Live, Work, and Enjoy Life - Mixed Use Development in UT

admin — Tue, 29 Sep 2009 05:25:42 +0000

Our latest interview with Jared Westhoff of EGI Financial in Leeds, Utah gave us great insight into a
company that plans to remain profitable even though we are in the middle of an economic downturn. Located in the southern part of the State while working on projects from St. George to the greater Salt Lake City area, EGI focused mainly on land development and distressed properties and mortgages in the early 2000’s. In 2006 EGI began planning along with DAI, Utah’s foremost land developer, for a 2700+ acre master planned community named Pole Canyon. This community has been designed as a place where people can live, work, and enjoy life. The crux of this plan is to combine the benefits of light industrial, commercial and residential building into one well thought-out community with upwards of nineteen different neighborhoods. This take on the “mixed use” concept seeks to appeal to those looking for a short work commute with everything necessary for an elevated standard of living.

The project is complete with 38 acres of pedestrian, equestrian, and ATV with access at several points to thousands of acres of federal lands. It will have a rodeo arena, a central park linked by trails to other neighborhood parks. This community desires to appeal to those already living in Utah and those desiring to leave more expensive states, such as California. With energy costs 30% lower and a state income tax 4% lower than California, this community will hold major appeal to many families looking for a more affordable lifestyle while boosting their quality of life.

While an ample short-term water system already exists with millions of gallons per day in excess capacity, securing a long-term option is currently in the works. On the industrial side, there are 100’s of acres available to companies looking to breakground in the near future. In the past six months there have been four fortunes 500 companies which have put Pole Canyon on their short list of sites to expand to. EGI sees the opportunity to provide an environment where companies can locate in a pro-business city, county and state where their employees can enhance their quality of life while they dramatically increase their bottom line. As members of the Economic Development Corporation of Utah, EGI have been very impressed with the representation gained through this quasi-government entity. Coupled with the state and local incentives to attract businesses to their area, they hope to attract not only local businesses, but those who see the financial benefit of moving or expanding operations into the mountain west region

“Land-PIE has been an integral part of the planning process for this large project. It has helped us focus in on the financial details of the development – details that have been the downfall of others. Performing “what-if” analysis using Land-PIE, while testing many alternatives, has made us much more productive and cost-effective with the small staff that we have,” said Westhoff.

On the other side of their business, purchasing distressed properties, they have found great benefits while using Land-PIE. “It’s extremely helpful in getting the owners to understand ‘why’ their property is worth the current, often depreciated, value,” explains Jared. They have seen Land-PIE as an excellent tool to determine a fair market value for the prospective properties. After agreeing upon the assumptions with property owners, they run the model and let the numbers speak for themselves.

While their activities have been limited during the present financial crisis, they are a company that has been able to remain focused and whole with a vision for the future.

Walkable Communities Are a Winner for Urban Community Partners

admin — Tue, 29 Sep 2009 05:15:06 +0000

While “sustainability” is a word that if often flung around in today’s society, hearing it in the world of building and development is becoming more common. According to Ian Gillis of Urban Community Partners, LLC, “Everyone has their own definition of sustainability. For me I prefer the word “walkable. We want to create a community where people can walk to work, to the store and out for dinner.” Not only is this idea something that is environmentally friendly, cutting back on use of cars, it is also much healthier for individuals. “Studies have shown,” he continues, “that people who live in mixed-use communities are actually healthier than those who don’t. They are using the two legs God have them, instead of their cars.”

In today’s towns, we are used to one-use communities that fit the building codes established after World War II. But according to Gillis, cities are rethinking their layouts and rewriting their codes to accommodate a changing world view and demographics, “Young and old are looking for more to do and are moving back into cities and towns, looking for a more vibrant and connected lifestyle.”

Along these lines, Gillis and his company have just completed plans for a new Walkable community in Yuma, Arizona, complete with 1100 homes, shopping and an organic farm. They were able to use a “smart-growth overlay” to convince city officials that altering city codes is going to be the best bet for future development. Cities along the California coast are also starting to adopt this more progressive planning method.

