86: Fearless With Doug Steiner

Foreign.

This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program, you'll learn about the world of commercial real estate and find out why it's one of the largest investment opportunities in New York and around the world. Now, here is your host, James Nelson.

Welcome to episode number 86 of Real Estate Investing Live from New York. This is your host, James Nelson. I am principal and head of Tri State Investment Sales at Avis and Young. Thank you, thank you. Thank you as always for tuning in and listening. And I so much appreciate your ratings, your comments and your subscribing as well, because that's how we spread the news on the show and certainly moving up the rankings. We're over 175,000 downloads, which is just amazing in a little over a year and a half. And it's just been so much fun. And we are providing incredible insight and information which will help you become the best possible investor. And that's what this show is all about. And if you did not hear my interview last week with Greta Guggenheim, please go back and give that a listen. She has such an inspiring story, which I know you will get a lot out of. Also, I just wanted to take a minute and some of you have asked me what are the other podcasts that I listen to, and I am happy to share. I mean, I'm a huge consumer of podcasts. Not always for business, certainly for fun. I've been a fan of Conan o' Brien's show as well as Smart List. But when it comes to real estate, I, I will say that some of the shows that I listen to regularly, Rod Santomssimo, the Massimo show, and Rod's been on my program twice. That's definitely worth a listen, as is Miriam Hall's Make Yourself at Home. CBRE does a nice podcast as well. The weekly take, you've got the Michael Bull Bull show. You've got my friend Larry Haber with his Real estate Realty check, which is worth a listen. And Ryan Serhant is out with his podcast Big Money Energy. So if you haven't given those a listen, I would definitely check them out. We can always be learning and there's just so much out there for you to take advantage of. So with that, I'd like to give you a preview. We're going to be bringing on Doug Steiner right after this break. I've known Doug for over 10 years. He is the chairman of Steiner Studios. And, and Doug has such an unbelievable story. He talks in this episode a lot about some sleepless nights, but he truly in my mind is fearless and amazing that he has taken on not only new business plans, asset classes, geographies, but he has no fear of taking these on and learning how to do it and not accepting the status quo of how things are traditionally done. Some of the things he said in this interview I've never heard before. So I think you're going to get so much out of this. So we're going to have a brief word from our sponsor and we'll be right back with that interview with Doug Steiner.

Thank you.

Hi, I'm Mark Rose, Global CEO of Avis and Young, the world's fastest growing real estate services firm and we are proud supporters of Voice America. With over 5,000 professionals in 120 offices in 20 countries, Avis and Young delivers local expertise in partnership with global reach. Because we are principally owned, Avis and Young prioritizes client success over shareholder profits through our open architecture. Our firm's experts provide value added client centric investment, sales, leasing, advisory management and financing services to clients across the office, retail, industrial, multifamily and hospitality sectors. Our culture is the bedrock for collaboration that enables each assignment to benefit from the collective intelligence garnered from a company wide database partnership performance. Learn how we deliver different@avisonyoung.com to learn.

More.

You are listening to Real Estate Investing live from New York. To find out more about James Nelson or avison young, visit avisonyoung.com now back to our show.

And now it's time for our Investor Spotlight. And I am absolutely thrilled today to have with us Doug Steiner who is Chairman of Steiner Studios. Steiner Studios is New York's only Hollywood style film and television production facility with over 780,000 square feet of sound stages in the transformed historic Brooklyn Navy Yard. His latest projects include Steiner Studios and Sunset park, which we're going to be talking about today, as well as his development at Admiral's Row. But Doug has an incredible track record having been in real estate development for over 35 years, including some of his developments, the Hub, a 55 story 750 rental unit building, and 333 Skimmerhorn street in Brooklyn, which was the tallest completed building in Brooklyn, at least for a little while longer. We're going to get into Steiner East Village as well as several other exciting projects that he has built throughout his career. His civic engagement is incredibly inspiring. His work for bam, the Brooklyn Academy of Music, Brick Arts and Media in Brooklyn and the Downtown Brooklyn Partnership just To name a few really shows his dedication and giving back to the community. So, Doug, great to see you as always. Thank you so much for joining us.

Thanks for such a warm introduction.

You're welcome. So, Doug, if I'm not mistaken, you grew up in Brooklyn, so you're a lifelong New Yorker. Maybe you could tell the audience a little bit about what it was like to grow up in Brooklyn.

