Senior Capstone Project

Real Estate Development Exploration

Ocean Jangda
May 18, 2017
Introduction

My capstone project was intended to be an exploration of real

estate development and associated careers in real estate.
Although the learning outcomes I proposed near the beginning of
the semester are a little bit different than what I have written
about here, I am very happy with the outcome of my work.

I interviewed ten professionals, attended a number of events,

spent hours working in the real estate field, and spent a lot of
time reflecting on all the information I was soaking up. The
following report is a reflection on each of my activities.

Reading

Making it in Real Estate: Starting Out as a Developer

John McNellis

John McNellis is a real estate developer who’s company, McNellis

Partners, develops suburban retail shopping centers in the Bay
Area. This short book is a non-technical development manual that
Mcnellis wrote to share his lessons learned over 40 years in the
industry. It was funny, insightful and succinct. Although the
book is really a sort of manual for becoming a successful
developer, it reads like a witty novel and loosely follows
McNellis’ career.

Key takeaway: in real estate development, you stand to gain only

slightly more than you stand to lose. Get comfortable with risk,
play it smart and you might win more than you lose!

Real Estate Development: Principles and Process

Mike Miles, Laurence Netherton, Adrienne Schmitz

Real Estate Development is an academic textbook about the

history, process, partners and associated information regarding
real estate development. It is a few hundred pages of pure gold.
I have not read it cover to cover yet, but I eventually will.

I never was fascinated with American history until I read it

through the lens of real estate in this book. The history of
American land development is mind boggling. The insights that
the authors extract from case studies and past development
trends alone is worth way more than the cost of the book. Those
elements supplement a central narrative which describes an
eight-stage development process which is considered by many as
the gold standard for modern development. The process reflects
the changing asymmetries in information amongst stakeholders
which did not exist in the past and stresses the importance of
stakeholder alignment for long-term profitability.

Key takeaway: you don't know what you don't know. Real estate is
such a complex field that you truly can never know it all, all
you can do is to never stop learning.

The Millionaire Real Estate Agent: It’s Not About the Money
Gary Keller

I purchased this publication in audiobook form and enjoyed it

immensely. Although it is more focused on sales than real estate
itself, I found the insights highly valuable. Keller is the
founder of Keller Williams, the largest real estate franchise in
the world by agent headcount. He and his writing partners did
extensive interviews with the most successful agents in the US
and extrapolated a system of business which, if followed
closely, seems to lead to massive success.

One key takeaway is regarding the title. Keller says they

decided to name it as they did because they knew the title would
sell. But in reality, the book is largely about mindset; about
thinking in ways that are similar to those people who have
already become massively successful in real estate sales. I find
that to be valuable on its own, but the book also lays out very
technical systems for managing a successful real estate
brokerage, which I also find fascinating.

Key takeaway: selling is often more about mindset and attitude

than product and market expertise.
Events

The Midtown Story: Rochester’s Case For A Mixed-Use Core

Urban Land Institute

This event was hosted in downtown Rochester by the Buffalo ULI

chapter. The chapter president, Dave Stebbins, later was
responsible for adding me to the Urban Revitalization Council
day as a guest during the ULI spring meeting.

Successful developers from around Rochester spoke on a panel

about the numerous developments ongoing in downtown. Andrew
Gallina, who's daughter Lauren I interviewed, spoke about their
Metropolitan project. The $30-some million Chase Tower
redevelopment is bringing young professionals back into downtown
and providing them with unparalleled views from up to 26 floors
above the city. Gallina also talked about parcel 5, the last
undeveloped plot of land in downtown for which the city was, at
that time, still in the RFP process (Gallina’s proposal for an
additional mixed use tower and a park was rejected in favor of a
new performing arts theater).

Joe Eddy, VP of Winn Development, spoke about Winn's extensive

$200 million mixed-use redevelopment of Sibley Square. Sibley
Square and the Sibley Building will be the cornerstone of many
future investments in downtown Rochester, and the fact that Winn
is not a local company indicates the level of attention downtown
Rochester is receiving on a national scale.

The developers and designers of the brand-new Tower 280, where

the event was held, spoke about the legacy of downtown and the
current upswing in investment.

Key takeaways:

1. A rising tide lifts all boats: a number of the most powerful

developers in Rochester all sat side by side for an hour to
talk about their projects, many of which are competing for
customers. It makes sense, however, because investors need
other investors around them to make it work. Bringing a
neighborhood back to life isn’t a one-man-show. As long as
everyone is building quality product, everyone wins.
2. Nonlocal investment indicates successful markets: local money
is great and necessary, especially early on, but having
nonlocal investors demonstrating an interest in your market is
 important for more extensive growth. Small markets mostly just
see local money, middle markets like Rochester are beginning
(again) to see nonlocal investment, and we can see foreign
investment generally funnels mostly to alpha markets like New
York and Los Angeles.
3. Invest in Rochester: if you have cash sitting around, you
should have invested it in Rochester real estate yesterday!

Designing Detroit: rebuilding by reconnecting

Reshaping Rochester Series

Reshaping Rochester is an award-winning event series hosted by

the Community Design Center Rochester. They invite ambassadors
and leaders of successful urban areas to speak about lessons
learned and to participate in a knowledge share with Rochester.

The guest for this event was Maurice Cox, Director of City
Planning for Detroit. Meg Walbaum invited me to join her for a
roundtable discussion in the morning and I also attended
Maurice’s lecture later that night. Learning about what Detroit
has done in the past few years to begin reversing decades of
decline was fascinating.

