In this new series, we’re taking a look at the big picture and daily realities of commercial real estate leadership roles. In each article we’ll be sharing inside takes, perspectives, and advice from some of the top commercial real estate experts working with Bullpen.
Matthew Ticknor is a multifamily developer who started his real estate career in private equity before moving into development with Greystar. After honing his skills across the full spectrum of development roles with Greystar, Matthew ventured out on his own, launching Junction Properties. Junction has since built two new apartment properties in Oakland, CA, the 97-unit Telegraph Arts and the 78-unit Moran.
Having seen development from a variety of different angles, Matthew shared some of his insights on development with Bullpen.
What makes a good developer a good developer?
Well, you can't do a project without capital. So you need to have capital, and who's going to give you capital? The people that give you capital are people that trust you, and have faith that you can execute a project on budget. In my experience, I had years of private equity experience and years of experience in development with a national developer. I had great relationships, and I had people with significant experience in the market that were mentors to me, that were a phone call away, who I could call for a quick question. So I was resourceful. As a developer, being resourceful is critical.
So maybe I'm a jack of all trades, master of none. But I knew where to go for what I needed at any given time, whether it's on the capital side, or if it's an engineering question, or entitlements. I'm grateful for all the relationships that I have built throughout my career, because I know who to call for anything. So to your question on what makes a good developer a good developer, it’s being resourceful, and knowing where to go, because you're not going to have all the answers. But you need to know where to find them.
What does ongoing learning look like for a developer?
First, let’s talk about technology. When it comes to construction technology, I rely on my friends who are architects and designers, who are constantly in meetings with vendors who are presenting new products and technologies. An architect might tell me, “Matthew, we just were introduced to this new tool, it seems really interesting.” For instance, in our projects, we put in parking stackers, basically robotic systems that reduce the cost of parking. A parking spot in a normal lot might cost north of $50,000 per space. The stackers that were in our budget cost around $13,000 per spot.
On the financing front, we're always looking for different financial products. PACE (Property Assessed Clean Energy) financing came out in 2007, allowing you to finance certain improvements, and then the debt service payments are on your tax bill. It could be that or it could be a different financing product that can help capitalize a project, so I need to stay in touch with bankers and various capital sources that are aware of different products out there that might help get a deal financed.
At the end of the day, I'm learning about architecture, learning about construction, and learning about financing products. I’m in touch with land use attorneys who are aware of changes in the zoning code that might benefit a project, such as, potentially, a density bonus that's being explored.
How do you manage timelines and urgency during a development project?
The way I structure my team, every architect, interior designer, landscape architect, engineer, everyone is on a contract. At the beginning of a project, I make it clear to everyone on the team what our roles are, and I put together a master schedule with milestones that need to be met. Typically, I'll create that in conjunction with the architect, and then the architect will run and manage the consultants for the project, because everyone usually needs to deliver their product to the architect, who packages everything up. I remember in our projects we had to submit our construction documents for plan review by a certain date. Otherwise, the impact fees were going to go up by something like $7,000 per unit. So we set a deadline that was two weeks before that, to leave some cushion.
Really, time is money. Every day that goes by you've got capital earning a preferred return, or you've got a loan that's earning interest. The bigger the project, the more that costs every day. Once you're non-refundable on your deposit, you're moving, it's quick, and everyone is hustling. It's important to have a team that recognizes the impacts of time and money because we all want a successful project.
Do the most intense parts of the development process seem to take forever, or are they over in the blink of an eye?
In the Bay Area it takes a year or two, generally, to entitle a project. It feels slow because once you submit it to the city, you're waiting on the city. It’s a lot of hurry up, hurry up, stop. So you build that into your schedule, to allow for response times. Yes, it feels like it takes a while during entitlement, and then construction. Once you're out of the ground, it feels like it goes pretty quickly. And the goal is to get out of the ground as quickly as possible, because that's where the significant construction risk is. Because you don't always know exactly what's in the ground until you dig.
What development trends are you watching?
In the Bay Area, people haven't really gone back to the office yet. You have two incredible educational institutions, Stanford and Berkeley, and you have all this venture capital money, but people aren't going to the office. And so if they're not going to an office, do they need to live downtown? Is downtown going to come back? Locally, these are the challenges that we're trying to solve for. And there's still a housing shortage. So we know housing is needed but where is it needed? Are people not going back to work? If so, are they going to want to be in an urban environment?
Second, since COVID more people are working from home. Does the layout of an apartment need to change to reflect more of that working from home, living at home experience? And maybe that's only in the Bay Area, maybe it's different in the Southeast. With in-migration in places like Florida and Texas, construction and development is raging back. But a lot of people aren’t really touching the Bay Area yet, because they don't know if it is going to be a return to historical norms or not.
Third, will there be a big move with office to residential conversions? Everyone's talking about it but it's really difficult. Office floor plates are not always designed to easily allow for a residential conversion. So there's a lot of design and engineering implications there, which if solved, could be a great thing, but we're all working on it and trying to figure out what economically makes sense.
Interested in bringing Matthew onto your development team? Get in touch with us here.