What could go wrong?

Development, an endless game of whack-a-mole

You try to underwrite and build your pro-forma (expectations) to the best of your abilities and then you hold your breath! That’s an oversimplification of the front end of real estate development but I think holding your breath and hoping for the best is par for the course. Real estate development, and erecting a building in general, is incredibly desirous for so many people and yet it comes with a tremendous amount of headache, challenges and inevitable mistakes. I work for one of the largest real estate developers in the country and I’ve seen this both second hand through our partners in the business as well as first hand with my own (limited data set) experiences. As our LA partner, Rob Kane, says “development is a constant worry that the sky is falling…but you have to keep walking ahead.” It might feel like the real world chicken little sometimes but you have to remember, you can only control so much - you just have to keep going. Costs rise and fall, the market can drop out beneath you, interest rates could fluctuate wildly and any other unforeseen variables can come out of nowhere to ruin your project. Or, the world can move in your direction, you can time it perfectly and the demand / supply dynamics slide nicely in your favor and you can see the beautiful fruits of your labor. Nonetheless, this game is not for the faint of heart.

Development is a highly skilled game. It’s a game that rewards risk taking in some areas and risk mitigating in others. Track record might not mean everything in some industries but it certainly placates fears in real estate development. Development is a business that can slaughter newcomers and put even the best veterans on their back but having experience certainly reduces your chances of a butt whooping. I’m lucky that when I ventured into my own development project I was able to find the right partner, with the right experiences to partner alongside.

When I acquired a small piece of land in Philadelphia in 2018, I knew that I couldn’t build a project myself. I was living in LA at the time and my motivation was both financial as well as educational. I had just started working for a real estate development company but wasn’t close enough to the project side to really get a flavor for all the work that it entailed to get a project from design to stabilization. I thought no better way to learn than do it on a small project of my own. The age old wisdom is that it takes the same amount of work to do a big project as it does a small project but the difference is the amount of money you can lose. So I started small.

I ultimately knew it wasn’t a matter of something going wrong, it’s more about how you manage all the unexpected mistakes that will arise along the way. What’s true in life is generally true in real estate development: pick your partners wisely, treat people with respect, do your diligence, manage communications and hope you got your timing right.

We’re now almost two and a half years into the project and we hope to deliver by the early spring of 2022. The list of bottlenecks, hiccups and unforeseen costs keep piling up but such is the way of building in a dense and populous city like Philadelphia. My partner has done a great job of managing through all of them and keeping the project moving along. Whether it was the tremendously long delay to bring power to the site, the structural issue above the window that required a steel beam reinforcement or its the tenant that signed a retail lease only to go dark upon security deposit submission, I’m sure we’re not done with mistakes and misfortunes but hope we’re vindicated in the end.