Like many successful entrepreneurs, Alan ‘Gus’ Gillespie didn’t see his decision to start his own homebuilding company as a big risk. Twenty years later, his son Marty viewed his decision to expand the business dramatically in much the same way. Today that business, Heartland Homes, is the second largest homebuilder in the region, and is showing no signs of putting on the brakes.

Gus Gillespie had grown up as a homebuilder working for his father-in-law, legendary homebuilder Ed Ryan, who founded Ryan Homes. Gillespie was comfortably ensconced as the president of Ryan’s Pittsburgh region, but found that his style of doing business and his expectations were not a good fit for the corporate culture of NVR Inc. after the merger of Ryan Homes with the publicly-traded NVR. So in 1984, after 18 years in the family business, he founded a family business of his own to pursue a different portion of the market.

“After college I started to pursue a master’s in architecture at Carnegie Mellon, but never got to finish it before getting so involved at Ryan,” Gillespie explains. “I’ve always been most interested in the design of the homes, and I wanted to work more with individual customers and build the best custom homes I could.”

Gus Gillespie knew the homebuilding business well from both the sales and construction sides of the process, and wasn’t overly concerned about succeeding, or about the fact that the economy in Western PA wasn’t terribly friendly in 1984.

“I’m actually very conservative, but I started Heartland purely out of love for the business” he says. Gillespie laughs when he’s reminded of the timing of his new venture, not only because the steel industry was being decimated here, but also because his personal timing wasn’t so perfect. “I bought a small piece of ground in Upper St. Clair and built my own home there first. At the time I started construction we didn’t have the final approval on the sewer permit, but my wife was pregnant so I couldn’t delay. I didn’t actually get the sewer permit until the day we moved in, which also turned out to be the day my sixth child was born!”

Heartland Homes built and sold two more houses in Upper St. Clair that first year, and Gillespie was able to profitably build five or six houses during the next few years. As Pittsburgh’s economy began to recover, and the southern suburbs began to expand into Washington County, Heartland stepped up its production, building 15 to 20 custom homes for a few more years. In 1991 Gillespie was able to change his business model to meet a need he saw growing in the Pittsburgh market, or at least the far South Hills.

“My dad built to a market that wasn’t being served when he started, building smaller custom homes,” explains Marty Gillespie. “When you are truly custom it’s hard to build smaller because your profit margins stay about the same, but it’s a percentage of a smaller number.” Gus Gillespie’s experience at Ryan Homes had taught him how to build efficiently, and had created relationships with subcontractors that were important to Heartland Homes. By using efficient designs and construction methods, Heartland was able to offer customization in floor plans, and higher end products to give buyers of 2,500 to 3,500 square foot homes something of custom quality.

The next step was to adapt those custom home sensibilities and expectations to higher volume. Heartland moved to a tract home business model in 1991, opening up two communities in Washington County, Glen Canon Heights outside Canonsburg, and Cherrybrook in Cecil Township. The next year the company put together plans for its first master planned community, Meadowbrook in North Strabane Township. With a larger inventory of lots at their disposal, and a more rapid pace of growth in Washington County, Heartland’s volume doubled and the company maintained production levels of 50 to 75 homes per year throughout the decade.

One of those early neighborhoods was Pine Tree, a small development in Scott Township. During the early stages of the project he discovered that his wife had more of an instinct for the family business than she let on. “We got these 14 or 15 lots there and I was worried about how we were going to sell them,” Gus remembers. “My wife said ‘Hey that’s in Our Lady of Grace Parish, and we’re trying to get more kids in the school. Why don’t you give discounts to Our Lady of Grace parents?’ So we did and sold about eight or ten of the lots right away!”

A facet of his business that Alan Gillespie wouldn’t change with the higher volume was his belief in the value
of customization.

