Welcome to the real estate shop where we bring in top industry experts with their current projects that are making an impact
This podcast is brought to you by myself Steve Lawrence and my partner curving Latham this episode of the developers
We had the privilege to interview Eddie Benoit
President and CEO of the Atlanta based Benoit group. Let's join in and hear how they developed a vertically integrated company
My actually my first job out of college. I was recruited out of college by a large construction company
by the name of beers construction to move here to Atlanta and
They were soon acquired by Skanska
which
Took over about a year or so after I joined that company
I worked for them for about three and a half years and actually building projects was office buildings hotels
and I'm working on some hospital projects and
And the end of the three and a half year period and my goal was to always join a commercial real estate development company
But I wanted to make sure that I had the opportunity to learn how to build projects first
You know my undergraduate and graduate degrees were in construction and also in real estate science
So that's why I chose that first route to learn about the bricks and mortar first before I started venturing into the development
industry
I actually worked for a development company for about eight years after leaving the construction company and
During the eight year period of time. It was just really baptism by fire
learned a lot
develop office buildings
retail developments
hotels
multifamily developments pretty much, you know throughout the southeast and mid-atlantic
areas and
at the end of the eight year period of time I decided that it was really time for me to
become a little bit more entrepreneurial and
The company was going through certain changes where they wanted to focus more on office and I thought at that time
I wanted to focus more on multifamily. So
It was really an
Amicable, you know separation and I decided to go a different route and joined my ex partners of now
that
my handling partners and
Opened the Atlanta office here and started focusing on multifamily development really throughout the country
So we grew that company for about nine years
to almost 1200 employees with five different offices
Doing all types of development from affordable mixed income housing to lot developments to condominium
developments to
student housing
luxury
apartment housing just throughout the country when you when you first started how did you
Overcome some of the obstacles that a lot of developers face like personal guarantees and such
How did you overcome that and you know as you went on? How do you get a lot of your deals finance now?
I tell you you never overcome
Those personal guarantees those obstacles as long as you're in the game
You are going to have guarantees somehow some way whether you're guaranteeing them personally or you know
You have some type of guarantee fund that set aside that is at risk that you already worked for
That's just the nature of the business. There's always going to be some type of financial guarantee
but when we started it was in 2010 and
We're right in the middle of the recession couldn't have been a worse time
to
split up, you know our companies and
just kind of go on our own because it didn't matter how long we've been in the business and
Once you have a new company you are a newbie lenders look at you as a newbie
And so you couldn't get any lines of credit at that time
Operating lines of credit because we were a newbie and plus we're in the recession and everybody was pulling back on
operating lines of credit
Underwriting was very very difficult at that time tax credit
investment pricing was very low the
Capital markets were sidelined so they weren't putting equity in deals for at least a good two plus years
Pension funds reach everybody was just sidelined to see what would happen
So for us, we really had to focus on building our pipeline
we changed our business platform and went to a very low to moderate risk business platform and
We figured well the federal government is the only lender
right at that time
so therefore
it made sense for us to focus on the affordable mixed income housing and also
focus on you know, the services side of our business where we could actually
you know grow a property management company and
Keep some vertical integration. So we created Dorchester management
which was actually a small acquisition of a
an acquisition of a small management company that we we took over then we created a construction management arm and
That actually oversees over all of our design and construction and also does some third-party work similarly
Dorchester management does some third-party work, too
And then we focused on our advisory business
Where we would perform development advisory services
Program management services for companies throughout the u.s. That needed development expertise
Working with municipalities on a lot of program
You know management and also working with governments abroad that needed program management and master planning and financial
You know assistance on some of their large projects that they were looking to undertake
So we diversified our business during that period of time to make sure that we had not only the at-risk side of our business from a
Development standpoint that was pretty limited and focused primarily in affordable
Low-income housing mixed income housing independent senior living
But then we have the services side of our business that really that we could really count on as far as the monthly cash inflows
In order to keep you know, sustain our business operations throughout that time. Wow. That's a
Resiliency man. That's how you have to do it fast forward. I see you guys are in multiple states now
So you're doing business, you know throughout the country. What's your investment thesis now?
And is there um any go-to financing that you do or is it your project specific?
