We have a willingness to just dive in in a way that I think enables a lot of architects who are ready to make that transition, indoor expansion and other work much easier.
Welcome to the Business of Architecture. This is a very special episode. So I'm your host, Ryan will art and a few weeks ago, I had the absolute pleasure and delight in hosting a live round table event in Manhattan, New York, in the offices of Andres Soleri, ancillary architecture, where we discussed the ins and outs, the benefits, the challenges, the methodologies of becoming an architect developer. So I chose this particular topic, because architect developer is probably one of the most mentioned, desires and aspirations that I hear from architects all around the world, the idea of becoming your own client, having complete freedom, having having building something which you're going to continually make money from creating an asset base, creating wealth, and getting to be creative and putting forward your own architectural ideology that can benefit society and contribute to humanity in a meaningful way. Why on earth would you not be an architect developer? So that's very much the nature of the conversation that we speak today. And we had some brilliant speakers with a number of Business of Architecture. Clients who begin with Jeff, Jeff Krieger, who is the esteemed president of Krieger architects. This is a Philadelphia based firm with a quarter century of service, they've ventured into the realms of residential and educational architecture, showcasing their versatility and dedication. And Jeff has recently completed a foray into development with a single family spec house. They've used inventive strategies and construction, financing and contractor compensation highlights highlighting their adaptability and forward thinking approach. So Jeff, as I said, he's just completed his first project, his first self initiated development project where he's financed it himself. He's raised the funds and now he's looking to sell the project. And he's very insightful in sharing some of the challenges, the insights, the insights of actually being an architect who serves this kind of client, and what he's learned from doing his own project. Next, we meet Marina, who has been on the podcast before she's a trailblazer. In self initiated projects. She is nothing short of formidable. In the past, she's developed a self initiated project that took them in its opacity to court and rewrote the zoning laws. This is she's on her fifth successful self initiated development project. She's led a process. She's led a protest to reclaim her unpaid fees. She negotiates percentage of sale price bonuses for services with developer clients. She has been featured in The New York Times for innovations with AD use. She has introduced gentle density for affordable housing into anti density towns. She has completed projects, utilizing a streamline concept and production service. She's even created a co working space to incubate Princeton's small businesses. And she has also built her own AIA award winning home of the year project that was modular in construction and installed in a single day, quite a force to be reckoned with lots and lots of experience here in both working for developers, and actually being a developer herself. And again, you'll get a sense of Marina her drive her vision, her mission is very much about what she calls loveable, livable density, having good quality, affordable housing accessible to everybody, and how being an architect of architect developer can actually facilitate that. We also have Andre Soleri. Andre is the principal of scenario architecture commands attention with his prolific body of work across New York, New Jersey and Washington State. His firm's accolades include a prestigious AIA, NY state Presidential Citation, which underscores his mastery in architecture. Andres role during the COVID 19 pandemic, especially in aid in New York City restaurants and small businesses showcases his dedication to community and innovation. He's won numerous awards. One of his projects was named by Fast Company Magazine among the 10 most innovative buildings of 2020. And Andre is a real innovator he has worked extensively with developers in New York, and is currently in the process of his first self initiated project, where he is putting and collaborating with a joint venture of a developer with putting in his own finance putting in his own sweat equity to create a project and he's also in the process of raising capital and developing a capital fund for future investments. Next on our round table is the formidable force, which is AJ Perez, and AJ has been practicing real estate design and development in New York for over 15 years, specifically, in Brooklyn in DUMBO. His career started as a project manager for Peter Walker and partners on the World Trade Center memorial in downtown Manhattan. In 2006, AJ became a founding member of ally development, a real estate development company based in Brooklyn, New York. Ally manage the acquisition the design, the capitalization, the construction and deposition of projects that seek to promote thoughtful design and add value to the built environment of New York City. AJ received his Bachelors of Arts from Amherst College and a master's of architecture and certificate in real estate from the University of Pennsylvania. He teaches and speaks regularly in the fields of real estate development and design has previously lectured at Syracuse University, Columbia University, New York University, and the University of Pennsylvania, Parsons, and Pratt. Ajay serves on the board for of the center of architecture, the Urban Design forum, and community bank, Delaware. He is a licensed architect, a LEED Accredited Professional and a licensed real estate salesperson. He lives with his wife and two children in Brooklyn, in one of the apartments have one of the developments that they were involved in and an ally. So again, AJ is really an incredible force. And for me, personally, I think one of the best if not the, one of the best example of architect developer probably on the planet, really, when what these guys have done, Ally is absolutely phenomenal. Go and check out the podcast I did with Jared, a few months back. Absolutely fascinating, absolutely incredible example of architect developer. And finally, but not least, we have the current AIA, New York president, and past Business of Architecture client, Matthew Bremmer, who is the founder and director of architecture information in New York. Matt's firm works include both customs, supportive, affordable and senior housing developments. They've got an extraordinary portfolio of beautiful high end luxury residential work. I love how that dovetails with their affordable, and senior housing developments and hospitality. They're currently engaged in the development of a 200 acre six generation old family ranch in the Texas Hill countryside, which they're turning into a mixed use development in Texas Hill Country, Matt has also developed his own house in upstate New York, the refurbishment of an extraordinary old church, which has been published in many magazines, you can go and check it out on his Instagram, as well as the development of many rezone properties which they use for short term rentals and leases. So, a really and of course, Matt's has a vast array of experience of speaking with and facilitating dialogue with hundreds of architecture firms in New York, many of which are engaged with working with developers or who have the aspirations of becoming developers themselves. So this was really a powerful dynamic group of architect developers, all with a very rich level of experience to be talking on this subject. There is loads of gold here, and just sit back, relax, and enjoy. And stay tuned for the next live event that we'll be doing here on the East Coast. We're going to have more of these. Also, I must give a little shout out to Aaron Pellegrino who was in the audience, because she makes some fantastic contributions in this podcast as well. So sit back, relax and enjoy the architects developer roundtable.
