Master Planner Hillwood Brings New Homes to DFW by the Thousands

 Host Candy Evans sat down with Fred Balda, President of Hillwood Communities, for this episode of Dallas Dirt to discuss housing en masse, particularly their new developments at Harvest, Tree Line, and Landmark. The Fort Worth-based Perot company specializes in master-planned communities, which include signature developments like AllianceTexas, Circle T Ranch, and Frisco Station. 

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Shelby Skrhak (00:06)
I'm Candy Evans and this is Dallas Dirt. Let me tell you who my guest is today. It's Fred Balda, who's president of Hillwood Communities. I've known Fred for a long time. We have a little bit of a history in Costa Rica that we will not tell you about just yet. I am so excited to have you here today. Thank you for coming.

Thank you for having me. It's my pleasure. I've been watching a lot of your podcasts, so I'm honored to be on it. we'd love that you're watching. We'd love that you're here. And Hillwood's Union Park was just named the master planned community of the year. But was it by the ULI that did that? I believe or it was by the Dallas Builders Association, which is a huge, huge distinction and honor. Big honor. We're proud of it. I'm so proud of you guys. Maybe for your audience, maybe a little bit about.

who am I with and then I'll bring it down to Hillwood communities. Exactly. How about that? We're going to start by saying that he is an amazing leader of an amazing company that is headed by Ross Perot. Yes. Ross Perot Jr. is our leader and he started Hillwood in 1988 with the beginning of the Alliance development, which is anchored by the world's first industrial airport. And so out of that particular project came a variety of disciplines. We have four main competencies.

We got our industrial distribution group, which has really got a huge platform, literally across the world. They've done about 270 million square feet and they currently have about 70 million square feet that they own and manage. We have a commercial division that is developing wonderful commercial properties. They've done about three and a half million square feet and they currently have about a million seven that they still own and manage. And they're actually building the Goldman Sachs building down at Victory, which is 800 ,000 square feet.

And when it delivers a few years from now, it'll be 5 ,000 employees coming into that part of town, which is wonderful activity. We have a huge news for Dallas in that part. Uh, victory has been very, very active. Multifamily is also a huge part of our business. They probably have delivered 4 ,000 units and they probably do 600 units, two products a year is kind of their cadence right now. And then of course, the division that I manage, which is Hillwood communities, we've done nearly a hundred.

projects across the nation that we've owned or managed Which represents about 50 ,000 lots. So if you do the math 50 ,000 lots times three people per home That's a hundred and fifty thousand people. These are literally cities that we are developing really across mostly North Texas We currently have 12 projects. Eight of those are in the Dallas area and the other four in Austin and Houston. Are you primarily in Texas? Are you

We're primarily on our own account in Texas, the great state of Texas, the great Republic of Texas, but we also invest in other markets. So we have several partners, great partners, local partners in Florida, North Carolina, Northern Virginia, those markets we love. And so we have a representation there with other partners and we happen to be their equity.

and they do the daily work like we do here in Texas. The equity means you invest the capital. We're the capital, the majority of the capital for them. And so they do wonderful work and we have a wonderful relationship and we trade a lot of secrets back and forth. So we all become better in that relationship. So it's not just about capital, it's about learning and getting better constantly. And you learn from them for your community. Both. think we can add value to them and they certainly add value to us. So we

getting better. The bar keeps getting setting higher and higher. Homes are the topic of conversation now, which is amazing. I mean, we have evolved into this, that the con that we're talking about at the federal level, we're talking about at this, at the local level because there's not enough housing out there. And you guys, this is why I'm so excited to have you here because you guys are making housing. I mean, you're creating housing and I think your price points are somewhere, what, in the

Well, they're higher than they've ever been. So we'll talk about affordability really being the core issue of housing right now. But today to get into our projects, we're averaging $600 ,000 in these wonderful projects where we used to be averaging three or 400 ,000 not too long ago. So kind of a case in point would be in 2019, our average priced home in all of our communities, our portfolio of communities across the great state of Texas would have been about $350 ,000.

