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Edd (Ehsan) Hamzanlui : Founder, MassCan Capital
34 Plays1 year ago
For nearly two decades, Edd (Ehsan) has worked in real estate finance and banking, private equity, development, construction and cost consulting, and architecture. He has received an MBA from the University of Chicago Booth, a M.Sc. in Construction Management from Georgia Tech, and a M.Sc. in Architecture from the University of Tehran. Throughout his career in development, Edd has taken on the crucial responsibility of managing project objectives and overseeing the development process from the initial concept phase to stabilization.
Edd previously held the position of Vice President of Affordable Housing Development at Bank of America Merrill Lynch, where he gained extensive expertise in multifamily development and underwriting for LIHTC/Historic Tax Credit deals. His impressive portfolio includes analyzing and underwriting deals worth over $4.3 billion in ground-up and value-add affordable housing. In his most recent role, he led a family office-backed real estate development practice in the New England region focusing on middle-income housing.
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Transcript
Introduction to Ed Hamzan Loub
00:00:00
Speaker
BAM!
00:00:27
Speaker
Ed Hamzan Loub is a highly accomplished and very well educated real estate developer who's based in the New England region. While he's currently leading a family office backed real estate development practice called Mascan Capital, Ed has extensive experience on the corporate side of the industry.
00:00:43
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having served as the vice president of one of Merrill Lynch's housing development programs, as the managing director of Harkins Properties, as well as a project manager, architect and development associate, as well as a pre-construction expert at various other companies and private equity establishments.
00:00:59
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Ed moved to the United States when he was 26 years old from Iran, where he extensively studied and then built a career in architecture.
Journey from Iran and Architectural Beginnings
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He holds a master's degree from Georgia Tech in building construction and facility management, as well as a finance concentrated MBA from Chicago's Boots School of Business. Enjoy the episode.
00:01:18
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You have a very, very interesting academic and professional upbringing. Did you grow up in Iran? I did, yes. Tell us a little bit about that. Yes, I was born and raised in Iran, actually. I moved to the US when I was 26. So I was pretty grown up at that time.
00:01:43
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I grew up in a real estate family, per se. My dad was a mason who grew up to become a home builder. Later on, I was practicing architecture in Iran. I licensed architect by training. I worked for a construction company, a couple of architecture consulting firms.
00:02:13
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I crossed the board, worked for my own family office a little bit. My sister is also an architect. My brother was an architect. I have two other brothers who are builders. Basically grew up in this business. Obviously, that's a very, very different practice on that side of the world. And even Iran is different from the other Gulf regions.
00:02:41
Speaker
But half of that is because of the construction. Regardless of the design, the other half is about the credit market and capital market in general. So are you saying that the position of architect in Iran is a lot more finance-based than what you would typically practice in the
Impact of Country Development on Education
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US? No. Unfortunately, architecture
00:03:07
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as a trade has really not much to do with the financing side of it. However, because the capital market and the way you finance a deal, on that side of the world, it's very different from here. Architect usually has a more active role in capitalizing a deal.
00:03:34
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got it. And when you were applying for school there, did it ever cross your mind to study anything else? Or was your family influence of having so many architects and builders in the family just kind of make that course of study inevitable? I was a number guy from the beginning. So organically, I was not the best candidate to go after architecture. I wasn't you know, I was good with numbers. I was good with mathematics and
00:04:04
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those, you know, sciences. However, I just, I grew, you know, to like it even more. But, uh, let's take a step back because that might be confusing. Um, the position of, uh, let me start like, like that, uh, NBA, that there are a lot of, you know, NBA schools across the U S you know, on like in North America in general.
00:04:35
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There is a need for that, right? That's why we have so many MBAs. Or some other majors, college degrees. Some of them are much more important here, more practical than some other countries or, you know. And in my view, that highly connects the stage of the country. What do I mean by that? Let me elaborate.
00:05:03
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Iran at the time, I grew up like 30 years ago, 25 years ago, post 1978 revolution or a war that we had at that time was in a development era. What do I mean? I'm talking about China in the 80s, 70s, 80s and 90s. Iran was on the same pace at that time.
00:05:28
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comparing to fully developed countries like western side here, Canada, United States, Germany, we know most of the western European countries, Nordic countries,
00:05:42
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How does
US Market and Real Estate Opportunities
00:05:43
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that, you know, define the curriculum or what majors or, you know, avenues to go when it comes to college higher education is coming from the stage of the country. You are in a building, say, of a country. You need to build a lot of infrastructure from April to hospitals, to schools, to hotels, a lot of housing.
00:06:10
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and you need to rebuild a lot of cities. And naturally, you are trying to train those professionals with a heavy emphasis on engineering, architecture, across the board, different type of engineers, architecture. You are trying to build different plants, industrial fabrication, manufacturing,
00:06:39
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mining, you know, when you are in the building stage and then you look at the college configuration, what they are made of, you see a lot of heavy engineering programs across the board. You look at a more developed side of the world like the United States.
