Epcon Experts Series With Steve Peck: Land Acquisition and Development

 

Steve Peck, national land manager at Epcon Franchising, discusses land acquisition and development, residential zoning, entitlements, land tips and trends, and more in this episode of the Epcon Experts Podcast.

“If you feel like you have too much information that you’re presenting at a meeting, you probably don’t have enough. What we see right now is a lot of these planning commission members aren’t necessarily industry people.

These cities and counties are begging people to be on these boards, because there’s no glory in it. They don’t necessarily understand planning growth and development.”

Host: I’d like to welcome Steve Peck, national land manager for Epcon Franchising, with us today. Welcome, Steve.

Steve Peck: Thank you. Good morning.

Host: Good morning. Number one question that we often ask is, from your perspective, what are the most important traits that are necessary for an Epcon franchise builder?

Steve: We see all types. I would say depending on the size of their current organization, we see varying levels of success. For those that are coming from smaller businesses, it’s important for them to hire early and to delegate. It allows them to move quicker.

Those who can manage their time and dedicate what’s necessary to get an Epcon project up and running. Those who struggle tend to try to do everything themselves and don’t hire early enough. It slows down their ability to get to market and affects margins overall in the long term.

Host: Delegation is what you’re saying. The ability to let other people do their job?

Steve: That is correct. Most of them are entrepreneurs. They’re generally used to being close to the vest and controlling. They got to find time to let things go and get some staffing.

Host: If you want to grow and scale as a business, you’ve just got to work as a bigger business. That often requires your delegation to the rest of your team.

Steve: Exactly. It’s hard for them, but the ones that see it, they pick up on it quick. It moves things forward.

Host: I was wondering if you could share a little bit about your background, Steve, and your current role at Epcon.

Steve: I’ve been doing land development since 1997. I started with a local developer in Atlanta, Georgia. We developed lots and sold to national builders. We did generally between 400-500 lots a year.

After having kids, we moved back home to Columbus. I was with a regional builder, Dominion Homes, as their land manager. A good‑sized region. We were doing 900 lots roughly a year, except through the downturn, where things trimmed back into the 400s.

They were ultimately purchased by Pulte Homes in 2018. Stayed on with them for a little while. Was their director of land development. Had four or five employees. We put in anywhere from 800 to 1,100 lots a year.

That’s my background. I am a land planner, construction management by trade. Had been in it ever since.

Host: You’re a land guy.

Steve: That’s all I’ve ever done.

Host: If you look it up on Google, your picture comes up.

Steve: That’s right. Other than mowing lawns when I was 10.

Host: That could be useful to some of our builders as well.

Steve: That’s right.

Host: What ultimately brought you to Epcon?

Steve: It was an opportunity for me to get back out into the field and help people. When you’re with national builders, you spend a lot of time in internal operations, meetings, goals shift rapidly.

For me, it’s the ability to get out into the field and work with engineers, land planners, municipalities and be more hands‑on and help people through the process. I like the teaching aspect.

I get a lot out of seeing people grow and understand that maybe on that second or third project, they’re doing a lot of it on their own. It’s fun for me to see them grow, and their business grow to where they can learn from me and then do it on their own sometime down the road.

Host: Can you talk a little bit about how you work with our franchise builders around the country? How do you help them in the areas they need most? Especially in the land area.

Steve: Very early on, it’s all about getting with them on how to analyze a deal. Generally, before they come on board, they are looking at land, but they don’t know necessarily how to analyze it.

Maybe put lots on paper and understand what it costs to develop and figure out if it’s a deal that may work. I spend a lot of time with them.

Then we move on to preliminary budgets, and then put it into the grinder of a proforma and see what it spits out in terms of margins and trying to do some high‑level budgeting in terms of their vertical costs and stuff.

It’s really about finding engineers, planners, working with municipalities to get them to be able to figure out if the site’s going to work.

Host: You mentioned the word analyze. Talk a little bit about how you analyze a piece of property, a piece of land for a 55‑plus community, let alone an Epcon community.

Steve: A lot of it’s on the market analysis. We do some demographic research and we track a lot of that with our existing projects and we try to emulate what has been done in the past and been successful. Obviously, we’re not trying to recreate the wheel here. We want to do what’s been successful and just repeat it.

Whether that’s looking at our expected sales price as it relates to existing ‑‑ and that would come from that demographic research ‑‑ or doing a lot of research on what other new homes are available in the area.

We want to make sure that our pricing is in alignment. We do charge a little bit of a premium over most builders. We still have to be somewhat competitive. We can’t be too far out of line with what they do.

Host: I assume there’s some trends happening in land acquisition right now. It’s an ongoing issue for any builder. If you don’t have a piece of property to build a home, you don’t really have anywhere to go. What’s happening in land acquisition right now?

Steve: Unfortunately, the two things that come to mind are not good. Number one is with costs getting so much higher, the percentage of what the lot would be in a sales price. Historically, that’s always been 20 percent.

Most deals are in that 24 to 27 percent of the lot cost in the sales price. That’s troubling, because it’s tight on the margin. It just leaves very little room for error for the builder/developer.

Host: Those are some realities that builders are dealing with. Where’s the good news?

Steve: We don’t know yet, but we are watching to see. For us, the big builders have been so aggressive the last few years. Having come from a large national builder myself, where the market maybe shows some signs of taking a little bit of a downturn, those national builders start to look at their three to five‑year lot inventories.