That was the average priced home in our great communities. And at the time, the interest rate was 4%. And when you do the PITI, principal interest taxes insurance, the payment for the homeowners that are buying those homes, they were probably $2 ,300 a month. And the qualification for that $2 ,300 a month meant 92 ,000 household income. Today, you take that $600 ,000 home with this new, unbelievably high interest rate of 7%,

So 600,000 7% is $4,800, $4,900 PITI. And that equates to about $195 ,000 household income. Not sustainable, very, very expensive right now. Even so we're seeing a huge demand still coming into this marketplace, which I can tell you more about, but it's just phenomenal, still good business. It's just very pricey right now. And again, I always like to have readers and viewers understand.

why it's pricey. It's not that you guys are just out there like putting tons of money in the bank. It's because of the interest rates. It's because of the regulations. It's because of all of these things that are piled on top of you as the developer, correct? Exactly right. So it starts with land. Yes. So land prices have not gone down. No. One iota. In fact, they're continuing to go up. I would say our construction costs are starting to level off. So that's a positive, but they're still high, but they're leveling up. They're not coming down, which is what we need.

So that's high, that cost is high. The entitlements still take a long time. Entitlement meaning? Entitlements meaning zoning. whatever we do out here in North Texas, we need zoning to accomplish. You go to the community. We go to the city officials or the jurisdiction and we ask them for a variety of zoning, which allows us to do a variety of product, which is really important in these big master plans to have the ability to bring on a whole pilot of different types of housing. When you have these big projects that

a couple of decades old, know, economy is going to constantly change as it's changing right now. It's important for us to have a smaller footprint of a lot, which allows a smaller footprint of a home and all that is dictated by zoning. So if you do it right on the front end, you can kind of get through these times that we're dealing with right now. So we're still challenged, but we least we have a fighting chance of meeting some good demand that's out there right now. So we develop the communities and we sell our lots to home builders. To be clear, we don't build the homes. You don't build the homes.

We build these beautiful masterful communities. But you what they want in those communities. You betcha. So like they want pools, they want walking trails, What do they want? All the above. so... So the master plans, the amenities, I guess is what you're asking is what's important to the buyers coming into our master plans.

We do a variety of amenities, but I would say the basic ones that they keep repeating and asking for, even when I was younger, are trails. Trails and open space are key to every master plan. But beyond that, we still do the pools, parks, playgrounds. They're all a little bit themed differently now. Pickleball versus tennis. Pickleball is huge right now. Have you ever played pickleball? Yes. Pickleball is a lot of fun. Be careful because you think you can stretch a little bit more. Be careful. A lot of these, these,

Doctor offices are seeing a lot of folks like you and me coming in there with a sore this and a sore that. But pickleball is really big. All the different kind of courts are still big. Basketball is big. Tennis is still big. Workout facilities are big. It's all about health. Health and outdoors, if possible. So again, so we're loaded with all that. And it's also the furry pets. Your dogs have a place in these master plans and they're getting bigger and better. And so we benchmark nearly everything we do.

So we were constantly on the road looking at the best and greatest of California or the East Coast or wherever. and you'll start to see a lot more master plans pop up here in North Texas. We haven't had a whole lot of that, but now you get some wonderful competitors of ours that are up here doing great work. Why is that? you think? Well, I think there's a lot of relocation happening. So people are almost demanding it and developers need to probably

build bigger projects so that they're not competing with the builders that are also developing quite a few lots right now. So the bigger we can go is the more we can aggregate, the more economies of scale that we can bring in and we can deliver to the private builders in a big way that they can't go develop their own lot. So you're seeing bigger projects like that. And so in times like this, when inflation has really gone big, no pun intended, is how do we bring these costs