My dirty little secret is that I was born and raised in New Jersey. Okay, there goes whatever Brooklyn cool I might have aspired to.

All right, well, at least give you credit for being in the metro area. So let's change that and ask what was it like growing up in Jersey? And with. Did you have a family that was in the real estate business or how did you find your way into this?

I worked with my dad from starting in high school, construction in the summers and joined him when I got out of school and. And really have worked with him ever since. He's 91, so he stepped down several years ago from day to day operations and we could both rely on each other for really anything. It was really nice to have that level of confidence in each other. He did buildings across the United States, 14 states. And I decided I'd like to concentrate more on New York. Made the leap over the river in 1999. And I think having grown up in New Jersey, the turnpike used to really stink. I really liked the Pulaski Skyway and the industrial landscape. And I think I really liked Navy Yard because it was such a bombed out mess in 1999. And it appealed to me because of the grittiness of it and the opportunity to have such a big footprint in, you know, such a dense city. Although Brooklyn certainly wasn't first choice then for very many people. And all I heard for the five and a half years while we were developing the first building at the studio was no one will ever go to Brooklyn, Thank God. That stood on its head.

So you did get experience or exposure to real estate at an early age. But I also see that you were an English major at Stanford. So I. I'm assuming. And not only that, but you were the editor in chief of the Stanford. Was that magazine. Yes.

It's like the Harvard Lampoon, but funnier.

Got it. Did you think at some point that you were going to go into, you know, comedy or was there maybe you'd end up being a screenwriter? What was.

I always wanted to be a novelist. And then I finally decided, I finally figured out that I love reading, but writing is torture, and started working and haven't looked back since. So my degree is in creative writing, but it's useful for writing letters and reading contracts. But otherwise I think communication is really important and underrated for for all walks of life.

I would certainly agree with that. So you're speaking to another English major here and I certainly use those skills every day, but yeah, not sure if it would have paid the bills on its own. So what was your so graduating Stanford. What was your first job out of school then?

I've worked for my dad. I went to Paris. I lived in Paris for about six months hoping to write the great American novel. And I did a lot of reading and wrote a lot of letters. And that's when I figured out writing is torture and came back and started work the next day and have worked ever since. So I've worked with my dad. We did office buildings and industrial buildings, warehouses in New Jersey spec and built to suits for lease in multiple industrial parks and corporate parks, Fortune 500 companies. And from there I got us into retail, did the second Home Depot in the Northeast and a few more Home Depots, a few Wegmans power centers when those were a new thing. Manalap in New Jersey, Bridgewater, New Jersey and then crossed the river and started with a condo project. I'd never built residential before and I started with two phase project in Williamsburg, 58 and 80 metropolitan luxury condos. Bought a great site at the peak of the market and delivered at the bottom. So that was a good education. Had some cost overruns and sort of the price of my education or the learning curve. And while I was doing that, we did our first studio building. We opened in 04 with the studio and we've been expanding ever since. So right now, besides the project in Sunset park which is in the construction document phase, we are starting in the next six months or so another 120,000ft gut reno in the Navy Yard for the studio expansion. And Sunset park will be 650 700,000ft spread among five buildings, two gut renovations, historic renovations and two new and a parking structure. And that's a 16 acre site backing up to Bush Terminal, Pierce park between Industry City and nyu Langone Hospital, formerly Lutheran. And because of the size of that project and the constant expansion of the studios, I think we bandwidth wise. I don't really want to undertake any more projects right now. I'd like to not be totally swamped. It's a bit off enough to chew for right now.

Wow, amazing. And I was so excited to do this interview because I know over your career You've done so many different types of projects, so would like to kind of go back and look at each phase. So I mean, I guess first of all, you know, starting out working in the family business, so to say, you know, what were kind of some of your early tasks and maybe for some of our listeners who are, you know, either working with the family business or thinking about it, you know, what was that dynamic like, you know, any pros and cons or, you know, stories you.

