• placemakingpodcast@gmail.com
Facebook-f Twitter Linkedin Instagram

Financing Developments that Create Great Places with Ward Davis – Ep. 033

About the Guest

I am really excited to share this next conversation with all of you. Ward Davis is a founding partner of High Street Real Estate & Development, a real estate company focused on urban and New Urban properties in vibrant, growing cities and towns. Ward recently served as President of the National Town Builders Association, a national trade organization for leading developers of economically, socially and environmentally sustainable neighborhoods and town centers.  Ward has a BA in Economics from Davidson College, a General Course Diploma in Economics from The London School of Economics and Political Science, and an MBA from The University of Virginia.

Ward, along with his partner, Morgan Hooker, first began toying with the idea of joining forces to form High Street back in 2004. Since then, they have built their portfolio to include a multitude of high-quality developments. High Street Real Estate & Development was born out of a need to build great new places and to redevelop properties in Northwest Arkansas’s downtowns.  Their residential and commercial projects are influenced by philosophies that improve livability, adding lasting value to our neighborhoods and communities. They continually strive to make better places for communities, tenants, neighbors and local businesses as a whole. From renovations to adaptive reuse to from-the-ground-up neighborhood building, their end goals are always the same. These are improving livability, reducing operating costs and delivering unrealized value.

In this episode, we are going to discuss the financial model for place oriented development and how that differs from conventional development, alignment of interest with investors, and what types of investors might be interested in placemaking and why. There is tons of great information in this episode and I greatly appreciated Ward’s candor in discussing these topics and how they relate to their company’s business model.

Main Take-Away’s From This Show

This was an extremely fun show for me to host! I really enjoyed the candid discussion that was had when discussing the various business models utilized commonly by real estate development groups. Ward was able to intertwine his beliefs of creating great and memorable places with a strong financial foundation. These ideas combined to form the backbone of the real estate company that he is the co-founder of. The following main topics of the show come from a deep understanding in the role of strong town centers and the inherent value there is in understanding financial models behind successful real estate development endeavors.

  1. Location, location, location…This notion is important for developers seeking guaranteed appreciation.

  2. In this time of turmoil, investors seem to be looking for consistent returns. Not necessarily the highest initial returns.

  3. Timeless architecture can truly be timeless when done correctly.

As always, I will dig into each of these “take-away’s” every week on the blog. So, without further a due, here we go!

Location, location, location…This notion is important for developers seeking guaranteed appreciation.

The phrase “Location, Location, Location” has been utilized in real estate round tables for years. This saying shouldn’t be new to you or I, however the importance of this idiom cannot be understated. Especially for a real estate development model that counts on appreciation over time.

As discussed in this episode, the majority of the projects that High Street takes on begin with the understanding that they will be invested in the project for the long haul. This is very different from the majority of real estate developers and companies who often look to hold the project until the property is stabilized and then look to sell the asset based on this higher valuation.

This stabilize-and-hold strategy allows them to bank on potential appreciation of the property over time. According to Investopedia.com, “Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates.” The appreciation that Ward is most generally attempting to achieve is due to the increased demand of the asset over time.

In order to more or less guarantee appreciation, careful planning of not only the asset class they are planning to develop but also the location of the asset, are extremely important. This meticulous preparation tends to pay dividends with their developments so far. The location, along with the timeless designs and theories, help lend to providing consistent returns for the investors that they are partnering with.

In this time of turmoil, investors seem to be looking for consistent returns. Not necessarily the highest initial returns.

A common phrase I hear a lot when discussing the developer and investor relations is “Tell me about the return of my capital first, then tell me about the return on my capital.” I believe in tumultuous times like these, when volatility is at an all time high, investors are often looking for relatively safe places to park their hard-earned wealth as a first condition of investment.

The team at High Street Real Estate and Development understand this fact and also believe in long term appreciation of an asset can be a powerful force when looking at your return on investment over time. Oftentimes, this gets overlooked in typical ground-up development proformas as there is typically there is no hold period outside of the lease-up and stabilization time period. Hence, there is no way to quantify this appreciation in the valuation of the development.

High Street has found that investors they have worked with in the past aren’t so much interested in a larger balloon payout when the property sells, but enjoy the cash flow generated from a long-term holding strategy. This typically means that they might not have as many projects going on at one time but allows them to be methodical when truly creating great places that benefit the public and become truly timeless.

Timeless architecture can truly be timeless when done correctly.

This last take-away is one that really caught my attention during our discussion. My mind started racing on ways to truly create timeless design in architecture and what that really means for a project. I’ve heard this phrase thrown around several times in my architectural lecture class at University but what does it truly mean and why should you care?

In search of answers to my questions, I stumbled along a blog post that very plainly defined what “Timeless Architecture” should mean. Based on this post by Build, LLC, “timeless design is relevant for several generations, it outlast trends, fashion statements and society’s infatuation with styles. It is made of materials and methods that will last a century or more” among other things. This seemed to be exactly what we were discussing on the show.

Utilizing the permanence of the design, along with being involved in the minutiae of the various details involved in design, High Street is able to create truly design timeless pieces that not only hold their value but also appreciate in value over time. This attention to detail pays dividends in not only their bottom line, but also creates assets that they can be proud of.

These structures will stand the test of time and continue to provide returns for High Street and their investors. These buildings will also provide lasting places for their tenants to live, grow, and build their businesses for years to come.

As you can see from the take-aways above, this podcast episode was full of great information on the topic of the financing projects that create great spaces and provides actionable steps you can take on your next real estate development project. As always, if you have enjoyed the content and the show, please subscribe to the show below and share with your friends! We’ll have many more great discussions on the shows to come.

To Learn More About Ward Davis and High Street Real Estate and Development, Check out the Following Websites:

Resources Mentioned:

 

 

Recommended Reading Section

For more on funding your next Real Estate Development Deal, check out Episode 21 with Tony Holzbach to give you a perspective on funding your deal through a financial institution.

 

This podcast is brought to you by Audible! I have used Audible for many years now. I love it. Audible hands-down, has the largest selection of audiobooks in the world! I listen when I’m taking I’m riding to work, I listen while I’m running, basically… I listen whenever I can. Audible is offering The Placemaking Podcast listeners a two-free audiobooks with a 30-day trial membership. Just go to Audible.com and browse the amazing selection of audio programs. Then, when you’ve found a couple books you like, download your free titles and start listening! It’s extremely easy. Simply go to Audible.com

Podcast: Play in new window | Download (Duration: 51:51 — 26.8MB) | Embed

Subscribe: Apple Podcasts | Spotify | TuneIn | RSS | More