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THE CONSTANT QUEST…
John Fenn, Division President Inland Empire
© 2016 KB Home 2
Inland Empire Management Team
© 2016 KB Home 3
Our Quest: 60th Anniversary for KB Home
Constant improvement of Satisfaction, internal and external
Constant improvement of the quality of our homes
Constant improvement on cycle time
Market leader on all fronts
Stay current with the latest in technology and trends
Quest to be the best
© 2016 KB Home 4
Regional Overview
Source: U.S. Census Bureau, Bureau of Labor Statistics, RiversideTopTenEmployers.com
Inland Empire Area Coverage:
Riverside County - 28 cities
San Bernardino County – 24 cities
East San Gabriel Valley / LA County – 10 cities
Population: 5.35 million
Area: 5,062 sq. miles (sized to the state of Connecticut)
Employment: 2.13 million
Permits: SFD 8,978 (KB: 10%) MF 3,482
Top Employers (# of employees):
Amazon, QVC, Distribution Hub, U.C. Riverside, Riverside USD, City of Riverside, Pac Bell/AT&T, Kaiser Permanente, Jurupa USD, The Press Enterprise Co., HUB Int’l Insurance Svcs., Alvord USD, Riverside Community Hospital, Ports of Int’l Goods/Trades, Loma Linda Medical, etc.
East San
Gabriel Valley
Riverside County
San Bernardino
County
© 2016 KB Home 5
Regional Overview: Active Communities
Wildflower at Las Haciendas
La VentanaCalabria
Spring Mountain Ranch:
Presidio, Mountain Gate
The Lodge:
Harmony / Elation / Symmetry
Park Place:
Hadleigh / Margate
Lynbrook
Stonecrest
CabrilloTerraces
Silvercreek
Mahogany Hills:
Acacia, Hawthorne, Ironwood
Pinnacle
Seneca
KB Home – Inland Empire Division
Target: 1st Time & 1st Move-Up Buyers
20 Active Communities
13 Detached Traditional
7 Detached Small Lot / Alley Load
Price Ranges: $230,000 to $889,000
Sq. Ft. range: 1,430 to 4,506
YoY Net Sales Growth: +30%
© 2016 KB Home 6
Regional Overview: Buyer Profile
Source: KB Home / MarketSight
Buyer Experience
41% 1st Time Buyer
59% Experienced Buyer
Age
30% Under 34 years old
49% 35 to 54 years old
21% 55+ years old
Income
23% earn below $80k
39% earn $80k - $120k
38% earn over $120k
Household Composition
62% couple with kids
11% single with kids
13% couple without kids
13% single without kids
Education Level
24% advanced degree
36% college degree
12% high school graduate
25% some college
© 2016 KB Home 7
Growth: Quest to be the Largest Builder in the IE Market!
Currently #3 in the Inland Empire market (based on unit closings)
How do we grow New Communities
Open On Time & On Budget
Execute on our land strategy
© 2016 KB Home 8
Growth Strategy
KB Home Inland Empire – 2016/2017
A look ahead - 5 New Communities
Beaumont
Chino Hills
Fontana
Menifee
Upland
Infill in the East San Gabriel Valley
Focus on Single Family traditional detached in the San Bernardino and Riverside Counties
Selective use of attached products in “A” markets of the Inland Empire
© 2016 KB Home 9
Growth Strategy: 3 Year Forecast
0
200
400
600
800
1000
1200
1400
2015 2016 Projected 2017 Projected 2018 Projected
34%
26%
26%
© 2016 KB Home 10
Product: Build a Better Home…Quest to be the BEST!