Could share there generally. My dad and I have always been super close and I have three sisters, none of whom are in the business, one of whom works and I'm very close to her. She's a doctor out in the West Coast. But my dad and I have always been close and I cut my teeth on his biggest deal to date at that time, which was a build to super lease for AT&T. AT&T was getting split up for the first time. Formerly had been the Bell system regulated industry and deregulation. They broke it up by federal court order. It had to be split up between Western Electric for the phone equipment, Bell Labs for the research, and I think it was AT&T for phone service. And then they were split up again subsequent to that. But we had a date to make. I started in 83 and we got at the time and maybe still the largest build to suit for lease office laboratory building ever. And that was self advertising with a term release. 700 840,000 square feet on 236 acres in Middletown, New Jersey. And we signed it in 83 and delivered the first 250,000ft in 85. So it was as big a deal as I could start on. And going to planning board meetings was such a difficult process. I figured if I didn't get ulcers, then I'd never get ulcers. The entitlement process in New Jersey is horrific. And part of why I wanted to come to New York when I learned more about New York. But we do, we did our own construction, we functioned as our own CM and we do our own property management, we did our own leasing. So I got exposed to everything from there. We were doing projects for Digital Equipment, Mutual Benefit Life insurance, computer center, 50,000 foot computer center, AT&T, bunch of builder suits for them. I converted a data center of 120,000ft into a multi tenant class A office building and pharmacy end up taking the whole thing as their world headquarters. So that was very satisfying. Basically if we built a single tenant build to suit, it had to be divided into multi tenant when they were out. And if we had a multi tenant building, it tends to go single tenant. Whatever we do would be backwards and have to be prepared to adjust.

You know, we haven't talked about built to suit on this show, but it's an interesting dynamic because some of the developers that we've had on the show before, they, they build spec, right? And you know, but, but when you're building to suit, I'm sure, you know, you've got a tenant on the other line who has their vision of what do they want to see done. And you know, you've got to manage costs and timelines. So I'm sure there was some lessons learned about how to, you know, work with the tenant. And I'm sure you had a lot of challenges that came up along the way. So I mean, if there was ever, you know, disagreements or cost overruns or whatever the challenges might have been, how did you. Do you have any methods on how to navigate your way through those?

Well, on that large project, the 840,000 square foot, you know, the change orders were, it's a constant stream. And just tracking them and making sure we were paid for any material changes was a job in and of itself. At the time, the new entity was American Bell Inc. Lenders didn't know anything about American Bell, so that was a challenge. It hadn't really been formed yet. We weren't very smart about getting financing in those days and our lenders were based in New Jersey. And looking back, I realized we were a lot more attractive as a borrower than we ever realized at that time. So that was kind of, kind of harrowing from time to time. And then depending on how sophisticated the tenant is and who's running the project on their end, determines sort of the stress and the aggravation that goes along with a given project. If it's somebody who's thrown to it, who's not used to running building projects, it's an education for them what has to be done and the changes they face and the political stuff internally they face, it's. It's a really godforsaken job to have.

So I mean, that's just such tremendous experience to kind of jump into the business with both feet. So I guess once you had figured that out and obviously demonstrated to your father that you could execute and get things done, what was that like? I guess when you had this idea to go start investing in retail shopping centers, you mentioned you did the second Home Depot ever. What was that conversation like with your father? Was he fully on board to expand and try different things.

I never had to consult with him about anything. He's always let me do whatever I want and had full confidence in me as I had in whatever he was working on. The division of responsibilities pretty much came down to in a matter of only a few years that he oversaw construction and he had a, you know, he last deals he did were probably 20, 25 years ago. And I did everything else. Buck construction. And then I, as he stepped down, I stepped further away from construction. I did everything. I started to use outside architects, which we had never done. We used to do everything in house. I didn't like that. I thought it was not a good way to stay current and a big staff and just more pain than helpful. And I used outside architects and I started to use outside cms, which was a big leap for us. But my ambition, you know, was larger than our bandwidth to do that stuff. And we don't keep a huge staff of field personnel on the construction side. So finding the right CMS for a given project was a new process for us. And we basically act as our own owner's rep, but also sort of as a second CM and buy out the trades ourselves still and act as, you know, one half of the CM but for the field personnel. So that's worked out well. Outside architects have worked out well and building in New York feels like the major leagues compared to other places. Although New Jersey is certainly not an easy place to develop. And I think a lot of developers in New York now that came from Jersey have proven their worth and been very successful as well. So I think it's not easy anywhere. But New Jersey is certainly one of the tougher states.

Yeah. I'm certainly going to ask you about how you were able to conquer New Jersey, the learning curve, because, I mean, you've tried different asset classes. Not just tried, you've been very successful at different asset classes, but geographies. So, you know, talk about what that was like to break into the New York market. So I mean, did you maybe talk about your first deal that you did in Brooklyn and did you already have contacts and how were you able to be competitive as the outsider, I would say, you know, even today, you know, the investors who have done repeat business in New York always seem to have the advantage because they have the inside track and the connections. So how are you able to level the playing field?

