Architecture and construction. It's it's kind of death by million cuts.
Hello and welcome to the Business of Architecture. I'm your host. Ryan Willard. Joining me today is Ben Parco, a distinguished architect with over 35 years of experience and a remarkable 20 million square feet of Class A construction to his name. Ben's expertise covers a wide array of project types, from commercial offices and R and D facilities to higher education, civic spaces, hospitality, transportation and residential developments. Ben is known for his thoughtful and energetic leadership, consistently delivering projects that not only meet but exceed expectations. His particular strength lies in creating high value solutions for commercial and workplace environments, including corporate campuses and urban mixed use developments. At leading voice into sustainable design, Ben's work in pre fabrication and low carbon buildings even caught the eye of former Vice President Al Gore, with his insights contributing to Gore's book our choice as founder of parko studio, Ben continues to innovate across various sectors, while also Rediscovering His love for designing single family homes and estates. He is also dedicated to mentoring the next generation of architects through his roles at UC Berkeley, the University of Washington and California College of the Arts. In this episode, we will be discussing beginning project development as an architect and doing your own projects. And Ben walks us through a project that he is engaged in at the moment and how they found it. We talk about the processes that Ben has been taking to work towards becoming a client, free firm, and we also look at what are the fundamentals that absolutely had to be in place to ensure this kind of adventure into the world of development is feasible. So loads of really great golden nuggets here. Sit back, relax and enjoy. Ben Parco, now a message from our sponsor, Why settle for switching between multiple design programs to complete a single project with Vectorworks architect, you don't have to simplify your workflow with a hybrid 2d and 3d modeling environment made to support your work from the pre design phase all the way through to construction documentation in a single platform. Learn more about the tool that can help you accomplish everything you need with the free seven day trial of Vectorworks. Architect, get started here@vectorworks.net forward slash Business of Architecture. Ben, Welcome to the Business of Architecture. How are you?
Hey, good to see you. Ryan,
excellent. My pleasure. Very good to have you on the podcast and to be talking about some of the exciting things that you've been up to. So you are the founder of Parco studio. You've had a pretty impressive career working at a lot of large name firms, doing high profile projects. And how long ago was it when you started Paco studio,
it's been four years. Four
years. Okay, so four years, and then we met maybe two years ago? Was it something like that? Two years ago, and we became a Business of Architecture client, and went through one of our programs, and we've, we've remained in touch, and I follow what you're up to, and a lot of your innovations, your, you know, really beautiful design work that you do. I really enjoyed a lot of the innovation that you were doing not so long ago with kind of AI imagery for some of the residential projects that you were doing, or just kind of they were like provocative imagery to start conversations. Yeah, really, really interesting. And then you and I, we were talking not so long ago online, and you started to kind of tease me a little bit with this, with some of the development work that you're starting to do, and how you're structuring so some of these, these deals. So let's, before we get into that, let's start a little bit about kind of a bit of your previous career at some of the larger, larger name firms, and that transition from there into Paco studio, and then that kind of sets up nicely the context for the work that you're doing in your in your current form, if you like,
Yeah, sure. You know, I started out in residential with some professors that I you know, worked for right after school, but then quickly got into moved to San Francisco from the East Coast and worked for big firms, James Stewart, pulsk and Partners, and worked at som for years, and design director at Gensler for years, and actually a few others as well. Hol Jones was kind of a period too, that there's sort of a boutique Wes Jones That was a period as well, and just sort of had. A, you know, there was a way in which I really was into the just the power is not the right word, but sort of like the capacity that architects have to deliver, like big things in the world, like I just was into it. You know, I think my first project that was sort of like, here Ben, have a, you know, was it? MBB J at the time, was like, here Ben, this is your project. It's a little 16,000 square foot lab building. You're gonna, you're gonna design this, you're gonna detail it, you're gonna do the CDs, you're gonna pitch the client, you're gonna do the whole thing. And it was a, it was a nice little tester project, and something about like, pulling a thing out of the ground from a blank piece of paper, was just so exciting to me. And there's a way in which I think that enticement just got me into bigger and bigger and bigger work and bigger firms. You know, at one point, I was working on 16 city blocks in Beijing, like, all at once, yeah, like, millions and millions and millions, 20 million square feet. Like, boom, pulled out of the ground. Yeah, 3000 workers on at one time. And it was just so exciting and so, like, almost unbelievable to me, that, like, a group of people could get together and have fun in a, you know, in a cool office environment with, like, colored pencils and markers and computers and like, you know, three printers and paper models, and just like, imagine things, and then years later, like, the whole thing's there, and people are working and living in it and all like, It just blew my mind. And there's a way in which I think that sort of excitement just drove me to like bigger and bigger thing and bigger and bigger places. Now, the thing that didn't work for me is, you know, that comes with baggage, right? It came with, came with all kinds of politics and mostly internal to these games, which, um, just rubbed me the wrong way. I I thought of it more as like a club. But, you know, the higher you get in those ranks, the more it turns into some kind of competition or something, instead of a club of friends. And that just graded on me more and more, you know, in a kind of an unconscious way in which ultimately, I ended up having to, basically, you know, leave and burn bridges and, you know, do all kinds of, like messy stuff, honestly, just to kind of finally get myself
