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Creation Of A Neighborhood
By Bob Phillips

Part 5: Interview With Jim Burrows, President Of Prudential Summerson-Burrows, Inc.

Jim Burrows is President of Prudential Summerson-Burrows, Inc.. He also is President and Managing Broker of Hallbrook Realty. In September of 1997 Jim agreed to an interview with NeighborhoodNet. The topic for the interview was Keith's proposed development, but in fact, the interview ranged over a wide variety of subjects.

The following are excerpts from that interview. The full interview covered additional topics. A transcript of that interview is available.

Some of the topics covered are:


Keith's Development Plans

I applaud him for what he wants to do. I think it's a niche market certainly. I don't know how large it is, but I think, like you, that there's a lot of people who buy a lot of homes that certainly aren't of the quality that I think Keith has in mind.

I think a lot of that has to do with maybe the public's lack of knowledge, but I think it also probably has to do with - it's always a perception of value and actual dollars spent. So, I say it's a niche market because I think people may not be willing to spend the money to buy a home like Keith wants to build.

Again, I think one of the difficulties, unless Keith can sell the houses himself: his actual sales force is the real estate brokerage or real estate community (of the new homes in Kansas City, 85% of them are sold by realtors). That's basically his sales force, so if they don't understand what he's selling, it's going to be hard for Keith, I think, to make that work.

Do you want to go in and spend, if you would, the kind of money it takes and the kind of subs you have to use and the supervision you have to give to build that "super quality home" for someone that's going to be there 3 to 5 years? Someone who will be moving on and has to worry about re-selling that home to a buyer that's coming in who may only be there 3 to 5 years. A buyer who, for instance, asks the question:

'Why is this house (and I'm just going to use a number) at 3,000 square feet - why does it cost $250,000 and why does that house over there, that looks pretty darn good to me at 3,000 square feet, cost $180,000?'

And probably fortunately or unfortunately, the difference is behind those sheet rock walls that they can't see. Did they pay $12 a foot for their framer, or did they pay $5? Big difference. Probably quite a bit of quality difference, but the consumer can't see it. Did they use 4,000 lb. concrete in the driveway or did they use 3? The driveway looks pretty good, who cares?

Those are the kind of issues that make it difficult to pass on to the consumer. How do you explain that? That's an issue that I really haven't gotten the answer for, because unless you really know what quality went into that house 5 years down the road, you can't say, or you shouldn't say, that's a poorly built house or whatever.

You just really don't know the subcontractors that were used and all those kind of issues. You can suspect, but if the people have done a good job of decorating, if they've kept the house in good shape, if they've fixed the little things that come up, the nuisances and things like that, they'll be ok.

That's the issue for Keith. It won't be a quality issue, it will be a marketing issue.

We find a lot that what people say and what they do are not always consistent. I can remember specifically, like you mentioned, the big energy crisis. All of a sudden they decided to go to heavier insulation in the walls. The builders, to do that, were charging $1,500 to $2,000. Well, we elected not to do that at the time because we didn't think the general public was that interested in it.

Sure enough, you could just sit down with them and say how long are you going to be in the house? They'd say, well, I'm going to be in it about 3 years. When you figured out what they were saving in the way of gas bills, electricity, and all this and that, in three years it was a long ways from adding up to $1,500. They could put more money into appliances or drapes or something like that. That just seemed to make more sense to them.

So those marketing issues are really the key issues.

Now there will be a niche market. There will be people that have the money. It's important to them to build that quality home and they have the money to do it. We have that kind of market right now. That's what Hallbrook is basically all about.

I hope that Keith is successful. But Keith will have to understand that consumer. And the consumer will basically, if you will listen to the consumer, they will tell us what they want. Then its just a question for Keith, are there enough consumers telling "That's what I want" to make it a viable endeavor.

He's got to get to the niche market. Now if he does, he can be extremely successful.

I really believe, and it might be because I am a realtor, when you get down to the successful developers and the successful builders, what they really, really understand, better than their competition, is marketing.

I can't tell you the number of people over the years, engineers and other people, that have said, you know, the quality of homes in Kansas City, I really question. And I'm going to get in the building business and build the kind of homes people should have. And the question really is not what they should have, it is what they want to have. If you talk to people who come in from out of town, Kansas City still gives overall one of the best values in the country for a home. I figure we have people from HBA's coming in from Houston, they just can't believe the quality of homes that you get in Kansas city on a comparison basis. And I think a lot of that is because of the small builders. As you eliminate competition in any field I am not sure that is in the best interest of the consumer. But that's what is going to happen.

