Yield PRO TV presents NAHB Power Hitters. Host Linda Hoffman talks with Bobby Bowling IV, President of Tropicana Building.
Transcript: NAHB Power Hitters interview. Linda Hoffman with Bobby Bowling IV, President of Tropicana Building, recorded December 2, 2021
Linda Hoffman: The sun always shines in El Paso Texas. It’s a city with over 300 sunny days per annum and the 22nd largest city in the nation. The top economic drivers are healthcare, social assistance, and retail. The highest paying jobs are in oil and gas; agriculture and corporate management. El Paso’s economy has grown steadily for a decade. Its job growth and housing have followed a similar, generally steady pace. Very few big swings in El Paso.
The Fort Bliss expansion protected the city’s housing market and hedged against the vacancy pressures felt by the rest of the nation. Things were sunny …until lockdowns.
El Paso has been among the slower to recover after COVID, with unemployment remaining above pre-pandemic levels, and its recovery trailing both that of Texas and of the nation.
Nearly a fifth of the city lives at the poverty level, mostly females aged 25 to 34. The median age in El Paso is 33 and Hispanics make up over 90 percent of El Paso’s population. Ninety-percent of its people are citizens.
There’s much in the news about our southern border, including the administration’s deal just today to re-implement the Remain-in-Mexico policy. The city of El Paso is front and center as it borders Mexico, and international trade greatly bolsters the city’s economic base.
Today we speak to someone at the center of it all. Bobby Bowling is a third-generation home builder in El Paso. Bobby, his brother Randy and partner, Demetrio Jimenez, own and operate Tropicana Building Corporation. They’ve built over 3,000 units, expertly using 9 percent tax credits.
There’s a lot more to the story, but let’s get it straight from our guest. Bobby, welcome to the show.
Bobby Bowling: Thank you, Linda. It’s a pleasure to be here.
Linda Hoffman: Bobby, let’s start with a quick overview. What do we need to know about you and about Tropicana?
Bobby Bowling: Well, you covered it pretty well. My brother and I are third-generation here in El Paso. My grandfather started building in El Paso in around 1950. And it’s a place that we love living. We both live here, as well as our third partner, Demetrio Jimenez, as you’ve mentioned. And we came from—you know there’s ebbs and flows in homebuilding—and my grandfather was pretty successful and then, you know, in the mid to late 70s and early 80s my father and my uncle struggled to make it as homebuilders.
And so to me that always—you know, we’re going to talk a little bit about us having all our eggs in one basket in El Paso, Texas, but having all of our eggs in one basket as just a single-family home builder—it became kind of evident that maybe that’s not the best way to go forward, as far as hedging risk, and protecting yourself against, you know, ebbs and flows and swings in the economy.
So, we branched out in the late 90s and around 2000 into the multifamily world, and it’s just been fantastic. We’ve had tremendous success, and I’m super grateful, and blessed by God to have what we have on our plate today.
Linda Hoffman: With a portfolio exclusive to El Paso County, Texas, in your 2 decades of operation, have you ever wished you were not dependent on a single local economy?
Bobby Bowling: Well, there’s a couple things at play there. First of all, El Paso is incredibly geographically isolated. We’re 300 miles from pretty much any other city, and you go to the east and it’s Lubbock. And Lubbock is a legit city, but it’s not a real big metroplex either. And 300 miles north is Albuquerque, and 300 miles west is Tucson. All, you know, nice cities, but kind of comparable to El Paso.
So, there never really was a big draw for us, you know, geographically. And plus, with our subcontractor relationships that we have here on the border—I think we have fantastic tradesmen here. But to get them to travel to another locale is not really on the table. So, if we moved our operation somewhere besides just El Paso, we’d have to really pretty much set up shop and start anew, like a new business. Of course, we have our knowledge of the industry, but relationships matter a lot to me in this world of building and developing. And just as much—the local rules and requirements for development. And building code is pretty much the same, but development codes and requirements and the way people in different cities want things done can vary tremendously from one locale to the next.