out. But it's, it's very, it's very difficult once you're, once you're in that particular track of architecture. I mean, I know this from, you know, when I was working at Grimshaw and rshp. It's a similar sort of world that kind of scale of projects you're doing, skyscrapers, airports, museums, and it's an, It's intoxicating in the sense that the projects are just, they're glamorous, they're big. People are going to know them. There's going to be, you know, in some cases, millions of users of your of your, of your project. There's a big audience. But then it comes with the the delivery mechanism of it is a kind of traditional corporate structure, of which there's loads of really interesting business benefits to that. But as a creative person, there can also be a lot of friction. And also, yeah, you know that there's the, there's the political side of it internally, which you gotta be, you gotta be skilled at navigating or avoiding even,
yeah, exactly, yeah. No, it is. I think intoxication is a good word, because in a way, it was just like, kind of being high on architecture for a couple decades, and then Florence, like, sobering up at some point and being like, whoa. Like, wait a second, Am I really that far down the rabbit hole, and is there a way out? And and I think what happened to me is almost unconsciously over the nut, over a number of positions over a number of jobs, my internal system just kept saying no, no, no, and intoxication saying yes, yes, yes, you know. And eventually I kind of worked myself, you know, unconsciously, into enough of a corner that I had no choice but to just stop and open my own shop and hang out my shingle and, you know, and what. And it was almost like a worst move, you know, on my unconscious self, to do that, and
what was the kind of work that you went into? Because that's often that can be quite interesting, if you setting up practice coming straight out of large practice that there's either a big jump in the scale of work that you're doing, because now you're working by yourself. And sometimes we see people who that they leave a big practice and they maybe, they take a client with them, and they take half a team with them, and then great, that can be a really excellent way of actually starting up a practice and and kind. Of jumping the a few steps and and working on a small commercial type of Lot, or you've got the other option, where you come out of large practice and now you're doing something like on a residential scale, which is just miles apart from a multi headed corporate client, which, which were you, and how did you navigate that in both mentally, emotionally and, like, kind of skill wise, technically,
yeah. I mean, the former would have been great, but it's not what happened. You know, it was we, the clients I was working with were so big, and there was so much at stake. There's and this might, maybe this was a perception on my part. I don't think it was completely, you know, a hallucination. It felt as if there was just no way to, like, take a client and a substantial project with me. Yeah, you know, maybe if I had had more, some kind of buffer resources, to feel like I could, okay, I'm gonna make payroll for three months and pull in, pull some people, and done it up, like it just didn't feel like that was gonna work. And so, you know, in some crazy way, I did it just even more, just totally blindly, just said, I'm done. I've, I've, I've basically burned all the exits. There's no way out, nothing else. I'm here. I've worked at every firm in the city, you know? And that's the end of it, right? Yeah. And so I just hung a shingle out and started kind of posting some stuff to Instagram and making some calls and doing some networking, and remarkably, within, like weeks of, and this was right after the pandemic, remarkably within weeks of kind of announcing. And the announcement was not big, it probably reached, I don't know, 100 people or something, you know, actually a reasonable sized commercial project came my way. It was for a Furniture Showroom for Pivot. Pivot is basically the biggest, like Herman Miller Knoll dealer in California, right? And they, you know, they kind of were, they were doing a new la showroom. Um, they couldn't hire Gensler or som or whoever, because then the others would be upset at them for not them, right? So they're like, We need someone that nobody knows. And I knew the people there, they said, Ben, would you do this? And, you know, I kind of hummed it hot. It wasn't exactly what I want to do, you know, it was, it was basically a kind of adaptive reuse tenant improvement project, kind of a, you know, la warehouse, brick building, bow string truss, kind of, you know, ceiling and a beautiful building. But, you know, the TI interior thing is not exactly my thing. But I was like, Well, I don't have any other work, and I know these people, and they know me enough to trust me and basically hire me with, you know, you know, really, I just walked into the interview and and pulled my website up on the screen and said, Hey, here's some things I've done, and this is how we did it. And, and that, that was, you know, that's how it launched. And I spent a few years on that project, which took a, it was during the pandemic. It took tons of time to get it through the LA building department, because they were all messed up at the time. And, you know, but in a way, like it was perfect, because it just, it, just the project, sort of, you know, much the chagrin of the client, the project stretched out because the permitting process, and it just turns out to be a long period of time where that was my bread and butter, and it allowed me to do other things. So, you know, here's to you know, miracles.
