Design is it's critical to a project, but it's not as we've been talking but it's a very small piece of the project. Hello
and welcome to the Business of Architecture. I'm your host, Ryan Willard, and it is with great pleasure that I introduce today's guest, my good friend, Jeff Ross. Jeff has a career spanning over 15 years in New York and beyond. He has established himself as a luminary in the realm of real estate development, renowned for his interdisciplinary expertise and unwavering commitment to quality. Originally hailing from Canada, Jeff has called New York City his home for over two decades. His journey began with a solid foundation in architecture, having trained and worked in prestigious firms, both in New York City and internationally. However, it was his transition to the ownership side of real estate development that truly marked the turning point in his illustrious career. Jeff's impressive portfolio includes overseeing some of the most ambitious and high profile projects with a combined value exceeding over $3 billion his work spans across various states, from large scale developments to the meticulous repositioning of assets in the heart of New York City. In today's episode, Jeff and I discuss the fine art of site assemblage and air rights. So this is going into a lot of detail about the kind of work that gets done before architects are actually involved or even invited to consider the site that developers are accumulating and acquiring. We also look at the finance stack, the different ways of funding and investing and how developers are raising capital to be able to get these projects up and running, we look at the different ways that developers actually make money, so we go deep into different business models that developers have, and different ways that they collect fees and actually make profit and money out of The projects, not just including the sale of the final development. And we also take a behind the scenes look at what some developers are looking for when they hire architects. So if you are working with commercial developers, particularly sophisticated developers, this is a very important podcast that I encourage you to listen to I'd love to hear some of your thoughts about some of the things that Jeff is sharing. You can share those in the comments, or you can email me directly at Business of Architecture to stick my name Ryan at businessof architecture.com So sit back, relax and enjoy the fantastic Jeff Ross, this podcast is produced by Business of Architecture, a leading business consultancy for architects and design professionals. This episode is sponsored by Smart practice. Business of architecture's flagship program to help you structure your firm for freedom, fulfillment and financial profit. If you want access for our free training on how to do this, please visit smartpractice method.com or if you want to speak directly to one of our advisors about how he might be able to help you, please follow the link in the information. Hello, listeners. We hope you're enjoying our show. We love bringing you these insightful conversations, but we couldn't do it about the support of our amazing sponsors. If you're a business owner or know someone who would be an excellent fit for our audience. We'd love to hear from you. Partnering with us means your brand will reach over 40,000 engaged listeners each month. Interested in becoming a sponsor. Please send us an email at support at Business of architecture.com. Jeff, hey, welcome. I'm good. Welcome to the Business of Architecture. Thank
you. Good to be back. Absolute
pleasure to have you on the show again, and this time, we get to do it face to face in your fantastic offices here at CMD. Yeah, last time was covid days it was we were locked away in tiny bedrooms in opposite sides of the Atlantic. Yeah. And it's been great, because since then, you and I, and we've met a number of times, we've had some fantastic dinners and some very good discussions and some very good discussions, which was why I was very keen to have you back on the show, because some of the insights that you've been sharing with me about development, how real estate works, particularly here in New York, has literally made my mind melt and dribble down the back of my throat.
There's lots to chew on. Yeah.
So let's talk a little bit first about your role. You were originally, for your sins, an architect, and at some point you crossed over into the dark world of development, and have found a far more you know, you found your your calling and your location. And so tell us a little bit about your career as an architect, what poured you into development, and then we can start talking about, you know, some of the things that architects might not know about, what actually is happening behind the scenes of developers when they approach architects. Yeah,
sure, of course. I started as an architect. I went to school for architecture. I always wanted to be an architect, since I couldn't remember, I think shortly. After a dump truck driver and astronaut architect was the next on the list, moved to New York, got a job working in architecture offices, small ones. There's a whole tier in New York of very small, mid sized, 2030 people, and then it really jumps up. So I was in a few 2030 person offices. Enjoyed the work, but just kind of wanted more. It wasn't, it wasn't a big enough picture for me. And the the clincher was I had flown down to Chevy Chase, Maryland to work on a retail project, flown in for the day, made sure that everybody had their tasks, made sure the contract was on top of things. Plumber knew where things were going. The owners rep had about just flowing. Got back in the car on my way to the airport and said I was the lowest paid person there today. I need to make some changes. Yeah. So I was talking to a very good friend of mine who was, is still an architect at a great firm in the city, and he knew somebody who was a client of his who needed somebody like me. And he said, you want to change the development. Why not? And the second I got there, I realized that this is the world that I wanted to be in, because it wasn't just sitting around drawing window details or making sure that the plumbers put things in the right place. That's part of the job, too, but it's also managing the architectural teams and the engineering teams. And then you see the bigger circles, so you see the finance aspects of things, where you talk to the leasing team and see what they need, and you see how the architecture part of it is just one little piece in a very large picture. Yeah, that's fun,
amazing. And so when you first moved over into development, what was your kind of role? What were you doing? Were you still working as an architect inside of a development organization, or did your duties start to shift and change?
The architectural knowledge that I had and the architectural skill set that I had was important. I wasn't designing anything, but I was guiding the design right, and it's something I still do to this day, which is get the best work out of a set of architects, as you possibly can, cajoling, threatening, encouraging, whatever it takes people respond differently, but the job is to find the most wonderful design that a talented group of people can put together for you. But then there's also managing the rest of it too, the financial, financial side of things, there's whole teams of analysts who are doing crazy, insane financial calculations, or people who are pulling in money to fund a project, and they all need information, too, so you have to sort of shift your architecture hat a little bit and sort of think about what is it that the other person actually needs from you for this, right?
So how would you describe your role here at CMD?
CMD, we aren't developers, but we're, we're a project management group. So we run project for other developers, right? So developer comes in and they might not have the experience to pull off a job, they might be a little bit small, or they might have picked up a project from somebody, and it's a little that's a little broken, so we come in to fix it, or to provide the bench strength for people that just don't have it. Big name companies like the headlines that you see in New York, real estate, they've got us in house already. So we're serving a whole different tier of people who have incredibly large projects but just don't have the right people, right?
So a company like Vornado, for example, they'll have their own. They've got project managers in house, dozens of me in house, right? Got it. And so you guys are kind of like an outsourced team for developers, like a plug in office, essentially to help. Essentially, yeah, got it. So what kind of developers would be using your services? Then
we have some. We have a food production company. We've now done three facilities for them, right? Managing their architectural teams or engineering teams and the construction teams getting the projects built. You know, when you learn that the factory is going to receive 20,000 pounds of cheese in a day to make food, your mind sort of boggles, right? We're doing 150 acre resort and branded residence project in the Caribbean, right for a team of investors who hired a hospitality company who hired us, etc, etc, etc, and then it's our job to find the architects, the engineers, manage them through the process, and manage the politics as much as possible to right?
