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Louis Dubin-Navigating Real Estate Development with Purpose and Passion (#102) · Icons of DC Area Real Estate

• 0:09
  Speaker A: Hi, I'm John Co and welcome to Icons of DC Area Real Estate, a one on one interview show highlighting the backgrounds and career trajectory of leading luminaries in the Washington, DC area real estate market. The purpose of the show is to highlight their backgrounds and their experiences and some interesting stories about their current business as well as their past, and to.
• 0:35
  Speaker B: Cite some things that you might take.
• 0:37
  Speaker A: Away both from educational standpoint as well as lessons learned in the industry and some amusing and sometimes interesting background stories. So I'm hoping that you will enjoy the show. Before I introduce my guest, I'd like to share that both this podcast and the community I started in 2021, called the Iconic Journey in CRE, is now part of a new nonprofit organization with that same name. The new company will offer opportunities for sponsorship to grow the community both in membership and in programs. It also allows you as listeners to show your appreciation for this podcast, which has delivered episodes twice monthly since August 2019 with a charitable contribution. Transitioning the community and podcast into the nonprofit organization is underway. The community, which is open to commercial real estate professionals between the ages of 25 and 40 years old, is currently up to 65 members and growing. If you would like to learn more about either joining the community or contributing to the podcast, please reach out directly to me at John at Co Enterprises coenterprases.com separately, my private company, Co enterprises, now will focus only on advisory work for early stage real estate firms and career counseling. If you have interest in learning more about its services, please review my website@coenterprises.com. Thank you for listening.
• 2:24
  Speaker B: Thank you for joining me for another.
• 2:25
  Speaker C: Episode of Icons of DC Area Real Estate. I am pleased to introduce my guest for today's show who is Louis Dubin? Louis is the principal of Red Brick LMD, which is a cutting edge development firm here in Washington, D. C. Louis is a seasoned real estate developer who shares his journey and insights in the industry. He discusses his role at Redbrick LMD, the company's growth and its strategic approach to development, emphasizing community impact and sustainability. Louis reflects on its family legacy in real estate that goes back to the 19th century in Baltimore with his grandfather and even great grandfather involvement. His educational background, including law school he attended, and his formative experiences which also included working at the Resolution Trust Corporation during the early 90s when we had issues where he managed a portfolio of $40 billion and then subsequently to the founding of his private equity firm and development firm, Athena Capital. He talks about the challenges and strategies in wealth management and real estate development, highlighting the importance of social responsibility technological advancements and long term investment in the opportunity zones, which is where his company invests with his deals in southeast Washington, which we go into detail about this episode, also concludes with his values and his advice for young people in the industry, which is sage. So thank you for joining me again for this wide ranging conversation with Louis Dubin.
• 4:24
  Speaker B: So, Louis Dubin, welcome to icons of DC Area Real Estate. Thank you for joining me today. I overviewed your biography in the introduction. We met in 1989 or 90 when your dad, Dick Dubin, in a partnership.
• 4:38
  Speaker A: With NHP, was selling Grosvenor Tower in Rockville, Maryland.
• 4:42
  Speaker B: And I represented Aetna, who had the.
• 4:45
  Speaker A: Property under letter of intent at the.
• 4:47
  Speaker B: Time, until they decided not to proceed, unfortunately. But it was good to meet you and your father at that time. A disappointment, but I still enjoyed meeting your dad and you before going into your personal history.
• 4:58
  Speaker D: Please share your role at Redbrook.
• 5:01
  Speaker B: And I met your partners, Tom Skinner and William Passmore, several years ago prior to your merging your former company with them. It seems you've helped them grow considerably since you joined them in 2013.
• 5:15
  Speaker D: Thank you so much for taking the time today. Thank you, Louie. My role at Red Brick LMD is really quite simple. Three of us own the firm. Red brick became red brick LMD when I joined in 2013. My initials are LMD, and my prior firm was LMD worldwide. Okay for that was Athena Group. So it was very simple. We didn't have all the fancy branding people today. We probably would have spent 100 grand figuring what the right name was, but we decided to come together. We just took red Brick and LMD, and hence red Brick LMD. The roles here are somewhat definable and siloed at the same time. It's all for one, one for all. It's a very different sort of sense of sort of governance. The three of us own the firm. All major and material decisions here have to be unanimous, and therefore, we're constantly talking about what's going on, what strategy is here, what we're developing, what financial structure is appropriate for us. My main role is overseeing all of the capital, equity capital that comes into the firm. We have our own white labeled broker dealer. With foresight, that allows us, with our own licensed people to raise capital directly, typically through the wealth management groups at UBS. Alex Brown, Raymond James, about 30 registered investment advisors, some insurance companies, some banks. But it gave us the ability, institutionally, to raise capital in a way that most people in our industry don't do it. And that's in the ultra high net worth world. Through these institutional wealth management channels, and that gives us very much a national platform to raise large amounts of capital and we are equity top heavy as opposed to debt top heavy. My other roles are really overseeing a lot of the design development here with our development teams, the product. Remember, at the end of the day, a lot of people think that development is very much around clever debt and capital stack engineering. We've always believed here that you make your money on the real estate. I think that's what I learned from my grandfather, my father, my former father in law. It's all about the real estate and these other capital structures can be accretive at certain times and they can also have you end up losing the property so very much overseeing the equity capital formation in the firm, the strategy on what we build and when and how ultimately how we capitalize, which for us really means how little debt do we put on as opposed to the typical lots of debt and lots of fancy structures.
• 8:09
  Speaker B: So why don't you now tell me a little bit about your origins, youth and parental experiences. I understand you're a fourth generation developer going back perhaps into the 18 hundreds, possibly in Baltimore.
• 8:23
  Speaker D: That story. I was born in DC at Sibley, grew up here, very proud product of the public schools in Montgomery county, went away to college, came back for law school to DC. My great grandfather, my grandfather and my father were all developers. My great grandfather started in development in the late 18 hundreds in Baltimore. His original profession was manufacturing gas mantles, which today would be akin to manufacturing light bulbs. He manufactured and distributed gas mantles, which were the wicks in gas lighting, in homes, in whatever kind of oil they were using. And then later on when they piped in natural gas, you actually in some cases had it hooked up to gas, like a gas lamp in the street. And by the late 18 hundreds he pivoted. He was in the lighting business, not the gas metal business, to electrifying cities with Edison, and built some of the very first dual system apartment and office buildings ever to be built with both the gas wick and the electric. Electricity back then was not reliable, so you needed both systems. And he built some of the first buildings with electricity in a number of the major mid atlantic cities and markets and then hence started building and developing more and more with apartments really being his foray. He had nine children. My father, who was my grandfather's son in law, with his son, followed in the Footsteps. Most of my family are in the building building trades, development, construction business. When I first started, I had to give a last look to master's lumber, which was my great uncle's company, my grandfather's brother, for the last price on lumber when I was building homes when I first started out. Because in the family, you always gave last look to members of the family that owned the plumbing concession within the family, the electrical concession, the lumber concession. The last one. One that was relevant to me was Uncle Eddie. And having to go to master's lumber for the last quote. So I grew up here. This is my hometown. Love, Washington.
• 10:50
  Speaker B: That's great. So you learned a lot about the construction business then, from your father and from all your other uncles, et cetera.
• 10:59
  Speaker D: And my grandfather. My grandfather was the first one to teach me how to underwrite on a piece of paper with a pencil, because you need an eraser on a piece of graph paper, how to underwrite a single family housing project, as well as anything that was income producing, and piece of graph paper and a pencil. And I can still remember. That's cool. Taking me through it. And if it took more than one page, it was too complicated. You shouldn't do the deal.
• 11:28
  Speaker B: So you know the back of the envelope pretty well then?
• 11:31
  Speaker D: I grew up with it. And when I got married, my father in law at the time was Al Taldman. He was back of the envelope.
• 11:40
  Speaker E: Yes.
• 11:41
  Speaker D: And he was one of the richest men in the world at the time. And it was back of the envelope.
• 11:45
  Speaker B: Well, sometimes the most successful people are the simplest, as far as what makes sense, in my experience. So if certain things work on a very simple basis, then they'll do it. And it doesn't have to be complicated.
• 12:01
  Speaker E: Yeah.
• 12:01
  Speaker D: And it's location, location, location, and not having a lot of debt that'll take you everywhere. It's also very helpful if you're buying at the low end of a cycle. So basis matters.
• 12:14
  Speaker E: Yes, of course.
• 12:15
  Speaker D: You never want to overpay. You can't afford to.
• 12:17
  Speaker E: Sure.
• 12:18
  Speaker D: And some very basic lessons, but I agree with you. What is it called?
• 12:23
  Speaker E: Kiss.
• 12:24
  Speaker D: Keep it simple, stupid.
• 12:25
  Speaker B: Absolutely. So what did your dad teach you specifically? What did you learn from him?
• 12:30
  Speaker D: Oh, my gosh. I learned an awful lot. I learned a lot from my dad. I learned how to construct buildings.
• 12:38
  Speaker E: Okay.