So we can aggregate a lot more by bringing, you know, bigger programs in. We can sell more lots that way. We can keep the price generally reasonable. So it takes that and it takes zoning. So size does matter in these big communities to be able to deliver the type of amenities that we think are important. Importantly, you know, I think what we do a good job at, sorry, what we do a great job at is great planning on these communities. So our master plans have a great sense of arrival. When you get there, you're going to see

variety of home builders with a variety of product type, great architecture and great amenities and amenities and amenities. People love that. And on -site schools, that's very important for our buyers right now. So when we do that, you get a lot more people buying into your community right now. Today, because of affordability,

we're having to go a little bit smaller on these lots and a little bit smaller on the footprint of these homes. that's how you're keeping the costs down. We're doing the best we can to do it, but it's important not to rock the boat. Remember what brung you is a lot of our good core product. and people expect the best out of these master plans. So the, the smaller product that we're bringing on right now, it's quality stuff. mean, it looks great. It fits in nicely. So that's one attempt at trying to hit affordability. The other attempt is a lot of folks aren't ready to buy just yet.

So this build for rent product is also really... What do you think about that? I like it and I believe in the thesis again because folks aren't quite ready yet but they want to test drive this wonderful master plan. So why don't I test drive it in a great way? I can bring my kids and put them in school. I can test drive these amenities. I can see who lives there and how I can socialize better. And so that's working out great. Do you think that's going to harm the home buying? It's a good question. No, because what we do with our...

We have a partner that's building these, build for rent homes called BB Living. They're out of Phoenix. They know what they're doing. But what I loved about them is they also listened to the type of product we wanted. And so that product needed to look good. It needed to feel good. And so the alternative would have been for that consumer to maybe go to an apartment and people you might remember in COVID, they were getting out of the apartment. wanted a home, whether it was for purchase or for rent. So now we're able to offer a for rent product.

in our communities without rocking the boat. that you're keying in on a key point, but I think we're, we've unlocked a really good, valuable product that I think is sustainable in all of our master plan. So we'll see more and more. to hear that because that gets people in the door. It does. Without the huge down payment. does. Cause he's Morgan, you heard my earlier statement that, know, the PITI is 4 ,800 bucks a month. And so when you go live in a project like Harvest, that's the number you're going

pay generally or you can live in this beautiful home for $3 ,200, $3 ,300 a month, something like that. And it's, doesn't go up. It's, it's set for a year or two. Well, yeah, it's set for the amount of your lease. So it might be six months to a year or something like that. So that's good. Cause it's not only the pity, but part of that pity is the taxes, which keep going up. That's right. And then the insurance, which I am really concerned about is that it's going to be a real killer.

I am too and I probably haven't honed in on the insurance enough, but it's going up everywhere. with all these big weather events, it's hitting all of us. You personally, me personally. Absolutely. The other aspect, know, variety of product does matter in these master plans. Okay. Let's talk about that. What kind of variety? So I could be, you know, smaller footprint might be a townhome or a 30 foot wide home to a 40 foot wide

Our normal or normal cup of tea, you know, years ago would have been our 50, a 60 foot and a 70 foot. That would have been our normal vernacular talking about the size of a product or the size of lot, which dictates the size of homes. Now we're going smaller on that side of it. We're doing the bill for rent. We're adding that side of it. We're still going bigger. There's still plenty of folks that want a bigger home on a bigger lot. That's going to continue to happen, especially in a maturing master plan community.