Master planned communities have become woefully homogenized over the past few years and while many are satisfied with their 2,000sf. Plus homes, where you need to drive to reach every facility and activity, others are opting for smaller homes, in integrated communities, neighboring condos, stores and libraries. With the climate change, rising cost of gas and adjusting demographics, people are looking for change, smart change. “I see mixed-use communities being a popular area of development for the future, explains Gillis. “This is a change that will be coming from municipalities looking for higher quality development for their communities but also from the market demanding this type of product.”

Gillis’ company was formed with the idea of developing Smart Growth walkable communities. Due to the economic and real estate meltdown development projects with a long term horizon are just not financeable today.. Like most, they have had to reinvent themselves in this economic climate. While consulting was always an aspect of what they did, it has become the main thrust of their company in light of decreased building. “Investors would rather purchase a finished product for 30 cents on the dollar than buy land and start from scratch. It’s hard to argue with that. Something has to change to make development viable again,” confesses Gillis.

The financial crisis has not been a welcomed guest, but as many builders and developers we have spoken with contend, it has perhaps led to a new way of thinking that will thrust us forward into a more stable economy and even a healthier lifestyle.

Tract-PIE and Land-PIE Aid Florida Builder in Challenging Times

admin — Fri, 18 Sep 2009 17:36:00 +0000

While there is much talk about having reached the economic bottom for the real estate market and that a possible upturn is right around the corner, developers and builders still may have uncertain times ahead. Our latest interview was with Jeff Daley, a 36-year old Assistant Vice President for a regional developer in the southeastern United States. Jeff gave us another look into those surviving the economic downturn. Daley was brought on as an analyst six years ago. Before the real estate crisis, his main responsibilities included sourcing and underwriting land deals along with the associated due diligence. Today his responsibilities have increased in light of the needed layoffs to cut overhead. “Like everyone else, we have had to downsize, and I’ve had to reinvent myself,” explains Daley. “I’m doing everything now from Power Point presentations to Real Estate Tax analysis.

As far as Daley’s project analysis is concerned, he strictly uses Land-PIE and Tract-PIE; “I can’t tell you how pleased I have been with the power and flexible capabilities of both Land-PIE and Tract-PIE. The ‘goal seeking’ element of the programs has been really beneficial. These systems are truly amazing and took my analysis to a whole new level,” praises Daley.

In regards to the economy, “I can’t say when there will be a turnaround. I have a theory that those who make a prediction, would be better served to simply say, ‘I don’t know.’ There’s just too much political risk,” surmises Daley. As far as personal growth is concerned, he has learned to be glad with the job he still has. “My wife and I have learned to cut corners. Well, I have had to. My wife comes from a more frugal-minded culture and I’ve learned a lot from her.” While admitting that this is his first economic “down stroke” experience, it has been more valuable than sitting in school earning his Masters. Apparently the school of hard knocks has another well-educated graduate.

Senior Housing Opportunities for Newlands Group

admin — Tue, 12 May 2009 23:50:25 +0000

Since beginning our interviews last year, we have come across one amazing story after another. While no one is enjoying, necessarily, the changes in the present real estate market, they are welcoming the creative opportunities rising from the ashes. Our latest interview with Michael Barnes was an exciting glance at new unforeseen opportunities and investments.

Situated in Reno, Nevada, Barnes was co-owner of Copper Canyon Development, a master planning developer from 2000-2005. Unlike many of his real estate contemporaries, Barnes and his company were able to sell at what turned out to be the height of the market and walk away with not only a profit, but an opportunity for a personal year - long sabbatical that led to a renewed enthusiasm for real estate potential.