I know we've spoken about the hospitality world before, and I found that very fascinating, how you were describing, actually, there's a group of investors. They're kind of provoking a project to happen somewhere. And they actually bring in, bring in one of these big name hotel in hotelier groups. But they're, they're the hotel name is like the brand, and they're going to run it. But then there's all these other players that are involved. Yeah. I mean, at the company to
it's hotels are strange, and every time I think that I understand how the pyramid works, I'm always surprised that there's another piece to it somehow. But yeah, typically the brand that is the hotel, the flag, essentially aren't the people who own the building, and they're usually not the people who built the building, either. Uh, there would be a team of investors who built the building and brought in the flag as like the consultant or slash management company. On top of that, there's other consultants that sort of factor into the process. So there's, there's many layers of people in hospitality project. The the actual fact that you're there renting a hotel room for the night is not where most of the people in the project have made their money, right? That's, that's how the hotel, you know, it's weird, right? Well,
this is what we're going to start getting into, because, like, the the the business model that we might assume, where money is being made is not necessarily always where the financial uplift is actually happening. So we're here in the heart of Manhattan. And, you know, it's quite appropriate that we're talking about deal making. You know, Manhattan kind of famously was made on a deal 24 bucks, wasn't it something
like that? I don't know if that's really the truth or not, but that's, that's the mythology. So we'll go with
we'll go with it. I like that mythology of the of the story. And it brings up a question that I think a lot of architects are actually very ignorant to, what actually developers do, particularly in more sophisticated developers, perhaps Mom Pop type of investors. They've got a bit of cash in their building, and architects can bring a lot more strategic value to a project, but certainly at the scale that you're working at and the scale that the majority of Manhattan is operating on, a lot of stuff has already been done, and it's a very complex, interesting world where things have been pieced together, and the architect has got a little hole where they're kind of being which has already been pre defined for them, And now they're being kind of asked to fit into it, so that perhaps we can start, start a little bit about so what kind of work has already been done before the architect gets involved,
before the architects got involved, typically, the site has been identified like, let's assume you're going to doesn't matter if you're doing an office building or a residential tower or a Hospitality project of some kind, right? The site's been identified. And if the site hasn't been fully purchased already, then it's probably in the process of being purchased, either directly as a single piece or by building up an assemblage. Assemblage is more of a New York thing. I mean, it happens everywhere, but it's almost a game in New York, right? All the lots in New York are standard, 25 by 100 and then they've been pieced together into larger and larger lots. So if you want to build an office tower, for instance, somewhere, you're going to need a whole bunch of land, and that land might be occupied under the buildings. You're going to need to find out who owns each of those buildings, make them a deal to buy that building from them, you're going to have a bunch of tenants in that building, office or residential, who you're going to need to get out, who have leases that run between one and 10 years. If they're close to the end of the lease, off they go. If they're not close to the end of the lease, you're going to need to buy them out. And you're going to need to buy them out in such a way that they don't get wise to the fact that you're onto something much bigger, because then they're going to want more money for it, and then you have to do this as you go, there's a developer. There's a developer in town, Gary Burnett, and he's with extel right he is one of the smartest people at this he's actually working in assemblage right now on the other side of the block from his diamond district building. It took him It took him years, probably, probably a decade, to put the land together. And because he's smart and very smart at this, he knew enough to not let on. So every purchase that's made is made under a different LLC,
right? Of course, because you go on to something like traded.co you can see all of the acquisitions that are being made and who was involved, and there's that high level of transparency with that. Or, like,
not so much, right? They've tried, in New York, especially, they've tried to bring more transparency to the LLCs, largely because, you know, ultra high value residential properties were really just as a way to hide money from somewhere else or offshore money from someone. So that's a whole other topic that we can get into, right? But at a space, if you need to build up an assemblage of 40, 5060, different properties for a very large project, we're probably realistically five to 10 for a small one, if you buy the first one, you don't necessarily want the fifth person to know that it's you who bought the first one, because then they're like, Aha, he not needs my piece, and I'm going to charge him more for it, right? And the same way, once you get the buildings and you have tenants in it that you need to buy out of their leases, because you don't want to wait a decade, Yeah, same thing. They can't know that you're buying them out to do something big, otherwise it's going to be incredibly expensive. Gosh,
I never even considered this, because obviously there isn't somewhere like here. There isn't just bits of land lying there open. You've got this stuff already occupied. It's very rare that you're going to get completely empty. Yes. So this can take years.
Yeah, it can take years, depending on the scale. The building can take years. And it doesn't always work right? There's a. I think we talked about this once before, like the cool concept of the spite house or the nail house. Yes, you see this in China all the time, a little house with a highway going around it, right? But it exists in New York as well. So on the south east corner of Macy's, there's a little, little, tiny building. And if you look the Macy's building carves around it billboards on top, right, it flows into the store as a single piece. It's a separate lot. It's owned by a different family. To this day, Macy's pays them rent. Wow,
wow. That's amazing. The back corners of
Rock Center on the back side of 30 rock on the west, on the north and the south. There's a bakery on the south end and Brooks Brothers on the north end. So Brooks Brothers on the north end, and there's still like little old four story homes, they've been guided inside completely, but they were people who held out they didn't want to sell.
So this is becomes very interesting then, because actually, it's starting to illuminate another level of risk that perhaps an architect is completely unaware of of the sort of work that's going on the developer, where they could be spending a long time actually putting together this sort of assemblage. So, and they've got to be finding the resources from either they're spending their own money or they're bringing in investors to purchase the land. How does, how does that work?
That depends wildly, right? And it depends on sort of what your business model as a developer is so we typically, I think most people, architects, average people, whatever it is, are thinking that developer buys the land with his money or a loan to buy it, and sits on it until he has enough of the pieces assembled. But that's not always the case. There's this whole structure in development, in most deals, really, in any industry, called the debt stack. And the debt stack is, you're buying home, right? You go to your bank, I'd like to buy a home, and they will give you a loan for the home, but we're gonna need 20% down in cash. And you're like, Okay, you know, here's my cash. They give you a loan. Off you go. But if you're a developer, you might not want to put down 20% of your cash in something, so you get another level of debt on top of it. It's a mezzanine loan, right? And that's been recently restructured since covid Because the rules went people got a little bit wild with it, so
you're getting a loan for the down payment, and then you're getting a loan for the major principal, correct?