00:06:59
Speaker
that financing and credit market is feeding the rest of the world, not just the economy in the US, but also managing a lot of money across the world. Naturally, you see a lot of opportunities for soft skills, like MBA, finance, management, accounting, that are not really as hot on the other side of the world.
00:07:30
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here and you don't really be able to see that on the other side of the world China has gone through that transition and you see more Asian you know by Asian I'm Iranian Asian too but here Asian usually refers to Eastern Asian
00:07:47
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You see more of them in business schools because the stage of data economy is closer, you know, to become a fully developed country and now they need some other skill in economy, finance and all of this stuff. Right. So the death of death is a little bit settled, you know.
00:08:08
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a difference between these two kind of economy. Yeah. On this note, I'm curious, you hold a lot of graduate degrees as well in a multitude of topics, right? You have two, I believe, MSCs, or maybe three, as well as an MBA in finance. So what drove your decision making there? Was it a desire for you to gain a particular job or position that led you to apply for those programs?
00:08:36
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I don't know if you can elaborate a little bit on that. No, absolutely. None of them were really by accident and they are kind of, now when I tell you, you will see how they are more relevant. I have started in, you know, a more technical side of design and slowly toward the more technical side, technology side of the design and then I pivot toward kind
00:09:04
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side type of practice after that. And I continued that here when I wanted to, you know, move to the U.S.
Transition from Architecture to Finance
00:09:15
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You know, my plan from the beginning to go to school and stay in the U.S., that is, for some people, I said, you know what, I go to Georgia Tech, Booth, Harvard,
00:09:33
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go back to my home country or wherever to practice that was not my plan my plan was to come and go to school and start working here and you know a new life yeah I'm not trying to sugarcoat that so uh
00:09:52
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that's one and you know from divine i quickly figured out that we are a uh in a developed mode country like the united states architecture is amazing however i decided to distance a little bit to more construction hands-on rules yeah and it took me a few years maybe two three four years working in a
00:10:17
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in that industry on the ground for a general contract in Atlanta. I figured out that it would be very beneficial to understand what is happening, how a deal comes together.
00:10:32
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and I frankly I had no idea I had no idea and it is not easy because I came from a very completely different market to a very pure capital market and I was not trained so I decided to learn
00:10:50
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you know that and MBA was an avenue to you know opportunity however by MBA I'm always telling people who are asking me to be very careful if you have an agenda or a plan in your mind be careful about what type of MBA or where you go the reason I went to University of Chicago was just for finance program
00:11:17
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And I was looking for that financing inside of the game because that's what I needed.
Role of a Developer in Real Estate
00:11:22
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I was not looking really for any other type of software skill. So for me, that was really, really helpful to give me the knowledge to understand how it works in general, to see the full picture and
00:11:43
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was talking to a very dominant architect down in Mississippi, that we were discussing some low income housing tax credit project, affordable housing project. And, you know, being able to look at the divine side architecture or construction side of the game, but at the end of the day, seeing a full deal together, how you put it together, you don't need an architect or general contractor.
00:12:12
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to tell you if this housing or residential project is good or bad. That is my job, to make sure that I can build that project at this in a very, very high level preliminary stages. And before I spend any money or engage in the architect, to start even for a very high level of schematic. Before going there, that's my job, to find a deal, to source a deal that works. And then I hire people.
00:12:46
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Yes, they are. They are not the first people, you know, and they are not the people who make or break a deal. They are delivering an amazing service, but you are in charge as a developer to decide.
00:13:02
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to make sure to put the deal together if it works or not. And also at the end of the day, depending on the groups that you work, engineering or construction, that's your job to make sure they understand what you need. And there is a very big gap between what is ideal and what is buildable.
00:13:28
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friends at Harvard University. They have an amazing housing study group, which is I believe between a business school and Harvard School of Design. They have a
00:13:41
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collaborative group that studying housing. And I was at one of the events book signing a couple of weeks ago, and I could feel even at one of the best design schools in the world. I saw that even these architects, probably the most expensive architects in the world, you still need to stay on top of them. And tell them, what do you need? Because you are the one who's
00:14:10
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spearheading a deal and you know find investors, find banks, find you know everything. So all these elements basically are critical and how I connect this to the sequence of my graduate degrees. For that reason I you know decided to do MBA and I did and I am very happy with that very expensive decision in my life.
00:14:36
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you know, those are not cheap and not easy to get in, but when you get in, it's just, it's the beginning. But I'm happy with that decision and help me as we are talking today, I'm learning every day. And I enjoy that part of it, you know, this is just, and also business in school, people usually underestimate or it is less spoken of
00:15:04
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kind of teaches you how to open your eyes and I don't know there is a side of your brain part of your brain that somehow deactivate that and you start this
Finding Strengths and Real-Life Experiences
00:15:20
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learning machine is much more active. Sure.