• 12:38
  Speaker D: I learned the value of early bird getting the worm. I'd get up very early. He was up by 430 or five every morning. And he would do that because he'd have multiple jobs, multiple projects going at one time, and they could be an hour away. And by 530, he was in his car going to Baltimore, Prince George's County, Anna Rundle, Montgomery county, visiting his projects, checking on the status of construction, et cetera. So early bird gets the worm. I learned the value of very hard work. My dad worked six, seven days a week, my father's day, the sales office did 50, 60% of their sales activity on the weekends. So you built during the week, and if you were a home builder, you sold on the weekends. And he would sit jobs with his salespeople very often on weekends. And so I always prized the time I had with him going and sitting in those sales office and watching his sales managers and others qualifying people for a home and the symbiotic relationship with whatever mortgage company was sitting the job and how it all worked. So I learned a lot about the business. I learned a lot about, as I said, work ethic, about getting up early, the value of integrity. Do what you say you're going to do. Really important.
• 13:59
  Speaker B: Did you know you wanted to be a real estate developer when you were little? I mean, when your dad did, your dad just kind of. Just kind of grew on you or what was.
• 14:10
  Speaker D: My dad really wanted me to go to law school.
• 14:12
  Speaker E: Okay.
• 14:13
  Speaker D: And I went to law school, and as soon as I passed the bar, that was the end of my legal career. All I ever wanted to do was build.
• 14:23
  Speaker B: So he's the one that influenced you to go to law school. That's interesting. Why did he want you to be.
• 14:28
  Speaker D: A lawyer internally, or. Because at the time, he felt that having a profession was sort of the guarantee professionally that you'd always be okay.
• 14:41
  Speaker E: Okay.
• 14:41
  Speaker D: And it was very important to him, since we had the resources and means, that I get as much education and schooling and credentialing as I could. What it really did for me is I got into law school at 24, and I was never afraid of things. There wasn't some lawyer, some land use counsel, some contract lawyer, some finance person that could sort of bamboozle me with concepts and ideas I couldn't understand and intimidate me. So law school was a really important thing for me to do because early on, right out of law school, while I was studying for the bar, I started building. And it gave me a really good foundation, confidence wise, that I wasn't intimidated.
• 15:30
  Speaker B: Why law school not getting an MBA?
• 15:32
  Speaker E: Business.
• 15:33
  Speaker D: I learned the rules. Building, development, a lot of it's all around the rules, a lot of it. I clerked when I was in law school at Lennon blocker. So I learned land use, I learned contractual side. It was about learning the rules. And it serves me well today to know the terms, the phrases. I can't give you any kind of real analysis locally on a jurisdiction in terms of zoning. But there isn't a zoning lawyer in this country that I couldn't talk to with the exception maybe of Louisiana, which is, but at least understand and be able to ask the right questions and have sort of a professional dialogue with counsel on things. So it's always been very helpful.
• 16:19
  Speaker B: I'm sure it helped you in your career looking at deals that were a little bit off the table for others, and you had a different vision for.
• 16:25
  Speaker D: It, which I'm sure. And being able early on to buy non performing loans Reo and go through complicated legal processes.
• 16:32
  Speaker E: Yeah, I'll bet.
• 16:34
  Speaker B: Any other family influences or stories?
• 16:38
  Speaker D: Well, my grandfather was quite influential in my life, too. He also would take me from time to time to his projects, and he had thousands of apartments that he owned in the DC region. What happened to his portfolio? Aimco. Upread units you probably are familiar with. Yes, of course, upreads. So our family still has. We're still major owners in UDC.
• 17:03
  Speaker B: Didn't Aimco also take over NHP at one point? I thought they were your father's partner.
• 17:09
  Speaker D: They were. That's what I thought they were. Exactly. But these public reits offered a great estate planning solution to sell and not have a tax liability.
• 17:21
  Speaker E: There you go.
• 17:22
  Speaker D: And then with the step up in basis, as many of your listeners are probably familiar with, and if they aren't, they should learn about it. It's a great estate planning tool.
• 17:29
  Speaker E: Yeah.
• 17:30
  Speaker B: I've interviewed several REIT ceos, so, yeah.
• 17:33
  Speaker D: We'Ve talked about it in the past.
• 17:35
  Speaker B: So you attended W l undergrad, Washington Lee. Is there anything you learned there that.
• 17:41
  Speaker A: You thought was interesting?
• 17:42
  Speaker B: Did you enjoy that environment down there?
• 17:44
  Speaker D: I loved it, and I still have some of my very best friends from Washington d Lee. And I think that really reinforced the idea of integrity. It was a school with very old fashioned values. The honor code there still is today, and was extremely strong. And I think that even today there's sort of a network at Washington Lee. If you're dealing with A-W-L counterparty in a transaction, there's a certain level of behavior you'd expect.
• 18:15
  Speaker E: Sure.
• 18:15
  Speaker D: And it served me really well when I went to New York, ultimately, where what distinguished me early on was I was just a straight shooter. There wasn't all the nonsense. And when I was young and I moved up to New York, that was a really helpful thing. I think it was part of who I was, but I think wnl really reinforced that quite a bit. I love w l. Did you go.
• 18:41
  Speaker B: Right to law school.
• 18:42
  Speaker D: After graduating, I did okay, went right to law school, which was a little bit unusual, but I went right to law school. I was able to, and I went right to law school.
• 18:54
  Speaker B: Why au?
• 18:55
  Speaker D: So I didn't get into Georgetown. I was waitlisted to Georgetown. I either wanted to go to AU or Georgetown. It was a very close second choice. Could have been my first, because it had a program in international law at the time that was almost as good, if not as good as Georgetown. And I had a really weird. I was always a very curious person as a kid. I remember having read back and forth the Encyclopedia of Britannica because I was really thirsty and hungry to learn about things. I loved learning about the world and thinking about the world, and had the only program at the time. This is in 84, where you could go. If you were at Au, you're automatically accepted to a term in China, at Beida Fudan, Hong Kong University. So I could go to school in China in 1984. Now, mind you, I didn't go until 85, but I could go to China and study. And this is when the Chinese were still wearing Mao suits. But I thought that there would be.
• 20:07
  Speaker B: It was Deng Xiaoping.
• 20:09
  Speaker D: Deng Xiaoping. And I thought that the chinese economy was the sleeping dragon and the next few decades would be theirs. And I was right. So very, very early on, I wanted to learn about that part of the world through the lens of going to the Yale and Harvard of China. And I wrote my thesis in law school on the chinese economic contract Law of the People's Republic of China.
• 20:40
  Speaker E: Wow.
• 20:40
  Speaker D: It was promulgated in 1985. It was the very first economic, foreign economic contract law they had ever promulgated. And I was able to do that because my professors wrote it. Interesting. At the universities, you lived quite poorly there. There was no tourist infrastructure. There was no western comforts.
• 21:01
  Speaker B: Was it in Beijing?
• 21:04
  Speaker D: I lived in Beijing at the dorms at Beidan. I lived in Shanghai and at Fudan University, the dorms there, and at Hong Kong University as well.
• 21:14
  Speaker E: Wow.
• 21:15
  Speaker D: That was a different story, Hong Kong. But it was very exciting. And I had some unbelievable professors and adjunct professors at Au.
• 21:23
  Speaker B: Have you been back?
• 21:25
  Speaker D: I was on the board, the dean's advisory board at Au for China. China. Not in many years. I had a joint venture briefly with Hong Kong land in the late 80s, early 2000s. So I was in Hong Kong a few times with the leadership of Hong Kong land, but they were more british than anything.
• 21:48
  Speaker B: I was involved with the Mandarin oriental here in Washington and dealt with. That's a Hong Kong based company. So it was interesting.
• 21:55
  Speaker D: I mean, it was. Even the chinese natives were more british than anyone I'd ever met. Oh, sure. It's a whole subculture. I think the Brits.
• 22:05
  Speaker A: Hong Kong's like five or six families.
• 22:07
  Speaker B: Basically control Hong Kong. It's interesting. So you joined your father's firm right after law school, sort of as a general counsel?
• 22:16
  Speaker D: Yes. The first year of a law school, when I was sitting for the bar, I built 30 houses in Anna Rondo county. On Broadwater Creek, which is right near deal, Maryland. And old court savings and loan, which had gone bankrupt, had this piece of dirt with fully subdivided lots. That I could buy for next to nothing.
• 22:41
  Speaker B: So this was after they went under?
• 22:43
  Speaker D: This is after they went under. Even the streetlights were in with no houses on it.
• 22:47
  Speaker E: Wow.
• 22:49
  Speaker D: And that was my first project.
• 22:50
  Speaker B: How'd you find that deal?
• 22:55
  Speaker D: He's since left us, but an old school guy, wonderful guy, named Paul Greenstein. I haven't thought of Paul in a long time. Wonderful man. He and his brother. His brother was an accountant. They were builder developers. And I think Paul was in his late 60s, early seventy s. And they really wanted a young partner to do work, to show up, to run the super, to run the sales. My dad knew him, members of our club. There were a lot of connective tissue.
