Jessica Joly - STILES 

We had the pleasure of having Jessica Joly come to our class and give us a presentation on the West Lake Commons development, a shopping center developed by Stiles, one of the oldest Commercial Real Estate Companies in South Florida. Jessica, a NSU Real Estate Program Graduate and an advisory to the board was appointed as project management for this project, which aimed to develop a total of about 100,000 sf. of retail space with a cost of over 35 million dollars. West Lake Commons has Publix, with 54,000.00 sf as an anchor store,

Her presentation was very clear, enlightening and educational. She went through the developing process of this project since the beginning, as she was involved in every part of it that included site analysis, planning, coordination, permits process, financial feasibility and execution.

She very well explained in detail what each of this steps entitled and what major issues they had to overcome. Site analysis, she emphasized is extremely important. Planning for contingency, she said, even though it is accounted for as a percentage of the total cost, has an intangible cost in time and efforts. Jessica explained how some issues that came up: a road widening request by the city and a mistake in the design façade, took an enormous amount of time and effort to be resolved in addition to the 3% of the contingency actual cost.

Jessica also explained how Stiles is following the road of sustainability in their projects and how West Lake Common development has some added features leading that way such as: construction waste management, energy and water, efficiency and recycle content.

Jessica’s presentation was excellent. She brought together all the development components of this project, which she successfully managed, explaining them in detail and giving us a sense of what issues we can encounter in future projects and how to deal with them.

Challenges in Retail Development

I was quite disappointed that I could not be present to Mrs. Jessica Joly’s presentation; I was looking forward to hearing the details and outcome of the Westlake Commons project, of which she served as the development manager on behalf of Styles.  I watched the video online, and I felt it was a well put-together presentation. Mrs. Joly shared an educational experience on the severe problems one can encounter on a project; the development she told us about took an unexpected amount of time, including a complex due diligence process, and ended up costing much more than it was expected. Construction was originally estimated to be in the $6MM range, and ended up costing upwards of $14MM. Her cautionary tale reminded me that even an experienced developer can encounter unforeseen circumstances and setbacks.

We had the opportunity to be familiar with this project beforehand, as it was an optional extra credit in the Real Estate Development I class. Having had to consider some of the obstacles that she did, I had great interest in Mrs. Joly’s conclusions; her ability to transform a well-located former car dealership site into a neighborhood shopping center, anchored by Publix, was an intriguing process, and I believe a sensible one.  This is the newest plaza built over the past three years in the Hollywood submarket in Broward County, where vacancies are below 5%.

Mrs. Joly explained the challenges of the site approval/pre-approval process during due diligence, securing an anchor tenant, and closing the deal. The construction aspect and navigating the regulations were no easy task to accomplish. Relocating utilities, traffic lights, and then the discovery of underground pipes during the construction process were among the issues that she had to face, all while still make sure to deliver the plaza on time, leasing the remainder of the property, and turning it to the asset management team.

Styles is one of the largest integrated real estate companies; as a well-known developer, investor, and asset manager in a variety of real estate, including office, retail and residential. When there are barriers to a project, they expect their employees to think on their feet, as a good developer would do, and deliver to their expectations. It was impressive to see that kind of work and motivation through Mrs. Joly’s experience. Furthermore, her example reminds me that the truly successful are those who keep a calm mind and compensate for unexpected problems with responsive solutions.

On the topic of unexpected expenses, I read an article from an Ohio newspaper about an unforeseen cost, though this situation was resolved much easier than that of Mrs. Joly. The department of Public Works in Canal Winchester was developing a site on property that the county had believed was theirs for years, in fact, they had even built a fence and gate on it. However, while reviewing maps, the county noticed a discrepancy and ordered a survey, upon which they discovered that the land in question actually belonged a real estate company which owned a golf course next to the county land. The county was forced to make an offer on the land in order to keep their project on schedule, but they were fortunate to benefit from the generosity of the owner: the real estate firm requested only half of what the county offered, in addition to the waiving of the inspection fees for a planned clubhouse on the golf course. While this should stand out to any Miami person, when a company is willing to take less money, I feel it also showed an intelligent move by the firm; there is no harm in gaining good will from your community, especially local committees. Though this was a small obstacle for the county, this was in some ways a windfall for the real estate firm, gaining an additional $10K for land that they had not been using, and of course, endearing themselves to the local council.

Anthony Trella – Suburban To Urban

Tony Trella has is the principle of The Meranth Company; an organization he founded in 1993 with the plan of provide advisory services in the commercial real estate development industry. Prior to starting his own advisory firm Tony ran commercial real estate development company to which he was responsible developing tens of thousand of acres of land for master planned communities.

Tony gave us the full life cycle of the American Dream from World War II to today and looking into the future.

After World War II the veterans coming home wanted a home with a white picket fence to raise a family. This is where Master planned communities were born though they did not realize that they were pioneering residential housing development in the United States.  

Today many people young and old are trading in their suburban home for a life to which live, work and play are in walking distance.  Many millennials have watched their parents live out their idea of the American dream, however the American dream on the millennials is to live in smaller residence in a urban setting.

Tony raised an extremely interesting point as to what will happen when all of the coast and urban areas are maximized to capacity. He believes instead of reverting back to suburban housing real estate developers will build complete urban cities with all facets of urban living except they will be built in rural areas.

