Show Notes

Matt (00:00:58):

Hey, welcome to the show, Bobby!

Bobby (00:01:11):

Great to be here, Matt. Thank you so much for having me.

Matt (00:01:15):

I’m honored to have you on the show! I know you’ve been on a couple other shows. I know Chris powers, a friend of mine that has been on this show before, but I want to take a slightly different twist and if you’re ready, I’d like to just jump right in.

Bobby (00:01:30):

That sounds great.

Matt (00:01:31):

So let’s, let’s get a little bit about your background starting out Bobby and then we’ll kind of transition that into Form and we’ll just keep going from there.

Bobby (00:01:43):

Okay. Perfect. Well okay. Where to begin? Well I was born in Boston and my dad was a mechanical engineering professor and we moved around the country every two to four years. So he was at MIT and then Michigan, and then I moved to the bay area, Phoenix for a bit south Jersey and, and, and a few other spots, but I grew up moving all around the country. I was actually homeschooled K through 12. Actually, that’s not true. I went to kindergarten, went to public kindergarten. I was homeschooled from first grade through 12th grade. And initially, then I initially went to school at the University of Southern California in Los Angeles where I studied history and film because I had the good fortune to get a scholarship. So I thought, yeah, I could study whatever I wanted.

Bobby (00:02:34):

And I went into an intro to film class and it sounded fun. So I thought, great. I’ll watch movies and read history books for the next few years after three years. So after my junior year, I got an internship and realized that I did not want to work in the movie industry. And I also had which, which I’ve described a little bit on Twitter. I also had a reconciliation with my parents. I had previously lost that relationship almost entirely. But by junior year, we ended up reconciling. So I ended up transferring to Penn and then studied economics where I met my wife my super senior year, so that was great timing. It was perfect timing. And then let’s see, I worked in consulting for a teeny bit and then went back to school to study math just cause I thought I wanted to work for a quantity hedge fund or an investment bank or something like that.

Bobby (00:03:48):

And after the first year back at school I ran into a friend from undergrad, from Penn, and we each kind of exchanged what we were doing. And he said that he and two other guys were starting a real estate development company in the basement of a seminary that they were trying to buy and convert into apartments. So I was intrigued and I started like, I was helping out maybe like once a week with just like some underwriting stuff since that was, you know, my background, right. Within a few weeks, I was there every day and by the end of the summer, that’s what I wanted to do. So, those three guys ended up becoming my partners and the company that we built was called Cross Properties in 2011. So that was the beginning.

Bobby (00:04:36):

We, you know we’re at the, we were at the end of like the global financial crisis and there were, we’re looking for deals like everyone else. So, I mean, the first deals that we got were ones where you could put deals under agreement for soft deposit and then just try and find equity to close them. So I think we probably put half a dozen deals under agreement before we fully closed the first one. We were just trading, you know, sweat equity to do some deals. So two of my eventual partners were a little bit, a little bit older, a little more experienced and myself and my other friend from the school were the, I guess like the young smart, like hotshot people who could, who could show up well in financing type meetings and things like that.

Bobby (00:05:29):

So that’s, that’s how I got started. And I would also say that by the end of that first summer, the main thing that convinced me to do real estate was not the real estate specifically. It was the other guys, I remember thinking like if I do this and I fail and I lose all my money and my time it’s still worth failing to work with good people. And I was fortunate at that time, and then I was married and my wife’s a nurse. And so she was able to pay bills. And I didn’t have school debt and things like that. So I could take some of those types of risks. But that’s how I got into the business.

Matt (00:06:14):

Wow. Yeah. I was going to ask you. You started out in film and then you kind of transitioned there to economics. And so real estate was never in the picture, even, even before college?

Bobby (00:06:30):

No, no, no. Real estate was never. No. And even then when I got started into it, it was mainly that I appreciate it as an asset. I thought I could figure it out, but before getting involved in real estate, I never took a single class. Although, you know, Wharton has plenty of great real estate classes. I didn’t take a single one. I didn’t take any urban policy classes. I was just, you know I mean, by that time I went to Penn, I was just taking the classes that I needed to take in order to like actually finish school. So all the electives that I ended up taking were in, you know it films with Alfred Hitchcock and stuff like that.

Matt (00:07:06):

Right, right. And you should aced those, right. Well, that’s, that’s great. Okay. So you didn’t really have any influence from parents or anything about real estate

Bobby (00:07:20):

I’m real estate? No, no, no. I came to it just, like I said, mainly because I liked the guys and also I li I, from the very beginning, I was motivated by the idea that real estate is transformational. Right. So the first few projects we were working at, or trying to do were some large scale conversions and partly due to my faith, but partly because I think it’s just a parent to anyone who can like touch and feel real assets. Like, did he have saying like, this is something and we can have a vision to make it like, better new transformative, like redeem, rebirth. Like these are really cool, big, awesome human ideas. And I was caught up in those like, like I think like many other people, so it’s it’s a good asset was fun to work on people and it felt like a problem that was worthy of like devoting into your life to try and to fix. So yeah.

Matt (00:08:18):

Wow. So from that, that first project where you’re in the basement of the seminary, just curious, how did that how did that work out, that first project?

Bobby (00:08:30):

So that project actually wasn’t even the first one we did, that was just one, we kind of like had under agreement because development takes a really long time and then things hit at different points. So I mean, there were a lot of things that went well and a lot of things that didn’t because as a younger, newer developer or I guess newer developed set of newer developers there were things that we knew and things that we didn’t. So we kind like trudged along and had capital partners and other partners who were willing to kind of like help us like get deals done. So I think if there was something that was really helpful, but that initial period of time it was that we weren’t too proud who not try and do a deal with someone else. So I think when you’re starting you can either try and do deal on your own or you can try and do deal with other people. And so we ended up choosing the other one for better and for worse it worked out in that we were able to complete those projects and get them done, which is the majority of what of what difficulty in development is. Yeah. So that’s, yeah, that’s what we did. Yeah.

Matt (00:09:41):

Yeah. The I was curious to see if, so these guys had never done any true projects before, before you got together or was this

Bobby (00:09:51):

As a company? No. but in, in previous professions they had just not as the not necessary principles, so kind of coming out of it, like two people who knew how projects worked. And then, you know, we kind of you know, put kind of the all-star team together, mixing and matching different, different skill sets. So there was, you know limitless energy willingness to roll fees into projects and just, you know, kind of roll our sleeves up and get projects out. So that was the thing we shared. And we shared the common goal of like getting projects done. And, you know, one of them was a lawyer. One of them was when capital markets and we just, I’m grateful for my partnership with those guys. It was, it was terrific.