• 23:31
  Speaker E: Got it.
• 23:32
  Speaker D: Wonderful, honest people. And they had found something that was really quite valuable. But someone needed to do the work.
• 23:38
  Speaker B: Good experience then.
• 23:39
  Speaker D: And so I partnered with them. And within a year, it was clear that the bigger deals, the bigger things out there to do. At 24, 25 years old, I was not going to be able to do myself. And my father really put me into business, which I'm very grateful for. We needed to close quickly, and I needed, like, $800,000 for my share of it all. We were doing it all equity at first, before we closed any bank loan. And they put up their share. I put up my share, and I was running it. And my father lent me that money. And told me this would be the most expensive postgraduate thing he could ever support. Good luck. Which made me very upset that I was going to blow all this money. And I worked seven days a week. And when I was finished with my day job, I was meeting with the banks to get this refinanced. And within three months or so, we had it not refinanced. We had it financed. I was able to give my dad.
• 24:41
  Speaker B: This is all for sale, though, right?
• 24:42
  Speaker D: Yeah, for sale. Housing. Annapolis federal got it.
• 24:46
  Speaker B: Interesting.
• 24:47
  Speaker D: And getting a loan under pressure, having to get it done because of that.
• 24:53
  Speaker B: And the early ninety s was not easy to get financing either.
• 24:56
  Speaker D: By then it was 93. No, you're right. No, this was 88. Oh, okay. This is right at the beginning of the end.
• 25:06
  Speaker E: Yeah.
• 25:07
  Speaker B: I mean, you could finance stuff.
• 25:08
  Speaker D: Then they were willing to give me sort of a character loan.
• 25:12
  Speaker E: Sure.
• 25:13
  Speaker D: Because they had done business with my grandfather and father.
• 25:16
  Speaker E: Okay.
• 25:17
  Speaker D: It was the old days.
• 25:18
  Speaker E: Sure. Yeah. It was a different era.
• 25:19
  Speaker D: Different era.
• 25:20
  Speaker E: Oh, yeah.
• 25:21
  Speaker D: So from there, I found some other deals that we should do. Some farmland and Prince George's, some other stuff that we should do in Bethesda. My father always had big stuff going on. Grovesner deal, Grosner and then Whitley park over Pooksill Road. And I decided, and he decided it was best to team up and do the stuff together. That was probably 88, 80, like that.
• 25:52
  Speaker B: And then eventually you decided to go to New York. So talk about that.
• 25:56
  Speaker D: So I teetered with my dad, built a couple of projects with him. By 1991, the world had ended. SNL crisis. For your audience that doesn't know it, you should look up resolution trust Corporation, RTC. I'll give you a little homework. It was the cleanup agency for all the failed snls in the US. There were about 780 failed institutions. Ultimately, and the federal government. Through its receiver, the resolution Trust Corporation became basically a private corporation owned by the federal government whose job was to resolve and liquidate the failed institutions. And I thought that's where all the action was. I mean, if you wanted to really learn about how you buy non performing loans and learn how to value portfolios and stuff I never even remotely had any exposure to, that was the place to go. Because by 90, it was clear, 1990, there weren't going to be any new buildings built. And so we were lucky that we didn't have a bunch of fires to put out and problems. My father and I, we had pretty much sold all the homes that we had built. And at the same time, I was too young to go play golf and tennis and all that stuff. So I wanted to challenge and I was offered ultimately a position at the Resolution trust Corporation as a consultant, but actually as an official there, which I took.
• 27:29
  Speaker B: Your legal background helped there?
• 27:31
  Speaker D: End of 90, early 90, yeah. DC was weird. I mean, it's still weird. If you're a young lawyer, there's a lot more opportunities available to you in government now. My legal background helped a great deal. I had clerked in some top firms, and this was a business position at Resolution trust. And in a very short amount of time, I became national director of all land and landloans at the Resolution Trust, had about a $40 billion portfolio at the time, which was a lot of money in 91, and spent a few years at Resolution trust Corporation designing and executing on some very large portfolio sales of partially completed buildings, a lot of lot, subdivision, partially completed single family homes, finished single family homes that hadn't sold yet. And that was an unbelievable experience. I got, was awarded institutional investor deal of the year either in 93 or 94 for my work there, which was a big deal to be a young person in the federal, basically a very high level but federal job. With that much attention, it was time to leave. All the good that could have come, had already come. And I had an opportunity to leave and go to New York in end of 93, 94 and start my own firm. So I put together a little bit of capital and I moved to New York and started Athena, and it really got going in very early 94.
• 29:18
  Speaker B: That was helped with your father in.
• 29:21
  Speaker E: Law at the time.
• 29:22
  Speaker B: Did he help you with that?
• 29:23
  Speaker D: Absolutely. I didn't expect him to. The original backers made a deal with me that I had to offer my father and my father in law an equal share in case they wanted to be involved, because they knew my family, they didn't want my father, father in law to be pissed off at somehow. So my father in law unexpectedly said, great idea. Yes. And what I wanted to do was buy non performing loans and reo and broken deals like I'd been packaging and becoming quite an expert at the RTC. And I put in my charter that I would do nothing with the FDIC or RTC. So one of the initial investors said, hey, I thought I was getting like sort of an inside track on things. I said, no, it just has the appearance of not being appropriate. As a lawyer, I don't do things that have the appearance of not being appropriate. So I put it in the charter, and of course that investor fell through.
• 30:28
  Speaker B: That's only two of the entities that were in distress. Everybody else was, too.
• 30:32
  Speaker D: That was my point.
• 30:33
  Speaker B: So many opportunities.
• 30:34
  Speaker D: That was exactly my point.
• 30:35
  Speaker E: Yeah.
• 30:36
  Speaker D: My point was, it's fish in a barrel and I need to go back. The perception, even though there was no technical conflict, because whatever I had worked on had already sold. But I knew how those programs worked and I didn't need it. And I started, and my very first deal came to me a few months later, set a reputation of knowing how to diligence very large, complicated, broken development deals. Midlandic National bank in New Jersey had 32 assets. You remember these things when they're like your first about half reo, half non performing loans, mainly subdivisions. Cherry Hill. Good real estate, good real estate. And I partnered with Khub of our Hubnanian and his father Kabork. I said, you guys are going to build out this stuff and we're going to be partners. And we figured out old methodology of doing that. So all of a sudden, the first six months of being up in New York, I'm 30 years old and I've got 32 assets in and around within an hour, hour and a half of, well, next to Philadelphia and within an hour, hour and a half of New York City. I'm sure it was right in, you know, in Hobook and or Weehawk and or things of that sort. So we were in know hired asset manager, brought a partner in.
• 32:03
  Speaker B: Did you finance those deals with banks or how did you structure your debt?
• 32:08
  Speaker D: The charter with the prohibition on federal deals is what got me Morgan.
• 32:15
  Speaker E: Ah, okay.
• 32:17
  Speaker D: They loved the fact that I'd left government. I wasn't going back to do the government stuff, but I had found this highly profitable deal and they offered to Morgan investment Management. Chipm was what they were called back then, JPIM. So they backed me on my first deal and they ended up being my large capital partner on the first four or five deals that we did. Actually, my recollection is they wrote like an 80% of the dollars we needed. We put in 20. I'd just go syndicate and put it together. And we had no debt, all equity. I mean, they were preferred equity before they even knew what preferred equity was. They got paid back first. Yeah. Really old school.
• 33:08
  Speaker B: Well, the debt markets were somewhat tumultuous at that point until cnbs really emerged. This was about 93, 94.
• 33:16
  Speaker D: Yeah. And I was early on, before the commercial CMBS markets, Michael Youngman and Ken Bacon.
• 33:24
  Speaker B: I know Ken, I've interviewed him.
• 33:26
  Speaker D: So Ken and Michael Youngman really did start all of that at the US. They had the first CMBs desk because they had enough product that they could make a market and figure out up to what loss they were willing to.
• 33:43
  Speaker B: Well, Fanny started the.
• 33:47
  Speaker D: You know, the RTC was really a laboratory for a lot of today's real estate finance and structuring and the way things are done or have traditionally been. So in the very beginning it was Morgan investment management and my father and my father in law at the time just didn't believe me. Like, you're 30 years old, JPMorgan, doesn't, they going to finance you. They don't finance people. You're not old enough. So I started closing deals and making money.
• 34:23
  Speaker E: Right.
• 34:24
  Speaker D: It was really sort of funny. It really gave me. It was like that first deal I did with my dad's money. All I wanted to do was pay him back, so I just wanted to perform.
• 34:33
  Speaker E: Right.
• 34:34
  Speaker D: And all the snickering. 30 years old, you're doing this on your own. So I did it. Instead of worrying about it, having debates about it, you just go do.
• 34:44
  Speaker B: There were several people about your age at that time that did similar things. Barry Sternlick, Barry's one of them. Ethan Penner, I was going to mention, and several other people.
• 34:56
  Speaker D: Oh, absolutely.
• 34:59
  Speaker B: Sam Zell, of course, was older, but he got into the market at that time.
