JPI CEO Payton Mayes On Building Bullishly in Dallas

Payton Mayes is CEO, part-owner and a board member at JPI, a major multifamily development and investment management firm that happens to be the biggest and most active housing builder in Dallas-Fort Worth.

Despite persistently high interest rates and overarching economic uncertainty, JPI is transitioning into a new era. The 36-year-old company has shifted into expansion mode — in terms of its portfolio size, its headcount, and its areas of expertise — particularly since being acquired by Japanese builder Sumitomo Forestry almost 18 months ago.

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Mayes was the keynote speaker at Commercial Observer’s Dallas Investment Forum on April 15 at the Santander Tower in Downtown Dallas. There he discussed how JPI got to where it is today, launching an affordable housing platform in uncertain times, JPI’s deal with Sumitomo Forestry, targeting public-private partnerships and more. 

This interview was edited for length and clarity.

Commercial Observer: First, can you introduce yourself and tell us about the landmark partnership your company made with Sumitomo Forestry, and what it means for JPI?

Payton Mayes: I grew up in Texas. You can tell from my accent. I went to school at Texas A&M, and I had a professor that actually convinced me to work in New York, and I ended up moving up to New York and working in the real estate and private equity space for about 12 years.

I moved back to Texas 15 years ago, and the Lord took me on a weird path, and I ended up at JPI in 2019. But I didn’t grow up in the multi-family development space. I’ve done a lot of different work in a lot of different spots in real estate, all asset classes, up and down the capital stack — both asset-level stuff and corporate and globally.

When I met with the JPI team and they were talking to me about coming over, one of the questions that Bobby Page — one of the founders — asked is, “Is there any concern that you’re going to be bored, because you’ve done all these other asset classes around the world, and this is just one asset class in the United States?” 

And, I can tell you I have not been bored for one second, because there is a ton going on. 

I had a relationship with Sumitomo Forestry going back to 2013, and so they started investing at the project level with us at first. And, then, in 2022, we started having conversations about a platform transaction. And, then, last November 2023, Mollie Fadule, our CFO, and I partnered with Sumitomo Forestry to acquire the operating platform at JPI.

We started having conversations with them in early 2022 about the platform. So, from early `22 to November 2023, the world changed a lot, right? The world’s always changing, and there’s a lot of uncertainty. But the more I’m around, the world’s always uncertain, and I think we’re fooling ourselves if we think it’s not. 

So, Sumitomo Forestry, talk about a long-term thinker: They were founded 333 years ago. So they have a very long-term mindset, which has been extremely helpful in this kind of capital markets environment where there’s a lot of volatility.

Our team is looking at projects in California, where the project may not even start for three or four years, and we won’t be able to sell them for seven, eight or nine years. So you have to have a long-term mindset, because, if not, the volatility will just drive you crazy.

Sumitomo Forestry came to the U.S. and started investing in homebuilding sites and single-family sites about 20 years ago, and then entered the multifamily side about seven or eight years ago.

Their mindset is to support the local leadership team, support them with capital and with other Japanese capital relationships, and it’s just been very, very helpful. 

So through the new ownership deal, you’re in expansion mode and able to play offense while so many others are being conservative or stuck on the sidelines, or at least cutting back. What kinds of markets are you targeting with new construction, and where have you been most focused since this new ownership deal?

For some context: JPI was founded in 1989 by four individuals. And I’d say they’ve had three different chapters, if you will. That first 20 years from 1989 to 2009 — lots of growth, partnered with Ray Hunt in that time period. Then a big partnership in 2000 with GE Capital, where GE was investing the vast majority of the equity in deals.

And I tell folks, when the Global Financial Crisis came, that was painful for a lot of developers, but very painful for JPI … because the capital partner that invested the vast majority of the equity basically went out of business. We had 12 different regional offices across the country, and the partners at the time finished their plans that were under construction, and sold their property management business to Greystar. 

But during that time, they looked at our track record and said, “We really do better in markets where we have a more dominant position.” And, so, since then, we’ve been heavily focused here in Texas and in Southern California. 