And now a word from our sponsor our cat. Hey, architect nation. As you know, running a small architectural practice has never been easy, and it's not getting any easier. solutions like our cat are here to help. Our cat.com offers free tools to help architecture and design professionals get your work done faster. It's an online database with a powerful search engine to find the right products for your projects, download. You can download BIM files, CAD file specifications right there on the very same day page without having to pay for anything or even register. Our cat.com also offers product videos, catalogs, screen reports, product service certification information, outline and short form specification generation and much more. archive.com is a one stop solution to help you as a small, firm owner, get the most out of you and your team's valuable time. You can check it out by going to our cat.com. That's Arca t.com.
Awesome, okay. Welcome. Here is where we're rolling. Welcome to the VOA architects developer events. Very, very special evening very pleased that everybody can make it in the real privilege for me to sit here and speak with you guys. Let me introduce the table to everybody here. AJ Perez, president of ally, you guys are you know, for me, one of the most exciting architect developers I've interviewed I've spoken with I've seen anywhere. Thank you for the scale of the work that you guys are doing in Dumbo in Brooklyn is fantastic. And, you know, us one of the reasons for this evening is because our Business of Architecture, the podcasts, we've been waving the banner of architects becoming profitable, business and money being something important, and actually creating equity and assets. And as architects were involved in a very important part of the built environment, and we're helping create a lot of wealth for people that tend not to be architects. And there's a lot to be said that we can take, you know, we can do great design, great architecture, and make some money as well. And I think the work that you guys have been doing is absolutely fantastic. Okay, so it's a real, I'll go go through and introduce everyone in a moment. But just to kind of set a little bit of context. I think the people that we have here on the table this evening, are at varying different scales of their development journey. Okay, so we've got people who haven't done it yet, we've been thinking about it, people who have just completed their first project, or those who are just starting to someone like AJ, who's their whole, their whole business model is the architects of development. So I think it's a real interesting mix of people and a very vast array of perspective. So we have AJ, and we have Marina. So Marina is based in Princeton, she is Business of Architecture client, as well. She works with developers, and in her own words, and I excuse my French share, she helps them not fuck it up. She's an advisor. She's a consultant, she's an architect, she's rewritten the zoning code, she sued the municipality of Princeton. And she's built numerous of her own self initiated development, architecture and projects. And she's now on her fifth, which I had the privilege of going visiting last week and toured around them. And it's super, super inspiring. We have Andre here who is hosting the seizing it says beautiful office, Andre is the principal of Soleri architects. They've got extensive work here in the city of Manhattan. You're in the process, actually, of developing your own kind of capital equity company. And you've actually started your own your first development where you're kind of using your architectural services as sweat equity for, you know, to get part of a development project, and you've got big plans of rebuilding my battle. We've got Matthew Bremmer, founder and principal of architecture and foundation and you're also the AIA, NYC, chapter president, and a real depth of you know, beautiful portfolio of delicious high end, apartments and an impressive array of affordable housing. So you're no stranger to working with developers, and working with people who are creating financial instruments with their buildings. And also you've got a very unique position in the architecture world, being in constant dialogue with a lot of practices, seeing their struggles, seeing those who are aspiring to become developers themselves. And I know that you've had your own ambitions to create development and those sorts of projects yourself. And finally, but not least, we have Jeff Krieger, who is the principal of Krieger architects. You're based in Philadelphia, beautiful portfolio of residential work. And Jeff has just completed his first development project, and it's now up for sale. Correct. Okay, so if any buyers here Jeff is excited there, Jeff is ready. So really, really excited to have you all and the first question that I'm going to pose to the panel and feel free to kind of jump in and say a little bit more about yourself if there's something that I've missed and wish but why Should architects be developers. And I will go for it, Andre. So
on a daily basis, we create value. And we typically do that for our clients. And usually, most of the time they appreciate it, sometimes they don't. And developers in particular, are tricky clients, right? They they're always after the bottom line, they, they have the things that are important to them, which obviously makes sense, from a financial standpoint. I think, as architects, we kind of look at the world a little bit differently, we kind of have some, I would say maybe the bigger picture involved the community, the environment. And there are ways to add value to projects, which, you know, maybe from like a short term standpoint, cost more, from a long term standpoint, add tremendous value. So in my experience, my first building here in Manhattan vidro up in Harlem, we, we made the developer an additional 17% on his sales with a million dollars. So it's a small lot building six units, not very big. But we we really, we were one of the first in Harlem to kind of do a high level building. And we sort of it was the design that brought that value. So you know, I think we can do that for our clients. And potentially, we can also do that for ourselves. And for me, personally, you know, I found a opportunity in these smaller buildings, which no one wants to do, they're incredibly difficult or technically difficult. There's not a lot of fat on them in terms of margin for error. And a lot of traditional developers rely on that margin of error to cover up all the things they don't know. And for, from a business standpoint, if you can handle that those technical issues, can actually open up a whole market segment, which is below the radar for a lot of people. And that's kind of what I'm interested in doing right.
Now, I would say that architects should become developers, if they're good at math. They have a stomach of steel for risk.
And what else?