Forming a new real estate development company in 2007, Newlands Group LLC, and taking on new partners, they have considered every possible method for land/real estate development popular over the last twenty-five years, and found them no longer effective in today’s market. He chuckles as he states candidly, “We are self/unemployed and looking for opportunities. We are having to feed our investments now until the market turns around and with a lot going out and nothing coming in, we’ve investigated all options. ” After stumbling through attempts to capitalize on the market downturn, they have landed upon the growing need for decent senior housing. With Baby boomers getting older, a considerable percentage of our society is going to need comfortable future housing. Instead of the sterile, tiny, “McDonald’s” cookie cutter standards of current senior housing available today, Barnes, desires to build appealing dwellings based on universal design standards, with outdoor common areas and gardens, adjacent to pathways, storage, garages, and an aquatic center. “I want to build something that I want to end up living in. They existing senior housing in our area is unsatisfactory, and I’m not working my whole life to end up in one of those,” states Barnes.

This is an area he has never before ventured into. Instead of entitling and developing land and selling for profit, this investment requires a long-term commitment of not only development, but operation as well. They envision rental properties, 50% larger in size than currently on the market, geared towards active adult and independent living, with unbundled services adjacent to neighborhood retail, providing part-time job opportunities geared towards seniors. “Operating expenses with such projects are generally greater than 50% of revenues. It’s like running a restaurant, hotel and apartments all with healthcare provisions,” explains Barnes, adding that this project, while smaller in acreage than what he is accustomed to developing, it is far more detailed than anything he has involved himself in adding, “The entire project is people dependant, often with mobility and health issues, and that is where larger companies will lose out; meeting the particular and often delicate needs of the client will either make or break the project.”

There are many challenges, not only as far as developing schemes and limited financing, but also in terms of affordability; the market for seniors able to afford rent between $3,500-$5,000 a month certainly limits their client potential. Yet, regardless of all the hurdles, not only does he see the potential, but also the necessity for this niche market.

While there are many challenges ahead, Barnes believes this to be a more lucrative direction as land development and building probably won’t see a turn around before 2013-2015. While the stimulus package has been initiated, it will take many months before its effects trickle down to the people changing their purchasing power and opening up job opportunities. Not only is the US market to be considered, but also those of the EU and Asia that are facing considerable challenges as well. There are so many unknowns that sitting back waiting for financial stability will leave people in an even more precarious situation.

While spearheading this movement toward senior housing, some of Barnes’ contemporaries are waiting for the outcome instead of diving in themselves. Regardless of the lack of company, Barnes is more than optimistic about the potential.

Michael can be reached at MBarnes@NewlandsGroupLLC.com

Kimball Hill Homes Exits Gracefully

admin — Tue, 12 May 2009 20:00:21 +0000

In our latest interview we touched base with the Western Regional President of Kimball Hill Homes, Tom Jacobs. Jacobs has been with the builder for 18 years and has journeyed with the company on its rise to the national top 20 spot and now on its slow and graceful exit from the building industry.

Last April, Kimball Hill Homes filed chapter 11 intending to eventually make its way through our current economic landslide, but instead due mostly to the changing priorities of their banks, they will instead be closing their doors. “At this point, it’s not a matter of if, but when,” says Jacobs.

To their credit, they are not escaping the industry looking to only benefit themselves, but have sold all their properties, provided severance packages for their associates and have maintained a spotless reputation with their banking partners and others in the industry, “We are looking to leave the industry with as much class as we entered it with,” comments Jacobs.

They attribute their successful exit to being honest and open with the banks and knowing when to quit. Unlike many builders, they filed for bankruptcy while they still had money to work with and this has allowed for an orderly liquidation; allowing the banks to gets the best return possible considering the circumstances.

In hind site Jacobs says that when looking to cut your budget, go over your last proposal and cut that by another 20%, “You have to react earlier, than later.” Some of their best decisions were the properties they did not purchase. Many times after rejecting an opportunity and hearing of it going to another, Jacobs would use Tract-PIE to figure out how the builder planned to benefit from the venture. More often than not, their success was based on intuition and on unrealistic circumstances. “You need balance when running a business, you have to use realistic models. You can’t rely solely on intuition,” Jacobs warns.

