7/10/10 – Presentation time

We felt pretty good about the final outcome of our presentation and we felt we had it down. Then Brant and Scott presented theirs and I started having second thoughts. They had a very good and detailed presentation and since they went first it set the bar pretty high. Oh well, we couldn’t make any changes at this point so we had to wing it with our good looks and personality!!! Too bad Forgey wasn’t a female instructor b/c I don’t get the impression he thinks we are all that good looking, personalities’ maybe? So the presentation was going pretty good until Dr. Forgey identified a flaw in our calculations. We had included the build out dollars in the sale proceeds numbers but we had left them out in our construction numbers…oops!! So basically, at first glance Forgey says our deal is a bust. We had to admit we made a crucial mistake and just take our lumps. Dam it!!! So during the 3rd presentation, I took out our spreadsheet and backed out the $40 psf of the sale price of the office condo’s and recalculated the ROI’s and IRR’s and fortunately they were still positive but not as good as they were and made the deal a little skinny. We didn’t make any money on just our profit split. So I showed Dr. Forgey the new numbers and begged for a D instead of an F. Then I remembered we actually had developer fees and commissions included so I showed him that instead of not making any money we still made $85,000 and begged for a C instead of a D. Maybe our awesome personalities’ will work b/c our brains sure weren’t working Friday night.

Then Dr. Forgey wanted us to go over blogs in class and so I thought maybe since I was fairly up to date and had a little fun with my blogs maybe a brother could get a little redemption. We’ll see???

Dr. Forgey asked us to give our take aways from the class and as much as I wanted patronage Dr. Forgey to try for a better grade, I figured that would not work so I just told the truth. I actually had many take aways but mainly I had a greater appreciation for the time it takes to get deals done and the creativity you have to have for financing a deal in today’s economic times. Time is a developer’s enemy. Also, the balance one has to have when dealing with Architects was a big take away! Finally, actually doing the project vs. reading about how to do a project gave me a better understanding of what it really takes to get a deal done. Overall, I thought it was a great class and I am not just saying that to get a better grade.

Class dismissed!! Off to Cowtown Café for lunch with the class. Thanks for lunch Dr. Forgey.

One more class completed and on my way to a Masters Degree!!

Makan Martini time!!

J2M out.

7/9/10 – M3 meets to finalize presentation

Metro and I were a little behind the 8 ball on getting everything completed so we vowed to pull an all nighter if need be. Putting the deal structure together took some creativity but we came up with a pretty good capital stack that threw off decent ROI’s and IRR’s plus we made a little bit of money with no money out of our pockets as developers…couple hundred thousand. Another reason we wanted to go with a for sale product was so we did not have to have an operating business and we could walk away when it was completed and start another venture. When we did the sale comps for both the office condo’s and the residential, the numbers were stronger than for the market lease rates and thus crystallized the for sale vs. for rent route. We had equity investors getting 30% ROI’s and 20% IRR’s, mezz debt guys getting 24% ROI’s and 16% IRR’s, and the land owner getting 20% ROI and 13% IRR. We were making $18,000 but we also had other fees built in so in the end with developer fees, commissions and our share of the profit we were up to $200,000 but we backed out taxes and insurance and put in a $25,000 contingency so it dropped it down to approximately $100,000. After getting all the numbers put together and creating the spreadsheets we had to get in presentation format. That took longer than anticipated b/c both me an d Metro are anal about the details and formatting. We finally got it all put together and we shut it down about 3:30 am. At that point, we were going with it so we could at least get a couple of hours sleep b/f we had to present on Sat. morning. Good night and we didn’t even get to have any drinks b/f bed!!

It’s almost over,

J2M

7/7/10 – Chipman Construction

I reached out to a friend of mine who owns a construction company and asked for his assistance in getting the cost for our project. I sent him our conceptual for him to understand what we were trying to construct. I had to give him our site size and the size of the building but he was able to give us the estimated costs for everything. We had forgotten about the site work for the alley and sidewalk but luckily it was not too much more…about $6100. We had also thought we could get away without having to put a sprinkler system in but he said we should plan on it so we did. We told him we wanted to just have the shell space for downstairs b/c we were not sure what the user would want to have as a build out and to what extent. He said the shell would cost about $50 psf and it would be a pretty nice finish out with another $40 psf. He said we need to plan on about $102 psf for the residential and that would get us a very nice finish out with granite countertops, wood floors and good tile work. This is more than what Dr. Forgey wanted however, since we are doing a for sale product vs. a for lease product, and we are targeting a higher cliental, we felt it was going to have to be higher end.

