Human-Centered Development with Joshua Benaim

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Welcome to episode number 243 of The Insider's Edge to Real Estate Investing. This is your co-host James Nelson, and this is Kim Trohler, also your co-host. And today we have with us Joshua Benayim, who is founder and CEO of Aria Development Group. Josh founded an award-winning real estate company focused on the next generation of real estate development. He founded Aria in 2009 with his partners David Arditi and Timothy Gordon to create outsized returns. And with Josh at the At the helm, Aria's development portfolio has grown to more than 4,000 units, $1.5 billion of institutional investment across the US, including value-add, special situations, and opportunistic investments.

Josh's broad portfolio spans New York, DC, Miami, Charlotte, Nashville, and Kansas City. And whether it's ground-up development or adaptive reuse, Josh talks about how to breathe new life into buildings and how to really deliver product that fits with the, the wants and needs of the tenants in the community.

And Kim, what I really love about Josh's story, and you'll sense this throughout the whole interview, is his passion and his enthusiasm for this. I mean, he's taken some very complicated projects and he kind of approaches each one with intellectual curiosity. And so that, that's been wonderful to hear. He also went as far as to write a book, uh, Real Estate: A Love Story, uh, and this came in, in 2021. But before that, he had also worked at the Harvard Business School to help co-write an online real estate course. He's also someone who has a history of giving back. So with that, we're going to have a brief word from our sponsor, and we'll get right into our interview with Josh Benayim.

Avis and Young's United States investment sales platform executes on multifamily, office, retail, development, and specialty asset transactions across top U.S. markets. As experienced leaders in the industry, our integrated national team is here to help you make informed investment decisions. Whether advising on your current holdings or identifying new opportunities nationwide. Our one unified platform is built on unparalleled collaboration and connectivity across 120 full-service offices around the world, giving clients direct access to the deepest pools of capital. We put our clients first, delivering tailor-made strategies to achieve superior results.

Welcome everyone. We are here today with Joshua Benaim, who is founder and CEO of Aria Development Group and also author of Real Estate: A Love Story, Wisdom, Honor, and Beauty in the Toughest Business in the World. Josh, welcome. Thank you so much for joining us today.

Thank you for having me.

So I'd like to start off with, this is kind of towards the end of your bio, but this is definitely a first for the Insider's Edge. Not only are you an opera singer, but you've also appeared at the Metropolitan Opera. I mean, this is like, you know, the real deal. So how did that happen? And I think also I read somewhere that that gave you courage to start your investing. So maybe—

Yes. Well, it doesn't get more exposed and vulnerable than being on stage in front of thousands of people with the lights dim and an orchestra playing, and then you have to deliver something that's powerful and meaningful.

Mm-hmm.

And you have only a moment to make that impression, to, to move people's hearts and minds and very quickly. And with the power of opera, you can do that. Throughout my whole career, I've tried to find that same that same inspiration, that same power in the real estate space, which has been, you know, one of the animating parts of my whole career— how to bring beauty and meaning to apartments that people live in. And you have to do it for a good price because otherwise you can get in big trouble. So it changes the— it changes the dynamic. But I think I've always been sort of a cautious investor and, and thoughtful about it, something that came from deep in my family story. But opera gave me, I guess, a brush with stepping up and getting in the game. And that helped me really when I started investing with Aria to have the confidence to get in the game.

I was just amazed. So you went to Harvard, you have an MBA from HBS. So at some point, I don't know if you received classical training or what, because I doubt you just show up to the Met and decide to sing one day.

It's an enormous amount of training. I actually, I had a crazy experience as a teenager growing up in New York City. I shared a taxi. We were waiting for the bus in the rain, the M10 bus, to get home from school. And I shared a taxi with somebody and it turned out she was going to a music lesson. And she said, well, you like music? You know, do you like classical music? I was like, yeah, it sounds pretty good. I did Joy to the World and you know, in the chorus of our school. And then she said, well, why don't you come up and listen? Maybe this was meant to be. Maybe this taxi ride was kismet. And lo and behold, I went up there to some stranger's apartment in New York, because of course that's what you do. Just go up to somebody's apartment randomly in the city that you don't know. And it was fantastic. And I entered a whole different world that opened up my eyes to to opera and that tradition of, of bel canto, beautiful singing. And, and it's been a passion ever since.

Amazing.

Wow. So you grew up in a family real estate business. Kind of walk us through the, the path from Manicherian Brothers to Aria Development Group. I know you said your, your grandfather was one of the founding brothers of, of Manicherian Brothers. Um, so before we dive into your investment strategy, it would be great to hear about the formation of your actual company and your family roots.