Did they see the crisis coming? They say they were not so much surprised by the downfall, as much as by its depth and duration. Some of the signs were when “affordability was severely challenged,” saying, “You cannot do that and meet the consumers’ needs.” As the price of land began to soar, Jacobs said they had to question their steps, but as a builder, you cannot stay out of the game, you have to participate.

A growing concern was also felt as builders were becoming the developers as well and failing to partner with others to share the risk, echoing the mistakes of the 1980’s. “This is cyclical, but hopefully people will learn from their mistakes this time,” he encourages.

As far as government involvement is concerned, he believes the best route is to offer buyers low interest (3%) loans for an extended period of time to stabilize the economy and help clear the existing inventory of foreclosures.

For Jacobs, he would like to stay in the industry saying, “It’s not just a job for me, it’s a passion. I love helping people attain the American dream, that of owning a home.” That excitement coupled with the knowledge he carries, would, I believe, be an asset to any company.

Workforce Housing In West Texas

admin — Fri, 24 Apr 2009 00:39:51 +0000

In our latest interview, we discussed with Daniel Crow of Banner Communities, their innovative and ground-breaking methods for successful building in a struggling economy. Crow has been in development and construction for nearly 40 years spanning all areas of building from luxury housing to commercial development to affordable rental housing.

For the last two years his company has been building what he calls “Workforce Housing” in west Texas. Unlike any other building developers I have ever run across, their personal involvement with the community does not end with the sale of the home; it is just beginning.

Building single-family starter homes ranging from $150-200K, their goal is not only to build energy-efficient (a point I’ll cover) affordable homes, but to ensure that their homeowners will keep their homes in beautiful condition; preserving the esthetics of the home and aiding to maintain its value. This “Transparent Life Management System” helps to preserve the integrity of the community through HOA’s and by maintaining for the homeowners their front yard and community landscaping. Anthem also keeps as full-time property manager at the community to assist homeowners and not abandon them as some builders do, creating more of an investment in the community and establishing a long-term relationship.

If that’s not enough, the homes come complete with all appliances, community pools and meeting places; designed to create an orderly and comfortable lifestyle, “Our intention is to provide something that is not dramatically different, but distinctively different from our competitors,” Crow says. And they are doing just that; setting them apart at their price point.

Also in contrast to most homes built today, these homes have a modular core, with over-framing, providing a completely Energy Star home that appears totally stick-built to the untrained eye, “We want to create a product that on the surface seems no different from the competitor, but inside is completely different.” Aside from the obvious money-saving benefits (about 40%), those looking to purchase energy efficient homes often qualify for 12% more as they will be paying less for utilities monthly, allowing available funds for a larger mortgage payment.

This idea was birthed by Anthem Properties more out of necessity than intent. Having to compete for reliable labor with the oil fields, they instead opted to have the modular components prepared in a plant and to hire only a plumber and electrician for on-site work. Getting the home manufacturers to mimic the quality they desired was an arduous, “stud-by-stud” task. It is time consuming, but a critical business as they are staking their reputation on another’s work.

These homes also have steel foundations, avoiding headaches with concrete companies and schedules. This method aids in energy efficiency and makes the home unaffected by land movement. Using steel foundations allows them to attach modular components and have it ready for outer framing in just two days.

They are facing some challenges with the present economy with short and long-term financing. Their lenders are having trouble keeping their commitments and also providing loans for potential homeowners; though working mainly with FHA loans is helping everyone involved. They have not had to use private investors and that is a path they would like to avoid if at all possible.

While the innovative possibilities seem endless, the foundation of Anthem’s success is simple – small, but efficient. “We only have 6 people on staff and have been this way for about ten years… you have to see yourself as the weakest link and hire partners who are the best in class. There are no big shots in this organization, everyone gets their hands dirty, everyone has a purpose.”

