Cursed By Knowing The Numbers

 Was at ULI this last past week, and listening to friends and participants there got me to thinking again about a triple bottom line approach to real estate development.

Majora Carter, in her TED talk last spring, articulated a triple bottom line for her projects. I am sold on this approach to recasting a property's land use, and I believe ULI can do much more in shaping how planners and practitioners understand what "best land use practices" really means. At this point, I need to get beyond the talk--4.9 million hits on Google for Triple Bottom Line--and get to the execution stage.

The question is how this affects my competitiveness--gaining control of sites, raising capital, executing on a plan.  Does including two other elements into the calculus of recasting property make me more competitive?  Or less?

My take on triple bottom line development is its value in perfecting a land use and its entitlements to create positive returns to the community, the environment, and those who build the asset.  The three "bottom lines" are:

1. Environmentally sustainable
2. Community enhancing
3. Rewarding to capital

The components of my projects are:

• Land Use
• Labor Utilization
• Return on Capital
• Quality of Plan and Execution
• Environmental footprint
• Community benefit

My goal is optimizing ROI's achieved from sustainable, community friendly development that have satisfactory returns to us and our investors.   Environmentalists embracing their inner capitalist, developers embracing their inner flower child, and politicos embracing their inner Jefferson Smith.

Environmentally sustainable is where I am seeing the most potential. Awareness of how to build in an efficient manner, how to use technology to produce more more carbon neutral assets, and use of the internet to offset your carbon footprint is becoming an integral part of our project planning. And sustainable technology, thanks to demand being induced in Europe, is really attractive.

Community enhancing is a little more ambiguous, as diverse communities have diverse needs.  Its mostly about seeing the bigger picture, creating crazy-good places where people who just love the area walk everywhere. Daily needs within a couple of blocks.

Posted by Ted at 2:56 PM | Permalink

If things seem under control, you are just not going fast enough.

--Mario Andretti

This blog started on  20JUN06.  This post shares what 100 days of living in this new subculture has felt like.

My goals were:

• become a better professional by using this weblog to gain insight into the trends, pressures and vacuums in the residential development space. Ask the right questions, induce change, and understand the underserved spaces in producing distinctive residential properties;
• develop a more disciplined approach to investing and building by noting issues in this weblog;
• become a better storyteller about producing insanely great places for people to live;
• better understand the roles in the real estate development food chain and utilize network effects to understand where focus is needed;
• develop conversations with architects, investors, land owners, builders and consultants about how we add utility and value to real estate through quality, design and execution--ie become the English Cut for those people wanting an architecturally significant home in Northern California or Hawaii;
• provide a series of essays on getting the development numbers to work instead of just bitching about them;
• find current problems in the real estate production food chain and figure out a faster/better/smarter fix;
• post in one area subjects to be referred back to--ie, not answer the same question twice;
• become a better investor in the the value add process, and
• quantify this amorphous marketing process.

The hardest part was the lack of direct feedback.  The metrics of this subculture are of roughly 100 people--1 of them will blog, 11 will comment, and 89 will view with no feedback.  A very different way of communicating for me.  But yet you have to keep talking, or you risk your blog looking stale and tired.  Now I know what those people on NPR fundraisers must feel like...Feeding the content beast with no well defined feedback is like sailing in the middle of the night with cloudy skies...

Second hardest thing was sitting down and posting 1x day.  I only mustered 71 posts in 100 days.

The easiest thing was the actual posting.  I blog on Moveable Type software.  Not intuitively obvious to set up, but once I was set up, I use Windows Live Writer to compose my posts with, making it one-click easy.   Now I understand why there are 55 million of these weblogs out there--35 million of them in China.

How did the first hundred days go?

• Initial Technorati Rank: 1,387,589 of 42.1 million blogs.
• Final Technorati Rank:  1,699,000 of 55.2 million blogs.

Humbling numbers, indeed.  Insane that you can even track to this amount of detail.

I accomplished:

• putting together a library of technical notes on the issues I repeatedly ran across over the last 15 years of my career.  When I run into them again, I start the discussion by sending the note to who I need to cover the topic with.
• understanding the blog tool. It is a relatively unstructured way to maintain market and project information for future reference, and the ability to frictionlessly share it.
• producing an alternative market development tool to cold calling property sellers and brokers.
• identified competitive open space and new markets for products and spin-off companies.
• a tool for riffing from conversations I have with architects, owners, and contractors.

