Developing a Vision of Master Planned Communities

Speaker Name: Edward R. "Bobby" Ginn
Speaker Title: President
Speaker Company: The Ginn Company

Edward R. "Bobby" Ginn I'd like to take this opportunity to tell you who we are, what we hope to do, and what we’re doing now in your area. Then I'd like to open it up to questions from the student body.

I was born in Hampton County, South Carolina — a very small, rural area. I grew up in the country, and I never left there — my home is still there. I love the outdoors; I love to hunt, fish, and farm — to virtually do anything outside. My passion has always been development; I love to build things. I enjoy the process of thinking of an idea and going through the process of creating something that means something. I tried a career in college, but that didn’t go over so well. The SAT score that I had — if I had taken it twice, then I still wouldn't have gotten in, so I figured I needed to get a job. All my life has been in the construction, development, and hospitality business.

Virtually everything we did, back in the early 70s, was centered on the fact that if you build something then you want people to enjoy it. Whether it's moving into a first home, second home, or staying in a resort or a hotel — over the years we have taken that to another degree, but our business has always been based on the fact that we have to operate and use it after we build it. I spent so much time and money trying to figure out how to make things operate that I probably could have made a lot more money, been a lot more successful, and done a lot more things if I had just stayed in the traditional line of historic land development — doing it the faster way.

I've been in business since the early 70s — thirty six years. I've become an old guy in the business where there aren't many old guys. There aren't many people that can survive the development business, and if you're in it, then be humbled because it will always humble you. You have to know that there is always a risk there and so we did the traditional thing — we were developers, we were operators, we were builders, and we did that all the way to the early 90s. In the 80s developing took a hit. I listened to mentors in my industry constantly, but what kept standing out to me was a theory that the third person made the money. You had to find a guy that had a great vision; he would come in and fail. The second guy would come in and fail, but then some Wall Street guy would come in and put the money into it, and this third guy would buy it for a fraction of the value and make money on it. It didn't have a consistency from start to finish. We took a couple of years off in the 90s and this really led to where we are today.

The company today probably has more nepotism in it than any other company its size in America; we are probably one of the few companies to encourage it. Both of my sons have worked in it and a lot of other employee's children, aunts, uncles, and cousins. We have to be careful what we say about anyone, because someone's probably kin to them. We encourage it, we enjoy it, and we think the people are happier and more productive that way.

In our company, some of us have been together twenty-five or thirty years, but today it's full of young people. Everyday I get up, and sometimes these old bones don't want to make it one more trip or they don't want to get out one more time, but what leads me to do that are these young, great minds coming out of the university system — like here at ASU — that will run the business. It doesn't take long to train them, they get ahead of us and then it's all to the graces to try to keep up with them. They lead us in marketing and sales. They are the real stars. If I had to hire one person, it would be someone young. They are far ahead than when we started in the business because of the training they receive from this education system. They have a technological comfort that we didn't have; we had to train ourselves differently. We've merged the old and the new ways with what we knew worked and with what we knew didn't work. This led us to the early nineties when I took a few years off.

In the nineties I was going to do something I had never done before. I was going to actually sit down and write out a business plan. It was the most interesting thing I had ever done. I called all my friends, talked to every banker, and talked to every construction worker. I spent two years actually talking to people who had worked in the fields that fed into our business. I came to a point where I said, "NOW I know what a business plan is". I separated the facts from the myths, and thought about why the third person is the winner. Why does the bank dictate whether or not you need a bond or general contracts? Why can't a developer be a builder? Why do I need Marriott to tell me how to operate something that was my vision in the beginning? My company took it all the way through — we built it and we came up with a long list of things that really made it happen. This is what caused us to change our way of doing business. We started a countercyclical process that has taken me from 1990 to 2006; it has been one that we have been committed to a fault. We don't waver off that business plan. We change our business, we grow in our business, we've done things that we didn't do back then, but we just don't waver off that business plan, and — by gosh — coincidentally we are doing things differently today, and we are more successful and have more longevity today than we ever had in business.