Key takeaways:

1. Focus on creating beauty: two of the major challenges facing

Detroit are blight and crime. The city is facing both
challenges by creating beautiful spaces. Maurice, along with
most urbanists and community leaders, believes that people
love to be active in beautiful spaces. If a place is ugly,
uncared-for and rundown, blight occurs and crime proliferates.
Investing in community programs that beautify neighborhoods is
clearing away blight and reducing crime by activating healthy
communities in those spaces. Some of the strategies they are
using include demolishing buildings which are beyond repair,
establishing community gardens on empty lots, and employing
local artists to decorate unattractive building facades.
2. Well informed infrastructure: being able to get around
quickly, safely, and affordably, and having access to basic
urban amenities is a core ingredient in catalyzing urban
revitalization. You can’t just build infrastructure though,
you have to start with a very informed model of where it is
needed and who it will serve. So much infrastructure
investment in the past has avoided underserved communities,
 thereby actually reducing the overall quality of life in the
city and exacerbated inequality and crime rates.
3. Cities should be sharing: cities like Rochester, Buffalo,
Cleveland, and Detroit have so much in common. They have
shared histories and face similar challenges today. The
process of rebuilding urban communities is long and hard, but
cities have to recognize that they are not in it alone. Each
similar city can and should be sharing resources like research
data, best practices, and lessons learned.

Tacoma: City of Destiny

Urban Land Institute Spring Meeting

I arrived in Seattle for the ULI spring meeting on a Monday

night. The following Tuesday was pre-conference day. A number of
full-day tours were offered and I was able to join a group
headed south to Tacoma to learn about how the city was quietly
growing in the shadow of Seattle’s ongoing boom.

First, our bus let off at the American car museum, an amazing
monolithic wood frame building which is home to one of the
largest private car collections in the world. The Mayor of
Tacoma, Marilyn Strickland, met us there to share a brief
introduction to the city’s recent economic growth and business
environment.

Tacoma has had a rough past. Notorious for dangerous

neighborhoods and industrial pollution, it had, for the past few
decades, struggled to attract young new citizens. In the last
few years, however, Tacoma has made a number of good decisions
which resulted in a massive industrial clean-up effort and a
spate of new development and growth. As rents skyrocket in
Seattle and its surrounding suburbs, Tacoma has become a more
affordable alternative for commuters to Seattle and has recently
begun to emerge as an appealing place to live and work in its
own right.

After leaving the Museum we walked to the north end of the

city’s new light rail, which is free to ride and fully funded by
the city and state. We hopped off the light rail in the central
business district where the University of Washington Tacoma has
recently relocated. The fully urban campus is home to around
5,000 students and has been a driving force behind decreasing
urban crime rates and growing economic development in downtown.
A major highway and rail line separate downtown from the
waterfront, an area which has historically been polluted by
years of poorly regulated industrial activity. The city has long
been home to industrial trade, but multiple stakeholders have
come together to clean up the area adjacent to downtown. The
area is known as Thea Foss Waterway has been rezoned as
residential land and is now home to a number of residential
developments and museums.

The bus took us from downtown through a geographical bottleneck

created by steep hillsides to the south and the bay to the
north. The thin strip of beach is occupied by the highway and a
rail line, leaving little room for good public transit or bike
paths. Regardless, once the geography opens up towards Point
Rustin, developers have been hard at work transforming the area.
Located on a once-polluted industrial site, a huge new mixed-use
development is shooting out of the ground. Over a thousand
market rate residential units, a handful of restaurants and
businesses, a supermarket, and a park are all under
construction. The condos and apartments on the coast near the
park overlook stunning views of the mountains and bays that
border the Tacoma area.

As I spoke with an architect-turned-developer named Steve who I

met on the bus, a number of things about the development raised
questions about its long-term value to the community. First of
all, its very hard to get to without a car. This is a typically
American problem with a lot of new developments and is going to
present future challenges. Second, it seems far to easy to argue
that the buildings are seriously ugly. Third, Tacoma has a
persisting income inequality issue which the development fails
to address. It’s hard to be perfect, however, and the city of
Tacoma is still grateful for the investment regardless of its
debatable shortcomings.

Next, we visited a central area of Tacoma and learned about a

number of recent developments. A beautifully restored high
school, a large new restaurant space that has been reporting
record sales for its parent company, and a large new residential
building still under construction. The area seemed lively and
prosperous and the community recognizes it as a ground zero area
for Tacoma’s comeback.

After returning to downtown we followed a local guide around the

University. We saw how the University of Washington’s investment
and dedication to redeveloping core real estate in the city has
lead to a number of private developments around the campus as an
anchor. The university does not provide any amenities to
students itself, but rather partners with local businesses so
that the economic benefit is maximized and the student
experience is highly urban and integrated into the community. We
ended our day at Seven Seas Brewing and Taproom which has
redeveloped an industrial building at the edge of the campus.
The brewery currently produces all of their beer in the building
which doubles as a tasting room, meeting space, and restaurant.
The project has been a highly successful example of the brewery
boom in Tacoma which is now home to dozens of breweries.

It was a fascinating day. Exploring a city which is experiencing

an urban renaissance, with a group of successful developers and
others, listing to their questions and asking a few of my own,
was eye-opening and highly educational.

Key takeaways:

1. Make sure it “pencils”: ask every question and work through

every contingency to ensure that you understand how your
project makes money and which downsides to protect against
given the development environment and project variables. If it
doesn’t look like it will be profitable on the back of a
napkin, you will fight at every stage to turn a profit.
2. Designing for the future is designing for the community: a
project must meet the needs of the current market to be
profitable, but if it is not also designed for the future of
the community, it can’t really be considered an asset to the
city. Merchant development has a tendency to produce low-
quality products which will burden rather than bolster the
community in the future.
3. Secondary markets love developers: cities experiencing a boom
can often resist further growth and development. Smaller
markets and second-tier cities which have been left out of the
action, however, are doing everything they can to accommodate
development and make the process easier and more appealing to
investors.

Route 50 Roadshow: Rose Fellowship Mayor’s Panel

Urban Land Institute Spring Meeting

Following the Tacoma tour, I attended a panel discussion with

three mayors currently working with the Rose Fellowship. The
Rose Fellowship is an organization of city builders who consult
with five cities each year in order to catalyze positive change
and help those cities overcome what they identify as their key
urban challenges. This year Anchorage, Grand Rapids, San Jose,
and D.C. were chosen, with the mayors from the first three
participating in the panel.

