This is the real estate shop where each episode will bring you a top industry expert to share their
current programs or projects that are making an impact in our communities today. Be sure to check
us out on Spotify and Apple Podcasts. Welcome to the real estate shop. Today we have the privilege
of having Milk Pratt, executive vice president of the Michaels Development Company, stop by to
chop it up with us. Milk, won't you uh if you can uh just let the audience know a little bit
about your background and how you came and joined uh Michael's organization. Sure thanks for
thanks for having me on the show guys really appreciate the opportunity to talk about the
work that we do here at Michaels, the folks that I work with and a little bit about myself. I've
been at Michaels uh going to 19 years. I've got a background in public housing. I was in government
for a few years as regional administrator, worked on the tax credit equity side and at Michaels
um I've done a lot of different things at the company but right now I'm executive vice president
of focus primarily on uh developing, securing opportunities in the affordable space and our
attainable housing platform that we intend to grow significantly over the next couple years.
I also because of my public housing background do a lot of repositioning and dispositions of
our older PHA assets, our older hope six transactions like that. So um I've got a diverse background
at Michaels and worked on all sides of these deals in government. I work at National Equity Fund,
Nepalo Housing back in the late 90s. So uh I've got a very diverse background and and seen these
deals on all three sides from the government side, investment side, and of course the private sector.
Excellent. Milk, can you discuss the distinction between the Michaels organization and the Michaels
development company? A lot of people don't know the breadth of the organization, founder, the number
of vertically integrated entities within the organization. Yeah it's always confusing for
some folks. The Michaels organization is the parent company that owns and operates all of our
smaller, not smaller but all of our individual divisions. So we've got three primary divisions,
we've got a construction group, we've got a large, and this is where most of our employees lie,
a large property management operation, and then of course our development business.
Our property management group is the largest in total. We have about 3,000 employees,
but most of them are folks out in the field doing the hard work of property management,
taking care of our people, taking care of our residents because without our residents we simply
don't have a business. Then we have a construction company of course that operates in a handful of
markets and they obviously only work exclusively for our development business. Then we've done
some things in the last two years to reorganize and merge our development shops. Previously we
had two separate development businesses. One was affordable and then one was everything other than
affordable. So at this point we've merged them all together under Mick Flanagan, mixed the president
of Michael's development and that's our merged development business and that covers everything
from luxury, student, attainable, affordable, and military housing development. We like to think
of ourselves as a solution-oriented developer. We're one of the only developers in the country
that can do everything from luxury housing all the way down to affordable housing. So our founder
Mike Levitt created this organization back in 1972 so we just celebrated our 50th anniversary
and Mike was really a visionary in his industry. He was one of the pioneers in terms of affordable
housing. We're one of the first companies to have social service division that Mike spearheaded
back in the early 80s. Mike's had a long history of developing families and supporting families.
We've got a very large scholarship program that every year that Mike and Pat Levitt support.
We've got many long-term employees at the organization as well which is part of the culture.
As I said I've been here about 19 years but Mark Morgan and John O'Donnell have each been here over
30 years. Mark's a COO and John's the president of the Michael's organization but we've also got
plenty of site managers and property managers and everybody in between that's been here for 15,
20 years and in this kind of a business it's unusual to have people who aren't owners in the
company want to be at a company for their entire careers 20, 30 years. I was at a ceremony a few
years ago. We celebrated someone that had 35 years of service at the Michael's organization so that's
something that we pride ourselves on as a number of long-term employees. Well I really speak to
the culture that's been built. What geography does the Michael's organization, Michael's development
cover? Yeah well you know every time I say a number it changes in a couple weeks but I'm
going to give you the 30 second elevator pit. So we've got about 75,000 units across the country.
We've got about 570 individual communities and we're in 39 states and we are continuing to grow.
Over the last few years we've acquired a large military portfolio that's expanded our business.
We acquired the old Harmony House development business. We're not the business but the properties
that they owned and operated and that increased our footprint up to 39. And you're in the Caribbean
from what I remember too right? We are in the Caribbean. We operate four communities in the
Virgin Islands and we're currently actively developing a project in Puerto Rico with the
Puerto Rico Housing Authority. Can you talk a little bit about how you
were able to foster that relationship? Sure it's interesting but we've been in the Virgin Islands
for probably 30 plus years. I did one development down there a few years ago. Sugar Estates that
we're proud of. It's a senior development. It's one of the few senior new construction developments
over in St. Thomas at the foothill of a beautiful mountain. It's got beautiful vistas but we developed
that business down there primarily through relationships. We were already working down there
for like I said 30 years and then Sugar Estates was an RFP from the Virgin Islands Housing Authority.