“I’ve always liked the opportunity to adapt a plan or design something that fits what a customer wants,” Gus says. “It’s good to be able to say yes to someone who wants to see something a little different. We have over 60 designs today and we still allow customers to tweak any design. That keeps our architectural staff busy.”

At the beginning of this decade Gillespie tweaked his own plan when he asked Marty to leave a career with Eaton Corp. to join the company. Marty Gillespie had started with Westinghouse’s Distribution & Controls Business Unit, and had prospered, as the company was acquired by Cutler Hammer, and then later by Eaton.

“Marty has a very tenacious attitude,” Gus Gillespie says. “He always has found a way to do what he set his mind to. When he worked for Westinghouse he was one of the few salesmen who weren’t electrical engineers, yet he became a good businessman, a good salesman because he overcame a lack of engineering background with belief in himself and his products.”

“It was a difficult decision because I liked what I was doing and where I worked,” remembers Marty. “But I felt working at Heartland would give me control of my own destiny, and I thought it would be fun working with my dad.” Marty Gillespie says that his dad had always been willing to listen to other opinions and make changes when somebody else had a good idea. “I also liked the idea of growing a smaller business into something larger.”

Early on, Marty thought he saw segments of the market that were very active but weren’t being overserved. “We were building a good value product, and were selling homes, but we were in maybe three communities in the south. I realized we could grow if we built outside our comfort zone geographically and concentrated on areas where there was growth, in the north and west.”

Before jumping in, however, there was work to be done...

identifying what should be built, and in convincing Heartland’s management, which included brother Brian Gillespie as CFO, that there was room for another builder to get much bigger. Marty Gillespie approached the research in a hands on way, visiting communities throughout the North Hills and airport corridor, checking on what was being offered, how it was being priced and how the homes were being sold.

“I ‘bought’ homes from a number of builders in a number of neighborhoods, including those that the higher volume builders were in,” explains Marty Gillespie. “I tried to ask every question I could think of about what I might want as a customer, and got a comfort level with what was needed in those markets.”

His conclusion was that the market forces at the time (in 2001) were creating a gap in the $250,000 to $350,000 range. At the same time, one of the region’s two top builders, Maronda Homes, was beginning to dial back its volume in Western PA. But when he set his sights on opening a plan off Mt. Nebo Road near I-79 in Ohio Township there was still some question about where the expansion would take Heartland. “My dad thought the opportunity was there to build 125 homes a year, but I thought it was more like 200 or 250,” remembers
Marty Gillespie.

That first foray into the North Hills for Heartland was Northridge, and the results were favorable enough to encourage Heartland to start Valleybrook Farms, its first neighborhood in Butler County, the following year in Adams Township. The next year Heartland started work on two large planned residential developments in the western suburbs. In North Fayette Township, the company had the largest piece of the Fayette Farms community; and in Moon Township, Heartland has been the biggest builder in the Sonoma Ridge neighborhood, offering both detached single-family homes and townhouses.

Since then, Heartland Homes has started, and in some cases completed, neighborhoods in Cranberry Township, Pine Township, Hampton Township, Marshall Township, and Richland Township in the north, and the company has grown its new home construction to the second highest volume in the region, selling more than 400 homes in 2007, and 500 in 2008.

During the past two years Heartland Homes has looked to meet market demands in a couple of ways that go beyond building in new markets.

Green buildings and green lifestyles have become part of the mainstream in business and, increasingly, among consumers. Homebuilders are responding by focusing more and more on healthy and energy efficient homes. As part of that effort, Heartland is undergoing EnergyStar certification, a national designation that is earned by incorporating green building practices into new home construction.

Heartland’s marketing director, Kevin Oakley, explained that the decision went beyond the company’s interest in building responsibly, that the customer’s attitude had changed. “We just finished a 500-person survey of our projects in Allegheny, Washington and Butler counties. It’s an overall branding survey but we discovered that people are now asking about how green our homes were, and were willing to pay extra for an energy efficient home with a healthier indoor environment.”