00:15:24
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for a MBA graduate, in my view, they encourage a curiosity inside you that even post-MBA, whatever you are always looking for, you know, and you can connect the dots. It's very important, very important to learn how to connect the dots when it comes, you know. So that was the sequence of, you know,
00:15:50
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from very pure architecture, technical to construction to MBA finance. And I'm in an industry that if I use an analogy of a round table, you have a housing, a residential multifamily deal ground up or rehab water. You have several stakeholders around or team members around the table. Again, I'm using the analogy of a round table.
00:16:21
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The chair of that table is the developer who's chairing that table. But you have a lender, usually, who provides the credits to build that deal. You have equity investors in basically capital investors on debt and equity and different type of money. Then you have a general contractor who builds it. Then you have an architect and engineering team
00:16:48
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that helping facilitate that. Then you have a city planner and see the whole entitlement process. So it's a combination of few people at least. If you are building affordable housing, low income housing tax credit, there would be other participant around that table. What I'm trying to say is
00:17:15
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being around from design to construction and worked in a bank and on a private equity enabled me finally to understand, be able to communicate with all of these people and understand different agendas. And it was difficult. Maybe not everybody needs to get remasters. I don't think that is necessary, but being able to have
00:17:46
Speaker
more you can communicate and see other people. Sure. That would be beneficial to your final product. Absolutely. I would love honestly for you to summarize what it is that you're doing these days with development and consulting, but the question that's attached to that is whether you always had the intention, even when you started off in architecture,
00:18:09
Speaker
to head towards development and consulting? Was it kind of in your mind as you transitioned from architecture to construction that you're kind of building your way towards where you are now? Or was it more of a personal preference thing where you kind of realized that architecture in the States wasn't completely what you wanted to be doing and construction looked like it might suit you better, if that makes sense? No, that's the fair question. I'm happy you asked that. Not really.
00:18:39
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And the reason is I didn't know what I didn't know. I knew that I don't understand how it works. I knew that, that I don't know how this works. I was aware of that. What I did was put myself in a position in locations or took actions to learn and to understand.
00:19:07
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myself how it works. I did not know about development in my early life in the U.S. I did not. And for that matter, none of the things coming to that game, you know? But they knew I wanted to do something like that. And I had no idea what that is. What I knew at that time is that I didn't know what that is. So I tried to learn. I tried to be out there
00:19:37
Speaker
And the whatever it takes, again, I went to business school purely to understand how it works, what that is that I don't know. And for that reason, I'm very thankful because I guess finally I came to realize or understand how it works and where I can contribute, what would be, you know, I have some very serious weaknesses, right? And some very strong, you know,
00:20:05
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skill set like everybody and if you see what is going on understand the whole game and you know combine a big picture a little bit more micro you know visions here and there that would help you to strategize your move that's what happened i over the time you believe or not for a period i wanted to do investment banking because it is a fascinating job
00:20:35
Speaker
but uh and i tried hard uh to get into but in the middle of that process i learned a lot about what the job is and that itself cooled me down a little bit you know so the process is doing something sometimes i'm talking about maybe five years ago six years ago wanted to do investment banking real estate because i thought that
00:21:02
Speaker
For that matter, I did, for a while, private equity, real estate, investment in multifamily, value add, for a while, for a short period. And even that, I learned a ton about the job, but also I figured out what I want to do and what I'm good at. People, just in my personal, this is my personal view, it is important to do something that you
00:21:36
Speaker
But in my view, it is a little bit harsh language. You might not, you know, some people that listen to this might not like it. But in my view, figure out what you are good at and do that instead of what you like to do. Because if I wanted to follow my own whatever interest, probably end up in places, which I did a couple of times, that I was not competitive.
Personal Responsibility in Career Development
00:22:04
Speaker
you know, that there was not competitive. Yes, I like to do that to make it a lifestyle, but I was at the best an average person. Sure. But I figured out what I'm good at. I'm very competitive. Yeah. And I decided to do that. It was not easy, but I said, you know, yeah, maybe I need to make these adjustments. And those are all mental games.
00:22:31
Speaker
You know, to get comfortable with the reality that's how we compete in this market. And I believe that it's good to figure out what you're good at instead of what you like to do. Sometimes some people are lucky they're the same. But if you figure out what you're good at and follow that, that is very rewarding because you're competitive and you're competitive.
00:22:56
Speaker
that brings you know success in so many ways and that is very rewarding so you start enjoying doing it. Now I'm really curious because you're touching on something that is a huge
00:23:07
Speaker
burden for a lot of young people is exactly figuring out what you're good at versus what you can actually do with those talents to make money, right? Or to create a lifestyle for yourself. Exactly. How are you going to support your family and the lifestyle that you actually want to live? Was this like a very introspective process for you? Or did you have a mentor that you were able to ask, you know, what am I good at? And these are my skills. And in what direction should I go? How did you decipher all of this?