For more information about some of the projects that Banner Communities is working on in Midland, TX, you can go to www.easyhome4you.com . Daniel can be contacted at dcrow@anthemcom.com

Challenges for Mountain Capital Group

admin — Wed, 28 Jan 2009 18:29:36 +0000

In my latest interview with Mountain Capital Group (MCG) partner, Ellen Bellandi Alexander, I was really impressed not only with her understanding of her area of influence, but also with her ability to see the larger picture and incorporate others into it.

MCG is a private boutique equity lender providing Capital and Mezzanine Loans to real estate developers utilizing private equity sources. MCG provided about $200 million in private equity and Mezzanine debt for the development of real estate projects in California, Nevada and Colorado; funding the development of more than 6,800 housing units.

Since Mountain Capital’s inception in 1996, Alexander’s responsibilities have been mostly in the area of project due diligence and lending/underwriting and funding with her partner focusing on raising capital for developers who were building almost exclusively residential tracts, although MCG funded some value added apartments.

After the market turned south in 2007, Alexander had to devote her attention from funding new projects to exclusively spending one hundred percent of her time attempting to restructure debt and equity not only their developers and their attorneys but with the senior construction lenders while attempting to quell investor’s apprehension concerning the declining value of their equity.

The impact of the troubled housing market has been devastating and beyond anyone’s initial comprehension of the problem. One of MCG’s major developer clients has filed Chapter 7 bankruptcy which impaired 34 properties and $560 million of bank debt. Another one of their developers has walked from $200 million of bank debt and is in default and/ or foreclosed out on all its projects. According to a recent distressed real estate conference it is estimated that there will not be one residential tract loan that will not have to be written down severely in the next 6 to 12 months when the FDIC is fully staffed and enforcing mark to market.

In an attempt to negotiate with the banks and requesting them to modify existing loans for a long enough period of time for the market to rebound she encountered resistance. She found that the banks were not in a position to take discounts due to their own impaired capital situation and could not extend the loan at all or past a one year period due to banking regulations. Most banks wanted a substantial principal pay down (from an already dying developer or now fearful investors who had already lost their initial capital) or did not understand the grim reality of what was going to happen going forward preferring to foreclose instead. Some banks indicated that they would rather foreclose rather than modifying the loan and felt that they would not take a loss because they had a recent appraisal that indicated they were well capitalized.

Another banker told her that they could not make any decisions as the auditors were running the bank. Other bankers told her they were selling the notes in bulk and were not going to deal on an individual basis. One Texas bank simply quit funding at 50% of its construction loan commitment which in turned caused liens which then caused the banker to declare the loan in default and foreclose on the project! On another of her projects the bank indicated that it has received FDIC capital but still has not commenced with project funding.

In short, the various scenarios do not bode well for a rebounding residential market. This is in addition to the lack of buyer loans to move existing product that is out there and the abundance of bank foreclosed homes that are driving down pricing even more in certain markets.

Ms. Alexander says the problems with this route are exponential, as many banks aren’t staffed with experienced real estate work out lenders or REO personnel and therefore don’t have the time or the experience to manage the assets in house. As a result many banks are facing vandalism, squatters and stolen materials from half-completed worksites and model homes. So many sub-contractors never received money from failing builders and as a result are hoping to receive some kind of compensation, whether honest or not. Unlike the recession in the 1990’s, our present situation is compounded by many other problems in every area of the economy. The banks are already strapped for cash and appear to be at a standstill on which way to go. Due to the potential for insolvency the bank cannot afford to throw more money after bad nor can they afford to write down the project. She adamantly believes that the situation is more dire than the general public knows.

A few months ago she had a scenario established with a lender who was willing to take a loss and continue with a building project hoping to recoup their losses in the future. Unfortunately, the FDIC stepped in and took over the bank and now everything has been at a standstill for months. In the meantime, no surveillance has been established at the property and the copper wiring has been stolen and all the model furniture. They either don’t want to or cannot afford to pay the ongoing expenses of taking over and running a project. This means as an example paying the $15 an hour for security or putting in an experienced receiver to manage the property or building out and selling or renting those homes in that phase. The alternative is to sell the project at a deep discount to a builder who can take it over for them. Either way, the bank stands to lose millions now or at a later date.