We started off from day one thinking about what was right and what was wrong. We found that developers basically did things wrong. They would buy a piece of land and then they had something they could bank on, and then they'd spend money to do something, but then if they ran out of money then they didn't have any other alternative. So we had to retrain capital and how capital looked at our infrastructure, which means we had to do a lot of thinking. We had to compete with capital like the industrial companies and the people who came out of the industry. We started off with a process and said what do we have to do and what do we have to change? I use the engineering system as an example when explaining the vision — it's always important when you run a business to keep everyone focused on the vision of company. When Lexus started out, some engineer brings out an idea and says I think I can build a great car for people, and it'll cost a lot less. So here's the engineering corps, he takes it to his boss and his boss says go do some desensitivities tests, go do some prototypes, see if you can get it to work. They test it and say it works. The marketing campaign — they do a search to see the best ports to import and export from. Where is the best source of employees and where is the best place to ultimately build the plant. The last thing they do is the real estate, not the first.

We had it all backwards. We had to change the way we do business. We had to start by saying where do we want to be? What do we want to be? What is our vision? What is our product? The last thing we have to worry about is where the piece of land is that we're going to build it on. If you get to the end of the day here in North Carolina, in this community, that's exactly what has to happen. We looked for four years; I flew over a hundred hours in a helicopter looking at land in the North Carolina Mountains to find a place to build our vision. We found a piece of land and said here's a piece of land! Let's go build! It's a deal! Good deal is the worst phrase in my vocabulary. It doesn't necessarily mean it's a good deal because it's a good price on the land; it means it's a good deal because it fits into the model of what we want to do with it — it fits the vision of what you want to build. We started out on a mission and it was to change the way we operated our business.

Today it hasn't changed much. Capital malfunction — Wall Street. Our investors — Harvard, Yale, Princeton and William and Mary. We've got that market cornered. It’s the blue chip companies that would have never been in the land development business ten years ago — couldn't have convinced them. The way we got them in? They would use one or two percent of their discretionary funds to throw someone a bone, but to really be in business and to understand business? Today when I bring my investors in, I'm talking in short hand terms. They're educated, they know what my business is and they know how I operate. They know that I may need to spend ten million dollars to put on a marketing campaign before we start versus waiting until we've got a market that says we might be able to sell it. Those are the dollars that have got to be funded up front, and they know we'll spend them. If it takes twelve versus ten they have to understand that going in, but they believe that we can execute and be successful at the end of the day. We're not going to execute something that won't be successful. That's what industry takes. There is no guarantee that Lexus is going to sell, but it certainly was a much better opportunity for them to sell when they had a hundred million dollar wisdom campaign. They had America prove to them that it was going to be a quality brand; it was going to be all the things that made the car in the automobile industry. That's what we're building today. Our company is building quality here in this community.

This is how we put the business together over the last fifteen years, and today we are looking to do great! We do our own permitting; we buy our own land; we start at the lowest common denominator on the chain. We have our own in-house architecture department. I think we are the largest architect firm in Florida and it is used only for our company. We build our own golf courses; we build our own roads. We have a franchised program — we franchise local custom builders. We can still control the process without taking builders from customers and while having some control over them. We can get custom homes built in our communities without bringing builders in like Syntex and other developers. We do our own marketing in-house; we do our own sales in-house. We're a company that takes it all the way through, and at the end of the day we're a hospitality system. We don't turn it over to someone else to operate; we operate it ourselves. So when we look at a piece of land, we are looking at it with a vision already. We know what we want to build.

We then go to the hospitality side; we’ve got to figure out how we are going to make it operate. Then we back it up the way developers have done for years and years. We're one company — one company that starts with you at the beginning and stays with you all the way through to the end. When we start a community we operate what we build, we build what we operate, and we do it with people that are truly passionate about it. I love it when employees get passionate about the process, that's what counts. You have to engage all of your employees if you're in the fun business, which we're in, and if you can engage them, then you can engage the customers.

