Ron Schinik of New Blueprint Partners | Vancouver Innovation Center in Vancouver, WA | Redeveloping Manufacturing

Transcript

[00:00:00] What goes into making an iconic building in America? What are the stories and who are the people behind the next generation of architecture? If your work touches the real estate industry in any way, or you're just curious about what goes into one of a kind cities and towns all across our country, join us on the American Building Podcast.

In season two, we learned about everything from skyscrapers to single-family homes from the famous and soon-to-be-famous designers and developers responsible. This season focuses particularly on the pandemic and how our buildings will change in response. Our sponsor is the iconic design firm, Michael Graves Architecture and Design. And now, your host award-winning architect-turned-entrepreneur, Atif Qadir, AIA.

[00:00:47] Atif Qadir: This is American Building, and I'm your host, Atif Qadir. I'm the CEO of REDIST, a technology company focused on innovative public financing for real estate projects. We are recording from the historic home of world renowned architect, Michael Graves, in Princeton, New Jersey. Check out this amazing space for yourself at the Michael Graves Architecture and Design YouTube channel. Now, let's build something.

Our guest is developer Ron Schick. Ron is the CEO of new blueprint partners, a New York based company focused on redeveloping manufacturing facilities into mixed used assets. Previously. He was the chief financial officer at Wright brothers, a company providing consulting services for the complex closures.

Of manufacturing facilities. Um, he also worked at crown capital, an investor in small businesses and a quick international career. He began his career in audit at Eisner Amper. He is a certified public accountant by training and a graduate of NYU stern and Queens college. Like my former boss at Exel development, Gary barn.

Hmm, we will be talking about the Vancouver innovation center in Washington state, and more broadly we'll be discussing the future of manufacturing and what it means for the real estate industry. Thank you so much for being here with us,

[00:02:13] Ron Schinik: Ron. Ah, it's a pleasure to be here. Thank you for having me.

[00:02:17] Atif Qadir: Thank you.

And so, as I mentioned, you began your career in audit. Explain to our listeners, many of whom are architects and developers themselves. What exactly auditing is.

[00:02:31] Ron Schinik: Okay, well, that's pretty simple. I started my career as a, uh, public accountant and my job out of, uh, one of my first jobs out of college. I joined the, an accounting firm and, uh, audit is simply the, uh, analysis of financial statements provided by a particular client.

Mm-hmm whether it be retail, manufacturing, or whatever the case may be, but we basically certify the numbers. and generally ensure that the numbers fairly represent what they're supposed to represent to a third party.

[00:03:02] Atif Qadir: And that could be whether for a real estate company, a manufacturing company, or literally any company.

Right. Yeah. I mean, I

[00:03:08] Ron Schinik: think really one of the interesting things about being an auditor is that you get to see a, a wide variety of different clients, right? Mm. You know, it's a really good foundation from a business perspective, because one, you get to see different type of industry sectors. Right. Mm-hmm

So I had, you know, retail clients and I had manufacturing clients and, you know, at construction clients and yada yada, yada. So you had a chance to sort of just look at every different company. And quite frankly, it was very fascinating to see all. Amazing how quite frankly, either they survived or made money and, you know, what was the basic components of their business.

So it was really kind of, it was very interesting from that perspective.

[00:03:48] Atif Qadir: So Ron, from that foundation of, uh, work in auditing, you grew into the role of being, uh, a CFO. So the chief financial officer at three companies, uh, centered around a shared theme and that's operational efficiency. So tell us about each of those experiences and what you took away from them.

[00:04:09] Ron Schinik: Uh, good question. I think, you know, being CFO of a logistics company was really my first sort of real CFO job. It was a fairly broad, uh, company in terms of worldwide presence, number of people working there. And there was a tremendous amount of data and really falls into what you know, AI is doing today, which is to say that when you have thousands of flights, inbound, outbound, Thousands of packages.

It was the next flight out business. So literally you could take one piece of hardware, a key, a phone, whatever it was and fly it anywhere around the world, on the next flight out mm-hmm . So the type of work we did might be umbilical cords. So we may have done clinical trials for the pharmaceutical company, but you know, when you have all that information, you have to take the time to figure out what is the.

Profitable leg in terms of where you're shipping, how you're shipping and who you're using. So it's a very, very, very complicated business, you know, from an operational perspective, they handle that from a data perspective. I always wanted to understand the core tenants of the business. When you peel back the layers of the union, where were we making money?

It's great. We have a thousand clients. It's great that we put thousands of flights. It's great. There were thousands of legs from anywhere in the world, 24 7, 365 days a year. But where is your pricing optimized and where is your pricing? Not optimized? Mm-hmm and I think those are the type of things you try to do as a financial person in these companies, which is peel back the layers of the onion to figure out exactly what transpires underneath the hood.

You know, and most of the time what companies do is they run, run, run, run, mm-hmm . They try to figure out how they're making money, but they don't really, because they're really focused on marketing, serving their clients and making sure operationally that they're, that their sound mm-hmm takes a financial person sometimes to layer themselves on top and help them figure out and get to the bottom line, literally getting to the bottom line and how you get there.

So that was from the logistics business. I think. then, you know, we owned a couple of, uh, plastics businesses, which were cycling businesses, which quite frankly, was also a, a data centered type of endeavor because. You have different methodology for recycling plastic, you're doing it for different clients.

