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Transcript Of Interview With Jim Burrows, President Of Prudential Summerson-Burrows, Inc.
By NeighborhoodNet, September, 1997
Subjects:
Jim Burrows
NN: So, can you tell me a little bit about your background?
JB: Well let's see. I graduated from Kansas University, in 1961 - a degree in Education. Went directly with Standard Oil of Indiana out of college and went with marketing with them for 10 years. Finished up as assistant regional real estate manager for them and decided that - their headquarters were in Chicago - so we decided, my wife and I and three daughters, decided not to make the move. I went to work for J.C. Nichols and was with the Nichols company for seven years. I was with a smaller real estate firm for 1 year and actually started Shannon Valley subdivision from scratch.
NN: So you've been through this whole process of creating a neighborhood here in Johnson County?
JB: Been through it quite a bit. Right. Then, after a year, I was approached and started Summerson-Burrows in June of 1978 and have been with Summerson-Burrows since 1978.
NN: What's your role at Summerson-Burrows?
JB: Well, I'm the President and one of the principals of Summerson-Burrows.
NN: What's the function that Summerson-Burrows basically plays?
JB: We basically are a residential real estate company. I also am President of Hallbrook Realty, which is a joint venture with J.D. Reece. We market all the homes exclusively in Hallbrook. Reece now has very minor interest in that. I am the Managing Broker of Hallbrook Realty also.
NN: We've talked some about Keith's concerns and vision. What are your thoughts about the quality of building here in Johnson County?
JB: Well, I could probably ramble on that a little bit. 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.
Shannon Valley
NN: What sort of stuff, when you were developing Shannon subdevelopment from scratch and going forward, what sort of issues did you run into?
JB: Well, back then my main responsibility was to find five good builders and to do model homes and things like that. I was able to do that. That was really the first major subdivision in the Blue Valley School District and west of Metcalf that broke south of I-435. That, of course, was a result of the sewers coming south and breaking that barrier from the Shawnee Mission School District to the Blue Valley School District.
NN: Did you run into any issues with sewers? Were sewers a given that they were already there? Did you put in dry sewers to start with? Did you start out with the whole sewer system?
JB: We had full sewer system.
NN: What was your experience in dealing with Johnson County and the approvals that you had to get to go forward: the Board of County Commissioners, the Planning Department, and so on?
JB: Well, I think they're pretty consistent. I think they do a good job. I think sometimes they've had to get a little more stringent because I think that in the past a lot of developers have promised them things that never happened. Landscaping is a major issue. [There were some] gentleman agreements and they weren't done. [The city] had to take action to make sure in the future that they were done. So I think a lot of what the city has demanded is the result of people, of some developers, not doing what they were supposed to do in the beginning.
NN: What sort of stuff do you look into or do they care about when it comes to landscaping? When you developed Shannon Valley, what were the major landscaping issues?
JB: I think basically the city required you to plant certain trees in every yard. Also, just from a marketing standpoint, anytime you have a major street like College Boulevard, if you've got a good developer that understands marketing, he's going to do a good job of screening those back yards from the streets. We knew we were going to have commercial on the eastern boundary, which is now Shannon Valley Shopping Center and eventually we would be up at Antioch and all those. A good developer just does a very good job of extensive landscaping because it's good marketing.
Then we have the sewer treatment plant on the West side.
NN: How large a subdivision is Shannon Valley?
JB: Approximately 500 homes.
NN: Did you start out with 500 homes in one phase?
JB: What you do is you get a preliminary and final plat approved with the 500 houses. Now that can vary. When you are doing a subdivision of that size the market is going to dictate to a certain extent, interest rates and everything, how fast you take it out. That determines how many lots you're going to do by phase.
NN: Now when you finance a subdivision like this, you're working with major banks?
JB: Major banks, right.
NN: Was it just one bank? Or was it a consortium with Shannon Valley?
JB: Well, basically as far as the development itself, that was one bank. Then the builders dealt with their own banks on the construction financing.
Neighborhood Associations And Deed Restrictions
NN: Could you talk some about neighborhood associations and really the control that you as a developer felt you needed to maintain before you passed control over to a neighborhood association - deed restrictions, that sort of thing.
JB: Well, 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.
NN: At what point do you believe the home owners should have a voice in the neighborhood association? I've seen some subdivisions where, at least for a period of time, they have no voice. Another period of time or other subdivisions where they're appointed, but there's another company that really runs the sub-division.
JB: Well, I think there's a couple of instances. 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.
Affordability
NN: What are some other things I should be asking you? You've got a lot of experience, I don't.
JB: Well, 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.
NN: What do you think of as the cut off prices where affordable begins and ends?
JB: Well, 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.
NN: So the city really does not want more than 3 1/2 to 4 per acre?
JB: They really don't. 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.
NN: What is the market like right now [editor's note - in September, 1997].
JB: Very strong. 1997's been an excellent year.
NN: So at least in Johnson County there really isn't a problem right now.
JB: As far as the market - people buying - every developer and builder in town will tell you it's been a big year. Again, part of that is the schools. If you want to retain value, and if you look at any area that makes the commitment to its school system, you'll find an area that has good real estate sales and re-sales are strong. If you show an area that, for whatever reason, maybe the age of the populace or whatever, and they feel like the schools aren't quite as important, those real estate values will go down.
NN: So as demographics change, as children move out...
JB: Yep, yep. Got to be careful. If those schools' level of excellence must be maintained or it'll seriously affect the re-sale value of the property.
NN: What are some other major factors that affect the re-sale value of the property?
JB: Well, I think interest rates, just the overall economy, is certainly going to affect home sales. Affordability. 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.
NN: How many houses does Prudential-Summerson-Burrows market per year?