DFW is our home, where we’re headquartered. And I think this market is kind of a proto-
type for when we’re expanding and how we like to do it, which is what we’re doing now. It’s based on the theory of fewer markets, bigger market share.

So, we’re by far the largest multifamily developer in DFW. In most years, we’re bigger than the companies who are second-, third-, fourth-biggest combined. 

Our land chase team, every Monday morning we have a meeting here, and we look at like 600 land sites a year in DFW. I remember when I started, I said, “Are there 600 land sites in DFW?” And there are, obviously, as things get just bigger, bigger, bigger as we go out. 

Our goal is to do the best risk-adjusted returns. So we look at 600, we make offers on 120 to 130, we get roughly 30 of those under contract. Most of those have to go through a rezone process, and sometimes a public-private partnership negotiation. And so our goal every year in DFW is to start what we think are the best 10 to 15 projects a year.

We’re vertically integrated. We have the land acquisition side, development side and construction. We’re also bringing design in-house. And, then, also, we’re integrating some of the trades into our business, which, with our model of being in fewer markets, bigger market share, allows us to do that.

How does a company end up in Dallas and Southern California, specifically, so heavily? I mean, what’s the difference in delivery timing in getting a project from start to ground-up?

It can vary widely. Obviously, there are fewer barriers to entry here. 

In Southern California, the entitlement process is a pain. But since we’ve had an almost 30-year track record in California, you have that kind of institutional knowledge, and know how the process works. 

We love the market. It’s a pain to do business in, but because it’s such a pain to do business in, a lot of people just don’t want to open shop out there. There’s still such a huge housing issue in California, for quality housing. And we’re choosing to attack that space, and a lot of our pipeline is out there. 

But you’re also looking at markets now outside of Dallas and Southern California?

That’s right. So, pre-Global Financial Crisis, JPI was nationwide. Post-GFC, the partners at the time decided we really want to focus the working capital we have on a bigger market share in fewer markets. 

Around 2022 or 2023, we were the eighth-largest developer in the country by National Multifamily Housing Council rankings, but we were only in two markets. Most of our peers have a broader approach, with just one or two deals per market. 

Now that we have this relationship with Sumitomo Forestry, with additional working capital available, we are expanding. And it’s a great time to expand because it’s hard to get deals because the capital markets are extremely challenging, including for JPI. But, with the additional working capital, we can make deals work that maybe some other market peers can’t. 

For a lot of our peers, their production has fallen off a cliff. So we found that now is a great time to expand by taking over deals that other people or other folks can’t get capitalized.

So, Lord willing, we’ll have our first project start outside of Texas and Southern California in over a decade: We have a project up in Redmond, Wash., that’s really close to the Microsoft headquarters that we should start construction on next month. Our goal is we don’t want to just do one deal up there. We want to be the dominant player. When we choose to expand somewhere, we want to be the dominant player.

So we’re looking at all the obvious places where there’s job growth, population growth, incomes that can support development. 

I didn’t realize when I got into it, but our industry is so fragmented. The top 10 single-family builders in the country control about 60 percent of that market. The top 10 multifamily players control about 12 percent of our industry. So there’s no market that we’re looking to enter into that one of our peers has a dominant market share.

So that market fragmentation lowers the barriers to entry? 

Yes, the markets are extremely fragmented, both in terms of just developers and also just in terms of the value chain itself. 

I think there’s a million real estate companies in the U.S. with an average number of employees of like seven people. When you start thinking about it, I mean, how fragmented is that relative to all other industries? 

Our goal is to build a more integrated company, and integrate the value chain on the trades as well, and try to truly differentiate ourselves. We have a lot of amazing trade partners, but, compared to other building industries, our industry is relatively unsophisticated. 

For example, take flooring. You’ll send the plans to “Sally,” and Sally sends it out to a couple suppliers to get some bids, she sends it to a couple installers to get some bids, and then Sally slaps on 20 percent and says, “Here’s your price.” And, then, when there’s an issue, it’s not Sally that’s the one figuring it out. It’s our JPI team. 