Mm-hmm . And every one of these processes either took, you know, took a different amount of time to use different types of equipment. So once again, it was all about trying to figure out where is the most profitable client, what is our most profitable process? So it's all about once again, I use that saying, and maybe I overuse it, but peeling by the layers of the onion.

Mm-hmm . Finally, you know, when I worked in sort of a real estate acquisition company, it wasn't, it wasn't too dissimilar. It was a little bit oversimplified because you know, there, you can buy chunks of land and buildings. And, but the bottom line is that any one of these businesses, whatever you put into this system is whatever you get out of this system.

And it's, it's very, very important that when you're. Your inputs are, uh, correct. They're, they're, they're a hundred percent true. And that, that quite frankly, that they make a lot of sense, because at the end of the day, when you're presenting to your executive team, you wanna feel good about what you're presenting and the conclusions that you've drawn.

And the only way you can do it is make sure that the numbers line up

[00:07:15] Atif Qadir: accordingly. I really like that description. I like how you had mentioned that the, the core ability to make a profit is very different than the ability to make revenue. And I think particularly with companies that might be venture backed or technology based, there's even like a, a greater simplification, which is literally just to get customers, not even making revenue or not even making a profit at all.

So I think that that grounding in reality, Is very important, very refreshing. Um, so your background in accounting and audit reminds me a lot of someone else, and that is Joe fury, who is the president of Michael Graves, architecture and design. So, uh, he's a CPA as well, uh, in both, uh, development and design, having a CPA at the head of a firm is still extremely unusual.

Tell me why you think that the, the background that you. In financial services and understanding the finances of a and understanding the finances of a company, uh, suits you well to be a developer.

[00:08:14] Ron Schinik: Good question. I, well, I think one of the things I've learned is that fundamentally, when you're a CPA, you, you have a keen understanding of how the numbers come together.

Mm-hmm and you also keen understanding of what third parties are. so I think, you know, the thing for me personally is a little bit left brain, right brain, right. Mm-hmm my sense of the world is I always felt I was a little bit more creative than the typical accountant or CPA. And I think if you sort of have that sense of creativity, that sense of vision, that.

That that real good feel for strategy, the underlying strengths of, of where you should go in a sense of vision, I think. And you combine that with your sense of numbers. I think it's a really powerful combination. So I think anybody who's a CPA or accountant or who's someone who has that background, who also often feels like maybe they're not doing as much as they can do.

Mm-hmm , it's really because they have that little bit of creativity or vision that they wanna expand upon. And maybe an accountant is really not the, you know, end all be all for. Yeah. So for me, I'm real, more creative and strategically driven. And I, what I get to do is fall back on my understanding of how numbers come together and what they represent.

And it leads you to a position of being a CEO where maybe you have a little bit more insight into how numbers are put together. Then the CEO who came from the marketing or engineering or operational discipl.

[00:09:37] Atif Qadir: Mm-hmm I think I could, I can agree with you on that idea. Uh, for me being a, a licensed architect that moved into development, I would say being an architect, wasn't the be all end all for me, I really wanted to understand the whys and the meat potatoes of a decision.

And that often lies in the financial side of things. So for me, getting the license, getting an MBA and then working development, I really enjoyed being able to lean. On all of my design and construction knowledge, but really be attuned more towards the, the financial aspects of a project, which I think is probably the, the key to one of, some of the most successful developers is they come from a foundational experience and a key element, uh, accounting and finance or architecture, engineering, or legal, and then use that in their, in their development.

[00:10:26] Ron Schinik: Yeah, I, I think, you know, typically, you know, sometimes the way you, you know, you get through college and you get your first couple of jobs, you can become very myopic mm-hmm . So the architect is really, you know, and it makes sense because you really have to focus on doing the best you can in your particular discipline mm-hmm

But what it doesn't do, and it doesn't allow you to grow from outside of that discipline, doesn't give you peripheral. Mm. So, you know, I think if you can take being an architect and everything, you've learned, combine that with some other discipline mm-hmm then you've, you've got an excellent found. That's a

[00:10:59] Atif Qadir: great, great metaphor.

The, the peripheral vision. So you decided to leave your executive role at Rike brothers at my calculations at age 59. So we have had, uh, many folks on the show, leave corporate roles and jump into entrepreneurship. But only a select few, like Maryanne Gilmar and yourself have done it after having reached the very top of the corporate America ladder.

So what was going on in your mind when you decided to make that leap and did your family think you were crazy?

[00:11:35] Ron Schinik: Yeah. Well, well let me just, let me just correct you. So I was 56 when I left. Okay. So I'll give you three more units but still, I mean, three years of 56 is, is you're not off the mark very much, but I think a couple of things were going on.

I. I don't know, you know, we, the was the saying that, you know, you have a yearning to do something grant mm-hmm . And sometimes when you're working for somebody, even though you've reached a certain position in life, it may not be exactly what you wanted to do. And you do realize in your fifties, everybody that you realize there's not that much more time to do what you really do want to do.

And maybe what you thought you could do. Mm-hmm and. my family, you know, to get to the question, my family thought I was crazy. They didn't understand that 56 leaving a secure job, you know, and counting on X, you know, number of dollars every year. And just knowing what, you know, as opposed to, you know, the w you don't know.

And I think, you know, risk is a very, very, it's a four letter word mm-hmm risk averse. People are risk takers. I've always been a risk taker. and quite frankly, I wanted to do something with my partner. Who's really one of my best friends. Mm-hmm and I wanted to do something where we could maybe just leave our mark and, and do something really, really interesting.