Little Havana Redevelopment Perspectives

Our first site visit was to Little Havana, where we met with Mauricio Villasuso, a real estate broker, and Jose Hernandez, a retired developer and longtime owner of buildings in the area. They presented us with two very different perspectives on the future of Little Havana’s redevelopment opportunities.

Mr. Villasuso was very well-versed in regulatory matters, particularly in zoning. He had a strong understanding of the requirements and potential benefits that would be present in the area if the local government approves new zoning. The proposed up-zoning’s major significance would be the raising of T-4 zones to T-5-L or T-5-R, which would legally permit a maximum of 5 stories. Mr. Villasuso pointed out that a typical Little Havana lot of 7,000sf would only permit the building of 11 units, which given average unit sizes, would yield a three-story building. Raising the zoning would allow increments in building heights, and especially density; this change would strongly benefit the rental apartment market, and would not compete with the downtown Brickell target market. 

Mr. Villasuso sees an opportunity, due to the influence of the downtown Brickell area, recent strong demand, and mentioned the Midtown transformation over the past years. Current vacancy in the area is very low, and most of the area is residential low-income, Section 8 and some commercial historic sites. Up to an extent, that is true, and there has been some potential in the area, specifically in the corridor that is close to the  Miami river, and in some pockets of Little Havana, where new affordable housing projects and some commercial retail have been developed successfully.

However, the area faces many challenges, which are preventing the area from ever becoming a sustainable redevelopment opportunity. The local government has done little to improve the real ailments of the area, such crime, gangs and drugs. Therefore, not much is being done, despite the perception of a “great redevelopment potential zone.” Little Havana is a multi-cultural area, which was once predominately populated by  Cubans in the 70’s, and has since come to accommodate a variety of Central and Latin Americans,  as well as the low-income population that were once in the Midtown area. Little Havana is very fragmented in terms of ownership, and no large track parcels of land or existing buildings are easy to put together; this makes any redevelopment effort particularly difficult.  Furthermore, there is not much interest by current owners in participating in any changes.

Where Mr. Villasuso sees opportunity, Mr. Jose Hernandez is skeptical. He does not foresee a transformation in the area in the very near future. He strongly believes that it will take years, if not at least a decade, before there are any significant changes. From a developer’s perspective, the numbers do not add up; the potential cost of redeveloping the area at this time, and the high amount of risk involved do not make it a worthwhile investment. The whole discussion was a great reminder that there is always more than one perspective on an area; where one person sees great potential, another says play it safe and do not take a risk. While sometimes the riskier projects may yield a strong profit someday, a sensible developer will take the time to analyze all the factors and make an informed decision.

The Miami Herald carried an article on the proposed up-zoning for Little Havana, which shed more light for me on both the opportunities and opposition to the decision. Proponents of the movement suggest that this will inject life into an area that is pocked with vacant lots and dilapidated buildings. They mention that the implementation of Miami21 regulations have actually become stricter in this area than they originally were; because of this, building owners are hesitant to make repairs and renovations on their properties, as it may require further expenses to bring the buildings to the new code. They believe that the raising of the zones would allow developers to improve the area. However, some residents and opponents feel that this is a situation that would allow developers to take advantage of a poor area, and that this movement would lead to the gentrification of a “unique area.” Some of those interviewed expressed a feeling that the local government was avoiding their participation, mentioning that the all the signs for the community hearing in the matter were in English, in a predominately Spanish-speaking section of the city. One activist suggested that even if the upzoning created new potential in the area, the long-rooted culture of Little Havana would be undermined. This article illuminated the additional obstacles that can be present in an attempted development: many locals are very protective of their neighborhood, in any area, and may provide another barrier for a project’s success.

Jesse Holshouser – Repeating The Same Cycle?

Jesse Holshouser is the Chief Financial Officer (CFO) of Silver Capital, a real estate investment and development firm. Jesse gave us an insider prospective on real estate capital markets from the 1970s to his outlook on the future on the CMBS market.

In the 1970s the banking in general was much more simplistic than present times. Banks would acquire capital from depositors buy offering the depositor a rate at which they would earn a risk free return for keeping their money deposited in their bank. The bank would then lend at a higher rate to a borrower to which the bank would make the spread. The bank would hold on to the loan they made till maturity and their for would be extremely risk adverse as they would be the ones holding the note until maturity.

This led to what Jesse referred to as the “mortgage revolution”, where mortgages were bundled together and sold. The process was a mortgage broker or bank would draw up and fund the loan, then the bank would bundle and sell the mortgages to the investment community. Government Sponsored Entities (GSEs) such as Freddie and Fannie Mac would ultimately secure the loans for a fee of course, making the investment community be less fearful of a possible default.

This practice led to banks and everyone related in the real estate and banking industry to enter into a full fledged frenzy. The banks would write pretty much any loan they could with out fear of default, as they would sell the loans as soon as they would write them. This was a game all about fees.

As we all now know this came to a halt in housing recession to which most of the nation still feels effects of what took place seven years ago. Jesse points out that many of the indicators are beginning to look like 2005 all over again.

The past is always a great predictor of the future, however lets hope we learned out lesson.