Challenge ourselves daily to improve our homes Quality (Fit & Finish Performance)
Sustainability Reduce waste
Green product use
Stay affordable Control cost (Labor & Products)
Be the best value in each market
Listen to our surveys and match consumer demand & desires
Innovative plans & products that are efficient to build
© 2016 KB Home 11
Spotlight Project: Master Plan Community
Spring Mountain Ranch: Mission Gate, Presidio Point
Riverside, CA
• $376,990 - $469,990
• 1698 - 3379 Sq. Ft
• 3 - 6 Beds
• Nine Different Plan Types
• 435 Units
• Sports Courts
• Pedestrian Trails
© 2016 KB Home 12
Spotlight Project: Master Plan Community
Mahogany Hills: Acacia, Hawthorne, Ironwood
French Valley, CA
• $359,990 - $447,990
• 1698 - 4506 Sq. Ft
• 3 - 6 Beds
• Single and Two Story Plans
• 503 Units
• Baseball Park
• Country Setting
© 2016 KB Home 13
Spotlight Project – Large Lots
La Ventana
Rancho Cucamonga, CA
• $764,990 - $888,880
• 2491 - 4506 Sq. Ft
• 3 - 6 Beds
• Casita option
• 1/2 Acre lot size
• Equestrian / Walking Trails
© 2016 KB Home 14
Spotlight Project: Attached Product
Jade Tree
Chino Hills, CA
• Starting in the mid $500’s
• 1630 - 1735 Sq. Ft
• 3 - 4 Beds
• Up to 3.5 Baths
• 65 Townhomes
• Three Story Units
• Community Park
• Greenbelts
• Opening Q1, 2017
© 2016 KB Home 15
Market & Economics: Inland Empire New Homes
Source: Metrostudy
Starts Up 6%
Closings Up 22%
+66%+1%
+22% +4%
• Median new home price: $417,500 2Q 2016, up 4.2% from last year.
• Annual new home starts: 7,698 through 2Q 2016, up 4% from a year ago.
• Annual new home closings: 7,705 through 2Q 2016, up 22% from a year ago.
© 2016 KB Home 16
Market & Economics: New Home Detail Q2 ‘15 – Q2’ 16)
Source: Metrostudy
Riverside County 2Q 2015 2Q 2016
AnnClosings 3,605 4,408
AnnStarts 4,073 4,426
HousInv Supply 9.3 mos. 7.7 mos.
VDL Supply 23.4 mos. 22.3 mos.
San Bernardino County 2Q 2015 2Q 2016
AnnClosings 1,700 2,485
AnnStarts 2,339 2,633
HousInv Supply 10.5 mos. 7.9 mos.
VDL Supply 31.4 mos. 21.2 mos.
Coachella Valley 2Q 2015 2Q 2016
AnnClosings 999 812
AnnStarts 982 639
HousInv Supply 10.1 mos. 9.8 mos.
VDL Supply 42.6 mos. 71.0 mos.
© 2016 KB Home 17
Market & Economics: Home Price Appreciation
MEDIAN ANNUAL HOME PRICE
2nd Quarter 2016
$1
33
,97
0
$1
37
,52
4
$1
38
,75
6
$1
36
,40
3
$1
31
,54
5
$1
23
,11
6
$1
17
,03
8
$1
17
,18
8
$1
18
,68
5
$1
27
,13
3
$1
37
,34
9
$1
53
,02
3
$1
74
,68
6
$2
13
,67
3
$2
89
,98
4
$3
57
,32
3
$383,802
$3
56
,89
8
$2
33
,16
3
$1
57
,99
1
$1
74
,30
5
$1
68
,35
7
$1
83
,88
1
$2
33
,12
7
$2
63
,48
2
$280,821
$2
94
,22
4
$3
02
,20
3
$3
08
,09
0
$3
11
,25
2
$3
11
,86
9
$3
08
,86
6
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
est2
01
7p
rj2
01
8p
rj2
01
9p
rj2
02
0p
rj2
02
1p
rj
Source: Moody's Analytics; various county recorders offices; Real Estate Economics
FORECAST PRICE APPRECIATION
Riverside-San Bernardino-Ontario, CA CBSA
Category 2015 2016 2017 2018 2019 2020
All Homes 6.6% 4.8% 2.7% 1.9% 1.0% -1.0%
New Home 3.7% 3.8% 1.8% 1.5% 0.7% -0.7%
Existing Homes 3.0% 3.3% 1.5% 1.3% 0.6% -0.6%
Distressed Homes 5.2% 3.4% 2.1% 1.4% 0.8% -0.7%
Source: Real Estate Economics
© 2016 KB Home 18
Market & Economics: Strong Job Growth
Source: Bureau of Labor Statistics; Real Estate Economics
1,200
87,200
98,100
336,700
11,400
43,400
143,300
208,300
156,900
44,700
240,600
0 100,000 200,000 300,000 400,000
Natural Resources and Mining
Construction
Manufacturing
Trade, Transportation, and Utilities
Information
Financial Activities
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Government
-100
6,900
3,700
14,100
100
500
0
6,100
6,800
1,400
7,300
-2,000 2,000 6,000 10,000 14,000