Matt (00:10:35):

Yeah. That sounds like a fun experience, you know, just starting out when you when you’re all kind of got that common mission, that common goal to get them together and build something that’s, that’s pretty exciting stuff. So from that, the humble beginnings here with the four of you, or is it three or four? So

Bobby (00:10:55):

Four total. I mean, there was, so the beginning of any company, there’s like a really weird like Tim on when things start, when they don’t, there are people came in and out, I’d say so eventually what ended up being was there ended up being for people who are quote-unquote there from the beginning because some people can’t make it for one reason or another, which is understandable, but eventually there ended up being four of us. Okay.

Matt (00:11:18):

So from those humble beginnings kind of transition that to where we’re at now or where you’re at right now.

Bobby (00:11:25):

Sure. So we did a few let’s see. So the first, like real large-scale project that we worked on, what’s called 16, 16 Walnut. That was a gut renovation conversion of a 250,000 square foot office building that’s located in, in downtown Philadelphia, a block or so off, off Rittenhouse square. So when we put that building under agreement and we’re able to cobble together a partnership with another developer and then a large private equity firm and get, and get that project done it was a an enormous undertaking. And we had a S M in executing the project. We ended up being tasked with like, I guess, as part of the overall partnership tasks with different part of executing it, but collectively we got that project done in about three and a half years, which is pretty neat. So that project gave us sort of the credibility to then continue to do more projects especially even when we were partly through.

Bobby (00:12:28):

So that was the first one that really sort of established that we were starting you’re hungry and that we were ambitious to try and do more projects. And it was, it w it was a beautiful project. In my opinion, it’s still the best or one of the best renovation projects done. In Philadelphia, there are some other great ones too, but I’m upset partial. And 250,000 square feet, you said 250,000 square feet of office. And we converted it into 206 apartments and about 40,000 square feet of retail. Some there was some that was a cardio tenant in the basement arrest a restaurant, a pizzeria a bank, a Santander bank, and a theory and then an architect’s office and then apartments above. So it was it was a beautiful building built in 1929, art deco.

Bobby (00:13:27):

It was a lot of fun and it was very difficult. Yeah. I’m just curious, did you use historic tax credits? Did we did so, so the, the historic tax credits enabled us to get back, you know the, the rough calculation for historic tax credits ends up being that you get about 25 cents on the dollar of your hard copy of your hard costs spent back in the form of tax credit, which you can then sell or have someone to invest into that. And we, we did that, the downside of getting historic tax credits is that the national park service has purview over the inside of me outside of the building. So on the outside, that usually means you have to replace the windows with similar materials. You can’t replace metal, provisional or wood for vinyl.

Bobby (00:14:24):

You’re stuck with basically the original materials and, and similar profile. So it makes a lot of extra work and masonry more expensive than, than most of their jobs. And then the other thing which makes let’s talk renovations and renovations in general and historic renovations, particularly problematic if it doesn’t check the right boxes, is that on the inside the feds have purview over where your hallways and units can and can’t go. So in this particular unit or in this particular building the floor plate for the bulk of the building, which is like it was a wedding cake design. But for the bulk of the building was a fairly efficient size, double loaded corridor. And the existing hallway already ran through the middle of the building. So there wasn’t much that we had to change and the building had been renovated for different office tenants, a number of times over the years.

Bobby (00:15:24):

So there wasn’t that much historic fabric to protect other than the elevator lobbies. So we, we were able to do that convert one of the elevator entrances into a unit entrance, a unit door. But it was a fairly straightforward building layout again for the architects, had a much harder time of it. And then I just but I I’d still say that for historic renovations, it was more straightforward than many. Okay. so then, and then, and then, and then we started doing projects outside of the city. There was another historic renovation project that was in the suburbs, that was the conversion of the seminary. And then after that, we started doing a few other projects in that same neighborhood of ground up multifamily, because I’d say what we learned from those first few projects is that we were able to do development wise projects that were more complicated than many other developers were willing to undertake for better and for worse.

Bobby (00:16:29):

So we were gluttons for punishment in that aspect, but it just, it meant that other people looked at buildings or looked at zoning codes and thought I’m not willing to do that. I’m not willing to take that kind of risk. And partly because we didn’t have the luxury of not, not doing deals and the luxury of like trying to do the same thing as everyone else, we just, you know, roll up our sleeves and, and try to figure it out. So that’s kind of at super, we hit our stride in 20 14, 15, 16 is probably like when we hit our stride on what we were relatively good at, which was the suburban ground-up development. And then as deals came along and we were in the market, we, we picked up we picked a buildings as, as they made sense, but that was our, that was the thing that we were good at. Yeah.

Matt (00:17:22):

Yeah. So I, I was about to ask what your ideal project was, and you kind of mentioned that, you know tougher ground up his historic renovations, he started out with the 250,000 square foot office renovation. I mean, that’s, it’s pretty bold. So, yeah. I guess what, other than obviously the, the scale of that larger building, but what made these projects more difficult to, was it entitlement risk or, or were there certain things that made these projects or tougher?

Bobby (00:17:58):

Well I’d say not, not, not to jump the gun on talking about placemaking, but I would say that in a lot of these different areas, so let’s say in, in, in neighborhoods that are, that would be considered NIMBY ish or that have like pretty high barriers where there’s multiple levels of approvals to go through different things, and they have local historic ordinances and things like that. I’d say that the biggest challenge, most developers shy away from them because they see the number of steps that you need to go through in order to get something approved. And what, and, and what development likes most is a certainty. They can deal with that complexity, but uncertainty is the most difficult things. So I’d say that like historic tax credit renovations I suppose the uncertainty of whether you’d get the tax credit might be something, but most people like you’ll know if a building is eligible or not.

