Interview by Clayton
Steven J. Koenig runs a "vertically integrated" construction
business that tackles some commercial projects and complex
residential developments but mostly specializes in custom
residential homes on Kiawah Island, Seabrook Island, and Johns
Island along the South Carolina shore. Most are high-end —
make that very high-end — homes that vary in size from 3,000
to 10,000 square feet and cost at least $350 per square foot but
can run as much as $500 per square foot, or more. (And that's just
construction cost, excluding land.) Recently, one of his homes
listed at $23.5 million. Most of these are second homes ("or third
or fourth or fifth homes," notes Koenig) for a global client base,
primarily from the northeastern U.S. and Europe. Koenig joins us to
discuss how he works with this discriminating clientele and how he
meets the even higher expectations of the architects who design the
homes he builds.
On a special lot on Kiawah Island measuring 100,667 square
feet, Steven J. Koenig Construction built the Ballybunion residence
designed by architect Robert A.M. Stern. The main house and a
guesthouse comprise 9,777 square feet of conditioned space. The
structure is built to V-zone flood standards, so the lowest floor
is not included in the conditioned space but is dehumidified to
provide suitable storage space for the owners.
HOW DO YOU CULTIVATE YOUR HIGH-END CLIENTELE?
Our mantra is "We Build Relationships." It's on all our marketing,
and we truly strive to do just that. The company is all management;
the production is subbed out. Under this model, we emphasize that
it's a team who works with the client; it's not me, or one
individual, making the sale and then turning the job over to others
To make this work, we try to pick clients who we're willing to bust
our butts for, who we know respect us and our abilities, and who
want to have a Steven J. Koenig Construction home. When we find
that, the relationship builds on itself.
SO IT SOUNDS LIKE YOU'RE ALSO RATHER
DISCRIMINATING ABOUT YOUR CLIENTELE.
In building a home, there is a strain that's put on everybody
involved. There needs to be a base of mutual respect; otherwise,
the process will break down. The multiple number of decisions
required to complete a custom home puts an enormous burden on
someone's already very complicated life.
When you've just asked someone to get back to you with answers on
256 questions, you need someone who's good at making decisions. It
drags out the process when we pick somebody who's indecisive or,
worse, won't take the time to do this. Our management costs go up
for the same amount of income, so it's worth our while to be
DOES WORKING WITH ELITE ARCHITECTS ADD TO THE
It can if the clients don't understand what they're getting
involved in. For example, we did a home for a client who'd hired
Robert A.M. Stern. This client was far less demanding than Stern
and, as a result, paid a significant premium. Where the client was
willing to put $15,000 worth of interior door hardware in the
house, Stern's design called for hardware priced out at $125,000.
And where the client would have picked off-the-counter trim, we had
about 130 custom knives cut for the interior trim profiles. We did
full-scale shop drawings of cabinetry and doors just so Stern could
see the direction of the grain on each piece that comprised the
door of a cabinet. That's the level of complexity we have to deal
with but which a lot of clients don't understand at first.
To complete the interior trim of the Ballybunion residence,
Steven J. Koenig had more than 130 custom molding knives cut to
create the trim profiles.
DO YOU GET MOST OF YOUR JOBS THROUGH THESE ARCHITECTS?
It helps to have an established reputation with the better
architects, but we don't get all our jobs that way. Often it's the
other way around: We help the clients select an architect. We ask
them a lot of questions in the initial meeting to determine what
level of quality they want — if they want an award-winning
home or just a place they are comfortable with — and what
kind of budget they have to work with. That helps us steer them in
the right direction.
Many of our leads come from client referrals. Or they come from
real-estate firms that give clients a list of builders and highly
recommend certain ones. We also do a lot of in-house marketing:
mostly letters of introduction to certain clients who buy high-end
lots. We target areas on the islands in certain price ranges. We've
learned that with the team effort we invest in each job, we would
lose money building a home at too low a price point.
The main staircase at Ballybunion includes quartersawn white
oak treads. The handrail is also oak, stained to provide sharp
contrast to the custom-turned balusters.
HOW DO YOU WORK WITH A GLOBAL CLIENT BASE?
Lots of e-mail. On our Web site, we also have proprietary pages for
each project where people can go in and view weekly progress
pictures. All of our project managers and superintendents have
digital cameras and laptops. We work with a lot of out-of-town
architects, too, so we will shoot on site and immediately e-mail
the images to the architect's office to get approval for a
decision. All of our financials are posted on the Web site as well.
We do cost plus almost exclusively, so it's important to keep a
report of budget versus actual costs for our clients to review. We
bill over the Internet and send clients copies of every invoice.
All our transactions can take place via the Internet and
IF YOU WORK COST PLUS, HOW DO YOU WIN THE JOB? DO YOU GET INVOLVED
IN ANY KIND OF BIDDING?
We are up against other builders on many of our jobs. There are at
least three other builders in this area who can deliver the same
quality we do, and we compete with them for certain high-end
ON A ONE-OF-A-KIND HOME, HOW DO YOU COME UP
WITH ACCURATE NUMBERS IN A COMPETITIVE SITUATION?
