Who is Helen Dragas?
March Interview: Helen E. Dragas, President and CEO , The Dragas Cos., Virginia Beach
- March 1, 2012
Virginia Business: The Dragas Cos. led Hampton Roads in new home sales in 2010. What kind of a year did you see in 2011, and what are you projecting for this year?
Dragas: 2011 was a year very similar to 2010 for us. We closed a handful more homes in 2010, just six or seven more houses. But we sold out of two sites in 2010, and we opened only one site in 2011, so on a per-community basis, we were very pleased at the way the year turned out.
VB: What was your total number of closures?
Dragas: We closed 155 houses in 2011.
VB: How many did you do in 2010?
VB: Any new communities for last year?
Dragas: We opened a new community in the Western Branch section of Chesapeake called King’s Pointe. It’s a pretty large community, about 400 units on about 55 acres. We opened in May, and we sold about 30 homes there.
VB: That sounds pretty good in a down market.
Dragas; It is pretty good. It’s a great location. It’s very close to I-664 and the Monitor-Merrimac Tunnel, but it’s not a central Virginia Beach or central Chesapeake location. So we were very pleased with the outcome there.
VB: What is the price point for most of the homes in that development?
Dragas: They range from about $150,000 to about $225,000.
VB: And are these condominiums?
Dragas: They are condominiums.
VB: What is the square footage for these homes?
Dragas: They would range from about 1,300 square feet to about 1,850 square feet.
VB: Are most of your buyers first-time buyers? I know your company in the past said they wanted to help people achieve the American dream.
Dragas: Yes. We’ve always served the first-time home buyer market. I don’t have the exact figures at hand, but in this housing market, I would say that number has probably proportionally increased because first-time home buyers don’t have an existing home that they have to resell … We’ve seen a real pick up in traffic and in sales just in the last three weeks.
It actually started at the end of 2011. And we’ve had a very active January so far. So we’re optimistic about 2012.
VB: Your company had plans for an apartment community at Renaissance Park. Is that still on your drawing board?
Dragas: Yes. That’s a 130-acre piece of property located in central Virginia Beach. It’s really the last large zoned tract of land in the city. It has zoning on it for up to 400 apartment units, 680 for-sale residential homes, a 26-acre retail complex and a hotel. It’s a large, mixed-use parcel of land. We are starting out, as you indicated, by developing apartments. We’re in the active design phase at the moment, and we hope to be open with the leasing center and our first buildings in say early fall of say 2012 … I’d say mid- to late-fall we’ll be moving people in.
VB: Is this your company’s first mixed-use project?
Dragas: It’s the first that would have a commercial component. We’ve done commercial development before. We’ve done residential before. We’ve done office. But we haven’t done them all on the same piece of property.
VB: Are you excited about that?
Dragas: Very excited. We’re really looking forward to creating a signature development there. We pride ourselves on … and it’s written in our mission statement … that our goal is to create communities of enduring value and lasting beauty. We’ve been in this market in Hampton Roads for … this is our 44th year. And we recognize that what we do has a large and lasting impact on the region. So we take a lot of pride in really doing a first-rate job in our landscaping, in our community design, in our exterior aesthetics.
VB: Can you tell me how big of a project this is in terms of the investment value?
Dragas: Well I can tell you it’s public record that we paid $20.5 million for the land.
We expect that the land development will probably run about the same. There’s onsite and offsite land development work that needs to be done, and then the value of the buildings. The apartments overall, including the land and development, will probably be close to a $40 million development. And that’s only on 23 acres of the property … I would say overall we’d probably be looking at $150 million development total, as you walk through each component.
VB: Would this be your largest project then?
Dragas: It would be our largest. We did develop a community called Ridgely Manor, which we started in 2004 that was about the same size in terms of number of residential units, but it didn’t have the commercial component.
VB: Anything else new and major on the drawing board for 2012?
Dragas: We have a community in Chesapeake called The Grove at the Arboretum that is just about a month and a half, two months away from being open for sales.
VB: How big is that one?
Dragas: It’s much smaller. It’s about 11 acres, and its 112 units. Very centrally located in the Greenbrier area.