Bobby (00:18:51):

So those are complicated from a construction and development, a design perspective, but if you have the right GC and you have the right architect, you can probably get that one through suburban approvals. And, and, and obviously there are certain urban neighborhoods where this is true also have a different sort of flavor and that the risk is kind of like one or zero, but you’re either going to get it or you’re not. And that’s, and it’s very difficult to to underwrite that. So I’d say that’s kind of what, what,

what drew us to it is that we had done a few projects and we’d done one specifically in, in, in this area. And it, I don’t want to say bought us some credibility, but that enabled us that when we were talking to other people in the neighborhood, from that specific in that specific neighborhood or ones outside, we could point to these projects and say, this is what we mean by doing a good job or doing these kinds of projects.

Bobby (00:19:46):

And so it burners those credentials a bit. And not that, you know, they laid out the red carpet for us, but that we felt confident because of the relationships that have been built by what we’d already done, that we could eventually get through. So I’d say that’s why we were willing to do those jobs, because through those other hard projects, we had developed a relationship with, you know, count that again. I’m sure we’ll get into this more later, but like most people don’t realize like how much like the township zoning officer and [inaudible], and like the traffic engineer who’s usually hired by a third-party like group that you can work with another jobs. And like, those people really drive the process. and so like working with them and solving problems with them, like creatively and being a good partner to those folks really buys you like a lot of I don’t want to say leeway, but it’s something like that.

Bobby (00:20:40):

It’s like, you have relational, you, you, you, you have like a relationship, you have relational capital, right. And, and you can, and you can ask him directly questions like, Hey, tell me straight, like, is this thing that I want, is this reasonable, or help me craft this in such a way that we can both create like, collective, like get this project done. So that’s, I’d say how we got to those is because we’re able to have a pretty good relationship with those folks who rarely make the headlines and yet I’d say end up making functional policy as much as almost anyone else on the projects that get done on the ground.

Matt (00:21:17):

Oh yeah. Yeah. That’s, that’s a great point. You know, I talked to John Anderson is doing a lot of south Dallas work and, you know, very focused on one height one area we talked about John Marsh earlier, he’s focused on one area, you know, you know, we always talk about building credibility with the folks around the area, the people in the area, the citizens, but you brought up another good point about bringing up and, you know, really building those relationships with the policymakers, the ones on, you know, the city councils, the planning, commissions, all the governing bodies, and, you know, even the review engineer, like

Bobby (00:22:10):

You said, yes, exactly.

Matt (00:22:12):

You know, building that social capital up to where you can make these requests. And even if they’re busy though, they’ll respond and that’s huge.

Bobby (00:22:23):

That is huge. Right? Exactly. Getting to the point where you can know the guy and say like, Hey, whatever the guy’s name is, Hey, John, like shoots me straight. Like, can you take a look at this? And just like, tell me if I’m headed in the right direction. I know you can’t give me an official response for a while, but just like, let me know if this is going to be at the red flag. And again, if you have like relational capital and do known to be like a regional person, they’ll usually accommodate that and say like, this looks good. I don’t think we’ll have any issues. I’m sure I’ll have comments, but like, you can stay on track. And like, that’s, that’s huge. I also think that a lot of developers tend to maybe try and overshoot, right. They try to say like, we want to go to city council to like, force like the solicitor or the engineer, whoever to like, see it this way.

Bobby (00:23:04):

Like often I think it’s way better to try and work with those people first, because if there’s one thing, those guys don’t like, it’s like, they don’t like getting told by like city council that they have to do this and they have to do that. It’s like good luck. Right. You can win that. You can win the battle, lose the war. It’s like, all right, good luck having them, you know come about, you’re going to be changed at some point, like in the child, like you’re getting some relief. It’s like, I need to move my electrical room. It’s like, well, I guess we’ll get to it when we do. Right. Yeah. Then someone who’s like on your team,

Matt (00:23:37):

I love this. Cause like, now I really haven’t had this discussion on the show yet, ally, at least that interaction, but it’s so important. And and we were talking about it, you know, it’s important for me from an engineering standpoint to, to have this relationship. But I think ultimately for, for developer it may be even more important because, you know, if they like you, you can go a lot further than and like he said, going go in above their heads yeah, you, you may win the battle, but you’ll lose the war if you ever want to do anything else in that city. It’s no, this

Bobby (00:24:26):

Well, and, and the other thing is a lot of those, a lot of those civil servants have significant, longer tenure than almost. I mean, there are some cities of difference. These will have significant, longer tenure than most politicians. So I mean, and yeah, I live the utmost respect for those folks, I think they generally do want to see their communities be better. And sometimes there are rules that they enforce that feel unfair, whether it’s, you can only use these materials or it has to be this sort of facade, or you have to go to these different like, process that might feel unfair. But I think that at the end of the day, there was almost nothing to be gained by antagonizing. And, and, and that’s another thing I think that’s, that’s important about one of those placemaking or community or development.

Bobby (00:25:11):

It’s like, understand that, like it’s not, you know, just your project and just your tenants. And oh, one, one separate note. So when you’re going through approvals, I guess, advice to anyone who’s going through approvals B last thing you should ever site for, like why a township should approve your project is referencing how much you’re going to pay in real estate taxes for a new project. Like no one ever wants to hear that. And developers always say it as if it’s like some source of pride. It’s like that wins bureau people don’t say it. It’s true. Just don’t say it.

Matt (00:25:54):

You don’t have any tags. I’ve heard that too. That’s that’s funny. That’s a comedy sketch right there. It’s it’s true. It’s yeah. And they don’t, they don’t and I’ve heard several that say, well, do I need to talk to the mayor? It’s like, that’s, that’s barely ever, unless you have a really good relationship with the mayor that will never get you in. Right, right, right. Good, good. Well, let’s come back a little bit. That was a

great sidetrack. I liked it. But how do you balance the risk reward for some of these tougher projects with your own ideology? And think you

Bobby (00:26:43):

Kind of mentioned a little bit already, but yeah. Well I’d say that it part of it comes down to the golden rule, right? The person with the gold makes the rules. And when you’re a developer, unless you’re doing it with your own money, then you’re doing the projects that you can credibly raise money for. So development is always going to be higher return and higher risk. So perhaps you can, you have relationships where you’ve, you’ve done a few projects in order to establish, you can get that done. And perhaps you, you haven’t, again for better or for worse. I think people developers, GPS have done a terrific job doing both. So I think one it’s knowing, like, if you want to go and development, you have to have access to a certain kind of capital.