Love it. Love it. So when you came to Business of Architecture, what were some of the things that led you to to us? What were you, what were you dealing with, with the What were you dealing with in the practice? And,
yeah, I think I had no idea what the heck I was doing. I just really didn't know. I was like, how do I, you know, I've got all this creative, you know, ambition and interest and curiosity, and I'm not done with this career, and how do I make something happen? And I really was not clear on how to do that. And I think at the time, you know, I feel like there's even a conversation around, like Enoch was wanting to see me further, kind of, in the arc of the firm's growth, and it was literally just started, and there was like nothing to show, or there were no people, there were no employees, there was nothing, there was hardly any revenue. And I. So, you know, we decided to, you know, we sort of agreed to just go for it anyway and and at a time, my thinking was, I'd rather, I'd rather start and learn how to do things right, right from the start, in a way, and kind of get this thing headed in the right direction, then wait two years and make a bunch of mistakes and get a bunch of really bad habits under my belt, and then come to Business of Architecture and have to, like, erase it all and relearn everything. And I feel like that was it feels like it was a really good move. It you guys helped so much, and helps to kind of, like, just add a whole, like, chunk of brain to my head that didn't exist before. You know, I've been so long in this kind of rarefied world of, like, design leader at a firm, and I don't have to worry about that, and I'll have to think about that. And other people do that, and I can tell those guys to do that, you know, like, basically spoiled, like, spoiled beyond belief. I mean, I didn't have to set up a zoom call. People would come in and set it up for you and, you know, like, just so spoiled and lazy. And there's a way in which, you know, I just need to learn a ton of things, which is, you guys were, it was kind of perfect timing, because
what I don't know, what was, you know, when you're looking at the practice now, what are some of the things that you're very, kind of pleased with, that you've implemented, that you've built out, that you've actually, you know that you're that, and perhaps you could outline some of the challenges that you've navigated around. Sure,
you know that if I just kind of made some categories, it's like, well, you know, marketing and business development, that is a there's a way in which the people part of that comes naturally to me. There's other parts of that that don't come so naturally to me. And, you know, it's there's sort of like, too bad, right? Like, you just have to do it, you know, I think maybe in a way, like instilling this idea that, like, money is what drives the practice. It's the thing that allows you to do the work that getting that into my head so thoroughly and sort of feeling the truth of that through maybe some economic cycles, and feeling what it's like to make, you know, what's it feel like to make, you know, gross five grand a month. And what's it feel like to gross 50 grand a month and, you know, and seeing like, oh, and what's possible the month after that $50,000 month, like, suddenly it becomes, like, blatantly obvious. And it may not. There's some way in which it may not have been as obvious to me Well, living through that, had you guys not been sort of in my ear saying, This is what's happening. Bad like, pay attention, right? There's some way in which it just helped to have this kind of heads up display, like a VOA heads up display where something happens and the thing comes up, and I'm looking through that at what's happening, and seeing, like, oh, like, I see this is because of that, and, you know, that's because of this. And it's just brought so much clarity. So I think, you know, marketing and business development has been a piece which I still it's still probably my biggest challenge, and the thing that I struggle work on and work to improve and hone every day, and I still watch my boa peers that are good at it kind of Pay close attention to what they're doing. And that's like just an everyday thing for me, the financial kind of tracking and, well, just financial tracking in general, and just kind of, you know, even things like accounts receivable, it's like we're not going to allow clients to hold our money like we did good work. Here it is, you know, we need to, we need to get paid. And so, like, our ARS, like, are, like, eight days now, a little bit of money to maintain that, because I basically say everyone has to pay via ACH. There's no credit cards because the fees are too high. There's no checks. It's all ACH. And there's a and, you know, I've been using monograph, which, you know, we, we all kind of have been playing around with at boa and, know, they instituted ACH at some point, and I kind of hummed and hot about it, and was kind of cheap about it, and they realized, wait a second, like, I've got six clients, you know, that's 60 bucks a month. That is way worth it to get paid within eight days, yeah, and not be chasing people around and everything else. And so these ways in which, like, smoothing, you know, smoothing out. All the frictions and all the bumps and making this thing just easy, easy for clients to engage, easy for easy for clients to pay contracts and kind of setting up language and and sort of ways of talking about the work that is easy for clients to say yes, like, this whole lens of, like, you know, getting it, getting everything set up so that it's just an easy yes for people, because there's other people that are asking too, you know, other architects who are vying for work, and you Just want to be like, the low friction answer, and so that's been, that's been huge too. Let's, let's,
let's talk a little bit about that, because that's really interesting as well, because it kind of sets the scene as well, of tuning the business up and, you know, putting the fundamentals into into place. And I was, as I said, at the beginning of the conversation, I was very excited when you and I started talking recently again, and you were, you were talking about some of the innovations that you're having, or some of the deals that you're starting to strike with potential commercial developers in exchange for, You know, how you how you can kind of start getting involved in those sorts of projects. And I'm a big advocate for any form of architect led development, or architects just getting involved in development, because this is now I spoke with them, Jonathan Seagal this morning in in San Diego and and we were talking about, he was, he was just making the point of, you know, in his mind, actually being a developer is less risky than being the architect. And there's a lot, there's a lot less, there's a lot less friction to deal with it when you're the architect developer, because you don't need to produce so many drawings. You're not having to cover your back for so many different things. You're not having to, you're not getting involved with this problematic triangle of architect, client and contractor, where, you know, it's always the kind of, you know, the classic school boy trio, where two are ganging up on the other one, and the architect obviously, is usually the most agreeable out of the other two, and often comes off worse. So this idea of the architect being empowered to be, you know, leading their own projects, I think opens up so much possibility for practices and also for just wealth and money that, you know, I think it's really, really good, powerful business model to be pursuing and exploring. So perhaps we you could talk to that a little bit about your ideas, big picture, about what you'd like to be doing, and then that can kind of set the scene for some of the conversations that you're entering into and how you're doing that
