Real estate development is a challenging, competitive and ever-changing arena. Yet this segment of the industry lures people away from successful careers in resales, law and even medicine.
Phil L. Stuepfert, director of planning in Illinois for SEC Planning Consultants, says that people, builders in particular, are transitioning to careers as developers for a number of reasons. For one, the availability of land is scarce, so many builders have pursued acquiring land and going through the entitlements on their own instead of waiting for a land developer, says Stuepfert.
“Small builders are growing their companies and the next logical transition or step is to entitle and develop land for their own homebuilding operation,” Stuepfert says. “The building industry has been strong for several years and the risk has been reduced. Also, the potential revenue from the development aspect is strong, so it is a win-win for a builder to make a profit on the land development operation and the homebuilding side,” he adds.
Rich Guerard and partner Mary Krasner were enjoying success in a real estate law practice together when Krasner found a piece of available property and the two tried their hands at developing it themselves. Little by little they got more involved, and in 1996 they became full-time developers. Their company, Wyndham Deerpoint Homes, currently employs 50 people who oversee 26 projects on 8,000 lots.
Guerard said the switch was a natural outgrowth for him to begin doing work for himself that he was already doing for his developer clients at the law firm. “I still end up doing a lot of law and still work as many hours,” says Guerard. “I tell people I have the perfect law practice: I do law but I have no clients.
“I don’t think there are any easy businesses to go into these days, but real estate has been a great business to get into over the past 10 years. It’s certainly something that’s worked for me with my background. Real estate has been a very solid investment in the U.S., and I’m glad I made the move and took the risks to do that.”
No stranger to the world of real estate, Steven Glick of CG Realty Group spent a number of years as a broker representing developers in trying to find land. The more he did that, and the less traditional brokerage work he took on, the more he understood the demands of construction and development.
“There were numerous properties where we represented the developer and assisted with going through the procedures and learning what was involved with environmental issues or neighborhood issues,” says Glick. “It became apparent to put your hat in the ring and do it for yourself instead of working on a commission base, that rather than sell this property off, we can develop it ourselves.”
The company, which Glick operates with business partner David Chencinski, is actually two-fold because it encompasses both a boutique real estate company with 20 licensed agents performing traditional commissioned transactions as well as the development business. The development business has a concentration in new construction of single-family homes and condos, as well as condo conversion and retail projects primarily in Chicagoland.
“You definitely know that nothing that’s worthwhile is easy. You do have city and government processes you have to go through to get any project approved, and it’s sometimes hurry up and wait.
“One of the things I have felt that differentiates us and has been a major asset is that we started as real estate agents, taking buyers around and understanding the excitement, fear and confusion of the process of buying property or trading up,” Glick says.
He recommends that anyone considering development as a career should learn the ropes from a hands-on perspective before wearing the hat of a developer. For someone already in real estate, Glick suggests attempting the transition gradually. “You’re better off keeping some of the brokerage, if you can, for stability. The development side has a much lengthier project timeline, whereas brokers can expect closings much more frequently.”
Similarly, Chris Feurer, president of Feurer Companies, was enjoying success in real estate as a Realtor with Koenig & Strey GMAC. He streamlined development deals for developers he represented by finding land and creating packages for what the property was best suited. It seemed like a natural progression that, with all of his hands-on experience, he would eventually become the developer and begin streamlining his own projects.
He’s since found the career a welcoming challenge and currently has a 400-unit project in Sunny Isles Beach, Florida and a 360-unit project in Chicagoland. (The location has not yet been disclosed.) This year he’ll complete 850 units; he has doubled his production every year for the past five years. But he didn’t start out building the big projects.
“Start small and, with each job, make a natural progression with the size of your projects,” Feurer says. “There’s no handbook out there telling you how to do everything. There’s not a school for developers and there are no restrictions; everyone can do it.” The best advice he can offer is to “learn underneath people so you don’t just dive in head first.”
Good developers are results-oriented and know how to get work completed on time, which involves managing labor, establishing time estimates, getting appropriate equipment operators and construction crews.
But there is no set course for making the jump to a career as a developer. Some enter the business by working for another developer, getting experience as a construction manager on large projects or just striking out on their own, starting with smaller transactions.
Others, such as Mitch Newman, owner of Tiberias Construction, Tiberias Homebuilders and Tarpoon Affordable Housing, do it out of necessity. After completing a medical residency and practicing for two years, Newman left his career as a physician and spent the next 10 years writing and running a theater company in Chicago. Coming from a long line of real estate developers, he had the experience and advice of his father and brother when he decided development would be his next career.
“I inherited a little bit of money and asked my brother to build a building for me,” Newman says. When the project continued to be delayed, Newman took over and constructed it himself. He was hooked.
“At the very beginning, I was very tentative and kept running the theater company while I tried developing on the side,” says Newman. By 2002 he felt comfortable enough to take on developing full time, and today he’s constructing condo buildings in Chicago and near Tampa, Fla.
Although he’s enjoying the growth of his company, Newman has a specific goal in mind: to grow it large enough that he no longer has to be involved in the day-to-day operation. His development niche helps spur rapid growth, he believes, because he offers high-end design to middle market areas. Tiberias has an in-house designer, and that expertise gives him an edge over his competition.
“The first building I built, I intuitively brought all the right people to the table to build that building,” he recalls. “It turned out great, everybody was happy and it sold very well.”
The best advice Newman can offer others who might be thinking about making a switch to developing is to find someone who knows what they’re doing to look over your shoulder and save you from making a huge mistake, he says. “The most important thing in your projects, though, is conception. Are you building the right thing for the marketplace? If not, no matter what you build, it will never be right.
“I try to do it for the passion of it,” adds Newman of his new career. “I treat it like I did my craft when I wrote. I try to create something I love, and that’s what makes it interesting.” C.A.
copyright 2006 Agent Publishing LLC
From Builder to Developer
There are four critical tools every builder must use to successfully make the jump from building homes to developing communities. Each of these plays an important role in the design and creation of thriving, marketable communities.
• Research all the important data affecting the project
• Know the codes and ordinances
• Know and understand the political climate
• Know the big issues and impact of your project
• Collect good information early in the process
• Perform a net usable analysis
Good planning is critical
• Community planning should complement the natural environment and maximize the opportunities of the land
• Design should meet the needs of the market and jurisdiction
• Pedestrian-friendly design encourages social interaction
• A good land plan should transition well to engineering and construction with minimal alterations
• Amenities are a must
• Strive for creative and efficient design
Accelerate the entitlements process
• Purchase land in the right location
• Identify and designate a local contact
• Identify the key players to gaining approvals
• Establish good community relations
• Make the project have emotional impact
• Focus on open space
• Meet with the neighbors early and address their issues
Your reputation and your team
• Assemble the best project team possible
• Designate a project leader who will champion the project
• A good, strong reputation lays the foundation for long term relationships
• Establish an atmosphere of trust with the community where you do business
Courtesy of SEC Planning Consultants
Koenig & Strey GMAC
Managing Broker, Owner
CG Realty Group
Wyndham Deerpoint Homes
Director of Planning
SEC Planning Consultants 630.553.1700