Well, this business is not like you're going to produce 100,000 widgets or 110,000 widgets. It becomes, you know, success or failure at A million milestones along the way. The first residential project we did which was 80 metropolitan, 123 units. It was the first time I did joint venture. My dad had done a series of joint ventures with State Farm Life Insurance which at the time and maybe still is like the second largest financial institution in the country but because it's mutual people don't really know about it. And that was the old style of joint venture where they put up all the money and we had sole control and got half the deal. And anything short of that seemed to me very very wrong. But when I did the deal in Williamsburg at AD Mitch Walton we did it with JP Morgan and I was very. I had a great deal of trepidation going in and I thought they'd be very difficult to deal with and sort of a weight on us. And instead it was a really good relationship. It turned into a phase two which was another 50 units to total 173. On the second phase I had cost overruns. I was responsible for the cost overruns. At the end of the job I wrote them a check for a million dollars. I didn't try to negotiate it. My feeling is a deal's a deal and partners are partners. And I think that was an unusual experience for them and has been helpful in our further dealings. But the idea of a waterfall pref. All of that was. Was really new to me. Preferred equity was new to me which we used AT hub. The 750 unit high rise. I'd never built a high rise before. I never built a rental building before. And we built it, it's 55 stories. We built it non union. I don't believe we used an outside CM because I hadn't built high rise. I don't believe in a GMP because I think the cushion that the CM gives himself really you never get to see that you're still going to get hit with all the same change orders but you have to convince the lenders that you know what you're talking about, you won't be hurt and that extra money is better budgeted in contingency than a GMP. That really is illusory. I also don't like, I don't like the bond stuff. I think bonds are a pain, very hard to realize if you do have a problem. Same with Sub Guard insurance. So I question everything. And just because people are used to doing things a certain way, if it doesn't make sense to me, I try to get other people to see it my way. And it worked out pretty well. We came in I think, $30 million under budget. I try to be real realistic in my budgeting and projections. And unfortunately, I think lenders by definition will discount the projections and think we're. We're under projecting costs and over projecting income. And I try to be really realistic and mostly on the conservative side. So at the end of the job, I don't want any surprises, and if there are surprises, should be all positive. So that worked out really well. I think the Hub is the best residential building in downtown Brooklyn. We have a great amenities package. I'm obsessive about the design, about the marketing, and I look at it as hospitality. Residential real estate and rental is really hospitality, and it's a social life. And it has to have the right flow and the right juju. And I don't know how to explain it better than that, but it's not what amenities you have, but where they are, how they work with each other, how they promote interactions among residents and make it a place people want to hang out in rather than just check the box that it's there in the building before they move in. And even we set up our leasing office facing the pool and the deck. And it's like a. It's like a resort in the middle of Brooklyn. And you don't know you're a block from Flatbush because of the way the buildings next to us lay. Schermerhorn's an extra wide street. There's a park across the street. My inspiration for the deck, which is about our site's about 50,000 square feet. My inspiration for this podium with all of our common spaces in one level. At that podium level, I wanted people to be hanging out at the parapet, looking down and landscaping cascading over. And anyone walking by should say should be. I want to be there. I want some of that. And even looking into the lobby and through the lobby to Nevins, it's like another street in the neighborhood. It's not a fortress. It's not mysterious. It's just part of the urban fabric. And I think we succeeded there design wise. I don't want to do anything trendy. I want something that really will stand the test of time and not too far out there or not too current. And I think we succeed on that front too. We use an architect that we've worked with a lot, Datner, Richard Dattner and Associates. And it's been a great collaboration.

Doug, I'm just completely blown away here. I mean, I've known you. I mean, I don't know if it's 10 years, 20 years. And half, you know, half of what you just said, I had no idea. And I don't know if our listeners realize, you know, I'm getting high blood pressure, you know, my heart rate's going up, just kind of listening to this. But I mean, it is unbelievable. I mean, I think a lot of people would look at what you've done and you know, it would be very focused on the risk. Right. And what if there's cost overruns and you know, what do you mean? How can you get this done without bonding? And how can you take on and gc a project, you know, a high rise when you've never done this before? I mean, was there ever any doubt in your mind or fear that you wouldn't be able to pull this off? And I mean, certainly if this was your first time tackling something like this, there had to be mistakes along the way. I'm still trying to understand how you were able to pull these massive first time projects off the way.