The other thing that we're seeing is the active adult product is also coming in a big way. Sometimes we dictate active adult and sometimes it's based on the product that we're delivering. So there is definitely like myself, an active adult that really is that we're catering to as well. So if I had to give you percentages, families are still the big part of it. 65 to 75, 70 % of our buyers are family oriented. And then you might have young professionals that is 15 to 20%.

and then you've got the active adult, which is 15 to 20%. That kind of makes up our entire buyer program. Well, I was going to ask you because I'm so glad to hear that you are kind of diversifying that buyer to the front end of the, you know, maybe singles or maybe people who won't, what is the double income, no kids, you know, the dinks, you know, they may be there forever and they may want to live in that area. That's the market we're dealing with. So you better attend to them. And again, I'm back to zoning. So you better have the proper zoning that allows you to meet and greet

whatever the market wants at the time. Well, speaking of zoning, some municipalities like Fort Worth have discussed imposing fees, impact fees for these very large residential communities. How does Hillwood view these fees? Are they fair? Are they a solution? Well, we love Fort Worth. So, Fort Worth, if you're listening, we love you. We love you, too. But across the board, I would say these growing cities, part of it is just inflation. So, these impact fees are going up, period.

The real challenge in the debate we always have is what is it going for? Because normally these big master plans, they're paying their own way. We're paying our own way. We're creating great value. We're creating higher priced homes, which kind of take care of themselves. So it's a sustainable operation that we create. So why am I having to pay extra on the impact? So it's always a debate as to what is it going for? Don't mind it, but what is it going for? So I think we can spend our money

wiser and more efficiently than maybe the government can. And the other thing is you're creating these homes which are creating property tax revenue for these communities. you're actually contributing to them, not taking away. That's right. So if we all understand the long run picture.

then it's an easier conversation. And honestly, but I respect all the cities. They do have a budget that they've got to deal with. So I just want to make sure that it's budgeted appropriately. So of course this is all to really be open minded and open with each other.

the suburbia grew after COVID. That's, as you said, that's where everyone wanted to go. We got plenty to do in that space right now. We can't keep up with it, to be honest with you. And in times like this, the master plan does even better. So I love the business that we're in. It's very upfront cost expected to, you know, when we put all these amenities in and infrastructure in, it's a big dollar that we got to put in. Not many groups can do that. So that diversity of product is really important,

I guess my point is that in good times and in bad times, that buyer really is attracted to the master plan, especially in a downturn time where they're really conscientious about where they spend their money. So am going to spend my money here or this very successful master plan that I know that I'm going to make some sort of investment on my investment or return on my investment, I should

Absolutely. And did work from home kind of give you guys a big boost? It did. It did. COVID of course supercharged us. Uh huh. Uh, I was going to tell you earlier that I've been with Hillwood for, I'm on my 32nd year at Hillwood. in that period of time, I've been through, I started in a recession. 1992 was, we were coming out of a terrible recession. 2000, there was a mini recession.

And then 08 through 12 was another terrible recession. So I've had three recessions and you would think every eight to 10 years there ought to be another. And there would have been if COVID hadn't come in in 2020. know, 2019 was still a decent year, but things were starting to slow a bit. But it kind of supercharged us again. So we kind of avoided what might've been a normal recession. So we just haven't seen it. So we're constantly looking at...

Where are we heading with this marketplace? What gives me confidence in this place is incredible job creation. The last 10 years we've averaged a hundred thousand jobs a year. So a million jobs in, D F W in North Texas, which is one of the hottest, you know, new employment sectors in the nation is creating a lot of new housing demand. We've got a lot of population coming in here. want to say the number is 375 people every day.

are showing up in this marketplace right now. So when you do the mathematics, Aggie math, that's 170 ,000 new people being created in this marketplace. That's every six years, we got a million people coming into this place. And so we're sitting at about 8 .1 million people in the Metroplex. We're number four. Chicago is sitting at about 9 million. So the prediction is in 2028, we're going to be the number three most populated Metro.

in the US. So a lot of good growth here. The work from home has also allowed us to have additional growth that we didn't count on. So there's still plenty of people working from home, not as much as it was clearly in COVID, but still a larger percentage than we've seen in the past. That airport is incredibly important at DFW airport. So when we look for new places, you know, it's like if you're 30 minutes from that next work opportunity, that's important, or 30 minutes from the airport.

That's important. So that's kind of where we kind of triangulate as to where where's our next big deal.

