How Real Estate Developers Think. Peter Hendee BrownЧитать онлайн книгу.
zoning codes and unique local and neighborhood politics. Thus each project is uniquely fitted to its site, unlike a typical template-based suburban subdivision built on agricultural land by a national homebuilder that offers the same ten unit plans across the country. All developers—urban and suburban—innovate constantly at the margins but suburban developers are more able than urban developers to replicate their products. For these reasons, urban development is generally understood to be riskier, more uncertain, more time-consuming, and more costly, so developers who work in cities expect a higher profit margin than they might receive from a relatively simpler office park or subdivision of production homes in the far exurbs.
Developers can be either private, for-profit companies or nonprofit organizations, such as the many community development corporations in the United States that provide affordable rental housing in urban areas. A private developer can be very large or very small, from a single individual with some capital and a good idea to large companies such as Hines Interests, Trammell Crow Company, or the Trump Organization, with many divisions and projects and hundreds or even thousands of employees.
Entrepreneurial people who seek large profits and who have access to capital choose the real estate development business because it can be lucrative and the barriers to entry are low. Smaller and medium-sized private developers—firms of between one and twenty people who are led by one or two visionary and entrepreneurial individuals—undertake an enormous share of the development in cities. Unlike their larger corporate and institutional peers, who often labor under more bureaucratic organizational structures and have less of an equity stake in their projects, these people run efficient organizations and risk their own cash—and that of their investors—on their own creative visions. And while some people go into development during boom times with the hope of earning a quick profit and then getting back out, many others commit their careers to development. These people acknowledge that development can be both rewarding and difficult, that it is risky, and that, like anything else, becoming good at it requires practice. The context within which development occurs has changed since eighteenth-century Boston but developers still conceive and execute grand visions. Some go well beyond being mere “land subdividers,” and the most imaginative developers create the world we live in.
City Builders and Creators of Culture
Developers build our cities. Others, from architects, city planners, and elected officials to preservationists, environmentalists, other special interests, community members, and nearby neighbors, play a part in the private development process. Governments build major facilities, public streets, and parks and plazas, and they regulate growth and development through planning and zoning functions and the management of public participation processes. But throughout the history of the United States, where the great majority of land is privately owned, the buildings that make up American cities have been planned, designed, and built almost entirely by developers, using private capital, one project at a time. This incremental process of development—and all of the individual large and small projects that result from it—continues to give shape to cities today.9
Developers create the buildings in which we spend much of our lives. We work in their office buildings and we shop at their retail centers, mega-malls, and lifestyle centers. Their light assembly, industrial, and distribution centers store the food we eat and the goods we buy, from furniture and electronics to clothes and appliances. When we travel we stay in hotels, eat at restaurants, and visit entertainment and cultural attractions built by developers. Finally, most Americans grow up living in single and multifamily rental properties and for-sale homes that were mass-produced by developers. The work of developers makes up a large share of what we call the “urban fabric” of the city, from the exterior façades of their buildings to the land in between. More important, developers influence our basic conceptions of home, work, and life, from the high-rise office buildings of the early twentieth century, the suburban tracts of the post–World War II era, and the regional malls of the 1960s and 1970s, to the more recent warehouse-to-loft conversions, high-rise condominiums, and luxury apartments of the city.
All new real estate products begin as innovations to existing products. For example, from the downtown department store to the suburban strip center, regional mall, mega-mall, and entertainment center, each grew to become a reality that felt inevitable. But they each began as an untested incremental improvement on a former product. And for each one, a developer had a vision that became a real part of the world and of life for many people. In the next section, a Chicago developer named Gerald Fogelson will explain how vision and several other traits were central to his success in transforming an old railyard into a new urban community.
Seeing What Can Be
In 1988, Gerald Fogelson had a vision of his own. In place of the old, abandoned, sixty-nine-acre Central Station railroad yard on the south side of Chicago that he could see from his office window, Fogelson saw a new and vibrant residential community. He took his vision to Albert Ratner of the Cleveland-based national development company, Forest City, and Ratner agreed to partner with Fogelson on the acquisition and development of the Central Station property.10
Fogelson also had tenacity. He first developed townhomes on the land and then other developers saw the promise of his vision and began to partner with him to develop more housing. By the end of the 2000s, the area was home to fourteen million square feet of new real estate and more than five thousand people called the area, now known as Central Station, their neighborhood. In 2014 Fogelson was eighty, the redevelopment of Central Station had been under way for nearly three decades but was still not complete, and he still worked on it from his office on Michigan Avenue, in the heart of the area. But how did it all start?
Figure 5. Model showing the Central Station development as of 2010. The dark buildings are part of the Central Station development, which started with low-rise townhomes to the south in the late 1980s (right, in this photo) and then was built up to midrise and high-rise towers on the north, facing Millennium Park. Photo by author.
Figure 6. Central Station in 2010, with the Museum Park towers at the northern end, facing Millennium Park. Photo by author.
I Was Hooked
Gerald Fogelson’s Russian father came to America in 1908 only to find that the doors to traditional professions and businesses were closed to him. Like many other members of ethnic immigrant communities—Jews, Greeks, Italians, and others—he saw that the barriers to entry were lower in other industries like construction, clothing, movie making, and retailing. So he opened a shoe store in the small town of Dover, New Jersey. Fogelson worked there from the time when he was very young and learned the importance of understanding one’s buyer. “One day I said to my father, ‘These are the ugliest shoes I have ever seen and I don’t know why anyone would buy them.’ So my father told me, ‘These are not the shoes your mother or sister would wear but a good marketing person—a good buyer—knows his customer, so the reason that I buy and sell these shoes is that I have my customer in mind and I know what they like.’ His point,” says Fogelson, “was that you have to take your own personal tastes out of the equation, and this has stuck with me. I have always understood my buyer intuitively through all of the many different stages of my life and career even as I have developed different product types.”
After graduating high school, Fogelson attended Lehigh University, in Pennsylvania, where he studied business and majored in marketing. When he was a second-semester senior, Xerox and IBM and other companies came recruiting on campus. “I did not think much of the kinds of jobs and salaries they were offering,” said Fogelson, “because I had been taught that it is better to make a dime for yourself than to make a dollar for someone else.” Then his father came home one day and said, “There is a guy who lives in the next town over who is building houses and doing well, and if he can build houses, you can build houses, because after all, you are graduating from college and you know everything.” So in the middle of his senior year, Fogelson and his father went into business together and bought two small lots in Netcong,