And, and to be blunt for your audience, I want to make more money. got it. You know, I mean, let's not, you know, I, I don't wanna pussy foot around it, you know, mm-hmm, when you work for someone, you can earn a lot of money. It depends where you are certainly in technology where it's highly scalable, certainly in real estate.

But I think we thought we could do better for ourselves. And I think it's a risk reward. And so we sort of jumped off. And so it was about doing something unique and interesting, and it was about making more.

[00:13:17] Atif Qadir: that makes a lot of sense. And you might be interested in knowing that one of the pushes that I needed to, uh, leave Exel was, uh, late night on a Thursday working a proforma for Gary's project in park city, uh, which I think came in the news two, three years ago.

And there was a, a whole kind of list of. Uh, thing due diligence items before the acquisition. And one of the things that came up was kept an understanding of who would be buying these properties, uh, that were part of a large development project. And, uh, I had jokingly said to, uh, one of the team members or senior member, a development team that I was working the project with that maybe me and you, we could, we could buy one of these places.

And he said, as long as we are working here, neither of us will ever be buying one of those places. So I was like, yep, Nope, you're

[00:14:00] Ron Schinik: right. You absolutely. You know, you absolutely hit the nail in the head because here's the reality, right? You're doing the numbers. You're doing the PROFOR. You have a sense of the marketplace, right?

Mm-hmm cause you're doing the due diligence. And then you think to yourself at some point, well, why am I not doing this? Mm-hmm and for us, we knew our way around money. You probably also know your way around money. It's not that hard to raise money. It's not like it was 30, 40, 50 years ago or 10 years ago.

Today's world is a very different world with institutional money. So if you believe in what you're doing and you have a real good sense of how strong you are in a particular market segment or sector, and you have a keen understanding of how it works. , it's not a big leap for you to, to explain it to institutional investors or potential family offices or whatever the case may be.

So it, it's a unique time in, in, I think in the world in terms of the economy, because, you know, if, if you believe in yourself and you, and you have that expertise, there's a good chance. You can go out there and raise money.

[00:14:59] Atif Qadir: Absolutely. And then speaking of projects out west, uh, I want to hear about Vancouver and for our listeners.

We're not talking about Canada, we're talking about the state of Washington. So tell us about Vancouver, Washington and, uh, the site itself.

[00:15:12] Ron Schinik: Well, Vancouver. Yeah, I know most people don't believe there's a Vancouver, Washington. you might tell a couple of times, but like, But nonetheless, so Vancouver, Washington was the, the project in and of itself was it was 180 acre site owned by Uler Packard Muller Packard in the early 1980s built 700,000 square feet of industrial space slash office space in Vancouver, Washington.

The, at the time they took over the 180 acres. The surrounding area here was completely farmland. There was nothing around it. And Vancouver was always played the second or third cousin to the Portland, Oregon, which is right across the Columbia river here, literally three or four miles away, Uler Packard at the time built his facility.

It was the initial research and development for the inject. Which is quite frankly amazing. That is in the 1980s. And then they actually, over time, they not only designed it here, but they built it here. Mm-hmm so build testing rooms, sound, chambers, RFI, chambers. They built a huge manufacturing facility here that could support the, the, the building, the components and assembling the components.

For the United States and for export, when we saw it a couple of years ago, it was essentially owned by a company by of se America. Se America is a manufacturer of, uh, plastics and semiconductors. It's a Japanese concern, multi-billion dollar concern who were going to do something on site here and make the 700,000 useful mm-hmm they would employ, but as things happened, they never did.

And they held onto the property for 10 years. When we got ahold of it, we were shocked that the, the bones, the fact that it was. Uh, even though it was built in the 1980s, it looked like it was built 10 years ago. It was, this condition had excellent bones, had a very high ceilings, had tremendous manufacturing space was all conditioned inside and out.

And an interior courtyard with a basketball court was surrounded by these other a hundred. And. 10 acres, 15 acres of forested land and goes on and on and on. And of course in today's world, it had space, it had power, it was all conditioned accessible to water. Uh, good electric rates, good. Hydro-electric in the Vancouver Washington area.

It had all those components, but there was one problem. Nobody wanted to buy it here because the land wasn't entitle. Except for and the buildings were as one private equity group told us was a bunch of Frankenstein buildings. And what's happened over the last couple of years is if it's not a rectangle, people don't know what to do with it.

Mm-hmm , but we saw it and we had to have a sense of vision. What was this all about? What could we do with it? What was the next best use? You know, all of these questions. And could we get there in, within the context of getting this through the city and having people support what we wanted to do? So. A lot of questions, but a lot of opportunity.

[00:18:19] Atif Qadir: Hmm. And I like that description of a, of a Frankenstein building. And I'm guessing that also allowed you to start thinking about the ability to make creative unique spaces that aren't just cookie cutter, repeat, repeat type office spaces. Was that some of the opportunities that you started seeing say on your first, uh, site walkthrough?

[00:18:39] Ron Schinik: I think the thing that struck me and my partner was that in a world where. Everything seemed the same. This was different. Mm-hmm in a world where you could go to your office, go upstairs, go downstairs and leave. This was different. Mm-hmm this was a campus. This had a basketball court, they had some horseshoe thing here.

They have a place, big sequoias where you can sit in the courtyard, but it also gave you the opportunity to walk around, walk around the buildings, walk within the buildings, that sense that maybe people wanted something D. maybe this would be a community mm-hmm as opposed to an office building. And we, what we wanted to do, what we saw as a chance to build a community.

