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Prudent Planning Pays Off for Cooper Communities

5 min read

John Cooper Jr. always told his son to have a backup plan ready.

John Cooper III was smart enough to listen.

Cooper is president and chairman of the board of directors of Cooper Communities Inc. of Rogers, a prolific land development company for the past 50-plus years. How prolific is a company secret, as Cooper politely declines to share the private company’s revenue or employment figures.

Cooper, 46, did sit down at his company’s headquarters for an interview, his first ever with the media, he said.

“We are really good at marketing, but I’m not big on getting into the paper,” Cooper said. “Boy, publicity can be bad. Interviews are not my thing.”

Land is, though. Cooper is the grandson of company founder John Cooper Sr., a 2004 inductee into the Arkansas Business Hall of Fame who developed the nation’s first retirement community with the founding of 13,000-acre Cherokee Village in 1955.

More sprawling retirement communities followed: 36,600-acre Bella Vista Village in 1965, 26,000-acre Hot Springs Village in 1970 and 4,795-acre Tellico Village in Knoxville, Tennessee, in 1985.

Along the way, John Jr. succeeded his father as head of the company, which branched out into homebuilding and commercial real estate. John III became president of the company in 2002, but his father was still deeply involved with the family business.

It was a good thing, too. Because in the mid-2000s, as Cooper Communities prepared to move on its $70 million investment with Turner Crest outside of Austin, Texas, John Jr. detected economic headwinds.

“Your dad at a board meeting in late 2006, early 2007 instructed everybody to ‘Get rid of stuff,’” said Neff Basore, John Cooper III’s cousin and the company’s senior vice president. “John Jr. was an extremely perceptive guy. He was saying, ‘The money these folks are borrowing — they have no collateral.’ It was just a free-for-all. He just said this can’t be sustained.”

(In those days, Cooper Communities was more forthcoming about its revenue. In 2007, the last time the company volunteered information for Arkansas Business’ annual list of the state’s largest private companies, Cooper reported revenue of $177.34 million for the fiscal year that ended Dec. 1, 2006. That compared with $198 million in fiscal 2005.)

So Cooper Communities went to Plan B. It began to shed, as best it could, its nonproducing inventory so it could ride out the storm when it hit.

When the real estate market collapsed and the recession hit in 2008, Cooper still got hammered. But it could have been much worse. Instead of developing Turner Crest’s 3,200 acres, Cooper sold the land.

Cooper said it could have been cataclysmic for the company if it had been building in Texas when the market disintegrated.

“We weren’t blindsided,” Cooper III said. “Nobody got out without losing some skin. It was very difficult. We had to manage for cash and get rid of inventory. We had 200 houses built. We ended up just selling off and raising cash to get ready for it.”

Changing Business Model

The company had survived recessions, double-digit interest rates and otherwise bad times before. Cooper, Basore and CFO Kent Burger all said the recession was especially bad because it hit all segments of real estate and lasted longer than expected.

One of the hallmarks of Cooper Communities is a healthy respect for risk and how to best avoid it. The crushing recession of just a few years ago — “The year 2008 was a doozy for us,” Cooper said — reinforced those ideals to a company that never stopped believing in them.

Cooper had begun to focus on commercial real estate holdings in 2000 and redoubled those efforts after the market collapsed. Cooper sold all but one of its vacation club holdings, and the last one is scheduled to be sold in the next couple of months.

The company has also moved away from its foundation in large-scale residential communities and homebuilding to dedicate its resources on development of existing properties.

“We’re getting through it,” Cooper said. “My goal was that we would pull back and manage for cash for a couple of years and then we’d go back in. The problem is the world is night and day compared to where we were. The financing is a lot more difficult, as is the risk, the regulatory environment, the customer. The risk is just not right there. Will we ever do another again? I can’t say whether we would or wouldn’t.”

Basore said the company has holdings and interests in states throughout the southeastern United States. Cooper III said the company’s goal is to infill as much of that existing inventory as possible in the next few years.

Looking Within for Opportunity

Cooper said the real estate environment is much more cash-intensive now, which brings about its share of risks. That is why the company isn’t in acquisition mode, even though there have been times Cooper wishes it was, so the company can handle the properties it held onto when the recession swept through the real estate industry.

“Right now we’re looking at opportunities in our existing communities,” Cooper said. “We still have a fair amount of land that is unimproved in our existing communities. We’re infilling our own communities, much like what is going on in downtown Bentonville. We still have inventory that we can take advantage of.

“We’re not looking to acquire land to develop unless we already own it. As it is right now, unless something changes, you can’t finance it, it’s too difficult to get the permit and with the developing costs and marketing, it’s easier to go make money somewhere else.”

Basore said Cooper’s grandfather and father were very conservative investors, and it’s no surprise that the third in line has the same prudence since John III worked so closely with his father, who died at age 74 in January 2013. Cooper retrenched just in time before the chaos hit and is biding its time with smart development — it hopes — until it can think of expansion again.

“It was great before 2008,” said Cooper about running the family business. “It’s not as much fun as it was before 2008. This is what I tell people, I say this all the time, we were laughing and smiling in 2004, 2005, 2006. The nature of the business is cyclical so you have to be laughing and smiling during the down time.”

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