But often that's not enough to cover it. So you'll bring in investors, right? And they'll and slowly that 20% or whatever is required, you know, for that's the purchasing land or a building, if it's construction, you need 40% cash down, right? You can add in investors into that as well, right? And depending how much money they've put in, what deal you cut with them and where they are in the debt stack. It gives them control over the project, right? The bank gets paid first, because they're banks. They're good at this. They've been doing this a lot longer than anyone else, right? So they really have no risk. So the interest that they're going to charge you is whatever the going rate is, 7% or something like that right now. But as you get into the more complex bits of money, the mezzanine debt, or the investor debt, or things like that, they know that they're they're second, right? So if the if the deal doesn't work out, if the project goes sideways, banks getting paid first. If there's any money left over, it goes to them, right?
So they're going to have a higher rate of interest because they're taking more risk. Correct?
Mezzanine loans are, I don't know what they are, right now, probably like 12 to 15% right? Then you've got hard money, which is like, bad example. It sounds like Pawn Shop money, right, right, right. So even higher on that. And then when you get into equity investors, they're bringing in money, but they they're so far down the stack that they will they want a higher rate of return, or they want more control over your share of the deal, right? So in take it on a little bit of a tangent, away from the architects for a second, but in 2009 when the global economy fell apart and real estate fell apart as well. There's a firm developers in New York, Savannah, again, like very smart people. I mean, there's no stupid developers in New York, yeah, otherwise they wouldn't still be around. Yeah. Savannah had teams of people, and all they would do was dig through the books that were the debt stack. So 2009 it was all electronic, but you would still be given paper copies of the model of money from the project, and they were, I don't know who does it, I don't know why or how it came about, but they'd be bound the same, and it was like an encyclopedia set. So people would just go through the entire debt stack find the cheapest piece of money that they could purchase to give them the most control over the project,
right? So they're buying people's bits of debt, right? So if
an investor or mes loan or hard money, whatever it was, had, let's say, $100 in the project, right? Project's not going to work out. It's pretty broken,
right? Oh, my God, you're right. Okay,
you walk up to the. You're like, you've got money in a broken project. This is not gonna go well, freaking out $100 we'll help you. You're never seeing that $100 I'll give you 60, and it's now mine. And then you do that enough times, depending how complicated the stack is, and you can really, really stick at some people, and you show up and say you're not making any money, not only because the project's broken, but now I control a significant portion of it. I'm going to make sure you don't make any money. Why don't you take the deal that's on the table, and suddenly, now, if you've done it well, and Savannah did it very well, you control the entire project for significantly less money than went into it in the first place. So if you're in a broken economy, it's a little less broken because you've now brought the cost of the project down to something that's going
to work. Gotcha? Wow. Okay, so that's how people can kind of come in and swoop possession or control over a project where another developer has been plowing money into it and now they're getting burnt, correct? What about the acquisition of a plot of land? Is there any other costs that are associated with just holding on to the land? So obviously, you've got interests that you're paying on loans if you if you're leveraged, are you paying taxes on the land as
well? Yeah, you are. So back to the assemblage thing, right? If you're building this assemblage, you're holding some of these properties for a long time. You don't want to be emptying it out first thing, right? Because then, then you're paying for the land, either for the taxes or for the upkeep of the building that's there, or the financing cost to demo the building down. If you demo it, then that's a clear sign to everyone else that you're trying to get the land out from that something's coming that they should be part of. So you need to structure these things in such a way that they're still going concerns, and that they're still going to be able to just survive,
right? So, so you might go and buy some like, where there might be retail, and try and keep the retail just doing what it's doing, collecting rent off it for a while, until you finished your assemblage, and just
paying the debt. Got it. If we can pay the bills and cover the interest on the debt, it's all you need to do. Wow.
Okay, so that's that's quite fascinating. Let's talk a little bit about air rights as well, because this was also a very thing that kind of blew my mind. And it's, it's almost like we're playing a game of, kind of real estate Tetris, where you're there's this kind of art of trading space above a building which can be collected and then stacked on top of your site where you want to go to. So what is an air, right? How does it work?
Sure. I mean, it's, it's in many cities around the world, there's usually zoning rules that say, how tall, how wide, how dense something can be. Some places don't. Houston, I don't think is a whole lot in the way of zoning. If you can put enough parking spaces for the building that's good enough for them, right? Right? New York, though, has very specific rules, and it stems from, I think, like 1918 which, if you go up a certain distance, you have to start to go in. Because people were realizing, as these 20 and 30 story buildings were popping up, straight up off the sidewalk, that the city was turning into canyons. It was dark and it wasn't pleasant. So the classic form the Empire State Building is sort of following these rules. Yeah. Now the rules state that you can only build a certain percentage of your lot area, or certain multiple of your lot area, right floor area ratio. So if you have 1000 square foot lot, and the far of the site is 10. You can build a 10,000 square foot building. Now you're not going to build it to the full width of your or depth of your lot, so you know that would be a 10 story building if you did, and if you build half the lot area. Now it's a 20 story building. But if your neighbor is a lower building and hasn't used up all of their floor area ratio. You're allowed to transfer that over to you.
So it's a floor area ratio, basically how much full area which can be stacked into that correct and is there height restrictions? Depends,
depends on the neighborhood. Some areas, yes, there's, like, a an envelope that you can't penetrate, right? So even if you have all the air rights in the world, you're going to run out of space in that envelope. Gotcha. And then there's other parts of the city where no, just keep on going.
So, so if you, if you bought, say, 100,000 you know, square foot, whatever it is, square meters, and you, you could, in theory, have it as high as you like in terms of the internal floor space, but then I guess there's no point in doing that.
Okay, that's a whole separate conversation. Let's go back to the air rights for a second. Right? So you know, you've got a 10 full area ratio of 10, you can now build 10,000 square feet of building. If you had 1000 square foot lot, but you want more, right? You see an opportunity. Whatever it is, high end condos, office. Nobody wants an office right now. So if you have more space, if you have more floor area that you can build, you can make more money, but you've capped out on your site. So if your neighbors haven't used all. Of theirs, right? You can buy it from them, or they can give it to you for free. But nobody's that stupid, and you can only do it for a site that touches yours, right? If they have 10 feet of shared common property line, right? You're you're actually merging your lot with theirs. You're not merging it for tax purposes. You're not merging it for property reasons or anything like that. You're merging it only for zoning purposes, and you're creating a new zoning lot, which isn't the same as a property lot. It's just in the eyes of zoning, you have something called a Zelda zoning lot development agreement, which is the terms that you come to with this other person to put the stuff together right now, if further down the street there's another property that hasn't used all theirs, well, you can get that too, but you have to run it through a common property line to a common property line
to maintain that 10 foot boundary line, right? You
can't, you can't, like in checkers, you can't jump over somebody. You have to flow through them, right? So what you can do, let's say that you're gonna build a building your neighbors have, maybe they're pre zoning, so they've got more square footage than they would be allowed now. But further down the block is a whole bunch of stuff that's got a ton of space. You can scoop it all up, assuming you can make an agreement for all these people and run it through your neighbor, and if your neighbor is over built, then anything that you've gathered from the rest gets kind of deducted out of their overbuild, and then you can still flow it to yourself, right?
