How the Deal Was Done: Epcon Franchise Builder Says Systems, Track Record Opened Door for Financing
John Wahlen didn’t have homebuilding experience before he started developing his first community, and the Epcon name put bankers at ease
John Wahlen had been watching Epcon’s spectacular developments sell out fast in the Central Ohio region, where the company started nearly 30 years ago. He thought the concept would transfer well to Milwaukee, and he was right. His company — Cornerstone Development of S.E. WI LLC — now has three Epcon Communities there. But before he got started, he had to figure out how to find a lender willing to partner with someone who had never been a developer.
He says Epcon’s systems, support and track record made all the difference. Epcon Communities Franchising Inc. is America’s 36th-largest homebuilder (“2013 Builder 100,” Builder Magazine, May 2014), and one of the only home building franchise companies that exists.
“I had a sales and marketing background, and my partner had a building background — but nothing on this scale,” John says. “We had a big bank lend to the two of us with minimal down payment of 5 percent. The banks got it; they understood the success of Epcon.”
John believes that it was Epcon’s business blueprint that put lenders at ease. Epcon offers Franchise Builders extensive support and planning documents to help guide them through the development process, based on Epcon’s three decades of success building communities that are popular with active adults.
Just as impressive as the thorough systems is the transparency offered by the brand to its Franchise Builders. Epcon was willing to open its books and provide historical sales data. “That is the stuff the banks really worked hard to look at,” John says.
Success only made the process easier when it was time to build their second community. With plenty of capital to reinvest, Cornerstone Development of S.E. WI bought the land for the new community, and was able to use the equity from the land purchase to obtain financing to build infrastructure and a clubhouse for the second community. The clubhouse then served as a sales office as development began.
Growing to meet demand
As the economy improves and the real estate market gains strength, John has big plans to meet the demand for low-maintenance homes and communities.
“I plan to take it up to 75 to 200 condominium homes a year,” he says. “I have one community that is active right now and is about to sell out. I have three more coming. It’s amazing. Even in the downturn we were still selling. During that time we sold about 132 of these in about 2 1/2 years. Even around 2010, we were selling one and a half to two a month.”
Epcon is perfectly poised for today’s housing market, and for the trends that are expected to drive the market for several decades. There are 76 million boomers, according to the U.S. Census Bureau. Many plan to buy new homes for retirement that are smaller, but that offer a lot of amenities that they finally will have time to enjoy.
Epcon is perfectly positioned to capture these buyers. Since our founding in 1986, we have built low-maintenance homes and communities that are extremely popular with 55+ buyers. Today’s 55+ homebuyers represent a special opportunity. There are millions of them, they are wealthier than other generations and they have better credit and more equity in their existing homes. That puts them in the best position to buy, which is why Metrostudy (a division of Hanley Wood) projects that 55+ buyers will purchase 52 percent of the new homes sold between now and 2019.