Alexander is not waiting for the future to find her, but has plans for a new company to offer consulting services for repositioning projects. She admits that others are doing the same, but with her background, contacts and experience, she is confident it will be successful.

As far as the tools of the trade are concerned, Alexander says, "When the market comes back and we continue to work with developers, we will have them buy Tract-PIE so that we are all using the same software. This will eliminate operator error as opposed to using custom designed Excel programs which are different for every developer.

Tract-PIE’s effectiveness as a system, the ability to track actual versus budget and the ability to generate comprehensive management reports and the reasonable price and responsive service, make it the top software among its competitors today. "

For additional information, you can visit www.mountaincapitalgroup.com or contact Ellen directly at ellen@mountaincapitalgroup.com

Letter from NAHB - Tell Congress to Fix Housing First

admin — Mon, 15 Dec 2008 20:17:36 +0000

As the goal of this blog is to keep you, the reader, informed about the pain being caused by this housing crisis and what others are doing to weather the storm, I wanted to share with you the letter that I’ve just received from the NAHB. Many of their suggestions for solving this crisis quickly have been voiced already by those we’ve interviewed which means that someone is listening to someone!

The letter provides a CALL to Action and material to be downloaded and used as “talking points” when communicating with Congress. Let’s get involved and let Congress know what we want!

The letter follows:

December 10, 2008

From: Mark Pursell

Senior Staff Vice-President

Subject: Tell Congress to Fix Housing First

We need your help! The National Association of Home Builders (NAHB) is taking decisive actions to push President-elect Barack Obama and the 111^th Congress to revive the American economy by addressing the core problem to the current economic crisis falling home values.

The Problem: Falling homes values are at the core of the current economic crisis

The impact on the national economy of home building, and housing in general, in good times and bad, should not be underestimated. The historic increase in foreclosures, tightened mortgage qualifying criteria, and general declining economic conditions have significantly cut demand of housing. Housing wealth is the primary source of savings for most households and a key driver of consumer spending.

As housing has slowed, so has the national economy. In recent quarters, the decline in home building activity has subtracted a percentage point or more from annualized GDP growth. These facts suggest that the recovery from the current economic crisis must begin in the housing sector. Without addressing the crisis in home prices and residential construction, no recovery effort will be successful. Key to this effort is stimulating housing demand.

The Solution: Targeted incentives to encourage Americans to buy homes again.

Earlier in 2008, Congress adopted a measure providing first-time home buyers with a tax credit of up to $7,500. While well intentioned, the legislation failed to stimulate or stabilize the housing market. The measure’s failure can be attributed to three main factors: the tax credit was really a loan that had to be recaptured: the tax credit was only available to first-time home buyers; and $7,500 was not enough to entice people to buy.

NAHB proposes to build upon the foundation of the homebuyer tax credit by perfecting its structure and scope. First, eliminate the repayment requirement. Second, make the credit larger by increasing the credit amount on a sliding scaled between $10,000 and $22,000. Third, make the credit available to all homebuyers. Finally, extend the eligibility period for the credit to December, 30, 2009.

In addition to an enhanced homebuyer credit, NAHB is advocating for a short-term mortgage subsidy for purchases made in 2009. As you know, the Treasury Department is reportedly considering a program to provide 4.5 percent, below-market rate mortgages. While this program is a welcome first-step, the depth of the recession demands a more aggressive response. Specifically, NAHB proposed a federally-subsidized, 30-year fixed rate 2.99 percent mortgage for homes purchased before June 30, 2009 and a 3.99 percent mortgage rate for homes purchased before December 31, 2009. The rate subsidy would only apply to principal residences. This dual strategy of a homebuyer tax credit and a mortgage subsidy was used successfully during the 1970’s housing crisis, which was fed by excel inventory and falling home prices.