What we’re hoping is that there may be some opportunities where they pull back on some of those deals. Then it would be something that we could be opportunistic and jump on it. That’s the opportunity if some land becomes more available. It’s not getting any cheaper. There just may be more opportunities to look at.

Host: In addition to those type of land holdings, can you speak a little bit about the importance of developing relationships with local real estate brokers for acquiring land?

Steve: It’s critical. 90 percent of what we find today is an off‑market deal. What happens is, if a property has been listed for however long ‑‑ and you can see some that have been listed for years ‑‑ what happens is everybody looks at it and there’s always a problem that kills that deal.

We have to have local connections to be able to figure out who may be a willing seller and then we approach those people. Having somebody local that they know of, see at church, or whatever, it gives them a level of comfort, rather than having to deal with an outsider sending just mass letters asking them if they’re interested in selling.

That local connection, maybe knowing who may want to sell or who’s maybe having health issues, or the kids got the land in a trust and now they’re ready to divide it up. That’s critical for us to find a deal.

Host: Like so many things in life and business, it comes down to relationships.

Steve: That’s exactly right. You’ve got to have that local presence. Now, most of our builders have a local presence and that’s helpful. Still, if they’ve never been on the land search side other than just buying scattered lots, it’s a different process.

It takes a lot more of a commitment from a seller’s end. The time it takes to get through entitlements and zoning, it’s a much different than just buying a house. These can take up to a year to 18 months before you’re even closing. That relationship’s critical.

Host: Can you talk a little bit more about zoning and entitlements and what tips you might give to builders, or the conversations you have with the builders around the country?

Steve: We’ve had a couple of these recently where the one thing I would say, if you feel like you have too much information that you’re presenting at a meeting, you probably don’t have enough. What we see right now is a lot of these planning commission members aren’t necessarily industry people.

These cities and counties are begging people to be on these boards because there’s no glory in it. They don’t necessarily understand planning growth and development. You really have to educate them to move the line and get them to understand what you’re doing.

That’s probably the biggest thing we’ve seen recently is that you just can’t undersell it enough. You have to stand up and be proud of what you’re delivering and help them understand the benefits to the community, which they may not get.

All they look at is traffic and trees are falling down. They may not understand the overall benefits to the community.

Host: For builders that come into the Epcon network, you are able to help guide them and hold their hand through these types of issues.

Steve: That’s correct. I’m very hands‑on where they want me now. Some of our builders have already done some development before. In those cases, I’m maybe a second set of eyes.

To some of our builders that are brand new, I will make sure that it’s kicked off on the right path.

Host: Can you talk a little bit about public utilities and the importance of knowing where all those are as well?

Steve: It’s interesting. As technology improves in GIS mapping, that’s gotten a little better with the municipalities. As we start to look high‑level on areas within a town we want to be in, you have to start with the water and sewer locations. It’s impossible to develop what we do on septic and without water. It’s critical.

Again, we can find some of that on GIS mapping, but most municipalities still haven’t caught up to that. You really can’t. It’s critical even to the point where we’re driving around looking for manholes and hydrants in the field and then developing maps from that.

Or even old school utility districts, you still got to go into their office and they may have a map on the wall that they print out every month with where their sewer line is. You just go in to take a picture, and then you thank them.

Some of them are a little close to the vest with some of that information. Ultimately, that’s critical to find out where everything is. We move on from there. That’s where we start drawing circles on maps.

Host: You talked about acquiring land, getting through zoning, entitlements and sewer. Can you talk about the size of a piece of property? That’s something a lot of builders don’t deal with all the time.

Maybe they’re a custom builder, and they’re dealing with an individual lot. If you’re going to be building an entire community, then it’s about finding a larger piece of property.

Steve: Those come with its own challenges. Those are also great benefits if you can find one of those. Number one is it allows you to spread cost out over those increased number of lots.

If you’re looking at offsite sewer, offsite water pump stations, turn lanes, whatever that may be, the more lots you can spread that over, the better. Most sites are going to have that anyway.

If you’re going to go through that amount of work, you might as well try to squeeze more lots out of it. You have the inventory on the ground that you don’t gap out. Interest on raw land’s a lot better than interest on developed lots. The interest on developed lots can bring people and companies to their knees.

Host: That’s some great advice. Do you have any other advice for maybe a custom builder or a small low‑production builder on building an entire community of homes? Something maybe they haven’t done before.

Steve: It comes back to that land pipeline. Being custom builders, always doing on your lot, they are always focused on where I can go next. For us, it’s no different.

When you have a community, you do have some peace of mind that you have inventory in front of you, and you can control it. That’s the benefits of being within your own community is that peace of mind and that land pipeline and being able to control your starts.

Host: Being able to forecast your business out, what’s coming next. In addition to those tips and advice, I’m sure that you’ve developed some tools and resources to help our builders around the country.

Steve: The other tools we have are presentations and lots of photography and marketing that is done. It helps us sell the project. Again, selling it to the banks, to the municipalities throughout the zoning process. All those resources are critical and stuff we have organized and gathered to allow that builder to produce those documents very early on.

Host: Do most of the builders that you deal with around the country, do they have someone like you on staff now?

Steve: I would say very few. Most of them are pickup truck builders to some extent. They deal themselves on the land side in terms of finding on‑your‑lot stuff.

Host: What a great peace of mind to have somebody like you they can turn to, to help along in this process.

Steve: That’s the goal. That’s what I like doing.

Host: I appreciate it, Steve. Thank you for joining us today.

Steve: Thank you.