Mm-hmm a place that was unique to the typical slash office slash flexible industrial user.

[00:19:31] Atif Qadir: Interesting. And then, uh, help our users understand. So 180 acres, what is the, the scope of this project of this redevelopment that you're.

[00:19:40] Ron Schinik: I mean, the redevelopment is actually massive and, and, and under consideration now is around.

Well, I'd say we're, we're going to start building 300 apartments, uh, in the very near future. That will be in the context of at least 12 to 1500 apartments here. Wow. We are, yeah, it, we are set to build another, at least 750,000 to million square feet of industrial buildings here. Mm-hmm we are going to build a downtown area.

Uh, with retail and shopping, open air markets, maker spaces, and we will be building probably another half, a million, 300 to half a million dollars of mixed use 300 to 500,000 square feet of additional mixed use. I think all in all, what the investment in the, in the Vic over time will be somewhere around three to $400 million.

Um, over the next five to seven years. And so we're going to build this, hopefully all inclusive community, a 20 minute community, which is the, which is the end all be all lately, but there's good reasons, right? Mm-hmm you don't wanna get your car. You want everything there. And it's the reverse of what happened in suburbia.

Mm-hmm 1950s and sixties, right? People taking their car going out as far as they can, but people don't want that anymore. People for environmental reason. For health reasons for work reasons, for time reasons, it literally goes on and on and on. So we're building this community, hopefully be thousands of people working here.

Thousands of people living here and thousands of people shopping here.

[00:21:11] Atif Qadir: So, uh, given that people are cinema as confused by the name of Vancouver, uh, for Washington, I may humbly suggest that you rename the city, Ron town. Yeah. Or Shick city are my two, the two that I would recommend. So yeah, I've actually, I I've,

[00:21:25] Ron Schinik: I pitched that to my, um, book.

[00:21:28] Atif Qadir: Did they like Ron town? they

didn't

[00:21:30] Ron Schinik: like Ron town, but so I said to them, let's just have, every street will be named Shick, but it'll be Shick Shick place.

[00:21:37] Atif Qadir: It's gonna be Queens then that's, that's the issue with Caesar's so

[00:21:40] Ron Schinik: hard. , you know, make a left on chink, make a right on Shinnick, then go straight on chink and I'm.

I

[00:21:48] Atif Qadir: would say like, as much as I, I, I love New York city. That's a place I've, I've lived for so long in my life. I still can't get over. Why in Queens, there is hundred 30th street hundred 30th place and hundred 30th drive all next to each other, all intersecting with each other.

[00:22:03] Ron Schinik: Yeah. I grew up there and I don't know.

See

[00:22:05] Atif Qadir: exactly. There you go. yeah. So you had a joint venture partner on this project and that's Reina and you were also working with, uh, sidewalk labs. Yeah. So help our, uh, listeners understand what roles they played in this

[00:22:19] Ron Schinik: project. Right? So Reina, first of all, we're really, we're thrilled to be partner with REA Rubina is a, uh, is a, uh, New York city developer, a multi-generational owner and developer based in New York city.

With a tremendous amount of disciplines under their roof. So they help us with the back office in billing. They help us on terms of developing the new buildings, uh, and they're helping us drive process to build out this particular facility. And of course, mm-hmm to cut to the chase. They have the majority, um, of financer.

Okay. So they, they, they put up the bulk of the money to do the transaction. Again. I just like calling it what it is, but we were lucky enough, not just to have them as financiers, but to have them as experts and as a good team to help us build out the current facility. Um, excellent. The sidewalk labs, we engaged Google sidewalk labs, which Google sidewalk labs was the residue from them, trying to build that facility in Toronto, in Toronto.

If you remember, they were trying to build a, a, a, a high tech res you know, high tech. mixed use site in Toronto, that didn't happen, right. Is all right. That didn't happen. So what they did is they said we're gonna start our consulting gig, using everything we learned and Google sidewalk glads came in here and they basically educated us on mobility, on environmental sustainability, on building community, on how to, you know, how to, you know, transact and I'm not using the right words, but mm-hmm, , you know how to build out this particular 20, 20 minute use community.

So they, they wanted to take everything they learned in Toronto and, and, and sort of allow us to, to, to learn from them. And it was fascinating because what they were doing is they were using all the high tech technology, the cutting edge of what's going on now, how do you measure how many people are using the parking spots?

Well, you use that by monitors on the ground. You know, things like that. How do you save rain, water, you know, and, and how does that work? You know, all of these. Little nuances and, you know, they, they taught us about, and so every week, once a week or twice a week, we would go through different segments with them.

[00:24:26] Atif Qadir: Mm-hmm that sounds fascinating. So would you consider them, like, in your mind, from a traditional development perspective, there was something like a, like a site engineer that, or, or some sort of like a, what would you place them with? Like the, the normal Pantheon of consult.

[00:24:43] Ron Schinik: I, you know, it's funny. It's a good question because what they're doing is they're taking every discipline, whether it's civil, mechanical mobility, environmental and sustainability, and what they've done is they've picked apart.

What, what is the true cutting edge on a global basis? I, I couldn't, you know, I would call 'em a consulting firm that is allowing you to cut through the clutter. Mm-hmm to figure out what is the premier type of use service build out that you, that, that you would want? I, I don't know. I've called them a, just a, a very like an umbrella consultant.