Okay, so you literally, you're building some kind of corridor of connection Correct, that's linking them all up, and then you're kind of taking that three dimensional air rights correct, or the floor area really correct, and then bringing it on if someone's over built, so hold on. So that's that's an interesting thing. So people see people over build,
there are buildings that were built to the code at the time, and then the code changed later. So there are a lot of buildings in New York that are over built for the zone that they're in. Okay? I see Right, right? It's a existing non conforming condition, grandfathered in, essentially. Okay.
So they've done anything wrong. And what would happen if you were to over build and you just did what you wanted? You
can't, because you got to get it approved by the city and the building department and all those things so it doesn't happen, right? Okay, gotcha now there's, there's fun loopholes in, in the holy rights thing too. A landmark can transfer it, I think it's anywhere on the block, so, like a church could move its its air around on the block. I think I could be remembering that wrong. But landmarks can also move air rights across the street, right directly across the street, or kitty corner across okay? So the church, the church that's down below is here, could transfer to us, okay, or across the street because it's on the corner across the street to the south, or kitty corner to the building over there, right?
So an enormous amount of research must go into like just trying to identify who has what air rights and where have they already been transferred, and what do those records look like, and how do you kind of go through them? Is that something that's that's managed by the city? It is,
it is managed by the city, and it's all recorded. New York has a very robust system of recording deeds, land transfers, Zelda zoning law, development agreements on a site called acras. I don't remember what ACRI stands for. It's all there, and it's all it's all searchable by block and by lot, and then it just lists everything that's happened the building for 50 or 60 years, right? So you can see each deed transfer as the building has been sold. You can see who bought it, or the LLC that was bought, under which then you have to go and dig for but you'll also see zoning lot development agreements that have
been recorded, right? Got it? Okay? So this, again, adds another level of complexity with just the initial assemblage of trying to get something where you can put a decent footprint together. Then once you've got that, now you're trying to figure out, do we have enough space for to be able to build upwards, and all the time you're still trying to, you're on this kind of knife edge of, is it going to work financially, because we've got to let the building out, or we've got to sell it and and it, and then that. I guess that's kind of driving the space requirements as well, because there's going to be certain, you know, if you can't get as much as you need, then the whole project is just going to implode on itself.
Yes, yes. But sometimes it doesn't matter if the project implodes on itself, right? And this is where it gets this is where it gets, like, really weird. This is
when my brain is going to start melting. Yeah,
developers, on the whole are looking to build a project like for for reality, right? If you have a functioning building, one that you just created, or one that you've purchased, and it. Is throwing off money it has tenants. Tenants are paying the rent. The rent is covering whatever the debt is on the building. Plus, always, it's a going concern, right? If there's extra money that the building is throwing off, great, you can take that. But most of the time, as a developer, what you're actually doing is you're making you money on the debt. So the value of the building is, we'll do a very stupid simple example. Is a multiple of the rent that's coming into a show. So if the building is making $1,000 a year, the value of the building might be around 20 times that cost. The value of the building's about $20,000 so you have a loan from the bank for somewhere around that amount that you bought the building with and did improvements and paid investors, etc. If the rent goes up to $2,000 a year, you've now got a building worth $40,000 you go back to the bank and you say, I know that I owe you $20,000 but the value has just gone up. The value of the building is now $40,000 would you like to give me a loan for $40,000 and I'll pay you back the 20,000 and they say, of course, we'll do that. So they just gave you $40,000 worth of money. Yeah, the rents can support the interest payments on that. Whatever debt service that you have, you pay the bank back the 20,000 that they gave you. You pay back anyone else that was an investor. You take that money, the loan, and you pocket that right. Now, the sneaky, fun part about that is that money is tax free because it's not an earning, it's debt. You still owe it to someone else, right so as long as the building has enough money to pay for its debt service, you get to keep that money. And if the the rent roll continues to grow and the building increases in value, you do it again. You refinance the building again. You take the debt, and you pocket the debt. Gotcha.
So it's just a kind of constant re refinancing of the building as it's going up. And as long as the building can, you know, can get those rents right. And so hence why you get into this kind of situation where rents need to be going up and property needs to be at a certain or rents
or buildings need to be not vacant, yes, because there's a lot of debt out on them. Gotcha.
Okay. So, I mean, this is quite discipline. This is fascinating already, in terms of how developers are actually making their money, because they're, I mean, you said the developer ideally they want to build something. Ideally
they want to build something, but they do, they have to.
And is there like a world where, you know, people are, let's say just that art of building the assemblage and then the air rights, I would imagine that just piecing that together over 10 years, or whatever it is, you might be sick and tired of it, and then you just sell the piece of land to someone else who's going to take on the risk of actually completing it,
right? And this goes back to, like, how much skin do you have in the game, right? So if, if, just for the acquisition, you need 20% cash down, but you've borrowed that money from everyone else, other loans or other investors. You essentially don't have any skin in the game. But as the developer, you're paying yourself to develop the building. So you're not just going to make your money on the end product of the building. You've priced into the development of the building a fee for yourself, right? So whether it works or not, you're getting paid.
Rewind, okay, so
let's say we're selling condos. Yeah, we're going to build a new condo tower. We've done all the modeling for it, and the math works out, yep, and it looks good. We've got banks loaning us money, we've got investors loaning us money. We've got as loans coming in, whatever the project is financed, and it's going to go forward. We are getting a fee as the developer to develop that building. Gotcha, we'll get a share of the profits when it's successful, but we're getting a fee up front to do it right. It's
like, like, the salary almost a ton of Yeah. Basically,
I get you if the project doesn't work out, you still get your fee. You still got your fee. You still owe other people a lot of money, but you got your fee. And if the project isn't working out because of the economic world falling apart or something like that, the banks will usually play along and say, Look, forget paying us the principal, just pay us the interest for now, that's all the banks care about, is the interest. So as long as you can pay that, cut a deal with them, you can you can float the project and coast the project right. If your investors get itchy, right, they can get out. They can sell their debt to someone else. They may not get the full value of it because the person is buying it knows the project's in trouble. Project's in trouble and is gonna be a bit predatory. Got it, which is, like, what you were talking about is what we were talking about before. So if the project doesn't work out, and the debt can be sold, and you don't have any skin in the game, okay, the project failed. That's a shame. You made your money. Yeah, it's the size of the. Side of the business I don't like. And that's not how most people operate, yeah, but it is how some people operate, yeah.
But I guess it's, it's, I guess most developers, their, their intention is to actually build the asset, to get the money and be able to refinance, right? You know, it's really much more valuable than just getting your fee. Yeah, there's, and then there's, there's the risk of, you know, of owing lots of people, lots of money, correct?