I want to talk about your properties though. Let's go through them. I'm not going to ask you for your favorite one. Although I'm a big Harvest fan because I just think the concept is so cool. So let's start with Harvest. Tell me about Harvest. Yeah. Harvest just celebrated its 10th year anniversary of selling homes. When it builds out, we'll have about 4 ,400 homes. There's probably three or four years left of really good sales activity in that program. It's not all sold out yet.

It's not, we still have a few more phases left to develop, it's probably 3000 homes on the ground today. it's North Texas? It's North Lake. North Lake and Argyle. It's kind of split. The horsey country. The horsey country. Yes. Yes, exactly right. So the horsey country, which used to be kind of farm country. So we tipped our hat to that farming community by creating harvest. And so we got this magnificent older...

farmhouse, which was built in the 1870s. And we retrofitted it and made it the iconic view as you're coming into the program. And then next to it, we created some crop fields and we created some five greenhouses and we hired a professional farmer to kind of help. could, he could grow his own crop in the, the greenhouses. But part of the give back for him was that he would teach our residents how to grow things, which is really cool and neat. So we have, think 170 raised

where the community rents a planter for the year. I think it's, I don't know, 80 bucks a year. It's not about the money, but just commitment. And so it's really taken off. But separately from just that agrihood that it started out to Agrihood. I love that word. You like that word? Love it. Okay. Good. I made it up. I'm joking. And so we still do all the other nice amenities and you got this mile and half central park, I call it.

that has a variety of different amenities all the way up. It's kind of North South oriented that allows additional amenities. It might be an entertainment venue where a band will come in and play for the residents over the weekend and they'll have food trucks there and you'll have a big band there playing and you have a playground there. So that whole lawn just fills up with wonderful, wonderful activity. We got a brand new fitness facility. We got a brand new dog park. We got another couple more pools. So.

It's loaded with amenities, but importantly, you know, kind of the glue for these great neighborhoods is our lifestyle programming. day one, we have this wonderful group of professionals and what they do is they have fun and they energize all these wonderful amenities that we created. It's great to spend the money on them, but you want people to use them. And we hear from them as to what's working and what's not working so that the next project we can keep turning the volume up and whatever that might mean. So, so really.

really fun, good, solid group. There are ambassadors on the front end. I think we've sold a few homes through their social media, sight unseen, especially during COVID. There were several homes that were being sold online. So pretty amazing stuff. That's great. Okay. Let's talk about, I'm really wanting to know about your Austin property that I was heard about and saw the prototype home when I was in Austin, because I'm blown away by icon homes. They're amazing. That is amazing. Yeah. Is it Wolf?

Wolf Ranch, exactly right in Georgetown, which is north of Boston. So it's another great project, probably in total. It's in the 23, 2400 home range. It's probably has again, another three or four years left to sell. Most of our big master plans that we currently have on the books today, we oversold over the last three years. It's just been such a hot market. could you oversell? Did we just kick people out of homes?

Yeah, the demand is just greater than we ever expected. So every time we delivered these lots, they would just be sold just like that. So we're in this big rebuilding year right now. We probably have 3 ,500 lots that we're under development right now, which is our biggest development year that we've ever had. So big rebuilding. But back to your question on Wolf Ranch. Yes, it's got a variety of great product. It's selling quite well. And we tested...

because costs were so high and getting the workforce to show up and getting the supply chain to be figured out appropriately. A couple of visionaries, Lennar Homes and ICON together came to build these homes and they asked for our approval because they were going to do it with ranch and we said, absolutely. So innovation, takes this kind of innovation and takes courage to go create this new product and I think it's wonderful product. It's beautiful product.

