Peter Hendee Brown starts a real estate development class he teaches at the University of Minnesota’s Humphrey School of Public Affairs by asking his students what pops into their heads when he says “real estate developer.”
Their answers instantly spill out, and he hears that developers are “ripoff artists,” “greedy,” “bloodsuckers,” “devils,” “rich white men” and “opportunists.” He can’t write them fast enough on the white board.
Eventually, however, one of the grad students may say something like “visionary.” And that’s a word Brown himself may have thought of first.
In fact, he has lots of good things to say about developers in a book that’s just come out. He wrote it with the idea that if people just understood a little more of what developers actually do, how they come up with their plans and how much time and money they put at risk, then they might be a little more inclined to go along with a developer’s plan.
And Brown makes the great point that less conflict and more cooperation should lead to far better buildings and cities that are better places to live and work in.
Brown is an author, architect, teacher and city planner who primarily makes his living as a consultant, and his book is based on years of close-range observation. He called his book “How Real Estate Developers Think.” Trying to get a handle on that has been a personal interest of mine, too, as I’ve been married to a developer for 29 years.
Through her, my brothers and others, I’ve seen public perceptions of developers play out in many ways. By way of disclosure, my wife is not currently working on any real estate projects. One of my brothers is the head of community development for a Twin Cities municipality. Another is a developer of projects here in the Twin Cities, including some that have engendered controversy and attention from the Star Tribune and other media.
Developers buy a piece of real estate with plans to make money creating a new project on it, through renovation or new construction. It’s not one job so much as a bunch of smaller ones. The best of them manage to be a financial analyst in the morning, a salesman over lunch and an architecture critic in the afternoon.
When you enter the community center to hear more about a new real estate project, Brown said, the odds favor that the only person in the room who sees the whole picture — the city’s development goals, the probable concerns of the neighbors, what tenants can afford to pay, whether a bank will finance construction, what design would look best — is the developer.
Brown says the risks developers take are underappreciated. They have to put in some capital, maybe helped by investors, and then usually borrow money for the rest of a project’s cost. But certainly with smaller developers, a bank will require a personal guarantee or other collateral for the loan. And the payoff is years down the road, if it comes at all.
So is the developer trying to make money, having risked all that? Absolutely.
Brown is also certain there are greedy and shortsighted developers, but he thinks of them as the most likely to fail.
“You grew up in a house built by a developer,” he said. “You shop at a mall built by a developer. You go to restaurants in a building built by developers. If you look at the world over the last several hundred years, speculative, risk-taking people with capital have created it.”
Brown loves the story of Beacon Hill, the prestigious Boston neighborhood.
No one now would call Beacon Hill a highly speculative “real estate development.” But it was in 1795, when businessmen formed a company to buy the land, pare back the hill, lay out streets and start building.
“We used to call them our town founders and we honored them by erecting their statues in our town squares,” Andrés Duany, a Miami architect and planner, told Brown. “Today we just call them developers.”
The days of erecting statues appear over, but Brown suggests the pendulum has swung too far.
Now just about any project initially faces skepticism if not outright opposition. As he put it, “There are a lot of people who want to tell them how to risk their money, without wanting to participate in the risk.”
Conflict with developers is more likely in older neighborhoods, when building something new probably means knocking something else down or filling in a vacant lot the neighbors have thought of as open space.
Brown begins his book by telling readers about a condominium project in Evanston, Ill., just north of Chicago, that neighbors didn’t want because it would obscure views over a vacant lot.
The developer’s requests for city approvals went nowhere because of neighborhood opposition. The developer then asked his architect to redesign the side that would face the neighbors to make it more attractive. The neighbors liked the new look but still didn’t want it.
With no other choice, and after long delays, the developer had to build it exactly as specified by code. The story ends with the neighbors facing an unadorned brick wall and the project in foreclosure.
Brown said we have to find a way to get a far better result than that. He ends his book with some advice, such as figuring out which of the elements of a proposed design are easiest to influence. And as one of the great characters of his book put it, the Chicago developer Buzz Ruttenberg, please try to understand that no properties are “zoned vacant.”
“The developers and the density are coming, folks,” Brown said. “So let’s get on board with that.”