Well, that, it had a huge impact on me in my life. My grandfather and my uncles have been, you know, unbelievably were, I mean, and, and are in, in the case of my uncles, incredibly supportive and, and just great, great influences in my life. I think my grandfather passed away in 1999, one of the most remarkable people that I know. And he came here in 1941 on a boat and it took him 113 days to, to get here.

Wow.

And he always used to tell me that he was on the boat across the Pacific with a lot of American sailors, and everyone was getting Cokes and having a good time, and he was saving his dime. He wouldn't buy the Coke because he was saving it to telegram his mother that he was alive on this journey. And he became a brilliant investor, but started out with antiques, importing antiques. And actually, I really got into real estate, the values of real estate, And the, the wisdom of, of those characters really has influenced me a lot. But I, I kind of got into real estate independently. I started working on Wall Street and then, and then took various jobs and, and, you know, private equity development. And I always came back to family, I think because it, it was something special and meaningful in my life, but it was also important to me to sort of prove myself that I could really do it independently. And, and also, you know, was always advised, make, make your own life. And, and, and, you know, this, this is something that— I mean, I, I was pretty much also convinced that we were sort of starving refugees throughout my childhood, which, because of the history— my dad came from Tangiers in, you know, after 1967 and came to New York, met my mom, and he's been at the same company for, I think, 60, almost 60 years. And so the culture, I think I got great values and, and investing wisdom, but it wasn't so much like, oh yes, you should be doing real estate. It was do something what, what you're passionate about, do what you really can, can do well. And, and, and then it happens that, that working really hard, being smart and cautious, thinking ahead, and, and creativity and creating value happened to also work in my own real estate life.

So, did you ever think about going into the family business? Because I see, I mean, you had a pretty serious job before you founded Aria. You were a managing principal at Square Mile, and then you start Aria in 2009 in the depths of the financial crisis. So, at some point, were you thinking, you know, maybe I'll just go work with the family? They've got a, you know, pretty nice portfolio. As opposed to really starting off, uh, your own development and investment platform?

Never really thought of it in that way. I think maybe I, I don't know if it's a chip on my shoulder. I always felt like I had to outperform and be, you know, excel in my own right, in a sense. Although I got incredible mentorship and support in starting Arya from my, my uncles in the business, which was indispensable. I mean, really fantastic. So I'm super grateful for those, for those, and they still remain amazing figures in my life. And but I always felt like, I guess I had my own vision of what real estate could be like. And it was inspired a lot by my uncles and grandfather who had taken beautiful old buildings and renovated them in the city or transformed them and taking really good care of these antique buildings in a sense, and bringing them back to life. I had also learned a lot about investing from business school or finance, and I really admired Warren Buffett and a value investment approach. A lot of my early part of my career was how to buy real estate right, how to buy that value, and how to apply those ideas from value investing to the real estate business, which is really difficult. I remember reading in Insider's Edge how you're talking about what deals slip through the cracks, what are deals that were either there's a motivated seller or it's not widely marketed. So, one of the first deals that I did, actually the first deal I did in New York was marketed as a 52% tenants in common interest in a building in the West Village. And this was in 2009 or '10 and nobody wanted to touch that thing. It was like, First of all, no one knew who was the other 48%. And you'd be— tenants in common, you'd be in business with this person, you're literally like married to that person. And so how could you find something of value like hidden in plain sight on Bank Street in the West Village? So I said, you know, okay, I should at least go find out what's going on. And people were like, no, no, you're wasting your time. Why would you do something messed up like that when you could just buy a normal building? That's, you know, so this building— so I went and I met the 48%. It was this lovely older Japanese lady, and she had met, you know, her American serviceman, you know, and after World War II and came to America. And, and she ended up selling us half her shares, and she kept the remainder for her kids who are still in it. And but because we sort of were willing to deal with the complexity, that's how we found value in that case. I remember the rent roll when we bought it was $776,000 because it was 1776, and now, it's closer to the real 1776. It's like 1.4, and we just refinanced much more than we ever had put in. My early part of my career was finding these quirky We started buying condo assemblages of buildings that had extra development rights to assemble all the condos. I'm still in some, and it's like 14 years later.

I got a lot of personalities on those condo boards.

I got two of them. I got two more out of one. And then we did an amazing deal in Miami that I proposed to just, you know, to Insider's Edge, how do you find deals When things are out there, how do you find things that have value? As you point out in the book, the only thing you can't go back and change is the price you paid. Once you pay the price for a property, you're in it. I've learned that the easy way and I've learned it the hard way, but I'll talk about the easy way for now. I mean, this piece in Surfside, Florida next to— we had heard that the Four Seasons was going in up the street, but we bought a piece of land and we saw this amazing piece of land for sale, 100 feet of frontage on the ocean. In Surfside near Bal Harbour. And my partner and I were looking at, why is this thing so cheap? It was like $4 or $5 million. Why is this acre of land so cheap? And so we're like, interesting, let's do it. Like, let's go all in, we got to buy this thing. So then we find out that it's leased to a co-op for 36 remaining years at like $6,000 a month. Your return guaranteed, it was triple net to the co-op, so you're guaranteed a return of zero for 36 years.

