By Jeff McKinney
The Cincinnati Enquirer

Ray Hughes, of R & R Masonry works on a Drees home at Thornwilde in Hebron. (Gary Landers photo) | ZOOM |

Though the Drees Co. has been approached by larger home builders about being acquired, David Drees confidently says that's not in the company's game plan or its desires.

Any such deal would be a gem for an out-of-town builder because in Drees, it would pick up:

• Greater Cincinnati's largest home builder.

• A privately owned company with annual revenues approaching $1 billion.

• The No. 1 market share in the Tristate among home builders that build homes fitting a broad spectrum of consumers' housing needs and lifestyles, according to local building experts.

Drees Co., which celebrates its 75th anniversary this year, has endured the Great Depression and 11 recessions by building quality homes, getting repeat and referral business from satisfied customers, offering competitive pricing and taking some risks, local homebuilding executives say.

"We've had those opportunities ... and that would probably be particularly good for a national home builder looking to get into this market, but we get a lot of satisfaction doing this for ourselves and employees," says Drees, 42, the third generation of the family that founded the firm.

Drees, the president and chief executive of the Fort Mitchell-based company says he and his father, Ralph, don't need the money, don't have any competitive pressure to sell and wouldn't know what to do if they left the business.

"What else would we do?" Drees said, laughing. "It's what we do, and we really don't want to work for somebody else."

TIMELINE

1928: The Drees Co. is founded by Theodore Drees in Northern Kentucky. 1940s: Homes built by Theodore Drees in Fort Wright stillare marketable today. 1968: Ralph Drees starts Drees Builder and Developers Inc., a new corporation. 1970: Drees diversifies into multifamily apartment construction and management. 1975: Drees debuts Towne Home communities. 1984: Drees expands into the Dallas/Fort Worth area. 1991: Drees expands into Washington, D.C., area. 1992: Drees is named Builder of the Year for 1991 by Professional Builder and Remodeler. 1994: David Drees is named president. 1996: Drees launches Marquis Homes for first-time new home buyers. 2000: Record sales of 2,036. David Drees becomes chief executive. Ralph Drees remains as board chairman. 2001: Drees buys assets of parent of Zaring Homes, its largest deal at $60 million. 2002: Ranks first among Enquirer's largest privately owned companies. Source: The Drees Co.

Strong points

David Drees, the third-generation president of the Drees Co., on factors that have helped Greater Cincinnati's largest homebuilder remain in business 75 years: • "It always goes back to the employees," he says. "We have up to 37 employees who have been with the company for 20 years or longer." He says longevity and loyalty of some of the managers that have stayed with Drees has been amazing. They include ones whom David's father, Ralph, hired. One such individual is John Prodoehl, Ralph's first employee, who has been with the company for more than 43 years and now is land manager in Drees' land development unit. • The ability to find property in the right community, create an environment that people want to live in and yet see it apart from housing developments down the road. For instance, he pointed to Thornwilde in Hebron, Ky., a multifaceted housing development that Drees blended with the land's natural surroundings, including walking trails, a mile-long entry with no housing, natural streams and trees preserved on the hillside. • The ability to customize homes, something Drees has done since its beginning. The company focuses on customizing homes, incorporating the homeowner's ideas into the home and selling it at a reasonable price. "If you want a larger family room, we can take a standard floor plan, take that to our architect, made the adjustment efficiently and price it correctly."

DAVID DREES ON ...

• William A. "Bill" Erpenbeck, the troubled Northern Kentucky homebuilder under investigation for bank fraud: "People got hurt by Erpenbeck, and what he did affected the local home-building industry. It makes some people skeptical about hiring builders to build a home, probably hurting smaller builders more so than larger ones. If you buy a house or want to have one built, you want somebody that you can trust. The Erpenbeck situation makes it tougher for some builders." • On one of his challenges: "The biggest challenge is continuing to evolve the company, in terms of personnel and various operations, to match that growth," he says. "We've had to change the companies several times to manage that growth, and that's something we'll have to keep on doing."

