By Iris Richmond. There's a reason why most people don't go into the land development business. Sit down with any developer and you'll hear stories about pitfalls and capricious character. In this profession, survival demands the patience of Job and the optimism of Pollyanna. Every victory is hard-won, and the entitlement process is perhaps the grimmest outpost known today. Yet, developers live to tell their tales.
Taylor Woodrow's Keith Bass, president of the company's Florida home building and land development operations, says it's not that he minds playing by all the rules of the development process. "My only caveat is that it's never, 'Swing three times and you're out,' " he says. "The rules of the game are constantly changing, and that's really every developer's worst fear.
"Just last month, I showed up at a meeting to discuss a site plan at a local municipality," Bass continues. "The city rules state that 30 days after a developer supplies his site plan, everyone must meet to discuss the comments that [municipality] members were to have submitted to the developer two weeks prior. Some comments we got the week before, some were faxed the night before, and two people handed us three pages of comments the day of. That cost us a 30-day delay. With a $30-million piece of property, that meant an extra $250,000 interest payment.
"It happens every day, and all you can do is smile and say, 'Thank you very much.' You never get the money back, and if you call them to task, your site plan just went to the bottom of the pile. Unfortunately, they're not held accountable."
Tom Miller, vice president of land development for The Drees Co., says most city planning people don't understand "the turns," the fundamental necessity of land developers. "You have to turn through the development process to make it profitable," he says. "If you don't, the interest on the land will eat up all the profit."
Hitting the Funny Bone
When things go wrong — a given in the land business — it's sometimes difficult to inject humor, let alone leverage, into the process, says Ashton Woods Homes' president and CEO Tom Krobot. To combat a furrowed brow, Krobot likes to tell this story, which, he says, epitomizes the development business:
"Man walks into a bar, sits down next to a woman, and asks: 'So, what brings you here?' to which the woman answers, 'I've just been divorced for the third time, and I'm still a virgin.' The man's jaw drops and he asks, 'How can that be?!' The woman puts out her cigarette and says, 'Well, my first husband was a city official. We never got anything accomplished. My second husband was a fanatic about stopping growth. And my third husband was a land developer. All he ever did was sit on the edge of the bed and tell me how great it was going to be.'
"Developers are the most optimistic people in the industry," says Krobot, whose company is headquartered in Roswell, Ga. "We have to be."
Banking on Ingenuity
While waiting to gain a better toehold in the political landscape, developers have had to learn how to turn barriers into opportunities. Miller recalls years back when the government first started requiring builders in the Midwest to build water detention basins to catch and drain storm water. "My big concern was that the basins would become very much of an eyesore because the runoff leaves sediment behind. But as time passed, they became even more unattractive. Weeds grew out of them and leaves collected, too."
Drees, based in Fort Mitchell, Ky., was then met with the task of trying to turn a negative into a positive. "The lots surrounding the detention basins are always the last to sell, if at all," says Miller. "By spending roughly $5,000 more to build a retention [basin], which we filled to make into a lake — and also an amenity — those units soon became the first to go. You have to be creative in this business."
Along with resourcefulness, a developer has to keep to a schedule, advises Jim Previti, president of Empire Capital, based in Irvine, Calif. "If you're not minding the store constantly," he says, "bad things will happen, and you can't whine about the results.
"Years ago, I sold a piece of land to a fella'. He had some troubles, didn't focus real well, [and] was doing it mainly for his ego. He called me up and said, 'You sold me problem land. You have to take a ride and let me show you what's happened.' He drove me to a house that was in a tunnel. 'Look at this,' he said. 'This is a disgrace!' I said, 'Look, do you know how many subs were here before you got to this [point]? You had a cement contractor do the foundation, and you had people frame it. This thing is finished, and do you mean to tell me you didn't realize it was this way until now?'
"He'd thrown away the plans that we'd stayed up three nights in a row to make sure were perfect before giving to him, which included a proper grading plan. Instead of grading it, his people built big retaining walls. He didn't pay attention to the details, and that's what I decided I'd never let happen to me. I can get off schedule for a week, even a month, but I'm going to know what the issues are. It's never going to be, 'God, look at this, we're a year off track.' "
Terrabrook executive vice president and COO David Frame is of the same mind. "Because you don't realize what your challenges are until you encounter another challenge," says the Dallas developer, "a developer has to have already paid the dumb tax, figured out where all the ghosts are, and know exactly who needs to be on his team."
But when all is said and done, most developers will tell you they love their jobs. Previti puts it like this: "The development business is one of the more difficult businesses, and it won't get easier in the future, but the rewards are very gratifying. I'm happy I didn't go into the shoe business."
Published in BIG BUILDER Magazine, October 2002