I think that we probably have the most loyal customers of any similar company. Many of our people follow us from community to community or live in multiple communities that we build, and we enjoy that — we think that's wonderful — we get to know them and they become a part of the family. If you want a real market study, then look at somebody that buys from you and wants to buy from you again. They'll tell you what you're doing wrong; they'll tell you what you're doing right. If you listen to them, they actually will tell you. That's the best marketing study I've ever seen, and if you're really in touch with your customers, then you'll be able to see that.

Thirteen years ago we put a bonus program in place for the young employee. Every pay period each employee in our company gets a bonus. We gross receipts of the company for the former pay period. So a housekeeper gets two checks; they get one that says here's how much you make, and the other is here's how much the company is earning. That means the real estate agent or the restaurant worker is doing a good job, and therefore they receive a larger check. It means something to those employees, and it gets them engaged. I've seen a world of change in them. For example, a housekeeper can ruin the client's experience. That client can have the best experience in the world, but the housekeeper (who is the closest contact to that customer most of the time) can ruin the experience by just not bringing them towels. They know that the client is going to relate to something that means money in their check. They understand that if they can help the company do better, then it will benefit everyone.

We keep everything in one company all the way through. It's made a huge difference in the way we do business.

We try to engage immediately in the communities, just after we have the vision, after we know how the property will be operated and how we're going put it together. A training program for us is truly a principal. People come out of college, other companies, and we bring them through our process as an apprenticeship. It's really a great program; it means something in terms of making it and giving it to somebody who is doing what they do and excited about doing it well. The most important part about that is the excited part. It has changed the way people are coming into our company. We have to be competitive because we are in a business when you go into a market; you know you usually have to go in against the best of the best. We're in Colorado competing against Vail; that's a tough labor market to get the best of the best that are enthusiastic about what they do and paid well enough to stay in one place. So that was the last thing we had to do. We encouraged them; we had to figure out how to keep them in an environment.

Our industry is development and hospitality. It's a service industry at the end of the day; boil it all back down and it's a service industry. The service industry is not generally a predictable industry; we decided we would change that. In our communities we buy bigger tracts of land, we have other employees. In this community we're building in North Carolina, the Boone area, we start with a club. We start with people who buy the real estate from us, and those real estate people buy into a pool of cash that allows us to employ people and keep them employed so we don't lose them during the off season. We go into our resort, we look at it as if it was full regardless of whether it is or not, and the homeowners that are there participate in that. So we can truly invest time and money into the employee and get something out of it. The employee can come to work and know that they're going to have a job twelve months out of the year — not be laid off the first time that something goes wrong.

In communities like this, we'll employ about fifteen hundred people in this community. Fifteen hundred jobs — most will come right out of the community; fifteen hundred jobs that are permanent jobs — not seasonal jobs. We finally got to the point where our industry was an industry that mayors would be trying to get into their communities, but we're not a smokestack, we're not going anywhere. The financial underpinning of the club and the way it operates — you've got a company in your community that can't go under. Nobody's going to close down the entire club. The hospitality department may not work as well, but the club itself will continue to operate and that's the basis for our hospitality operation. That's what we're doing here.

At the end of the day I think we will have a beautiful resort here. It took me almost five years to find this piece of land, to create the vision. We will market real estate clearly, but our end result is to build something that would be an icon and that's what we want in North Carolina. That's what we think it's going to be. We're positioning ourselves for that; we're positioning our employees for that. We've got a beautiful piece of property and a beautiful community. We've put the passion of people and what they do and how they do it into Laurelmor. We're launching here in November, but we've been working out there now for almost two years. We've got a great relationship with ASU; we've got a great relationship with the community and the county. We're here for the long haul. If asked exactly where I would like to be, I would respond standing here being a part of this university and part of this community.

Thank you.