I’ve always wanted to be creative. Trouble is, I’m simply not creative, at least not in any traditional sense. No musical talent, no artistic expression, at least not that others would enjoy. Frankly, I’m much better with numbers than any tool of the artist. Thankfully, my grandfather inspired me (and my parents encouraged me) to pursue a career in real estate, specifically development. I obtained a construction management degree because I wanted to understand real estate from the ground up. Fresh out of university, I found myself “blue-taping” obscure imperfections at what was to be Apple Computer’s HQ in Cupertino, California. Not long after that, I was counting rebar in footing excavations for an apartment building. Somehow that led to 30 years in the apartment industry. To me, even Apple HQ seemed boring compared to apartments and amenities. Weird but true.
I’ve been blessed to express creativity in problem solving business and construction issues, and much more in discovering intrinsic value for tired properties, then imagining their radically new position as preferred communities. Ones that would celebrate what was true but somehow lost, or worse, never discovered. Based on a new vision or theme, they would then be converted to something quite special that new residents would appreciate, rather than settle for. And while it’s a strange set of skills, I get equally fired up by a spreadsheet that demonstrates the transformation of financial disfunction to machine-like cash flow. I’ve truly enjoyed the vast majority of my career, particularly the last dozen years that involved creating Thrive Communities and RISE Properties Trust, which were built on this emphasis of value creation. But I burned out. Frankly success brought growth, and with growth came responsibilities far less creative and far less satisfying. It was a progression I was unaware of, except in retrospect.
Of course, there’s a very personal side to the burn-out, which I’ll share with some of you directly, but not here. Suffice to say that careful alignment of values, authority and responsibilities is more art than science, and I was out of alignment. The stress took a physical toll, which I couldn’t quite resolve, so a long time off was needed. I wasn’t sure if I’d ever care to work with apartments again. But honestly, stepping away was the best thing that I could have done. Thrive and Rise are doing better than ever, and I am relieved from responsibilities I didn’t really want, and now I’m bursting with creative energy.
My excitement is possible because of the reboot I’ve enjoyed, but also because of the potential I see in the marketplace. In spite of global and political uncertainties, it is clear that housing is desperately undersupplied. And our supply chain for new housing is terribly antiquated. Sadly, there’s an unfair disparity between the quality of existing housing and new housing. To over-simplify, the cost of entitlement and permitting new developments, layered on the increasing land costs due to scarcity and increasing construction costs, limit developments to only those that generate the highest rents. As a result, new apartment supply is almost exclusively luxury product for high wage earners. Where this supply is intense, lease-up pressures involve rental rate concessions that pressure rates for existing apartments (who would choose old vs new if the rate is nearly the same), so existing apartments struggle to generate the fair income needed to improve. The result of this dynamic is an opportunity for creatively improving tired existing “complexes” to better compete with the finishes and amenities (and services) of new product. I’ve done this so many times, and I’m just really excited to do it again, but this time without the responsibility of running a property management company and co-directing a private REIT. Very personally, it feels like my entire career has prepared me for exactly what I’m best at doing. That’s why I’m excited and blessed!