Wow.

But it's a beautiful development site, and they're not making any more oceanfront land on it. That one, I think you can count on. I think your grandfather would have supported us on that. Yes, that's true. They're not making any more land on the ocean, but it was leased for 36 years. Two parties, a brother and sister that couldn't stand each other and they were fighting. One owned 50%, said, look, I'll sell it to you, but you gotta make a much worse deal with my brother. And because, you know, he's not gonna, he's gonna take advantage of you. And the other one. And so my partner, David Arditi in Miami, you know, and Tim Gordon, fantastic partners for many years, started just talking to the brother, talk to the sister. Let's see, can we make a deal with one? Would we do the deal with just one? "Okay, how about both?" So, he finally managed both and we have this co-op sitting there and of course, they're not going to— So, we were going to make a deal to the co-op. It was bungalows from the '50s and the rent was stuck in 1950. It was flat. There was no inflation. So finally, we were able to get this thing for maybe equivalent of 15 cents on the dollar if it was unencumbered, the least fee interest. And we started negotiating with the, the, the co-op, and they're very difficult. I mean, as any condo co-op board is not easy to do business with. So they come in and they're, they're, you know, no, we don't want this. What about the taxes? It's a corporate tax. And then little by little, the Four Seasons was announced around that time up the street, and it's going to be a Four Seasons Hotel, the most luxurious hotel in, you know, the United States. And condos And then the developer, the owner of the Four Seasons, very smart, creative guy, starts assembling the rest of the block. And then he gets two more blocks up, and then he gets up to our block. And finally, he bought the co-op.

Oh wow.

He bought the corporation of the co-op. So we were trying to do a deal with these guys, and we were like, damn, this guy literally just bought this thing out from under us.

But then we realized he's got a 36-year position, right?

We own the land under him, right? So how's he gonna build anything without making a deal with us. So then, then we got a little more patient. And then we're like, no, no, what's the rush? Let's just, let's just take our time, guys. What's the rush? No, we, we, no, we don't want to do anything. And then we waited. And like 5 or 6 years later, finally he came back and was like, you know what, and in the recent boom, we were able to find a very, very good accommodation that was That paid us off very nicely for the, the, the taking the risk on buying a 36-year thing.

Wow.

But, uh, so one thing I'd love to unpack before we get into your investment strategy and talking about deal specifics, from what I've heard about your book, which I'm really excited to read, is that you talk about the importance of having a human-centered approach with real estate. What does a human-centered approach look like? What does that mean to you and your family? And how does that. Manifest in your actual investment strategy?

That's really interesting. For me, a human-centered approach is trying to figure out how your real estate makes people feel and then including that in your business plan. And it's everything from what floor plans do people need, what kind of layouts do people want. What we found in Washington, for example, started developing in Washington, and a lot of young professionals were moving into the neighborhood, and people weren't thinking, "I want a giant suburban kitchen." Like, that's not, they needed roommates. So we were able to take certain areas, even some closets and different parts, and create 2 bedrooms where there was 1 bedroom. We did it, my uncle Donald is a genius of this. And so I took it to Miami, and then, sorry, to Washington, and then also to Miami, How to use space really efficiently. People in many cases are comfortable with a small space if they feel great. So how do you make people feel great in a small space? And a lot of the places that we build or renovate, people say— I'll shock them with what the square footage is. Not all square feet are created equal, as we like to say in our company. So the, the key is, how does it— how do people How do people feel when they walk into the building? How do they feel when they walk into the space? And how can, can you create value for them? Can you create a lower chunk rent by having, let's say, roommates to share, or give them what they want? If people are using their kitchen to store, you know, shoes and stuff in the oven, and, and it's not really a— a lot of people moving into New York are single and don't want, don't They don't need the layout from 1955. They want the layout from today where they can have an awesome roof deck and have a great gym and have a beautifully designed room with beautiful window, but not, not, not sort of the antiquated sort of family structure that many of the buildings were built for anyway. Or, or family apartments in New York is another thing that we have a lot of '60s and '70s stock. There are very few apartments built for, for families. Really, it was the pre-war era that had families. So folks like Naftali, you know, brilliantly figured out, whoa, there's a market that's not being hit. How do we build for what people want? So for me, building for what people want and need is part of the art of real estate development, and it's, it's bringing the human side. And, and, and you can sometimes bring the human side in ways that are unexpected.