VB: How important are low interest rates in getting people to return to the housing market?
Dragas: I do think they’re playing a role. And I think the only component that has been missing has just been confidence. I see that coming back. But the low interest rates are really instrumental in making home ownership affordable for first-time home buyers. I think consumers are realizing they’re not going to last forever, and that they are starting to take a little bit of a risk and get out there and look at houses and buy houses. I think the feeling is ‘I’m going to be able to look back five years from now and realize I jumped in at the perfect, opportune moment.’”
VB: I didn’t realize that your company had its own mortgage financing arm. What are your rates?
Dragas; They’re competitive rates with any external mortgage company that we might use. We don’t do just our own financing. We do loans for other builders, customers. We do refinances. We do resale loans. Anything that’s in the state of Virginia we can finance.
VB: How big is this subsidiary of the company?
Dragas: Of course it varies depending on market conditions, but the building and development component is the largest by far. I started off on that side … In fact, it was the first company that my father founded. It was the first business he was in.
VB: What is it called?
Dragas: Dragas Mortgage Co.
VB: How many people work on that side?
Dragas: Right now the staff is about six.
VB: How many people do you have in building and development?
Dragas: Probably 40.
VB: So altogether you employ about 46 people here?
Dragas: We have a property management company, and we have an apartment complex that we run and manage. They have about 12 to 14 on staff.
VB: Do they run all of your properties then?
Dragas: Yes, they manage our income-producing properties. And we have as well our real estate brokerage firm. Now in that case, unlike the mortgage company, that company basically handles only Dragas building company-related transactions … .It just helps synchronize things, bringing a buyer from purchase to closing. We are all in good communication and have sort of standard ways of operating.
VB: As a private company … how big is your portfolio in terms of investment value?
Dragas: We don’t disclose it.
VB: How many communities so you own?
Dragas: I’d rather keep it confidential.
VB: Over the last couple of years, a lot of people in this country worried that we were seeing an erosion of the American dream. Either people lost their jobs and couldn’t afford to buy that first home, or they had a home, and lost their job and couldn’t make the mortgage, so they ended up in foreclosure. Or maybe they’re an existing homeowner whose home value has dropped so low that they’re not going to have much success in terms of selling their home. What do you think about that?
Dragas: Well I think that’s very true, that the financial condition of our country has caused that decision to buy a home to be more carefully considered than it was before. But I think home ownership is about much more than a tax deduction or the pure economics of it. I think as long as people have an emotional attachment to the place where they live it will remain in the American DNA. And I think that nesting instinct is really strong. It’s a place where people make their memories. It’s a place where they can do whatever they want with the property. They can plant whatever they want in the yard. They can paint their walls whatever color they like. They can have a creative element to decorating, which people enjoy. Unless you own a home, it’s harder to find a rental that has a yard for people raising children. So I don’t think it has suffered a death blow by any means.
VB: In terms of your properties, what would be the percentage of ownership versus rental? I thought most of your properties were condominiums.
Dragas: Yes, there’s is a much higher percentage of ownership.
VB: Could you give me a breakdown, say 60/40?
Dragas: Well, what happens with the condominiums is you develop and sell them, so there’s not a static number you can compare to. But most of our employment, our staff is focused on the building and development and sales side.
VB: Where do you get your financing for your projects?
Dragas: We are not big borrowers, which probably has a lot to do with why we’re still here after 44 years. So when we do seek financing, which is relatively rare, we will just go out into the market and request proposals from your standard lenders.
VB: Like banks.
VB: In 2009, the company was named one of the best builders of the year by Builder Magazine. How is the company staying on top of its game these days? And how did it manage to remain profitable during one of the country’s worst housing recessions?
Dragas: I think the answer to that question is we’ve never really changed our focus. We’ve never really changed our mode of operation. We have a relentless commitment to quality developments, quality products. We have a very conservative way of managing our balance sheet. We have a very scientific way of evaluating land acquisitions. So there’s not a great difference between what we were doing in 2009 versus 2012. We have continued to open new communities during this downturn. We’ve just maintained our standards and our way of operating. There’s not really a lot we’ve done that has changed.