Bobby (00:27:33):

Which is that capital that is okay either buying on entitled or close to unentitled land, very risky. And what else? I think I’d do it. And then I’d also say that it comes from smartly knowing where you couldn’t and shouldn’t where you are, where you should, and shouldn’t take risks. I mean things definitely did not go all well on all different projects. We’ve, we’ve done several that in pre-development lost quite a bit of money. Just because that was just sort of the nature. Like you, you are, you are taking a gamble, so you have to be aware of that and either a raise for that, or have, or have built up enough fees that you can sustain those kinds of losses or have relationships with third parties that are willing to kind of go with you at risk.

Bobby (00:28:28):

So I think going for those kinds of projects, you need a certain kind of skill and you need I think in the particular limiting thing is a certain kind of like financial ability. I mean, like the guarantees on a ground up construction loan and our historic tax rate alone, or even more because you have to guarantee the tax credit separately are very different than what you would do on, on a stabilized or aren’t evaluated deal with. Sure. There’s really not much to financially guarantee, but on a, you know, on a, on a large scale development, even if you’ve got under contract, if you don’t have the money, like you couldn’t close a loan, you couldn’t get a ton. So if you spent money there and you can’t close the loan, that it means you’ll, you’re, you’re betting on someone else coming in with you to coach GP with you, or you’re betting on being able to sell it. So maybe that may be private. Well, maybe you don’t. So I think that’s the main thing that I would caution people to think about as they’re going through or thinking about those, those kinds of projects in in, in, in thinking about heavy development or, you know, a more typical cosmetic value add of a stabilized

Matt (00:29:42):

Asset. Right. Right. No, that makes sense. You know, even just having the financial firepower to weather the storms, if it is, if it does come down to it and be willing to take those risks mean, like you said, it comes down to how much financial backup you do have, and yep. That’s perfect.

Bobby (00:30:13):

I’d also say, I’d also say that I think that that is a, a part of the market and kind of fast forward something that I’m doing a little bit of now. So I invest in some other people’s projects now among, among doing, among working on some of my own, but I’d say one part of that, of the market that is of the capital market that is not efficiently priced from a capital perspective, I do think is, is those different pursuit dollars because I’ve seen, and again, I, I know this from what I’ve done, I’ve seen other developers to money folks because they have had in an appropriate risk reward analysis, you should lose or take some risks and pre-development that don’t pay off, right? Either you try to tie up some land and maybe go for like a big rezoning and you don’t get it and move on, or you tie up the land and spend some money in some exploratory ways that, that doesn’t always work out.

Bobby (00:31:08):

Right. And I’d say that grounded developers tend to be too married to the different projects because they don’t have the capital to take some of the rest. So they have to make it work. So I’d say like if you bought a thousand on on buying a project, entitle it and going forward it in kind of like general, like equilibrium would say like, but you haven’t taken the appropriate risks. But you could have taken more risks now, again, I’m not trying to flush anyone’s money down the toilet. I’m just saying like, that’s what an efficient market would be if that like something happened. So I think that there was a market for people who understand development risk and market timing to invest in that particular slice with other developers. So I’ve been doing a little of that on my own.

Bobby (00:31:56):

I think it’d be a really interesting thing to do. I know that other people with the real estate Twitter have like been throwing around like how they could make that work, like someone vetting deals and other people put money into early because the pre-development is risky and expensive. So all that to say, I think, I think that’s a really exciting thing that could happen. Maybe even through Twitter or through, I like decentralized funding. It is something that at the moment is not really fundable at all at the moment. It’s just people taking risks with their own money or private lending, which is basically just balance sheet lending. So it’s not really, it’s not really underwriting the deal. It’s underwriting. Like I’ll lend you money. I I’ll just lend you money based on what else you have or something like,

Matt (00:32:47):

Yeah, yeah, yeah, no, that’s cool. I’ve, I’ve, I’ve seen a little bit of a kind of that crowd, essentially. This is a little different than what you’re saying, but that crowdfunding for development. And if pickers is working on that with her site, and it seems like it’s working, she’s just having some troubles, but it’s just tough to get through the, the red tape of, of you know, the financial world. So certainly as I think she’s having her troubles there, but, you know, she’s, she’s made a few works, so hopefully that keeps going and it might give more opportunity to make development a little more equitable for the rest of us. So, yeah. Cool. so I guess when you start out of let’s, let’s go high level workflow for, I guess, due diligence through starting initial due diligence through putting a shovel in the ground, essentially. What does that look like for your group?

Bobby (00:34:04):

Well, let’s talk about the Mr. Bourbon entitlement process. This, this would, this would apply to the urban one too, but again, I just have, I’ve had a few more reps of the complicated one within the suburban side. So this would generally apply to the urban, went to I’d say a lot of that due diligence occurs prior to putting anything under agreement, right. Because you can need to know, like, what can I build? Where can I agenda to get relief on things like that? If you parachute into a certain place to like buy it and then you try and figure it out later that’s I suppose you could always try and retrade later and seller, but it’s not really good business practice and I’m not sure how successful that would be. So mainly

I’d say the bulk of what you’re going to do is going to be to figure out, like, I believe that I can build about the size of building and think and given the the max height and, and the parking ratios, this is the construction type that I’m generally going to be building.

Bobby (00:35:08):

Right. So in the suburbs, you’re going to be like, all right, wait, I have to build like four over one, five over two. Depending on my business, this is the size of the building I can build, you know, two far, two and a half far or whatever it is, like the model is going to be relatively straightforward because we’ve hopefully done enough projects that, you know, gel within cost. Or you can ask, you know, your last GC, this is what I want to build. What is this 1 65, a foot plus ditch for the garage or wherever. So that’s your model. Your model is pretty tight at other thing I’d say, is that on those particular deals, the the land doesn’t affect the not that you should pay anything for the land, but that doesn’t move the needle on the overall deal as much as some of the other larger terms.

Bobby (00:35:53):

So that’s why most developers will pay for time, right? So like paying 5% more on the land to get an extra 18 months can be risked the job quite a bit. Sure. so I’d say once you get into, once you get into due diligence, to me, the main thing that you really want to do is ideally to me, it comes down to different stages of financing. The finance of it wraps up projects entirely as a construction loan. And in order to close a construction loan, you need you need to sort of work backwards to closing structured loan. You need a building permit and a GMP, and, or to have both of those two things, you need to have full CDs in order to have full CDs and you to know like full engineering of where that’s going to go.