We do a very detailed breakdown based on records of similar jobs
that resemble different areas of a home and on what we know of the
Designed by architect Mark P. Finlay of Southport, Conn., the
Bass Creek residence on Kiawah Island is built on a double lot,
totaling approximately 50,000 square feet. The pool house and main
house combine to a total of roughly 5,200 square feet of
We spend a lot of time educating our clients about what goes into
our costs. We explain there are three components: materials,
workmanship, and profit. We're very open about what we charge. But
when someone is shopping around, the numbers from different
builders aren't always so transparent. On one job, we were cost
plus 16%, and the other guy was cost plus 12%, which the client was
quick to mention. After examining the numbers from the other
builder, I pointed out that the difference was all in supervisory
costs. The other builder was billing for his superintendent on the
job site. I said we'd be delighted to do 12%, and then bill every
month for our management time on site. That way, we're guaranteed
not to lose any money.
Clients rarely see these differences. So we are very leery of going
into any project that has too many builders involved. If a client
says, "I'm looking at these three builders," and we're one of them,
we'll stay in the game and put some sweat equity into it until the
client can make an informed decision. But if there are seven or
eight builders, we just walk away.
HOW DO YOU MANAGE PRODUCTION ONCE YOU GET ON
We have three project managers: my son, my brother, and me. And we
have two superintendents, who are soon to be project managers. In
our company, we consider a supervisor to be a project manager in
training. Our superintendents will be given their own jobs very
shortly, and then we'll bring in another superintendent to take
their places. This mentoring system is central to building a team
that can ensure the quality we provide.
Our subs are obviously key to quality production, and we're very
loyal to them. We don't shop around with six or seven subs to get
the absolute lowest price. We tend to help mentor them along, too,
particularly to make sure they're pricing properly. The worst thing
that can happen is to hire someone who's underbid the job and gets
in over his head.
A lot of selecting the right sub has to do with the complexity of
our jobs. When you get into homes that are above $400 per square
foot, there's so much in them and the architecture is so complex
that it requires a great deal of our time, in-house, to make sure
the puzzle goes together in the right order.
We'd prefer all the architectural details to be called out by the
architect, but when those details are lacking, we have to establish
the performance criteria ourselves. Over the years we've amassed a
quality book from which we can print out details — kick-out
flashing on a sidewall, for example — and we give those to
our subs. If we're clear about the details, we can pick the right
sub to execute them.
WHAT ARE SOME EXAMPLES OF THE COMPLEXITIES INVOLVED?
We have a house going now with an interior trim package —
trim and cabinetry, with materials and installation — that
will cost about $2.2 million. On that job, we must have a hundred
pages of shop drawings just for the interior finishes. That takes a
great deal of time working with the architectural firm before
production begins. Our estimator does most of that integration for
The windows add enormous complexity. We use a lot of commercial
windows like Zeluck (www.zeluck.com), Tischler (www.tischlercommerial.com), and Michael Reilly
(www.reillywoodworks.com). We'll put a million dollars
in a window-and-door package, when most people wouldn't spend that
much on a house.
Tischler has its own crew that it sends down and who can certify
the installation, which is important when we're spending $30,000
just on installation costs. With Zeluck windows, one of our framing
crews has a window division with a separate crew who does nothing
but install these high-end windows. That expertise is very
influential in deciding which sub gets the job.
Another example of the complexities involved is in painting. We
have painters who are painters, and then we have painters who are
artists. Some clients are willing to pay for the artist and get
interior trim with seven coats of enamel, sanded between each
All of the paint-grade work throughout this 6,000-square-foot
home is poplar. The floor leading from the foyer to the main living
area is cumaru, a dark mahogany.
The framing is usually pretty involved, too. We're sitting on a
100-year fault here, so we're in a seismic zone, as well as in a
130-mph wind zone. In this setting, the consequences of not getting
something right can be pretty serious.
The Rhetts Bluff residence is another Mark Finlay design on a
single Kiawah lot measuring 34,540 square feet, with the
conditioned space of the home comprising 5,567 square feet. Like
all of the homes shown throughout this article, construction costs
on this caliber home reach over $500 per square foot.
WHAT'S INVOVED IN BUILDING TO RESIST BOTH
SEISMIC AND HIGH-WIND CONDITIONS?
We start with a soil analysis to evaluate how deep the liquefaction
of the soil goes. This will dictate if the foundation should be
pilings and grade beams rather than spread footers, even when
building inland where pilings aren't always required.
In addition, the houses typically have a lot of glass, so with the
wind loads, an internal shear wall often isn't enough. We typically
use big steel moment frames that are welded in the field. So
selecting a framing crew for a job like this depends on that framer
having welding expertise as well.
THAT COMPLEXITY MUST SERIOUSLY LIMIT THE FIELD OF SUBS
Absolutely. To select the right sub, we evaluate a combination of
availability, quality, and price. On some smaller jobs, we know
five framers who could easily handle the job. But on other jobs, we
might have only two framers who have the skill, equipment, and
manpower required to get the job done.
We have a home going now that's about 10,000 square feet. If we
were to pick one framer — one who does fine work, but lacks
the manpower — he would be on that job for two years, and our
client would be very upset with us. On jobs like these, quality
isn't just in the final product. ~
All photos by Rick Rhodes.