And it's all done with a 3D printed component printer. they're good looking. looking. They're kind of got this contemporary look to them. They popped up the ceilings. They've got this wonderful roof on them, standing seam roof on them. It's beautiful. they're Now, but they're not inexpensive either. They're about the same price as the maybe even a little bit higher than the stick -built home. so we really need to focus on how can we bring

But it'll take that sort of innovation where can you bring that down even some more and do it thoughtfully and do it with quality. that's the thing. We've been researching a couple of these different builders who are trying to do like the manufactured, the nice manufactured prefab housing, but they're not that much cheaper than the sticks. That's the challenge. And I don't want any of them to quit because they're going it out. But together it does take a village. So it'll be talking to...

groups like that, ourselves, the jurisdictions, those folks are challenged with the transportation to get that home to, whereas ICON, you know, built it on right there on site. And it's quiet, it's robotic, the waste is hardly anything, there's not a lot of trash blown around, there's a lot of pause that is behind that. So I'm hopeful that we can continue that sort of approach and keep bringing the price down and having the quality there as

I know we've got to wrap, but tell me one more cause I love your products. One more community. well I'll tell you real quick. As I mentioned, we are running out of product and so our acquisition team is on it in a big way and all of our markets. are growing Houston, we are growing Austin and we're DFW. We have four new projects underway, four big projects underway. So we have three in North Texas. we got our Ramble project in Salina.

You know where Celina is? Yes. North of Frisco. Love it. It's hot. Literally hot. A lot of activity happening in Celina and we've been there for many, many years. And so we're really proud to have a new project there. 1 ,400 acres, about 4 ,000 lots. It'll, we'll break ground later this year and we'll deliver sometime in at 25 and homes will start selling in 26. So that's.

Project number one, project number two is underway in Justin, Texas. You know, on the Alliance side of our, of our Metroplex. Over on the other side of Fort Worth. Yes ma 'am. You know where the boots are made? Right there. So Tree Line is the name of that project. It's well underway. We'll still deliver our model lots, probably fourth quarter of this year. We should start selling homes early next year. Would be, would be our goal. And then Landmark, which is in Denton, Texas. We're so excited about.

We've owned that property for many decades now. It's on along I -35W. It straddles on both sides. You got these wonderful mother nature with these beautiful knobs that have been there forever. And so we're going to protect the knobs and Landmark is the name and we've selected our builders and we should break ground later this year and probably takes us. It takes about a year to year and a half to deliver that first phase. And then we have a big project in Houston called Legacy.

in League City that is well underway right now that also will deliver end of the year or first of the year. So those are the four new ones that we've got underway and we probably have another four on the drawing boards that we hope to break ground after that. So very, very active. And we will be covering those and we really want to have you back to talk about. Well, I'd love to. Thank you so much. I think this was a wealth of information. know, real estate's great up here. The future looks very, very bright in Texas, especially North Texas. So we're excited about what we do. We love what we do.

One more thing, you don't mind, is just the philanthropy behind what we do in our communities. One thing to develop these great, wonderful communities, there's probably two programs that we're really excited about that we give back to. One is the North Texas Food Bank in North Texas. we're big in that group and Harvest started that program for us as we were kind of a perfect assimilation. And so every time you come to a community event, you're encouraged to bring some type of food.

And then we donate that out to these different pantries. And then building homes for heroes, you know, it's really all the way from Mr. Perot Sr., who was big in the military, as you know, and the give back he has had forever. So we will continue that. So we give away at least two homes a year in any one of our projects, or even our joint venture projects outside of Texas to a wounded veteran. They'll get a mortgage free home in one of our communities. So we've had several celebrations.

in our communities and it's great for the community. It's great for the veterans and their families and so it's a wonderful program that we enjoy doing. thank you for sharing those with us because we're big fans of those kind of programs and I love everything you're doing and I think housing is the most exciting story in the face of the earth and I have never faltered in that thought so it's great to talk with you and hear what you guys are doing. pleasure. Thank you. you, Hillwood. Thank you, Fred. And to be continued.

to be continued. you. Thank you for joining us today. And I think there's a lot of information that we packed into this. So enjoy it and stay tuned for the next Dallas Dirt.