JB: We'll sell in excess of 2,000 to 2,500 homes. Now those are not all new homes.
NN: But your agent has been on one side or the other of the transaction?
JB: Right, right.
NN: Do you have any thoughts about buyer's agents as opposed to seller's agents?
JB: Well I think it's changed the marketing process tremendously. I think the real estate industry is still struggling to a certain extent with what that all means. What the agent's role is as a buyer's agent and what the agent's role is as a seller's agent.
NN: What are your thoughts on those two roles?
JB: Well, I think its good. However a good agent is a good agent is a good agent. Just because you're a seller's agent or a buyer's agent doesn't make you a good agent. The key is still, like in any business, to deal with a professional that has the consumer's interest. That's number one. Make sure they have all the facts.
We find that if the consumers have all the facts, they'll make a pretty darn good decision. It's when maybe the consumer doesn't have the experience to ask the right questions and, for whatever reason, the realtor elects not to give them the right answers, or at least the detailed answers, there seems to be some confusion.
Quality Homes
NN: Back in the 70's and early 80's when we were going through an energy crisis, there was a lot of focus on passive solar homes, on energy efficient homes, the rest of it. Do you see any of that now?
JB: No, it was a niche market. I think that's where people tried to build the high quality homes, but you get different kinds of buyers:
Their expectations on what they want is completely different.
So 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.
NN: So what sort of characteristics do you find in a Hallbrook house that you would not find otherwise.
JB: Well, I think just basically the quality of the sub in a Hallbrook house is different. The mindset is just different in the building of a Hallbrook house. The people have the money to pay for it and are willing to pay for it.
Probably, and I'm only guessing, I would say probably the spendable income, their income is such that on a percentage-wise that house is probably less percentage of their total expendable dollars than it is in the lower price homes. They just have a different mindset when it comes to quality: on what kind of, and how much money they spend on, an entry floor; how much money they spend on counter tops; the grade of appliances, the amount of trim work.
NN: Is there much interest in whether they're using 2x4's or 2x6's?
JB: Most consumers don't have a lot of knowledge. They're kind of saying I think: if you pay more money, you expect to get a better car if you buy a Mercedes than if you buy some other type of car. Most of us don't look under the engine. We just assume that based on performance, that's what we get. Well, that's kind of like, if you use a certain builder in Hallbrook you're going to make some assumptions as to the quality of home that that builder uses and the quality of subcontractor that he uses. Their performance over the years and customer satisfaction is an indication that they are doing that.
NN: What are the range of prices in Hallbrook?
JB: Right now it's awfully difficult to build a new home in Hallbrook under $800,000.
NN: And the resales are in basically the same range?
JB: Basically, it's awful hard. Now, when we first started Hallbrook - I remember the first consumer moved into Hallbrook in December of '88 - we had houses out there in the $400,000 range. Those people - it turned out to be an unbelievable investment for them. And who'd have ever thought it back in 1988? Now, if you get anything priced under 650, provided the house has been kept up and everything, that house won't last 30 days on the market place. It's unbelievable.
Vertical Integration
The biggest change your going to see, Bob, is that - 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.
NN: Where does that leave Prudential-Summerson-Burrows.
JB: Well, 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.
NN: What's a current project that you're doing with this joint venture?
JB: Parkwood Hills at 143rd and Pflumm.
NN: Who are your joint venture partners.
JB: The builders are Gabe and Michael Brown and our investors are Joe Jenkins and Jay Bridenthall. It's been extremely successful.
NN: When did that get started?
JB: Spring Parade of homes in 1996.
NN: And what's your target market?
JB: Well, we started out, we wanted to be in the upper $120's and on up. With inflation its awful hard for us to build anything under $140, but the market continues to be extremely strong out there. It happens to be one of those areas, very close to Olathe, but it happens to be in the Blue Valley School district.
When we bought the ground, my concern was that we were so close to Olathe that our consumer would be someone who wanted to live in Olathe and would want Olathe School District. That was just a concern.
I underestimated the power of the real estate community. It was one of the few areas where you could get into the Blue Valley School District for under $150,000. They carried the market for us and sold it.
People say "I want in the Blue Valley School District." A co-worker's comment carries tremendous weight. They say to somebody moving in from out of town, "You want to be in the Blue Valley School District." Even though maybe test scores and all those kind of things might indicate that Olathe School District test scores are equivalent to Blue Valley, when that co-worker makes that statement, as a realtor, anyway, I personally don't try to change that thinking, I try to go with it and support it if I can find the price of home that they need.
Well, that seems to be what the realtors are doing. Somebody says "I want to spend $140 or $150, that's what I can afford, but I want in the Blue Valley School District" and I knew we have to have it. And it's been extremely successful.
We all know the Blue Valley School District. The facilities are excellent. The quality of the teachers and everything they say is true. But Olathe is excellent and Shawnee Mission School District. We're just really fortunate in south Johnson County to have the quality of schools that we have.
The Importance Of Marketing
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.
Darryl Rodrock's strength is he understands marketing. He understands the consumer. 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.
Tibbles is a niche market. Those people, Rich Carlson is a niche market. There are a few people that get to that niche market. But they make tremendous commitment and usually they have to have pretty deep pockets. Hallbrook is a niche market.
But I've often said: there's a Jack Henry's and there's a Wal-Mart. I know there are more people that are going to go to Wal-Mart than are to Jack Henry, but I know that there is that market. What I don't want to get into is in the middle. Where I don't have the Jack Henry's market and I don't have the Wal-Mart. I'm caught in the middle. I don't have the quality and I get in between, so I really haven't catered to my market and that's where people, I think, get killed. And that is just 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.