Right. So how do you go about evaluating the wants and needs of both your tenants and also the broader community that the, the building is, is sitting in? Do you issue out surveys? What kind of data are you collecting? Like, how do you really drill down to, to what the needs are?

I wish I could say, well, I, I run it through an algorithm and AI use big data, and actually our proprietary data model is how I really— I would be raising money left and right. Our business would be worth— no. Well, it's a lot of it is, is a little more human scale. We look at the buildings we've already developed our own. What, you know, what, what are people— are they loving the studios, or is it, do they want a 1+ den? How are people reviewing our common areas? Do they love the, the gym, or maybe we made the closets too small last time? No, but I guess part of it is, is studying the market carefully of, of, and trying to get ahead of where, what people want in a certain neighborhood. A lot of the time we go with— we'll go from, in terms of neighborhood selection, we'll go with where the best food is. People want to be next to really good bars and restaurants, and that's been a really good guide. So like, I'll look where my younger brother's moving to. Okay, this one went to Adams Morgan, my other brother went to Brooklyn. Or where are creative people moving? Where are the cool offbeat restaurants that become a cult classic? And little by little, things pop up around you. One of the, one of the most powerful transformations that can happen in real estate is when a neighborhood really changes around you. There, I'm thinking about what I've seen in, in, in our recent lifetime of Long Island City, for example, just going from being, you know, kind of mostly industrial to a thriving residential 24/7 neighborhood. And I guess those catalytic moments, rezoning, subway comes next to you, someone opens the Apple Store next to your building. I like to call that— there's a favorite scene in opera in The Barber of Seville where Figaro says, the cheese just fell on the macaroni. And that's how do you position yourself in business so the cheese can fall on the macaroni? It's like, oh, the Apple Store just opened up next to— Whole Foods just popped up in your you know, 2 blocks away. Well, that's— then you look like a genius, like you really, you knew it was happening all along. You sort of have to try to do that. So some of it is in the location, in the neighborhood, and then some of it is in the building itself. And, and one of my favorite things to do is how to reposition and reimagine a building so that it offers more for, for the, for the resident for less? How can you let them feel like they're living, you know, like a, like a king or queen in a— everyone is affordable, affordability constrained. You gotta, you gotta make ends meet. So how can we make— that's been one of my favorite businesses to do. I'll give you an example. In Washington, we, we bought this building in the, in the West End, in a fairly stable, nice neighborhood. We bought an old kind of an old rundown building that actually had been attached to another building. So, it had been decommissioned as a front entrance and turned into a hotel for economists with the World Bank and the IMF. So, we bought it vacant and had a chance to reposition and reimagine the building. It was kind of like very tacky interior, basically like sort of '80s, '90s sort of look. I can't quite explain but it— but also the front of the building was boarded up in a sense because it didn't need to be. And even the building originally hadn't been all that, if I want to be— it was sort of a nice pre-war looking building but run down. So we consulted architects in town, we went to a bunch of different architects, and one said, oh well, maybe reskin the bottom floors. Another one said put put a big glass metal canopy, steel? How do you modernize this building to make it a Class A building? And, and I suddenly, I, I looked at this thing and I just had this instinct that it should be a great pre-war building, like New York, like the Upper West Side where I grew up. The nicest buildings at that time were these pre-war buildings, and this had the bones of a pre-war building. So if I go with the What would— what's the soul of this building? What does it want to be? What, what does the building want to be? And that's what I ask myself anytime we buy something, whether renovation— what does this building want to be? And that building wanted to be the most beautiful pre-war building in that part of DC. And so I, I did a bunch of research on canopies, like those cast iron beautiful canopies you see on Fifth Avenue or Central Park West, whatever, and, and, and London, Paris. I tried to find— and I finally found that there was a company in Utah that made the Saks Fifth Avenue— you know, Saks Fifth Avenue, those beautiful canopies with the swirly, very, very ornate black cast iron. So the company had just renovated that, and they had the molds that made all the beautiful historic detail. So I called these guys in Utah and said, get me— how can we get a bunch of this stuff? Get it onto a— how do we mount this onto a thing at some reasonable price? And I found a steelworks in Baltimore, and they, they glued the— they, they soldered on the Sachs ornate decorative stuff onto sort of a steel frame, you know, sort of a good old American steel frame thing, and we attached it to the building. And to this day, everyone thinks this is a beautiful old building, and people would walk into this and think this is a I live in a— I'm, I'm, I'm, I made it. I'm pretty good, you know. And when you add that to the fact that then we created lots more bedrooms so that people could share and get in there, get into a real elegant building, feel good about themselves at a pretty low price, the, the building did well over time. We just hit our first unit rented at $90 per square foot, which in DC is about 30% higher than, you know, amazing in the market. It's unheard of. Anyway, so that's how we try to find the humanistic side of development. But it has to contribute to the bottom line. It has to contribute to your business strategy.