00:23:37
Speaker
I did have mentors and for sure I'm so thankful to people who helped me. But at the end of the day, it falls on you to figure that out. That's not someone else job with like two hours quarterly to tell you or twice a year to tell you what to do with your life. Sure. You know, they are always there. If you reach out, you have a question and you really need someone to help you with a particular topic. But
00:24:06
Speaker
In general, at the end of the day, that's not even your parents' job either. At some point, you need to take the responsibility to sit behind the wheel. And it's just there is no right or wrong. You have to do it to figure it out. Some people are luckier than the rest of us. Unfortunately, some of us are less lucky. But those who are surrounded
00:24:36
Speaker
were born in an environment surrounded with so many different successful people. So from early stages of your life, you get to see a lot. And so not many people have that. Not many, maybe a few percent, 5% of the people have that. But for the rest of us, the other 95%, we need to do the hard work. And it's a little bit of luck.
00:25:04
Speaker
But in my view, you can reduce the impact of luck by trying harder and not giving up easily because, you know, I make an analogy of going to events, real estate events that's really a huge part of our industry in general, doesn't matter what you do. Assuming that there is a hypothesis
00:25:33
Speaker
a real uh you know uh angel help you as a partner or investor whatever how you come across that guy you know you might come across that guy at the bar one night you know randomly right if it's possible yeah but what if you go uh or at a real estate even once right but if you go to 10 events
00:26:03
Speaker
you improve your chance to come across that one hypothetical angel 10 times more, right? So what is that going to that event 10 times to different 10, 10 events is your work, your leg work, right? So yes, there is a lot to come across that guy. But if you, you know, try a little bit harder and expose yourself to different, you know, situations,
00:26:30
Speaker
you reduce the amount of the impact of that luck or you improve the odds that you can come across those opportunities. But just being out there and everybody saying that, very successful people should just be out there. Sometimes it just doesn't make any sense to be out there.
00:26:58
Speaker
It might be networking. It might be just doing the work. Sometimes you need to do a lot of free work to stay in touch with people to, you know, whatever it is, whatever it is. Being passive is not going to do anything. Yeah. Being active definitely improves that
Importance of Networking in Real Estate
00:27:20
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odds. But I try to,
00:27:25
Speaker
I don't know how successful I was, but. Oh, it totally did answer my question. And it leads to a follow up one of how much networking are you actually doing on a day to day basis? Like as a developer consultant, do you have to be at these sort of events a couple times a month or even a couple times a week? How social is it? It depends. It depends. I am going to answer your question. It's a very short answer, but I need to, uh,
00:27:53
Speaker
explain a little bit before I answer your question. It depends where you are, what is your situation. If you are in a failed position across the board, whatever you sell, you sell debt, you sell equity, you sell relationship, you're a broker, you sell assets, whatever you sell, most of your job is to be out there. So if you come across people that are out there every day, that's part of the job.
00:28:21
Speaker
Or if you're a student, you're on a recruiting phase. You're trying to learn and connect with people. So, you know, the networking side of the game, it really depends on a person. Everybody has to do it, but not everybody has to be a killer, you know?
00:28:51
Speaker
Everybody has to be out there. For some people, you know, I go out. I'm a member of that organization. I go out once a month, the monthly meeting, the monthly launch on. That's good, you know. Some people have to be out there twice a day in the morning and five other meetings during the day. Now, depending on the stage of your career, you are and what you are doing, that matters. Right now, I started my own firm a few weeks ago.
00:29:22
Speaker
I'm at the stage, thank you, I'm at the stage that I need to find so many people. Yeah. From equity investors, from partners, you know, to sourcing deals in housing, like I have to build my relationship with, you know, public municipalities, like across the board. So I, most of my time, these days are just talking to people.
00:29:52
Speaker
I've done a lot of groundwork in the past, so I have a good infrastructure in place. I don't have to reinvent the whole wheel. But in terms of establishing my practice, I need to touch on many, many contacts that I have and try to get the news out. But that might have applied. It did not definitely apply to me six months ago when I was
00:30:21
Speaker
on a construction and doing a deal. So it depends. But I recommend everybody to be out there at least once or twice a month. Everybody. Right. Everybody. Especially when you're in the growing phase. Got it. Always. Always. At least once or twice a month, in my view.
Leaving Corporate Life for Freedom
00:30:39
Speaker
You know, you can be very specific. You can say, I like this organization for this reason. I become a member. They have like once a month or every other month meeting I go.