I was particularly excited to attend this event in order to

learn what Ethan Berkowitz (mayor of my hometown of Anchorage)
had to say. The key challenges for Anchorage were around urban
resilience. For Berkowitz that means balancing demographic
diversity and poverty with a transitioning economy. Alaska’s
economy has long been highly dependent on oil revenues which
have begun a long slow decline towards an inevitable halt.
Encouraging the correct forms of development is key to
maintaining a healthy city over the long term and Anchorage
certainly has its work cut out for it.

Key takeaways:

1. Structural inequality is easiest to fight at the neighborhood

level: equal access to public amenities such as transit and
healthy food markets across income and racial spectrums is
critical to urban health. Making sure that city and state
funding and development is oriented around a “most vulnerable
first” approach is key to producing real change at the
neighborhood level.
2. Mayors hold considerable power over their city’s wellbeing:
although they often do not have the most cash at their
disposal or the final say in most legislation, the attitude
and approach of the mayor is one of the key forces behind most
forms of positive change in a city.

Creative Placemaking Lunch

Urban Land Institute Spring Meeting

Day one of the meeting began with a lunch presentation by

Juanita Hardy about “creative placemaking.” The premise of
Juanita's lecture was that cities need places filled with
people, places that represent a community’s interests and that
draw people (and therefore economic growth) into underutilized
spaces. She shared examples of public facing art amenities such
as redeveloped theaters and art parks and proposed a number of
guiding principles for creative placemaking for developers.
Key takeaways:

1. Artists activate space: incorporating amenities into your

developments which aim to serve the art community helps to
actively integrate the project into the social fabric of a
place. Such amenities ultimately add to the long-term ROI, as
they tend to draw more foot traffic and social engagement.
2. Understand a community’s values before building: making an
effort to understand what the community values pays off by
allowing your development to cater to those values. Public
facing programming and amenities cost money to develop but
save more in the long run by aligning the project with the
existing community. For example, Juanita shared an example of
a highly successful building which was redeveloped to include
a shared kitchen/cooking school/food service incubator because
the developer identified cooking as a major interest of
existing residents of the neighborhood.

Interview with Alaska Airlines CEO Bradley Tilden

Urban Land Institute Spring Meeting

After lunch, day one kicked off with an interview. The guest was
Alaska Airlines CEO Bradley Tilden. Each meeting the ULI brings
in a leader from outside the real estate industry to talk about
their challenges and successes. The objective is to get all the
city builders out of their bubbles and to draw corollaries
between industries. Bradley is a friendly flying enthusiast who
ascended through the ranks of Price Waterhouse before joining
Alaska Air.

Key takeaways:

1. Do something you love: although it was brief and somewhat

offhand, Bradley mentioned the value of doing what you love.
As an avid pilot himself, he is uniquely disposed to do a
great job running an airline. Not only does he know their core
business activity firsthand, he understands the motives of his
employees and is exposed to the world he enjoys every day.
That passion and alignment has resulted in Alaska Air being
highly successful under his leadership.
 Concurrent Session: Small-Scale Adaptive Reuse
Urban Land Institute Spring Meeting

I attended two formal learning sessions during meeting day one.

The first was a discussion between a moderator and three small-
scale developers. Each developer presented an adaptive reuse
project they had recently completed along with their lessons
learned. I attended this session over other concurrent sessions
because I have an interest in adaptive reuse and it tends to be
the lowest barrier to entry form of development, so it felt
immediately relevant to me.

Key takeaways:

1. Build in contingencies: oftentimes a project won’t pencil

without some concessions on the part of the developer, the
designers, the city, and/or the tenants. In a perfect world a
developer would buy a property to redevelop, find no hidden
structural surprises, be able to afford an awesome design,
find perfect and creditworthy tenants to fill the space, and
have a smooth regulatory experience with the city and the
neighbors. That’s the plan, but in most cases, it seems like
it does not go according to plan. That’s where contingencies
come in. A level must be added to the building to make it
profitable and you have to fight the zoning to get it built,
you can’t find the perfect tenant to rent an entire floor and
have to build it out for three tenants instead, a piece of the
foundation starts falling apart during construction, the list
goes on and on. These problems are typical of adaptive reuse
projects and making sure the project will pencil with
significant contingencies from the start is critical to
success. If you can’t make it pencil without budgeting for the
inevitable, you are gambling with your career.
2. Make it cool: adaptive reuse projects are generally pursued
because there are good bones in a building but the property
needs love. If you just do the bare minimum, you might make
money and you might have fun, but if you try to create
something amazing, fun, and cool, you will probably have more
fun and you are far more likely to draw in the type of people
who will make your project a success in the long run. One
developer kept old advertising artwork on the exterior walls
of the adjoining building (which, when they added another
story to their own building, became their own interior walls),
another developer personally financed the build-out of a
highly creative coffee shop concept in his building because he
believed in the energy and vision of the young coffee
 entrepreneur behind the idea. The coffee shop went on to grace
the cover of a prominent magazine and became a hangout for
highly successful tech entrepreneurs.
3. Build relationships with good tenants: each of the three
developers shared insights which made it clear that one of
their priorities was to do repeat business with tenants they
have mutual respect for. It made their lives easier as
developers when they had a successful business in one of their
buildings that would like to open a second location in their
next building.
4. Vertically integrate: when you own the design and construction
arms of the business, those elements of the process are
significantly streamlined. You can go back and forth with
design iterations and get construction estimates far faster,
reducing your overall cash burn and project timeline.

Concurrent Session: Changes to the Retail Landscape

Urban Land Institute Spring Meeting

The second learning session I attended was a discussion about

the future of retail real estate. The retail landscape has been
undergoing seismic shifts as e-commerce continues to swallow up
huge percentages of sales. Brick and mortar retail, however, is
not dead, it’s just changing.