But as far as having everything here in El Paso—you touched on in your intro. I think, I mean I could speak for 20 minutes about El Paso because I love, love, love my hometown. So, I’m going to try to keep it short, but, it’s a really good place to have all our eggs in one basket. El Paso has some geographic things that are always going to be, that that make it positive. As you mentioned, we’re one of the largest border cities in the United States, across the street from one of the largest border cities in Mexico.
And, of course, Mexico is obviously our most important neighbor. So, we’re always going to have that. And, partially as a result of that, we have one of the largest military bases in the country, as well. It’s the largest land-based military installation in the United States—Fort Bliss—and it’s always going to be important because, number one, we’re on the border, and number two, the desert mountain terrain that we have here is perfect for training for the troops that are going to be engaged in places like the Middle East.
So, in the last base realignment and closure, as you mentioned, in the last BRAC (Base Realignment and Closure) process, Fort Bliss was the biggest winner in the country. We were the only base to get substantially more troops, and we got a $5 billion investment from the federal government to improve the base. So, there are some distinct advantages to that. But there’s also some disadvantages to that. We don’t have a large corporate presence here in El Paso, like you said. So, we’re sometimes not going to reap the benefits of a booming U.S. economy like other major metroplexes do.
Most of our largest employers are governmental entities. All the federal law enforcement agencies are here—the FBI, the CIA, the DVA, the border patrol, obviously. And those are very stable jobs, so it does kind of protect us from the booms and busts, like you said. We’re not a real big oil-based economy, we’re just outside edge of the Permian basin. But, like you said, you put it perfectly. We have steady growth for the last 10 years, and really for the last 30 years, since I’ve been in business.
It’s a nice place to live and do business. It’s kind of predictable. Our slow and steady growth—it’s safe and we found a really nice niche in building a product that is available and affordable to the masses here in El Paso. So, like I said, there could be worse places to have all your eggs in one basket. It’s been a good community to us.
Linda Hoffman: Does operating low-income, tax credit properties mitigate the risk of geographic concentration at all?
Bobby Bowling: Yeah, definitely. I think if we were—I think it’s a pretty tough place to make a living as a custom builder or someone selling a high-end product here in El Paso, because we just don’t have, like I just mentioned, we just don’t have a lot of high-paid corporate executives here. I mean, we have some. It’s a great place to live and it’s a great place to locate. I wish we had more. But really, you know, our economy is what it is, and we accept that, and we deliver a product and serve the market as it is.
And like you said, 20 percent of the population in El Paso lives below the federal poverty level. We know that. I knew that off the top my head before you even mentioned it. And we’re just aware of those things, and so, of course low-income housing is always going to have an appeal here. We’re always going to have a lot of first- and second-generation Americans. And the thing that they need first and foremost is affordable housing. And so, we’re providing that with our low-income housing and then we also—we’ll talk about that probably a little further along in this interview—we try to incubate those people, and eventually get them into the American Dream of homeownership.
Linda Hoffman: Have you considered expanding to other regions?
Bobby Bowling: Yeah. So, this is a question I get asked a lot, like at trade shows and things like that: why are we only in El Paso? I think if we had stuck with just being a single-family home builder we probably would have expanded at this point. My brother and I into Southern New Mexico, and probably the Permian Basin. But, we chose instead to grow vertically, and we’ve invested in lumber companies, and door companies and window companies, and other real estate services over the year with some success. But where we’ve really been successful in vertically integrating is our mortgage company, Patriot Mortgage, as well as our apartment development company, and then what followed was our apartment management company. So, instead of expanding, you know, horizontally to another geographic location we’ve expanded, you know, vertically, and just provided more housing resources and more housing options for the people of El Paso. It’s been great for us.