VB: And you didn’t have to let anyone go?
Dragas: Now I wouldn’t say that. We did downsize, but a lot of that had to do with coming off of the large community we built in … the one I’m going to show you today in Virginia Beach and selling out of communities we had there. But we did scale back a bit.
VB: You said there’s a scientific way of making land acquisitions. Can you elaborate?
Dragas: We do a lot of market research, from tracking our own buyer demographics to macro and micro economic analysis. And then we do a lot of land development feasibility — all the various physical challenges that a piece of property can provide — from environmental issues to utility issues, to zoning. Then we put it through a pretty rigorous financial analysis as well.
VB: So you’re looking for a certain rate of return before you turn over the first shovel of dirt?
Dragas: Right. Before we’ll put a piece of property under contract, we’ll make our best estimates as to what the end result will be.
VB: Do you think that’s one of the more challenging things that you do?
Dragas: It’s one of the more unique parts of what we do. In our business, it’s very easy for developers to follow financing. That’s why you see a lot of apartment development right now coming out of the ground. If the Renaissance Park property that we acquired wasn’t so well located, I’d be concerned about building a new apartment community right now.
VB: Really? I’m being told by experts and analysts that multi-family is one of the hottest sectors right now in commercial real estate.
Dragas: Well they said that about housing in 2006. So it is a hot sector right now. The question is will the supply outstrip the demand? I think there’s a high possibility that it will because financing is still so readily available for new apartments and at relatively high loan-to-value ratios. So if one is willing to go through sort of the bureaucratic red tape of seeking government-sponsored financing for apartments, which is long and tedious, you can build an apartment community with 5 percent down.
VB: But you all don’t go that route?
VB: That’s not your model.
Dragas: No. That’s definitely not, no. I have to sleep at night.
VB: What is a typical day like for you as the CEO of a private construction and development business?
Dragas: There’s a lot of variety in what I do. That’s probably the only thing I could say that’s typical is that there’s a lot of variety. Even just within the development business, I may spend time in one given day working on design issues, financial evaluations, land acquisition work. But as much as that, with my involvement at UVa. and a couple of other community organizations, and having a household full of adolescents, those other activities of mine provide a lot of variety.
VB: How many children do you have?
Dragas: I have three.
VB: And they’re all teenagers?
Dragas: Well one’s on the cusp. He’s 12½. And I have a 15-year-old and a 17-year-old.
VB: They’re driving and mom is praying?
Dragas: Exactly. They’ve taught me a lot about letting go of control, especially in the passenger seat with a new learner’s permit.
VB: How would you describe your management style?
Dragas: I would say I set high standards, but I put a lot of thought and energy into hiring the right people.
VB: How do you go about doing that?
Dragas: Well we have a process for that as well. We’re big believers in natural attributes and capabilities versus experience, so we like to bring up from within and train from within. We believe in and use extensively the Myers-Briggs type indicator/personality indicator. We use that not just for hiring but also for understanding group dynamics and who’s best suited to what particular task we might have at hand and how we interact together. We reference a lot. We rely also on one’s past credit history as an indicator of how one manages one’s own affairs, as sort of a barometer or predictor of how one might handle themselves in a professional environment. We have lots of long-standing employees. So we’re fortunate in that we don’t have a lot of turnover.
Beyond that, I try to create a supportive environment for them to do their best work, hire good people and create opportunities for them. I recognize my skill set, which is not in execution or detail. I’m a little better at creating or providing big-picture guidance and expertise and setting a longer term direction. But the people we have here are just exceptional at their work.
I think that the Chinese drywall situation really spotlighted their commitment to this company, their commitment to our home buyers and their individual and collective talents. They were just amazing. And they never resisted all the different challenges that brought to us. They were wonderfully supportive of our homeowners.
VB: How many cases of drywall did you have in your homes?
VB: Did people start to complain, or how did you find out?
Dragas: We found out about it from a woman who had been complaining. Let me just qualify by saying $6.5 million and three years later, we’re still in litigation with our insurance companies and our suppliers’ insurance companies over this matter, so there’s only so much I can say.