Peter Huddle, EVP of Development for Westfield America, joined

Dawn Clark, VP of store design for Nordstrom, to discuss the
changes they have seen in the retail real estate industry. I
think it was intended to be a discussion about the overall
changing nature of retail as a whole in order to gain insights
as to what the future might hold. In reality, it ended up being
a list of things that both companies are doing to transform
shopping into an experience which still has a place in a world
where you could get everything you need online.

There seemed to be a baseline assumption throughout the

conversation that brick and mortar retail is becoming experience
oriented. In the past, retail real estate was often not much
more than a place to display goods for people to purchase. Since
the internet actually fulfills that need much more effectively
in most cases, the future of brick and mortar retail is much
more complex.
Key takeaways:

1. Shifting consumer trends: young consumers seem to care more

about the quality of an experience over the form that it comes
in. In other words, they are picky about how they spend their
time and money and are most engaged with experiences that are
fun, meaningful, and immersive. That means well-designed
spaces for shopping, socializing, and recreating, all bundled
into the retail experience.
2. Connectivity must be integrated: physical places need to be
integrated into digital experiences in order to draw in more
users and to provide experiences which don’t begin and end at
the front door. For example, a customer can shop on their
phone, hail an Uber to Nordstrom, arrive in the physical
building and have their garments waiting to be tried on. Once
they decide what they like they can just walk out and their
online account takes care of the purchase. In this example,
the real estate is a necessary part of a seamless digital/
physical experience.

Insights from Ex-Vice President Joe Biden

Urban Land Institute Spring Meeting

One really cool thing about attending the spring meeting was
hearing from Joe Biden. The conference hall where he spoke had
about 3,000 chairs in it, but I didn’t see it full until the
night when he spoke. It was a standing room only event and folks
waited a half hour in line to get seats up front. The guy must
be famous or something. He is quite an engaging speaker. The
conversation reflected on his experience rebounding from
multiple deaths in his family, patriotic resilience, the
assassination of Bin Laden, and the current state of American
politics.

Key takeaways:

1. Life after death: Biden’s story about the death of his first
wife, daughter, and son were very emotional, but the tragic
sadness brought with it incredible lessons. He spoke about how
experiencing loss gave him a renewed appreciation and respect
for people. He recognizes now that anyone could be going
through something terrible and that it's not his job to judge
people for who the are. Tragedy gave him an opportunity to
reconsider his own character, strength, and morality.
Incredibly, he was able to use it as a source of strength and
 inspiration for the purpose of his life. His advice was that
we each also seek strength from our injuries. My novice
writing skills don’t do his message justice, suffice to say
people were crying.
2. American resilience: Biden spent a good deal of time speaking
about the resilience and pride of Americans. During a time
when it seems like politics and the social fabric of our
country are divisive as ever, I think everyone in the room
appreciated Biden’s optimistic outlook on the future and his
call to be more appreciative of those who's opinions and
values conflict with your own.
3. We can build it: one key element of Biden’s message had to do
with the fact that he was a politician speaking to a room of
city builders; developers, architects, planners, etc. He
insisted that Americans have it in their blood to solve
problems by building better solutions. We have always done it
and it only recently seems like builders have lost sight of
our ambitious history. We are more than capable if we can just
dream big and have confidence in our truly world-class
capabilities.

Council day: Urban Revitalization Council (URC)

Urban Land Institute Spring Meeting

The second day of the meeting was dedicated to the councils.

Full members of the ULI are all members of a specific council
which specializes in a particular real estate product or
process. As I mentioned before, the present of the ULI Buffalo
chapter added me to the URC so that I could follow the group as
a guest during the second day of the meeting.

Turns out that the URC finds the city itself to be the most
engaging learning environment, so we spent the full day on a
walking tour. We visited a number of projects around Seattle
which exemplify best practices in the urban revitalization
process. The council’s partner for the meeting, a local design
firm called MG2, hosted breakfast and the opening remarks. The
CEO and President of the Downtown Seattle Association spoke
about their work in helping expand and manage the city's
services during a period of intense growth and development.

After breakfast, we walked from downtown to Pioneer Square, the

oldest neighborhood in the city. In Pioneer square we heard from
a panel of developers about the neighborhood's history and urban
challenges. We were introduced to Seattle’s homelessness issues
and learned that Pioneer Square used to be an underserved
neighborhood with a significant population of homeless and
mentally ill occupants. In the past few years, however, The
Alliance for Pioneer Square (a community design organization)
has worked with the city as a whole and with private and public
developers to transform an entire urban area into a thriving
tech sector, all without displacing low-income residents.

Later we visited a massive mixed-income housing development lead

by the Seattle Housing Authority. 560 units were being
redeveloped for individuals earning under 30% of the average
median income (AMI), 290 more were being built for those under
60%, and 850 more were in the works for residents earning under
80% AMI (a bracket typically referred to as workforce housing).

In the afternoon we arrived at Seattle University via trolly for

a discussion about affordable housing development. The President
of the Housing Affordability and Livability Agenda (HALA) spoke
about the need for zoning changes and innovated design standards
in affordable housing.

Key takeaways:

1. Homelessness is a wicked problem in American cities: when

rents in a city skyrocket a lot of people can be displaced.
Some of them end up joining the ranks of homeless. Many
homeless people require mental health attention in addition to
affordable housing. When real estate is booming and developers
are making a killing building luxury condos, for example, the
underlying problem of affordability is not being addressed. It
takes many stakeholders working together to come up with
solutions and we are far from solving the problem.
2. Single-owner equity-funded projects catalyze change: when an
all equity developer builds a building with their own money,
they have a lot of room to experiment with creative ways to
engage with the community. That type of project tends to
stimulate more traditional development around it, creating a
multiplier effect which lifts the entire neighborhood.
3. Housing affordability is not just for the homeless: when
school teachers or mailmen can no longer afford to live where
they work, cities have a real problem. There is currently a
massive and growing gap between supply and demand for
affordable housing in the US. Construction costs and land
costs are the main prohibiting factors.
4. Civil services are key: in pioneer square, there has been a
recent movement to clean up and activate alleyways. This has
 resulted in a new schedule and format for trash pickup to be
instituted, allowing alleyways to be occupied by people and
businesses instead of dumpsters and crime.
5. So much more: I could write another ten pages about just this
one day, but I will spare you. It was a very educational
experience.