there's basically a power dynamic, right, you know, of sorts at play always, right? With everybody and and I think in the kind of architect, developer, contractor world. There's a power dynamic, there's a value sort of ecosystem. And, you know, because business is business, the idea is like, get the get the most value, you know, for the least possible, you know, cash you can afford as a as you know, whatever you're doing, if you're Apple, cranking out iPad, or if you're a developer, pulling some project out of the ground, like you want to, you want to be, it's because it's free money. Like, the second you the five minute negotiation saves you 40 grand. Like, that was an incredibly valuable five minutes. So if you can, sort of like, muscle and squeeze and intimidate someone into low fees, like, God, that's, that's high value time as a developer, whomever, and so I'm probably, yeah, I mean, yeah, just anyway. So I don't know that. Yeah, in a way, I don't know that for me. I don't think it's even started as that com, you know, conversation or idea in my head. I just knew that I wanted to do things. And this does get back to the power dynamic and kind of control. In a way, it's like I wanted to do things the way that I wanted to do though, like I know I know how to do some things really well, and it doesn't mean they have to be expensive or exorbitant or outrageous or crazy. They can be perfectly sane and sober and really brilliant at. The same time and like, and to find a developer who will let you do that, who will trust that you're sane and sober, but let you do something like, really elevated and amazing. Like, that's not easy. Yeah, you know, if you're a stark attack, that's one thing, because that's what they're signing up for. They're coming in. They know that you're going to deliver this outrageous thing, and that's what they're paying for, is that kind of brand power thing, but at a smaller scale, like, that's hard to come by. And so I think some internal part of me was just interested in doing things my way for once. And you know, the few ways that that has begun to occur to me as like, oh, we can do we can do this, and we can do that has just been at a small residential scale. You know, my partner and I purchased a piece of land a few years ago and have been designing a home for this land that's very unusual, very cost effective. This
is the A frame building, right? Yeah, yeah. I
call it the italic a it's kind of, yeah, straight on one side and slanted on the other side. And, you know, it's an unusual house. It's small. It's only, you know, 1300 square feet or something. But, you know, it's sort of a daylight filled, very kind of fungible spaces that can be used in all kinds of ways. And it's in California, yeah, we haven't built it yet, right where we've designed it, and we're, you know, we're sort of saving money and sure, and, you know, it hardly has any interior walls, just where there's almost like a commercial core that runs through the building and everything else is open, and the core divides the kind of public and private sides of the house. And, you know, and it's all heavy timber, Glu lamb or Glu lamb construction, these big kind of timber beds. And in a way, it's like a super simple building. And I'm interested in that. I'm interested in, like, how can we do something really simply from a construction and kind of tectonic standpoint, but do something really beautiful, and do it on a piece of land which is maybe a little bit challenged in its day, lighting and such, but capture as much light as we can, where we can get it, and just sort of make something special, where someone else might do what I call plop a texture, which is just kind of plop a thing there, and, you know, it's done and, and so, you know. So that's just been
some pretty, that's pretty because, so that's,
that was kind of the first foray into that world, just like, like, almost giving myself and through really, like, general, you know, intense amounts of trust and generosity from my partner, basically, you know, my development partner, right? My my life partner is my development partner, and trust me, and sees me and knows me well enough to trust that, like we can do this, and we can go in this direction, and, and so that was kind of number one. It's like, let's, let's do this. And, you know, and, and even with, as with a developer, like we fought and struggled and, you know, really kind of got into it around all kinds of aspects of this thing that that she didn't understand and and I had to kind of, you know, show up in the ways that one has to show up to try to get it, you know, have someone see what I'm seeing, which isn't so easy, but it was kind of a great process, and sort of, I think, gave us the bug in a way. And what happened is, before we were even able to finish that project, a house in the same neighborhood area, not even, I mean, it's kind of a neighborhood we live in, a pretty rural part of California. A house nearby, 10 minute walk away, came on the market completely rotten, like rotten this molding squirrels living in the roof. You know, buckets in the living room, a line of buckets 20 feet long, collecting water that's coming through the roof, like, really rotten big burly contractors would not step inside because the mole stench was too intense for them. Now, that doesn't normally happen, like, you know, like they would put the gloves on, like, big tough guys that are normally like, I don't care, you know. So this house came on the market, and we loved the the basic bones of it, even though half the boats were rotten. And we kind of like, forgot that we had just bought this other piece of land and and decided to build a house on it, and couldn't help ourselves but to just like, let's buy this house and make it great. Because it's, yeah, it's. It's really beautiful structure, and it can be amazing, and that's what we've been doing the last year. So So there, at a mini level, we just personally have been taking our resources, our time, our energy, our our money, and pouring it into some projects for ourselves, self development, whether we live in them or don't live in them, or rent them out, or put our aging parents in them, or whatever it ultimately ends up being. Um, California, real estate is is a thing, and this is where we live. And so it seemed like we can add some value to our own portfolios, in a way, and do some good work at the same time. And kind of all proof of concept that like this, this little shop, parko studio, can do some things, and they're good. And so that was sort of the beginning of I think this idea for me is just like no one else even involved, except my partner and I. What