And they have a sense of, Well, they have backup liquidity, because it's going to take that to start and be there when Yeah, I guess you could say design. Development, I shouldn't even say this, this guy's the Rockstar, but like, development is a design project. Yeah. It like everything's a design project, you know, your daily calendar, you know, is a design project with all of our lives are in 15 minute increments these days. You know, it's development is almost just its own typology of design. And, you know, I don't I have, I think my fear personally, is that I haven't learned that typology. I've never done healthcare, and I probably won't. So I'm like, Oh, my God, I'm too old to learn. And so like, there's something still about just the pro forma or about the whole, like, going forth with that level of debt. That scares the crap out of me. Right. And, you know, I think both the emotional and just the sort of tactical and technical is, isn't that is the aspect of you got to have that in your back pocket in order to be
awesome. But I say I'm testament to the fact that you're not too old. Because I started my first development project, right after my 65th birthday. And we can talk more about that later. But I think about the seat I was thinking about this evening in terms of the pros and the cons, because there's always a con, to getting into development to taking on a new market sector to expanding your own architectural practice. And we'll just focus on the pros right now. So why should architects become developers? For me, it's the two primary reasons or control and potential in italics, finding Agile reward. So in terms of control, when you're the developer, you don't have a client. And for those of us that do a lot of residential work, you know how wonderful that could be. You get to pick and choose the contractor you want to work with, you get to select the project, the site, the program, so you have absolute control over the project in terms of the program in the design, and the output. So that's, I would say, the first reason is control. And let's face it, we all have to have control over over our work. The second thing is the financial reward, which can be substantially greater than anything you can, you will earn as an architect on the same project. Obviously, there's a extremely high level of risk. And most of the time that risk relates to factors that are outside of our control. And that's what makes us all very nervous. But to me, those those are the two of the primary reasons to consider real estate development. Obviously, you need resources, and we can get into that later. But that's what attracted me. Thank you, Marina. Well, I
definitely agree with what you guys are saying. But to continue on the you need the math abilities, and the heart of steel. But I also found that architects as developers, are, at least in my experience, we do what other developers won't do, which is to piggyback on what Andre was saying is that I don't know. But I think everyone in the career in our career comes to the point where I really want to do this, and nobody wants to do it with me, that project that you always wanted to do, whether it's control over design, or whether you have an idea in the world, whether it's about sustainability, or it's about density, and you try to get either find clients who would want to do it, or you try to talk to your existing clients. And then at some point, you reach the point where no one is doing it, I better do it myself. Because there's no other way. At least, that's how I came to development was sort of what I call innovation out of desperation. Where, well, fine, nobody's gonna do this, I guess I have to do this. But I think it's also somewhat liberating. Again, what Andre was starting to say is that you get to experiment and make mistakes, and you're your own client, and you could cover it up. And not a lot of people are gonna find out. Hopefully. So, for me, it's sort of it's sort of building prototypes. And it's not that we're going to take the work away from other developers, it's a way to sort of shift the conversation, it's to try something different. And then they will follow. And that sort of opens the door for you and for your practice, but it also opens the door for others who would have been afraid who? Oh, okay. Well, you know, that wasn't so scary. They don't know how scary was and you know, where the mistakes are, you just sort of not say, but that's sort of been my experience and curious,
because I have so many thoughts right now. This is a wonderful conversation, and I wish it existed 20 years ago, when I went to graduate school. For me, it's helpful to just talk about my own experience of how I got to the place of wanting to be an architect developer. I was, I was a creative writing major, and I was making art on the West Coast. And I was starving, and I needed a profession. And I thought, oh, architecture, that wouldn't be good for me. It's a creative, but it also has left brain things that I think I have capacity. And I went to architecture school to make buildings and that's what I thought I was doing. And it became clear very early that architecture is a service profession, that a lot of the wins and successes were couched in terms of how people manipulated other people to get successes. And for whatever, clairvoyants at the time, it was like, Well, I don't I want to be there. I want to be where the owner is. And it was very nascent as an idea. It was only about wanting to make buildings. And we started from a place of believing that it was about control or agency, right. And I think what we've learned over time is it's really about access to where value is made and the ability to participate in the decisions. You know, one of the things we say a lot is, you know, anybody who points at a building and says, I did that as like it takes 1000 people to make a building. And the truth is, is there are always people that have a degree of influence control. Impact on a building just because they're there big huge pieces of civic work, right. And so, for me, it's for people who are no longer stimulated by the traditional practice of architecture in the service, professional architecture, which is not everybody, it might be everybody in this room, but it's not a lot of people really enjoy. I just love the problems, and I want to, I will love my work. And I'd like to solve those problems, and somebody's paying me great like, and that that's actually really great for a lot of people. Usually people come to a point where they're unsatisfied by something that won't happen, they see a business opportunity, they are ready to make a leap to take and they are compelled to be entrepreneurial, and to take risks and to find access to whatever it is they're interested in, in the development process. It's not always about money. It's not always about design, there's a lot of types of development work out there, right. And so one of the things we are very good at, as architects and the education is excellent, that is two things that go a very long way in the process of development. One is the ability to envision something is the ability to see what others can't see, and to tell somebody a story about what it will be in the future, because that's mostly all of what it is, is talking about something that doesn't exist yet, we're excellent at that we're really good at it. The second thing we're very good at is going way down the rabbit hole to solve a problem. Anybody who's ever been deep in the weeds of a warranty manual and thinking about where the detail is on the waterproofing, right? Like, we're really good at that. And that's just really complex problem solving. That is no different than opening it up in Excel or reading the legal documents or anything like that. And so we have a willingness to just dive in a way that I think enables a lot of architects who are ready to make that transition and or expansion and other work much easier. Because once you do it once you're like, Oh, that wasn't that hard, right? Then you start to just build the skills that are required to take on more responsibility to assume more risk and to participate more in where those values are.
I think it's really interesting. Everyone's kind of echoing a sentiment of freedom, as well, like, why do we? Why do we set up a business, we're setting up a business because of some kind of freedom. And immediately when we get involved as, as architects serving clients, and certainly in the residential area, that this can be very constraining. And we see opportunities and development is like the next level of complete freedom, both financially, both creatively, intellectually, and you know what, you're able to contribute to a piece of a piece of city. So why should architects not be developers? What are some of the reasons that we'd say no, architects should stay in their lane? We shouldn't be doing this. So I'll start with Jeff. Okay,
so you came with note, you're really prepared?
All right. Well, this is just to remember the key point, so why would you not want to take on real estate development? I think, first and foremost, it's your tolerance for risk, financial risk, which we've already heard a bit about, it can be incredibly stressful. In most instances, you're borrowing money. And suddenly, you're the one that has to pay that loan back. Right, if a client doesn't pay you that you have some recourse, but when it's if you're putting your own time and money into the project, and if there's something outside of your control, like the market has a correction. It's all on you. So you do have to have that steel stomach, I think was the phrase you use. But that I think, for me, that's the primary reason in, but that may be because it's just you're not at the right point in your career, you don't necessarily have the assets available. You don't have the confidence that you can pull this off even when things go south. And for me, this is something I had wanted to do for since I got out of school, but I just just was not at a point in my life where I could do it both financially, personally, you know, I had young kids putting away money for college funds and all sorts of things like that. And it just that was something I wasn't willing to risk at the time. Now they've adult ID and I felt as though I had a lot more opportunity to assume that risk
for you personally, we can bring in your family along with you on this journey or investment. And
no, no, this was not something to share with my partner at home. I mean, that's that's hyperbole. I mean, we certainly she was well aware of what I was doing. But the sort of the details of the ins and outs and what I was putting at risk financially, I kept a little bit more to myself. Yeah.