Starting with the River: Chattanooga’s Model for Successful

Downtown Redevelopment
Reshaping Rochester Series

During my second Reshaping Rochester Series event, I learned

about Chattanooga, Tennessee. Kim White, President of the River
City Company spoke about her lessons learned in transforming her
riverfront city.

There are similarities between Chattanooga and Rochester. Both

are mid-sized, ex-industrial cities built on a river. Most of
Kim’s lecture had to do with strategies they employed to
activate their riverfront. The presentation reminded me of
Howard Decker’s 12 criteria for urban excellence (see
interview), one of which is to “capitalize on natural
resources.” Howard is adamant, with justification, that this one
principle holds the power to transform Rochester. Kim also
agrees.

Key takeaways:

1. Urban geography is an asset: the fact that Rochester has a

massive waterfall in the center of downtown is astounding.
Developers, designers, investors and the city need to work
together to transform the riverfront into a world-class place
that everyone thinks of immediately when they think of
Rochester.
2. One hit wonders: a single property, properly designed and
intended for use by the public, can transform an entire city.
For example, a massive aquarium on the banks of the river was
a catalyst for years of significant investment which
transformed Chattanooga.
Interviews

Real estate is a complex industry with diverse professionals

working together to create, sell and manage products. It seemed
like the best way to learn would be to actually speak with these
professionals in person and ask them about their work and ideas.
Interviews are also a natural and convenient way to network
while still in school. The following are short summaries of my
thoughts from each of the 10 people I met with.

Lauren Gallina
Real estate marketer
Gallina Development Corporation

I met Lauren through a mutual friend who indicated that she may
be useful in getting connected with the Rochester real estate
scene. He was correct and after an email intro, I met with
Lauren to chat about what she does.

Lauren’s father, Andrew Gallina, is a respected real estate

developer who has focussed on building suburban commercial and
industrial properties in the Rochester area. Today Gallina
Development Corporation is a family business and Lauren leads
the marketing team.

Lauren is currently focussed on the company’s largest project to

date: the redevelopment of Chase Tower in downtown Rochester.
Gallina purchased the iconic 26 story tower from JP Morgan Chase
for around $6 million but the project is budgeted to cost over
$30 million when it is finished. The landmark skyscraper was
originally built as commercial office space but has sat half-
empty for years as the primary bank tenant moved a number of
jobs out of Rochester.

Once Gallina’s massive redevelopment is complete, however, the

tower will (if all goes according to plan) be full once again.
The redevelopment is changing thousands of square feet of empty
office space into dozens of luxury apartments with some of the
best views in the city. A number of lower floors will remain as
commercial space and the below-grade levels will be home to new
restaurants, a gym, and a restaurant incubator amongst other
amenities.
Renovating an existing building and changing the use of the
space is a hugely complex project. From working with existing
tenants who will remain in the building through the
construction, to integrating with a number of other projects
surrounding the property and striking contracts with new
tenants, there are few other developers in town with the
expertise and experience to pull it off. For that reason, the
project is a big deal for downtown Rochester and for the
Gallinas as well.

In a broad sense, Lauren knows the building as well as any of

the contractors or developers involved in the build and for good
reason. When she gave me a tour the building and their onsite
“war room” where floor plans, apartment finishes and concept
renderings on display, it became clear to me that to sell a
product is to know it, inside and out.

Blake & Max Gianniny

Management partners & developers
FGB Property

Lauren Gallina mentioned that she knew Blake and Max Gianniny
were two young guys buying up Rochester real estate and that
they might be interested in meeting me. After an email intro,
Blake and I met up for a beer and hit it off. After meeting a
couple more times, Blake suggested that I come work with him and
Max. I quickly accepted the offer as it was the perfect
opportunity to continue learning and making connections. Most of
my subsequent interviews were the result of an intro from Blake.

Blake (31) and his brother Max (27) buy, renovate and manage
single family and multifamily properties, mostly around the
14609 area code. They tend to buy cheap properties in rough
neighborhoods where the barrier to entry is low and the risks
are manageable. That said they are expanding their portfolio
quickly but cautiously, learning the business as they go and
working towards higher and higher barrier to entry properties.
Ultimately they want to see Rochester thrive and would love for
their investments to help revive local neighborhoods,
particularly Beachwood.

Blake and Max are second-generation real estate professionals.

Their father Bruce and his brother Mark are developers in the
Rochester area. As a result, they had a wealth of real estate
knowledge at a young age and they benefit from a wide network of
vetted contacts who are familiar with the Gianniny brand. That
brand is one of relatively safe investments, not being over
leveraged, and commitment to long-term returns rather than
inflated short-term profits. They tend to only buy properties
that they are willing to sit on for ten years or more. That
strategy shelters them from economic fluctuations and will
eventually lead them to a very profitable portfolio in the
decades to come.

Even though their father and uncle came before them, Blake and
Max feel like there is still a lot of work to do. After failing
to convince Bruce and Mark to use their heard-earned wealth to
invest in more exciting, game-changing projects, Blake figured
he would have to do it himself. It was something like 7 years
ago that Blake left his father's company to strike out on his
own, and Max has since come on board. They both aspire to work
on awesome projects that help to build an innovative new path
forward in Rochester real estate.

