Green Homebuilder Markets to Cultural Creatives—By Design

However, a real estate development company nestled at the base of the Rocky Mountains in the Cultural Creative haven that is Boulder, Colo., has built a thriving business by marrying those apparent opposites. McStain Enterprises, an 85-person operation that expects close to $80 million in revenues in 2000 and that this year will build close to 400 houses along Colorado's Front Range, creates developments that treat the environment like an essential design element rather than an impediment. And in the course of its 34-year history, the company has discovered that its customers, those selfsame Cultural Creatives, respond very positively to that approach.

“It was probably about five years ago when it struck us that we weren't selling to a typical two-parent, three-kid family,” says Karla Martin, McStain's marketing director.

Some 75 percent of McStain's homebuyers have either one child or none at all. And many buyers are single. Those nontraditional homebuyers are also willing to pay a premium price, often 20 percent per square foot more, to live in a McStain community rather than a traditional housing development.

“We discovered we were different when we hired an outside ad agency that had done a lot of work with other builders,” Martin says. “They said, 'Oh, thanks for telling me who you're selling to. This is not at all who any of my other clients market to.'”

Martin says it was at about this same time that her company began consulting with San Francisco-based American Lives, the firm that identified the social movement ultimately tabbed Cultural Creatives by social anthropologist Paul Ray. “They were the ones that said to us, 'We strongly believe that these people match your values,'” she says.

“Our mission, which is building a better world, is at our core,” says architect Tom Hoyt, McStain Enterprises co-founder with his wife Caroline, who is also an architect. “Early on Caroline, as a professional on the design side, recognized that builders were making a bigger impact on the landscape than an individual piece of architecture was. I came to the same conclusion from the natural landscape side, of always being concerned about what we were building having such an enormous impact [on the land].”

In 1966, McStain began as a design-oriented, custom-home construction company but almost immediately altered course to tackle the location aspect of building homes. “We decided it was as much about where houses are and how they are put together as about the features and benefits of an individual house,” Hoyt says. “It's all an issue of bigger awareness, how that individual house fits into the whole ecosystem.

“Being a mission-driven company means we didn't identify Cultural Creatives as a market and then go after them,” Hoyt explains. “We said, 'What's our mission and how are we going to carry that out?' We realized that the best market for our vision was Cultural Creatives.”

McStain manages to synthesize two building-industry buzz phrases: “New Urbanism” and “Built Green.” The company builds everything from manufactured housing to condominiums to cottages to single family homes. But it does so by combining them all in the New Urbanism mode—high-density “community” developments that incorporate open space and public transportation access. McStain also is about as eco-friendly a production builder as can be found in the United States. The company often uses more environmentally friendly building materials than are required to garner the local Metropolitan Denver Home Builders Association (HBA) “Built Green” designation.

To be Built Green under the HBA's requirements, a home must include at least 35 environmentally appropriate building features (see sidebar). McStain at times has incorporated 54.

“We are a very nontraditional, nonconventional builder,” says Martin. “In 1992 we built our first environmental house to test alternate building materials. We used about 35 materials that were not traditional building materials so we could try them out and see what was warrantable and what was easiest to install. We opened it up to the public for four weeks hoping that we could not only educate ourselves but educate them.”

Eight years later, under construction in the Colorado Front Range city of Loveland is a McStain community that will showcase a company-funded environmental center dedicated to teaching land stewardship to children. The site is also designed around the preservation of wetlands used by numerous species of migratory birds.

“The context I think McStain should be seen in is that of a production builder. They stand out considerably,” says Doug Seiter, environmental and residential energy consultant for Planit Green in Arvada, Colo., and coordinator of Colorado's statewide Built Green program—the only statewide program of its kind in the country. “They have an environmental ethic built into their corporate culture that comes from the top,” he says. “It's not an option; it is built into their way of doing business.” Seiter says he knows of no other production builder that holds the same ethic as McStain.

Others familiar with the firm seem to agree. In 1999, McStain won the University of Denver Daniels College of Business award for business ethics and social responsibility. The award recognizes “moral courage—down to environmental standards, employee relations and fundamental business practices,” says Bruce Hutton, a co-originator of the award and past dean of the Daniels College of Business.

As one might imagine, it isn't entirely easy to stay on the leading edge of green building.
Sourcing materials for McStain's environmentally friendly community developments, for example, is a continuing challenge. “We recently had to replace 140 [heating and air conditioning] units in one project. The problem is that a lot of times you are working with emerging technology,” Hoyt says.

There's also the cost equation. When McStain began construction on one of its Boulder County developments five years ago, so-called low E glass windows—windows that contain glass with a high insulation factor—cost twice as much as regular glass windows. The builder had to negotiate a $100 add-on to the price of its homes to partially cover the cost, Hoyt says.

The good news, however, is that the cost of eco-friendly housing supplies is fast reaching parity with conventional supplies. Today, Hoyt says, the difference in price between low E glass and regular glass is insignificant.

That being said, McStain homes do cost more, and homebuyers do have second thoughts about paying for environmentally appropriate amenities. “It's very hard on big-ticket items like houses to get people to understand the tradeoffs of what you spend today vs. long-term value,” Hoyt says.

Also, because of McStain's Cultural Creative customer, the company has found it can't go to outside agencies for its marketing needs due to their lack of familiarity with the target audience. As a result, McStain has built its own full-service, in-house advertising and marketing division and tends to spend more on marketing than other builders. The company does all its own ads and buys all its own media.

“For the most part, you won't see a home in our ads,” Martin says.
“Primarily you'll see activities: You'll see the parks or the trails or the views. I don't want to call them lifestyle ads, because that's not really what they are about. They are about neighborhoods.”

The in-house effort is worth it, however, according to Martin. By telling its own story, the company saves money in the long run, avoiding the trial-and-error process inherent in bringing an ad agency up to speed on McStain's consumers and how to approach them.

But while McStain has had to go it alone to get its message out, Hoyt says the upside to being a company that caters to Cultural Creatives is the significant advantage of being grouped under the larger LOHAS marketplace
umbrella.

“What do I spend my time doing if I have the opportunity? Well, if Tom Chappell [of natural personal care products-maker Tom's of Maine] is going to come to town and talk, you bet I'm really interested,” Hoyt says. “There are great parallels there for both the type of consumer we have and our care for the environment.”

Hoyt also says that the opportunity to sit down with other local LOHAS companies and discuss long-term growth strategies is invaluable. He cites conversations with executives of Horizon Organic (HCOW), a Longmont, Colo.-based dairy-products maker. “I've actually had the discussion with their principals about how we, in a very capital intensive business, can get environmentally oriented investors,” he says.

But it's on the consumer side that Hoyt sees even greater benefits. The more LOHAS companies can understand their consumer, the better off they will be, he asserts. “Our experience is that consumers want to act in a more responsible way. They just don't know what the alternatives are,” he says.

Getting consumers the right information is good for McStain, and the planet, Hoyt believes. “I mean, when you're comparing notes with your neighbor, you ask, 'How big is your house?'” he points out. “Well, that's the wrong damn question.”