So instead of being a civil, instead of go to sustainability, instead of going to a, you know, on and on and on and on mm-hmm . They bring it to your doorstep and they say, listen, here's, what's going on. One of the most fascinating things they taught us about is, and you probably know about this is, is mobility within the apartment in and of itself and how walls move now.

So you can take a, ah, a studio apartment and create a dent and then move it back and then create a bed. So it literally was all these little nuances that we went through on how to maximize space and maximize value and create an environmental sustainable place that people want to live. And.

[00:25:57] Atif Qadir: So, uh, sidewalk labs also, uh, in its previous iteration, uh, was producing, uh, hard pieces, like hard equipment to do certain things in, in terms of recording data.

So for example, one of them related to parking was, uh, pebble. Are there things like that, that you were able to incorporate in this development site?

[00:26:16] Ron Schinik: Well, it's still an open question and I, I think eventually we will. Okay. But it's, you know, it, it it's time will come, but not.

[00:26:26] Atif Qadir: Okay. So, and potentially lay out the major milestones on the project for such a huge project to give us an idea of the process of execution.

[00:26:39] Ron Schinik: Yeah. Execution is interesting because I think, you know, first of all, this, this was, this land was zoned as industrial. So you had 180 acres industrial, and the reality of this situation is that you. I think if you're a good developer, if you're humanistic, you're trying to figure out really what works in the context of the current neighborhood.

Mm-hmm . So what happened was that 30 years ago, when HP built this, this was all farmland. Didn't matter what you did or how you did it. Right? But now all the people I'd say encroached on this site. And now what you have is thousands. If not tens of thousands of people home. Around the site. So the question is in question of what works, right?

And every developer says, what works here? What, you know, how much pushback am I gonna get? Am I doing the right thing for the community, as well as myself? How do we make money doing this? Right. Mm-hmm . And I think the reality was that we didn't think what, what made sense is to put manufacturing facilities throughout the 180 acres, you know, up against what is.

family oriented, residential area. Mm-hmm of course the idea was then to rezone this to a mixed use and get a designation for mixed use. So we started that almost well. We started that before we owned it because the, the previous owner allowed us to take the lead in rezoning at the time mm-hmm . And so we had to meet with the community.

We met with the planning commission. We had multiple public hearings, so that was, you know, a year and a half, two years ago. So the idea was to rezone it. That started about a year and a half ago, two years ago, we went through public hearings. We went through the. The count. Uh, the city commissioners, we, we spoke to the mayor, we had public relations get togethers.

I mean, it took a while. And so once we got that done, the idea then was what do we do next? And that's kind of where we are today, which is to say that now that we have a mixed use designation, now that we know we want to do we hire chop architects, uh, about six months ago, mm-hmm, two of them weirdly, one of the top 10 architectural firms in the world right now from a lot of, mm.

Done on a global basis. And the idea here was for them to master plan this for us. So once we got designated, we did have a initial master plan. We then hired chop to create. Our final master plan, they came up with a terrific plan. And the idea for us now is to quite frankly, try to figure out how to, you know, how to set this in motion and we're picking it apart, right?

So we have a master plan. We're gonna do the industrial building up north, which is about 200,000 square feet. It's about 25 million investment there. The second phase is to build 300 apartments on the lower west side or the south west side at, and then we have to try to activate the site, which is we'd like to try to get to building the town center, right.

Because we wanna at least get a, a sense of community. Within what we're currently building. Right? We can't build out everything at the same time. There's infrastructure, there's sewer systems, there's roads that have to be built out. We've been told that the infrastructure's gonna cost us a hundred million dollars, so it's not peanuts and it's not academic.

So what we're trying to do is phase build what we have planned here. Mm-hmm but I will say to everybody who's listening, one of the greatest things that we had was the, was the 700,000 square feet buildings. Hmm. We already had some tenants. We were already a break. Even. We knew that if we could market this and position, this the right way that we could create enough cash flow, that building out the rest of the site would be less of a burden to us in our partners.

So for everybody who was listening, it wasn't just that, you know what, we're gonna throw a couple hundred million at this. It was let's lease up the 700,000 square feet, which was half leased at the time we bought it. Mm-hmm and maybe at a break even make a little bit more, I was making money. But it wasn't making money, money.

So leasing out the rest of it, all that incremental income on the 350,000 square feet would give us a, a tremendous amount of cash flow and allow us to really sort of have lift off on building out the rest of the site without bringing in more, much more equity and, and so on and so forth. So. That's a sense for you?

I hope it's a good timeline. It was the rezoning. Yeah, it was the filling up of the current set of buildings. Mm-hmm , I'm getting thereof. And now we're in the phase of going to the city in the next couple of days, we're going through pre-op on the 200,000 square foot. Building in about four months, we'll be going to pre-op on the 300 apartments and then we're figuring out the town center.

[00:31:19] Atif Qadir: So I like the way that you described that focus on being able to mitigate risk. Cause that really just sounds like the CPA and you coming out, making sure that those numbers make sense and you're doing the most prudent thing. Um, so we talked about the schedule aspect of it, and I wanna understand a little more about the, uh, financing at the, the project level.

In terms of the debt, any public financing programs or incentives that you were able to take as well?

[00:31:45] Ron Schinik: You know what? I will just say there was no public financing mm-hmm on the transaction. It, it was a private transaction, but I will tell everybody who's listening here that. I will go back to the current set of buildings.