Go to http://www.nahb.org/fileUpload_details.aspx?contentID=106531 to view a one-pager on the home buyer tax credit and mortgage subsidy.

AD&C Credit

The nation’s single family and multifamily home builders are currently experiencing a dramatic deterioration in credit availability for Acquisition, Development and Construction (AD&C) loans, and there is intensifying pressure on builders with outstanding loans to restructure the basic terms of the agreement.

In many instances, the construction projects are solid projects that simply need to be built out for completion. Even builders who are current on their AD&C loan payments are facing bank demands for additional capital, builders, who would otherwise be able to complete and sell the project under the original terms of the loan, are being bankrupted because they lack the additional money the banks suddenly demand.

NAHB is urging Congress to examine the need for regulators and lenders to provide relief to residential construction borrowers who have loans in good standing by providing feasibility on re-appraisals and forbearance on loans to give builders time to complete their projects.

Go to http://www.nahb.org/fileUpload_details.aspx?contentID=106523 to view talking points on the AD&C credit crisis.

How You Can Help ? Visit www.capitolconnect.com/builderlink

Congress is currently crafting economic stimulus legislation that will most-likely be debated and voted on by Congress in early January. It is expected the President-elect Barack Obama will sign stimulus legislation soon after his inauguration on January 20. Now is the time to tell Congress to fix housing first and ensure that housing recovery measures are incorporated into the stimulus package.

Visit www.capitolconnect.com/builderlink and send an electronic letter to Congress and urge their support for a homebuyer tax credit and short-term mortgage subsidy. In addition, ask Congress to re-examine the need for regulators and lenders to give leeway to residential construction borrowers who have loans in good standing.

Please provide feedback to builderlink@nahb.com

Thank you for your help!

Housing Crisis in the DC Area

admin — Wed, 10 Dec 2008 23:39:01 +0000

Marty Mitchell is the Vice CEO and Vice President of Land and Business Development for Mit chell and Best Homebuilders, focusing on single family home development in Washington D.C. and outlying areas.

Having survived the slump of the early 1990’s, they were very aware of the market cycle. But no one could have predicted their present circumstances. Since 1997, the number of employees they have averaged was around 80; however, since the economic crisis, they have about 20 on staff, including 5 family members. While in a typical year, they would build between 80-90 units priced between 800K and 1 million per sale, they experienced a drop off in 2006 and presently have about 25-30 homes in inventory. They are struggling at this point to rid themselves of these "spec" units and in the process attain a breakeven point.A few years ago they experienced some delays with banks funding loans. These delays caused problems in other areas and eventually left them with a housing inventory of unsold homes that they are forced to get rid of after the housing prices had fallen 20-30%. If not for the delays, they would have been able to sell the remaining properties while their values were still high.

Mitchell remains optimistic, although admitting that this crisis is quite possibly the "Great Depression 2". "While we all expect financial dips from time to time in the industry, no one would remain in it if they knew something like this would happen."

The lessons they have learned boil down to returning to a policy of being much more conservative in their plans and transactions. Specifically, they plan to hold off buying future properties until the last minute and not be so anxious to get in there and beat the competition, but to use more caution in their dealings.

Secondly, although some of their potential projects would have caused them to stretch their building and development expertise abit, financially they would have been wiser to do them and avoid their present situation. Perhaps the profit margin would have been less, but they would not have been left with their present challenges.

As far as private investors are concerned, Mitchell insists that there are many, but they are waiting on the sidelines. "They are simply waiting for the right time to cash in of this crisis and will jump in as the market stabilizes."

