BY DARELL KOH
At the YLG Peer-to-Peer “Young Developers From the Ground Up” event held on May 13, panelists discussed their personal stories, motivations, challenges and successes of starting their own companies as a young developer in the New York market. The event was moderated by David Behin, President, CEO and Co-Founder of MNS Real Estate and CityFunders, and panelists included David Schwartz, Principal and Co-Founder of Slate Property Group, Justin Palmer, CEO and Co-Founder of Synapse Development Group and Diego Hodara, CEO and Founder of Titanium Realty Group.
The discussion kicked off with a brief overview of the panelists’ backgrounds and work experiences prior to starting their own companies. All three panelists shared similar ambitions to venture out on their own from a young age. David Schwartz and Justin Palmer started by working for bigger institutional firms such as Crescent Heights and Lehman Brothers, while Diego Hodara started out on a smaller scale by doing REO deals and enrolling in the NYU Masters in Real Estate program to weather the 2008 recession before devoting himself to his firm full-time.
On the topic of deal size and financing, the panelists unanimously agreed that “money is easy, but deals are hard to get in New York.” Reflecting on how he started out pre-buying condominiums using mezzanine debt, David Schwartz emphasized the importance of starting small and not leveraging too much in the early stages. Justin Palmer pointed out that he would “rather do several singles than one home run” and that start-up developers need to be extremely picky about every deal, as they have very limited resources compared to bigger players with institutional backing who are willing to pay a lot more for a piece of land. Diego Hodara also supported this view, recalling how he relied a lot on personal money and financing from high net-worth individuals from Latin America on early deals, as capital markets in Latin America were still developing at the time. To sum it up, David Behin analogized the current market competition in NYC to “having just one bottle of water, but everyone in the audience is thirsty for it.”
When asked about their firm’s competitive advantages, David Schwartz conveyed how growing up in Brooklyn has helped him understand the market extremely well, in terms of having “micro knowledge of every street corner.” He further added that knowing retail and condominium rents in a particular submarket before others understand it is an added advantage, because “once the NYTimes covers the story, the time has passed.” In support of this notion, David recalled how his firm beat out Equity Residential, a large REIT, on a deal because they were less constrained by due diligence and were able to employ more flexible and creative strategies on high-risk deals. Additionally, Justin Palmer recalled how he found out about an off-market deal from the superintendent of a neighboring property, driving home the point that everyone is a potential broker in New York and one never knows where the next deal is coming from. All panelists agreed that a young developer’s main advantage is knowing something that your competitors do not, along with having a unique angle and acting quickly on a good deal.
As advice for young developers, Justin Palmer stressed the importance of having the right partners and people in place, reiterating how investors love to see passion and commitment in the team. Diego Hodara cautions future young developers to start small and build a track record first and foremost in order to prove themselves as a successful entrepreneur. Memorably, David Schwartz wrapped up the session by emphasizing the need for urgency as a young entrepreneur — “There is no right time to do it, but you need to know you’re going to get it done. Don’t quit.”