But the scale, the scale of profit, is radically different from just the fee versus a share of the actual success of the project, right? Or if you're building it to keep it, the accreting value of the building that allows you to pull out more debt from it on a refi, which is, as we spoke before, is non taxable money, because it's not money, it's debt.
So last time, when we spoke, we were talking about another thing, of how developers make money without necessarily building and again, I think this is quite wild in a sense that you were saying that developers are able to make money, okay, one from the fees that they get from developing the site and doing all that kind of hard work and assembling things together and doing their their risk analysis, etc, etc, and the feasibility. And then also they can get paid through getting the finance together.
Oh yeah. So
there's kind of two fees that they can be collecting on one is the fee of, like, bringing the possibility of physical space, and the other is a fee for bringing together the possibility of money, right? So
a lot of development firms will have sort of their own funding, basically, like, you know, a real estate investment trust is a good example. Any REIT, you've created a fund. You've created an investment vehicle that people will invest in because they trust you as the developer. And then you're going to take that money and use it for other things. Gotcha, right? So those other things that you're going to use it for are developing projects which you're collecting a fee on right, but as the person running that investment fund, you're collecting a fee on that right, right? You're going to collect a fee every time that you can. It's almost like taxes, right? You know,
you get like a management fee of looking after somebody's money and then putting it into whatever mechanisms it needs to be corrected, correct?
And typically, when a developer acquires a building that's connected to a fund. There's often, like an acquisition side, an acquisition fee on that deal, right? And if they've used their own brokers on it, then there's a fee involved in that too. I used to work with a really fun developer. I used to joke that he would get paid three times and on on anything, right? He was the developer who was collecting a development fee on a deal, right? He had his own construction company, so he's getting paid to do the construction. He had brokers in house, so any, any deal that was transacted in the building was getting paid on that and I'm sure that I wasn't part of the finance of that time, but I'm sure that he was getting fees on the finance side of things too, right? And this mentality, this stretched out to everything in his life. So there's a year that he took the entire office out for a holiday dinner. There must been like 70 people or something, and everything was covered, totally open bar, open food. This was like, boom, boom time. So it was a lot of fun. And you know that he just wrote that off. That's a business expense, right? So he somehow reduced taxes by taking the office out for lunch right afterwards. Afterwards, he said, who'd like to go for drinks? And everybody's hand goes up, and he's like, okay, meet at the whatever, whatever bar it was, right? We walk in. He walks up to the bar. He knows the bartender. He puts down his black card, so he's getting the points on this. He's just taking the office at lunch again. It's going to go through the company, so it's another write off, but he's getting the points on it. And I found out afterwards he was a co owner of the bar.
He might have even profited from taking us out that night. I love it, yeah, but it's that kind of thinking, yeah,
yeah. And it's, well, it's well, it's kind of, you know, it's creating your world and making sure that there's well, like syllog synergy as an entrepreneur, between the two businesses that can be supporting each other, right? So going back to how developers make money, and there's this idea that they can be making money on the development fee for the site. They can actually be making money if they've got a fund involved. So literally, an investor, or part of the money that an investor is putting in is just getting eaten up as a as a fee for putting cash into the project. I'm guessing, in a similar kind of sense, the way when you invest in stocks and shares through Yeah, exactly, somebody's taking a little, a little cut of your fees. So so they and then like, and then the final bit of payment is when the building's actually built and they can be using it, selling it, taking rent off it, et cetera. Gotcha. Okay, so that's the kind of a broad stroke of different ways that developers can actually be making money, which starts to pay an interest. Picture of how much work is getting done to building out finance, building out the site, and then when they're ready. So when, when are they ready? When are they ready to kind of break ground? When does the architect get involved into all of this?
It depends on the project and the complexity you'll sometimes bring an architect in early usually is one of sort of a, you know, the panoply of consultants that you've got so early on, you're going to have a legal team who specializes in real estate, who will be doing some of the due diligence for you. You know, are there zeldas? Are there encumbrances on the site? You know, it's title search stuff. But there's also some, some legal things there you've got, you've got your own acquisitions team who probably knows the people or knows the background of the current owner. So there's that team that's doing some thinking. And then you've also usually got an architect involved as well, and the architect is, if the zoning portion of your legal team isn't telling you, your architect will how big can this be? It's rare that your architect and shame on them. It's rare that the architect will go, hey, you know, if you get that other building next door, or at least their air rights, you can do this. It's usually the architects kind of like, okay, what? How many, how much, how much floor do I have to work with? Okay, I will mask something out. Yeah, it will be this big. If it's going to be condos, you know, you can get roughly this many. That's
interesting and actually very a kind of pertinent point for an architect who's wanting to work with developers, that there's a huge potential value that you could bring to developers by starting to think like that, or trying to meet developers further on, upstream, if you like, because I'm sure the architectural way of thinking about sites could be really useful in assemblage assemblages and kind of air rights and putting that three dimensional puzzle together, yeah? Whereas a team of developers might miss something, or
architects are great at solving solving problems. Yeah, right. But in my experience, they're only going to solve the problems with the pieces that are in front of them, and you need to look for the other pieces that are outside of the puzzle to find a better solution. Yeah. Like, this is not to get super nerdy, isn't this, like one of the basic pieces of Star Trek, right? Didn't Captain Kirk, like in his academy days, have some sort of test that he's guaranteed to fail on Right, right, and the whole test is designed to see how they react under pressure. So what does he do the night before he goes and, like, rewires the computer and then wins, wins the challenge. Like, architects should be thinking like that, like, Oh, here's the puzzle we're trying to solve. And you know, we can solve it. But you know, if you just did it to this and look at this, because if you do that, we can do all these other things. And the other things shouldn't be, how pretty is the building? The other thing should be, how much more money will it make? Yeah, well, and
then this is interesting as well, because an architect, potentially, if you're working with a number of different developer clients, then you've got intel on how different developers are working around the city, or different you know, there's just another level of of intelligence that could be brought upstream?
Yeah, I don't think most architects would do that, and it's a little bit of a conflict of interest. Like, I'm working with, right? I'm working with an engineering team who are doing the work for developers next door to one of our projects. And I'm working with he's like, Yeah, that's a team. This is a team. I've got a firewall
between. Okay, so you got your Chinese walls inside, the inside of the offices. There's an ethical
thing to that one, right? Sure, sure. Okay.