And so we've done good work down there. It's been challenging obviously with the number of
hurricanes that have occurred down there but nonetheless for now we're staying the course
and we've expanded into Puerto Rico where we've probably been working there for the last four
or five years since I guess Hurricane Maria came through. So we are excited about that new project.
It's called Los Alamos and got a lot of work to be done there. Our Mid-Atlantic team Rosa
Estrada is heading up that workforce and we're excited about the prospects there and we haven't
closed yet but we expect to close sometime within the next 10 to 12 months. Excellent. We get a lot
of questions about how do you get into affordable housing and niche industry. Can you discuss your
foray into the industry coming out of college? You know I've answered this question before for
other folks and it's always sort of a comical story I tell but I started out wanting to be a
school teacher and somehow gotten an urban planning public administration and I went on my first job
interview or wasn't even a job interview it was an internship interview and because I worked at the
library I could read the code of federal registers to CFR and so I went on the interview and I happened
to be sitting at his you know my soon-to-be boss's desk and he had to see a far his desk and he said
Milton uh you know tell me about yourself I told him about myself and then I said I can read the
CFR right there and he said can you and he asked me to pull out a section of it and read it and
interpret it and because I work at Westchester and I work spent a lot of time in a government
document section I could read the CFR so that that's what landed me the job as an intern with the
city with the borough of Norristown and I was involved with their housing and community development
office and then I left there went to Philadelphia Housing Authority and then I just kept growing
from there. What role did you um did you play at Michaels and helping to scale the organization?
When I came to Michaels 19 years ago I'm trying to think how many units we probably had 35,000
units I'm just guessing so I spent a lot of time when I first got here primarily focused on
growing our public housing business so I did a number of public housing transactions around
the country New Orleans Sarasota I'm redeveloping our finished out our Tampa project down there
there's a few projects here in Philadelphia so I helped to grow our public housing hope six
business for a number of years and our naturally occur well and our uh tax credit business as well.
Excellent so we are kind of already alluded to this just from here some of your answers
but a common theme that comes across our guess is the importance of relationships,
networkings and outside activities. Can you speak to the importance of how this played for you and
the importance of it? Yeah um I always tell folks I've I've got a lot of relationships
all throughout the country throughout the industry and and I always remind myself that sometimes I'm
going to work with someone one time and I may not see him again for seven, eight, nine, ten years
and then lo and behold they've moved around or I've moved around and we're working together again
in a different capacity so you know maintaining good relationships and showing respect to one
another is something that I really believe is tough sometimes because these are these are
challenging deals to get done um you know sometime you're in the heat of battle but at the end of the
day you always got to you know remain calm and try to represent your organization as best you
possibly can and so developing those relationships is something I think is critical. Also we at
Michaels want to be an industry leader and a thought leader so Bob Greer who was the president
of Michaels Development when I first got here Bob was always out talking to folks in the industry
about our organization and representing the industry with many with many trade associations
so so we've continued that legacy of Bob's so I'm I'm active with national housing and redevelopment
associations I've also been on the active member of NARA which is a public housing
trade association we have others in the organization that are involved with national
multi-housing council as well as affordable housing tax credit coalition so we we want to be
not just a good developer a family-owned business a place where you have good culture
and good people but we also want to be a good representative in the industry at every level.