Some of our most intriguing conversations were over lunch at

Jim’s Diner on Main street. Blake and Max both are full of ideas
about the future. They are natural entrepreneurs at heart and
real estate suits their fast-paced movements and friendly
personalities. They are not enamored by convention. Every day it
seemed like one of them would propose some innovative business
idea. They are especially intrigued by the future possibilities
inherent in clean energy technologies. They pay attention to
companies like Tesla and keep up to date with the falling cost
of solar energy. When it comes down to it, they simply want to
be successful enough to have the capital to experiment with
their business ideas in an effort to solve problems and make the
world better.

George Traikos
Manager & developer
Traikos Group

Jon Rodibaugh, Director of Alumni Relations at RIT, mentioned he

had recently sat down with a real estate developer who might
agree to meet me. An email intro ensued and I met George in
Founders Cafe, a business which rents a ground floor space in
the Academy building which he redeveloped.

George grew up in Sao Paulo, Brazil. He relocated to the US and

eventually moved to Miami where he began his career in real
estate. George is now President and CEO of the Traikos Group,
which manages real estate in both Rochester and Miami. George’s
first real estate investments were condos in the Miami area,
some of which he still owns.

The Academy Building is a beautiful stone building built at 13

Fitzhugh Street in 1873. George acquired the vacant building
years ago but postponed his plans for redevelopment after the
financial downturn in 2008. Once the lending environment was
favorable again, he fulfilled his vision and redeveloped the
Academy Building into luxury apartments with first floor retail
(Founders Cafe). In 2013 the project was awarded a New York
State Historic Preservation Award for its masterful revival of a
building which began life as Rochester’s first high school.

George stressed the importance and practicality of pursuing

projects which the community champions and that government will
help fund. That means pursuing sustainable building and design
practices and fulfilling a vision that is shared by the
community at large. To illustrate his point he explained how,
even though it was a highly complicated historical preservation
renovation project, state, city, and federal level financial
support made it profitable. The project was approved by the city
because it enhanced (rather than disrupted, as many developments
do) the character of the neighborhood and would serve as a
catalyst for the future revival of the area. George took on a
fair amount of risk investing in the Academy Building. The
project ran over budget, pushing his returns further out into
the future, but he is confident that it was a smart move as the
property has become part of a wave of renewal in downtown
Rochester real estate.

One of the things I found particularly interesting about George

is that he was not born in the US. It goes to show that even
though real estate development is complex and expensive, you
need not be grandfathered into the system to be successful.

Chris Hill
Managing partner & developer
I. Gordon Group

On our second meeting, Blake invited his friend Chris to join

us. Chris is an energetic developer and property manager who
runs the day to day operations at I. Gordon Group. He agreed to
meet up a few months later to discuss what he does and we got
along really well, perhaps due to Blake’s positive
recommendation.

I. Gordon was founded decades ago by Chris’ Father-in-law’s

grandfather. It was originally a manufacturing company which
later transitioned into real estate. Today the company manages
hundreds of residential and commercial spaces around Rochester
and is in the process of building more. Chris is responsible for
the day-to-day operations of the company, including finding
tenants and developing new property (amongst a million other
things).

Chris is currently the developer of a multifamily project in the

finger lakes region. Building real estate is a long process, he
says, you have to be patient and manage your expectations. While
that project is underway, he is also working on numerous other
ongoing projects. Amongst them is First Federal Plaza, the
iconic 21 story 1970’s skyscraper where I. Gordon’s offices are
located. Between the rose colored glass exterior and the top
floor shaped like a spaceship coming to land on the roof, the
build is a Rochester icon. Currently, Chris is working on
leasing out the 19th floor and redeveloping the lobby restaurant
which sits at the edge of the Genesee. The restaurant will soon
look out over a riverwalk which is currently under development
as part of a multistage project to revive the riverfront.

On one occasion, Chris gave Max and I a tour of the 19th-floor

space under the guise of seeking our input on an idea he had for
turning a good chunk of the floor into an events space to draw
larger clients to the building. “Big game hunting,” he called
it. At the time he was throwing around ideas like having a tech/
marketing incubator and or events lounge and thought some young
energy on the project could be useful. Max and I took advantage
of the opportunity to take in the views and the private elevator
ride (the elevator is all glass, operates on the outside of the
building, and only has two buttons: Lobby and 19th... how cool
is that). During our meeting I recall Chris saying something
along the lines of “a desire for wealth is an indicator of
ambition.” I found that interesting and I would agree, although
Chris is the first person I have met to say that.
 Jordan Morgenstern
Attorney, partner
Morgenstern DeVoesick Attorneys

Blake introduced me to his friend and attorney, Jordan, and I

was able to get a half hour with him in his Pittsford law
office. I couldn't help but think “gangster” when I met Jordan;
he’s a big guy, always in a tailored suit and with slicked back
hair that makes me feel like he just ordered a hit on someone
who owned him money.

Outside of my overactive imagination, however, Jordan is a very

successful business attorney and is at the head of his own firm
even though he’s still in his thirties. He handles hundreds of
clients and deals with everything from speeding tickets to
multimillion-dollar real estate closings. The speeding tickets
are an exception, however, he’s only doing that as per a special
request for the daughter of a particularly powerful client. I
guess money really does make the world go ‘round.

Even though he seems relatively young, Jordan knows what he’s

doing. Together with his partner Jeff DeVoesick, his firm
handles a substantial chunk of the legal work for the local real
estate market. He sees what deals are made, who makes money and
who loses it. He understands many of the behind-closed-doors
nuances of getting a real estate development completed. He knows
what goes into the day-to-day in terms of contracts and
financing for some of the most successful real estate firms in
the region.

It all comes down to finding good deals, he says. If you can’t

get a good deal to start, your just going to fight at every
stage to make money on your project. That’s what he likes about
the Gianniny bros; they want to sit on all their investments so
they tend to do their homework and get him involved wherever
possible on a property. Maybe his advice is bias, but his claim
that paying more for a better attorney ultimately pays off
doesn’t seem far fetched to me.