• 35:03
  Speaker D: John Klopp, who runs Morgan Stanley's real estate group now, and Craig Hatkoff, they had a company called Victor Capital, and they sold me. I mean, John runs Morgan Stanley's real estate, all their funds and groups today. But, yeah, the fraternity of people I grew up with, Paul Casalonis, Jonathan Gray, who's not basically running Blackstone, not just real estate. It was quite a good vintage of people. David Hamoto, I don't know if you remember David, but a lot of big.
• 35:38
  Speaker B: Players, opportunistic plays, and that RTC was billions of dollars from that.
• 35:45
  Speaker D: That was the early proving grounds.
• 35:47
  Speaker B: The question I have now is whether today is a similar moment.
• 35:51
  Speaker D: I had a partner's call. I had a partner's meeting this morning. Is there blood in the streets yet? When? How do we know what metrics we decided the three of us are going to write up for next Monday's meeting where we think we are and what we think the appropriate strategy is in terms of new acquisitions, because we've got a lot of dry powder.
• 36:15
  Speaker B: Talk about Athena's growth a little bit.
• 36:17
  Speaker D: How did it grow?
• 36:18
  Speaker B: And that was your first deal. Talk about how your business strategy grew over time.
• 36:24
  Speaker D: So 93, 94, really, to 2000 and 815 years was Athena and many sps through Athena, sure. I think we had 25 acquisitions or so, something like that. I don't remember the exact numbers anymore. We had very high returns for many years. Multiple funds through.
• 36:50
  Speaker B: Was it mostly opportunistic, high risk type transactions? Development, yes, exactly.
• 36:56
  Speaker D: Development. And then it pivoted, of course, to my core strength, which was building buildings primarily in New York City and Washington, DC. So the development activities were really DC and New York built a lot of buildings in New York.
• 37:11
  Speaker B: We had a lot of money in office mostly.
• 37:14
  Speaker E: No, no.
• 37:14
  Speaker D: Residential, residential for sale condos.
• 37:18
  Speaker E: Okay.
• 37:19
  Speaker D: And in Manhattan, mostly in Manhattan, although I did the first major luxury condo deal in Jersey City, which at the time was a nascent market and today is a big mega market. I built 111 Central Park north, the top of the park, 838 5th Avenue, 65th and Fifth.
• 37:47
  Speaker B: These are all residential.
• 37:48
  Speaker D: 43 West 64th between Central Park west and Broadway.
• 37:56
  Speaker B: These high rise buildings.
• 37:58
  Speaker D: High rise buildings. And I lived on the Upper east side. I lived in New York for about 20 years.
• 38:03
  Speaker E: Right.
• 38:04
  Speaker D: So development, and then we were dollars with a controlled GP position in other developments or projects that had stopped, that needed the capital to continue in a development partner. So that took us to places like Miami, Palm Beach County, Providence, Rhode Island, Boston. We had about 2 million office in Boston. We made a lot of money in Boston. It's a very long story for a whole nother podcast, how you make a lot of money in office. It all has to do ultimately with basis. If you buy really low and you have tenants or a prospect for tenants, and you don't let leverage screw you up, there are ways you can make a lot of money. I don't know about today, but back then, certainly back then, office was very.
• 38:57
  Speaker B: Much different demand factors.
• 38:59
  Speaker D: Today, different demand factors. But office was a very scorned upon product type in 95, 96, 98.
• 39:07
  Speaker B: Well, what Sam Zell did in the early 90s in Washington, other cities just goped up product at such a discount.
• 39:16
  Speaker D: Absolutely. We did similar. And so the office stuff we did, we made a lot of money on.
• 39:20
  Speaker E: Yeah.
• 39:21
  Speaker D: And then there was always land, big land stuff we made a lot of money on, especially unintitled land where we could buy it in distress or buy it really well below.
• 39:32
  Speaker B: So you're willing to take entitlement risk?
• 39:35
  Speaker D: Absolutely.
• 39:36
  Speaker E: There you go.
• 39:37
  Speaker D: Okay. It's part of a mantra.
• 39:40
  Speaker E: Okay.
• 39:41
  Speaker D: Some people are, we understand, we understand it. And the older I get, the more localized I get on being able to take. I'll take entitlement risk all day long in DC because my partners and I probably understand it as well as anyone out there. Is there anyone understands it better? I don't know, but we certainly were very comfortable with entitlement risk.
• 40:07
  Speaker B: The government aspect is one thing, but the community aspect is another. And we can talk about that.
• 40:12
  Speaker D: Absolutely.
• 40:13
  Speaker B: Yeah, we'll get into that a little bit. So Athena was a 15 year effort.
• 40:19
  Speaker D: Yeah, probably 25 transactions. 2008, I parted, I got divorced from my wife. My major partners at that time were my wife's family. And we parted in 2008, right before.
• 40:41
  Speaker B: The world sort of ended between Bear and Lehman in that era.
• 40:47
  Speaker D: Exactly.
• 40:48
  Speaker E: Yeah, exactly.
• 40:50
  Speaker B: That year. So that was a big cataclysmic change in your life then?
• 40:54
  Speaker D: Huge.
• 40:56
  Speaker E: Right.
• 40:57
  Speaker B: So then what was your thought process at that point?
• 41:00
  Speaker D: So I started Redbrick LMD. I had agreed who I would take from Oldco, from the old company, and I started on my own.
• 41:11
  Speaker B: You came back to Washington at that?
• 41:13
  Speaker D: No, no, I was in New York. My daughter was still in high school.
• 41:16
  Speaker E: Okay.
• 41:16
  Speaker D: I've always been very active in my daughter's life and raising her and all, so I really couldn't believe. And I started Redbrick LMD.
• 41:27
  Speaker B: And what did you look at at that point?
• 41:30
  Speaker D: We were one of the two or three bidders on Lichman's bank, chorus bank.
• 41:36
  Speaker E: Oh, sure.
• 41:37
  Speaker D: So we got qualified to bid on that. I put like a billion dollar offer together on that with a big team of people I brought together. We went against Sternlich and a few others, but we were one of a handful of bidders that were qualified and we looked at that very seriously. And then I put a couple of other major assets under contract and.
• 42:04
  Speaker E: Had.
• 42:05
  Speaker D: People with all kinds of problems unraveling. All of a sudden. I didn't have the unraveling so I could help put together solutions for people that had development projects that had stalled or stopped or things of that sort.
• 42:19
  Speaker B: So how did you come together with your partners now?
• 42:22
  Speaker D: So I decided to move back to DC in 2013. And I was really looking around where's the next big opportunity? And I had built and developed all over this country. I had an office in LA at one point, Boston in Florida, multiple offices in DC and northern Virginia. And I was looking for dynamics. That made sense. I'd done some work overseas early in my career, so I was really looking for where's the next emerging market? How do I find that? How do I have an open mind about it? I got remarried, had big opportunities out in Los Angeles, really didn't like living there, and decided ultimately that Washington had that emerging market that I was looking for. And my wife was okay with moving from Malibu to DC, but not Malibu to New York. Okay, it's one of those.
• 43:31
  Speaker E: Yeah.
• 43:32
  Speaker D: And my father was building big project on 14th street called the Bentley at the time and a lot of assets here. And I took a little look around. I hadn't really looked at DC seriously for a while. And I was like, oh my God, the locals are really missing it. What's happening down by the ballpark and in southeast and Monty Hoffman's grand plans for southwest, the entire city is going to pivot south and east.
• 44:09
  Speaker B: And it did.
• 44:10
  Speaker D: And I would tell people that grew up here, some of my parent, father's friends, grew up in Anacostia and conquer sites. These are areas that changed tremendously last 50 years. As a matter of fact, my synagogue, their original cemetery is next to anacostian congressites. Washington Hebrews. Original cemetery is on Alabama Avenue in southeast DC.
• 44:34
  Speaker E: Interesting.
• 44:35
  Speaker D: These were very diverse neighborhoods. Jewish, italian, irish, african american, solid middle class. So a lot of cops, government workers, firemen, teachers. Not the wealthier area in town, but a very solid area in town. I don't know, something like some neighborhoods in Queens or something. So I saw this opportunity here in DC. And analogous to Brooklyn. Yes, sir. Valentis. Even more a dumbo.
• 45:09
  Speaker B: Yeah, it's analogous to Brooklyn Dumbo.