Linda Hoffman: The 9 percent tax credits that you use are awarded on a competitive basis. What is the secret formula for winning these credits on such a consistent basis?
Bobby Bowling: Yes. So, I think that’s probably just like any other successful business story. It’s just a lot of hard work, preparation, research, studying, determination, and then all of that leads to some extremely good luck, or divine blessings along the way.
The 9 percent program is something that’s changed our whole life as a business, and for our employees, and for the residents of El Paso. A lot of it is just being at the right place at the right time on a lot of things, and just showing up and doing your best and doing our best in an honest way. And, sometimes, when we make mistakes, really delve into where our responsibility was on that, and try to improve on for the next year.
But we’ve been fortunate to have been awarded 37 competitive 9 percent tax credit awards since the year 2000, when I first applied. And that first year of 2000 was the only year that we didn’t win an award. So, the program itself has always been, like, a natural for me with the talents I was born with. I always have liked to, like, read the rules of a game, or of a competition, and try to figure out the best way to go, and try to master whatever the game is.
I like politics. I like public policy debates and I like building things. So, all of those things are kind of the right mix for what the tax credit program is. And then there’s one other thing that’s probably, maybe the most key, I’m extremely competitive. It’s hard, like around these times, holiday times, when the family wants to play games—nobody wants to play with me, because I don’t really know how to behave sometimes. Because I just, I hate, hate losing.
And so, you know, with a 9 percent program, it’s a competition every year. And, you know, I scratched and clawed, and did everything I could, especially early in my career to try and make sure that we got a competitive tax credit award every year here for El Paso, so…
Linda Hoffman: Still, it is not a lock. Does the uncertainty of tax credits awards cause any concerns or difficulties in planning?
Bobby Bowling: So, I mean fortunately at this point in my career, we’re probably fine if we never get another tax credit award. But when I was younger and rising up from a working-class family in Northeast El Paso—oh heck yeah man—I was hell-bent to fight tooth and nail to try to get a tax credit award every year. I mean, sometimes, you know, we challenged rules, we brought in lawyers. You know, we fought it, political debates. We challenged, you know, the rules and we challenged the authority over the awards process. And it’s a tough competition, but I think what I would do, I just kept working until I could find the right combination every year.
And, in Texas, a lot of the points are awarded based on location, and the QAP, which are the rules that every state puts together to govern the 9 percent program. It changes every year in Texas. But I would try to stay involved and up to speed and educated and in tune with the conversations that were going on so I could see where next year’s QAP was going as far as points. And I would try to factor that into sites that I would go look for here in El Paso county that I thought would be would be what the public policy shift for next year will be, and what would score high.
And luckily, I guessed right most of the time, and so, you know, it’s good it’s been a nice ride. I will say though, even when I was young, we always had the single-family home building company, and the mortgage company to fall back on, and we have a real estate brokerage, as well. And actually, once the first couple years were under our belt, and I would say, I always tell people this, like to me, the break-even point was having 300 units. Once we had 300 units we could kind of have another profit center at our apartment management company. That was kind of the even water mark where we needed to rise above.
And so that developed into a wonderful company, and a great profit center for us, as well. Especially now that we have over 3,500 units, so, the economies of scale of that just really start to help you exponentially with every new deal, it costs less and less to operate, so…
Linda Hoffman: So, in market-rate, it’s not uncommon to see projects with 100s of units. We don’t see communities of that size very often in the affordable space. Why is that?
Bobby Bowling: Yeah. I think that’s because, you know, most of the affordable product is financed or subsidized with some limited government resource, right? So, I mean Texas is a big state. Even if we’re getting, you know, a 10-year credit of $500 million every year—that’s still a limited resource that needs to be spread out over, you know, Texas has a regional allocation formula where the state is broken up into 27 different independent competitions. So, you know, even a big number like 50 million, or 500 million, over 10 years, you know, gets spread pretty thin when you start looking at those 27 different competitions getting each a little pot of money.
