Four Lessons Learned From The Bust

It’s said that developers have short memories. That’s probably true. But coming out of this downturn, some developers (who are actually getting projects in the ground) are changing their strategies after suffering through 2008 and 2009. Here are four of the lessons they've learned. Lesson #1: Consider the finished lot model; it makes more sense. Before the downturn, a lot of homebuilders got overextended with land that needed time in the pipeline for re-zoning. Though not as highly publicized, the same thing happened to apartment owners in the last boom. “That [entitlement risk] is where everyone lost a lot of money when the party ended,” says Jim Butz, CEO of McLean, Va.-Jefferson Apartment Group and former president of JPI East. “If you were re-zoning a deal in early in 2008, you would have written off all of that money. JPI did, and all of our competitors did it, and that’s very painful.” That has changed Butz’s strategy this time through the cycle. “We are looking for sites that are zoned and we are not taking entitlement risk,” Butz says. “We may have to take those on eventually, but we’re trying to be prudent and not take on deals that have re-zoning risks.”

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