If you're going to do, you know, if you're gonna buy something and you're gonna do a mixed use mm-hmm it clearly doesn't hurt that you have a current cash flow. So we were lucky enough to have some cash flow. When we bought the site mm-hmm, bought it at the right price of being just upfront and honest again.

And we, our financing came from Reina and from us. Certain proportions that I don't, I won't have to get into mm-hmm and then we simply hire, we hired JLL. We have a group at JLL that we're very close to and JLL went to the market for us, and they raised the, the debt side of the, the, the, the financing. And that's it.

And we got a sort of a term loan with HIV capital. Who have been very, very good with us and we have a great relationship with everybody and that's really, it, it was, it was equity from our partner and us and it, uh, and supplanted by accompanied by a debt from H I capital

[00:32:50] Atif Qadir: very clean for, for really complex project.

Uh, and I'm guessing that was a. A certain term for construction and then eventually it'll, uh, convert to a perm loan.

Yeah,

[00:33:01] Ron Schinik: well, it wasn't a construction load. It was strictly based on the buildings and the point the buildings got it. So it's, it's actually at, in the next week or two, we're going back to the markets, uh, FYI, and we're going to refi the building.

Now that it's going to be a hundred percent full it's 700,000 square feet. Mm-hmm back. We for your listeners, you know, the deal. The, uh, new cash flow is raised the value of the buildings to the extent that we can now finance refinance out some of our company. Um, and we can have pre and we can set up for preconstruction on the north building and on the apartments.

So it, it, it really, you know, my partner and will always say it's a magic carpet ride . But, but, but we knew what was a, we knew it was a carpet. I don't know how much magic we thought. .

[00:33:48] Atif Qadir: So I'm guessing one of you is a lad on the other one's Jasmine . Yeah, basically. So describe to our listeners. So this, the, the first, the first building we talked about, and then the, the development in and around.

If they were to drive into, uh, Vancouver, the number of years down the road, that'll take to finish the entire project, what would they be seeing? What would be going on as they're walking through the entire complex?

[00:34:14] Ron Schinik: Yeah, I think there's a couple of things, right? There's when we first started this, we sold some land to the city.

so to the city school system here. Um, so we sold 20 acres to the school, which is in the Northwest portion of the facility. And if you drive in here, you'll see the current set of buildings, the 700,000 square feet where we are revamping. What we call the commons area. Mm-hmm so a new entrance way that sort of announces, Hey, this is the Vancouver innovation center.

Mm-hmm you walk to the commons area. This will be complete in about six or nine months, and there'll be a fireplace there's conference room. There's couches. There's gonna be a food cafe. It's gonna be a sort of like a, a real field. Good. Will feel good place that you want to be. And it has, will have. up to snuff up to date new gym.

Mm-hmm what we're building is the commons area in the gym is for the current tenants and we're gonna sell memberships to the community. So what you're gonna see is this unique commons area, communal type of place that you don't find in east Vancouver. Mm-hmm right. And you know why? Because you know, right now land is expensive.

Nobody sets aside common space of this magnitude and it's about eight or 9,000 square feet. So you will get the, you will. First thing you'll notice is the new entrance, the new commons and the. Not food court, food area and gym. If you drive past this, you'll start seeing construction in a couple of months on the north building, which is 200,000 square feet.

Mm-hmm , which is really a really beautiful building. We love to design and we love how it's coming out and we think it's gonna be terrific. And it's gonna good. The aesthetics gonna be good. It's completely operational for manufacturing and or distribution, but primarily manufacturing. And if you drove around that, or if you went to the left after you came in in about a year, you're gonna be seeing some tremendous buildings being put up apartment buildings with a center play area where there'll be a dog park and barbecue stations and, and places to gather mm-hmm

And then if you went to the right, you'll see what we can call the town center. And the town center will have a music venue. Over the next couple of years, it helped maker spaces where you'll have woodworking, metalworking cooking, where you can take classes. You'll also have arts and arts, um, centers where we're talking to a number of, um, cultural centers here in the Vancouver area that wanna bring either visual arts museums to the town center.

And most importantly, you'll find gathering spaces, um, where people can get together in sort of a Piats type feel to it. Like you'd find in Madrid. All of this is really meant to create that sense of community and sense of being, because one of the things that people have done in these sort of these suburban type places is they don't have a place to meander.

Mm. So what we wanna do is we don't want you to drive to the pizza place and the restaurant and drive home. We want you to be here. We want you to enjoy lastly, you know, we're deeding part of the parks to the. And the city, um, will be programming this with us. We have 15 acres of forested area. Wow. So you'll be able to go out to eat.

You'll be able to see some, you hear some music, maybe you'll go to the rooftop cinema, and then you'll stroll with your loved one or the kids. And you'll walk into the forested area. And during the day, if you happen to live here or you wanna avail yourself in the forest area, you can bike through there.

So. Over time. What you're going to see is, you know, industrial, residential mixed use shops, restaurants. And by the way, we're going to get some tremendous restaurants, niche, restaurants, unique to the area. Um, and we will hopefully create a sense of community and sense of discovery. Mm-hmm get here. You know, you want to be here, you you'll enjoy being here.

And I, I hope that, um, that unfolds over the next three to five years. I think

[00:38:10] Atif Qadir: that sounds to five years, three, three to five years, you said one, well, one to five,

[00:38:14] Ron Schinik: cause I know construction on the industrial building will start in about six months to a year. Okay. You know, residential that will start in probably six months to a year.