We bought the site at Hub. We sold that big 8 billion. The built a suit lease in Middletown was a 15 year self amortizing deal. Then they renewed cast a new deal for another 15 years and it expired I think in 2012. I was hoping they would buy it pursuant to an option of purchase because I really thought it was a bit of a white elephant. We got it back. Suburban office, ginormous, isolated Monmouth county, single user. They bought it and then we did a 1031. I did a series of 1031 exchanges. Far more complicated than I ever realized in terms of needing sureness of execution, not going over. If you blow one part of it, you've blown the whole thing. And there was a big tax deferral involved. So I was very stressed out through that. But in that process, the market was still pretty much in the toilet. When we bought the cipher hub at 60% bucks to build a wolf foot, which was great. I think generally in real estate it's a race against the clock. Who knows where the market is when you're done? So we just started building right away without getting a construction loan in place. And I did get stressed out as we had more and more money in the ground and not closed on our financing. And I'm not sure if I did the right thing or continue to do that the right way because I'm not sure if lenders take advantage of that as I get closer to really needing to pull more money. But it certainly gets us finished sooner and hopefully the market is good. But if you pick the right location. You build a timeless project, hopefully in terms of design and style and you pay attention to the design and not defer to your architects or your engineers. You do the best you can and hopefully the market's okay. And that's what we did. But I stressed out like crazy during this tax free exchanges and I stressed out like crazy getting the construction financing. The construction itself was not too bad. We had a good CM and we had a big site. So for an urban site that 50,000ft when our footprint was roughly 20 and smaller as the tower goes up. But there was a lot of room to work. So that made it a little easier and it was an education. It's different building vertical like that.

But you've always seemed very calm, cool and collected to me. So you do a good job hiding it. So I gotta ask, how do you think about what the next best thing is? I mean, are you, how do you get your ideas? I mean, let's talk about Admiral's Row because here you brought Wegmans where some people in New York, I mean I'm sure if they haven't visited already they should. But you know, I went to school in Colgate and upstate New York. And you know, you see these and these are like institutions, I mean they're, you know, they got these huge followings. But I'm sure that took a little bit of convincing on, you know, how to get them into New York and make it work. So how did you even come up with that idea? I mean did you first vision Admiral's Row and kind of think about what that was? Or was it about, you know, finding a place for Wegmans? How did that all happen?

Well, it's interesting attorney, you know, Tish James, now the Attorney General was a council member from that area, Fort Greene. And she had always wanted a supermarket, a real supermarket in what was a food desert. And the Navy Yard had wanted to create a supermarket there for 15 years and went through a year process to rezone it, an RFP process. And they went through the RFP process and we did not bid. I didn't like it. I didn't understand New York enough and I didn't have Wegmans in tow. It was awarded someone else. And that other developer then tried to substitute a wholesale club for the supermarket which was not acceptable to the Navy Yard or anybody else. And they elected side and then they went out for with an RFP again at which time I called my contacts at Wegmans because I have these other deals with them and a great Relationship with them because they're very relationship oriented, family business, do what they say. Just fantastic company in so many ways. And we got Danny Wegman down and toured around bro and showed them the site and showed them the competition and showed them some of the things we've done here and they were on board. So I think the Navy Yard was elated and couldn't say no. And it was. The best thing that could happen to the site is to bring Wagners. They were considered one of the best employers in America of any kind. Their service is great, their quality is great and their prices are great. Mainly as being a great employer and hiring from the neighborhood as part of my lease requirements. They just perform above and beyond. And I get, I get teary eyed almost walking around the store feeling. I don't usually feel very proud of stuff that's an inner issue. But I really feel proud of Wegmans and feel good about all the people that got jobs there and that now have place to shop with healthy stuff, good prices. And between the people working there and the customers, it is the personification of Brooklyn. Just totally diverse, all socioeconomic levels, ages, everything. And it's a really nice place to shop because of that mix and experience.

It's so incredible to hear and you should be proud and I mean, wow. I'm sure that was quite the process figuring out how to regroup and go after that RFP and work in partnership with the city and again to really introduce the opportunity to this great relationship. It's been wonderful to see how impactful that's been for the community. I guess after that. Did you always have your eyes on the television film business? I mean, did you ever think at one point that you'd be involved in studio space? How did that all come about?

