Jonathan Lee had a tumultuous introduction to the construction industry, to say the least. After graduating college, he joined a property management firm as a leasing agent, eventually replacing one of the company’s partners. When his partner went bankrupt during the recession, Lee bought him out. He rebuilt the company after 60 percent of its properties were repossessed by the bank, selling it in 2012, having accrued a lot of experience in project management.
At just 27 Lee started his own construction company focused on remodels and additions. In 2012 he founded 787 Developers, leveraging his background in property management and construction with his expertise in the emerging Austin, Texas, market. Lee created a real estate development company focused on creating high-return infill projects in one of the country’s fastest-growing cities.
Since its inception, 787 Developers has completed 11 residential building projects and is currently eyeing expansion into the commercial market. In the booming housing market that is Austin, 787 Developers has set itself apart with a focus on creating unique, community-centric developments.
“The biggest thing that sets us apart is our focus on community,” says Lee, founder and president of 787 Developers. “For example, we have one project that most builders would have gone into and built some rental property-type duplexes and then sold them off to investors, but we wanted to do something that’s both creative and also fosters a sense of community by getting people out of their homes and connecting with one another.”
Known as The Mahan Villas, this project turned into a series of condominiums that seeks to connect residents through community gardens, walking spaces and a shared outdoor kitchen space. “We did some outside-of-the-box thinking to make something that is not so cookie cutter,” says Lee. “We’re building duplexes, but it’s more like two little luxury townhomes.”
787 Developer’s real niche in the market lies in its ability to navigate Austin’s infamously stringent land development code. “It’s one of the worst in the country and our specialty is working through some of those issues and knowing how to get things done,” he says.
In the company’s largest project to date, 787 Developers is currently building a 50-unit development in East Austin that will represent the company’s first foray into rezoning and site plan development. Heflin Garden Home Community will be an amenity-rich development of single-family homes centered on the same community-building principles of shared outdoor space such as The Mahan Villas.
The 5-acre development will include a greenbelt of walking and cycling trails, and also features community gardens and communal outdoor space.
Finding a niche
With a focus on the multifamily market, 787 Developers serves a very specific sector of the residential market: young couples and the semi-retired looking to downsize to a smaller, more centrally-located community with easier access to Austin’s nightlife and vibrant live music scene.
As an infill developer, 787 Developers markets each community to the demographic segment that it best serves. “The areas we’ve been building in don’t have the greatest schools, so a lot of people in the middle demographic with kids aren’t interested,” he says.
787 Developers is currently eyeing its first commercial development project, bringing the same creative approach to that market as with its residential projects. The company is looking to develop a 200,000-square-foot warehouse park with a unique business model that Lee describes as a blue-collar co-working space. “In a traditional business park everything is sliced up into 5,000- to 10,000-square-foot units, each with its own kitchen, offices and bathroom,” says Lee. “We’re looking to have a more hub-and-spoke model where the bathrooms and kitchen would be a common area. It would help people connect and there may be some shared equipment if there was a desire for that.”
“There is still a building shortage right now, which is a great problem for a developer.” – Jonathan Lee
In a bid to increase 787 Developer’s vertical integration, Lee recently founded a cabinet company to help cut costs on what is typically one of the most marked-up products in the construction industry. The warehouse could one day house Lee’s cabinet company as well as various craftsmen from woodworkers to light fixture producers.
A strong return on investment
Lee is keeping the payroll to a minimum at 787 Developers as he continues to grow the company, which is now staffed solely by the founder and a couple of part-time assistants. The company subcontracts out all design, engineering and construction work to a trusted network of industry partners, including Lee’s own construction company, Iron Rock Construction. This separate entity completes all of 787 Developer’s construction work as well as occasionally taking on outside projects.
Today Lee’s biggest challenge is getting investors to share in his vision for more unique, community-centric residential developments that speak to trends in the current market. “It’s always difficult getting them to trust us, but a lot of that is showing them that we can be successful with our smaller projects. We’ve had a strong return for all our investors so far,” he says.
While the booming Austin construction market isn’t the secret it once was, Lee still sees several years of strong development potential in the area. Beyond that, the developer is eyeing Texas’ four major metropolitan markets which represent more than 22 million potential customers. “There is still a building shortage right now, which is a great problem for a developer,” he says.
With inside knowledge of one of the nation’s fastest-growing construction markets and a growing portfolio of residential development projects to its name, 787 Developers is poised for growth in Texas.
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