I agree more with the why, why should the white shark tanks not to protect themselves? Which is also the the one thing that the AI stands for? Can't stand?
Their residency left over?
I've got two months left. So yes, no, I think it's a real problem. Yeah, we're told we can't talk about fees. We know that that is collusion. And the notion that that is collusion is bullshit. We have like, doctors, lawyers, any other professionals come on, we've like it means like, we don't know. I mean, I feel like I do operate my profession, in a vacuum. I mean, it's almost like a sort of dirty backroom conversation when a colleague calls me to say, Hey, I'm trying to negotiate this on a big affordable housing project and an RFP, we just won, or like, I'm trying to negotiate an additional FF II project with a really difficult client out in the Hamptons, like, you know, there's all this like, we don't know. And suddenly, when you are your own agent for that. You actually get to set your own table. Yeah, in a way. And that's significant. And yes, yes. The tablecloth can be pulled out from under you at any moment, and that you'd have to be ready for. But yes, it's true that they can be liberating. And I've been, I'm actually right in the middle of a potential development project. We've done like, for small. I've done four houses for me and my husband. Yeah. So we're, like, sort of Airbnb, be them. And, you know, it's so effing refreshing because yes, you can take, you know, something that no one sees any value, and then you can turn, you know, you can polish a turd, as they say, yeah. And suddenly, there's a lot of value. And that's not something that you can always talk the client into. Or suddenly you do, and then they flip it for, you know, $7 million didn't pay your last invoice.
Alright,
so I completely agree about the, the issue of the AE fees and talking about it. And, you know, so I'm a co chair for the future of practice at a New York. And that is like the big elephant in the room that I definitely want to tackle. And that has, I think, structurally is the base of a lot of the reasons why architects are in the position that they are. I won't bore you with all of that right now. But that's a whole separate issue. In terms of development. I mean, I think like this, like risk is the main issue. But at the end of the day, we're one of the few professions where we are financially liable, even after we die. Right? If you actually look at the law, as like, and like fiduciary responsibility from financial advisors doesn't go that far. But it goes that far for us. So to me that the risk in development is actually less than that. So we are liable, like, as professionals, more than just about everyone else.
So this is really interesting, actually. Because, you know, being trained as an architect, we, you know, that the training does make us very fearful, makes us fearful of getting sued. It makes us fearful of doing something wrong. It makes us fearful of like liability. And being a developer is not that game. And it's a different mindset that happens.
Yeah, so we are our first event is a committee inherit I'm going to call on you in a second. We had a panel on the value of architects one of the things that we work that came up in our panel was this fear of. It's kind of instilled in us from the profession. And I mean, I thought Aaron spoke brilliantly about it. And I don't know if you want to say anything about that. But like, I think it's one of the things that's holding us back, sort of as a profession, I think we need to get past that, where we actually have a mind
dump. We have been called out. Yeah,
I mean, I think I don't like my back to you guys. It's weird, right? It's both like a top down and a bottom up problem, I think in the sense that you start by not talking about it to students, who don't think to think about it or to ask about it. And then it's weird in the office, and no one brings it up. And then you don't know how to talk about it when you're in a meeting. Or if you are on your own, and you get your first client and someone starts to ask you about fees. So I think it's as it Stokes, a culture of fear where people that are not confident, and I don't, regardless whether it's a development discussion, or any sort of business discussion, if you go in and kind of like, you know, ripping down and not really knowing how to answer the question of what the value is that you bring, you're not going to likely get the value that you're worth, and not knowing what others are charging. Again, you're right, discussion is not collusion, it's the most crazy thing. Our laws are stricter than the US as laws. But the AIA is the two if you don't know how to talk about money, you don't know how to price yourself. And essentially, in the development world, or even just in the country, you're just gonna get eaten alive. Like, I think from the bottom up, you don't talk about it enough with younger students, then they don't know they don't, when they get to managers, they don't know what to do. And then if you can't talk about it, as a firm owner, or in firm leadership with your peers, it's just everyone says, this is a race to the bottom. Everyone's just gonna go to the cheaper and cheaper and cheaper and then our value is not defined by what we can do. It's how much we're willing to do for as little as humanly possible. That's not sustainable. So thank
you very well said, Yeah, awesome. Marina. So
thank you, thank you, Erin for for saying these things. And I feel like I am living this in my development project in it very much echoes what Jeff was saying, because I do have kids who are one of them is going to college in four years. And the current development project is known as my kids college fund. And I asked permission if it would be okay to call it the college fund here today. And they said, Okay. But to Aaron's point, it's been very liberating, even talking to my kids about this, that, you know, we're gonna walk over there and get bubble tea, next to your college fund. And, you know, when we see problems and point out, you know, why are the window sills too low? Oh, my goodness, because the contractor was drunk, right? And things you find out, but it's sort of this, it's been very liberating to be able to talk out loud about these things, have a conversation around the dinner table, kids coming home saying, like, is the market gonna crash? And we're gonna go to college? I'm like, Well, you get into college, we discuss who's gonna pay for it? If the market crashes, the government's gonna pay for it. But it is risky, for sure. But I think one reason why. I'm not a sort of, why not be developer, I'm much more in the yes and camp, that I think the reason on some projects, I don't want to be developer because I have so much to learn from my developer clients, that I'm just like, I'm following you and taking notes on how you do all this. Raising funds, wow. Or they have amazing sites that I can't get my hands on, they already own them. And that's such a wonderful opportunity for me to sort of be there with them on this journey. And to have development projects as well. So I think that, you know, if, if they're already doing what you're super curious and excited about doing, you don't need to be your own developer, you just want to be part of the team and learn. It's sort of like any collaboration, you know, they're just collaborators that you could learn from and be, you know, open minded and engaged and you bring your value and they bring their value, but I would be in the Yes. and Cam.