I know you guys do some student housing some low-income housing
How how's that priority work for you all these days? Well, first of all, we try to keep a good balance
up until
Last year our portfolio
was primarily affordable mixed income housing with public private partnerships and
with different
public housing authorities municipalities development authorities and or phase-based
organizations
Whereby there was another um quasi governmental agency that was involved
So that gave us, you know the leverage that we needed in order to get the different
You know subsidies that allowed our you know deals, you know to be financially feasible in the markets that we focus on
Which are primarily urban and suburban markets. We're actively in seven states right now and more recently
Just was awarded a deal um in st. Thomas, us virgin island. So that will be you know, our eighth state
and so
Most of our deals we uh, we look at certain types of financing
that
Pretty much is in line with deals that are um focused on
Delivering affordably priced housing, you know to the state of the country
Delivering affordably priced housing, you know to that community
Okay, so we're not necessarily doing every deal now as affordable housing
With tax credits because there are deals that we're doing that are workforce housing that have no tax credits
And there are deals that we're doing that are student oriented and workforce oriented
Because of its location that have no tax credit investments. However, they're getting different types of
governmental incentives
that allow
the affordability
from a price standpoint as it as it competes with
Other, you know properties and the surrounding area
So and sometimes there's just not enough housing, you know to to meet the demand needs there
and so ultimately
we
Finance most of our projects with taxes and bonds
we use
a lot of um tax abatements
Whether we're in urban enterprise zones
or whether we're in difficult to develop areas or we're in
um
housing opportunity, you know zones
Um, or we're in corridor tads
Or just regular tads or tiff districts where we can actually get these tax benefits that enabled us
You know to provide a more affordable, you know price point to the end user
Which are residents
We also look at some of our financing with HUD insured financing that gives us the 40-year amortization
and the lower interest rate
benefit in order to
You know get a higher leverage on the debt that we can actually place on these types of projects
Therefore reducing the amount of equity that we put in
We actually put in equity, you know ourselves, but we also participate some of that equity with just some outside
You know investors and whether it's on a short term
Horizon three to five years or long term depending on what the holding strategy is
For that project and um every once in a while if we have tax credit deals
Whether it's nine percent or four percent tax credits
We may have the deals that are nine percent tax credits that have conventional debt
And then the four percent tax credits we're dealing with taxes and bond your office is based in atlanta. You've got projects
You just said in st. Thomas
And in other parts of the country eight states total
Can you walk us through like how you built your team?
And how you how were you able to expand from a personnel perspective to take on those projects?
Well from a team standpoint, we use we've had some people that have worked with us for
Since my ambling days they've transitioned over and still working with us
And we've had people who've been working with us since we started. Um, you know shortly after we started TBG
typically we
hire people
And especially on the development side of the business where you have less attrition that are focused
um, you know primarily
on
wanting to
you know pursue the development and then
That falls within, you know our vision our mission statement, you know for the company
And if they're really not in tune to that then it makes no sense to really join our organization
Because we're not necessarily trying to just offer a job or place them in a position in pigeon holder
We're really looking to provide them a career to really become a real estate developer
It doesn't matter what you focus on initially
It's a matter of what your opportunities are within your organization as far as your upward, you know trajectory in our organization
And the other thing is is that you have to be multi-dimensional
It doesn't matter if you're a development analyst, you know today
tomorrow you could be in front of you know in Bermuda and dealing with the
Government there as a consultant in a consultant role that gives us the ability to deal with the real estate cycles
And when you're going through a down cycle and you got to focus more on your services side, then we don't have to
Lose some of our you know these key
You know associates that have been working with us who's investing time with us and who we've invested a lot of time
In as far as training them so they could easily transition over
And work on the other sides of our business or focus on the asset management of our portfolio
Making sure that we're yielding, you know the optimal results on you know, our properties cash flows
Looking at a lot of our capital
You know expenditures, you know on on our on our assets
Those are the things that are very critical to us as far as each associate having the ability to wear multiple hats
We've seen how that worked for us during the past recession
We've also seen how it worked for us this past, you know 16 17 months
With um, we're just uh covid
I mean a lot of things pretty much stalled but
When our team realized that there's only so many new deals we could do because equity was somewhat sidelined, too
Because of the uncertainty of the market and people were not tenants not paying rent
We decided that guess what we're going to focus all of our efforts now on building pipeline
so we
Put our hats on and started
rolling on up our sleeves and
and responding to rfp's and expanding on our
Our geographic, you know footprint. That's how we expanded into virginia and also expanded into the virgin islands
Just by virtually doing that as opposed to really trying to push deals that really
You know
Shouldn't be worked on at that time, you know lumber prices were through the roof
You know debt was pretty decent because of the low interest rates
But you know just the equity markets, you know, they were very you know, very uncertain as to how to underwrite a deal
Because of the vacancy issues, um, or if you didn't have physical vacancy the economic vacancies were just so high
So we chose, you know, you know to take that route. So from a team standpoint
Uh, it's important for us again to
to hire bring on
Associates who are multi-dimensional and that can you know carry over their talents on some of the different parts of our business
as we move along we have uh
About 120 or so employees collectively amongst all four companies that we have
Right now and we think that for us the optimal side will be somewhere around
200 employees as we continue to grow and most of it will be in our property management company because we self-manage
Wow, that's incredible. How many units do you uh, what you say you have under management currently?