Amazing.

Well, what's incredible to see is the range of different projects that you've done. So clearly, you know, from land, a land play in Florida to a conversion. I had the chance to go tour the, it's the Florian, right? The Florian, yes. Yes, the 388 units Class A. I mean, this is a spectacular development, and clearly you kind of brought a new design aesthetic to the area at a certain level. Now, I know it was Morris Adjami, a New York-based architect, so maybe someone is bringing, you know, some of this, you know, modern aesthetic, you know, to the market. But I think you also, when you told me about the project, you said, I really wanted to base this on some of the, you know, the piazzas and your visits in Italy. So maybe talk about how that all was conceptualized, and then how do you deliver that at a, you know, kind of a reasonable cost when you go to build it? Because I mean, clearly there are the economics, as you mentioned, to making the project viable.

Yes, so that, that's a project I'm really proud of, one of the most beautiful projects that I've, that I've built. And we went to sit down with Morris Adjami as a prospective architect for this, and he had this inspiration of a palace in Italy, a Renaissance palace that had— that's covered with diamonds. It's called the, you know, the Palace of Diamonds. And he— it's kind of like diamond studs. I don't know how to— you, you can look it up in Ferrara. And he thought he would make a modern interpretation of this diamond palace by using precast concrete diamond studs. The first second I saw his rendering, I thought, this is genius. It's so beautiful. And we, we needed something that would redefine that corner. It was previously an Exxon that there was a lot of illicit activity going on, and it was not the most beloved corner. But apparently that had been a traffic circle with a fountain, and it had been part of a beautiful walkable neighborhood. And at some point, the federal government decided to run a highway through it, basically. And it became a highway, sort of car-oriented neighborhood, which has been somewhat unwound. Little by little, we're changing that. And also, it was right near where Union Market has also just exploded in interest. But what we realized is that we had this piece that had the downtown zoning, the, the northernmost tip of the downtown zoning. Everything around it is brownstone zoning. So we realized we had these epic views and light in there. We also, in order to make it effective for people to— the trick was to make affordable luxury. So we made the building beautiful, but it wasn't extraordinarily expensive in the, in its actual— and even the interior.

Is it possible with the, you know, the diamond studded—

the diamond studs? It's, it's, it's just concrete in a mold. You can, you can mold it into any shape you want. I mean, it's, you know, it's, it's not that much. It was the same cost as brick, for example. It's the same cost as concrete. They took the mold, and then once they made the mold in the concrete place, you know, the casting, they just repeated that 1,000 times for the whole building. So we also bought it before inflation went crazy, so that probably helped. We, we bought out the job prior to— and we started— it started to run away from us, costs. And we were able to buy it at the time. But part of what happened is we made smaller units and very efficient units. So both a lot of smaller studios and junior ones, and then twos and threes that are shareable with equal-sized bedrooms for roommates. And that turned out to be a great hit so that every person living in there, they're probably, I mean, for 388 units, there's 500-something bedrooms. So that customer base of that age group is sharing. So it's each, it's more like a bed than you're renting that room.

But great amenities as well. I remember the gym was like top notch.

Yes.

Really a lot of thought.

We went over the top with beautiful amenities. We had the gym designed by this group, Omage Fitness, which is these personal trainers that, you know, that train Scarlett Johansson and other celebrities. And we thought, yes, we're, people are going to have a reasonably small space, but it's going to be beautiful views, beautiful finishes, and fantastic amenities. So we have the, the spaces on the roof are, are my favorite. I mean, panoramic views, barbecues, but also like co-working area, Persian rugs. I even, we, we went crazy on the interior design to make something really livable and, and creative, more like a little bit more like a creative office, I guess, like not, not as institutional as something that would be warm and appealing. And it's— we, we're about 90% leased. Amazing. So this spring it's time to bring us, bring us home.

All right, so let's talk about adaptive reuse because that's an area that you've been very active in as of late. And you mentioned something that really stuck with me is what does this building want to be? So how do you know, like, what makes a good building a good candidate for adaptive reuse? What are the key signals that you look for? And what sort of policies and incentives at the, at the local level need to be in place to actually encourage this type of development. And for example, like Northern Virginia, we know they have the highest percentage of their office stock under conversion in the country at like 8.7%. And I know that you've recently bought 4420 Fairfax, but that's more of like a ground-up development play, right? Like a covered land play. So like what, what kind of policies should replicated? Like, what is Virginia doing right that other, other municipalities can mimic?