Bobby (00:36:46):

So working backwards, like that’s like the time that it takes, plus like all the money that takes to get there until you get to that point where you have like a GMP and the building permit a bank, you may have a signed agreement with the bank, but like they have no obligation to fund. I mean, and you have to raise the money and of raised equity, but those two things should the project directors of what you have to do. So I mainly say, like, we start with that and how quickly can we get there? And the big thing is going to be is during the due diligence time, can I get through that stage, if not, then it means either you’re closing on the land with equity, or you’re closing the land with, you know, a a low leverage a low leverage land loan.

Bobby (00:37:28):

So that’s the big divide in projects is how much time you’re going to get. And if you aren’t going to get enough time to finish all those approvals, then it doesn’t matter that much the difference between like, whether you have your architecturals 65% done, or 20% done. Now, then the other thing where it does really matter is which to me is all about speed in that first part is if you were putting in an offer for raw land, the most important thing you can do is to basically give every penny, you have your civil engineer. I don’t want to say, ignore your architect, but just enough for them. And basically try and drive through to get like the density and like the general meets and bounds, the understanding of the density of the project as fast as possible, right? Because that’s something that fundamentally changes like the asset in what the bank can lend against because now instead of two acres, it’s now, you know a building of size, this parking lot like this and this many units, and that’s like a different kind of security that you can get a loan against.

Bobby (00:38:31):

You could even sell that if you want it to. So I’d say like in that initial thing I encourage is especially all newer developers spend money on your civil engineer and like your zoning attorney, but like be there, be generous with them and be stingy with everybody else because those things don’t matter until you after get that first piece.

Matt (00:38:52):

I didn’t pay you to say this by the way, just for the record. It’s true. It’s true. No, I know, I know, you know, like you said, having those entitlements upfront and this reminded me of something that Sean Sweeney had said that, you know, you have to have, you want to get your ESA phase one, your geotag, all your reports before you even move forward with anything really, you know, and no, that’s, that’s perfectly true. That’s and it might save you a little, little money and headache further down the line.

Bobby (00:39:34):

Totally. Yeah, absolutely. Right. Yes. Like it’s, it’s all, it’s all of those things first and it’s the fancy things later. The pronounce now, again, like where it’s a little bit different once you’re good and you, and, you know, you have the financial capabilities and the deal like works and you know, you’re going to do it through, then you can kind of do everything all at the same time. And you’re probably going to be fundraising a little bit earlier. So it is easier to fundraise with like pretty pictures and some, and some architecturals and stuff like that. So I guess the difficulty is that a very large developer won’t follow that rule, but anyone who’s like early should yeah. Spend all your money on like, like those reports that are necessary in order to close a loan, right. Phase one geo-tech and things that are necessary to like place the initial building with, with a civil ALPA whatever, obviously.

Matt (00:40:25):

So let’s, let’s talk about the, the fancy things, the pretty pictures. Sure. Architecture. So I’m on Twitter, you’re, you’re very vocal about your fascination admiration. Sure. With a floor plan strategies you know, maybe it’s an obsession. I don’t know. Sure. I’ll let you, I’ll let you describe that.

Bobby (00:40:56):

So obviously there’s lots of different ways that I can talk about, but I’ll keep talking about within the context that we’re discussing, which is like zoning and approvals and civil, I’d say like the first way that you need to think about floor plans, unit mix is in regards to zoning entitlements, right? One thing that, again, developers know, but maybe other people don’t know as much as every single it might be similar, but every single municipal zoning code is different in terms of like parking, right. In terms of the type of parking they loud in terms of how many spaces you can do in a row without having that, the median in terms of like, whether they require like a bailout lane for a drive-through, whether this thing is a conditional use or a, like Bi-Rite use, there’s lots of different things. And the parking requirements by unit type do tend to have similarity between different suburbs.

Bobby (00:41:53):

But there anyway, it’s, that’s that to me is that we’re floor plans start, right? Like you start with, you see the certain, you S you S you, you see the rules and then you’re going to design units given those restrictions in order to minimize the amount of parking that you need to build in order to build a building as best as best you can while hitting like your rent per square foot. So like, that’s, to me is kind of like where it started, like, so in the first area where we were building they had the same parking count

per unit required regardless of the unit type, which definitely meant that you did not want to build a studio 400 square foot studio. You wanted to build like as large of unit as you possibly could in order to comply with these zoning.

Matt (00:42:47):

So, yeah. Yeah, no, that’s a good point. And that’s, that’s something that is a little misunderstood, I think, but, you know, I love, so I’m very mathematical myself, you your, your background as well. I’m sure. But it’s funny. Cause I always try to think of things in variables and you’re, you’re plugging in these different variables essentially in your brain about, okay, what’s the square foot of rent. What’s how much parking am I going to have? How much space does this take and then how much rent can I get and all these different variables. Yeah.

Bobby (00:43:34):

And, and that, and that, and that’s where like, so a lot of the work that I do and have done within fourplex spend, like how do we quantify unit types? Right. And use has been in different unit types. So if you look in like the the, the parking requirements of, I don’t know, 99% of zoning codes they have made, might change a different it might be a different number of parking spots required by unit type, but four units. It’s almost always number per unit, right? Like parking spaces for this number of units, right. Might be different for studios with three bedrooms, but it’s always that every other use is parking spaces per square foot. I have not seen a zoning code where it’s parking spaces per by like residential square foot. So that necessarily is going to have like a really big, like, drive, if you’re thinking about your four plans and like your types in the right way.

Bobby (00:44:25):

So it’s where, like, if you were to design again, I go over specifically like a lot on stuff of like how insert the suburb, like a 1200 square foot unit. What’s the difference between a two bedroom den and a three bedroom, right? It might look exactly the same. You could even call it the same. Right. It might, every, every aspect of it might be identical, but there are some areas we’re calling that a two bedroom den means you have different park requirements, something that’s three bedrooms. And also like the way that someone’s going to use that in real life is probably also the same. If again, it’s a 1200 square foot, three bedroom, there aren’t that many people in new construction, given the kinds of rent you need to charge who are going to be using those all three bedrooms, the same way that you’d use it, like a 2200 square foot, three bedroom townhome or something like that.