Um, we have under 4 000 units
Um under management, you know currently most of which you know belongs to us about
Easily 3 500 or so are our units and we have about another
I think 1 100 or so units planned to develop
Over the next 24 months nice nice. That's that's awesome. It's a follow-up question to the um
To the previous questions about team
About building your team, you know relation real estate's a real relationship driven
industry, right, uh, you mentioned in 2010
You know banks are looking at you as being a green company
You're out on your own essentially
How did you kind of foster those relationships and get you to where you are today?
Was it you know, can you talk through some of the strategies that you employed in the beginning? Well, one of the first things
that we had to
Contend with is the fact that you know, we had nobody had a clean balance sheet
Everybody had some some issues going on. It didn't matter the size of the company
You know you had some workout you had that was going on. It didn't look pretty it was bad
You had to explain the issues projects that were failed or fulfilling
And it was across the board
The so it was really important to get ahead of those questions and bring it to the table up front
with lenders and equity partners
And tell them exactly what's going on
And what you plan on doing, you know to address it
from a financial standpoint and from really a strategic standpoint
and I found that to be very beneficial when you
Apprise them of the issues without them asking about them
You know
As they discover the issues during their due diligence, you know process
I think that's that's a bad situation
You know typically when you're having to answer something when they've already gone down the road with you and you never brought it up
The other thing is is that you know, most of the lenders and equity, you know partners were underwriting people
They were underwriting the person not the project to a certain extent
Because of the uncertainties at that time and you know projects were speculative. Yeah, they may like the deal
But at the end of the day, they're like, you know what?
I believe Eddie Benoit
Is going to do the best he can
To make sure that this deal is done
He does not sacrifice quality
He's not going to
Sacrifice the quality in order just to preserve developer fee
Even if he has to defer all his fee to make sure that we have a quality project. He will do so
And if he has to put in more money and above and beyond the developer fee, he will still do so
then those conversations
were
Pretty much what we had
with the with these investors
During
That period of time of the recession, you know, they you know, the deal is kind of just you know, especially when you're doing an affordable deal
It either works or it doesn't either you like the location or you don't either the market study supports it or it doesn't
You know once you get beyond some of those, you know, the the main underwriting thresholds, then it's a matter of
Okay, is this
Client here
The client that we want to do business with it was the same thing
With some of the state agencies, you know, which clients did they look at as tier one clients?
Same thing with the lenders same thing with HUD as far as you know having HUD sponsorship experience
so
The because we had all of that experience
It really helped us it gave us a competitive edge even though we were you know a new company
And we were still able to compete
With some of the larger companies even though we had a significantly smaller balance sheet than some of the larger companies
But when we competed
on RFPs, you know, we're able to win
Even though we were the smaller, you know company because of our experience in our track record we
in addition to that so you look at some of the
equity partners and lenders that we
Did business with back in 2010 and 11
We're still doing business with them today
And they're doing the lion's share of our business some of the companies have changed but who the
relationship person
Is the same we just ended up following the same relationship person
So we're big on relationships whether it's with our equity partners our lenders
You know consultants designers, you know, you'll see based on our
Track record how much repeat business did we have with some of the same groups? That's excellent
Looking at our emerging developers who might be looking at this or listening to this podcast
What's your number one piece of advice?