• 45:12
  Speaker D: I always was in awe of the Valentis family. And for those listeners, look up the Valentis's early on. They saw it big time. Their basis was next to nothing. They were so dead on. And so I saw it. And then I got to understand how the green line worked. The green subway line, which in our generation, the red line was everything. Of course, not anymore, but it was everything. The green line is a new red line. And I came to believe that eleven years ago. And so the first week I'm back, one of my great budies, who's lived on Capitol Hill for 25 years, he says, I got to take a ride with you. And he's a very well known political person, very smart guy. Strategy says, I just don't get it. Why is no one buying this land on Howard Road at Poplar Point? Why are all these big vacant areas? Why is there this blight when right across, and they're going to be building a new bridge, Louis, you know, the new stadium has come, and this is all. Why wouldn't be Jeff reperson, would it? No, this wasn't Jeff. Jeff owned a good bit of what we bought from UBS actually gathering. But my friend brought me over, and no, no, he had no connection to any of, like, he was trying to, I think, seduce me into coming back to Washington. And he knew I needed something big, okay? So I'd never done little things. And I was like, this is a no brainer. And I said, let me research and figure all this out. UbS owned the big, important piece over on Howard Road right at Poplar Point. And I learned very quickly that they had close to four acres. And I learned even more that they had until the end of September 2013 to dispose of that asset and get their 90% loss share from the swiss government. So this was in August of 13. They needed to move fast. Interesting. So I needed to mobilize fast. And within a week I met Tom Skinner and William Passmore, who became my partners ultimately. And they had diligence and analyzed the site for 1824 months. So all the diligence stuff, all the stuff I would have had started from scratch, they had done. And we agreed the next day at a really good first meeting. Let's pursue this together. Let's just pursue it together. We have different skill sets and all.
• 47:54
  Speaker E: Sure.
• 47:55
  Speaker D: And before we knew it, literally three weeks later, we had titled the property. Some major local families came in as investors. So did our capital, and we bought it for cash. And that's pretty much been our mantra. All the land that we've bought up today in southeast, we have close to 9 millionft owned and controlled in the city today. We have no debt on land, so we do it all, equity on land. And then when we go vertical, we typically don't have more than 40% construction debt, which is one of the only reasons, or one of the reasons that we're one of the only developers still able to build. We have a $430,000,000 project. I'm looking at the cranes right now through the window that's gone on. We closed that construction debt last fall. So this low leverage own land, own land with no debt is the only way you're getting stuff done.
• 49:02
  Speaker B: That's a multi generational view.
• 49:05
  Speaker D: We're not traders. We're not traders. And then all of a sudden in 18, actually the end of 17, opportunity zone legislation came along and all this land that we were buying got a major push because there was all this capital that needed to be in sort of emerging markets that qualified as being low income or historically low income under the 2010 census. And that was a huge boom because a lot of the alternate worth market that were taking capital gains is able to use that program and put it into projects of ours and speed up the development or redevelopment of these areas in southeast that we're now building out in a very big and fulsome way.
• 49:52
  Speaker B: So you've got that big project, then you're also involved in the St. Elizabeth's project.
• 49:55
  Speaker E: Talk about that.
• 49:56
  Speaker D: We were picked as the original master developer. We've been picked twice now on different phases of that master development that's gone unbelievably well. Very delighted with that. The first phase we partnered up with Flaherty and Collins. We built 250 apartments there. We were able to figure out with Flaherty how to do that. 80% workforce housing affordable. The requirement was 20 and we were able to use low income tax credits and gap equity funding from the city and historic tax credits. That year, we were the largest producer of workforce affordable housing.
• 50:36
  Speaker B: Is that a ground up structure?
• 50:37
  Speaker D: No, that was adaptive reuse of one of the hospital buildings, seven of them.
• 50:43
  Speaker E: Really? It's beautiful.
• 50:44
  Speaker D: If you haven't seen it, I haven't looked at it.
• 50:46
  Speaker B: I saw it before it started construction.
• 50:48
  Speaker D: Incredibly beautiful before you were even appointed. And because of the way it was constructed, the heights they make for very generous apartments. I can imagine. It's just really, really nice.
• 50:56
  Speaker B: Ceiling heights are probably not fall.
• 50:58
  Speaker D: And then we were able early on to partner with Whitman Walker for about 130,000 foot office building, which we cut the ribbon on with the mayor, I think in September. They have about 330 people working in that building now. That was a pharmacy, food and health services, desert. Whitman Walker is now able to see 10,000 people a year.
• 51:23
  Speaker E: Wow.
• 51:23
  Speaker D: That would not have had that kind of access to what they offer, including putting it on the ground floor, a compounding pharmacy. Of all the deals I've done, all the big projects I've done, I think I'm most proud of that because that was financially a big success.
• 51:37
  Speaker B: That's great.
• 51:38
  Speaker D: And it really brought something to a community that brings tears to people's eyes. It was just needed access to, really, health care and dental care, dental clinic there as well. And it's state of the art. Beautiful. Class a building was just at their 50th gala. I was in tears. I was so excited. I mean, we really did something amazing with our skills and talent. We made money at it, and the impact that we had is colossal. This year will be done with just under 100 townhouses for sale. Housing was really important to the mayor, really important to us. In building strong, middle class communities, you need homeownership, and about 30% of those units were in the workforce affordable program. So people that are working hard that perhaps aren't earning 150 grand a year, but earning 80, 90 can get themselves qualified for.
• 52:37
  Speaker B: Before you took that opportunity, what was your thought process going in there? You looked at those historic buildings and you said, so how are we going to make this work?
• 52:49
  Speaker D: So we knew that there were parcels with no buildings on them.
• 52:54
  Speaker E: Right?
• 52:55
  Speaker D: There are parcels with buildings on them, parcels with buildings on them converted well to apartments. We knew Homeland Security was coming with their new headquarters. We knew the Coast Guard was coming with their new headquarters. There was a tunnel under the road, under MLK right into our campus. We knew that the feds had big plans to have customs and border patrol and ice ultimately there. And we knew that there are other federal agencies that were expanding there because of the cyber Defense intel threats, including Defense intelligence Agency, which is right there. People know that they're but public, they're there. They're at Joint Base in acostia, right down the hill less than a mile. So we knew that there were all kinds of drivers there if you could put together a really good, safe plan. We also decided that it was really important that the time that marrow, we had the option in our first phase on the entertainment and sports arena site, we thought that was a really good idea. The mayor and the city built 5000 seat arena right in the middle of all the stuff we were developing. And we decided, oh my gosh, we got to build a town center here now. And before we do that, we're going to build the first all wood CLT, cross laminated timber structure in this area. And we're going to house at least 15 businesses. There you go. They underbuilt the food and beverage in the arena on purpose, so that people, when they float out, would have to go next door or in the neighborhood to eat and drink to get some economic, some dollars into the local economy. And what we did was convened a jury with our partner in that, and the new town center is Emerson collective. What we did there was we asked the community to put a jury together with us to select, out of 30 some applicants, 15 local businesses that could go in, in a subsidized way with full legal, business coach, accounting, support for businesses that already proven out that they had a product that was commercial and marketable, whether it was food truck, or a small restaurant, or someone that baked pies, or someone that had a fashion brand, or someone that had an antique store or an art studio, someone that had commercially viable product to sell or food and beverage. We picked 15 out of the 30. They were all black owned, ward seven a businesses. And by doing that, and by building something fabulously beautiful, the day we opened, we had 1300 people. At the opening, we were expecting 300. The community, they cry when they talk about it, the pride that they have. I learned a lot in New York around how you do this, right? You don't do it with brutalist architecture and chained stairs, chairs and concrete benches, and uninviting, awful, sort of dehumanizing stuff. You do it in a way that is so beautiful. The lawful community is going to be really difficult on anyone that defaces or hurts that place. That's really the key. And it worked. And it's incredibly beautiful, amazingly successful, pre Covid, they had over 100 events a year up there.
• 56:34
  Speaker B: That's great.
• 56:34
  Speaker D: And so they have this whole built in economic cycle now that everything's getting sort of restarted.
• 56:40
  Speaker B: So I interviewed Catherine Buell.
• 56:44
  Speaker D: I did the deal with her.
• 56:46
  Speaker E: Yeah.
• 56:46
  Speaker B: So I knew she talked about St. Elizabeth before, of course, she went on to Amazon, did amazing things at Amazon, and now is doing a sabbatical up at university.
• 56:57
  Speaker D: But yeah, Catherine's a lawyer. She's another.
• 57:00
  Speaker E: That's right.
• 57:01
  Speaker D: Performed lawyer.
• 57:03
  Speaker E: Yeah.
• 57:03
  Speaker D: Her story is amazing.
• 57:05
  Speaker B: So listeners, please listen to that episode. It's pretty special. And she was a big part of what you were doing up there.
• 57:12
  Speaker E: Yes.
• 57:12
  Speaker D: She was the executive director for the mayor, and I negotiated with her directly. Very smart lady.
• 57:20
  Speaker B: So talk a little bit more about the bridge district project. You've got several properties, buildings under construction there.
• 57:29
  Speaker E: Talk about that a little bit.
• 57:30
  Speaker D: So our big theme today and everything that we're building new is net zero. Sustainability is the mantra at our firm.
• 57:40
  Speaker E: Okay.
• 57:40
  Speaker D: And we're currently building at the bridge district. We're able to build a little over two and a half million feet. We have the zoning in place. We're currently building about 760 apartments. It's under construction now. That building currently is the largest net zero from operations apartment building under development in the world. So the impact world is all over us. Trying to understand the interest is mainly coming out of Europe, to be candid. Europeans, especially the Germans, the Dutch, scandinavian.
• 58:20
  Speaker B: Countries, talk about the technologies through accomplishing that.