So this is the light. The the land has been acquired. The financing is in order, yeah, the bankers have been found. Found. The financial products are in place. It's institutional finance loans, the architect now gets invited into the scenario. And what are the developers looking for with the architects? What are the, what's the, what's the value that the architect is is going to be bringing? Well, it
depends on the project. Obviously you want, there's usually a couple of different architects that you want. You want, sort of the thinking architect, the one, sort of the thinking architect, the one who's going to sort of figure out best and highest use in terms of square footage. But then you want the sexy architect, and the sexy architect is going to do something for you, which is going to either be create something in a style that is more luxurious, more sellable, more basic, whatever it is, whatever it is that is your business model, stylistically, they're going to plug into that, right? Or name recognition, right, right? They have done these other things, therefore you want them on the project for that name recognition, because people be like, Oh, designed by so and so. But most of the time that's not really the case, right? And the architects, like they're incredibly important to the project, but they're also not that important to the project, because if a project's big, I'm going to go out to five, five architects, and I'm not looking to like to get the cheapest. We've talked about this before, right? It's not the cheapest architect. It's the within reason, it's the one who's going to do the best for your. Project, but the fact that I can go up to five, they're all interchangeable, right? Some will self select out in the process, and it's like, oh my god, they interviewed terribly, like they don't care, right? Or others, the fee is too high, or whatever. But you've gone out to five people that you feel are more or less equal, you'd be happy with any of them on your job. So is there like, one architect that's going to make or break a project? No, because there's four more that are just as good.
Yeah. So, so how does an architect start to distinguish themselves in this, in this kind of scenario, how can they, how can they bring more value to a project? Or what would, what would help them be able to win these sorts of projects. What would you be looking for?
Usually having similar projects under their belt, right? Helps, right? If I have a pool of five architects, and I think that any of them could do the job, and they've all come in at more or less the same value, right? The ones who have done more projects, like the style that I'm doing or the location that I'm doing, they're gonna win the day. It's the classic thing, like, you know, you need experience to get the job. How do you get Sure, right? It's a variation on that, but that's one of the ways, right?
Do you ever have architects who are well versed in the in all of this kind of upfront work that the developer is doing, they've got a good understanding of the business model, of how the developers are working, or are they more passive and just kind of
far more passive, far more passive. Would would that
understanding of the business plan be an advantage, not
necessarily of a specific business plan, but I think an understanding of how it works would be good, right? Yeah, you know, design is, it's critical to a project, but it's not, as we've been talking but it's, it's, it's a very small piece of the project, yeah, and the project has been sort of figured out before it gets to the design stage. Yeah, it's almost
like you've got, here's the envelope. Don't fuck it up,
basically, yeah, put something nice in the space. Yeah, right. So I don't know if there's something that an architect can do to to be better than another one, just if you get invited into something, it's not the lowest bid. Some some people it is, but it's not the lowest bid. And most developers are going to come back and try and give you a haircut afterwards. Anyway, so price that in, yeah, it's for me personally. It's also just knowing how easy are they going to be to work with, right? And there are diva architects, and then there are architects who are talented but a pleasure to work with. And it's always the diva ones just like, Oh, God, I don't want to have to hire them. And you know, the client, since we're doing stuff for other developers, client might be like, Oh, that's the people that we want to use. Okay, we're going to have problems. But, okay, yeah,
so it's interesting. You were saying, as well, some of the value then architect, and this is more the exception is, if they're a big brand name, you've got, obviously, something like, you know, the Frank Gehry skyscrapers, you know, they're completely, they're very iconic here, quite interesting. I'm sure that that was a very conscious, you know, it's Frank Gehry, so let's just make sure that
the but does it work?
I don't know.
I don't know. Like, are they getting more rent in the Frank Gehry building? Because it's a Frank Gehry building
that I would doubt. I doubt it too. I would doubt, and I would doubt that the general populace is particularly aware of.
No, it is, I don't think, at least for housing, I don't think that there's a lot of people who look at the building, ooh, curvy. I want to live there, right? Like the one place in the city that you're not going to see the Frank Gehry building, yeah, is from inside your apartment in the building. So, yeah. Does it look important on the skyline? Sure. Is it important for the value of the building? Not as much. It speaks to, I think it speaks to an expectation more than anything else, and we all want nice things because it's good to have something like that on the skyline, whether you agree with the form or don't. It's good the copper building, which is just the window down there, we were talking about before, simple, it's good. It makes the city better. And there is value to being better than the others, but I don't know if it really reflects in the rent
in the world of developers. How are architects typically perceived
partners in a project? You know people that you need to work with to get something done, depending on the scale of the project, they might have like a larger or smaller influence on the role.
Do you ever? Do you ever see developers kind of getting creative with their deal, make. With architects, and say, architects kind of get a bit of the back end if they're, if they're being flexible or creative, of how their fees are working, yes,
yes. And those are usually the projects you don't want to be part of, really. Yeah. That usually means something's gone wrong, right? If a developer is as good as what they do,
okay, they're gonna be giving out any equity for you, not giving out equity for you, putting sway equity into it?
No, and they've got a kind of line of banks and investors that they can tap for money. And why are they coming to you? Yeah, if a developer was since the architect, again, I'll give you equity. And it's either a very small project, and maybe there is something to that, sure,
okay, so maybe in a more unsophisticated development, yeah,
smaller scale, so you design, build something, yeah, sure, there's something to that, but on a larger scale, development, no, yeah, too risky. Very risky, very risky. We had a hotel brand approaches once with something like that, and they were looking for for equity their international group like, you don't need our equity. You've got tons of equity. Are you coming to me, it smells bad, right? Yeah, from the get go,
right? Interesting. And it's not something that an architect could kind of strike up themselves as a as a deal, or, like, I guess it's irrelevant, really, because it's the money is already in place, which, which is for the architects fees. It
depends on the scale of the project, right? Yeah, we're doing, we're doing a project that phase one is going to have a cost of construction of somewhere close to $500 million the architects fee is like one, like, do I want a portion of $1 million to help finance 500 million. I'm like, No, I'm not interested. Yeah, it's
too it's too small, too insignificant, yeah, yeah, that makes sense. Very interesting, very interesting. We were talking about a certain kind of business structure, yeah. Last time, what was it called this skits. It was, it was like a form of business structure where people were able to buy or it, it's, it was like an IPO, but not an IPO, a SPAC, a SPAC,
special purpose acquisition company, yes,
yes. How does that play into all of this? And what is a SPAC? Or was it totally a left field?
It's, it's a little left field. It was something that was sort of tried out in the last 10 years or so as a way to move money around. It's sort of fallen out of favor. It's kind of like, it's like the nfts of financing, right, right? It's, it's a, it's a shell company that is publicly traded, typically that has money to be deployed, but doesn't know where it's going to go yet. So it's like an undirected Investment Fund. Essentially, it happens in real estate, but it's pretty rare, right? Because it's a bit more directed and it's a bit more targeted. The largest developers in New York have many funds, and some of them are SPACs. But like SPACs the name only, it's like, we are going to go take your money, invest in something. Got it? Okay?