I checked. Yeah, I
mean, there's a lot of reasons why, why people shouldn't get into development. It's definitely a very personal right, like the entrepreneurial decision is a very different way of living relative to how you're choosing to receive your resources in time and affects your loved ones, whether it's your child or your partner or your partner relative that, like, those decisions influence your life. So if you're very kind of church and state relative to like, I have my personal desires and goals and interests, and then I go to work and they pay me a salary, that doesn't work, right, because all of the development stuff comes home and you live and breathe it and think about it in the middle of the night and all of that. The other risk that is transitionary. And or you should really think about if it's something you're doing, and you have a traditional practice is the conflict of interest in balancing your time between the project that you're at risk on and providing services to somebody because when the two phones rang at the same time, there is no question which one you're answering at all. And so your service work suffers a little bit through emotion through attachment through just candidly the amount of bandwidth and energy you direct to it. The kind of mindset of like, I have two jobs, Rich's like I have a regular job where I do my work, and I'm going to get paid for it. And I'm going to fight the fight through the traditional service, practice, model and get, and then I'm also doing in my free time, on the weekends, at my second job to do the first project, the second home, whatever, is a really great way into it. But at some point, that's unsustainable. And you really have to just do one or the other, I think, because it's really hard. We realized that pretty early and it was like, we can't I just can't talk to you about your shoes in the closet and how it's gonna fit. And you know, whether your dog is gonna say, Yeah, I personal recourse over here like, Oh, by you know,
it's so funny. You say that, because I have the opposite problem. Like, my project is always laughs Oh, that's not good. And then your children go barefoot.
I definitely had the same. Yeah, same issue was that the development project took precedence over everything else in the office. And there were there were conflicts, there's no question.
So but so how clarifying right relative to where your interests were, right. But
if we can go back and talk about why you might want to become a real estate developer as an architect, the other advantage if you can resolve the conflict with your time, and you have a support staff that is experienced enough to take your shoulders, some of the work that that you do, there are tremendous benefits to the office, as well. And into your own practice, because like you learn how to finance the project, you learn what your clients are going through, you learn what's really important to the contractor who's building stuff, and a lot of the details that we pour over, don't really matter when it comes time to build something. Right? So I learned an incredible amount about the development process that I can bring back into my everyday architectural practice. And we know more about, like, how does the builder look at the site? What are the what are the constraints about getting heavy equipment, in and out of a lot kind of things we just never really thought about, we just okay, they'll fake contract, we'll figure it out. We're sure they're figured out. But maybe they're charging an astronomical amount of money, because there's some logistical problem with a site that you're not even thinking about. So it's put us in the shoes of our clients, and our contractors. And to me, that's, that's been really invaluable. And we've engaged our staff and lots of site visits and conversations about what we're seeing and what we're learning as we as we go through the build. So I think it's worth mentioning that it's, yeah, there's a lot of downside and conflicts with your time. But there's also benefits.
But this essentially, just don't say Marina and a lot of the work that you do. You're advising developers and actually your first project. So you can talk a little bit about that, even though you ended up suing Princeton, basically writing the code. It's my third, your third project. I mean, that's tremendous amount of risk in and of itself to even just have the resilience to go and do that most people would just break. And, and that actually opened up a whole new world of work with developers as a result, because you kind of demonstrated,
yeah, so this was the project that it came about, because I saw a problem that existed that I truly believed somebody needed to fix. And nobody was doing it. And we're through conversations with lawyers with clients. I realized that, you know, somebody's got to do something about it and sort of worked backwards. I sort of knew the answer at the back For the book that I needed a building that had two units, it had to meet these particular requirements that I could bring a lawsuit. So I was going out specifically looking for a building to match a lawsuit, which is really bad. But I think that it was one of those moments where I have tried to talk all the clients in the past Oh, well, we everybody would agree and the people in the municipality would agree that, yes, we have these laws on the book. And they're Yes, we know they're wrong. And they're don't comply with the state regulations. But, you know, everybody's been dealing with this. And at some point, so this building had two units. And the lawsuit that I brought to the town was about allowing accessory dwelling units, and also eliminating owner occupancy requirement, which was really big deal with the owner occupancy requirement where I had to, my lawyer didn't want to go there. But it was really important to me, because effectively what was going on is the local municipality was discriminating based on type of ownership. It's a complicated situation. But once we got it resolved, it created an opportunity where, basically, you could rent two units, you could sell two units, you could live in one, you can rent another one. For years. Everybody knew it was sort of unspoken. Yeah, of course, that's not legal. We all know that that's discriminatory. But there, nobody would do it. And the way I approached that risk was, I couldn't take it any longer. And I found the cheapest building, they came on the market, literally, and it took three years out of my life. And you know, I would receive these legal documents where my heart would sink, and I would just have to put everything down and go walk around the block a few times and just like up. And it was emotionally draining. But it worked. And I think what the opportunity that it created was, it was that type of project that created an opportunity for many other people. And many people followed and the opportunities and the options that are opened up. Even though I didn't make any money on that project, basically, my entire fee went into the lawsuit. Luckily, I broke even, you don't want to know what my husband said on the subject. And the kids were too little to understand. So at least they don't know. But at that point, what that created is a many, many different new projects that came after and both for me and for many other people. But it's also something that I truly believe in that we need different types of housing, different sizes. And that was just not an option. And, again, nobody was doing.
It's a great example of the opportunity of the model, right of taking the additional risk and the access that it affords. And the ability to lead relative to a lot of the people around the build industry who are providing service professionals don't have the ability to have the agency to make that kind of change. Great, great, awesome example.
