Cohousing-L Mailing List: Notes from Jim Leach Teletalk

[Elizabeth B. V. Urner (ebv]

Sorry these were so long in coming.  Ann and I took a while trying to synch up
our notes.  It was a great conference call; hopefully all of you can glean
some worthwhile ideas from what follows:

TeleTalk Conference Call
Thursday, April 1, 1999

In order of connecting to the bridge line:

1. Melissa Burch   Cornerstone
2. Jim Leach    GUEST:  Wonderland Hill
3. Michael Donovan   Village  in the City
4. Daniel Kern    Developer/Miami
5. Gilda Iriate    Miami
6. Fred Olson    Minneapolis
7. Elana Kann    Westwood Coho
8. Diane Simpson   Nexus (Boston/Jamaica Plain)
9. Bill Fleming    Westwood Coho
10. Mark Bishop     Acorn
11. Libby Urner    Arcadia Farm
12. Ken Thompson
13. Mabel Laing
14. Tom Lofft    Synergy
15. Sari Winston    Synergy
16. Mike Winston    Synergy
17. Ann Zabaldo    Moderator

Jim Leach was the Guest speaker on this TeleTalk.  Jim, through his
company, Wonderland Hill Development Company, has built more cohousing
communities than any other builder/developer in North America.

Jim's opening remarks -- We are experimenting with a process we call the

Streamline Process.  Using this process we have been able to reduce the
development time to about 2 years -- one year to build the community and
one year to build the buildings.  Building cohousing is challenging and
exciting.

Mabel -- the political process is the part that is taking the REALLY
long time.

Jim -- Yes, and this is the part that varies so much from place to
place.  It typically takes at least 1 year to get through the
permitting alone.

Elana -- does the first project in a particular area take the longest
and then does it get easier once one is done?

Jim -- yes -- the first time around you're educating people; what takes
time is getting your project understood.    And, of course, resistance
by neighbors

Gilda -- too many options also cause house prices to go up.

Jim -- We designed the Streamline Process around McCamant & Durrett's
3 part process.  First, the site plan, then the common house, and
finally, the units.

Make sure the group has its process together so they can make decisions
and make them stick, with a RIGOROUS process for revisiting already-made
decisions.

It's also important to show the relationship between "Value" and "cost"
- -- sales price has often been higher than "normal" construction
due to common facilities and greater environmental quality,
but also because members opt for quality over quantity.

In trying to hit a price point in typical development, we cut the
quality; in cohousing we make the units smaller; but cohousers like
quality.  We've been able to convince lenders and appraisers that
value is there.  Rule of thumb -- keep within 10-20% above "typical"
market cost.  In any given market, there is a whole spectrum of pricing
- -- anywhere from $100 sq. ft vs custom home @$200. sq. ft.

Cohousing is never as low as big developments where you're building
literally hundreds of the same houses, and your design costs will be
greater.   Begin to associate value in some way other than dollar per
sq. ft.  Rely on community members themselves.  Members do research
themselves.  Highest level of truth is in the community itself.
Group members can focus too much on individual houses when
the REAL focus should be on building the community.  Ultimately, you
need to get value out of LIVING there, of being in community.
Demonstrate the value to new people.  Ultimately, people buy by
their budget.

Mabel -- have you been able to convince appraisers that houses 10-20%
above surrounding houses are worth lending on?

Jim -- yes, because cohousing houses are 70% pre-sold; we give other
appraisers names of appraisers who've done cohousing projects before,
and we try to present it in a way that makes sense.

Brigitte -- do you contract w/ a group's LLC or LLP or other legal
entity?

Jim -- We form a new partnership w/ the group: a Limited Liability
Company or LLC.  (Note added by Ann:  LLC's and Limited Liability
Partnerships or LLP's are not recognized in all jurisdictions.
Generally, where they are allowed, the entity combines the best of
corporate shielding while allowing profit or loss to
pass through to the individual's taxable income bracket.)  Wonderland
signs a contract between the new LLC and new buyers individually.
Money individuals had invested to that point converts to their down payment.

Libby -- how does the money work?  What's the cash flow look like?