I had no idea I'd end up in it. Somebody I tangentially knew called me and said, the city or the Navy Yard? The Navy Yard is looking for a white knight. Some local guys weren't able to put it together. They had an agreement to enter to a lease with the Navy Yard but they couldn't satisfy the conditions to get the lease. And for inexperienced, they weren't developers. There were just some tenants in the yard. And the city wanted to put in Robert De Niro, Harvey Weinstein and Vornado. And I think Vornado is about as smart as they come. Steve Roth and I figured it's a no brainer. It was pitched to me as a no brainer. Huge margins. City welcomed us with open arms and I figured we could Build for a lot less than Vornado could because they're not really builders, they were more investors. And I think we build pretty efficiently. So I figured I'd have no money in. And so I stepped into the shoes of these guys. And no sooner did I do that than Giuliani had a press conference announcing the deal was being done by De Niro, Weinstein and Brunado. So then I had to square off with Giuliani, which I don't mind litigation as a last resort if I feel I've been wronged. But squaring off with Giuliani gave me pause and I was able to work it out on an amicable basis, which was ideal. But then I found as I started to build it, I had various milestones to meet in terms of plans, work, investment. And I got more and more into it and as I was really well into it, couldn't get financing. At the same time as this project. I was going through a real ugly divorce also. Five and a half years. And I say the project wouldn't have been built if I hadn't been gone through the divorce because I would have pulled out sooner because I didn't know what the hell I was doing. And I thought I was going to go broke. I aged about 10, 15 years on it. Really difficult. I'd never faced failure before and I thought it'd be very public embarrassing, colossal failure, blunder. So I moved to Brooklyn and started working in. By year three we were in break even and year four we were in the black. It's a very difficult business. I know it's like the flavor of the month now. Everyone thinks it's a no brainer, but there are a lot of reasons why it's crazy for anyone to do and they shouldn't do it. But I think I learned more by my brush with failure than I did for my successes before that and pulled it out. So we been expanding ever since and I think we've been able to build something that never existed in New York before. And what's nice about the film and TV business is it's a handshake business. You have to perform. You can't gouge anyone. It's a small community of producers and you have to treat everyone fairly. And if you say you're going to do something, you better do it because they have a lot of money by the minute when they're rolling. And I like that. And also the contract part of it, the legal part of it is not the six month negotiation of a 200 page lease like most large real estate transactions. So it doesn't get bogged down in that stuff. And it's an operating business, which I'd never run before. Managing real estate is not the same as a real operating business. It's like a boutique hotel for a particular industry that's very demanding and ever changing in their needs and it's very satisfying to be able to accommodate them and be well received by your clients. So I like it.

I can't thank you enough and really appreciate the honesty, as I'm sure our listeners would agree about kind of being on the brink there. And I think oftentimes tendency to look at these big New York City developers and it just seems like, you know, success follows them everywhere. But, you know, to kind of put it on the line and to persevere is just incredibly inspiring. So I just, you know, here again, you know, accelerating this learning curve. I mean, I gotta imagine that building a sound studio, a production studio, rather is a lot more complex than just, you know, throwing up an industrial shed. I mean, did you have to. To figure out how to actually do the production aspect? I mean, did they bring the equipment or how much of that infrastructure were you responsible for?

We had to figure out how to design something for the east Coast. Climate in New York that didn't exist on the west coast would be. There's outdoors for moving between different types of spaces. So we went out to California and looked at everything that was there and then we pretty much designed it from the inside out and learned a lot about acoustics. My dad was, you know, builder without peers. So structurally and engineering wise, you know, it was no problem for him. I'm more of the aesthetics person, style. But it was something new and we, I like to think we've gotten better with each building we do and we're constantly improving what we have already built. I'm not afraid to make alterations and regroup, but it's a challenge. I like doing stuff I haven't done before. So I've done industrial, I've done office, I've done retail, and now I've done special purpose. I did a high rise, I've done condo. I like the mental challenge and I like the collaboration that goes into it with everyone on the team sort of being involved at every step so that everyone understands it better. It's more satisfying a job for them and they understand the context of any particular task they have. And people have good ideas. You know, I have veto power, but it doesn't mean people can't, can't suggest things and sometimes they're right and it's a great addition. But it gives everybody a feeling of ownership of the project. And I think our team has a great deal of passion for what they do.

So, Doug, how do you factor in or deal with kind of external factors, risk? Because it's one thing if you say, okay, I'm going to take on this development project and I'm going to build this, and this is the first time that I'm taking on something of this scale and I'm going to figure out.