00:30:50
Speaker
But everybody has to be out there to some extent, you know how much it depends on you, but
00:30:58
Speaker
Right. Why did you decide? I'm really curious because you're so freshly on this entrepreneurial pathway, but why did you decide to leave corporate? And we've heard on this podcast just answers that run the gamut from, you know, I just wanted more free time with my family to I didn't like working for and with other people. But what is your impulse for having started this new chapter?
00:31:22
Speaker
It was a very impulse. Yes. It was not a big decision that I've been working on for years. It was not. As I said earlier, I really tried hard to get into corporate. I worked at Merrill Lynch, which I'm so thankful for a while and different sizes of organizations in my career. And to start my own shop, I haven't planned for this for years. It was relatively new, but, uh,
00:31:52
Speaker
My mentor once told me a very, very interesting story that you might find it fascinating. I personally found it very fascinating. He told me that as a parent, you always like your kids to go to school, a good college, maybe a good graduate of school, and then
00:32:18
Speaker
graduate with a very good degree and get the job at a very good established corporate with a high salary or whatever and build their life, right? That is a very good path. But he said, I actually like my kids to go to a good college and a good graduate of school, graduate with a very good degree and get a bad job.
00:32:45
Speaker
and get a bad job because if you are trained, if your brain is like fresh and you are a fighter, you're looking for it and you get the bad job that activates your entrepreneurship site, that pushes you to figure out what is outside the box, what is outside this corporate life on my paycheck or what is happening outside and that usually leads to successful people. Those people who are
00:33:13
Speaker
who have the foundation, right, education, right, you know, brain to do the work, right, skill set, but in the wrong place, you know? Absolutely. I'm not saying that's the way to go. That's usually a bad luck. Who goes to work for, you know, wrong organizations. But that happens a lot, actually. And believe it or not, it is very common in real estate.
00:33:40
Speaker
in different forms and shapes, you probably come across every day people that are not happy, you know, because of the functional operation. So for me, I, you know, I wanted to do this and I engaged a few entities over the past few years and I narrowed down my focus on housing.
Current Housing Market Dynamics
00:34:04
Speaker
Yeah. Part of it was both personal, part of it is the economy.
00:34:10
Speaker
Part of it is the market demand. It might be a strong statement, but they strongly believe that we are in a golden age of housing. From an investor developer point of view. I think in housing, we are in a place that industry was 10 years ago.
00:34:30
Speaker
Can you elaborate on that in what sense? And for one, you know, if you understand what you are doing and you're in the right market and know how to do it, it's a good time to be in housing industry, investment, development, brokerage, whatever. And the reason is simple. We are heavily short on housing.
00:34:56
Speaker
Different numbers are out there, but 6 million, 5 million, 7 million, 4.6 million. These are all numbers and the deliveries are between half a million and a million a year. We literally won't have any major deliveries the next year to 2024, 2025. And that only makes it worse. And I do not even take into account the obsolescence of the inventory.
00:35:27
Speaker
Massachusetts at that time based off 50% of the inventory or built before 1960. Are we talking about residential residential? I'm talking about housing residential different type of housing. It could be multifamily, single family condos, subsidized market rate, affordable, whatever you call it. I'm talking about in general housing sector,
00:35:53
Speaker
We have some serious problem in housing across the country. In some of the markets, especially in Sunbelt, it seems there is a little bit overbuilt. But in my view, those are temporary. Atlanta, Nashville, Orlando, Jacksonville, Austin. If whomever are building those, I'm not really, I don't have any deals down there.
00:36:17
Speaker
can you know whether through the next two years it comes back, it's going to balance itself out. However, there are other markets. We have Midwest market across the board, not just Chicago, across the Midwest. Northeast market. We have mid-Atlantic, D.C. area, Philadelphia, New York. And that we have a very, very imbalance in some serious housing shortage.
00:36:45
Speaker
Again, if someone want to get into real estate for the next five to 10 years, in my view, housing is a very good place to be. Anywhere, you know, it doesn't have to be in development. It could be on a lending side. It could be on a government side, municipal, you know, in charge of housing. It could be architect. It could be, well, architecture and construction are not heavily involved with the economy side of the game.
00:37:11
Speaker
But on a real estate side, you could be in any capacity that you can get in. At the end of the day, you need to see what are the options available. But I'm bullish on that. I'm bullish. And I don't think in 15 or 20 years that would be the same. I don't know. Nobody knows. But it is a very sharp
00:37:38
Speaker
shortage right now and it's only gonna last for so long, you know, we're in a market economy so we build and at some point we overbuild and we balance ourselves out and you know like the other property type you have a problem in office right now which is a little bit infused by remote working COVID but partially also because of overbuild or retail a little bit maybe industrial in the next five years
00:38:08
Speaker
And all of them have their own cycles. And in my view, housing is the place to be right now. And the next five to 10 years, yeah.
