We’ve been meeting with some very kind and experienced individuals in the urban development space. I thought I’d document some insights I’ve taken away from talking with them, as we slowly begin to learn more about this new world we’ve chosen to operate in.
Look more closely at the city. Consider which properties might be underperforming and why. Look to make off-market deals by bringing unsolicited proposals to owners. Own, develop, or operate based on strategic decisions – don’t own for the sake of owning, or build something new when a retrofit operating model or design would suffice. This lets you focus on the core of what your innovation is, with any given project.
Go into places where there are market failures. A market failure in an urban setting means the incentives go against use of a property, causing it to be underutilized compared with demand. Examples of market failures: long-time owners who own properties outright and pay low taxes often have greater risk from an unknown new tenant than holding the property vacant. San Francisco’s strict tenant laws have dis-incentivized many a homeowner from renting out their basement apartments because the risk of a poor tenant to their property and their stress levels outweighs the contribution to their bank account.
Find supporters by bringing people into what you do. If they understand your ethos and your value proposition, then when you want to innovate, you’re only asking them to believe one new thing. One way to do this is by being open, sharing what you’re up to, and getting people to participate. Actions speak louder than words – especially your own actions. Participation is something people internalize in a way that a pro forma can never compete with.
If you have a new model and you want to find partners, this suggests you either want to find someone who understands your vision, but has less experience with real estate, or someone who understands real estate, but has less experience with your market. If you can make a solid financial and market argument for your idea, that will speak to investors even if they don’t understand your idea.