So, you know, the public policy leaders, at least in Texas, and I think nationwide, always kind of want to make sure that different parts of their states get their fair share, or that no one gets shut out. So, that leads to—you know, there’s going to be a maximum, and in most instances, that you could apply for. Like in the rural areas of Texas, today, with inflation that number for 2022 is going to be about 50 units in most of the rural areas. So, there’s going to be a lot 50-unit developments that are better applied for next year.
And, so, I think—but I would just say as a commentary on that, I think that’s probably good. It is important to make sure that all regions of every one of these states, everyone at all these places around the country, you know, are able to participate in this program. Because it’s such a fantastic program, really, it is. I mean, we can have a 30 minute discussion just about the 9 percent program to me, because it’s—I don’t know what happened that made Congress actually get something right, but they did with this program. It makes sense on so many levels so little oversight of government bureaucracy. The private sector polices itself and the units get built at a price per square foot that’s reasonable and it’s just such a fantastic public policy program.
Linda Hoffman: Well, as a part of that, Bobby, Tropicana offers a variety of social services to its residents. What percentage of residents engage in these programs?
Bobby Bowling: So, I think about 50 percent of our residents throughout our portfolio take advantage of at least one of the social services that we provide. We wish that were higher, and we try to come up with services from one year to the next that appeal to the tenants, and that add real value to their lives.
Part of the problem, though, is you mentioned this in your intro, you know, residents of El Paso, and really 9 percent tax credit residents in general around the country—a lot of them are single moms, you know, with a job. They just don’t have as much free time, like for self-betterment, as probably they would wish, or that we would wish. You know, so it’s kind of a tough thing for a lot of families, you know. The tenant is just going to work, and then coming home, making dinner, taking care of the kids, and then going to bed, and then doing activities with the kid on the weekend, so, or kids. And so, it’s tough.
But you know, we have a full-time social services director here at Tropicana Properties. And she does a really good job. She’s got a masters in social work, and we do a lot of outreach, and like I said, we try to do a lot of programs that add value. We do some healthcare stuff. We do some, you know, dietary classes. There’s a, you know tremendously high percentage of the El Pasoans that have some form of diabetes, and so we try to address that—exercise and things like that, so yeah. I think it’s a great thing that we offer, and I know we do everything we can from one day to the next to try to get as many of the of the families and the tenants involved in programs.
Linda Hoffman: This is a question you would know for sure: What programs are of the most benefit to keeping residents housed, or even to become a homeowner?
Bobby Bowling: Yes. So, by far, our best social program is the homeownership programs we offer to our tenants. In the last four years from 2018, and including 2021, we’ve had the pleasure, and we been able to qualify 60 of our former low-income tenants, into homeownership. And it’s just a fantastic thing, and we’re so proud of that. You know we’re averaging—that’s 15 tenants per year that are going from low income housing into homeownership.
And the programs for those family sometimes start out with just learning English as a second language, and then we graduate them to financial literacy classes, and then we graduate them to homebuyer counseling, and then at the very last—and sometimes you think this would be the easiest step—to send out realtors and mortgage loan officers to try to work with the family and convince them that they can do this. But sometimes that’s the hardest thing to get over is the mentality of, you know, people come from a background where they think they can’t have something nice. And that’s the most rewarding thing when you can convince a family—you can do this. You know, you can buy a home. Here’s your income. Here’s what your monthly payment will be. You have a stable job. You have a stable income and look at this wonderful house.
We try to—our model is tax credit development—and we’re not always able to achieve this, but we go for is we try to do a tax credit development first, and then build single-family houses around the tax credit development, and the physical, visual thing of—look homeownership is literally right across the street from where you live. And, you know, El Paso—I just want to take a little rabbit hole here—a lot of places that wouldn’t work because there’s a lot of NIMBYs in this country that are, like, “not in my backyard;” I don’t want to live next to quote-unquote “those people.”