He has excellent insight when determining the best route for government intervention into the housing sector. "The government needs to make sure that the money given will end up on the streets, actually providing loans for the American public. If not, it will be money wasted." Mitchell insists that the proposed $7,500 tax credit needs to be forgotten and instead provide a $22,000, non-refundable credit to all home buyers for a year or so. Also, the government needs to expedite the funding loans through Fannie Mae, Freddie Mac and FHA making home purchasing possible with fixed rates as low as 2.99% through the beginning of 2009 and then at 3.99% for the next six months. "These loans should be available for purchasing and refinancing. While loan modifications dealing with eliminating portions of the loan balances can help, making the loan at a low, fixed rate will be far more beneficial for those who want to stay in their homes. And in the bigger picture, it is a far more prudent choice for banks since they don’t want the responsibility and liability of owning, protecting and maintaining foreclosed homes."

Mitchell also brings up an excellent point that the building industry is not about simply building a home, but providing work for thousands of individuals, "For every 1,000 homes built, 3,000 jobs are created. It’s about not only employing the construction workers, but the lenders, underwriters, appliance manufacturers, insurance brokers, technological experts etc. Stimulating the building industry will help to create jobs and ultimately stabilize our economy."

As far as software is concerned, now more than ever, they are using their Tract-PIE programs not only to re-run new projections for development purposes, but also to create realistic "if-then" scenarios for lenders who are pushing for payment and unwilling to listen to reason.

Similar to others in their industry, they are looking into multi-family housing and smaller homes on small lots. They have also dabbled in environmentally-friendly approaches to homebuilding, an area they know will be increasingly popular in the future.

Mitchell is optimistic and determined. "We will survive these next 18-24 months and will do very well at the backend."

For more information about Mitchell and Best Builders, visit their site at http://www.mitchellbesthomes.com.

Green Projects in Tulsa, OK

admin — Mon, 01 Dec 2008 22:13:47 +0000

: One Architecture

Shelby Navarro is the founder and owner of ONE Architecture in Tulsa, OK. Navarro has had his own firm for six years and unlike other companies in his industry, Navarro has been very successful in branching out into other areas to compensate for the lack of building in the present economic crisis.

While focusing mainly on architectural design for residential and commercial buildings, he has set his company apart with his work in "sustainable" or environmentally sensitive design. While there are existing incentives for builders and owners of green homes, Navarro hopes that there will soon be more that actually benefit the developer as well. He confesses that interest in high energy conservative approaches has waned a bit since their price of fuel has decreased, but there still are many potential homeowners interested in decreasing their energy use and incorporating healthy and environmentally friendly techniques.

Among environmentally friendly features for developers, he has used the "geothermal loop", a process using the natural stable temperature of the earth to heat and cool homes making it 50-70% more efficient. "The system will also provide free hot water." Navarro says that "although these projects are environmentally and financially beneficial in the long run, certain selections can be an expensive process in the short run and more tax credits would encourage more developers to take this route." He also has designed concepts for using solar and wind power by installing wind turbines in and near housing communities.

While One Architecture has hit a few snags in terms of getting rid of housing inventory, their relationship with banks has continued to be healthy. At this point they have purchased five distressed properties which they are renting at such a successful rate that there are plans to purchase five more. They have explored constructing housing in other areas of the country, but are convinced the Tulsa area affords the best opportunities at this point and is far more stable than other areas in the USA.

As far as software is concerned, SitePlanner seems to be a real favorite. With SitePlanner, he can "use it intuitively" without much effort. SitePlanner has provided him with quick information about lot yield and metrics on right-of-way square footages that he can use in evaluating the feasibility of a proposed project. SitePlanner also provides him the ability to overlay graphics and include bodies of water and roads for his presentation material. Unlike AutoCAD which is tedious and difficult to use, he can rapidly put together various conceptual designs for a project and then import the plans from SitePlanner directly into AutoCAD saving him much time, grief and money!

The more entrepreneurs we connect with in the industry, the more we’re hearing about the good that’s coming from this crisis; people are entering new areas and finding great ideas that are untouched. In the midst of financial trials, they are stepping out and exploring new possibilities both professionally and personally.