So some of the trades we’re bringing in-house in order to really take out contingencies and buffers and all that stuff. 

About how many people have you been adding, or departments or different arms, to your company through this integration? 

I know today we have 365 folks on the team. That’s probably 100 more than we had last year. I’m super proud of the fact that we’re able to attract extremely high-quality people.

Some of y’all may have seen the news that we did have one significant person leave our company on Feb. 5. Scott Turner is now our secretary of Housing and Urban Development, and we’re super proud of that fact.

Scott had a number of different opportunities to do different things when he came out of the first Trump administration. And he met with JPI, and I started spending time with him, and he truly believed that — and I certainly believe that — JPI is focused on doing things a different way so we can scale and build things at a lower cost. 

Another gentleman, Paal Kibsgaard, who came to the team a couple years ago [as chief transformation officer], is just a world-class talent who’s completely differentiating us from any of our peers. And we’re integrating the value chain, especially on the construction side, in part because, depending on the project, construction is 70 percent plus or minus the overall project costs. So that’s where we feel like we can move the needle. 

Paal came from the oil and gas space. He spent five years at ExxonMobil, 25 years at Schlumberger, and the last 10 years of that he was CEO. When he was leading Schlumberger, it was a $120 billion company with 125,000 employees across the world, 85 different countries they’re operating in. 

And he truly believes that our industry is ripe for disruption. There are way too many players and it’s way too fragmented. 

Is JPI also investing in any sort of tech or data collection to help make things faster and easier? 

Yes, I think we’ve invested roughly $10 million over the past couple of years. Again, a lot of it on the construction side. Because the value chain is so broken and fragmented, there’s almost a lack of motivation to invest in technology. 

We have drones flying over our sites every week. Our construction team has cameras that they wear. And, at the end of the day, all that data gets uploaded to the cloud, and we have a team in India that’s comparing all of our digital plans for what’s supposed to be built and what’s actually built. And, if there are any issues, the superintendent comes to the job site the next morning, and on their iPad it says they need to check those certain things.

We’re also investing in supply chain tracking to try to do things faster. We’ve seen our pace of framing on “the new way of working” is roughly double what we were doing the old way.

Speed is always important. But especially with this cost of capital environment we’re in, it’s even that much more important.

Talk about how you’ve utilized public-private partnerships to help address the affordable housing crisis and provide high-quality homes for essential workers.

When I started meeting with JPI in 2019, and going over our business plan, I asked them at the time, “Have we ever done any affordable housing?” And they said no. 

At my previous job in New York, we owned an affordable housing company up there. And I knew there’s an aspect where, whether you’re Republican or a Democrat, they can’t really agree on anything, but one thing that they do agree on is we have affordable housing issues.

So, like it or not, the government is going to be more involved going forward. So I said, by not looking at that, I think we’re missing out. So we added some talent to the team initially to look at tax credit deals. And we did a few of those deals and liked those, but then we started looking at these public-private partnerships.

A lot of our peers were attacking the space by taking as much cost out of the community as possible. And, to me, you can tell pretty much immediately when that stuff is built. And five years down the road you can tell that’s what the strategy was. 

And, so, JPI is known for building high-quality communities, and we want to stick to that. We’ve chosen to use these partnerships with the municipalities in order to add new housing. Our big belief is the only way that the affordable housing issue is going to be solved is by adding supply. 

And there’s been a lot of transactions and conversions that take properties off the tax rolls. Some of those have added affordable housing. A lot of them have not. And that’s why I think developers get a bad rep, like “greedy developers,” where it’s just about lining their pockets and not doing nearly enough for the public.

I’m not saying all conversions are bad, but what we’ve chosen to do is use the laws to add new supply, and at least half our pipeline today here in Texas has some sort of public-private partnership component to it.

Greg Cornfield can be reached at gcornfield@commercialobserver.com.