00:38:16
Speaker
What is your specific niche right now with your company when it comes to affordable housing? Are you doing ground-up developments or serious rehabs of existing buildings? We have two strategies. One of them is ground-up new construction, mixed income, or fully light-tech. By mixed income, I mean truly mixed income, like have some light-tech component, up to 60% AMI.
00:38:43
Speaker
As a state-to-state, the requirements are different, so I cannot talk about people outside of Massachusetts or Rhode Island, but in some markets, rate units, I call it mixed income. So we have two strategies. One is ground-up new construction. You source the land or existing property, tear it down, or piece of raw land and build housing.
00:39:13
Speaker
In some of the markets like Northeast that we are, or even Midwest that I know personally, there are a lot of old buildings. It could be in a form of meals. And there are some requirements, regulations around that.
00:39:35
Speaker
And some of them are vacant or abundant and it comes with a lot of hair per se. They are not usually very straightforward comparing to a piece of land that you can build. Programming those historic deals are very difficult. But our second strategy is conversion, adaptive reuse.
Challenges in Rezoning and Market Operations
00:39:55
Speaker
Finding those assets and trying to figure out if they are feasible based on the whole
00:40:07
Speaker
good deal is doable or not. Right. If I could jump in there really quickly, do you feel like your very technical background in architecture and construction kind of give you a like up when it comes to negotiating with municipalities, city officials, owners, planners? It definitely did, yes. Okay.
00:40:27
Speaker
Sure. To what degree does politics really play into these projects? Because I know I've spoken to other developers and my own boss is kind of in the preliminary stages of starting his own small development projects. And kind of having to go through the movements of rezoning things is a little bit of a turnoff. And I get the sense that that's why a lot of people stay away from development is because
00:40:49
Speaker
the city negotiation aspect of it can be such a drawn out headache. But do you enjoy that process? And is it really even that difficult? Or are people kind of being dramatic? It can be difficult. You can be wise about it. You can be smart about it and a structure you deal in a way that you know, that wouldn't be so expensive to go to entitlement, sometimes is more expensive.
00:41:20
Speaker
And the problem is that the local planning boards that are not usually experienced people, they are literally volunteers that sign up for those fees have a lot of power. So that's where you see the gap. You have officials running for office.
00:41:48
Speaker
development and all those good stuff. So when it comes to the ground, to the local, you don't see that much actions because at the end of the day, the people, you know, in those local city or county or whatever, and sometimes they are literally volunteers sitting on a planning board. They are not experienced people. It's very difficult to go through. And there are some zoning
00:42:18
Speaker
The rezoning is taking place across the U.S. Some markets are much more development friendly, Texas, Houston, Southeast in general, Florida, Georgia, Nashville, Carolina in general are much more development friendly and that's why your entitlement is very quick.
00:42:40
Speaker
and much less expensive compared to Northeast markets. Boston is notorious for that. It takes years to get a project entitled. And that's why it's very expensive. And that's why you have a very low supply of new products out there. And compared to those markets that are easier to build. It is not always construction cost. Construction cost.
00:43:07
Speaker
is one component, but as you accurately pointed out, entitlement process is that important. Yeah, politics always, always important. Local politics and also federal, like we are talking about presidential election next year, and many people looking forward because somehow, you know, that is going to impact the housing
00:43:36
Speaker
especially if you're in light of affordable housing development, you know, the administration can really change that. They have a lot of power. You have a housing shortage. And in that term, I believe that's a bipartisan, you know, topic. I'm not too worried about it, regardless who's in office. We're going to have advocates on both sides of the aisle, you know, on this topic in particular. But
00:44:07
Speaker
If you want to get a little bit more detailed look under the hood, when you talk about labor immigration laws is important, you know, and construction 50 to 60 percent of construction costs.
00:44:22
Speaker
are basically labor costs. So, you know, immigration is one leg when it comes to that. Those are politics, but in terms of housing, general housing in general, at this point right now, it is relatively bipartisan. If there's so much red tape to cut through in the Northeast,
00:44:44
Speaker
Why did you decide to start your business there as opposed to in the Southeast? Because I know you lived in Atlanta for a little while. That gets me wondering if there's a specific benefit or advantage to being in places that are kind of difficult to work in as a developer. And I don't know if that's giving away like the secrets of your niche. You know, this is not a real, you know, CNBC interview. So I'm trying to not be
00:45:15
Speaker
I'm trying to be honest. I'm trying to be honest here. It was partially because of my previous job happened to be here. Sure. And then you are in a market, your relationship and your understanding knowledge of the local market improves. Doesn't matter what people say, real estate is very local.
00:45:45
Speaker
there are a handful of companies like Blackestone, KKR or Tishman related of the word that can be everywhere but most of the market especially not institutional smaller shops are very local and they are very powerful like wherever you are you know on drift and the market
00:46:07
Speaker
you know, the right people, right connections. And also the local regulations, laws, rents, restrictions, this and that. And that differs from one state to another one. And I happened to be here for the past year and a half and I was on the ground and got to know the market very well.