I hope Keith makes it. But I think he really has to listen to that consumer. I hope he's got some people that he feels comfortable with that he let's them have input on what they're hearing and see if they're all hearing the same thing. And I hope he finds that niche market. I applaud him for what he's trying to do; I really do.


Consolidation and Vertical Integration Of The Real Estate Market

In the 60's, the 70's, the 80's in Kansas City you had a developer that developed, you had a builder that built, and you had a realtor that sold. That's changing. It's now coming in under one umbrella, if you would. A developer is developing, building, and marketing all under one umbrella.

We're into that business now. We found ourselves being the odd man out. You could replace the realtor easier than you could replace the developer or the builder. So we decided that if we wanted to stay and do homes, we were going to have to take over the role of developer and builder. We think we have the marketing expertise to do that and we're in the process of doing that.

We are also joint venturing with some investors, where we are investor and we bring the marketing to the table and our investor brings the money to the table. One of the partners is also a builder. All the risk goes under one umbrella, but all the profits come in under one umbrella.

It's a change. Kansas City is just a different type of marketing set-up, if you would, than if you go to Dallas, if you go to Atlanta. What we are doing now, they have been doing for years and years and years. Major corporations like Pulte, Ryland Homes, they're doing it under one umbrella. We just never had the size and the aborption rate to do that. Kansas City has a lot of small builders and a lot of small developers that other major cities just don't have. But that's all changing and it will change a lot in the next 5 to 10 years. I think you are going to see fewer developers and fewer builders. It's happening.


Neighborhood Associations

I give credit to restrictions/homes associations to the J.C. Nichols Company. They started their restrictions years ago. I'm a great advocate of it. I just think you have to make sure that you use good common sense and the restrictions that you expect. Then be prepared as a developer to enforce those restrictions, but I think they're the driving force in helping a particular subdivision to increase in value.

I as a developer would not want to give up control of the homes association until I feel that I'm almost through with the subdivision. Now, I can do that a number of ways. I can turn over the subdivision right away, but I have enough votes with the number of lots that I hold that I can control it that way. The homes association basically at that point in time are more like an advisory board, but as a developer I control.

If I'm doing landscaping and flowers and things like that, that to me is part of marketing. I want to make sure that they continue to do that until I'm through with my lots.

Now, after I'm gone as a developer, if the homes association wants to decide they don't want to spend that kind of money to do the flowers or to keep the pool up, whatever, that's a decision at that point in time that the home owners can make. But I don't want them making that decision while I still have a major investment in that project. And I feel pretty strong about it because before they buy they know what the rules are. Or they should know what the rules are regarding the homes association guidelines.

So I think that I like to give them some input, but I don't want to give them control until I'm ready to move on.


Housing Affordability In Johnson County

I think all of us are always talking about affordable houses in Johnson County. The ground cost has gotten very expensive; cities have put a lot of requirements on the developer in the way of fees for water hook ups; development costs have skyrocketed. There's just a lot of issues.

There is always a difference of opinion of who should pay more for the streets. Should it be the developer or should it be the city, who benefits from growth? I suppose if you're a developer, you'll think the city should help because growth helps the city. On the other hand, probably if you're an independent home owner, you'd just as soon see a developer probably pay for it, rather than pay it in taxes.

But as a developer, I'm going to pass it on to the buying public, so it always gets back to the issue of affordable housing and I think that's why Lees Summit and some of the other areas have had a growth spurt. They've been able to address a market that Johnson County is becoming less able to address.

A lot of it depends on housing density. The city is real concerned if they give you a density per acre of much over 3 1/2 to 4 per acre

And density is one of the issues if you want to provide affordable housing. Generally speaking, right now in the Blue Valley School District, except for very few possibilities, you cannot buy a new home for under $140,000. Probably none of use consider that entry level housing.

There's just more people that can afford a home for $120,000 than there are who can afford a home for $220,000. I was talking to some of Johnson County's Blue Valley School District officials (I serve on a couple of committees) and they don't see too many homes being built in the Blue Valley School District for under $200,000. It is pretty amazing that the absorption rate continues with the price of housing that it has.


The Next Installment: How To Get $1 Million For Your Dream

Written by Bob Phillips. All rights reserved. Copyright 1998, All rights reserved. February, 1998.
Any reproduction by any means of this material without the explicit written consent of the author is forbidden.
Displayed on NeighborhoodNet(tm) with permission of the author

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