How to build it.

But more or less, and one of the beauties of New York is oftentimes you're building as of right. With something like this, where it's not just a real estate business, it's an operating business. And a lot of this you're kind of victim to incentives. And you hear that Georgia is making a big push to offer these studios with great incentives. You hear about a lot of these shoots going over across borders up in Canada. I mean, how do you, you know, how do you factor that in? How do you weigh that when making a decision that you want to pursue this when the success of the business does rely on, you know, things that are going on up in Albany?

I don't sleep well. I'm really a nervous wreck regardless of my exterior. And what the development world doesn't understand when they think this is an easy, no brainer business, unlike any other use in real estate, I say in residential real estate, New York, the great thing about it is there's essentially infinite demand. It's only a question of price. That's not necessarily true of suburban office. Industrial at any given time, retail certainly, but residential at least, you can clear at a certain price. With the studio business, there are a few throttles on it and it's unlike anything developers are used to. Number one, all the theatrical unions right now in New York are at full employment and the business is a union business. So there isn't additional crew to fill more stages, L.A. studios. The big guys will say, build them, build them, build them, be there. They have no downside saying that they do that as a matter of course everywhere around the world and try to get tax credits everywhere around the world because it lowers their cost of production. But the truth of the matter is you need crew availability, you need production tax credits that we get from Albany, where the business will, I wouldn't say dry up. It'll just flee immediately as it did when it lapsed for a short while years ago. We helped to create the tax credit and it was signed into our ribbon cutting and thank God we did it, which is part of my solution to my crisis. Also, there are only about a dozen customers ultimately for our product and those are the major LA studios. It all goes back to a dozen groups again. So you have to treat everyone fairly. And the buildings are very special purpose and it's a real operating business. So you have tax credits, you have union availability and crew availability, you have lack of an infinite number of customers or a broad array of customers and special purpose, very special purpose buildings. And the way we manage it, it's like an LA lot. We don't just give you the keys and say let us know when you're done shooting. We manage it like an LA lot. It's full service and I have a huge payroll, so it's different.

Super.

Interesting.

Well, I'd also love to hear about the organization that you've built up. What was that like over the years? I mean, when you started with your father, I mean, how many people within the organization, what does it look like today and how did you go about building that team?

If anyone asked my father how many people work in his office, he would say about half. We started when I started there were probably about 10, 15 people altogether with field staff, probably about 15 construction supers and whatnot. Now we have, we don't necessarily do our own CM work on everything. We'll be like our own owners rep for second CM. But our total count field office, NJ office, we still have and in Brooklyn about 90 people. And a few years ago I think I heard Jonathan Gray, speaker, somebody from Blackstone talking about buying property and how he wanted to pay as much as he could in order to get it. My kids are old enough to be in the workforce now and my attitude has evolved to trying to pay people as much as I can can and certainly pay them their worth and not try to pay them as little as I can get away with, treat them the way I want my kids to be treated or the way I would want to be treated. And I hate dealing with that, you know, compensation, stuff like that. But it makes it a lot easier. Being fully transparent and open and trying to do the right thing by them has been a real plus, I think in terms of keeping everybody happy. And we have people working with us through whole careers.

Amazing. So would you consider yourself leading by example? Are you getting very active in the day to day operations? I know you mentioned that you really like the aesthetics. So do you jump into the details as well? Like what's your typical day and how you drive the ship, so to speak.

I'm unfortunately a total control freak. I really believe a development needs one person synthesizing everything has to be one overarching designer. I also read pretty much every word of every document I ever sign and each draft and each change. Not trained as lawyer, but I've read enough stuff that I'm on the lookout. Notwithstanding how aggressive I may be, I'm very, very conservative in terms of. I just worry about downside. I'm not so concerned with upside, I'm really worried about downside and I'm always worried about the present conditions are not going to last. Everything is cyclical and people don't know inflation will come back and vacancies are not looking. By the time you're done with a project of a five or seven year gestation, it's going to be a very different looking market. So just have to worry about the downside in terms of capital, in terms of demand, in terms of construction costs, etc. So I'm a control freak. I bottleneck on the documents involved with everything. And I'm trying to not be such a perfectionist because I feel a little overwhelmed. But I think the product ends up being a great product.

So if you were to pick a couple words to kind of embody the keys to success for what you've done, what would those be?