To Jordan's credit, when I asked Max what the most important

partners on the development team are, he replied that he would
want his lawyer, accountant and financier team to be top notch.
I think there is a strong argument to include “talented design
team” in the same breath as “good legal advice,” but I’ve found
that it makes most developers uncomfortable to recognize the
importance of design. There are a few reasons for this, I think.
First of all, mediocre designs will often still result in a
profitable project. Really great design work costs the developer
more money and really ends up benefiting the community at large
more than the developer’s bottom line. Also, artists can get
really hard to work with, especially given they tend to have a
(justified) reputation for being hardheaded and uncomfortable
with compromise.

At one point I joined Jordan, Blake, and Max while they closed a
refinance deal with a bank on one of their properties. Blake and
Max purchased the property for somewhere in the $300,000 range
and, after completing renovations which increased the property
value, they were refinancing the property and pulling out close
to $270,000 in cash to be put to work elsewhere. It was
straightforward enough but they indicated that it was not a
typical closing because the legwork and negotiation for the
terms of the loan had already been sorted. Blake and Max signed
some 14 documents and picked up a sizable check in return. Blake
passed me the check with a casual "don’t lose it!” A few minutes
later Jordan’s administrative assistant came into the conference
room and offered to have the sum direct deposited and so alas,
the biggest check I’ve ever seen was torn up. To them, however,
it’s just one less trip to the bank.

Bruce & Mark Gianniny

Management partners and developers
Linden Oaks

When I asked about his father, Blake’s response was “Bruce? Oh

yeah, he’s as chill as they come, man.” He and Max owe much of
their early success to the fact that they grew up in an
environment steeped in the real estate industry. Bruce and Mark
are brothers just like Blake and Max, but unlike their
successors, they are old school. They have already found a
comfortable level of success from their endeavors and are
satisfied with riding it out rather than trying to stir the pot
at this point.

I got along with them both really well and we had a long,
enjoyable conversation. We talked about everything from college
parties to how technology is changing people's real estate
needs. It was a fascinating conversation, to say the least, and
I ended up skipping class to avoid ending it.
When I asked about why they became developers, they explained it
by enlightening me to the way of the investor. Their father was
a doctor who at one point treated a real estate developer. Thier
father got paid once for the time he spent treating the
developer, but the developer, on the other hand, would go home
and continue to be paid while he slept. That’s the difference,
he explained, between piecework and investments. From then on it
was real estate for the Gianniny bros and they have since been
quite successful.

The development world, however, is not all paychecks in the

night. Sometimes you lose money and other times you make money
in ways that you didn’t intend to. For example, decades ago,
Bruce and Mark redeveloped the greek mansions at a local
university. They were beautiful historic buildings and the
project was quite unorthodox. They acquired the rights to
millions of dollars worth of property just to restore them, then
gift the titles back to the university. Instead of keeping the
properties, they obtained hundreds of thousands of dollars worth
of tax credits from the historic building restoration. In other
words, they didn’t make any cash, they just saved a whole ton of
money on taxes at the end of the year. That’s great, but tax
credits don’t pay the dental plan. I guess you live and you
learn as a developer and you tend to make decisions on a mixture
of data and instinct.

Maria Furgiuele
Architect, Consultant
Community Design Center Rochester

I had the chance to meet Maria, the Director of the Community

Design Center, during a Reshaping Rochester event featuring
Maurice Cox, Director of City Planning for Detroit. We met up a
few weeks later in the design center and had a great
conversation.

Maria studied architecture and after graduating, she accepted a

job with a homebuilder. She was the homebuilder’s singular
employee and she accepted the job knowing that she would
eventually inherit the business. After taking the reigns of the
company, she spent most of her career successfully designing
luxury homes and learning about urbanism and community design.
She is now what most would consider an expert in these fields
and spends most of her time working to transform the community
design center into a successful consultancy.
When she started volunteering at the design center it was little
more than an underfunded community interest group. It has grown
since then, but Maria isn’t finished. There are community design
centers in cities all over the country and she recognizes the
need for theses nonprofit organizations to be independently
successful in order to do the most good. To that end, she is
working to develop the design center here in Rochester in two
ways. Instead of being dependent on grant funding, half of the
center’s operations are being built into a for-profit
consultancy aimed at helping developers save money by making
good design decisions. The other half is oriented towards being
a mediator and liaison between the city and community interests
in an effort to align stakeholders and accelerate positive
change in the urban fabric of Rochester.

Maria sees firsthand what motivates each stakeholder involved in

urban real estate projects and thus can understand how each
party must adjust to effectively and profitably bring about
positive change in the built environment. She speaks very much
in favor of community groups, stating that most developers have
no idea what they’re doing when it comes to working with
community interests. When I brought up the fact the developers
often list compromising with community groups as one of the most
profit-draining activities in the development process, we
engaged in a fascinating conversation about some critical
changes that are playing out in how developers go about creating
real estate.

In the past, real estate development has been somewhat of a

maverick field. The most successful developers were headstrong
entrepreneurs and visionaries who bulldozed through whatever and
whoever to make their visions come to life (think of our very
own 45th president). Today, however, we’re seeing a shift in
that mentality. As more people move into cities than ever before
in human history and technology enables us to get around and
communicate more efficiently, the factors which enable
successful development are changing.

The most successful developers over the coming decades are those
who are more interested in information and alignment. In the
1950’s a developer could get a project built with little more
than a simple financial analysis, a good money partner and a lot
of moxie. That was due to a lax regulatory environment, a
booming economy, and the fact that information was hard and or
expensive for laymen to acquire. Today the regulatory
environment is tighter than ever, the investment money is far
more cautious, and there is a plurality of free information on
both sides of the table.

Information and alignment are the new vision and moxie. Vision
and moxie are still as important as they ever were to the real
estate development process, the distinction is in that they are
no longer enough. This is where people like Maria come in. She
understands (and for a fee will explain) how urban communities
work, what specific needs each community has, what it values,
and what will be more economically valuable over time.