VB: But you did a call from a homeowner? Was this a relatively new development, or had it been up for a while?
Dragas: At the time I guess it had been up maybe three or four years.
VB: And what did she say?
Dragas: Again, I probably ought not to get too much into it, but she had been complaining about an odor, and we had tried to find the source of the odor for quite a long time. We had been working with her and just could not identify it. And then we starting reading reports out of Florida … because the Southeastern U.S. had much deeper problems than we did here in Virginia. It was through those news reports that we realized we may also unknowingly had Chinese drywall installed in our homes.
VB: So you took the Chinese drywall out of these 74 homes?
Dragas: We moved the homeowners out. We basically completely gutted their houses, paid for their housing while they were out, paid for any personal property that was damaged. It had a corrosive effect on metals, so from pitting plumbing facets to damaging personal property. We had one homeowner who was a professional flutist and had … how many thousands of dollars … I don’t remember. So we replaced personal property that was damaged, appliances where the electronics had been shorted out by the material.
VB: You got a lot of good press about that. I saw several stories about your company’s response to the drywall.
Dragas: Yes, and it’s unfortunate for other homeowners that it was noteworthy, for non-Dragas homeowners that had Chinese drywall.
VB: We’re going to switch gears where. What is it like to be the first woman rector of the Board of Visitors at the University of Virginia?
Dragas: Well, I don’t think of myself in my day-to-day activities as the first female rector. Let me say that. But I will say that I think it’s a milestone that the university needed to reach and to cross given its all-male origins. Symbolically it’s important. We have a brand-new … relatively new, I shouldn’t say brand new … president, who is also female, first female president. So clearly UVA is beyond this issue. I’m humbled to have the confidence of my peers on the Board of Visitors, most of whom are male. But I think I’m just satisfied and pleased that for the next person it won’t be a newsworthy item. It will be a point in time that the university crossed. That’s a good thing.
VB: How would you compare running your company to being the chief executive, in a sense, of the Board of Visitors of one of the state’s most revered public institutions?
Dragas: I don’t consider myself the chief executive of UVa. What I am is more like the chair of the board. My job there really is to engage the board and include the board in setting long-term direction for the university. The academic environment is one of shared governance, which is quite different than running a for-profit company. I recognize that, and I try to honor that.
VB: How many people are on the board?
Dragas: 16. Plus one student member, so that’s 17. It’s 16 appointees and 1 student.
VB: When is your term over?
Dragas: It’s a two-year term, and I started in July of 2011. So July 2013.
VB: I know that’s your alma mater, so I was just curious, when you go back to these meetings, what strikes you as some of the major differences now as compared to then?
Dragas: Gosh, there are so many similarities … They would be easier to list because there are such strong traditions there. I’m constantly struck by the quality of the students and the quality of the faculty. Not that they weren’t high-quality then, but the university is just so engaged in meaningful work of research. I think research opportunities and the research work at the university have expanded significantly since I was there. And there is a lot of interdisciplinary work going on that I think is relatively new. There’s more of an international focus there than when I was a student. But the long-standing traditions of student self-governance, of a strong honor system, of a commitment to undergraduate excellence are still very pervasive.
VB: What are some of the challenges of serving on the board? Universities today face tough issues with funding. They continue to get less and less public funding from the state. There are issues with technology. And there issues about what laws should be regarding rape on campus.
Dragas: All institutions of higher education are facing significant challenges — balancing competing objectives continues to be the largest of them. We want to provide the absolute highest caliber education, develop solutions to society’s problems through our research and deliver world class health care, all at an affordable price to our students and families and patients. We want this education and care to be accessible to all. Yet the boundless nature of teaching, learning, and research is such that institutions’ appetites for resources can seem insatiable. So it is the job of the leadership — the boards of visitors and the senior administrators — to guide their institutions to set priorities, align resources accordingly, and measure outcomes and achievements toward those priorities. It sounds very simple but it is highly complex in an institution of our size and scale.