I think tenacity is probably the most important thing. And you know, being good to your word, honest and good to your word and sticking to something and if you believe in something, don't let the naysayers affect your confidence. I definitely have the strength of my own convictions and I'll plow full speed ahead. Like I said, not waiting for a loan or anything because if it makes sense, just like if a, if there's a tenant out there that makes sense for a given space, I get real excited because it's a good fit. I don't get all excited if it's not a great fit because it might not happen or it's not meant to happen. But if it's a good fit, you know, I'm all in. So I draw, you know, ambition, tenacity and honesty and fairness.

Amazing. Now tenacity is something my grandfather always spoke about and certainly instilled in me. So I could not agree with you more. Is that stick to itiveness and how important that is for success. So I mean, Doug, what do you think about for the future? I mean, obviously getting through this pandemic, world's been turned on its head I mean, you've always had this knack for finding kind of the next best thing. I mean, you've kind of done it all in New York and even outside. I mean, what's next?

We don't have a discipline or a structure where we have people looking for acquisitions or new deals at all times. When we think we're going to be done with some stuff, we start looking and something turns up. And I'm not afraid to sit on my hands if I think the numbers don't make sense or something. You know, if there's nothing available that makes sense, then I'm not going to do it to keep a machine going. We'll find others. You know, we have enough of a base to keep busy with that and the studio expansion. But it's an unstructured thing and serendipity, we've always found something to do. It's not a logical answer, but you know.

No, no, you kind of, you know when you see it. But, but I also have to say I admire your discipline because there's been several opportunities that I presented to you in the past. You said, james, you know, this looks amazing. I just, my plate's too full, you know, and I think, you know, the fact that, you know, you're able to know kind of when to, you know, when you're ready to move on to the next one, I mean, that certainly takes discipline. So look, this has been such an incredible discussion. I know our listeners will get a huge amount out of this. My final question would be what advice would you give to the aspiring investor, someone who's looking to get into the game? Where would you suggest they start out?

I'm not sure I'm quite qualified to answer that because I only do projects where we create value and we don't buy existing product very well or often it was just from a tax free exchange. I bought like two existing product projects. I think people have to stay within what they know and start small and learn from that. I didn't really know how to deal with, with a closing until I bought my first apartment and realized I'd have insurance and a check, you know, I think, entitled insurance. Just be careful the downside and don't listen to anybody else, you know, do your own homework and rely on no one who's supposed to know more than you. Because you know, many times they're wrong whether they have a separate agenda, a different agenda or not. It doesn't mean that they have a separate agenda, but they still might not be right. So if you can't understand it and be satisfied, then don't do it.

That makes a ton of sense. So I will ask one quick follow up question, you know, and hopefully, you know, 100 people are not going to call you after I ask this question. But you know, for those college students or maybe it's someone in a master's program, if they were applying to work for your organization, I mean, what, what, you know, what are the skills? What are the things that pop out on a resume or this, you know, the traits that you're looking for when hiring? Maybe that would be, you know, helpful to the audience.

I think humility, ambition and organization. I think there's a lot of blocking and tackling that people overlook. Just my office is a sea of paper. I have a certain system for putting a footer on documents and that way I know which document came before which. And people think I'm, you know, incredibly anal and crazy. But you know, given the number of papers I deal with, it works how I organize by trade or by contract and set up my files for development. If you can't organize it that way, you can't really run a job. A job has to be organized and thought out from the beginning. It's all in the prep. So you have to be patient and ambitious and smart. But more importantly, I think the chemistry has to be right. Because if the chemistry is wrong, it doesn't matter how smart they are. They have to fit in the group and it has to be a pleasant place people like to go to every day and don't dread.

Incredible advice. Well, Doug, thank you so much for joining us today. This has been unbelievable, so just really appreciate your taking the time.

Thanks so much for having me.

Wonderful. Well, thanks again, everyone. This is James Nelson, your host of Real Estate Investing Live from New York. If you like this episode, please subscribe. Tell your friends, don't forget to leave your ratings and comments. And if you haven't already, please connect with me at James Nelson NYC, either on Instagram, Twitter or LinkedIn. I really appreciate hearing from you until next week. Thank you.

Thank you for tuning in this week to Real Estate Investing live from New York. Please join your host, James Nelson for another program next Tuesday at 7pm in New York, 4pm Pacific Time on the Voice America Business Channel. All shows are rebroadcast on Wednesday mornings at 7:00am Eastern Time and 4:00am Pacific Time, as well as always on demand. We'll talk again next week.

Sa.