Peace out,

J2M

7/2/2010 - Meeting of the Minds - M3 meets to strategize

Martini Makan Management, (M3) met at the Martini Ranch in Grapevine for an all day strategy meeting.  While we are still hopeful of connecting with James to get the plans, we made an executive decision to start plan B in case we need it.  We go back to or original design and first thing we discover is neither one of us can draw the conceptual model for our presentation but we have a rock star buddy who can - enter Brant Mullen.  We get Brant on the phone and beg him to help us and we would take him to a first class dinner...good thing we didn't say we would buy him a first class dinner because that didn't work.   He referred us to Google's Sketchup program and said it's easy and user friendly, just watch the 9 million training videos on YouTube and you'll have it down in 30 minutes.  Thanks Brant, I guess the referral is at least worth a Happy Meal at McDonald's.  

Here you go Brant, print this out and bring it to McDonald's and tell them I said you deserve a break today.

Off to the training video classroom I go.  I am going to be an expert in 30 minutes according to Brant.  In the meantime, Vishal is researching MLS, Loopnet and others to get comps for our land, retail and residential.  30 minutes later, I am still trying to figure out which video to watch!!! The heck with it, I went ahead and just started pushing buttons and whala, I learned a few keystrokes.  We spent the rest of the day figuring out the program and working on the ppt, the comps, a proforma and at 6pm, I needed a drink and Vishal had to meet his family for dinner.  Not to worry M3 is gonna come thru. 

I'm Makan a Martini, shaken not stirred.  I'm done with this stuff  for today.

Class tomorrow morning, can't have too many!!

J2M

ps.  Did you want to see what we came up with in Sketchup?

Take that to architecture school Brant and sign me up!!!!

6/30/2010 - Connected with James

Despite the fact I actually got through to James on my cell phone while in Canada, we spoke for a minute and then the connection dropped him.  I called back twice and could not get thru. 

We still have no plans. We are somewhat handicapped here in that we are waiting on the plans so we can talk to Beck to get construction costs and we need to look at the proforma based on the # of units etc.  Frustrating!!!

We may have to resort back to our original design and go from there.

Brant, have I told you how much Vishal and I think of you?  You are a rock star!!  Especially when it comes to conceptual renderings.

Cheers,

J2M

Still having trouble connecting with James for plans

Continued attempts to connect with James to get the plans has been challanging.  Despite we have actually talked a couple of times, we still do not have the plans.

*&^%$#!

Challenges!!!!!

I'm out.

J2M

6/27/2010 - Off to Canada I go.

Here's where partners come in. 

I have been deployed to Canada for the next three months returning every weekend to come to Dr. Forgey's Saturday classes...that's dedication to the Program, don't you think?!

I am fortunate enough to be working on a 2000 acre development outside of Alberta's Industrial Heartland.  This area has the second largest oil reserves in the World second only to Saudi Arabia.  We are developing a mixed-use Urban Square based on the principles of New-Urbanism.  More specifically, we are marketing to the 40 plus companies that call the Alberta Industrial Heartland home and offering to provide housing for its temporary, long-term and permanent employees just 12 kilometers Southeast of the Heartland.  We just completed the annexation of approximately 1500 acres and now the fun begins.

Chipman is Southeast of the Heartland as shown on this map.

Why do I share this with you?  Well because I need an excuse when Dr. Forgey asks what I have been doing all week and I say busy in Canada maybe he'll have sympathy for me...not!  Actually, I share this because without my partner Vishal "Metro" Makan, it would be difficult to accomplish anything which requires me to be on the ground in Fort Worth and Metro has my back.  Thanks partner.

Long drive, I don't recommend it.

See you next week.

J2M

6/26/2010 - Third Saturday Class

What a surprise...No AC and no Internet!!!  Class canceled?  Not so fast speed racer!

We have guest speakers lined up today...what do we do?

Forgey to the Rescue, hello Sheraton.  Forgey arranges a private dining room at the Sheraton's Shula's 347 Grill and buys everyone breakfast and had I known, I would have skipped breakfast before class.  At least I saved him $15.99 for the buffet.  I did however take advantage of the free lunch though.  Forgey buys lunch for everyone too.  Thank you Dr. Forgey.