So today, actually, AE we had our annual planning meeting with the co chairs and one of the big issues that came up was the need to develop new business models to create new opportunities. I think one of the best ways to do that is by architects taking on that risk to use the financial side of it as part of the design. So I think when you're younger is you know, in school, it's all about the building and the design and all of that which I love 100%. But when you actually start practicing, you start working with developers you start, especially in New York City, that is only half the problem. The other half of the design problem is the financial side. And I think unless you really dive into that you're you're not you're not fully understanding the design problem. And I think being able to lay capital to experiment in finding the best solution to a given problem. Most developers traditional developers don't have, I think the bandwidth or Maybe even the technical ability to understand those that potential things, I think there's there's a tremendous amount of value in that, which is untapped. I think that's what we all can bring to the table. And should, yeah. That's why we should get
it. Right. But it's what you guys are saying are basically the same thing when, when you're looking at the financing, you start evaluating decisions very differently. Right? You bring a very different perspective, you know, because I think for us, I always sort of struggled with this, what is the final product of an architect? Right? And a final product, I think we were told in school was the drawing, right? And then if that drawing goes out there in the world, and then does it get, you know, effed up? Or what happened? And then you're not there to say, well, you know, I didn't draw it that way, you know, stuff happened. So this is about, first of all, what, what is critical to put in that drawing, that will not get value engineered because you understand the finances, and you understand how it's done. And then sort of moving beyond what is my product of what I do, right. And then being a developer, it puts you into position, where, you know, I turned a corner from picking up my son from piano, and we turn the corner and I sort of gasp every time like, that is my product. It wasn't the drawing. And I'm like, Oh, my God, I made that. Yeah, that's
right, though, the agency comes with a greater degree of civic accountability, which is, you're more responsible for the decisions and you made them the thing that we see a lot with people who work in our office. And it's more true, traditionally, that stereotype people have been in practice longer is a lot of people want the constraints. And the the best anecdote is like when somebody does their first little renovation for their house, after being in architecture, school, and all that, and they actually have to make the decisions. And it's like, well, crap, I guess I'm not going to slap it out or do whatever I want, I'm going to do paint, I'm gonna buy that from IKEA. And they creatively solve the problem. Some people thrive on that. And they really like the ability to get in there, too, like, well, maybe that'll work. And I'll just peel this on. And I'll see if that holds up in three years. And like, I'm cool with that. Some people are like, really love it. When somebody goes in and says the blue one, and they go, Well, they picked the blue one. So I guess we're doing the blue one in it, and not my fault. And the more that you take on right, the more accountable you have to be to the decisions that were made is that as call it somebody has more agency and their civic things at the end of the especially the bigger they get, I mean, we're impacting, in our scale of our work now read, like large civic resources relative to jobs, and housing, and schools and public infrastructure and electrical infrastructure gets a lot of stuff. And there's a degree of like, wow, right. And so you want to, you know, you have to be able to be excited by that and or if that scares you, it's not for you. Right. And that's a scale things too.
Well, I think we did a really important part, which is notion of, I think, up until now, we've been talking about development as something which is about the architect, developer, whomever, building a product for resale. Yeah, that's sort of like the flipping model. Yeah, it's like, what once it's been sold, then like, you'll see how the balance sheet done, boom, done. And then that's the end of story. The other is what you're talking about, which is that civic component, or it could be even on maybe smaller scale, or more commercial scale, the component of continuing ownership, where the Civic ownership or the commercial ownership where maybe it's not a condo where you sell everything, maybe you are holding the asset, maybe you just donate your services, as you know, sweat equity for a restaurant or a hotel. And that's a whole different thing. What is the long term sustainability of this day? And that's something I've actually learned tons about from the affordable housing developers we work with, they actually care about, like how much it costs to operate their building on a monthly basis. And so they're excited to do Passivhaus. They brought it to New York and did the first ones and, you know, and now Aj is able to, like do school public schools that are Passivhaus which is incredible. Yeah. And so yeah,
I mean, I think the agency issues crucial which by the way, we're planning an event with our committee in the spring on agency, and I think you guys are all in so but One of the things that came out of our event about the value of architects was the lack of agency. How do you get Agency, and the agency is basically by having skin in the game. And, to your point about, hey, is kind of trained us to kind of back off of the risk is that is effectively created a loss of agency. And, and, and I think in the bigger scheme of things we don't like without the skin in the game, like, we're not really taken that seriously. So I think when, when, when you're kind of going all in, you know, it's that like that, that's the agency view. And I think, I think that's part of where the evolution of the profession needs to go is. And that's where we start, overall get getting taken more seriously, having a seat at the table, and being able to move the dial, and also starting to evolve. Is this models, financial models, all of those things and the quality of the built environment, because we actually give a shit.
Right? I'm gonna stop open up questions to the to the to the room, and I'm going to first start with do you guys have any questions for each other?
Was it worth it?
You're not doing I'm not done yet. When I have that first sale, yeah. And then I'll let you know. But I actually I can answer that today. Because even if I break even, which is a possibility, that's not so bad for the first time doing this. And I've learned so much that I can apply to architectural projects to future development projects, that I wouldn't hesitate to do it again.
Sometimes breaking even as a great outcome really is.
So we asked you if it was worth it. I
mean, I'm so privileged in love what I do, it's a really, it's a lot of it is just sheer luck and fortune relative to the partners that I've met. And where we chose to work in Brooklyn 20 years ago, whereas, you know, Brooklyn became Paris culturally relative to market demands. And, you know, it's, it's, it's, it's been worth the risk, it is a lot of risk, though. And it if you don't have the tolerance for risk, you know, and that's why it's sometimes it's easier to think about earlier when you're just dumber, and you're younger, and you don't know any better and have fewer responsibilities, which is certainly where I was when I started. But, you know, it was moments in the recession, and during the pennant race, where it's just gets really stressful. And the amount of recourse that I have now is ridiculous. But I built up a callus over time where I now I'm comfortable with it. And yeah, it was absolutely worth it. And I love what I do, and I'm really proud of the work that we've done. Yeah. What about you? Are you gonna keep going?
Well, we want to grow up and be just like you.
Don't be like yourself, just do more of it.
Right, right. But what I really need to learn is to give priority to my own work, because I just found out that for me, apparently, I'm always mine comes last. It's always every I always solve everybody's problems first. And then I'm like, it's in the middle of the night, and I didn't answer my own contractors. So that's a big Yeah, I need to start, you know, that's very hard for me. Yeah. Wow. Did not did not expect that. I thought that was a common problem. No, okay.