And then the downtown area, probably in about two to three years. Okay. So this will start to evolve.

[00:38:29] Atif Qadir: So I feel like I might want to buy a townhouse on Shick place and then open a second office, uh, in the Shick innovation center. on the block.

[00:38:39] Ron Schinik: I'll next to you on drive I'll I'll meet you at the Shick circle.

[00:38:45] Atif Qadir: There we go. And if our listeners are interested, are, do you guys have a leasing sales website up yet or not yet?

[00:38:52] Ron Schinik: Not yet. You can go to www the Vic. wa.com. And as we, as we, as different progressions of the master plan, come out, mm-hmm then we'll all be there.

[00:39:05] Atif Qadir: Excellent. So that's the vwa.com and I'll include that in the show notes.

So I'm going to pause here to let our listeners know about the sponsors of the American building podcast. Uh Reddis is a venture backed technology enabled company, transforming access to public financing for small to midsize real estate developers. We are currently doing in-depth research with public agencies and municipal governments that handle incentives in con.

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So Ron, you are pursuing projects like the Vancouver innovation center in markets across the country. So what are the common threads in your strategies amongst all these project?

[00:40:23] Ron Schinik: Well, I think what we're looking for is a, I think it's pretty straightforward. It's it's a, um, it's about, it's a little bit about demographics.

Mm-hmm, , it's a little bit about population density. It's a little bit about local microeconomics and the area in which you're considering, and then there's the real estate, right? Mm. Which is what is. What's it zone for what's its potential. How much does it cost to convert it from its previous use to a current use?

Those are, I think those are the basic concepts, you know, which is to say that at the Vic, the 700,000 square feet, while it needed to be upgraded, it didn't nothing else needed to be done to it. Mm-hmm to get it to a point where it was leaseable, quite frankly. And when you're looking at other mixed use projects or previous corporate campuses, From any one of these fortune 500 companies, we have to ask you saying the same question.

If it's all office, what does it take to convert it, maybe to an office flex and slash industrial. So it's, it's those type of things, you know, what is the initial outlay to bring it to a point where it makes sense? Mm-hmm so you sort of look at the surrounding environment and the surrounding growth and the potential and.

Quite frankly. Um, that's really it. And I think, you know, you have to be just very opportunistic and I think you have to be very creative and I think you have to come with a sense of vision because a lot of people are going to tell you it doesn't make any sense. And if you, you listen to everybody that tells you, it's not gonna make sense, or it's a Frankenstein building you're never gonna do.

You're never gonna follow your. and that's what I would tell people listening is sometimes you just have to follow your gut and you only need one or two people to sort of climb in bed with you, which is like Reina. We were turned down by 75 private equity firms. who couldn't see. 75. Yeah, probably somewhere in the nature of 75 firms.

It's a Frankenstein building. It doesn't make any sense. Can we tear it down and put, and what happens is that they didn't have a sense of vision. They understand numbers. Everybody understands numbers at that level, but to have a sense of vision is completely different story. So we're very thankful that Rapa had a sense of vision.

So I would say to anybody, who's looking at doing a mixed use site, you know, you have to have a real sense of vision. Yeah. Have a real sense of strategy and you have to. and you have to believe in what you're, what you're doing. And, and that's, that's really what we're doing. We're just looking for places where we think we can add value and that where it makes a lot of sense and where it's gonna be accepted in some way, shape or form by the local community.

[00:42:54] Atif Qadir: I think the, uh, what you're describing is a strategy that, uh, over the past two years, uh, I believe has gotten many really strong tailwinds as people have less and less desire to. 40 minutes an hour, an hour and a half into New York city or other cities. Uh, I had the opportunity for example, to tour recently bell labs, uh, which is in home Dell, New Jersey.

That was, uh, the renovation of a former, uh, office industrial site into a mixed use. Awesome awesomeness. That's what it is. And I think that I would imagine. And, uh, from, from your research and, and, uh, looking, I'm sure there are many potential gems like that in the rough, uh, that are just ready to be redeveloped.

Like the Vancouver innovation center.

[00:43:39] Ron Schinik: I that's probably true, but I think the problem that we have is there's a lot of money out there as long as money. Yep. Pre COVID was a very different time. We, we bought this pre COVID mm-hmm post COVID the problem that, again, me just being blunt as if is that there's a lot of money out there.

So it's driving up pricing on everywhere, industrial and every asset. So what people have done is they've sort of shipped the gears and said, well, where's the value add. And the value and play quite frankly, is in those bell labs and Vancouver innovation centers, where you have to invest money, you have to take a risk and you have to have a sense of vision.

It's not like buying a multifamily and it's not like buying an industrial complex. That's already leased up. Mm-hmm so it's a risk reward, but it's more money now. And so people, there were more people in the game, I would say.

[00:44:31] Atif Qadir: so sound to put your big boy pants on. So

[00:44:33] Ron Schinik: right. You have to put your, you have to put your big pants

[00:44:37] Atif Qadir: So I wanna dive into one of the topics that you mentioned, which was entitlements and specifically zoning. So zoning is often a big hurdle to large developments, like the ones that you pursue. Uh, I've had the chance recently to talk to, uh, professor Sarah Broan, uh, from Cornell university who has built her career on researching and understanding the barriers to.

That zoning policy presents all across the country. So tell us from your experience on the entitlements process, say for this project and other ones that you're pursuing, what you see as the landscape of both challenges for zoning, as well as potential opportunities or ways forward.