I don't know if you have a program in-house mill where you you know you've got a criteria for
less experienced developers to to take a deal to Michaels and you do a joint venture but do you
have any any such program or a criteria that a emerging developer can can reference if they
want to work with Michaels. Yeah that's a great question we don't have a program it's sort of
you know it's not like it's written down and this is the box you got to fit into because all these
deals are different all of them are challenging. I will say that when we get approached or sometimes
we approach emerging developers or smaller developers the first thing we want to understand is
what their local relationships are like I mean we're local in a lot of places because we have
people all over the country but many times people still see us as a developer from New Jersey on
the Camden Riverfront but the reality is when we partner with smaller developers we want them
to bring something to the table just like we typically bring our guarantee and our capital
to the table we want them to bring their local relationships their knowledge in the market
sometimes they've taken a deal and they've taken it from you know conception or inception all the
way to a place where they can no longer get the transaction to go for it without having a capital
partner with a balance sheet so it's not a hard and fast formula it's one where we want to do
business with good people with good firms that have similar cultural values and that even though
they may be developing a market rate deal or affordable deal doesn't matter we want to make
sure they have the same type of cultural values as ours and they are interested in doing good
quality projects so I hope I answered that question that was good so we've had a couple
interesting years in the industry between getting through the pandemic and the increased interest
rates and fluctuation in construction costs how did Michael's weather that storm and what is the
strategy for 2024? Great question again well let me start with getting through the pandemic
we had you know a few challenging years obviously since the pandemic hit in early 2020 but I'll
start by saying that the way we got through it and most importantly they were the people that were
on the ground in our communities our site managers our maintenance techs our orderlies or folks that
go out every single day they couldn't work from their all they couldn't work from their homes
they had to be on duty our essential workers out there those people are the heroes when I think
about the pandemic because they still had to fix toilets they still had to do recertifications
they still had to go in for emergency calls on Christmas Eve so hats off to all of our
property management staff that helped us weather the storm during the pandemic with increased
interest rates and fluctuation in construction obviously you know we we face the same challenges
that every developer has but we've tried to grow responsibly we try to continue to do
quality projects there's no simple solution you know we've done everything from buying lumber early
to closing on deals early to obviously having to put some of our own developer feedback
in some of some of our projects in order to get them done one of the other challenges that we're
facing is we're looking at doing less public housing work they're they're more challenging in some
cases they're more difficult so we're trying to focus more on our attainable program we think the
future a big part of our future is attainable housing I spend more of my time now talking to
healthcare systems and school districts about helping them solve their recruitment and retention
problem by creating workforce housing on land that they already own or hospitals that they are no
longer utilizing and we think that that's going to be a big part of our business as we go forward
one of the other strategies for 2024 is also to continue to hire good people there's a lot of you
know folks in the marketplace but we pride ourselves on hiring good people who do good work for us
and again want to be a part of our culture and that's whether it's a site manager or maintenance man
all the way up to one of our new vice presidents of development just wondering a part of your 2024
strategies also student housing as you've seen you know pretty substantial growth in the number
of projects that are coming out online around universities I don't know how michael's viewing
that and also have you seen a shift away from affordable housing and and lie tech deals our
our student housing business has grown tremendously uh net williams who's one of our executive vice
presidents has grown that business both on campus and off campus we've done a number of large high
profile deals out in california and dart mith and several other universities lsu and so we're
going to continue that business for 24 and as I said we think our attainable business is probably
probably going to be the one area that grows the most but we'll maintain a presence in the
student housing business as well in terms of our shift from affordable straight lie tech we are
still doing affordable housing projects and straight lie tech deals all across the country
we closed a deal earlier this year a few months ago in saddle river new jersey we're closing deals
uh throughout the country but the reality is uh we we know that affordable housing deals are getting
tougher and tougher to do the state agencies are pushing you to do smaller deals in many instances
and the developer fee caps are making it more difficult to earn earn earn a living so um we're
going to continue to you know pound the sand and get those deals done but at the same time we know
we've got to grow our our attainable housing business focused on health care in school districts
as a solution for them to their recruitment and retention challenges excellent so you kind of
lose this a little bit milk but workforce housing is a term that's thrown around a lot these days
you know another term is middle income that covers typically 61 percent AMI to 120 percent
uh you've used the term attainable housing a couple times and for what I've read the AMIs
in these deals can go as high as 250 percent can you get more information on attainable housing
and any deals that you may have in your pipeline that fits this category yeah you certainly can
we we like to call it attainable housing here at michael's we have uh made a commitment to
housing families from 80 to 120 percent those are the those are the core income criteria income
guidelines but you're right some projects that we're working on might go up beyond 80 beyond
120 rather uh project we're doing in steamboat springs uh some pre-development right now I