How Bray J. Yeah. Oh,
how was the
accrual and the sort of natural growth and scale? Part of growing that tolerance for risk and understanding start small and yeah,
it was it was somewhat linear in that regard. There were certainly like jumps in scale at times. But the first project we did, which we started in 2006, in a hit the financial recession, and in a $26 million project, we made maybe $100,000. And we were thrilled to be walking out alive. What was most interesting about that is it was it was medium scale was like 10, storeys. 20 something 1000 square feet, West, Chelsea, we were making it up, we had no idea what we were doing. And when we finished it, we're like, oh, you're a developer. And it was like really, like, you know, like, and it just takes one building and one project to validate and then we went from there and it's slightly bigger and slightly bigger. And then it was, you know, now we're doing really large projects. And it's the same process like as we all know, it's the same process whether you're doing a house, or a 40 unit, affordable asthma or a big big Campus, the same process the same amount of time. Sometimes it takes longer, but like, it's not like you can do a smaller project and do five of them in the same amount of time that you do one larger project on a scale or just to take longer than the scale definitely helps and scale. You know, over time, we've gotten better at our systems. We've tried a lot of different business models, too. We've done brokerage, construction, property management, some are better than others, right. And so we are in a place where we're developers, we're architects of record for our own work, there are certain things we don't do like the schools, because that's not a good thing for us to learn how to do as an architectural staff, and brokerages great is the most reward with zero risk. That's, that's a wonderful one, construction is terrible construction is really bad unless you can really scale up and be huge. So like, we figured out what we'd like try this self self. Oh, yeah, we did a couple of projects where we were architect of record, contractor, and owner, and like on the sign on thing, and we were all of the names, and we signed change orders for ourselves. Like it was that kind of a thing. Because legally if you keep it all separate, right to get loans and all that stuff, but that was not a good use of time construction is really, really a bandwidth suck. But yeah, we've kind of settled in our model. And and the scale is now kind of like, Yeah, let's do let's do stuff where we can have impact and try to participate in the discussion in the city about what's important.
That's really interesting. Is there a lot of I work with a lot of developers who also have the construction of their construction
fordable housing world that's about somebody else.
Yeah. Yeah. And the ability to wear multiple hats, not towards you have, let's say, three is probably not where you want to start.
Well, it's again, it's, it's back to that architectural thing we learned, which is like, Oh, I'm gonna have to really get in there and learn the difference, whether the latest 2700 or 3000, and where the controls go, and like will go way down into the thing. Right. And so our ability to do that is the ability to meet those challenges. Yeah.
Great. Questions from the audience? David Bucha, Nelly, those who don't know me, and this is a great panel, I met Jared 100 years ago, when he did PSAP. Library on Stan. Oh, yeah, I have won an award at Staten Island. But yeah, you guys crushed that's still in our office. Oh, it is. It's good. I bought my house in 1998. So I got into that whole world kind of was I wanted to build my house. Unfortunately, we had the staff suit, allow me to just run over there at a moment's notice, like, Oh, my God, I gotta go back to the house. And it was really rewarding. So you know, that was 2020 Dreams worth a lot of money. Always wanted to be a developer again, for my own projects. Really proceed? Well, you guys may or may not sure. Yeah, he was a keynote at one of the AIA in New York state conventions. 2010 2011. I was either presidents or past presidents. I don't remember what. And he just said flat out, all of us should be. And he didn't understand why more architects were not developers. And it's about the risk tolerance. But we are I think we are all risk tolerant by starting our own firms. So like, Okay, you're taught the financial risk by being kidding with it becoming a partner. And now you have skin in the game, starting from nothing, bootstrapping it up. So why not be? Right. And we've all worked with developers, and we see what they have to deal with. And sometimes they keep it all close to the vest with the finances, sometimes they don't. But I think it's something that we all have to learn. Because I think the the of the rewards is so much greater, and have to deal with the size of somebody's closet for the rest of your life when dealing with all your stuff that comes with working for a home loan or even for developer or multifamily projects or whatever the case. So that's that's the commentary. Read it in the question blank don't. Next.
There, I'm sorry, Sergeant firm compass, I'm on the brokerage side. So it's interesting, because I, it's interesting, because I ended up many times renovating my clients apartments before we put them on the market. So we get more money. And then I see myself making them $400,000 more. And you know, Andre, and I have had this conversation about well, why aren't I doing this? But from a developer side, I'd have two questions. One is in terms of the risks, we've talked about the risk, how do you get your head around? Or how do you get the legitimacy for going after that first developers financing? Like who's going to give you money when you haven't done it before? And what were the challenges you faced in? Sort of, because to me, that I think is a big part of it, you can have all the ideas, but am I gonna get the money and he's gonna believe me enough to do it. So that would be my first question. And if you want to answer that, and then a second question, yeah, I mean,
I think this thing that most people focus on is raising the money. But there's really two pieces, it's raising the money and then finding the individual the entity that can take the guarantee. And that's, that's the individual or the entity or the group of people that can sign the guarantee. That requires a balance sheet and somebody that's willing to risk it. And so in our instance, when we started, there's actually an architectural client of my partner Jarrods, who has been our partner for now almost 20 years, who is a high net worth individual who was looking for actually a home in Manhattan, and was saying to us trying to do work, I'd rather invest in the deal than pay for something at market. And so go ahead, let's try it. And if it works out, I'll make money and if not, I'll just take the penthouse and I live there, and that'll be my investment, right. And that's what happened. And she was able to sign on the guarantee. And so, you know, starting out, it's about trying to build the resources to both have the cash to invest and to have some assets, where you can put them up relative to the recourse, and over time, you can accrue them, you know, at a certain scale, it starts to become the math changes, and the metrics change relative to what you're covering, because it becomes more about how big can the problem be to solve versus like, it needs to be the size of the project, or needs to be two acts of something like it, you know, we do very large projects, I don't have the balance sheet, that's like when I could buy that whole project. But like, it's not it gets into more rational, but certainly when you're starting, you kind of have to have that resource and both the resource. So yeah, and you know, you can buy that you can pay for it, that's some people do that, like there are people who are in industry that can have a big balance sheet that know how to solve the problem, if you fall down where you can pay them a point or two points to borrow their balance sheet to have them sign on for recourse that requires a relationship, and you really have to get to know them. But that's out there.
Soon enough to get there.
Andre was also saying that for you guys, as architects, the risk follows you or the risk falls you after death, right? So I guess from a developer side, my thought always goes to the worst case scenario as well, as a broker in my mind, I go, Well, what's the worst case scenario? So you develop something and obviously, in Brooklyn, 20 years ago, there was a lot of things that caught up with developers after the fact. So how do you protect yourself as a developer from the lawsuits that might come later? Or how do you if you don't protect yourself? How do you sleep at night? Not having to worry about that?