We also face an environment of increasing public scrutiny. Now UVa is a real gem. Because we are accustomed to having it in the state, maybe we take it for granted sometimes. But it’s consistently ranked the number two public institution in the country, in the top 25 of all institutions. It’s a world-renowned research institution. I think as a board, we need to do a better job of making that case to elected officials and to citizens. You can make a very compelling case that public funding for higher education is an extremely lucrative investment because the return on the dollar spent is so great. But with that funding comes a reasonable call for more transparent accountability about the delivery and the outcomes of higher education. We have to work harder to demonstrate our value and to improve in areas where our value may have slipped.
Another area of focus for us (and for any institution that has one) is our academic medical center. This is an exciting place at UVA, offering cutting edge treatment for some of life’s toughest illnesses and injuries. Sometimes the UVA medical center doesn’t get as much attention from the general public because we are so well known for our undergraduate experience and the professional graduate programs. But it is actually larger in financial revenue terms than the academic side of the university and handles almost 800,000 patient visits a year. There is an enormous amount of regulatory change and market flux in the health care environment. So, we as a board are spending a lot of time in that arena as well.
And there is another, I won’t call it a challenge, but really a very special opportunity we have. While there are several new presidents of Virginia institutions right now, at UVa. we have a whole new leadership team. Our very talented president, Teresa Sullivan, has been in Charlottesville a year and a half. We have a stellar new chief operating officer and executive vice president, Michael Strine, who has recently assumed the position, held by our long-standing and much-loved COO, Leonard Sandridge. And we have a brilliant new provost in John Simon. They hail from extremely fine institutions—Michigan, Johns Hopkins, and Duke. In addition to that new talent, we have a board of visitors that changes relatively dramatically with every gubernatorial appointment year. So we have a lot of new energy at UVA, providing us with a unique moment in time to set the course for our next era of great achievement. It’s a really exciting time to be engaged there.
VB: What do you think about the idea from the president at William & Mary that we should privatize higher education in Virginia?
Dragas: Well, I can understand the rationale behind it, but I wouldn’t make the same argument for UVa. As state funding has declined, public universities have become more and more reliant on outside sources of funds, yet we still operate under certain legislated restrictions and non-legislated expectations. This is a serious frustration for the public institutions. At UVa., however, we feel strongly that we have a very public-focused mission that emanates from Thomas Jefferson’s original vision. His university was founded to be a capstone of public education in America, intended to link education and democracy so tightly together that the continued progression of freedom and the betterment of humankind would be assured. One of our most core values is public service through the development and application of useful knowledge. A privatized UVa would be a UVa out of alignment with its heart and soul.
In addition, we are grateful for the almost two centuries of public financial support. We recognize that we are an agency of the commonwealth. Our famous grounds were built with public money. Rather than suggest privatization, we’d prefer to be good partners with the commonwealth, helping advance economic development goals, improve college attainment levels, and help solve society’s very real problems. To do that, however, we need to be trusted partners, and adequately funded. And we need to produce results. We know that.
VB: What year did you graduate?
Dragas: I graduated as an undergraduate in 1984.
VB: What did you major in?
Dragas: I had a double major in economics and foreign affairs. And I had a minor in philosophy just to scare my parents. … Then I went to the Darden School of Business, Colgate Darden School of Business, and graduated there in 1988.
VB: So did you go straight to graduate school?
Dragas: No. I spent two years back here running our marketing department.
VB: You’re also on the board of Dominion, the state’s largest provider of electricity and one of the largest energy companies in the country. What is that like? Energy is such a huge issue now especially with green energy and alternative energy.
Dragas: That is a huge issue, and it’s a complicated one. I would say that with regard to that, I’m really proud to be associated with such a well-run company. I believe the company is run largely the way I run my company and similar to the values that have been so long-standing at UVa. I think they have a high sense of ethics. I think they have very high standards, performance standards. And they’re great corporate citizens.
VB: Have you learned anything sitting on the board of a large, public company as compared to running a private company? Gained any new insights?
Dragas: Oh sure. I’ve gained a greatly enhanced appreciation what is required to manage such a complex organization with a multitude of investors. Satisfying the needs of the owners of a private company is, of course, a relatively simple matter. In addition, Dominion operates in a highly technical field of great importance to national security and one that is also critical to people’s day to day living. It’s a very complex job, but the entire workforce at Dominion does it very well.
