The MSU School of Planning, Design and Construction held its 11th Industry Seminar Series event on Tuesday, Apr. 18, 2017, in East Lansing.
May 9, 2017
The MSU School of Planning, Design and Construction (SPDC) held its 11th Industry Seminar Series event on Tuesday, Apr. 18, 2017, in East Lansing. The featured speaker was 1973 construction management alumnus Alan Scott, president and owner of Alan F Scott (AFS), Inc., and former co-founder and managing member of The NRP Group LLC. He presented on the “Challenges and Opportunities ahead for Single-Family and Multi-Family Builders.”
Joseph Maguire, president and CEO of Wolverine Development Corporation, and president and co-founder of the Society of Environmentally Responsible Facilities (SERF), is the facilitator of the Series. The series continues to be popular with local alumni and industry leaders and helps to show SPDC students real-world examples of what is possible to achieve upon graduation.
Scott began his presentation by talking about what it was like starting an affordable housing business from his dining room table, and how it almost went bankrupt. Scott shared that he started this business because he “wanted people to be able to raise a family in single-family homes and be able to barbecue in their backyards.” He had great success with this in the Detroit area, where people could rent the home and later by it for as little as $15K, due to special financing opportunities available at that time. The advice he had for students is to “know what you’re doing” and to “learn from your mistakes.”
Scott also discussed his work on affordable housing apartment developments, including an industrial property in a Hispanic neighborhood in San Antonio, TX, which turned out to be one of the best projects in the whole portfolio, called Cevallos. Another Master Planned community in San Antonio, called Cresta Bella, includes two apartment complexes (market rate rentals), a shopping center, and 312 single-family homes. He highlighted the importance of “walking” the property that you buy, that “you can tell a lot about it when you walk it,” and not to assume you know what’s on it. “It’s a gut check,” Scott said. “Does it feel good? Then, do it, or watch out.”
He shared his experience on how he survived the Great Recession and said, “You have to blow with the wind” and “be able to turn on a dime.” From 2007-2011, he added that he had a better year, every single year, despite the industry’s deep slump. Scott’s advice--and what’s worked well for him--is to have a strategic plan, a roadmap. He talked about how it helps him know where he wants to go, what he wants to do, and what he want to make.
When Scott was a part of The NRP Group, they worked on projects in several states including Michigan, Indiana, Ohio, Pennsylvania, New York, Virginia, North and South Carolina, Florida, Louisiana, Texas, New Mexico and Arizona. He highlighted the importance of knowing your market.
For example, today, in Little River, SC, he is working on River Oaks, a project related to aging in place. They know the market is geared toward empty nesters and that walkability will be a crucial element, as seniors want to walk to different places within the development, and not drive or walk through the parking lots. River Oaks will include 190 single-story apartments with one- and two-car garages with a community center and connected walking paths throughout. This development is located adjacent to a Walmart-anchored shopping center.
On the topic of opportunities, Scott addressed the changing markets, and the fact that Millennials are starting to buy and the senior housing market is building steam. He said that production companies are doing well-selling homes to Millennials, and that there may be a few more good years for the rental market. Scott added that lot development should get easier and that the custom home market is doing well for small builders.
He also spoke a little bit about softening markets, and made a point of stating that it’s better to “get out of a market before it starts bleeding, which is easy to happen in multifamily.” Scott added that you need to look for the red flags, such as rental inducements like free rent.
In terms of challenges in the next four years, Scott pointed out that interest rates are rising, so “you need to learn how to adjust and deal with it.” He stated that “builders are having a hard time finding lots, and it’s hard to get financing.” Scott emphasized the continued need for skilled trade labor. While cities are doing well, other places are in trouble, especially those who in the past have made use of undocumented workers from Mexico.
Regarding the economic forecast for Michigan, Scott shared that home prices are trending upward 2-3 percent, while inventory continues to shrink, and that urban building remains relatively strong. He emphasized that the national unemployment rate is less than 5%, and that population growth in Michigan is relatively flat.
Scott wrapped up with session with some advice for the students in the audience:
Learn more about these events at SPDC Industry Speaker Series.