were some of the, some of the key lessons that you've learned from, you know, just simply the acquisition of a piece of land, and then you're, then you're kind of designing something speculative on it. And then also, you know, the work with, you know, taking the risk of buying this dilapidated, charming property. What sorts of lessons have you learned there around development, or just, or just managing risk? Because actually, that's quite a nice way of managing your risk, like that, when there's something that potentially, well, you could live in it. So you kind of take, you take away some kind of development risk, thereby it's got to function for you,
for sure. Well, like, I mean, a few things. One is, I think you quickly metabolize the idea of risk in a way that maybe you don't as an architect, right? Depending on your kind of lineage and upbringing, as an architect like you might be, you might just not be that aware of like the risks, or you might be if you're kind of a little more kind of developer minded. I mean, I tend to come from that developer world, so I'm pretty aware of roughly what kind of risks are involved. But it's a whole different ball game when it's your own money, and it becomes very real, very fast and and so suddenly you're, you know your developer and architect, and you have to kind of wear both hats. And suddenly every decision you make, every single decision you make, is fraught with some risk. And so you're making decisions differently, and through not just your architect lens, but through your developer risk lens, and it's pretty sobering, honestly, and kind of enlightening in a way, as to, like, what these folks are actually dealing with on a daily basis. Because the phrase I always use is architecture and construction. It's, it's kind of death by a million cuts. Like, there's no one piece of the project that actually costs that much. It's so spread evenly, like the peanut butter is spread structure and plumbing and electrical and finishes, and you know, it's just spread very evenly. You can't, like, save yourself. There's no silver bullet. There's nothing you can do to save yourself. If you make 20 bad decisions, they just add up and up and up and up, and before you know it, you're 50% over budget. And so I've known this instinctively, and it's kind of the way I think about my clients work when it's your own money and you're paying the contractors every two weeks, you really start to see it pretty fast, and start to metabolize that truth in a way that you never can. You just can't. If
it's, well, it's, I think it's such a sobering experience when we've done, you know, very small scale renovation here in the in the apartment in New York, and, you know, just having a contract to tear something down and then do it again, and then, and then being like, right? Okay, actually, that was, this is, this is my change order here, that's happening, and this is and, and it's costing me. And then I remember at the end of the day, you were like, right? That's cost. That's cost me X 1000s of dollars to do that. Was it worth it? And then
you look at that thing and you're like, Huh? Was that worth $4,000 that's just retail that I just didn't like how that didn't align with that. Yeah,
exactly, exactly. And it really puts a different flavor onto the dry, your kind of design drive or something, or just, it just gives another depth to it. I think that's really the there's, there's nothing else where it's, you know, on the one hand, when you're managing somebody else's money as an architect and encouraging them to make decisions, and then when it's your own money, there's just a different reality to it,
for sure. Yeah. Yeah, yeah. So that's, I mean, that's been, that's been a huge piece of it. It's just understanding the money and the risk and seeing what all those little, how those little decisions add up and influence the bottom line at the end of the day. I think that so one of the, I mean, to answer the other part of your question, one of the things we've done is to really, because we kind of painted ourselves into a little bit of a corner. We bought this property, we designed a house for it. We haven't permitted that house yet. Then we bought another house that's falling apart, and we're yet we're living in a third house. It's like, this is a problem. This doesn't look too clever at all, yeah. And so the, you know, then there's this, this kind of permutational, you know, scenario math that goes on of like, okay, how does this work? Like, we bought it to, you know, we have this land. We can build that later on, but we can't now, because we have to worry about this thing that we just bought. It's a two story house. It's actually quite easily demiseable into two units. So one of the things we did is we, you know, we just plumbed it and electrified it for two units, and it, you know, we haven't built two kitchens, but we stubbed it out, and we can basically put another kitchen in and a wall downstairs, and suddenly you've got a really lovely one bedroom apartment, condo, whatever you want in law, you know, whatever you want it to be full bath, there could be a full kitchen very easily. And you put in one wall, and suddenly it works as a unit, and all you have to do is close off the stair, and then the upstairs could be its own unit. It already has it, you know, we put a brand new kitchen in there. We built a bedroom on the back, and so that's a unit too. And then there's a little shed in the back that we plan to rebuild that could actually be its own little living quarters or Airbnb, or whatever. And so as we thought about, you know, how do we de risk this for ourselves? It's like, well, let's build this thing. Let's plan it to be able to turn into two, maybe even three, units. Let's try to live in it. Let's see if we can make enough money to support this asset that we've created. And if we can't, you know, we'll spend a little more money and split it in two and then start to kind of, you know, make it make sense financially, or, you know, or move an in law in and, and, you know, something right, like just being able to do that made much of sense to us. Now, we're in a situation where you know our our other piece of land which has a construction loan, which basically goes from a land loan to a construction loan, right? That when that loan flips, it basically times out as a land loan after three years. But you haven't built, haven't started building on it, the rate goes up. Well, we haven't started building on it, because we got busy with this thing. You thing. So now we either have to pay some crazy rate on that piece of land, which we're not going to do, or we have to basically buy that Buy, buy out that loan and own that piece of land outright. So now what we're looking at is like, Okay, let's take we just put we bought this house for about 50% of what it's now worth. Put another 50% of cash in to build it out. It's done. Now it's worth more. So our equity is like way more than the bank even knows. So, so now what we're looking at is a cash out refinance house that we're living in, to pull some cash out to pay off that piece of land over there. So there's this whole kind of shell game going on with money just to like,
well, it's, it's, it's, it's all, yeah, and it's quite nice actually, because you're sort of, you know, you're in that position now where you can kind of start to leverage the asset that you've created already here, refinance it, and then kind of brings a bit more certainty to another piece of land, rather than it just kind of spinning out control.
Do you notice that? Yeah, go ahead.
I was gonna say, what is it like in terms of your property taxes there with when you've when you're building something, and then you're owning a property on it, and it's not being let out, et cetera.