So it's not, it's not a typical format that you would see in real estate. Less less so, less so less
so you see it in a lot of other things. It was a way for Chinese companies to get onto a New York or American stock market. But it's, it's less and less something that you see in real estate. Gotcha before we wrap up the
state of the real estate market here at the moment, I know this is always a kind of precarious conversation. Last time we spoke during covid, times it was, it's grim and it's but it's Laina. We're looking around here. And you know you were showing me earlier buildings that are kind of 40% occupied. Yeah, I was in the financial district a couple of months back, in somebody's office, and you were just looking out into these beautiful empty buildings. It was, I don't know, it just kind of blows my mind, particularly when in the context of the conversation we've just had about the complexity and the energy and the money that's going into building out these assemblages and just working out these sites, and the huge amount of risk that's going into actually getting something built, then for it to just be empty, kind of starts to point towards some sort of something that's not working.
It's really not working. It's really broken. The office market in New York, like anywhere else is really broken. And it has been for basically since covid, people aren't coming back. There will be a day where offices are all full again, yada, yada, yada. It happens every time there's some sort of major economic cycle. Oh, you know, after 911 Oh, downtown is dead. No one's ever gonna work downtown. It's Filipino. All, it's fine. Yeah, it will take time to work out, but it's not. We're not seeing it like rapidly pick up and, you know, depending what newspaper you read, and whether it swings a little bit to the left or the right, there's, there's a different opinion there, sure, but the facts on the ground are still the same. Like, you can walk around the city at night and you can look up at these office buildings, and you see construction lights. They're not office lights, you know the little single bulbs, and you're like, empty, empty, empty, empty, empty, empty. The when we were walking around the office here, I was going to a building just to the south, and you can see a bunch of empty floors. This building is half empty. Major buildings, you see a lot of empty floors, I would say the optimistic numbers say that the vacancy rate in the city is around like 10% the other ones say around 40 right? New Construction, Hudson Yards, things like that, renting all day long, not a problem. Class B buildings like the older 20s, 30s, New York brick, things we
were looking at earlier, exactly.
The Fashion District had all these old manufacturing buildings. They're not doing so well. So the city needs to do something about that, and has needed to do something about that since, since the pandemic started. Does
it mean that there's deals happening? Like, in terms of, like, you know, real estate is getting cheaper. Oh yeah, commercial. Oh yeah, get commercial real estate.
The trade papers have stories about this daily, right? There have already been major landlords in New York who've turned in the keys for buildings. Like, thanks. This is not working. But you look into secondary markets, and it's staggering. It's just it's not good. There's buildings that are trading at half of what they were sold at in, you know, obviously a boom time of like six or 2006 2007 right? But that's money, and it's got to go somewhere. The banks are. The banks are bolstering themselves for this because they know how much bad debt that they're carrying. They've done this research. They're hiding that right now. And we saw, we saw a secondary regional banks tank just when the interest rates went up because they were absolute idiots for not covering their own have you be a banker and miss that? I don't know. But yeah, there we go. There's, there's a time bomb in the economy, and it's real estate and debt on real estate,
you know, going back to what you were describing earlier about the kind of refinance cycles that a developer might be doing if you've got that kind of if you're in that kind of game, and now suddenly it starts going the opposite direction. Yeah, you've got a problem correct, if
you Yeah, if you had that, that building making $1,000 dollars a year, and it's worth 20,000 and then it's making 2000 now
you're highly leveraged.
You're highly you've leveraged it up to 40,000 and now half the people are gone, so it's making 1000 again, it's only worth 20 Well, the banks are like, well, pay me the money. Yeah. Now, banks aren't dumb, right? They don't want something to go wrong on the balance sheet, because it makes it makes them look stupid. So the classic trick, and this was used in 2009 called extend and pretend, right? That's what it's called, Bank, Bank. Bank says, I know you're in trouble. I know this isn't working out, but maybe in three years or four years, things are going to get better. So for now, can you pay me just the interest? We'll sort of stop the principal payments on the loan. Pay me the interest, and as long as you can pay the interest, we're good. As a bank, I look good. My money is still coming in. As a developer, you look good. You still got your building, and hopefully things turn around for you, but at some point there's a reckoning. It's a band aid, it's a band aid, it's a band aid, it's a band aid, yeah, right. And there is a reckoning at some point. So you have different factions talking about what to do with this. There's a whole bunch of people saying, convert office to resi. And I'm a huge believer in this, because,
well, this wouldn't, this would seem to make a lot of a lot of sense. Where there's, you've got one massive need versus a surplus, yes,
you got a lot of empty space that people could live in. A lot of people who need somewhere to live,
there's gonna be like, I'm guessing zoning protections here. That's the main obstacle, or
there's zoning, but it's been done in the past, so it's doable. There's, there's just some common sense stuff. Some buildings work and some buildings don't, right, right? In New York, I think the rules you can't be more than 30 feet away from a window. So if you have an apartment that's more than 30 feet deep, that space is going to be kitchens or closets or storage, right? Yeah, okay. So if you think about it, you got
to build a really deep floor plates with the kind of core in the center of it, loads of space. It's not gonna, it's not
gonna be used for anything. There's a, there's a building out in Williamsburg on North fourth in Kent it's a great big old white three or four story warehouse building. Yeah, and back in the heyday, I knew people who had apartments on illegal. Apartments in the space. It got bought, and it got turned into proper apartments. And the first thing massive floor plates, the first thing they did was just like, scooped out the inside, maybe a great big courtyard, because now, now it works, right? So there's a bunch of buildings in New York that will New York Times did an amazing article on this with, you know, the New York Times graphics, and showing you how it works and all that. And it would explain it to anybody, and it was good the city has a lot of buildings that would work. The problem is that people it's very expensive to convert them, and in order to make it palatable to owners and developers, there needs to be a tax break. The last time they had this at 421 a right tax break was an incentive for developers like you get you're not paying property tax, or whatever it was, for 10 years, 20 years on the property. And it was an incentive for people to build. And they did, in spades. Financial District fi die, which was early, 2000s kind of like tanking. Nobody wanted those office buildings anymore. And you could walk around at night, the place was a ghost town. Just ghost town. They changed the rules. They incentivized that part of town to turn it into residential units, because the buildings are our smaller floor plates, and they work quite well. And it's not curtain walls, it's operable windows. So that's a rule that you can go check and it worked. There's an awful lot of housing and an awful lot of old office buildings downtown. You walk around financial district now, like nine or 10 o'clock at night, it's vibrant. There's restaurants, there's people, there's bars. They've made a neighborhood out of it. You know, you walk around some of these parts of midtown now there's nothing, yeah, it needs to change. That's
really interesting. That's obviously a very kind of quite an interesting opportunity for a lot of both developers and architects. If it's plausible,
it's plausible. But the math is weird, right? The math is really weird because if you're building as an office building is only making 50% of what it was making before, and you have leases expiring that are likely to not renew, and maybe you get a couple more. You've got a good decade where that building is going to underperform, and it may be underperforming the debt, right? Yeah, if you convert it to residential, you're going to get into more you're going to, you may, yeah, you're going to get into more debt. But the value of the building when you're done might be worth more. So you're going to go through more pain, and you're going to burn through money. But in the end, you get a building that you can go back to the bank and say, Hello, I'd like to refinance this for $100 million right? And it's like, well, wasn't this worth 100 or wasn't this worth like, 80 million before it's like, it was worth 80 million, but it was only really worth 50 million with the rent that was coming in, but I've spent 50 million on it, and now it's worth 100 million. So did you come out ahead in the process? No, but you came out ahead in the reversion value of the building at the end, which means you can refinance it, which, as we talked about earlier, is tax free money, right? Because it's not money, it's debt.