Oh, well, I would say we've done, we've done, we've done a variety of different locations. Renovation, which I view the office-to-residential conversion, which we've done in Kansas City, we've done it in Maryland, I view it as also, it's akin to renovation. And, and the renovation that, the renovations that went on in New York that my uncles did in the '80s, and, you know, buying something on in, in NoHo, or, you know, for, for, for peanuts, and then renovating it into apartments. So I think that what's cool about renovation is the floor plans are your business plan. Everything else is held constant. When you're doing ground-up development, you have infinite freedom. You can do any kind of building you want. What's cool about renovation is that You only really get to choose— the business is, is the floor plans and how do you orient them to maximize the value for people and then value consequently for yourself. And so how to squeeze more life out of the same square footage to me is, is one of the coolest parts about real estate. How to make efficient floor plans out of these deep office buildings. We have this, this project we did in outside DC, and that was an IRS office building from the '60s, a giant behemoth. I mean, that nobody would have thought is a good candidate, but we, we, we kind of pioneered some very creative unit types, just like we were early on creating micro units, I guess you'd call it, and small shareable units, co-living that became— in this case, we were, we were thinking creatively how to make use of the depth. And part of it is just how do people really want to live? Just like people were getting these awesome kitchens and then using them for— to store shoes or sweaters. They, they, they, they were also living, let's say, on the perimeter, but they were complaining it gets noisy, it gets cold. The bed in most studios in New York is near the window, but it gets cold, it gets— it, it's noisy, and I need blackout shades. The tenants would say, I want blackout shades. So what we found with these long, deep buildings is if people want to sleep, they want quiet, they want darkness, they don't want to necessarily sleep next to the window. If you have this super deep space, let them sleep inside. Now in New York, the laws are very cumbersome with regard to home offices and sort of inboard bedrooms. In the Mid-Atlantic or in the West Coast, it's much more liberal with regard to people sleeping wherever the hell they want. They want to sleep in, in, in the living room, they can sleep in the living room. But we have a nice room that's warm, cozy, and dark inside. I, I mean, that the New York laws have changed a little bit but not fully to allow people to live the way they want to live, and especially to use these deeper office buildings. I think Arlington County has made it very clear they want these buildings transformed because there's such a glut. New York, because we're New York, we're, we're the best in everything, we're the first in everything. We made all these laws that, that protect people from bad living conditions like 100 years ago, and now those laws still on the books. And the multiple dwelling law really restricts what you can do, but we, we created a good tax abatement program for adaptive reuse. 467M is a good one. There's still— I think if, if, if I were a policy guru here, maybe I should put some articles out. But there are a bunch of things that would create much more housing in New York, including— it's actually in many cases the HPD interpretation of certain laws that minimum habitability is basically saying it's inhumane to make people live this way. Meanwhile, in DC, people are paying us $4,000 a month to live that way. But But it's inhumane for the affordable units to be that way in New York. So some— someone's got to loosen up the rules a little bit so that we can make more affordable housing in the city, more density. And I think that, you know, that the— even on the ground up, the, the, the way the tax abatement works, the, the new 421(a) is, is written— everyone's built 99-unit buildings, right? Is that a magic number? No. Is there any genius? I mean, how are we going to build however many hundred thousand units we need if you can only go 99 at a time? So I think some of these reforms could, could unlock a lot more housing creation in New York. I guess on the plus side, people finally want more housing. After my whole career, everyone's saying, no, we don't want it, please not in our area, don't build anything. Now finally, especially the younger generation, is like, yes, we want housing, we want to live in somewhere. We don't want just older folks to keep their comfortable place and, you know, you've got it, but now everybody else is locked out? No, they want everyone to have a shot at housing and living in a place like New York. So I think there's hope to make more of this.

[Speaker] So Josh, you live in New York. It sounds like that's where your first investment was. Then you found something on the beach in Florida, and then you really landed in DC, Northern Virginia. You've done several projects there, but you also, I think, have a project in Kansas City. Nashville. So, from a geography standpoint, how did you figure out where you wanted to go and what's next?

I broke all the rules in your book, James. I really, I didn't follow the rules.

I think it seems to be working out well for you. I mean, I don't know, maybe there's a second edition coming up soon. Forget what we said in this book, you know.

I mean, we went to a really cool dive bar in Nashville right next to the side I saw all these restaurants popping up. I was like, I've seen this movie before. This looks like what I've seen in Brooklyn and other places. Now maybe it's going to take a little longer than I expected. So I really want to do more in New York. I think my next goal is to—

I know you're trying.