That you would give them as they look to kind of break into the game
Capita making sure that they have capital
And capital is key, you know, this business is all about, you know learning every day
That's what really gets me going. That's what gets me out of my bed
That I get to learn something every day. I'm nearing 30 years
here in this business and
It's been fun. It's been a roller coaster ride. Some days you ask yourself
Why am I in this business? But then you wake up another day. You have an opportunity to go at it again
and
So I guess you know this for those of us who are thrill seekers and deal junkies, you know, it just works very well for us
but if
One major thing that I would do
If I had to do it over again, just as I recommended, you know early on with
Question, you know about the young entrepreneurs that I would have aligned myself with a
strong capital partner
Under front end. I had, you know, my own capital
After I screwed up with my partners at Amblin and thought it'd be enough
Okay based on my business plan
Just to find out that it definitely wasn't enough because I didn't know how long this recession would last
Most of us start when it hit and we recognized we're in a recession
For those of us who are in active development
around late 2007
Some others took them until mid 2008 to realize that we were in a recession or accept it
And we thought it'd probably be a 24 month, you know situation 30 months
But it went well into started started to recovery around 2013
So I needed a lot more capital not only to continue to grow our business
And because we were getting larger
Deals and these larger deals as we were expanding required more money
Okay, so which is a great it's a great problem to have but it is really a problem because you still have to operate
Your company from an overhead standpoint
And then we had workouts
You know from a previous partnership deals that we were working out with the lenders
That had failed
And so that required another level of capital
That really had nothing to do with our day-to-day business that I needed to resolve
And these were not you know small checks
and so
I
It definitely put a strain on us, you know for a few years
And so had I had a strong capital partner, you know
in the company
I would have
I would have been able to do that
I wouldn't have had to you know deal with some of the financial hurdles I had to
Um, you know face in the early years of the company and growing the company
I guess to close out one of the questions we ask all the developers knowing just how hard this journey has been
It seems like everybody
Kind of fell into that 2007 2010. It's amazing how many
Of the developers we talked to came in came in the business around that time and the first thing he said
Yeah, it was a recession
But as you got over those hurdles as you progressed and as you grew
How did you balance?
You know the personal side of your life with the business side because that certainly is a challenge as well
It was it was very difficult, you know because on the personal side
I you know suffered because of the fact that you know, we were focusing all of our you know, just uh
Finances in rebuilding this company
Rebuilding and building I guess at the same time because as we worked out some of the issues from the
Previous partnership so, you know, it took nine years
To close out the last
workout
Okay, so it's kind of like we always had an albatross around our neck and had to explain these issues to lenders on every deal
As to what's going on with this project, you know, is it a threat is a financial threat things of that sort
But on the personal side, you know, we just really had to dig deep and
made you know certain decisions that hey, we're going to be in a rebuilding stage and
we're
going to be very judicious as to you know, how we spend and
Going to leverage, you know everything that we have in order to you know, put into this company and to grow it
so, um, you know my spouse and I we were
Definitely, you know on the same page relative to that
So we we didn't have any issues as to when it came up to guarantees and just putting more money into the company in
order for it to grow
Um, but the other thing that you know, I know I made a decision
About was to make sure I had a good time
I'm like can't have a a difficult time at work and I was having a difficult time at home on my personal side
That's very important
You have to have fun. You have to enjoy it, you know, then what's the purpose?
you know, so I um
I get to enjoy this business in so many different ways
Um, it's not really about the financial side. I get to enjoy just to see you know, just our associates
How they grow?
Their wins their successes within the organization
You know the uh get to see you know my residents when I go on site to see how happy they are
Uh with the property, you know that they're living in and what we're doing how we're engaging, you know with them
From a resident activity standpoint, um, I also get you know, have fun just doing things like this
As far as um, you know talking, you know to you guys or mentoring a lot of young
You know professionals or even those who are still in college
Or those who are entering, you know college for a real estate, you know
degree
Um, just also engaging in all these other professional organizations that are part of our different boards
You know, I find a lot of you know fun, you know there
I'm just that kind of guy. I'm very i'm more of an optimistic type of person
from a personality standpoint
and
This business is very stressful
and
It's all about how you approach it and how you let it affect you
You know, um even keel guy
And as I said before
I've never seen a similar day over the past 29 years
So there's as usual always light at the end of the tunnel. It doesn't matter how bad the deal is
Or the news is today
There's always some kind of silver lining down the road and the more you can stay calm and focused
The quicker you're gonna, you know recognize what the solution
You know is and um, so from a personal standpoint
Make sure you balance it
As much as you can have fun, you know, if your deal is cycling running playing golf swimming
Whatever it is do it
Don't let the job
Create an excuse for you not to have fun
and you know this uh