00:46:31
Speaker
compared to other markets that I personally like to live in. If it was up to me, I wanted to be in Miami today. But I know I'm not competitive in that market. I know. I don't know anything about that market whatsoever. The other thing I like about New England, Eastern Massachusetts market is it is one of the tightest housing market in the US. It is a strong foundation.
00:46:58
Speaker
So the economy nor this is very strong. The foundation is very strong. A state has a very healthy balance sheet. That means your population might not go up much, but you're not going to lose population in general, in major metros and in this region. And there is a very tight housing supply.
00:47:25
Speaker
Then when you have that problem, that's opportunity for developers to build new products, to introduce, bring new products to the market. Comparing to some other markets, as we said, a little bit overbuilt marketing, some built that maybe there would not be as much development the next five years until they, you know, balance the new products to stabilize that.
00:47:50
Speaker
decide for the next few years I believe it would be as active as ever. Especially now there are a lot of affordable money affordable housing actors got passed 4.1 billion dollars getting injected in different programs across Massachusetts. We are talking about some serious tax money coming
00:48:14
Speaker
for affordable housing that enables many deals that were not penciling a few months ago. Now they come back to life. I personally work on one of them right now that all of a sudden, you know, I can't make the deal work. And for those reasons, first being on the ground here, which happened just
00:48:36
Speaker
not really intentional in my previous job was here. So I understand this. And secondly, it is a very good market for the next five years in my view in housing, combination of these two reasons keeps me here. But no other secrets now. Okay, that makes sense. But if I but if I have to start
00:49:05
Speaker
From the beginning, I would go to southern markets, southeast. Any of those big markets. On that note, do you think that any of kind of the bigger name states like Florida and Texas are overhyped, in your opinion? Or do you think they are? They are, but they are temporarily like that.
Financial Acumen in Real Estate
00:49:23
Speaker
OK. They're going to pass that stage. It's going to balance itself out. They have a in-migration, which is more than the rest of the US in that region.
00:49:35
Speaker
They're getting a lot of population moving there. And yes, they are a little bit overbuilt right now, but in a year or 12 months, 18 months. It'll settle. Maybe two, three years. I don't know the numbers, but it's a good time to, you know, in general, again, if I didn't have any tie to this market or, you know, relationship, if I had to start from scratch today, I would go to one of those markets. Gotcha.
00:50:03
Speaker
In the spirit of you reflecting about starting over, I'm really curious. This ties into something that you said a little bit earlier in the interview of like, perhaps not having had to get all of the master's degrees that you did. As a developer yourself and looking at your peers who are also developers,
00:50:23
Speaker
What areas of study and real world experience in real estate are actually like unnegotiable and having a good understanding of like, does one need to be an architect, a construction executive and a finance expert to be good at their job as a developer? Or like, if you could go back and prioritize some experiences, which ones would you to kind of get to the same point faster?
00:50:49
Speaker
I would say finance is the most important. You don't have to be a really savvy finance person too. But because at the end of the day, you can have sharp eyes on the designer construction. But if you don't understand how to put the deal together, how it's worth, what are the numbers, how you perform a worth projection, and how real they are, what is the economy out there,
00:51:17
Speaker
And unfortunately you come across large shops that do not have that very well settled. So I would say maybe understand the economy behind the deal, the economy behind the deal. It's in my view the most critical part. Like we are talking about housing, right? A few factors coming together, understanding how it works.
00:51:46
Speaker
and which markets I believe would be critical. No, you don't need to be an architect. You don't need to have experience. You don't need to have experience in construction or you don't need to have any of your own, really. You don't even have to be a banker or an investor. It's private. That could be anything. But you need to understand the economy of the deal or real estate in general. Right. A little bit of underwriting to be
00:52:16
Speaker
to be able to look at the performance and understand how it works. The better you are, the more independent you are, but at least you want to understand the economy of
00:52:33
Speaker
property or piece of land or whatever, you want to understand if you can build something there.
Gaining Experience Over Education
00:52:39
Speaker
You always find people to design it for you, people to build it for you, you know, that's your job to organize. Got it. Got it.
00:52:51
Speaker
So like, let's say a high schooler is listening to this. I'm kind of trying to take the perspective of a brother of mine or a friend and they hear your advice and they go, I'm going to graduate from college and I'm going to go straight into an MBA finance program. And then I'm going to become a developer like in real estate. Is that completely ridiculous sounding? Like are there experiences that maybe they should gain before going for the MBA that would make the program more fruitful for them? Don't need an MBA for this. You don't. Okay.
00:53:21
Speaker
Yeah. But the problem is even MBA programs don't teach you much. You might get a couple of realistic courses, and realistic is a huge industry. Sure. You might learn a little bit about different things. And when it comes to particular development, that might be one class material that you get across in the whole MBA. Sure. So it costs you $1 million to get your MBA and two, three years of your life.
