LandQuest Locks Bentonville Subs

LandQuest Communities LLC started planning for its future growth at a time when some people were telling senior vice president Bart Bauer that the “boom” was over.

But that didn’t stop LandQuest from buying up land from 2001 onward that now includes more than 750 lots under development in five Bentonville subdivisions.

Bauer said he expects it will take about a decade to build homes on all of that land the company has purchased.

LandQuest Realty’s gross sales volume exceeded $30 million in 2004 from its subdivisions. About 50 percent of LandQuest’s completed homes have probably been sold, Bauer said. He estimates that LandQuest will probably sell 25 percent of the homes in Bentonville in 2005.

The company has its own comprehensive real estate system that profits from package lot sales to its select builders. The system allows LandQuest to control the housing price, which ranges from $160,000 to $550,000. Its subdivisions are equipped with model homes and on-site real estate agents.

“We are trying to keep a good builders program, because as the competition gets stiffer, a builder wants to make money too. He doesn’t want to build with a group of builders that just turned into builders. They might not know their costs and then end up selling a house for a lot cheaper,” Bauer said.

LandQuest offers its five builders incentives that are included in the lot price, such as co-operative advertising. The builder then lists its homes with LandQuest Realty and absorbs the cost of building and furnishing a model home that will sit empty for a few years.

“The builder does use our agents, but our commissions are lower and we are doing it as a service to cumulatively give a good deal,” Bauer said. “We don’t make money in the real estate company. It’s an insurance policy to get people into our subdivisions.”

Annabelle Nickell, owner of Arkansas Dream Builders Inc. of Farmington, said she likes the control that LandQuest exhibits in its subdivisions. All home plans have to be approved through the architectural control committee, which LandQuest hires. The builders meet every month.

Every subdivision has its own property owners association that is administered by LandQuest until the subdivision is 95 percent occupied. Larry Pease, owner and operator Community Management Group LLC in Bentonville, manages all five LandQuest communities in Bentonville.

“When you go into a subdivision you’re not sure what builders you are building with. You could end up with different products,” Nickell said.

Each LandQuest builder offers a variety of products that appeal to different people, so she doesn’t feel like the group is competitive, she said.

LandQuest also produces brochures about its subdivisions and builders, which it bills into the cost of the lot packages, Nickell said.

“I think its menial compared to the advertisement we get,” she said.

Nickell said LandQuest sells its lots to her about 20 at a time in each subdivision. That controls the saturation rate. LandQuest lot prices are a better bargain because of the amenities a builder receives, she said.

Bauer said Landquest’s strategy is to have an inventory of about 20 different houses on hand at all times, if all five builders start four at a time.

“You have to have a lot of standing inventory in this market,” Bauer said. “People from out of state are coming in, and they have a short window of time to buy.”

Nickell has about 45 lots coming out of the ground this year in three of its subdivisions — Allencroft, Oxford Ridge and Lochmoor Club.

Vision

Bauer moved to Bentonville from Michigan in 2001 in an effort to escape the bitter-cold northern winters.

“So I shopped around the southern area and I found little old Bentonville sitting here four years ago and I thought this was great,” Bauer said.

Bauer compares Bentonville’s growth to the residual effects of General Motors.

“At one time, GM was the world’s largest company,” Bauer said. “As soon as they put up a factory in Michigan, well then housing went crazy.”

Bauer owned and operated a smaller land development company in the Detroit metro area that focused on residential lot development. He formed LandQuest with developers Dominic Geric and Guy Rizzo. Bauer is the managing partner of the entity, and Geric and Rizzo function as primary owners. Combined, Geric and Rizzo have developed thousands of residential lots in Michigan among their various respective commercial and residential construction and development companies, Bauer said.

Planned Growth

Bauer said the area needs homes in all price points in order to be a successful real estate market.

LandQuest is designing a 180-lot subdivision called Brighton Farms that will feature 1,200 to 1,400 SF homes, a rarity in the current new home construction market. It plans to have the 40-acre subdivision ready for construction in early 2006.

“It’s a segment of the market that’s not being addressed,” Bauer said. “Through our efficiencies in advertising and marketing we’re able to do that [build smaller homes]. There is not much money in the lower end for most developers, but we want to be able to serve the customer.”

Bauer thinks he will build a future customer base with that offering.

“If you sell the guy the Cavalier, hopefully you’ll be there when he wants to buy a minivan,” Bauer said.

Bauer said Bentonville is headed for over-saturation.

For example, he said, Bentonville issued 681 building permits in 2004. If the city issued 800 in 2005, a healthy number for absorption of those lots is two and a half years.

“So if I took 800, let’s say, times 2.5, there should only be about 2,000 lots available. There is probably going to be double or triple that [in Bentonville].”

Bauer said his company pays for independent area studies that look at concepts like area demographics, where people are moving from and percentage of lot costs in buildings.

“We look at each price point,” Bauer said. “We don’t just open up the lots and sell a subdivision out really quick. If you have too many houses and they don’t sell, then the original home price goes down. Over-inventory is just like any business. You have to sell cheaper to delete the inventory, and it’s not good for the builder and the homeowner. You want your subdivision to have some appreciation.”

Down with POA

All LandQuest communities have property owners associations to go along with the company’s theory of “building communities.”

“Covenants are only as good as the person there to enforce them,” Bauer said. “Just because someone buys a more inexpensive house doesn’t mean they aren’t entitled to have someone take care of their neighborhood.”

Pease, who manages all of LandQuest’s properties, has more than 20 years experience in property management. He also manages the Clear Creek subdivision POA in Johnson.

He said Landquest’s POA dues range from $200 to $500 per year.

Property management, Pease said, is a multi-fold concept.

“We oversee the day-to-day administration of the association,” Pease said. He oversees the landscaping and makes sure that builders and property owners are keeping their lots neat. He also approves blueprints and ensures a home is built to code.

Pease said the developer pays the property-owners deficit because the first few years of a subdivision won’t produce enough dues.

His company performs compilation and analysis services to determine what the POA needs to maintain the property for a long time. For example, he can calculate how much it will cost to run the community pool in the long term.

“A lot of the time, a developer doesn’t have the background in the management side of it and doesn’t think about what he needs in the future to make an association run smoothly.”