One developer told me one time a little bit, you know older than me. He said you know what in 40 years of development
He can't even remember some of the deals he did
Um what year he did him and whatnot. I mean he pretty much remembered 97 percent
But he said he remembered every vacation he took with his family and sometimes remember what kind of clothes they had on
And that right there really changed my approach
He remembers every vacation
Yep
Yeah
All right, so that makes you think
Yeah, it does it changes
Yeah, it does it changes the perspective
You know
Yes
Now we uh, we certainly appreciate it, uh
Appreciate the time. I know cal
Kerber and I can both relate just the the stress and the balancing act and you know, certainly the entrepreneurs we talk to that's
a lot of things that we let them know that you know, this is a
This is a this is a profession that can consume you 100 percent
If you're not willing to dial it back to you know 60 or 50 to balance it out
Well people contact us, you know every day. I mean either via email or jesus called the main office
I think what's um
the most important
part is the fact that
It needs to be a deal that fits within our vision and mission statement
Okay, if it's not it has to be in
You know areas that we're interested in developing it
Um, so if it's not an urban or suburban location and if it's you know
If it's rural it needs to be pretty much close to a university
That's um, you know, that's where any rule deal we have a couple of rule deals, but they're right adjacent to tier one university
Because it gives us um
just
multiple options from an exit strategy
but otherwise
You know we get these calls every day. We get the emails
Every day or they reach us through social media. I have land
You know, I want to figure out how to develop it and they're like, you know
I want to do senior housing when I want to do a mixed use development we get those, you know a dime a dozen
But um every once in a while
um, you'll find one that makes sense and um
We're in it falls pretty much within what we would call our sweet spot
and we're able to
You know, uh, you know bring a deal like that to fruition the deals have to make
Have to have a purpose
We don't just chase deals just to do deals
I have every deal that we've done
You know under the banois group
Um has had a story behind it
A story as to why it was important enough for us to pursue that deal
And the story of how that deal
Not only changed the residents that live there but also how it impact the surrounding neighborhood
And so
That's what's more so we get we have an opportunity to cherry pick what we pursue
We don't just do deals just to do them, which is the reason why we're not a big
9 tax credit developer because the 9 tax credit, you know processes, you know
It's really more social engineering
It's a matter of where can you find a site that's going to meet?
You know as many of the requirements of the qap
And where you can score the most?
well
Sometimes I may not want to be in that market because I see some of the risks
Some of the inherent risks that may be on the front end or the inherent risk that may be on the back end. Yeah, exactly
No question. Yeah, so
um, so for us, you know, we we partnered with
At least
Uh, man, maybe at least half a dozen churches. We've got we just finished
Two projects with two churches and I think we have another two going on right now
um
In the pre-development stage
And we'll continue to do business with with the churches because they typically have some great land holdings
And assets in these urban and suburban markets the housing authority is the same thing
they have
properties that are in excellent locations because
40 50 years ago when those that housing was developed it was considered to be on the outskirts
Of these urban and suburban markets, but now they're in very desirable locations
And so the ability to work with them and redevelop tear down
Deconcentrate, you know the the low income and poverty
uh within you know their
their portfolio
Makes a lot of sense for them to them. And so we get very creative as to how we were to redevelop
You know those properties and you know do a more of a mixed income approach and a mixed demographic
Where we were to segregate the seniors, you know from just a regular multifamily
I think before before curving jumps into the last question, uh, since you guys are in multiple locations
from a strategy perspective
What is your I guess your geographic strategy like for instance i'm in philadelphia
Would you come far as far north as philadelphia or you guys just content with the southeast?
How do you approach those opportunities that they come as they come up? It's a great question great question
I would never say no, that wouldn't come to your great state of pennsylvania
It would have to make sense for at least three
Of our four business verticals
We don't go into a state, you know a new state or a new territory just for
one deal
It has to make sense for development where we know we can do more than one deal
We know there's going to be a regional focus. We're going to learn that state
We're going to build relationships, you know there
And we can our management company can not only manage manage our assets
But also can have other management opportunities for third-party owners
Same thing with our construction management company
And then last but not least in that market
When the real estate cycle were in a down cycle
We could always do some of our advisory services
So that's how we pretty much shop cherry pick, you know the different cities and states that we're actively, you know
Developing and own, you know assets in right now. I do a lot of things differently
but then
If you ask me
After I did those things differently, would you do things differently again? I'd say yeah, I do things differently again
Our vision plan
for the next five years
Over the next five years
Hopefully by 2026 is to really you know do a 2x multiplier
Of our portfolio size, you know currently we have about 22
So properties that are under operations
within these states and we think that
We have based on the pipeline that we have with deals and we have a great opportunity to double that size
Over the next five years
Another day at the shop
Another day at the shop content they can't get anywhere else