WHERE IT OPERATES

• Ohio: Cincinnati, Cleveland/Canton, Dayton. • Northern Kentucky. • Indiana: Indianapolis. • Texas: Dallas-Fort Worth, Austin. • Tennessee: Nashville. • North Carolina: Raleigh. • Washington, D.C.

And David Drees, who took over the privately owned company's reins in June 2000, has ambitious plans. That could include acquiring other regional builders and expanding into new cities.

Drees said he would like to see the company's revenues grow to $1.3 billion and production to reach 4,000 homes a year by 2007. Drees this year expects revenues of more than $850 million and expects to build 2,750 homes in all its markets, including about 1,100 locally.

Drees said growth could come from expanding its housing stock in cities such as Indianapoli; Dallas; Washington, D.C.; Nashville, Tenn.; and Raleigh, N.C., where it now operates; acquiring other builders in those markets; or expanding to new markets.

"We'd definitely like to be in two additional markets, likely in the Midwest, by 2007," Drees said. "That could come from internal growth or by making acquisitions."

One of Drees' biggest challenges came two years ago when it acquired assets of the financially troubled parent of Zaring Homes Inc., a deal that married the area's largest and third-largest home builders.

The deal, valued at about $60 million, allowed Drees to add about $200 million in revenues and pick up all of Zaring's assets in Cincinnati, Indianapolis and Nashville. Drees also picked up operations in North Carolina and merged them with Drees' unit there.

"That acquisition was very significant for us because it dramatically changed our size, gave us a presence in new markets such as Indianapolis and Nashville and complemented our existing operation in Raleigh," Drees said.

Please the customer

Elda Marshall, executive director of the Home Builders Association of Greater Cincinnati, said the Drees Co. has been able to grow and maintain market share largely because of customer service.

Marshall said Drees services homes it builds, and buyers come back for second and third homes. They tell friends about their pleasant experience, she said, adding that Drees is very competitive in pricing.

And though Drees has a conservative culture, Marshall said it has taken risks in many ways.

For instance, Drees crossed the river from Kentucky in the mid-'70s during hard economic times, so they earned their success the hard way.

"If they continue doing business the same way they've always done it, they'll last another 75 years," she said.

Dan Dressman, executive vice president of the Home Builders Association of Northern Kentucky, said Drees has been able to retain its competitive edge by building and offering a wide range of homes that meet the needs of first-time and move-up buyers. That allows it to cover two of the largest segments in the home-buying market.

Dressman said Drees' Marquis Homes builds homes for entry-level buyers in the $100,000 range. And it still builds most of its homes - priced at $250,000 to $300,000 - for move-up buyers. Moreover, he said, Drees was the first homebuilder in Northern Kentucky to develop a condominium product with Prospect Point in Villa Hills in the mid-1970s. Since then, the company has made condominiums and townhouse complexes a mainstay in the market.

Competing in every segment

"With their acquisition of Zaring Homes, they now can offer products to compete with custom builders and higher-income builders," Dressman said. "So, what they've basically done is created products that are competitive in every segment of the market, meeting the needs of everyone from first-time buyers to empty nesters that want to downsize."

But local building experts also contend that Drees cannot get complacent or it could lose business.

Michael J. Dinn of Dinn Focused Marketing Inc., a Wilder-based firm that provides market consulting services to residential developers, homebuilders and lenders, said Drees is a flagship local home-building company. He said Drees ranks top among U.S. builders in land position, sales and marketing and quality products.

Dinn's clients include Drees, Towne Properties and PNC Bank.

He said Drees has been able to set itself apart from other builders by having such things as an in-house army of land planners, staff of 25 architects and other internal resources others builders don't.

But he said the biggest challenge for Drees and other builders is recognizing that the Midwest is starting a new housing cycle as the economy recovers. He said that means companies like Drees must determine whether to expand into emerging markets to maintain growth and market share.

"If they don't do that and some other builders do, then it's obvious that they could lose market share," Dinn said. "The key for them is to keep doing what they've been doing and grow on that."

E-mail jmckinney@enquirer.com.