Natural Resources and Mining
Construction
Manufacturing
Trade, Transportation, and Utilities
Information
Financial Activities
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Government
Total Employment by Super Sector MSA 12-Month Employment Change by Super Sector
• Total non-farm jobs has increased by over 58,000 year-over-year
• Since 2010, the Inland Empire has added over 248,000 jobs
• Unemployment is down to 6.5%, compared to 13.7% in 2010
© 2016 KB Home 19
KB Cares
• Riverside University Health System Foundation golf
tournament
• 2016: $1 million commitment started in 2007
© 2016 KB Home 20
Design Center Studios
Rancho Cucamonga - Opened 2014 Temecula - Opened 2015
Conveniently located within high traffic shopping centers, go to destinations for food, entertainment, and shopping.
© 2016 KB Home 21
Customer Satisfaction Index (CSI): Quest to be #1
Customers are surveyed 30 days and 11 months after close of escrow
Our current 30 day CSI is 95.4%
Our Goals 97% overall satisfaction
Deliver 100% of homes Complete
Deliver 100% of homes On Time
The house must perform, no warranty claims within the first 30 days
Survey questions tie directly to the performance of our partners
11 months after COE, customers are surveyed on product performance, quality, workmanship, and materials Interior walls, Interior paint, Carpeting and flooring, Kitchen appliances, Heating and air-
conditioning system, Lighting fixtures, Windows, Cabinetry and finish, Overall Satisfaction with Quality of Workmanship and Materials
© 2016 KB Home 22
Customer Satisfaction Index (CSI): Your Survey Questions
Satisfaction with the variety of options and upgrades offered
How well job site cleanliness was ensured around your home
Was the home delivered on the date originally promised?
Was the home 100% complete when delivered?
Condition of home at walk-through/orientation,
Overall condition of the home at move-in
Accuracy of home completion date originally given to you
Overall Satisfaction with Home Readiness
How quickly did KB Home RESOLVE your warranty service issues
How many visits on average did it take to resolve each of your warranty service requests?
Quality of repairs / service provided (i.e., fixed right the first time)
Left your home clean after service work
Overall Satisfaction with Price and Value
Overall Satisfaction with Quality of Workmanship and Materials
Overall Satisfaction with the quality of your home
KB Home met its commitments to you
© 2016 KB Home 23
Our Partners: Quest to be your Best Customer!
It is our goal to be your #1 customer
True partnership
Collaborative relationship
Quick pay
Improved communication on schedules, work flow planning, and trends
© 2016 KB Home 24
Our Partners: Ways to be better partners with KB Home CSI is our top priority
Need to be aligned with our top priorities
CSI
Cost control
Produce a better product
Product must be available & must perform
Workforce must be able to supply our needs without delays
Know and understand our quality expectations
PMT on current and new product roll-outs for purchasing and studio teams
National level suppliers
Monthly division contact to address any escalated issues
Advanced notification for product changes; additions and deletions
Price stability
Regional suppliers
Trade partner owners and senior management involvement in job site QC walks
Employee training; set right expectations with employees on quality, safety , scheduling and KB Home procedures
Workload forecasting
Review “All Lot Details” on KBTPO for additional information that may effect your work
Job site cleanliness
Be better today than you were yesterday…The Constant Quest!