After the Crash

Developer Jackie Welch looks back on the real estate boom and bust.

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After 40 years in the real estate business, Jackie Welch has something he never had much of before: time on his hands.

The developer who sold a dozen school sites to the Shelby County school board, more than 4,000 residential lots, and scores of sites for suburban shopping centers, strip malls, and office buildings from 1990 to 2006 now has two employees. His office is on the market for $1.5 million. Only offer: $1.1 million.

We met at a restaurant on Poplar Avenue near Ridgeway. He recalled when cement mixers, pickups, and flatbed trucks carrying bricks and loads of lumber for new houses jammed Poplar between East Memphis and Collierville. Every once in a while a truck would go by while we ate, but not often.

"You hardly ever see a concrete truck going down the road any more," he said. "It's scary."

Nothing creates jobs like a new house. Jobs for concrete workers, bricklayers, painters, carpenters, decorators, electricians, landscapers, nurseries, plumbers, framing crews, appliance stores, furniture stores, real estate agents. Multiply by the number of days it takes to build a house times the number of new houses built in a year and add the roads and schools and shopping centers to serve them and you have either a booming economy or a recession.

And, of course, suburban sprawl and its costs in public debt and blighted neighborhoods that were abandoned.

"It was relocation. It wasn't growth," Welch said. "People were following the county school system and moving to avoid city taxes. Mortgages were so easy to get. Anyone could qualify. If you wanted to sell your house for $125,000, there was a buyer standing there who could qualify. Then you could step up to a $250,000 house and that person could buy a $400,000 house. It was a chain reaction."

Welch Realty and its partners developed two or three subdivisions a year in Shelby County, Bartlett, Cordova, and DeSoto County, ranging from starter homes on $35,000 lots to mansions in Devonshire Gardens near Collierville. Until around 2007, most of it sold right away.

"When it was good, it was great," Welch said.

The bet was that the guy who got the mortgage was good for it and the value of the house would go up. Neither happened.

The big-volume builders like Bowden, Reeves Williams, Matthews Brothers, and Faxon-Gillis Homes pulled back or shut down. Jerry Gillis, CEO of Faxon-Gillis, said his company will start 35 houses this year, compared to 12 last year and 150 in 2006.

"The sales volume on those 150 starts was $39 million, and $31 million of that was direct costs that go back into the economy, plus the real estate commissions," he said. "The amazing thing is that interest rates are the lowest in 60 years and prices are down. It appears the whole world has been hit by a downturn and everybody is keeping their powder dry — if they have any powder."

Welch commented on other signs of the times in his former stomping grounds:

Winchester: "It was once the main road in southeast Shelby County. Now, 22 restaurants closed. There's not much left of it."

Germantown Parkway from Poplar to Highway 64: "There's not a shopping center that doesn't have multiple vacancies."

Small neighborhood shopping centers: "You can buy those today for 60 cents on the dollar from banks."

The Land Use Control Board: "That's where everything starts in the development business, and they don't have anything to do right now. Meetings are over by 11 o'clock in the morning."

Whitehaven, where Welch grew up: "I bought a house for an investor for $50,000 that sold for $120,000 a few years ago."

First Capital Bank, a $185 million bank where Welch is chairman of the board: "We've got some questionable loans on the books, and we're working our way through them."

He is in favor of consolidation, although he lives in Collierville.

"I am for it, but it is not going to pass," he said. "And it would only be as good as the administration."

His outlook for a real estate comeback is grim.

"It will be a generation before it comes back like it was in the mid-'90s," he said. "Unemployment has to come down to 5 percent. We're not through the worst of this yet by any means. You're going to see a couple of companies that are pretty well known that will close before the end of the year. The shock waves will be tremendous."

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