But El Paso is so wonderful like that we’ve never had that as a problem. We’ll be able to sell $250,000 and $300,000 houses right across the street, or just blocks away from one of our tax credit developments. And it’s never been a thing. But we have some wonderful stories that come out of this. And we’ve gotten some fantastic local media coverage when it does happen that we get a low-income family into homeownership.
The last one we did was a couple years ago, and we had a lady started out—I don’t want to exaggerate—I think she had five kids and she barely spoke English. And she went through her programs, and she learned English. She got financial literacy. We took her to homebuyer counseling. But on her own, she went out and got a degree at the community college. And then she got a nursing degree. So, she went from this low-income family as a single mom with five kids, and when the local media—and now we’re doing this show in her home. She’s talking about, “this is my home. I own this, and I’m so grateful, and it’s such a wonderful program to graduate me from. I didn’t know where to go.”
She’s leaving a bad marriage, and she came to low-income housing—it’s all she could afford. And now she lives in a $250,000 or $300,000 house and she’s a nurse. So, I mean, there’s just a bunch of stories like that. About this program, it’s like I can talk to you for 30 minutes about the 9 percent program. It’s such a good program for low-income families, especially when you have the social services that do things like encourage homeownership, which is what our program really boils down to—our social services.
Linda Hoffman: That’s a memorable story. As a builder and manager of multifamily and single-family housing, have you considered getting into the single-family rental business?
Bobby Bowling: Well, so we have customers that want to live in a rental community and we have some that just definitely do not. Usually younger people in transition that are mobile, appreciate living in a rental community. They are surrounded by people that are kind of in the same boat, you know, they’re there just kind of establishing themselves. They’re a lot more socially extroverted, and they want to congregate with other people in a rental community.
But then there’s people who are not looking for that. We have had people in our single-family subdivisions who have straight up asked us, you know, at the point of contract, “now you guys are not selling homes for rent in this subdivision, are you? Because if you are, I don’t know if I’m interested in living here.”
So, it’s just a matter of personal taste, and we found that even though our model is, like I said, to have a tax credit development kind of at the entrance of the subdivision, and then single-family housing around it, that’s still kind of a separate, you know, two separate products that we’re pushing. Is the homeownership here? And that’s not to say that we haven’t had investors, like everybody does in the homebuilding industry that come in and they want to buy 20 houses or 30 houses, and they want to rent them. We try to avoid that when we can.
I will say our multifamily product is very similar to our single-family products. We use much of the same building materials. It’s kind of seamless. You wouldn’t really, it doesn’t really stand out as a low-income apartment complex in in the middle of the other single-family homes that are in one subdivision. Almost all of our product is its quadraplexes. Most of them one-story quadraplexes. And like I said, we use the same stucco materials and roofing materials and landscaping and even the interior products—we use ceramic tile on our low-income housing developments. And, you know, the same kind of appliances, Energy Star. All of our units have their own washer-dryer. All of them are individually metered.
So, when we go to doing the transition from rental housing to homeownership, you know, a lot of our tenants are already pretty familiar with—you know-they’re paying their own utility bills. They’ve got all of the things, the amenities and bells and whistles that our single-family homes have.
Linda Hoffman: Bobby, you really are an inspiration. You are the gateway of the American Dream. Thank you for sharing your boots on the ground knowledge with us today.
Bobby Bowling: Thank you, Linda. It’s a pleasure. I think this program is fantastic. I watch the other ones that you have posted with NAHB and it’s really good service, so thank you.
Linda Hoffman: Thank you very much. And thank you for being a part of—you’re what makes our industry great.
Bobby Bowling: Well, thank you.
Linda Hoffman: It’s a pretty sure bet. Our southern border will be top of mind for some time to come. And as with everything, housing will always be part of the story.
Well, that’s our show. Thank you for joining us. I’m Linda Hoffman. Look for our next exciting episode of NAHB Power Hitters.