Now we had to contact the speakers and give them the new venue, but wait, I had Owen coming at the my scheduled time of 10 am but Jason double books his speaker for my time slot...can anything else challenge this morning start?  It's all good, Owen is early and we get started.  Just giving you a hard time Jason!!

Owen tells us of his experience and how he went about acquiring the building and what he envisioned.  He brought before and after pictures and let me tell you, one had to have a vision to see the diamond in this ruff.  As Forgey has said, "either you have it or you don't...it can't be taught".  Well Owen has it.  Not only did Owen acquire the building, apply for the tax credits, retrofit the building with all the preservationists looking over his shoulder, installed two new elevators, repaired all the exterior windows, new electrical and plumbing, he got it done in 10 months.  Matter of fact, he was within weeks of filing bankruptcy getting it done.  One key take away was:  in order to use the tax credits, you have to have the buyers of the credits be a partner from day one or you can't use them.  Owen found this out the hard way and of $500,000 of credits available, I think he said he was only able to use $14,000 of them and they expire this year.  Ouch!

While Owen was presenting, Jason's guest speaker, Leslie Houston of Wells Fargo's Community Lending and Investment division joined us.  She chimed in and added to the discussion with Owen.  After Owen completed his presentation, Leslie discussed the lending perspective.  She was very helpful however, the bottom line had not changed...personal guarantees, 50% LTV's, 1.25-1.5 DCR's, and financial statements back by tax returns.  Lending is not a reality in this market without meeting these criteria.  She did however share with us there is a gov't program from the US Treasury called the "Community Development Financial Institutions" whereby they give large loans to these institutions and in turn they break them down into smaller loans and make them available to the community.  Check out this site for more details.  http://cdfi.org  and this site for the US Treasury.   www.cdfifund.gov/  This could provide a better source of funding however, we would need to research it further.

Dana Burghdoff, Deputy Director for the City of Ft. Worth's Planning and Development Dept. then joined us.  she was very helpful and in particular for us.  We were not sure about the parking requirement and unfortunately we have a minimum due to a certain section of the historic district that is less than 250 feet from our site.  It is four little houses that fall into this A-5 zoning and thus we have to meet a minimum number of parking spaces.  Not good for our deal.  She also helpful for us in that I was going down the wrong path for meeting with the appropriate people for what is called a "Certificate of Appropriateness".  The City has a department to aide developers with the conceptual plans and determining if they will be appropriate and if not, how to assist developers get their projects done.  Dana also referred us to Randy Hutchinson in the planning and development dept. if we needed any further assistance.  Another area helpful to developers is the Urban Design Commission.

Great day considering how it started.

Peace out,


J2M

6/25/2010 - James, James, James!!!

Continued calls to James with a couple of actual conversations in between.  We are assured we can get the plans on Monday.

To be continued.

J2M

6/24/2010 - Owen Hannay to discuss his perspective on re-developing the Awalt Building

I reached out to a friend of mine, Owen Hannay who re-developed the Awalt Building in Dallas' Historical West End District.  www.awaltbuilding.com/  Owen is the President and CEO of Slingshot Advertising Agency  www.davidandgoliath.com and they occupy several floors of the Awalt Building.  Owen is an Architect by trade but does not practice it.  He received his Architecture degree from the University of Virgina and his MBA from SMU.


J2M

6/22/2010 - "I'm back"

So, how did Mark's perspective strike you?

I shared with Mark, Vishal and I met with James and showed him our model and James' stated we "needed more density to make the numbers work".  I also shared with Mark, Vishal and I were working backwards to determine the cash flow needed to make it a viable venture and we may need to add a story or two for the residential piece.

Mark shares more of his perspective on the matter.  I quote from his email:

"For example, your comment of the owner that more density is required to "make the numbers work" is predicated upon an idea of income for quantity and not quality. "Cash flow" to be "viable" is quite clear indication that money is the primary, if not only, motive. It might seem un-American, certainly anti-Capitalist, to suggest that that's exactly the problem with the public realm and it's continuing degradation and precaution."

OK and fair enough.  One man's further perspective should be respected whether or not you share that perspective.  What do you think?

My response to Mark:

"Your world view appears clear to me and very much respected. Often those who do not share a “pluralistic mindset” may find it hard to relate to. Given this is a real estate development class whereby its students are more or less driven to an “achiever mindset” in that, success of the project is predicated on the ability to obtain equity and debt which require the students be cognitive of investor’s “return” and financial institution’s “debt coverage ratios” may cloud their mind to be open to a discussion which is counter to the objective for this particular class assignment."