VB: I don’t know if you ever had any thought of going public, but if you did, this has kind of squashed it?
Dragas: I never had any thought of going public.
VB: I want to go back a little bit in terms of your company’s history. Did you ever think you would work in the construction industry running your father’s company?
Dragas: I did. I was given an exceptional dinner table education at a very early age in this business, so I never gave a lot of thought to doing much different than I’ve done. And it’s a fun business. It’s an entrepreneurial business. While I can’t say it has been an easy road necessarily — because I just think staying competitive is always a challenge — I’ve really enjoyed my career here.
VB: So this is the only place you’ve worked since college?
Dragas: Yes … I had my first job here at the age of 13, summers. It has been a very high focus of my life.
VB: Do you have any siblings?
Dragas: I do; I have three sisters.
VB: are any of the other family members involved?
Dragas: No, they are not. They are happily raising children, pursuing their own interests.
VB: Are you the oldest?
Dragas: I’m the second oldest.
VB: According to what’s at your website, your father founded the company in 1968. He was a first-generation American and son of Greek immigrants. So I guess his family had moved to the Hampton Roads area?
Dragas: Both his parents immigrated here. They had four children here. My grandmother, his mother, decided to take the children to Greece to visit her family. And back then, you had to take a ship across the ocean, so you didn’t go for a week or two to visit. So her plan was to go for the summer. This was 1941.
So she took the children over to Greece to spend the summer with her family and WWII broke out. They were effectively trapped in Greece for a number of years, living in Athens during the German occupation of Athens. And then shortly after the end of WWII, a civil war broke out in Greece, so they suffered through some of that. They had a very hard time finding their way home, finding passage home.
My father’s family has some incredible stories of starvation, what they had to do for food, what their mother to do — go out to the countryside and cut grass and boil grass. I think my father was hospitalized for nutritional deficiency as a young boy. He was 4 when they went on this trip.
VB: It was just his siblings and the mother?
Dragas: That’s right. There was no communication between her and her husband during this time. So when she finally did make it back here, she arrived only to find that he had passed away during the time. He thought his family had all perished. It’s a sad story, but as it relates to the business, I think the experiences of my father as a young child molded a lot of the core values that he instilled in the company and the conservative approach to financing our operations.
VB: When did she finally get back to the States?
Dragas: It was seven years later, so it would have been ’48.
VB: I know community involvement has been a core value. Are there other activities you’d like to tell us about?
Dragas: We like to be exceptional corporate citizens. We’ve been engaged and involved in a lot of activities and institutions and organizations that have to do with really two core areas — education and housing. On the housing front, we have participated in building homes for Habitat for Humanity, the blitzes they have, Builder Blitz, where they’ll build 10 houses altogether in a neighborhood in a week’s time. About three or four years ago, we made a large donation to area cities. We gave $500,000 to each Virginia Beach, Norfolk, and Chesapeake so they could coordinate their work in the services available to homeless families. Our focus was on the families, particularly on the children.
VB: How much money?
Dragas: It was $1.5 million altogether. The idea was again to target homeless families to provide some housing stability for children so they could improve their educational outcomes. Because without their basic needs being met, trying to educate a child is a very difficult thing to do.
On the educational front, we’ve been big supporters and involved in Old Dominion University, Norfolk Academy, of course the University of Virginia, the Access organization which provides counseling services, college funding services for low-income and under-performing students in the public school systems.
VB: What do you do away from the office to relax?
Dragas: I don’t have a lot of time for that right now, but when I do, I love traveling with my family. We typically travel every school break that they have.
VB: Where do you like to go?
Dragas: We rotate between Europe, warm weather vacations and skiing … And I am an unabashed soccer mom, and a field hockey mom, a lacrosse mom, and a tennis mom. So I spend a lot of time spectating in my spare time.
VB: Is there anything else you’d like to share about your company?
Dragas: Yes, I’m exceptionally proud of the people here. They’re the ones who really deserve the attention that the company garners. My job, I believe, is the easiest one in the building.