She knows these things because she has spent her career
designing communities and seeing what works and what does not.
The margins in development are no longer wide enough to gamble
on stakeholders alignment. Even a small misalignment between the
developer and the city or the community itself could spread like
wildfire and stall a development long enough for the profit to
vaporize. Smart developers who want significant returns on their
project over the short and long terms must value stakeholder
alignment and are wise to seek the advice of people like Maria
to make it happen quickly and effectively.

Howard Decker
Architect, urbanist, author & speaker
Reconnect Rochester and Community Design Center Rochester

I met Howard at the same meeting as Maria. I enjoyed listening

to the conversation with Maurice Cox which Howard helped lead.
Upon his return from a cruise across the pacific, Howard agreed
to meet with me.

Howard is a licensed architect who has a storied past and a long

list of accomplishments. He studied theater in college, an
interest which eventually led him to architecture through his
interest in designing theaters. Later he started a practice in
Chicago which grew to over 80 employees. He has traveled
extensively, having visited 170 cities over the last 8 years
with his wife, Amy. I thoroughly enjoyed our conversation which
touched on architecture, urban design, career paths and personal
success.

A few things about Howard stood out to me in particular. The

first was his passion for travel and cities. His descriptions of
the places he has visited were vibrant and insightful. The next
was his deep expertise in urban design. He has combined these
two passions into a project that has him traveling to cities all
over the world.

Howard calls his travel project 20 Cities: A Search for Urban

Excellence. The project presents 12 criteria which describe
excellence in urban design. The substance of the 12 criteria is
explored through the lens of what Howard and his wife Amy
consider to be the 20 best cities they have visited.

When I asked him if he had any tips for traveling, he launched

into a slow but passionate explanation of his work/life
philosophy. Howard believes that once you find your thing (your
“box” as he calls it), you can go anywhere and do anything with
it. In other words, if you discover what you truly love and
master the body of knowledge associated with that thing, you
will naturally create things which are applicable no matter
where you are. He firmly believes that as long as you are
solving human problems, you can travel while you do it because
no matter where a city is, it's just made up of other humans
living their lives.

Howard’s recommendation for a hot career? Learn how great cities

work and consult with cities all over the world to make them
better places to live. There are a lot of problems facing cities
in the 21st century he says; figure out how to solve some of
them and the money will come. Another way? Work with global
consulting firms and take work in different cities while
learning how a multinational firm works. Another option?
Journalism is a great way to get paid while you travel if you
really have a unique perspective on something important. He has
employed this last one himself as he writes his book about
lessons from cities across the globe.

We spoke very little about architecture as a practice. I did not

learn much about how developers and architects work together,
but I was not disappointed because I did learn a new and unique
perspective on success which I think Howard embodies. His
philosophy of “finding your box” really spoke to me. The first
step, he says, is to find your box; what is it that you can’t
stop thinking about? Is there something that you know very well
that other people don’t understand or know? That thing is your
box. Step one is the hardest. The next step is to “fill up your
box.” Filling up your box is simply a learning process and
because information is so easy to acquire today, my generation
has a clear competitive advantage in this step. The last step is
to “take your box with you.” Once your box is full (i.e. you are
a master of the body of knowledge of the thing you love), you
can travel the world and you will find people who value what you
know. Knowledge is power, Howard says. Agreed!

There were a number of other people who I was introduced to but

did not have the time to meet with. They include Glenn Kellogg,
an architect and developer; Jim Buckley, a young entrepreneur
and broker; Sarah Farmer, a property manager; and Justin
Hamilton, co-founder of Hamilton Stern construction. Overall my
experiences meeting with the ten people above were
overwhelmingly positive. Not only did their faith in my career
bolster my confidence, their wisdom will surely contribute to my
success.

Work Reflection

Working with Blake and Max Gianniny at FGB Properties was a

highlight of this capstone project. They consistently blew me
away with how much they were willing to teach me. I saw first
hand what goes into the real estate acquisition process, as well
as what happens behind the scenes in property management.

They ended up offering me a full-time position for after

graduation. I was flattered and happy that such cool guys would
be down to grow their company with me as employee number three.
I feel strongly, however, that I do not belong in Rochester and
that my adventure here has come to a satisfactory close. I
declined their offer in favor of an internship with Bedrock
Detroit, a real estate company in downtown Detroit, and after
that a full-time position in sales for an exterior home
remodeling company called Power in Denver, CO.

I felt that although I may learn more working with Blake and
Max, they need someone who wants to settle down in Rochester.
Real estate is a long con and it would only be productive for me
to work here if I was interested in sticking around.

Over the course of the last few months, however, I learned so

much about real estate through the (very) part time work. I sat
in on refinancing deals in the attorney’s office, walked through
properties all over 14609, spend hours chatting and picking the
brains of two of the sharpest young real estate guys in the
city, and shaking the hands of dozens of highly successful and
influential professionals. Most of the introductions that lead
to interviews for this project were made by Blake. Additionally,
Blake paid for dozens of lunches and drinks for which I will be
forever grateful.

I feel very well prepared to start a career in real estate

because of my time at FGB. Just so you know, FGB stands for
Flying Gianniny Bros. It's a name which Bruce and Mark Gianniny
(see interview) came up with back in the day for an LLC, but
never used. Blake and Max decided it was high time the hilarious
name saw the light of day. These guys are real goofballs for
being in the good graces of seemingly every single person of
influence in the local real estate industry. Maybe that’s
actually why they’re so well-liked.
 Closing thoughts:

“Where there is no struggle, there can be no art.”

~Phil Knight

“Follow your heart and intuition. They somehow already know what
you truly want to become. Everything else is secondary.”
~Steve Jobs

“Dreams, taken seriously, are the most sophisticated things

known to humanity.”
~Dan Pallotta

“Every man is the architect of his own fortune.”

~Sallust