• 58:25
  Speaker D: There's a lot of carbon sequestration. The bottom line is we're doing things like having our own batch plant, which lets us put a much more efficient mix of slurry. It allows us to modify how much slag and ash we put into the mix, which means it takes a little longer to cure. But you're pouring it right on site.
• 58:46
  Speaker B: Are you doing the carbon cure process?
• 58:48
  Speaker D: Concrete is part of that. We're doing a lot of embodied carbon within the concrete, which is getting us a lot of net zero points. We signed a green energy output agreement with Exelon Pepco. That's a big part of it. And we have really state of the art. They like to call it geothermal. It's really ground source heat pump energy. How are you making your energy for your heating and your cooling and for moving your air around? That's a large part of it as well. We monitor it literally on a weekly basis.
• 59:25
  Speaker B: Interesting hit.
• 59:26
  Speaker D: Literally has a compliance person on the team.
• 59:29
  Speaker E: Cool.
• 59:30
  Speaker D: That is counting and judging how far the workers are commuting, how much gas they're expending in their cars. Without the concrete trucks, we don't have the co2 emissions and the idling because we've got the.
• 59:45
  Speaker B: You're measuring it all?
• 59:46
  Speaker D: We're measuring it all. And we have a third party that ultimately measures all of it and puts a third party report together on what the. When you add all of that up, what that adds up.
• 59:57
  Speaker B: Have you seen the American Geophysical Union.
• 59:59
  Speaker E: Building here in the city?
• 1:00:00
  Speaker D: Our team is toward it.
• 1:00:02
  Speaker B: It's very interesting.
• 1:00:04
  Speaker D: We're modeling our future buildings not just being net carbon zero from operation, but nets of carbon zeros themselves. And so our next building will be announcing very shortly. And the rest of that build out over there, I expect all but one of those buildings will be wood CLT to 130ft. About a year ago, we started with the district in getting the building code changed over to the 2024 international building code to allow you to go to 130ft of wood CLT.
• 1:00:35
  Speaker B: Is that similar to mass timber or.
• 1:00:37
  Speaker D: Is that same thing? It is cross laminated timber. There's different kinds of mass timber.
• 1:00:42
  Speaker E: Okay.
• 1:00:42
  Speaker D: Cross laminated. The simple way of explaining it is if you take your fingers and you don't cross them, you just sort of leave them like this. I can take my hand and easily break through.
• 1:00:54
  Speaker E: Right.
• 1:00:55
  Speaker D: The minute you cross it, that bond, you can't get through my hand. Got it. So there's a process that the Canadians do quite well. The leading technologists in doing the CLT is really mesh. Like mesh. Really? The Austrians?
• 1:01:11
  Speaker E: Yeah.
• 1:01:12
  Speaker D: And one of the biggest learnings is there's less of a carbon footprint for us to buy our cross laminated timber from austrian forests that get railed to a port and shipped to the port of Baltimore than it is for us to truck it from the Pacific Northwest, which is not intuitive at all, but rail and shipping is just much more, much less of a carbon imprint than trucking.
• 1:01:44
  Speaker B: When are you going to start leasing.
• 1:01:45
  Speaker D: The project over there? Sometime in 25, 700 is a lot.
• 1:01:53
  Speaker B: To put in the market at the same time.
• 1:01:54
  Speaker D: Well, we'll stagger it a little bit.
• 1:01:56
  Speaker E: Okay.
• 1:01:57
  Speaker D: But we have three different products there.
• 1:01:59
  Speaker B: Everything for rent?
• 1:02:00
  Speaker D: Everything for rent. But one of the products is more of a short term stay.
• 1:02:06
  Speaker E: Okay.
• 1:02:07
  Speaker D: And there's a huge demand for furnished apartments. Short term stay here. Huge. But no for sale product? No for sale product.
• 1:02:13
  Speaker B: Interesting.
• 1:02:14
  Speaker D: No, we want to own this for.
• 1:02:15
  Speaker B: A long time and then other uses. Unit retail there, too.
• 1:02:19
  Speaker D: Yeah. What's been announced already is we have about 24,000 foot lease with Atlas brewery, which as you may or may not know. They brew their beer with solar panels.
• 1:02:30
  Speaker B: That's kind of cool.
• 1:02:31
  Speaker D: They're sort of consistent with our net zero approach. Makes sense. So they've taken a lot of the first 40,000ft. They've taken a lot of it. We expect to be announcing soon. A really great market in there. And we have multiple coffee bar, restaurant and other groups that we're negotiating with. Office use. No office use in that building. But we do have a building that we're working on that has gotten some publicity recently called the National center for Cyber Leadership there. We're working both with federal partners, private sector and universities, and we'll be announcing soon. Some of those groups are, well, looking.
• 1:03:16
  Speaker B: At the wharf's recent success with some of the major law firms, it just seems to me that an anacastrial waterfront location, long term, might be worthwhile.
• 1:03:28
  Speaker D: The cyber people love it because CISA is being built less than half a mile from us.
• 1:03:34
  Speaker E: Okay, that makes sense.
• 1:03:36
  Speaker D: Cyber infrastructure and security Agency got DIA right down the world. DIA less than a mile. Homeland security up the hill.
• 1:03:45
  Speaker E: There you go.
• 1:03:45
  Speaker D: And let's just say that you're at the Grand Central station of dark fiber there. So you can imagine all of the fiber that must run around and through there. So it's a very unique location.
• 1:04:00
  Speaker B: What other major initiatives does Redbrook have out of those two major projects?
• 1:04:06
  Speaker D: Well, they've recently talked a little bit in the press about the Navy yard.
• 1:04:11
  Speaker E: Okay.
• 1:04:12
  Speaker D: So we are in the process now of closing on about 15 acres right here where we're sitting at the Navy yard, right along the water, all the way over to the 11th street bridge.
• 1:04:25
  Speaker B: Is that Brookfield, the seller on that? Are you working?
• 1:04:28
  Speaker D: No, it's a land swap we've been working on for many years with the Navy?
• 1:04:34
  Speaker B: With the Navy itself.
• 1:04:35
  Speaker E: Okay.
• 1:04:36
  Speaker B: And is that for government use or what are you thinking?
• 1:04:39
  Speaker D: No, that'll primarily be rental apartments and hospitality and a lot of food and beverage.
• 1:04:46
  Speaker E: Great.
• 1:04:47
  Speaker B: So that closed, what, next year?
• 1:04:49
  Speaker D: This year?
• 1:04:50
  Speaker B: Next year.
• 1:04:50
  Speaker D: Really?
• 1:04:50
  Speaker E: Next year? Great.
• 1:04:52
  Speaker D: Like another 1.7 millionft.
• 1:04:55
  Speaker B: What about existing portfolio income producing assets?
• 1:04:58
  Speaker D: We've sold most of our income assets off about a year and a half. Two years ago. The prices were getting really goofy with like sub four cap rates on 40 year old garden product. So we had a few thousand apartments that we own, primarily in northern Virginia. We sold most of those. We still have just under a thousand units in Yellowfield.
• 1:05:20
  Speaker B: So you're basically positioning yourself for development at this point.
• 1:05:26
  Speaker D: I would say that that's fair and accurate.
• 1:05:30
  Speaker B: So you're not going to acquire existing assets until the markets kind of.
• 1:05:34
  Speaker D: Well, earlier on, I said we're sort of debating, not really debating, but discussing what factors would indicate we're really at a lull and a low. And we've always been, Tom, William and myself, quite good at buying things at low points. So we have quite a bit of liquidity right now, and we'll deploy that liquidity when things are compelling and opportunistic.
• 1:05:58
  Speaker B: So your website indicates that you have some experience and some deep involvement in opportunity zone financing. Talk a little bit about that and how you engineered that.
• 1:06:09
  Speaker D: So in 17, when we sort of got a whiff of the possibility of legislation that was being talked about that would bring tax advantage dollars into low income census tracts. And since a lot of what we were buying, they were basing that on the 2010 census. In 2010, most of this area and anacostia and congressites, if not all of it, would have qualified. So we thought, oh my gosh, if this tax advantaged law that's been talked about becomes law, where legislation becomes law, this would be incredibly accretive. Early on, we did some modeling and analysis on it, and we thought it was worth up to 400 basis points more in after tax yield. So instead of getting a 15 IRR, you could get a 19 plus. Lots of tax goodies came along with it. That I won't go into today, but it was even more accretive than that.
• 1:07:16
  Speaker E: Sure.
• 1:07:19
  Speaker D: One of the biggest features of that was the fact that there was no recapture ever of any depreciation you may have taken, and all proceeds of refinance came out tax free. So there were all kinds of goodies you could even factor into that number. So we thought, oh my gosh, this would be terrific. This would speed up development in some of these parts of town that traditionally people had said, oh my gosh, there isn't an economic case for that. So we joined the early advocacy group for that economic innovation group, EIg became an early. I don't know if we were a charter member, but a very early member of the opportunity Zones coalition started going up to Capitol Hill, got very involved with legislation, got very involved with the regulations because they passed at the end of 17. It took them until end of 18, early 19, for the first regulations to even come out. We were all sort of guessing on how to structure this stuff. So we were very, very involved. And since it was worth hundreds of millions of dollars to us, we decided we really needed at the partner level to be very involved in understanding how this worked and creating products around ozone. So we did four different opportunity zone funds around raising capital into the buildings I've been describing for you here today.