Jim -- typically work with a group that's invested already. We invest
TIME getting things ready to build, we guarantee the loans, We will
bring in the financing and additional equity; investments by individuals
in the group prior to our involvement converts to their down payment.
What we provide is management of the development project for the group;
we then sell built houses to the individuals.

Libby -- what  do you want to see at the point you begin to work with a
group?

Jim -- We do a feasibility study. Prior to the feasibility study we do a
letter of agreement between the community and Wonderland.  We decide if
building the community is feasible.  If we decide it's not feasible and
Wonderland walks, the group doesn't owe anything.  If the group walks,
then the group owes Wonderland for its time to that point, typically
about $10,000. We want to build trust and develop a partnership relationship.
The community has to look like it will sell.  Wonderland doesn't sell houses.

Mabel -- are you the builder?

Jim -- not typically the builder.  In colorado we have a sister company,
otherwise we look for a local builder.  It's critical to get a builder
that's local and is a team member/player. there needs to be a high level
of trust.  In the Northwest we've used Chris Hanson, and he's worked
with Deacon and Co out of Portland, they're used to doing cohousing.

Ken Thompson - What do you look for in a builder

Jim -- we have a checksheet for pre-screening.  they need to be
experienced with volume, have the ability to build 20-30 houses in a
year.  Local reputation is very important, and they have to be
interested in Cohousing concept.  There needs to be a regular channel of
communication to focus communication, don't make the builder nuts.

We act as a project manager, managing all the professionals, and the
group works through me.

Bill -- do you function as a shield?  Are you rigorous about having
group members work thru Wonderland?

Jim -- we don't let individual members deal with the builder.  We focus
group input through a construction interface team; There is 1 person who
communicates with the builder.

For Example: in Ft. Collins we have 3 levels of customization for
indiv units. Using this prescribed way we control the process for change
orders.  (Note from Ann: "change orders" are alterations to the plans
made after the plan has been approved.  Change orders are VERY expensive.)

Gilda -- during CH and unit design -- do you provide info on costs of
the decisions they are making?

Jim -- yes.  We have workshops with Katie and Chuck.  We make sure the
decisions the group is making is based in reality.  Try to get local
builder's input too.

Michael -- 3 levels of customization?

Jim -- We've only tried this in one community.  Some communities are
disciplined; others are not. The 1st level of customization is a base
level with minor choices only, a production house where you pick colors
and such, NO contract changes; in Level 2, people pay $1500 just for
the ability to upgrade certain things like kitchen cabinets -- that 1500
is just to be allowed to upgrade, then there's the upgrade costs plus a
25% markup; in Level 3 we allow plan changes within the structural
framework of the unit.  A homeowner pays $3000 plus the cost of the
architect, builder est. serv + mark up.  (Note by Ann: in Levels 2&3
the $1500 & $3000 respectively is a fee that only covers the ability to
customize their unit.  The fee does NOT cover the cost of the products
or goods themselves.)

Even this isn't really tight enough -- In some developments, at least
half or more of the community who are not inclined to customize their
home end up paying for the ticket for upgrading by others.

Diane Simpson -- why do you not build on the East coast?

Jim -- We are not a large company -- we may be a little stretched right
now.  We are trying to encourage other developers to get into field by sharing
what we know.  We've suggested perhaps organizing something around the
N.A.Conference in Amherst this Fall.

Diane -- "Build Boston" is a BIG developer trade show.

Jim -- There is not much interest outside cohousing itself.  We really
have to help each other.

Elana -- regarding streamlined process -- can you give us any other tips on
how to counteract the tendency of a group to draw out the process?  Consensus
often equals long timelines. Do you use a defined time limit?

Jim -- schedule the project and get agreement with the community. Get on a
time line.  Group will start to drive themselves; they want to get through it
too.  There will always be groups who love the process more than the product.
Some group members get tempered by others. There are not that many
critical decisions.  It's not like designing a CH is that much different from
community to community.  We now have experience from other groups.  Group is
ultimately in power -- we'll "run" everything but the group makes the decisions.
That seems to put them at ease.