You know, the property taxes are, what they are. It's California. They're high. That's just part of that's just part of it. There's nothing we can do about that. And you know, if the equation, the kind of the balance sheet equation changes if we go to, if we go to rent it and turn it into a rental property as a, you know, as a residence for ourselves. It's got kind of one tax equation the second we start renting out part or all of it. Now it's a business, right? Um. Now we can take all the money that we put into it and use that towards our tax basis and and actually make the math work out better in a way. Yeah, so there's kind of a whole tax game that can be played there, ultimately, if we decide to rent out harder all of this. So, you know, it's, it has been, I mean, it's, it's been kind of amazing to me. I mean, I don't know if I even quite realized it until you just sort of underscored it, but there is a way in which it's shocking how quickly, like, we went from two people living in a communal household with other another family a year ago, to buying a piece of land, you know, with a bit with a mortgage, to buying another thing with a mortgage to now, Like having this like little pile of asset and debt that we can kind of jiggle around and kind of do creative things with in the tiniest short of time with almost nothing going in like it's been sort of amazing to see just how that kind of machinery and the fungibility of like money and financing can, like work for you. And it's not like you need 20 years of, you know, experience or legacy or anything to even do it. You could just go do it, right? Yeah, you know, it's, it's kind of wild. You need a little cash to start. But you can also supplement that with, you know, some crazy elbow grease, if you have to, which is what we did on this thing. I mean, we were up on the roof in harnesses and angle grinders, like grinding mold off of the framing, you know, like, this is, it's so there's been a lot of sweat involved. But boy, if you can, like, just get that little advantage, suddenly a whole world opens
up. I mean, it's amazing that you know, as as an architect, what the sorts of savings that you can make in your own projects by one you know, if you want to kind of be the GC, and you want to take that a step further and actually be some of the builders involved in it, and there's plenty, no shortage, of architects who get a real kick out of doing that, and, yeah, and enjoyment, but also just in terms of the amount of information that needs to be produced, you can reduce that in a as a, you know, kind of a set of drawings that you might be doing for another external client, and the efficiency which you can kind of drive in the project, and what you can get in terms of the value that You're creating, it's enormous.
Well, that's what we did here, right? It's been kind of wild, because all I literally, I have two floor plans and one cross section through this building. I have no other drawings. I didn't draw detail, I didn't draw late, I didn't draw anything like there's just nothing. And I G seated myself. So we basically hired all the trades and framers and everybody, and I was just on site every day telling them what to do and where to do it and how to do it. And, you know, the sheathing of the building is covered with, you know, Sharpie sketches of like, okay, do this that way. Do that that way. But, you know, I didn't spend three months like building some immaculate set of drawings, like you say, that someone might ignore anyway, but instead, I was just here, you know, retaining that 20% that I would have paid to a GC anyway, not spending three months drawing drawings as an architect and just kind of Like, you know, pulling the thing out of the ground as quickly as possible, and getting to live in it. So for sure, yeah, it's kind of wild, if you even just flip that whole script of, like, what are the pieces that we do and don't do and touch, and how good and
and the other asset as well that you're creating is that when it's a project that's been driven by yourself is that you've now got this kind of, this building that can be a calling card, a marketing collateral, and certainly nowadays, with the with the kind of amount of social media and different ways that we can publish ourselves, you know, you don't, it doesn't. There's just, there's 1000 different stories that we can tell and indulge on one single project that we've got the behind the scenes access to, which can just enhance the brand and the marketing of the architectural services as well in the more traditional, yeah, kind of business model,
agreed, agreed. And you know what I'm actually appreciating about this crazy, topsy turvy thing that we've gone through here is that I got to do all that and practice that on this house, instead of on the italic a up the street, which is a new build, right? Like, yeah, yeah. Like, I was going to be the GC on that. But I really. Didn't know what I was doing now that I've been to GC on this, I'm like, Oh, I can do that. Like, that's, that's like, gonna be way easier, and, you know, harder in some ways, but like, I kind of know what I'm doing now in a way that I didn't a year ago, and so that's just kind of a nice accident that, you know, this whole crazy processes bestowed upon me. Tell
us a little bit about the the the client that we were talking about, where you're now, you're the joint venture that you're entering into. Because I think this is a really interesting story to kind of start to document. And you know, I'd love to kind of track, track your progress, along with this, with this, and it kind of ties in nicely to the kind of next stage of evolution of the sorts of way that you've been, you've been practicing with development already,
yeah, um, yeah, thanks. I, I mean this, you know, this idea again, it's, it's one of these kind of kernels that has been floating around in all the BOA discussions. And I always found kind of interesting this idea of like, and I think the way we've always, the way we had talked about it in the course, had been something along the lines of basically a sort of, you know, a bonus for some kind of performance bonus, in a way, right? The idea that there may be a developer and you're an architect, and it's like, hey, if I can get you two more units in this multi unit housing project, you know, what's that worth? And can we kind of negotiate, you know, some kind of performance bonus that comes as a result of us delivering right, which I always found to be really interesting and kind of exciting, way to think about it. Then just completely by accident, you know, I walked into a shop locally, you know, it's owned by a real estate broker and his wife, she does staging, which is why it's a shop, because all the staging stuff lives in the shop and then goes out and but you can buy it too. And just kind of, you know, start up a conversation with this guy who I didn't really know. Turns out he's a real estate, real estate agent, really, not even really a developer, per se, but he does develop projects once a while, when he sees a, you know, because