Bobby (00:45:10):

So that’s where I think that like, thinking through like, who is my target renter, like, how large is it? How are these units actually going to be used? Can enable you to credibly, like call it one thing or something else. Like you can call it a three to one person. You can call it a two bedroom den to someone else you’re not lying to anyone. Just a matter of like perspective. So I think like knowing that, and, and, and as I’ve also, I, as I mentioned a little bit with Chris and as I try to sound, or I guess talk about a lot on Twitter is like, I think that it’s really narrowing in on like, apartments is a product of who is this for by like, I’m building this for whom. And I think that just like diets all out of different development decisions a lot better

Matt (00:45:57):

For your end-user. Right. So who

Bobby (00:46:00):

Exactly, exactly.

Matt (00:46:02):

And that’s, and I’ve, I’ve discussed this with others too, and it’s just like, not enough thought is off. I’m not going to say blanket role, but it’s generally thought about the end user when it comes to primarily residential, but even, even retail to some degree. I mean, it’s, it’s, it’s a, it’s a common problem. And, you know, I think what you’re doing is adding another variable essentially to this, this equation. And you know, we talked about this before the show a little bit, but playing within the rules, but coming up with creative ways to get the best product or get the best solution within that framework within those requirements. So I think that’s really interesting that you kind of spelled it out that way. So let’s kinda, let’s transition this into the term. Placemaking sure. I love to hear what people say and there’s tons of different definitions that people come up with this I’d just like to hear yours and then we can kind of build off of that

Bobby (00:47:26):

And not, you know, I’m not sure I have a strict definition. I think it’s something that I like most people, like I know when I see it, I know when I feel it’s like there are projects that I can point to and, or things that I can say, like, this is clearly placemaking and or there are neighborhoods and certain type of development. I like this is clued done the right way. But I think that, like, so I’d say the thing that about good placemaking that is important is like, it has to come from like good intention, a reading, there was this this is book called leadership, and self-deception kind of talks about like relating to people. And it says like, step one, before you like do any tricks or techniques in like getting people to like, you, you have to like, genuinely care about them first.

Bobby (00:48:17):

And I think that to me, like placemaking comes at the same time. I don’t think that someone can come in and say, like, I have this program, I’m going to run it here to me, regardless of the, of how beautiful that project is. I wouldn’t personally count that as placemaking I would, that can be incredible business acumen and you can execute it. But to me, placemaking has to come from the soul of saying like, I care about you about this particular place. I may not be from here, but I want to do best genuinely by that place with, within the limits of the restrictions that I have. I can’t be you know, there’s obviously financial limitations, but I think it has to come from that intentionality of hearing. Right,

Matt (00:49:01):

Right. And I’ve heard some describe as almost divide, like in the night you can put your finger on it, but when it’s there, it’s just like, wow. You know, it’s it’s hard to describe, like you said, it’s almost a, it’s just a, you feel it. And you do

Bobby (00:49:21):

Right. Exactly. I mean, you, you go and you visit like opelacka Alabama, which is where John Marshall works. And it, it is, you could just, you could just tell, like, that’s, what is, I don’t know exactly how to describe find it, but there’s that, and, you know yeah. Other other projects too, but you know, when you can feel it.

Matt (00:49:37):

Right. So, so how do you, how do you try to implement that into your, your different developments when it’s difficult to control everything around the project, but you can control, you know, at least up to your project and within your project. So how do you try to, how does that show in your projects?

Bobby (00:50:08):

Well, that’s something that it’s definitely I’ve matured or changed a lot in that, in my career. I’d say at first I thought a lot about the culture of the building itself, right? You think about, well going to have certain kinds of amenities. So I guess sort of starting with that first urban patch, we’re going to have certain kinds of retail tenants, and we want these retail tenants to signal to the right kind of people. It’s like, you know, you want to walk into, I think, you know, we have maybe other retail tends to go come in, but like, oh, theory is the kind of brand we have to be associated with. Or like, it was, you know, a nice bank, so great. Like this is a nice bank. So rather than I don’t know something else. So there’s that association out urban is a little bit different in that a lot of the placemaking is, is already established, at least in the projects did, because it was so urban, you know, Rittenhouse square.

Bobby (00:50:59):

It’s not going to change that much based on what we build into it. Right. so there’s, so there’s, there’s that aspect. And I, so again, it started by thinking about the amenities, right? Like how do amenities play with the rest of the different people? And then I’d say the thing that really changed the next step that I made was thinking about how kind of interacted with each other. The first one was mainly like, the amenities would make sense for each person individually. Like I’m still renting an apartment to this person and they fit this demographic profile. And so we have these amenities to attract them. So I’m renting a unit 8 0 1 through this kind of a person. We want everything to be holistic. And then frankly, like, as my wife and I lived in it in 16, 16 Walnut for eight years after we seven years after we sold the building we sort of realize something which we kind of already knew, which is that like my wife’s very hospitable.

Bobby (00:52:00):

And so we had 12 units on our floor and we had the largest one and we had, and we eventually had a few different kids and they, and they make noise or whatever. So whenever someone would come over, we’d always say like, Hey, look, we wanna invite them over and say like, if our kids get rowdy, please let us know. And just try to be friends with them as much as possible. I am certain that we improve people’s lives just by being kind to them. And I don’t mean this to pat ourselves on the back, but more to say, like that, that thing isn’t captured within a proforma, but it’s real. Right. so there are some management companies that try to encourage that through wine on Wednesdays or this sort of stuff, but like, it needs to be something it’s a lot deeper than that.

Bobby (00:52:42):

So sick that’s the next sort of like, level that I took to understand is like, okay, how could we maybe try and do things that would encourage interaction, which is going to be like a much stronger community bond. And then as we got into suburban development, you necessarily think about like, how does this building fit in with everything else? And I’d say that the downside that I initially thought of that was, and this is I think because I was being put through my paces by some very by certain kinds of local neighborhood groups tend to focus a lot more on the appearance of a building. Sure. Which is why a lot of those like pretty pictures really do matter. Right? You got to show them something that looks really nice. They will rarely have ever looked at the floor plans or think about that stuff.

Bobby (00:53:24):

They might say how many, two bedrooms are there because we don’t want the, we don’t the school’s overcrowded with kids and that sort of stuff, but generally new construction. You’re not going to have that many kids based on the unit size that you’re doing. It does happen. But they’re usually really focused on the exterior and I was as well. And then the next thing that developers end up being focused on again, which I, I did up, up until even a few years ago was thinking like, all right, if I’m going to think about how this building fits in with a rested building, I want to think about like mixed use. Right? So I ended up designing, getting some variances on a few of our projects, say like, let’s put in like a food hall let’s put in like this large, like two story-like a two story space to make it feel a little more grand.