00:53:54
Speaker
getting to industry now. If someone is about to go to college and really likes real estate, I would say from the beginning, you start to do whatever you can to let you do in real estate. It doesn't have to be development. This is the thing. I was talking to a gentleman a few nights ago. He was going to MBA at the University of Michigan, Ross.
00:54:21
Speaker
I told him about Steve Ross of Michigan and how the name is the real estate. However, I told him he was curious about real estate versus consulting or investment banking. I told him, you are about to graduate from your MBA degree. If you are not dead set on real estate for very solid reasons and you're just looking for a career to go,
00:54:48
Speaker
uh maybe go after investment bank or consulting because the recruiting would be easier. Sure. The pay probably compensation would be much better than real estate with your MBA degree and you get some very good corporate experience. What I'm trying to say here is in my view real estate is an industry especially development investment that you
00:55:16
Speaker
But you date investment banking and consulting, you know, but you end up marrying real estate at the end. It's a kind of industry end of it, you know, most of the people coming to it, you never see they leave, you know, and that's actually true. The turnover in the real estate, especially development shops are very
00:55:45
Speaker
The smaller shops, the turnover is very, very low. People don't move, you know? People go to that shop and stay for the rest of their life, literally. And so for a college student, I say do whatever they let you do. If it's from brokering, getting your, even getting your license, real estate license, that's simple. It's a low-hanging fruit. Do whatever you can.
00:56:12
Speaker
Working for a you know, whatever shop in your summertime or part-time do whatever you can in real estate to learn about it as You grow by the end of your college. You have a very good idea how it works If you can get one or two internship at one of these investment management shops like JLL The best one is black estate
00:56:36
Speaker
understand how difficult that is. But any of them, there are hundreds, thousands of them in the U.S. Just work with them to understand, learn on the writing, the diligence, putting a pitch book, looking at the evaluation, all of this stuff. At the same time, being out there, you know, working a little bit here, a little bit there,
00:56:59
Speaker
I told you the analogy of a roundtable. You can kind of learn a little bit about all of these people around the table in your college time. By the time you graduate, you are in a much better place and have a much better perspective vision about the industry than a person just getting a job.
Future Goals and Firm Establishment
00:57:20
Speaker
And let me tell you that if you can manage to do that, take advantage of your times, you would be better off than doing an MBA. This MBA is an amazing program, but not necessarily helping you with MBA, with real estate. It can, I'm not saying it doesn't, but it depends really. It's a huge investment and you don't have to do it.
00:57:47
Speaker
Right. It definitely sounds like you could seek out similar training in different, less expensive contexts. Yeah. Being a very, you know, having an agenda ahead of you. I want to be there in like four or five years and try keep your eyes open. Keep your ears open. You know, people talking, everybody needs some, you know, cheap labor across the board from brokerage arms, from development, construction companies.
00:58:12
Speaker
And you offer your services. I'm a college student. I work for minimum wage or whatever. And you get to work there for 100 hours. You get to really experience something in the house of one-sided decay. And if you have 10 of them, all of a sudden you are a guy, college graduate, who understands the industry better than many practitioners. Yeah.
00:58:38
Speaker
Yeah, you can learn a lot in 100 hours. This is so true. You don't have to be an expert. You just want to understand what they do. Really. Get a flavor for it. Exactly. Yeah. Ed, what are your goals for the next five to 10 years? Where do you want to take your company? You know, I really want to grow the company and have a few deals. My goal for the end of this year in 2024 is have two deals on the contract.
00:59:06
Speaker
by the end of 2024. Frankly, I want to grow this in the next five years. I want to be established housing development shop. I do not seek to be a big, big shop. That's not my style in trying to stay as lean as possible for as long as possible. But that's a good problem to have. If I ever get there, I'm not going to be ungrateful.
00:59:35
Speaker
to hire people, that means you have a lot of work. But I might be a stage that, you know, my goals are pretty clear at this point. Yeah. Well, I know we're really running up against time here, but your answer does make me curious. Why do you want to have a smaller shop? Is that just like a personality thing? Okay, gotcha. It's personality and flexibility. And I don't know if
01:00:08
Speaker
around next year, you know, it is real. When you have a startup, there is a good chance, you know, especially if you're in a very heavy capital, industrial real estate development. Right. But hey, I have a few deals and I'm hoping to get them to the finish line. But no, that's a personal preference. I just, you know, like flexibility.
01:00:36
Speaker
Yeah. Oh, I absolutely understand that. And I very much hope that your deals are successful. Thank you so much. And this has been so wonderful. Thank you for your time today. The advice has been great. So let me, usually my turnover is pretty quick for these episodes. I can probably get this finished, honestly.