• 1:08:42
  Speaker B: So just about all your developments or opportunity zone financing projects.
• 1:08:49
  Speaker D: Yes.
• 1:08:51
  Speaker B: So with that offered, I would assume.
• 1:08:53
  Speaker D: That with the exception of land, very often the land was stuff that was owned before.
• 1:08:59
  Speaker E: Sure.
• 1:09:00
  Speaker B: But what that does, it seems to me since you raise equity in the syndication marketplace, that's a huge tax incentive for a lot of people to invest in those types of situations.
• 1:09:13
  Speaker D: Huge. And so when you give a really big tax advantage plan to sophisticated wealth managers, there you are. And hence. But our relationship with UBS, Alex Brown, Raymond James, a number of other major insurance companies have wealth management platforms. Big rias. Sure. It just made sense and we were able to do that in raising in tremendous amounts of capital.
• 1:09:42
  Speaker E: Yeah.
• 1:09:43
  Speaker B: So your platform because of what you're doing is very unique because unless you have the scale of development like that, it's really hard to justify the infrastructure that you built for doing that.
• 1:09:54
  Speaker E: It couldn't.
• 1:09:55
  Speaker D: Yeah, a lot of friends, a lot of people, developers. Why can't I stand up my own white labeled sort of broker dealer and sort of mimic what you've done, buying.
• 1:10:06
  Speaker B: 8 million build then you could, but.
• 1:10:10
  Speaker D: You better be prepared to write, I don't know, five to $10 million check to get it started right. I mean, just to put it together and recruit your people. And it's not for the meek, but you need big scale. You need big scale.
• 1:10:26
  Speaker E: Yeah.
• 1:10:27
  Speaker B: It's not just a single project, it's got to be a major development situation of that scale. Fascinating. So talk a little bit about your team. You walked me around before we started today and introduced me to a few people. But talk about kind of the assembly of your team and what your thought process was as you developed the company's business strategies.
• 1:10:49
  Speaker D: Well, we needed the top development professionals that also had really good technical abilities to employ some of these newer technologies so we could build these net zero buildings. So we need the best of class developers, which not only included the really smart MBA types, but really focused on engineers as well, that actually understood systems controls, understood or could have the capacity to understand the technology. And so we recruited through executive search people, but heavily word of mouth as well. The same time we had some of the major firms in town, like JVG and others laying off their development people, going out of the hunting business and more into the farming business, as they say. And we were able to pick up from many of these firms, including Brookfield, which far city we've always been very close with and done a lot with and Brookfield as well, but including when they laid off most of their development people, we were able to pick up some of the very best people we had worked with there. So it's really been best of class professionals, young people that really excel as a young person in what they do, young people right, at a school that can demonstrate critical thinking that really are passionate about what we do. The dream about building buildings one day.
• 1:12:23
  Speaker B: So one of the interesting things is you don't have very high leverage. And I assume, and I'm just speculating again, your story to your investors is we're going to hold these long because the opportunity zone, ten years minimum. We told twelve the opportunity zone forces.
• 1:12:39
  Speaker D: That issue and we want a future proof. So we need to be technologically advanced.
• 1:12:44
  Speaker B: Okay, there you are.
• 1:12:45
  Speaker E: Okay.
• 1:12:46
  Speaker B: The city, of course, wants this 2033 goal they're trying to reach, which is probably not realistic, but it's something they're reaching for. So it helps in getting approvals. And when you're doing all this, I have to assume from an entitlement standpoint to get everything you want to accomplish. So it's interesting what you develop. It's exciting. It's really exciting.
• 1:13:12
  Speaker D: It is exciting and it all sort of fits together.
• 1:13:15
  Speaker B: It's interesting. So what's the long term strategy with this real estate? I mean, you're going to hold, obviously beyond that. You want to just keep holding it or you're looking for an exit strategy?
• 1:13:25
  Speaker D: Well, the ozone fund investors expect an exit at some point. I assume so we'll give them the opportunity to exit or not. There's lots of structures you can employ. It's too early to say what.
• 1:13:36
  Speaker B: And you can recapitalize if you want.
• 1:13:38
  Speaker D: To keep recapitalize in ten years, will there be a big premium for green REIT? Will we have the institutional stuff that very few other people have? I mean, there's lots of ways you could look at how you'd recapitalize, but right now it's about blocking, tackling and building portfolio.
• 1:13:59
  Speaker B: Is there anywhere else in the DMV that you're looking other than southeast Washington? Pretty much.
• 1:14:03
  Speaker D: Now for opportunities, we will begin to in 24 look at opportunistic deals, deals that need rescue Capital.
• 1:14:14
  Speaker E: Sure.
• 1:14:15
  Speaker D: Deals where there are buildings that have stopped broken projects. That's right. In our dna. We have one of the best development infrastructure in the city. So those are the kinds of things that we would be have unique proprietary.
• 1:14:30
  Speaker B: CBD sites that underutilized and under occupied.
• 1:14:35
  Speaker D: Could be, but no one showed me models yet really on how some of the CBD stuff converts. I mean, to me there's a lot of TED talk nonsense right now.
• 1:14:45
  Speaker B: Well, I interviewed Matt Pestrunk who was doing two major projects downtown and converting them to residential. And it's going to be interesting to see how he performs there. But one is a 700 unit project right near cross from Washington Hilton. And the other is a 2100 M.
• 1:15:02
  Speaker D: Street, which is a major project on.
• 1:15:04
  Speaker B: The west, on the east end, west end. It'd be fun to see how those come out. Big business.
• 1:15:10
  Speaker D: Absolutely. I'm just saying I don't know. We have people that come through with stuff that they've tied up or have control and we get to the punchline and it's 1213, 14% irrs. It's like, are you kidding me? I could put a debt strategy together, much less risk, much more priority to be paid back. So I just don't know. I'm not saying it won't happen, but I think pricing has to go a whole lot lower.
• 1:15:41
  Speaker E: Basis has to be lower. Get it?
• 1:15:43
  Speaker D: It's not there yet.
• 1:15:45
  Speaker B: There are trades now though that are.
• 1:15:47
  Speaker D: Sub 200 a foot in downtown Washington. So it's interesting. I know.
• 1:15:51
  Speaker E: Yeah.
• 1:15:52
  Speaker B: So it's coming, it seems to me.
• 1:15:54
  Speaker D: No, it's definitely coming. It's just what would we have to see as a firm to really jump in there and put a lot of resources? Because as I said, we have a lot of liquidity. So when we see it, we can move very fast and quick.
• 1:16:06
  Speaker B: Take the Warren Buffett approach. Just wait for the right pitch. There it is. You talked about sustainability. What about other aspects of.
• 1:16:16
  Speaker D: I'm glad you asked. Our social impact is the real, know all the different abbreviations. And the rest, what we're really about is building really environmentally friendly buildings that have incredible positive economic and other societal impact the way we do that in Anacostia. And I'm very proud of our head of construction because he finally gets it. He ran construction at JVG for 15 years. And at first I think Paul was trying to understand just how important it was to upset the normal contracting and subcontracting methods he was used to. And really giving a last look to the locals. And by doing that and getting to know the trade guilds and local firms that can deliver and that can price, and even getting involved at times where we're convinced that the local contractors may not understand the unit pricing or something. We've set up a methodology for local contractors to be able to win and to employ hundreds of local skilled workers, carpenters, steam fitters, gcs or subs. You're mostly talking about now mainly subs. Because most of the projects we're doing on the GC, whether it's a GCGM or CM there's only a handful of firms that can have the bonding and do the size of the projects. We're doing three 4500 million dollar projects. But it's not only in the discipline of demanding that our contractors, whether it's hit or car or others sit down with these firms, some of which they've never met before and figure out a way to incorporate them into a larger contract, et cetera. We have credibility and because of it a lot of the local citizenry in the ward will come out screaming and yelling to different approval authorities. Let's go. We want jobs. These guys are performing, delivering for us. So it's a very positive thing. I think with these 15 local businesses going into our latest building we get a lot of love. I'm constantly asked, I talk quite a bit a couple of times a year at churches in the community. Faith based is really important and talk about what we're up to, talk about opportunities. We have a head of community engagement that used to head community engagement for the attorney general before coming to work here. Attorney general for DC, for Attorney General Racine. She's unbelievable. She was award seven. Unbelievable, respected. Just even the nonprofit side of what we do. All the community groups that are always needing stuff, needing our involvement, we are there for everybody in the community.
• 1:19:10
  Speaker E: Great.
• 1:19:11
  Speaker D: And it takes from the top, it takes us stuffing turkeys to sponsoring things to showing up, cleaning out litter in a park in our service days where we'll have 30 people from red brick. It takes a commitment and with that commitment you build trust. It's been over ten years of doing what we say we're going to do.