Brigitte -- Do you usually charge a fixed price, a percentage --  how
does Wonderland get paid?

Jim -- We build into the budget a 5% project management fee.  The fee is
a percentage of total development cost; plus a 10% profit/contigency line
item to cover cost overruns.  At the time we break ground costs are fixed.
Any additional costs are taken from this contigency fee.  Whatever is
left of the contingency fee, Wonderland takes 1/2; 1/4 goes to the group,
typically for upgrades to the CH; and, 1/4 to investors.  There is shared
profit and incentive to make budget work.  These are typical homebuilder
numbers.

Diane -- if you have a model that works why can't you convince regular
developers to do this?

Jim -- A lot of developers don't want to work with a market until the
units are ready to sell.    Most developers and homebuilders presell
part of the project but not the whole project in case they need to make
up margin.  Too risky otherwise.

Fred -- what's your perception of the market?  What attendance would you
get at the  conference?

Jim -- some companies are starting to sprout around the country.  It's
still a very small market.

Fred -- we have more need for developer-driven streamline process
cohousing communities than we have developers able to do it.

Jim -- building and development is a very local activity; one project
will breed another; it's possible that you could get a developer/builder
to say they could build one a year or so; we would always need a local
builder to deal with local political issues.

Ann-- can you speak to a point I've often heard: if we don't use a
developer we can save money because we won't have to pay any profit.

Jim -- Even if not using a developer I still advise people on keeping
the 10% contingency fee in the budget; it doesn't change the price of the
houses very much; also if you're developing your community yourself you
will need a community member with the professional background.
Development is time consuming and mistake prone.
Need a *cohousing* architect, too.  Trying to do the design process
themselves will kill most groups.

Bill -- about some groups thinking they can do it and find they can't --
any anecdotal information on groups failing because they are doing it
themselves?

Jim -- there are any number of projects that are flawed by *professional*
architects!  Tierra Nueva is the oldest cohousing group in the U.S.
They had been working together for 8 years before Wonderland got involved 3
years ago.  Once organized it took only a year to get it built.  They're a
very strong group, very tightly bonded, but it cost them a lot of money to
get there.

Elana -- at Westwood -- we started outreach right away -- it was hard to
attract people;  once we had design and pricing people flowed in -- is this
typical?  Only 4 of the 25 units are occupied by people who were there
for the design phase.

When does the community do the marketing push?  After design and costs
are established?

Jim -- The only 4 final families participated in design and planning
phase is pretty common.  But together with pro forma budgets and prototype
designs people can visualize what's happening.  Without anything it is
difficult to attract people.

We have a design workshop; people pay for the workshop; however, if they
continue with the process and buy a house they get credit for the workshop
at $150% of cost.  Do a CH workshop when the community is 50% full; you do
not get workshop money back.; try to get people to get very real early on.

Gilda -- will you be doing developer trainings again?

Jim -- we've  talked about it -- maybe later this year.  Getting
together with others around Amherst area during or before the N.A. Cohousing
Conference.

Diane -- if we want more information about cohousing development will
give out your number?

Jim -- we have a website: www.whdc.com; and, a  newsletter; call 303
443-7876.

Ken -- we're in litigation -- getting a construction loan is difficult.
(Note from Ann: Ken's community is being sued by its neighbors.)

Jim  -- neighbors suing is tough; you can overcome most neighborhood
problems by getting the group involved.

Brigitte -- go to all local organizations and ask the groups to write
letters of support or at least not oppose the development.

Ken -- Courts are so clogged we can't get a hearing, but are trying to
talk to our adversaries...

Evaluation:

Brigitte  -- very helpful; very clear; worthwhile to get point of view
of professionals;
Jim -- covered lot of different issues
Libby -- exactly what I needed; worked pretty well
Elana -- enjoyed it
Diane -- appreciated Jim taking time to answer questions; I'd like him
to come back in 6 mos and focus on one aspect of the process.
Bill -- appreciate organizer of conference call.

The monthly TeleTalk conference call is a service of The Cohousing
Network.  It is provided free of charge.  The call was finished at
11:05 p.m. EST