he's out and about, he sees land, he's got a good eye for a good deal. And there have been, you know, points where, if he sees a good piece of land, he'll put together a little consortium of buyers, basically clients of his high net clients who have money that they want to diversify, and he'll make a little build, you know, put together a little LLC and buy a piece of land and build something on it. And so we got to talking, and, you know, it became apparent pretty quickly in our conversation that, you know, he basically had a piece of land has a house on it, that is, you know, almost falling down. You know, it's a kind of a rental building, but it really needs to go. And the plan is to put a multi unit building on there, probably between like 20 and 30 units. And we'll sort of see how it turns out, mostly contingent on parking more than anything, probably. But it became pretty apparent pretty quickly that, you know, he was sort of like, oh, you're an architect. And, you know, do you have you done multi, you know, multi unit work. And, you know, ultimately, it's, it started to become apparent to me that he just didn't have an architect, and that maybe they don't even have money for an architect, that somehow, maybe in the spirit of what I've been doing, which is like cedar pants, we don't actually know what we're doing, but we're going to do a thing, he somehow pulled together a consortium of buyers to buy this piece of real estate, and yet, they didn't really have a pro forma or fund set aside for any soft costs at all, but the idea was to do this multi family housing project, um. And so once that became clear to me, you know, we, you know, I immediately just broached the idea of, like, well, what if we, you know, what if we did some equity share kind of deal and you guys didn't have to pay me a penny? And, you know, as that conversation went the way it's turned out, and again, you know, it was sort of like, how do I make this? It looked like a huge opportunity to me. And it's like, how do I make this really compelling? And like, it's just an easy Yes. Back to that kind of friction question, yeah, this guy has partners. They're gonna have a say, you know, they're gonna be worried. How do I make this so easy for everybody that, you know, everyone says yes and you know, and maybe the upside of that is, like. It's actually so compelling for me that you know, that I'm willing to stretch well, one of the things he told me was that, you know, they don't know if they're going to build this building or not, that they probably won't even build it. They may just entitle it, which is a big deal in California, the entitlement process is fraught and long and protracted, and just getting planning permissions only is a big deal. And if you have planning permissions, selling that piece of land with those permissions on it to a developer or even just a sometimes it's a general contractor who just has some cash or some cheap financing and can pull out of the ground that that is that's done all the time, and it's kind of a low risk way for developers to make some money without, you know, worrying about market cycles and absorption rates and all the other things that they worry about. And so he said, Look, we probably just will entitle this and try to sell it. And at that point, I was like, Oh, wow. Like that process is, it's a lot easier and faster. It's still pain, because we're in California, and it just is. But it's way less of a lift than, like, doing a full set of all the way through construction documents and construction administration and all of that. So what I, you know, the deal I proposed to him was that we just, we just do it, and we do it kind of no money down, and that if we can get him entitlements, and we've set a time limit by a certain date that that we just take ownership in the project, and then when it sells, we have a proportion of a substantial proportion, it turns out, of of the Project value the way he had. So one of the ways I did this was I, so I went around to a bunch of my kind of developer friends, people I knew, from Gensler and som and elsewhere, and I said, you know, what's the, what's the per unit value for an entitlement on a multi family project? So what I mean by that is, like, you know, if you have a 20 unit project, you know, maybe those and you haven't built anything, but you're selling that land. That land is worth the cost of the land, or the value of the land, plus, you know, nominally, $100,000 per unit, they haven't built anything yet, just because you have an entitled planning permission. And so I went around and asked developer friends, and kind of built a spreadsheet looking at like, what is that value? You know, what's the over, under, what? How? You know, how bad could it be? How good could it be? And then, and then also, what I did is I asked him for his LLC agreement. I said I'd like to see what your agreement with your partners looks like, so I can understand what that whole math is like. So I could understand the split between him as a as a managing partner, and then his the general partners, who are, you know, really just kind of silent partners in a way. And what I realized is they've all put in cash. Put in cash too. So he's both a managing partner and a general partner, because he's also put cash in, sure, but then as a managing partner, he takes this huge swath off the top as a kind of fees, yeah, we'll make the project happen. Yeah. And so what I realized is like, Oh, well, sounds like you need another managing partner. You just need, you know, you need another person by your side who's basically splitting your fee. You're doing this side. You bought the land, you you structured the LLC deal. You're, a real estate broker, so you're going to sell it, but I can help you sell it as the architect, and I'll get you an entitlement. And so we just take that, that managing partner piece, and become partners in that part of the, you know, LLC equation. And that way, the people down here in, you know, the general partners, they don't lose anything. And, you know, we kind of went back and forth for, I don't know, two months or something on this, and just kind of talked about numbers and ratios and and eventually he was like, Yeah, let's, let's, let's do it. So, so we're doing it. Love it, yeah. And I mean what it amounts to, which is this is the amazing part is, like, we basically have 20% ownership in this project, which is a lot and, and the beauty of it is, I. Do my part at cost, right? Like, I, you know, like, I don't, you know, there's kind of a presume, presumed value of what we're delivering at a kind of a retail value of that. But I, but I get to do the whole thing at cost. And so the upside for me is, is huge. So you, so you, you've
negotiated your kind of equity, you know, your input at a certain market value, what you target value? Yeah, what you'd be charging. And that's kind of your token, but actually it's got, yeah, you know already, what it's costing you is 29% of that, or 20% of that, 30% of that, because that's your, that's the business model that you, that you'd be doing.