I did not accomplish:

• building huge traffic to this site. 
• driving visible change to issues that mean alot to me, ie. what is happening out at San Quentin,
• starting up a large number of meaningful conversations.
• finding a pot of gold at the end of the rainbow.

The biggest positive surprise?  The comments I received back on posts were great feedback--they helped me reframe issues that challenge me.

Thinking about putting a blog together?  Here is Guy Kawasaki's take on his first hundred days.  Here is Matrix' take on why the NYT real estate blog failed.  In short, you need to provide:

1. Consistency: post every day if possible
2. Voice: the language and tone need to be familiar to the reader
3. Passionate: express your views, not what you think the reader wants to hear.
4. Content:  Don’t use it as a vehicle to link to all your feature stories. It ok to do sometimes.
5. Original thoughts:  Don’t glom off of other blogs.
6. Better graphics:  Leverage the photo archives and use charts and graphs.
7. Champion the blog:  Have a representative, the person most identified with the blog.
8. Sense of community: Think about how much you want to orient the content to reader feedback.

Thanks for reading.

Posted by Ted at 10:17 AM | Permalink

I am asked occasionally by people looking to enter the industry for advice on how to do it.  And the fall is a great time to start looking and planning.

The rock stars of most real estate development companies are their project managers.  Most are well educated generalists--who have mastered the key skill of learning, observing, organizing, and delegating. 

Project managers are T shaped people--broadly empathic and with a deep understanding of a craft.  A craft could be that of an engineer or architect, it could be in the trades--carpenter, cabinetmaker, or an electrician--or it could be having the knack of performing an artful way of putting together deals, knowledge of how a building goes together, knowing the numbers, or structuring the cap stack.

Most development companies look for their project managers to have a graduate degree in architecture, real estate, an MBA, or a law degree.  I like the real estate development degree because it typically:

• has a mid-career student profile, designed so you can learn a lot from your fellow students,
• consists of small classes, and is only
• twelve months in duration, so you don't have to spend a lot of time offline reprogramming yourself.

Unless you are independently wealthy, or come from a prominent real estate family, the  first direction I would point you in is to find a grad program that is a fit for you.

The one I went to was started by Hank Spaulding and Larry Bacow at MIT's Center for Real Estate.

Michael Buckley, whom I learned under and worked for, heads up the real estate program at Columbia--and there may be no better location in the US to learn the art of real estate development than in New York City.

Stan Ross, the eminence grise of real estate accountants and dealmakers, is the chairman of the Lusk Center for Real Estate at USC.  And the winters in Southern California are a lot better than those in Boston...

Tony Ciochetti, the director of the MITCRE program, is in SF on 13NOV recruiting for the Class of '08.  I recommend this program very highly.  If you are interested, it is worth your time to come listen to the pitch.  I will be there and look forward to meeting you if you go.

The other group you want to get involved in is the Urban Land Institute.  They have a San Francisco Young Leaders Group that is a good platform.  They have a Learn from the Best program on 28SEP. 

I know, I know...grad school won't teach you everything...there are several essential skills you  need that you pick up best in el camino de la vida (loca)...  These include the ability to not be bullshitted by brokers, contractors, consultants, architects, et al and to survive the tedium of the public approvals process. 

A keen understanding of value, where the pain points are, and where you need to build momentum in the development food chain is what I  constantly strive for.  Keeping your eye on the prize.   These skills you pick up as best you can, either on your own projects, or working with a developer.

Posted by Ted at 12:01 PM | Permalink

To be a successful developer, you need three human capital assets--You need to know your numbers, you need the right relationships, and you need the juice or startup capital to get deals to a point where you can perfect the cap stack.

This blog is about refining the numbers--getting your algorithm right. By looking at situations with a keen sense of both the cost and value side, you get a better sense of where you should be deploying the juice and depending on your relationships. Top down and bottom up composition of the cost and value components of a project.

What is the value of good design? How do you characterize good design? Can you enumerate all the project risks? How do you eliminate/shift/mitigate project risk? How do you characterize the value side in a constantly shifting marketplace? Can you produce an algorithm for a constantly moving value indication--managing the moonshot?

They did put a man on the moon, didn't they?

Posted by Ted at 1:12 PM | Permalink