• 1:19:38
  Speaker B: Have you been hiring women in minorities as well here?
• 1:19:42
  Speaker D: Oh my gosh, yes.
• 1:19:43
  Speaker E: Great.
• 1:19:44
  Speaker D: We hire the best people and they come in every shape, size, color, background. And I think because of that view we have a very diverse group of people here. We have, I don't know if it's slightly, not quite half, but close to half of the senior leadership are women. It's a very diverse team. Very diverse team.
• 1:20:12
  Speaker B: So that's your culture then?
• 1:20:14
  Speaker D: It's the culture. But the diversity would flow out of the focus and the policies that I'm describing to you. This isn't something you can hire like a diversity person. You need to do it yourself. You need to do it from the top down, then people come to trust you. We have internship programs with Anacostia High and Baloo. The biggest challenge we have there are soft skills. How do you get the soft skills implicated? How do you take a really bright young person, maybe this is their first or second job, and have them understand what's required of them? Soft skills is the biggest thing. It's not the brain power.
• 1:20:55
  Speaker B: I agree.
• 1:20:55
  Speaker D: It's the soft skills. And we have nonprofits that help with that that will literally put us an intermediary on the soft skills side.
• 1:21:03
  Speaker E: That's great.
• 1:21:04
  Speaker D: We've got our head of community engagement who talks a lot of tough love, especially to a lot of young people, but it works. And we have formal programs. We have formal summer internships. We have internships during the school year really only for kids in the ward.
• 1:21:19
  Speaker B: So how do you recruit new employees? What do you look for an independent employee?
• 1:21:26
  Speaker D: Critical thinking. We look for people that are not going to default to sort of an answer. That would be the industry norm. I mean, it isn't the industry norm to be financing things the way we do. It isn't the industry norm to be building net zero buildings right now, especially to drink where there's no financing, but conversely, there's more financing for green stuff. So there's logic to what we're doing. It's just not the conventional wisdom. So it's really not the kid that's at biz now trying to soak up and hear from talking heads that are all saying the same thing. That's not the culture here. Both of my partners worked at McKinsey. One of them ran one of the largest private equity groups at McKinsey, was global co head out of the box critical thinking.
• 1:22:23
  Speaker B: Just to look at things differently, you.
• 1:22:25
  Speaker D: Have to look at things differently. It's hard. If you're not willing to go home exhausted mentally, it's probably not the right place. So you challenge everything you're challenging. And why is this the right answer? Why does this make sense? Why does it make sense to things.
• 1:22:42
  Speaker E: The way we do it?
• 1:22:43
  Speaker D: And at the end of the day, it makes great sense. The three of us. I mean, we are not merchant builders here. This isn't the place to come and build a building and build it as cheap as you can and move on to the next. It's the opposite. Everything we're doing here is to future proof. It's legacy long term.
• 1:23:04
  Speaker E: That's great.
• 1:23:06
  Speaker B: That's what's needed today in this environment.
• 1:23:08
  Speaker D: Certainly.
• 1:23:11
  Speaker B: So since this podcast is aimed at young real estate professionals. Please offer your thoughts on where you'd be focused today in both investment development businesses, product types, geographies. You've already talked about residential geographies. Niches. I mean, if I'm coming out of school, what would I be looking at? You look at things differently. Would you encourage people to do the same?
• 1:23:34
  Speaker D: Yeah. Data centers. Yes, I would look at the confluence of technology, resilience, and energy. It's not intuitive, but data centers are very much dependent on cheap energy. Just talk to Loudoun county, which doesn't have any energy left.
• 1:23:54
  Speaker B: I toured one with my community.
• 1:23:56
  Speaker E: You did?
• 1:23:57
  Speaker B: Recently.
• 1:23:57
  Speaker D: Then you understand. So this is where there's huge growth. In my other life, I'm chair of react, which is the real estate board at New York Common. So I chair that board. I've been on that board. I've been on the react board for 20 years. One of the largest public pension plans in the country recently. I don't want to say which managers, but two of the top managers were in, and they both have, as one of their niche focuses, data centers.
• 1:24:26
  Speaker B: There's a company here in Washington, Iron Point Partners, very active in that, but it's so needed.
• 1:24:33
  Speaker D: There's no such thing as lack of demand anywhere for this. It's sort of like what logistics was five years ago when we started being able, Amazon and the others needed all these distribution points. And logistics was the greatest. Amazing thing. It cost nothing to build. You could put it up quick, but data centers and there's technology, there's engineering around energy, where you're going to get it, how much it costs. Well, AI is accelerated AI, so that's a really cool place for a 20 something to be focused. In my view, there's still a lot of legs left in logistics, plays, in life sciences, but any kind of conventional thought on office or even multifamily today, I would stay away from it, unless you want to go through the pain of reinventing some of these industries multifamily. I think just because of cap rate compression and rates, it's got to be down 20% just if you do the numbers from where it was on the high post pandemic.
• 1:25:51
  Speaker B: My gut is that place making is more important than ever, and not only place making, but a reason to come to the office.
• 1:26:00
  Speaker D: Yeah, and that's one of our number one issues here, is on place making. In some of these new parts of town that we're building, we're teaming up very unlikely people and co heads of projects, one with an incredible place making background, one with incredible budgetary and financial acumen of what do I need to spend to get this look? We're teaming up different kinds of people to come at the place, making answer pretty well. In our office here, we wanted great place making. We wanted a really nice place here where people that literally, like, when you came in, you saw everyone having lunch. When you build these nice spaces, people stay in the office. They want to be together. You need generous space. People want the space. You can't cram people together the way you used to be able to. And you lead from the very top. I mean, Tom, William, and I, we have small offices. It's very rare we need in our office space for more than three people.
• 1:26:59
  Speaker E: There you go.
• 1:27:00
  Speaker D: So we don't need big space. And when you start with that, and a lot of your senior members also have the same size office as you do. I know it sounds silly, but it creates a very collegial, teamwork kind of environment, even if it's subliminal.
• 1:27:18
  Speaker B: So, Dick or Louie, what are your life priorities, family, work and giving back?
• 1:27:25
  Speaker D: Well, family is first. It's the first thing I tell people when they're, like, in final stages of interview, and it always throws them off when they say to me, what are the priorities here? And I say, the first priority is your family. And people usually look, especially young people, I'm like, look, you're a new parent. You're this, you're that. The needs of your family, your community, your elderly neighbor, your parents, your church, your synagogue, those needs are always first. That doesn't mean you don't work very hard. It means that if you need to go to an important soccer game or go to a doctor's appointment with somebody, you're finishing the work at 03:00 a.m. Those are the people we want here. We don't want people who are going to have to babysit. You just got to get your work done. We don't need to see your time card. But at the same time, family and community first. And I think that goes a long way with people. I think it's one of the reasons that so many people feel comfortable here. It doesn't mean for a minute this is slack or people are like, going to the beach for the week. But we are only hiring adults that know how to organize themselves to get projects and work done. So family definitely first. Community is very important. We live it here. Very important to me. My family's always been very involved philanthropically. We do a lot of stuff we don't really talk a lot about that. Does a lot of really good things within the community, including an anacostium. But these are really important things that people should also balance with their work life. And then at work, do something spectacular. Whatever you're doing on the team, be spectacular at it, but also do your work. Make sure that that spectacular you're trying to do, you've footed and vetted pretty well.
• 1:29:18
  Speaker B: What advice would you give your 25 year old self?
• 1:29:22
  Speaker D: I'd probably do everything exactly as I did it.
• 1:29:24
  Speaker E: Really?
• 1:29:25
  Speaker D: Yeah.
• 1:29:26
  Speaker E: That's great.
• 1:29:27
  Speaker D: I mean, I've had all these amazing different lives. Home builder, right? At a law school, was a fed for a few years. Huge power, really fun, really cool. Had the whole country. It taught me the language of Wall street, it taught me the ability at Goldman and Morgan Stanley and Payne Weber at the time, and first Boston and all these groups as my financial advisor. Jones Lane, Lasalle, Texas. Lasalle partners at the these when I was very young, teaching me the language of finance and investment so that I could start my own firm, do that. Live in New York for 20 years. Did really well with all that. The life experiences. I had offices overseas back then as well. We didn't even go into, but the life experience. I've had so many life experiences then to be able to go around the world and come back home, have an eight year old son and a 20 year old. My 28 year old's in New York, but I'm back home. And I like, kiss the ground being back home. This is my hometown, so be back here. Doing something with real gravitas is you've.
• 1:30:37
  Speaker B: Had some struggles, too, and you learned from them, right?
• 1:30:39
  Speaker D: Absolutely. But the emotional capital you get in coming home and doing all this in your backyard and building a new place of a whole new part of town is exciting.
• 1:30:52
  Speaker B: My final question, if you could post a statement on a billboard on the Capitol Beltway for millions to see.
• 1:31:02
  Speaker E: Go for it. All right.
• 1:31:06
  Speaker B: Thank you very much for your time.
• 1:31:07
  Speaker D: Really appreciate it. Thank you so much. Really appreciate it.
• 1:31:12
  Speaker E: Thank you.