Yeah, great. Yeah. So there's kind of like a double bump, that whole thing, just like, makes much sense on paper. So at that point, like it, it was so attractive to me, and he was like, Well, you know, what if we, you know, what if there were all these scenarios like, what if we don't, you know, what if it doesn't happen, or, you know, what if, what if this, and what if that? And there are a few of those in our contract that we kind of manage, but, but for the most part, the upside is so great for me, and the cost is so little, basically, to make the yes so easy, I just said, Look, we either don't have the thing or we don't, and if we don't, we don't get anything. And they're like, yeah, right, like, they love that. So, so that's kind of been that one which has been real, and, you know, and then and, and we've got a great working relationship, and we're having fun, and we're both learning stuff from one another, and he's excited enough, there's like, you know, let's finish this one, and let's just go do another one, and you'll just be my managing partner on on these projects. Like, great.
Love it. Brilliant. Yeah, I think, I think that's a wonderful story. Very excited to hear how it how it turns out, what I mean, what? Yeah, for you. For you, obviously, you've got the risk. You've got the risk of, you know, the time and the effort and the resources that it will cost you to to put into it, and obviously the the risk that that could have on the business, and then your other, your other paying projects, if you like, yeah. But what else is at risk for you in that
there's really nothing else like it. I mean, that's there's that risk, and that risk is sort of absolute, right? Because there's not really much in the way of, like, other kind of compensation clauses or anything like, could we either deliver or we don't deliver? And that's the end of it. Now, it's different if they decide not to sell, or if they, you know, there are closets in there for if they change their mind or flake out or whatever. But if, if everything's go and we don't deliver, we just don't deliver. And, you know, that's, that's what happens. But you know, part of the equation here too is as as painful as it can be to entitle work in California, this particular municipality that we're in is very easy pro development. They've been pressured by the state to pull housing out of the ground, and so they're highly, highly motivated, in a way that lots of cities are not in California. So that changes. That's half the battle. Is just, do I have a planning, you know, director who's on the side of building something, you know, and if so, so, you know, so, you know, if so, then, then why wouldn't we do it? And, you know, there are other factors that I've looked at. We've looked at the city and part of town that this building is in, and the particular parcel and the the zoning map, and just to see, like if we had a crystal ball, knowing what we know about the city, knowing what we know about the planning director, knowing what we know about this particular neighborhood, it's kind of transitional, and it's sort of mixed between, you know, single story residential, And then this other side of the street is taller, stuff, all of that. If we had to guess, with 30 plus years of experience, does this look like this is going to happen? Yeah, like maybe no one will pull it out of the ground. But that's not my problem. My problem is, can we get this entitled within a year? Absolutely brilliant. So, so it's just kind of balance, you know, managing those risks and kind of putting together some, some sort of lens to look through at the whole thing and assess, like, what? What can we offer that's going to be so positive and affirming to everybody and so low risk to us that, you know that it feels good, kind of exitable. Love it
excellent. I've
been surprised. I've been surprised at how sort of, in a way, easy the whole thing has been, which has kind of been just another one of these, kind of, like, the surprise of like, how much leverage you can. Uh, acquire in so short a period of time, if you are willing to do some things, development wise, on your own, this has been similar. It's like, how much leverage Can you acquire quickly just by kind of looking at things carefully and taking things and taking
Yeah, and taking the risk, yeah, taking a risk. Brilliant. Love it. I will. I'm very excited about this, and I look forward to we'll touch base again on the podcast and hear how it all unfolds and and what's next. I think that's the perfect place to conclude the conversation. Ben, thank you so much for thank you so much for being so candid and just open about you know what you've been doing and the kind of deals that you've been structuring that's been very refreshing.
Yeah, my pleasure. It's been fun. Thanks, Ryan, and that's a wrap. Hey,
Enoch Sears here, and I have a request, since you are a listener here of the Business of Architecture podcast, Ryan and I, we love putting this podcast together. We love sharing information as much as we can glean from all the other industries that we're a part of to bring it back, to empower you as an architect and a designer. One thing that helps us in our mission is the growth of this podcast, simply because it helps other architects stand for more their value spreads the business information that we're sharing to empower architects together so architects, designers, engineers, can really step into their greatness, whatever that looks like for each individual. And so here, my simple ask is for you to join us and be part of our community by doing the following, heading over to iTunes and leaving a review of the podcast. And as an expression of our sincere thanks, we would like to give you a free CEU course that can get you one professional development unit, but more importantly, will give you a very solid and firm foundation on your journey to becoming a profitable and thriving architect. So here's the process for that. After you leave this review, send an email to support at businessof architecture.com let us know the username that you use to leave the review, and we will send you that free training. On the training, you'll discover what 99% of architecture firm owners wish they would have known 20 years ago, and the other 1% well, they just didn't even know that. They didn't know. Head over to iTunes and leave us a review now.
Now a message from our sponsor, Why settle for switching between multiple design programs to complete a single project with Vectorworks architect? You don't have to simplify your workflow with a hybrid 2d and 3d modeling environment made to support your work from the pre design phase all the way through to construction documentation in a single platform. Learn more about the tool that can help you accomplish everything you need with the free seven day trial of Vectorworks architect. Get started here@vectorworks.net forward slash Business of Architecture, the views expressed on this show by my guests do not represent those of the host and I make no representation. Promise, guarantee, pledge, warranty, contract, bond or commitment, except to help you be unstoppable. You.