Yeah, we want to do something in New York, and I've been working closely with my family partners on doing something on the Upper East Side that's, that's really interesting. But I, I would love to do something, uh, in the city. It just got very expensive, I guess.

Mm-hmm.

Part of what happens is when you get sort of accustomed to certain rents and certain prices in your head, it's very hard to accept that things have increased.

Yeah.

Even if it's correct.

Right.

So I, I felt like things, things were too expensive. Now, now there's been a significant correction, certainly in existing buildings after the 2019 rent laws. There's been a big correction. So I think it's time to get back into New York. I love all these markets. I think I want to spend more time in the core markets, DC, which is like a second home in a way, Miami, where my partner David and Tim, we've gone almost native in the Miami story. It's a good hedge against if New York gets too crazy, we want to have some investments. Similarly with Nashville and Kansas City, I guess we followed partnerships. We followed friendships and we followed projects. But I guess I would say you've noted how eclectic our portfolio is. We probably would have done— if we had just stuck with one thing and just done it again and again, it probably would have been more of a scalable opportunity. But I guess we just went with what was— I guess we went with what was intellectually and creatively inspiring. Where we found real value. In the building we bought in Kansas City, for the price of a condo in New York, we had a 22-story building that was the Athletic Club of Kansas City, where Truman was a member, a giant ballroom, triple-height ballroom, and a gorgeous building, but it also gets the rents of Kansas City. So I don't want to glamorize some of these things. I think part of the next phase of life might be doing a little more buying of buildings as well as sites. And maybe some more conversions. And then maybe— because I found that I've enjoyed as much some of the— and have profit as much from some of the repositionings in a way as I have from the big assemblage plays. I guess I've been somewhat hooked on assemblage, and I love it, but it's also a very long-term game. And I think we'll see where the future brings us. I'm happy to— I'd love to do some cool stuff in the city.

It's so interesting how some buyers have such a mathematical approach to what markets they want to enter. Like, these are the select markets, these are the demographics, these are the signals that are pointing me here. Whereas other people will just have a relationship or a close family member that grew up in a certain neighborhood and they spent a lot of time there and understand it. Like, there's so many different kind of paths that can point you towards your, your market, right?

Totally.

And to go back to the, the Nashville Pike deal, That was— you obtained CPACE financing on that, correct?

Yes.

And I remember reading that that was one of the first, or if not the first CPACE financing deal in Nashville.

I knew it was very complex. I didn't know we were such pioneers in that.

I'm curious, like, congratulations. Why was that the path forward for that deal and what led you to that capital structure?

Really interesting. Well, no wonder our legal bills went up. Well, I, we, we, we went with primarily we went with a local bank that had a lot of knowledge of the site, the corridor, and, and our partner locally had a lot of confidence in our partner locally. But the, the best, the, the optimal structure that they actually pointed us in that direction, interestingly, because it allowed for a— we knew that we were doing a lot of site infrastructure that would be environmentally friendly, so it would qualify for a lot of this. It allowed them to keep the loan in a certain size that would give it a favorable reading in, in their regulatory framework and their environment. So they were able to make it a little bit less onerous as, as I guess loan terms by keeping the size right. And so by doing the C-PACE, we were able to craft a capital structure that is the most friendly because in development, you never know, things change, things go up and down. You have to be able to really ride out different cycles. We wanted a flexible capital structure with great knowledgeable partners. We actually had a great time working with Old National and also working with Laura Rapoport's team at—

She's great.

She's been on the show. Yeah, brilliant. She was able to figure this thing out and create special features that reflected our needs on a capital basis. We didn't want to take all the money at once. We wanted to put it in little by little while we did all this horizontal improvements. Because what— one of the things I've learned, I guess, as a New Yorker, I wasn't as knowledgeable. When you buy like 13 acres of land, you have to really do a lot of work on the, on the dirt. You need stormwater management, and they wanted us to build a road, so we're building this road. And it's, it's more, I guess, when you don't have the insider's edge, you know, this sometimes it's learning— you're learning a little bit on the job. And the amount of site work and, and infrastructure that you have to put in is, is more than, you know, one would necessarily think. I, I guess infrastructure— our infrastructure in this country is, is in many cases outdated. And, and, and as the developer, we're charged with taking responsibility for like upgrading the electric on a site. In, in DC, in the Florian, we were held up at the end because switching on the electricity— we rebuilt the electrical infrastructure. We also rebuilt the sewer infrastructure, and we had to scope the 100-year-old pipes and send a scope into a manhole to make sure that we wouldn't damage the, the, the 100-year-old sewer that ran in front of the site. Meanwhile, the shape and size of the manhole was such that there was only one scope. The equipment, the equipment was needed was tied up in Seattle. For several more months. And we were like, no, no, no, we got to start building. We can't, we can't wait for this scope to come from Seattle because that's the only one in the U.S. that fits the manhole size. So people don't quite understand the extent to which developers are asked to bear infrastructure costs. Maybe I should just buy existing buildings, James, you know.