It's a great question. I, you know, the approach that we've taken has been to be very transparent and as human as possible, because anybody can sue for any reason doesn't have to have any merit at all. And the the metrics and see there's, there's one lawsuit for every time condos made, that's like the actual metrics. So we've made 100 And something condominium units, we don't really do that anymore, we now have two rentals. And we've had one litigation that's still going right. And because that's just a pain, you know, you have to do the right thing and feel like you're accountable and making the right choices. And it is one of those things that architects I think don't like which is, you know, the part that people complain about a lot want to get past is when I show up, all of the priorities and principles and decisions have already been made relative to the biggest decisions, which is true, the owner has done that already. And then at the back end, I get to leave, right as the artists like I'm done, my services are done, CIA ended, I'm gone, right? But maybe I'll answer a question. If you have it. As the owner, you're still there. And so one of the advantages of the model is, we know how the building works, we continue to solve problems. I continue in our live in one of the condominium is when we made to go and solve people's problems, because it's the easiest and fastest and simplest way to do it, because I know how it was made. And, you know, if you're not interested in that kind of availability, and exposure and transparency, it's that it becomes much more arm's length, and you're speaking through somebody else. And then there may be attorneys. And that's where litigation happens. It's really hard to sue somebody that you know, personally, that's been in your home fixing your toilet, right? That's not a strategy. That's just how we approach the work that we're doing. Right, which is, I know how to fix that shirt. You wiggle this, it's done, you know? Right, right. To be a bad time to stick around?
Well, I will definitely say, first of all, is I'm an architect. I was just curious if you could talk at all about the pluses and minuses of potentially sort of as the architect going in sort of deferring your fee in exchange for a kind of equity interest in the project.
I guess I can talk a little bit about that. I have done both what you're describing where I worked with a developer who really wanted to work with us but couldn't afford or fee at the beginning and we sort of made a partnership that we would get paid at the sale and And that worked out, okay. And it was really interesting because the day of the sale, she came running with the check, I was a little nervous. But that we did charge a higher fee for that. But moving forward, I would much rather recommend something that I learned from attorneys where they basically said that this attorney that I've worked with who you get paid in part, while especially if you have staff that are working for you, you need to be charging for your everyday expenses. And because you have to pay people otherwise, you're basically giving somebody alone, and I'm not a bank, unless I'm charging bank rates. So what we do sometimes is organized the fees where we charge our operational, what we need operationally as we go along, and then we defer basically our profit to the end and up it a little bit. I have also done, I have a project going on with developers right now. I don't consider it my development project. But we basically have a percentage of sale that we're going to get. So we're getting a base fee based on what we're doing, right. And I can pay my staff and I could pay my mortgage at my own house, and my rent and my office, but at the end of the project sells really well. At that point, we get a bonus, which is effectively helping our client. But what that allows us to do is, in negotiations, this was a developer that we've never worked with before. And while we were negotiating the field, at some point, they stopped and said, Oh, wait, you're gonna be on our team. You're interested in US selling this project better? I'm like, Yes, I'm trying to actively encourage you to keep me involved that I you call when you need and I will give you advice so that this will sell better. And it was sort of interesting that it clicked in their mind was like, Oh, you're part of the team. Like yeah, exactly. So that that's the model that I prefer right now, rather than the sort of the holding your breath is like. Yeah,
I'm just gonna pause it here and say, Thank you so much for AJ, for coming along. Thanks so much. He wants to follow every conversation. Awesome. Thank you. Thanks. I do one last question from Francesca.
So Francesca Bastianini. I'm owner of side studio, which is a lighting firm. So rather solve this question, how does being a following this model change or impact your process in terms of bringing on other consultants and other jazz it impact? And perhaps Marina, what you were saying in terms of staffing and who's working for you?
I again, definitely would recommend that all of the consultant fees are not deferred until the end. And I guess I'm a little paranoid because when I get a bill from a
consultant, I'm like, Oh, my God, I
gotta pay right now. But yeah, I would. But it also makes you going back to what Matt and Jeff were saying is that it makes you really evaluate is this person adding value? And I've had, you know, the structural engineers, clearly not adding value over here. Right, I've had some issues. So then at that point, I'm like, I don't know, do we need this guy? Right. But it really puts everything in perspective where you wouldn't be doing the same level of scrutiny. You know, when it's like, Okay, you guys want to hire this consultant? Okay. Right. But to me, it really sort of narrows it down, what is really important what, what is going to deliver that result? And then if this if I have these consultants, or subcontractors or suppliers who really bring value, because and the value could be they made my life so much easier. We're working with that person doesn't matter. They're a little more expensive, right?
I mean, in essence, you are the client, when you're the developer, and so you have to do that assessment and say, is it worth paying this consultant, this contractor this sub, what they charge, am I going to get out of it something that will add value to the to the project, and that's a slightly different calculus than if you're working with a private client. But in our Okay, somebody was the same thing. We tended to use our team because we knew we could count on them for quality work and that they would deliver when we needed them, because we haven't even talked about schedule tonight. But that's, that's a whole nother topic.
Perfect place to conclude, we can continue the conversation by the drinks. Thank you very much to everyone on the panel. Thanks for everybody coming online.
And that's a wrap. Oh, yeah, one more thing. If you haven't already, head on over to iTunes and leave a review. We'd love to read your name out here on the show. And now a word from our sponsor our cat. Hey, architect nation. As you know, running a small architectural practice has never been easy, and it's not getting any easier. solutions like our cat are here to help. Our cat.com offers free tools to help architecture and design professionals get your work done faster. It's an online database with a powerful search engine to find the right products for your projects. Download. You can download BIM files, CAD file specifications right there on the very same page without having to pay for anything or even register. archive.com also offers product videos catalogs, green reports, product service certification information, outline and short form specification generation and much more. archive.com is a one stop solution to help you as a small firm owner get the most out of you and your team's valuable time. You can check it out by going to our cat.com That's a RC at.com. The views expressed on the show by my guests do not represent those of the hosts and I make no representation promise guarantee pledge warranty contract, bond or commitment except to help you conquer the world. QRP DM