Bobby (00:54:04):

Let’s pull the building back for literate from like this public square, but think about like how the building interacts with in public spaces. And I don’t think that’s wrong. And I think even up to that point, I was mainly thinking of the the residential is like, almost like, I don’t say passive, but that mixed use creates value. And then residential takes advantage of things that are like created by one store retail, a shops like bright lights good street parking or things like that. And so I think where I’ve eventually matured to thinking about is thinking about how floor plans make communities and where I can see it most is in the negative. There are new neighborhoods going up where basically everyone is developing by the same rubric. So you have in 10,000 units going up in somewhere like in Dallas, in certain areas, there’s going to be say like uptown in Dallas, most of the units fit like the same thing.

Bobby (00:55:10):

There’s a whole lot of these one bedrooms, a lot of stiffener, a lot of these different, like two bedrooms. There’s not a lot of like overall community of this thing of this more flushed out type community. So that to me and where I think about floor plan data. And when I think about like unit type data is like that’s what I would like to continue to research and advocate for and think about is like, and I also, frankly think it’s good business because if people are building, you know, 8,000 of a certain type of one bedroom it’s probably not good business to build the same one at bat. Right. You’d probably just be better off of building something, not that. So I think it’s good business, but I also think like that it’s more sustainable of saying like, great let’s assume, because that’s probably gonna be the case that like most large scale projects and developments within Dallas Fort worth or Phoenix, or these are Denver, these high growth areas is going to work.

Bobby (00:56:00):

So then what’s this community going to look like in three years. Right. and so that, that’s the way, the thing I’ve personally matured and thinking about, it’s absolutely necessary to also think about the mixed use stuff. I don’t have the background into that to like really be the person who pushes that forward. That’s going to be through other developers who know how like hospitality and food service, like really. So I think it’s for those people to push that, the one that I can think about is like, is, is think about us for plans. And I think I can think about, and describe that about as well as anyone else. So that that’ll be my, my mark, I think. And other people like John or whoever else will, we’ll talk about those other ones.

Matt (00:56:41):

Yeah. So, you know, we’re, you know, you, you’ve got the mathematical background and quantifiable data is tough. How do you quantify experience? I guess, I mean, wait, which, how, how do, how can you create a unit mix that creates more community within in an area? I know you can’t really quantify it from a, a numbers standpoint, but what, what types of things do you see that do create that value?

Bobby (00:57:30):

So that to me is I think where unit type diversity, particularly in larger things and for families is to me, I think where it’s a big difference. And again, I can, it’s, it’s difficult to see like what it should be ideally. I think it’s easier to see when it kind of goes the other direction. So you know, my wife and I rented a house in San Francisco for a summer and went to a 4th of July party with our two kids at the time there were at this party in golden gate park and we lived in, we lived in 19th of bell book, beautiful, beautiful part of the city, right in between the Presidio and golden gate park. At this 4th of July party, there were eight bouncy castles and our children were the only children there out of like thousands of people.

Bobby (00:58:20):

And I remember my, my son who was, I don’t know, few years old was just like baffled when we were just like those are not for kids because it was, you know, shenanigans and all that, all that sort of stuff. And so I think like nothing against San Francisco, I think it’s, I think it’s a terrific city. And I think it has every advantage weather-wise and autonomy and that sort of stuff. But even people live there will acknowledge like that there needs to be demographic diversity and like age diversity within that. I mean, it’s, you can see in all kinds of different groups, whether it’s like churches or other sorts of different community organizations, like it can’t all be everyone within the same cohort or becomes necessary that when people get to a certain life stage they’ll leave.

Bobby (00:59:05):

So I think at a minimum what’s really important is to have those units there, plenty people are going to choose to leave because people move more than usual. But I think just having those units that are going to be larger, we’ll have like just a few families, I think, enabled people to think it possible for me to stay. And then they, aren’t always going into that area saying I’m here to live in the city and then I’m going to leave. And I think that’s, that’s what causes a lot of friction, like I said, within within churches or within different sort of substance community, like people know even within New York, you go and you live in this part of the city when you’re single, you live in this part of the city that you have like a significant other. And then when you have kids, you move to the upper west side, you move to Brooklyn, right? Like it would be different. And the makeups that it would be different if it was, if there was a little bit more unit typology mix within those individual neighborhoods for better and for worse, and that, that may not work for New York. But that is where I see the opportunity within, especially some of these Greenfield developments.

Matt (01:00:11):

Yeah. That, that actually makes a lot of sense that the, having that unit diversity, you might have some, you know, families are usually a less transient group when there’s a family unit. So you know, maybe having some more options for that might be a little more stability.

Bobby (01:00:35):

Well, and also, you know, again, not, not to get into the floor plan layout stuff too much, but I would say like the way that a three-bedroom a floor plan is going to be laid out, that’s a highest and best use for family first, a three bedroom layout that’s best for like three roommates are vastly different. So as long as, as long as you build a unit, that’s like primarily for three for three roommates and then said, well, let’s just have the family move in there. And the family’s not going to compete with that because it’s always gonna make more sense for people to split the rent three ways at and, and bid it up, which is why, you know two bedrooms in pubic of San Francisco or six grand. Right. it, it, it’s people sharing, which is just slightly less expensive than, than getting something on your own.

Bobby (01:01:20):

So it needs, it would need to be something different, right. Smaller built in bunk beds. I’m not sure, but like, as you’ve seen different families who make things work in the city, then I think it’s through those odd shaped or smaller, more efficient or different type of different type of flip on layouts. So I think like looking at overall community and saying like, it seemed like that there’s not as much of this where I think that’s very difficult from the data. So, oh, I agree that this part is hard as you have, to, some degree you have to attach to paint that that is what’s needed, even though the data will not necessarily show up. If it’s there, you’d have to believe that that is where that’s a little bit easier for me to jump over the hurdle is that given how I have worked in, in some of these higher barrier, suburban areas, that’s something that you always have to get over right away because in areas where stuff has not been built for a long time, you can’t look at the existing information.