think the AMIs there are going to go north of 200 percent AMI and then it's going to go as low as
about 80 percent AMI we're also doing a project with disney down in Orlando and that'll be between
that 80 and 120 percent AMI as well as another project with the uh in Atlanta with the Atlanta
housing uh program Atlanta housing authority where we're redeveloping the Atlantic Civic Center
and that's going to have a combination of market rate affordable and attainable housing
communities contained all within that footprint and in these deals we think are are getting done
because more and more people see the need for housing for people between 80 and 120 these are
teachers firemen police officers they all need a quality uh place to live and we're here to provide
that solution for communities and employers across the country and melvin this is attainable housing
strategy and that's is that primarily for lease or is also a for sale component 100 percent for
for i'm sorry 100 percent for lease we don't do any home ownership projects to speak of uh we we
certainly have done one or two of those in the past but our primary focus going forward will always be
on the rental housing business at every sector gotcha and what does the capital stack and exit
strategy look like for the attainable housing initiative and are there any long-term AMI
covenants that come come along with that great great question um first yeah the capital stack
varies from project to project from community to community because oftentimes of local laws
and local regulations and programs that exist i'll say that of the four or five attainable housing
projects we're working on each one of them is like a snowflake it's getting developed differently
in florida for instance we are developing our projects down there primarily through the live
vocal act where we're going to get the benefit of real estate tax exemption for units between 80 and
120 when we're doing something directly with an employer oftentimes the employer will make land
or a building available at low cost or nominal cost that doesn't seem like a subsidy but obviously
that means that we don't have to buy land which means that you can drive down your development
costs so low cost land at real estate tax exemption are the two things that help drive those deals to
get in financed so the capital stack doesn't look like a tax credit project it looks more like a
conventional market rate deal with private equity and of course gp capital um generally speaking on
those projects we have a long-term development and whole position we don't intend to sell those
off in a few years to an intentional to a institutional investor we primarily intend to
hold those long term no i mean it sounds like you've done thousands of deals uh going back
are there any favorite deals that you either completed or currently in your pipeline that you
want to talk about um let me think well i for whatever reason when i think of uh of all the
deals i've done i think of a project i did in willaminton delaware it was a fire station
in a senior development i'm i always love doing senior developments because i love seeing a place
where i would want to have my grandmother or my parents that are in their 80s i would want them to
live so while i love doing family developments too uh the reality is when i see seniors and i see them
at the end of their lives and they have quality housing that we provide that's something that i
think uh for me is a personal legacy something that i enjoy so i did the project down in willaminton
was a fire station in 80 units of senior housing in a premier neighborhood full of services and
amenities for seniors it's just one of the one of the unique projects i've never done a project
with those two uses together so i'm excited i was excited about getting that done i also did
another development down in sarasota florida which is near uh wringling college which is a
fine arts college in sarasota we were really sort of the the impetus for other development
happening in that community so that was also a cool deal and then of course the project that's in
our pipeline that everybody's talking about is working with disney a premier international
company allowing us to help them create workforce housing for their employees
now if i think back to our our conversation today it seems like a large part of it is
based on strategy right and finding unique opportunities whether it's working with employers or
local government agencies through rfps what what advice do you give to someone that's that's trying
to craft their their strategy for 2024 and looking into 2025 based off of your experience
uh wow that's tough you mean an individual person or you mean a company uh individual leader within
a company okay i would say be flexible and explore new opportunities uh we at michael's we intend to
grow to 100 000 units uh john oldonne has set that as a as our goal that's a big number but we've
got to grow responsibly so through our acquisition team they're they're helping us grow responsibly by
you know bringing on new units that we are just buying our development teams out there across the
country are also working on creating new communities and and it's all about growing responsibly and
having the strategy you can't grow too fast you can't go out there and you know go into a market
that you've got no experience in and i would tell you that growing responsibly is the most important
thing and be diverse in the types of projects that you take on and oftentimes i see smaller
developers i mean small developers but developers take on more deals and they can handle in their
internal pipeline meaning with with their staff and that's that's recipe for a disaster
so milton with all your experience if you're able to do it all again would you do anything
differently i would probably spend more time with my family uh we we i i work hard we work hard here
at the michael's organization but i always feel like i would love to spend more time with my family
with my my uh my parents my sister my girlfriend my my kids because you know you just never know so
i that that would be the thing that i was to uh try to do it all over again i spend more time at
home you know spending time going to baseball games and soccer games and hanging out with my friends
i travel a lot so oftentimes i don't get a chance to go to everything for my kids or or my family so
that would be the thing i would do uh differently excellent but i don't do it uh milt certainly
appreciate your time for stopping by you're certainly a busy man uh glad you can come through
and give us some nuggets i think our audience is certainly going to appreciate it we look
forward to seeing you soon sounds good thanks for having me gents absolutely