Yeah, it wouldn't be any fun though.

We find something nice and big and, you know, something, you know, easygoing.

We can read books, relax, and, you know, What's amazing though, Josh, is just how much passion and enthusiasm. I mean, these are clearly complex situations, but you can definitely tell that you really enjoy it and each new project is a learning opportunity. So as we start to wrap up, you know, thinking about your work as co-chair of the HBS Real Estate Alumni Association, and you also helped with Professor Arthur Siegel in the creation of HBS's first online real estate course. Clearly, there is some passion here to give back, to teach. So maybe talk a little bit about that and how you have continued on to mentor the next generation.

Absolutely. Well, I love Professor Siegel, and basically if the phone rings and it's him, I'll do whatever he asks. I also like teaching and mentoring, and so that's been a fun part. I especially like when you teach and mentor people who will then do the work.

Yes.

And then you can— even though I'm very hands-on and passionate about this, I'm also happy to help support the success of my younger colleagues or partners. And I think having recently hit 50 and just done some thinking, I'm not sure where that second mountain is. I know there is a second mountain because I wouldn't be myself if I wasn't trying for the next peak. I'm not one to rest on my laurels, but I think teaching, mentoring, and maybe building a little bit more, maybe doing some more investing, but I also feel very strongly about a sense of civic responsibility for having, having finally learned how to create housing and done so much of it with thousands of units. I feel like I am in a position, having suffered through these difficult things, to try to help from a civic and policy standpoint, to try to help New York City or the United States, you know, figure out how to do more of this. Whether, where and how that, that comes to pass, or And if anybody is interested in all my ideas, I'm not sure, but I'm very happy to— I see that as being part of my responsibility. I've been incredibly lucky to be born in this city. I feel amazingly lucky to be born in America and to have the opportunities that I've had in this country to build. Some of the most moving experiences of my development career have been, well, the ones where we made 8 times our money. Those are certainly— those are probably the most moving, but among the most—

helps.

Equally moving have been where I can build a house for somebody and move them into a beautiful new home. And, and the experience of people finding their home, in a way, it's, you know, it's me trying to create home and, and searching for a home and searching for, for that meaning, but also building a home for somebody that where their lives can flourish is one of the most rewarding parts of our business. So I feel like something, something like where, where there's the opportunity to give back is definitely in the future. And we, we'll all have to stay tuned and figure out where, where that can most effectively be, be used.

I love how it all comes back to the, the human-centered approach.

Yeah.

Well, I, I'm reading Jim Collins' latest book, author of Good to Great. And of course now I'm gonna blank on the title of it, but it has with, with peaks, valleys, and cliffs and talking about how people have reinvented themselves. You know, like, what did Jimmy Page do after Led Zeppelin disbanded? And other, you know, great examples of some NFL athletes who went on to go run in Congress. And, you know, so yeah, absolutely. So plenty of great books to read. Certainly Real Estate: A Love Story is one of them. Josh, thank you again so much for joining us. This was an amazing conversation. Just tell our audience, what is the best way to connect with you, learn more about the book, maybe the program that you're you had a part in creating.

Well, I guess the book is available online. It's Real Estate: A Love Story, and it has a lot of my investing ideas, but often couched in, you know, sort of parables and life stories. The audiobook, which I had the fun job of reading—

You got a much better voice than I do. I actually offered to read my audiobook. They said, that's okay, James, we're gonna leave this to the professionals.

So I tried, I somehow I overruled that.

Okay, good.

And I was like, I want to try this.

Maybe this is your second thing in life. You could be, you know, read audiobooks.

I think podcasting, you know, James, you know, this podcast, I could get used to this. This is a great way to spend this morning.

You project very well. You can tell that you're a singer.

I'm having a blast. I mean, this may, maybe this is the future. So that's, that's fun. And then, you know, we're our company, our development group, or myself on LinkedIn is also is also a thing. But I hope we get to do more of this. This is a lot of fun. Really, thanks for having me.

Wonderful.

On this, on this conversation.

And thank you as always to everyone who joined. And we, we really appreciate, appreciate not only the, the comments, but also share this episode with a friend. That, that is the greatest thing you can do if you— and I don't know how you couldn't get benefit out of this conversation, but think about who you think would really enjoy this and forward it along. It really helps us pay forward. So until next week, this is your co-hosts James Nelson and Kim Troller. Thank you for joining.

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