Gotcha so and then again, the other thing that's happening here, you know, is the housing market itself is really bizarre. Housing
markets in New York has always been bizarre. I've lived here, like, over 25 years, and I've just, I've never really understood how people afford the houses that they do? You know, it's
the answers they don't. And that's the
New York Times does this they have, I think it's in their Sunday section, like, which house do they choose? It's almost, you know, it's a New York Times version of House Hunters. And I swear, it's just, it's a rage article, right? You know, she's, she's a butterfly collector, and he, he like, imports sweaters from Scotland, made from three sheep, right? Their budget for they're looking for a new apartment, their budget is $4 million like, what? Like, who are these? What I gotta get in butterfly collecting, if that's the case? Yeah. So I don't know how it works. I've never figured it out.
I mean, we were just looking at that building, the core out there, where you've got, was it 26 apartments in one building? Yes, which is just sort of,
yeah, it's kind of grotesque, right? It's a, it's mind bending, 30 something story tall tower with 26 apartments in it, right? There's two, there's sort of two diversion paths on that conversation, though, there's the ultra luxury apartments, right? And a lot of the time in New York, those, they're not built to live in, they're built as bank accounts. Yeah,
it's a financial instrument, and you've got oligarchs and people cleaning their money, essentially, right? Yeah,
there was an article 15 years ago, I think when the Time Warner Center was built. Like, who are these people? Are we selling so many million dollar condos? And they dug into the LLCs, and it's like, well, there's a warlord, there's a drug baron, there's, you know, all these things, okay, the magic of an LLC so I'm not going to say that all the money is coming from illegal sources, but I.
Uh, well, I mean, it's, it's, it's a, it's been one of these classic ways of cleaning money is real estate. When you look at, you look at vast swathes of divine which are just kind of empty. I mean, every major city has got this sort of correct. London went through this too, exactly this kind of perverse thing where you've got enormous buildings going up that are only housing a handful of people. They're worth insane amounts of of money, and they're not really used or activated. It creates this very bizarre scenario that we have, right?
That's, that's, that's one extreme of it, and that doesn't help anybody, because people need somewhere to live. And there's always this conversation about, where does the school teacher live? Where does the firefighter live? Like, taking that out of the picture in New York, that's the only way that works. Is in rent control, these people have to live far out and come in. But then there's also, like, just the sort of like, the average New Yorker. Call myself the average New Yorker, right? I was looking for an apartment a year and a half, two years ago, I was struggling to find something I could afford, like, I'm doing okay, yeah, this doesn't make any sense, you know, yeah, there's, there's all sorts of development going on in Long Island City and Williamsburg. And the rents for these one bedroom apartments are, you know, 52 5500 bucks a month. Like, who's paid? Who's, how are 1000s of people making that kind of money? Yeah, that's crazy. And they're not all rented. Some are some, aren't I mean,
it's really, it's really a city like, you know, a six figure salary doesn't mean squat here, no. And, you know, I've heard people say it's, you know, you've got to really be, you know, under 200,000 is you better struggle? Struggle, yeah,
that's it's insane. It's insane, right? So it begs the question of, like, all these, these $5,000 one bedroom apartments, right? Who's renting them? Like, are they? Are they really full? In the same way that all these million dollar apartments, or multi million dollar apartments, are full, or are they being built speculatively? And it doesn't matter if they're full, yeah, because everybody's made their money already. Yeah, right. And back to what you were talking from the beginning, right? The last part of it is rubber meeting the road. Is there going to be enough people to fill it at the price that supports all the financing. If there is great, if there isn't, okay, let's figure out something else. And I conspiracy side of my brain is like, what's going on with all these uni fatalities? But yeah, it's it's a problem, and housing is a problem, like anywhere in the world right now, housing is a problem. New York is no different, and we have a lot of empty office buildings.
I remember, there's a famous Buckminster Fuller quote where he talks about the kind of bizarreness of feminine and again, this is 3040, years ago. We were talking about the strange scenario that you've got, where at night, you have all these empty office blocks, you know, completely vacant, and then there's all these hundreds of 1000s of people sleeping on the streets, yeah, which is, I mean, obviously it's not practical. That's another conversation. But that the the idea that you know that there's empty, huge amounts of space, which is empty, and then there's people that are struggling to get housing, it's a strange quandary. It's not an architectural problem. No, this is a deep societal it's a societal problem, problem, and it's not, you know, is
it a political problem? Yes, but
it's, it's so multi layered, and everyone has an
interest in that one. Everyone has a different solution for it. And honestly, the solutions for things like this take longer than most people's political terms. So if you start something with all enthusiasm and honesty, the next guy who's in power could flip it.
Benevolent Dictator is what's needed.
He's working in Rwanda.
On that note, thank you so much. Thank you. Super fun as always, brilliant. Love speaking with you, and it was great to capture this on the podcast. Great. Thank you again. Thank you, and that's a wrap. And one more thing, if you haven't already, please do head on over to iTunes or Spotify and leave us a review. We'd love to read your name out here on the show, and we'd love to get your feedback, and we'd love to hear what it is that you'd like to see more of and what you love about the show already. This episode is sponsored by Smart practice, business of architecture's flagship program to help you structure your firm for freedom, fulfillment and financial profit. If you want access for our free training on how to do this, please visit smartpractice method.com or if you want to speak directly to one of our advisors about how he might be able to help you, please follow the link in the information. Hello, listeners. We hope you're enjoying our show. We love bringing you these insightful conversations, but we couldn't do it about the support of our amazing sponsors. If you're a business owner or know some. One who would be an excellent fit for our audience. We'd love to hear from you. Partnering with us means your brand will reach over 40,000 engaged listeners each month. Interested in becoming a sponsor, please send us an email at support, at businessof architecture.com 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.