“Green building is like the Internet was in the late 1990’s,” notes Oakley. “As soon as everyone figures out the business model, there is enormous potential.” While their business model requires that they keep a close watch on their construction costs, Heartland feels compelled to make room in the budget for more sustainable construction. “We’ve introduced the Heartland Healthy Home,” says Oakley. “The Healthy Homes all have Lennox air cleaners, and we really focus on indoor air quality. Those homes get the most energy efficient equipment we have, and we use recycled materials and products in the construction.”

Heartland Homes looks to their customers to help with those kinds of decisions about how they approach the marketplace. To get direct feedback they email a monthly questionnaire to a group of customers, Heartland’s Customer Advisory Board. The email involves three or four questions about the features, pricing, construction or some other critical aspect of homebuilding. It has proven to be invaluable guidance for the company.

In late 2007, Heartland introduced a new concept that took them ‘back to the future,’ so to speak. While they were shifting their business into a higher gear of development and construction, Heartland also made the strategic decision to offer homes on individual sites, formally creating the ‘Heartland Everywhere’ brand. More than 15 years after Gus Gillespie shifted his business to building neighborhoods, Heartland Homes is now back building custom homes as well.

“Building on individual lots is actually how the company started, and we’re running that operation almost identically to how we started,” explains Brad Roth, director of operations for Heartland Everywhere. “What is a big difference, because of our size, is that we can offer financing so that the buyer can proceed without getting a construction loan. That saves the homeowner thousands of dollars.”

Heartland’s ‘build on your lot’ program sold 15 new homes during 2008 (seven were completed), and has hopes for as many as 30 sales in 2009. They have become licensed in West Virginia of late, and are working in Cheat Lake. To attain an ambitious growth goal, especially this year, the builder expects to have to be very flexible.

“We are treating Heartland Everywhere as a separate entity,” explains Marty Gillespie. “But there are some advantages to that. Heartland Everywhere has access to the resources of Heartland Homes - the designers, the subcontractors – but the operation isn’t saddled with overhead that the parent company has. That lets them be more competitive than many custom builders.” The program has been a timely response to a trend that is relatively new to this market, but one that has attracted the attention of several builders based outside our region.

Marty Gillespie sees other opportunities on the horizon as the housing market emerges from its worst slump since the Great Depression, and is preparing now for recovery. “If we’re going to continue to grow we have to look outside the region. If we’re going to build 1,000 homes a year someday, those 1,000 won’t be in Western PA.” He says the company has looked at markets to the south, like Raleigh or Charleston, SC, which have weathered the recession better than others, and expects to do more research in 2010 to gauge if more expansion should be in
the works.

As Ed Ryan’s grandsons, Marty, Brian and Casey Gillespie have another benefit that most builders don’t: an extended family that is in the business. “We have cousins who are homebuilders in Chicago, DC and Dallas, and
we get together with them to talk about the markets and exchange best practices,” Marty explains. Those sessions are helpful to the brothers as they guide Heartland into changes in its internal processes, introducing more sophistication and better management practices as the company continues to grow. And that’s needed for an operation that has grown from a handful of people at the beginning of the decade to 70 employees in 2009.

Their father understands the necessity of managing the business in different ways than he did when he was building five or six custom homes a year, but believes Heartland’s future success will come from something
more basic.

“We’re really not that smart,” laughs Gus Gillespie. “We’ve succeeded because we really love the business and have some of the best subcontractors, many who have been with Heartland since I was doing custom homes. I’ve been fortunate to have found something to do for more than 40 years that has been a passion, and I told my children to find a career that was the same for them, so that when they got up every morning they wanted to go to work.”

So far that’s been Marty Gillespie’s experience.

“I’m excited about the next five or ten years for Heartland Homes,” he says. “These years should be an evolution where we hope to continue to get better at all the things we do. There will probably be another ‘next big thing’ somewhere in that time, and we’ll be working to make the best of it.” NH