Bobby (01:02:17):

Here’s going to say like, there’s high meeting income, there’s good schools. I know people are going to pay rents. It doesn’t matter that big to think product is like old and bad like that doesn’t hold my rents down. This is something that’s just like a different product for different kind of person. So I think you need to make similar jumps. And that’s one of the things that I’ve been trying to promote and bright guy I’ve had so much fun working on this through Twitter of just like consulting or talking to other people’s projects or saying like, here’s what I think you should do with their units because here’s, what’s, here’s, what’s everyone else is building. So at a minimum, let’s build something a little bit different and let’s try and like flesh out this these floor plan pipes, but holistically a little bit more so about it. It’s, it’s in the very early stages.

Matt (01:03:08):

Yeah. Yeah. And my next question is what keeps you up at night? And I, I think I think that might be part of it you’re, you’re busy drawing in your mind right now, but

Bobby (01:03:22):

Yes, ma’am, I am, I’d say that the thing that gets me the most excited is and I know we’ve talked a little before, we can maybe talk a little about the effect of Twitter, which I think has been so neat in terms of the way that there’s like knowledge share and you know, from people involved as apps. Incredible. I, I, I wish that I had had access to it early in my career. But now that I know a little bit what I’m doing, I, I enjoy being able to answer other people’s questions, but I would say the thing that isn’t really neat about real estate Twitter has been seeing the degree to which ideas that I have already as other people have have the potential to influence other people. I mean, I’ve, I’ve gotten I, I’ve now gotten to work on the floor plans of, for other people for you thousand units, which is more, more than I’ve built my entire career, just in the last, like four months on Twitter.

Bobby (01:04:16):

I’ve had a hand in redesigning or commenting on more units than I’ve ever done in my career today, just, just through social media, just because people saying like, Hey, Bobby these are my floor plans. Can

you tell me what you think they’re gonna rent for? Or can you tell me, like, based on the other units in the area, like how they should, how they should change. And so that’s been just really cool to see that the power of that kind of impact, I mean, generally development is not something that scales, right. Like that degree. And so it turns out that, you know, my, I guess my opinions about it can, some people are taking them, some people aren’t, but either way I’m offering them and it’s been a fun to do

Matt (01:04:57):

Well. And what I found from my limited use and Twitter until more recently is just the, the ability to share your information freely. It comes back to tenfold, you know, with it, does it either, you know, helping, helping somebody out, you know, holistically, if you feel a little bit better or just, you know, you, you meet people that like yourself that are, are, you know, advanced in their career just a little bit further, and they’re able to provide feedback. And it’s a, it’s a really cool space. So that’s, that’s, what’s keeping you up at night right now, essentially.

Bobby (01:05:46):

No, actually, well, I mean, it’s not, not the subject of this thing, but I would say being transparent, I would say this is actually one of the more stressful times in my career over the last few months. Porter’s obviously good, but there’s been it’s it’s a very stressful it, it don’t mean that in, it’s not all bad, but there’s, there’s a lot of things to do and I feel behind on a lot of different people. And so if there was one thing that does keep me going, it’s that I feel that the mask is worthy. Right. it’s I, I see a lot of floor plans. I think a lot of them are good. And I want them to be better and I want them to change with intentionality. So I, I do feel burdened to do that. And and I also feel burdened to try to do that in a way that’s also good for my family. So that, that, and then,

Matt (01:06:47):

Yeah, we all, we all have 24 hours, you know, we all have priorities, so just allow your priorities and it is tough though. It is. And that, that kind of brings me to my last true question here is, you know, if we were to Google your name, or you said, Wikipedia might not last, but in a hundred years, you know, what, what what would it say about you and form developers kind of a legacy that, that you would like to have from,

Bobby (01:07:24):

I think legacy is the right word there. I mean for a long time, like where I’ve thought that there’s anything on my epitaph that promise for husband, father, Kurt member, community member, anything comes before those things like I’ll consider my life to have been a waste. So that being said, I have, I have, I have significant ambitions and a lot of lot accomplish, but I always put those things kind of in, and then the other one I end. And so I’d say the, so business wise, what would I want to have accomplished in a hundred years? There’s two different ones, one by the end of my career I want to start a company where thousand people work and pay off their home. Bi-Weekly paychecks. I think the best mark of success of a company is if people choose to stay and obviously getting a thousand or 5,000, having people that there’s, those lists those larger numbers.

Bobby (01:08:38):

I think that that’s certainly a measure of financial success too, but to me, like, that’s the main thing that I would want. I would want a lot of people who have worked the company that I run and have worked there for a very long time. I admire a lot of these different professions, some of these different professional services firms especially within construction, feminine architecture tool, like people you go there and, you know the project manager had been there 47 years and, and the and some of the front desk has been there, you know, 40 years, I think, like, there’s just so much that you can tell about people. It’s like, well, you’ve done something right. And he treated people a certain way. So that’s, that’s it, that’s the other thing that I will accomplish. And the third one, if there was a realm in which like, I, I find myself like moving forward, it would be, and I, I use this term jokingly to be like, you know, the build teams of floor plans, but I would say like, I would want more than anything to be a part of, like Mo advancing the like narrative and not sure whether this is going to be through doing my own projects or through advocating for other people’s advocating for, and, and changing the way that apartment floor plans, the mindset with which they are laid out and the way in which they, and the way in which they are done.

Bobby (01:09:52):

So that’s those are the three things,

Matt (01:09:56):

That’s it? That’s it. So,

Bobby (01:09:58):

Yeah,

Matt (01:09:59):

Exactly. Yeah. You’re, you’re well, on your way. I want to give you a minute here just to have just to give a little bit more information about where they can, where listeners can find out more about you and your group Form developers and what you’re doing

Bobby (01:10:17):

Next store. Well, I respond to as many as a DM’s as I can. So if you follow me on Twitter @BobbyFijan I love to interact with you and answer any questions that I have. I would say the things that I’m most excited right now to work on with other people are that if you have another pro, if you have a grounded project or a heavy value add project, you’re working on that. Do you want me to look at your floor plans? I would love to do that. It’s a part of my business that I’m looking to expand, and I want to see that change in the United States. Yeah.

Matt (01:10:57):

Wow. All right. Well, I’ll provide a link on the page as well, and I appreciate your time, Bobby. I know you’re very busy. You got a lot going on, so I appreciate your time. And we’d love to stay in touch.

Bobby (01:11:12):

That’d be great, man. Thank you. All right. Thanks.