senior editor at Professional Builder would make available to Fidelity the expertise of a collection of the homebuilding industry’s best-known consultants on a pro bono basis, in exchange for a window into the goings-on of building a homebuilding company.

The resulting, high-profile, thirteen-installment series of feature articles in PB was called “From The Ground Up”.

The contributors included Diane Rivera, Don Evans, Rick Heaston, Scott Sedam, Chuck Shinn, Chris Spiro, Noelle Tarabulski, Ed Caldera, Kay Green, Martin Freedland, and myself. It also included the unselfish mentorship of David Weekley. It was my responsibility to help Fidelity design a set of workflows and outcomes for key business processes, and the coincidence of my onsite segment with the attacks of 9/11 have always made my work with David, Todd, and with Bill, particularly meaningful.

At the ten-year anniversary of the series mid-point, I thought a retrospective would be useful.

True, meaningful reflection demands more than the garden-variety set of feedback questions. I did ask David and Todd pointed questions about the history of Fidelity and the “From The Ground Up” project itself, but I also asked questions aimed at the values that are in-play and the lessons that have been learned.

One of the intentions of reflecting on the experience of Fidelity is to leave a legacy – for David and Todd to think, as they recount their own journey, in terms of other young, future, entrepreneurial homebuilders, who might one day choose to set out on their own journeys, and who would benefit from the insights their experience can provide.

Part I: The History of Fidelity
Part II: Factors and Circumstances
Part III: Resolve
Part IV: Lessons Learned
Part V: Friends
Part VI: Providence

 

"I remember where I was . . . I remember who I was with."

Posted September 7, 2011 By Fletcher Groves

(An updated version of this entry is posted on “Escape from Averageness” every year during the week leading up to the anniversary of the 9/11 attacks)

 

“What is it that you remember most about 9/11?” Whenever I am asked that question, my answer is invariably, “I remember what I can never forget.”

On Tuesday morning, September 11, 2001, I was in the offices of Fidelity Homes, in Venice, Florida, just starting a process mapping engagement that would give this start-up builder a state-of-the-art set of business processes. SAI’s involvement was part of a large pro bono effort, sponsored by Professional Builder, that included a number of top consultants then serving the homebuilding industry.

I was the Process Architect for Fidelity Homes.

Sitting across the table were David Hunihan and Todd Menke, two young builders, eager to take their experience in homebuilding and pursue a National Housing Quality award. To this day, I think these guys represent the entrepreneurial spirit and personal courage that makes this country and this industry great.

We had barely started, when David was pulled away by a telephone call. It was his wife, asking if he was aware of what was going on in New York City. As the events continued to unfold, in New York City, in Washington DC, in western Pennsylvania, we eventually found that it was impossible to concentrate on mapping processes, and it did not seem all that important, anyway. We cancelled everything for the rest of the day, and, in our own ways, watched and processed what was happening.

Bill Lurz, then a senior editor at Professional Builder, joined us the following day. We finished the project two days later, and I drove back to my family in Ponte Vedra Beach through a tropical storm. The hugs had more conviction than usual.

The articles were written for Professional Builder.

I will not impose my views on all of you, as to what I still consider to be the remaining, unfinished business of this country. Time has not changed my feelings one iota. We were attacked because of who we were, and because of who we remain; evil is still the enemy of good, and evil still has a face.

 

On the lasting meaning of 9/11, I think Bret Stephens of the WSJ says it very well:

[on December 7, 1951], “Americans could look back to Pearl Harbor and see its bookends in VE Day and the Japanese surrender on the USS Missouri. In that light, Pearl Harbor may have been a day of infamy but it was also, for the intelligence failures and military defeat it represented, a day to live down.

“The war that was begun on September 11 has no bookend. We don’t even know whether we are in the early, middle or late chapters – or whether we’re still in the same book. Perhaps that’s why dates like November 13, 2001 (the day Kabul fell to the Northern Alliance) or April 9, 2003 (when Baghdad fell to the U.S. Army) go down the memory hole. I doubt many people can recall the exact date Osama bin Laden was killed.

“So 9/11 remains a date and an event unto itself, somehow disconnected from everything that still flows from it. No doubt that helps draw a line between our feelings about it and [its] controversies . . . But it also strips the day of any context, intelligibility or a sense of the greater purposes that might flow from it. This is how an act of evil and of war has been reduced, in our debased correct parlance, to a “tragedy”.

“There is something dangerous about this. Dangerous because we risk losing sight of what brought 9/11 about. Dangerous because nations should not send men to war in far-flung places to avenge an outrage and then decide, mid-course, that the outrage and the war are two separate things. Dangerous above all because nations define themselves through the meanings they attach to memories, and 9/11 remains, 10 years on, a memory without a settled meaning.

“None of that was true in 1951. We had gone to war to avenge Pearl Harbor. We had won the war. We had been magnanimous in victory. The principal memorial that generation built was formed of the enemies they defeated, the people they saved, the world they built and the men and women they became. Our task on this 9/11 is to strive to do likewise.”

 

In the years that have followed, lives and careers have changed. But, I will never forget where I was, or who I was with.