Mark's response to me:

My belief is / was that any commentary regarding Architecture or design as a discipline was in addition to - to augment - your "success" scenario. To set a higher bar than ROI for an owner or the quick retirement of a bank's 'baby bird' hunger. As an architect concerned with integrity of idea and action, what else would I ethically talk about?

My thoughts back to Mark:
 
"Perhaps I have jumped to conclusions. I agree with your take on “addition to” and “to augment”. I must admit I failed to see it in this light initially and I appreciate you helping me see it in that way. In retrospect, design is an element the class assignment was told to consider and given “my” first hurdle of financing (not design), I obviously was one dimensional."
 
Why do I share this with you?
 
I think there is a balance developers and architects have to reach whereby there are mutually beneficial outcomes of ROI and integrity of idea and action.  Be aware of it.
 
Ponder that!!!
 
Deeply submitted,
J2M

6/23/2010 - Clairification and apology appreciated...and more.

Mark responded to my follow up email and noted his appreciation for my doing so and wanted me "to know that the lack of tone in the email likely also colored my [his] response about 'free' work."

Lesson two:  Design Quality vs. Financial Perfoma

Mark presents a perspective which deserves consideration.  I quote from his email:   

"To be clear, money has never been my goal in any part of my practice. Any I've ever made has gone back into the project or into books ( as you saw ). You heard me describe pejoratively the 'usual' developer idea of architectural services as "decorating the financial model" - one which denies that the actual quality of the architecture / design of the work might have any real value beyond additional hyperbole in the marketing. Or the notion of the "market" as any kind of index of quality at all."
 
I will leave it at that for now.  Marinate on it and let it resonate with you for a while.  I'll come back to it later.
 
J2M

6/22/2010 - Land Comparable - 1120 W. Magnolia

We contacted Gary Vasseur with Coldwell banker to get the land comp on Magnolia.  Seems as though we are in the market at $22 a square foot vs. this property at $30 psf.  While I was on the phone with Gary, I asked if the owners would be interested in JV'ing a deal and he said possibly.  I asked to to pursue it and get back to me.  You never know unless you ask.

So far so good.

More later.

J2M

6/21/2010 - Speaker line up (cont.)

LESSON:  The value of good communication is worth noting here. 

Long story short...I had a very detailed email for Mark on Sat. in class thanking him for our meeting and requesting his consideration to speak. Unfortunately, the wireless network at UTA does not allow me to send email therefore, I drafted a quick (less detailed) email on my cell phone so as to get it out ASAP.  It was interpreted as thank you for meeting and we were not interested in pursuing his services rather we just wanted a "free" speaking engagement from him.  Fair enough and understood.  A follow up email with the original email I drafted in class on my computer was forwarded to him apologizing for the poor communication on my part and to confirm we are not just looking for free services.  I gave him the details requested about the speaking engagement and we would follow up with him after our further discussions with James.

More to come.

BTW, another call to James to no avail.

J2M

6/20/2010 - Speaker line up & getting plans from James

The dialogues begin.

Mark Gunderson responds to my request to speak and wants more information on the topic.

Phone calls to James to no avail.

Part successful, part challenging.

Cheers,

J2M

6/19/2010 - Second Saturday Class

The koolaide is pouring strong.  We are all excited about our project after researching yesterday and we're anxious to get the plans from James.  After discussing our projects in class, come to find out Jerod is related to James through marriage and we got a little more insight from him...all good and confirming what we already had found out about him (James).

Seems as though every one's project research is revealing a lot of the same information.  I particularly like hearing what the other teams are experiencing in terms of  what challenges and successes they are having.  I don't feel alone with ours.

Class Assignment:  Line up guest speakers for class discussion next Saturday.  Since we had initial discussion with Architect Mark Gunderson, I signed up for the "Design" topic.

Class dismissed for lunch...Yucatan Taco Stand in Southside with the class.  What better way to get to get entrenched in the community than to patronize the local eateries.

The rest of the afternoon was allocated to getting more research completed and that we did.

Adios Amigos

J2M

ps.  Brant, no need for apologies for your three meetings vs. my "initial" two...read on and you'll note I had three on 6/18/10 as well.

And, Happy Birthday Mom.