[00:45:17] Ron Schinik: I think it's very easy.

I don't, I'd be interesting to see if this jives with what I'm about to say, but I don't know that it's any different than it's been, which. and maybe more so now, which is NIMBY, right? Mm. Not in my backyard. Right. So people will say that they want jobs development. People will say that they want a strong economic base.

People will say that they want a clean corporate contributor, uh, to the community. And then when you present them with that sense of, Hey, we're, , we're going to do this well, not in my backyard and not in my backyard is essentially. Maybe the acronym isn't wrong because I think people are somewhat resistant to change.

Mm-hmm they like what they have. They understand what they have and they have been accustomed to living in a certain way. And then somebody comes in and says, Wait a second. We're gonna develop 180 acres in your backyard. Mm-hmm and I think that is somewhat the issue, even though we said, listen, we're not going to do residential all over.

We're not going to do industrial. We wanna do something that actually benefits the community. Mm-hmm the reality is very different. And I, I'm not saying I blame anybody. Cause change is hard. You change your job, you change your marriage. You change. whatever you change your life,

[00:46:33] Atif Qadir: hairstyle, your hair

[00:46:35] Ron Schinik: lense.

Every simple thing is complicated in some way, shape or form. Yeah. When you come and you say we're gonna build this in the middle of your neighborhood. Well, you can't expect people to just say, well, that's the greatest thing since life bread. Mm-hmm you have to have a keen sense of how to communicate with people, have them understand that this is a win-win and that if, if it's not working for them, it probably doesn't work for us.

Right. Mm-hmm so that's one thing. That's the first thing, right? Who are your neighbors? How do you deal with them? It's an issue how you go around dealing with zoning and then quite frankly, the big issue is what, what does your local. What does your local municipality. mm-hmm because if they don't want what you're proposing, you're not gonna get the changes.

They're gonna vote you down. Mm-hmm it's not gonna work. You've probably spent time and money. So the idea when you're doing these transactions is get to know who the community is. Mm-hmm get to know who the, you know, who's on the council sits on these, on the council, get to know the mayor and their desires.

So when you talk about entitlements and zoning, those are all. That's the technical word for, for what we're doing here. Right? How is entitled and how is its own? But the real world is about people. Yes. What do the people, what is their desire for their community? What do they wish their community to be over time?

We were very lucky in Vancouver. Vancouver is a fast growing fast population, growth wise and what the community wants and what council wants and the mayor and the government here. And people working for the city, the city planners, as they want jobs. And they want environmental sustainability. There's a couple of reasons, right.

Land is getting ever scarce. Right? So you want density on land? It builds, it builds it real. It's it's good for real estate taxes. It's good for the environment. Uh, it's good for health wise. So, I mean, I, I don't know if I answered your question directly, but entitlements in zoning is the law. Did you figure out what fits.

[00:48:36] Atif Qadir: That is a such a unique, interesting perspective. And I feel it's such an OG perspective on real estate, which is it's always relationships. It begins and ends with relationships. And in the case of the developer for bell labs, as Somerset development and a brilliant, brilliant move that they made when they were.

Having an extremely difficult time with entitlements was one of the key features of their development is they wanted to add a lot of retail, uh, to this location. And one of the biggest, uh, issues that the public and the open hearings had was all of the traffic, all of the cars, all of the, the issues that they would have.

And even if they presented very intelligent, well thought. Thought out parking and traffic plans. It never got people over the emotional hurdle. So what they decided to do with their PR and their marketing team is to essentially have a pop up marketplace. So in the parking lot of this empty building, it's been empty for so long.

They essentially over the course of one long weekend, I believe it was mother's day. Uh, they essentially had all many of the retailers they planned on bringing in and said, just. Do five days, four days, we're gonna pay for everything, have everything invite the whole community in. And they said by Monday morning, they, the city council people that were the, the most opposed to this going on, the whole redevelopment were inundated with phone calls from people that said, when are we gonna get this for real?

I want the whole thing. I want everything. So ,

[00:50:05] Ron Schinik: it's 100. percent, you know, it's funny in the beginning of our discussion, we talked about the discipline, the discipline, whether you're an engineer or an accountant, you're an architect, but you know, there's one thing that it's very hard to put your finger on, which is EQ mm-hmm right.

Emotional quotion. Because you can be all of these things. You can be the greatest architect, the greatest accountant, the greatest, whatever. But if you do not communicate with people on the ground level, you are not going anywhere. If they don't believe in what you're telling them, if they don't believe in your project, if they, whatever the case may be, you're not getting anything done.

I don't care how smart you are. Yep. So what mark and I did in the beginning is we had, we, we would invite people here. We'd say, come take a tour. We had city council members here. We had the community here. I used to ride my bike around the parks where the kids would play here and talk to the neighbors and say to them, I'm part of the Vic.

What do you think about what we're proposing to for the, to the city? Yep. because you have to listen to everybody. Ah, the younger people thought it was great. The older people, you know, they were averse to change, but you get to hear everybody's concerns. And I think, you know, going back to your question about zoning and entitlement, eh, zoning entitlement is one thing.

Getting to understand how to bring about changes in zoning and entitlement to the benefit of the community. And yourself is really about getting down and dirty and, and speaking to people and not being afraid to hear the criticism.

[00:51:45] Atif Qadir: So I started with a question about the research from a Cornell professor.

Now I'm going to bring to you a research from an MIT professor. So, uh, last year there was a groundbreaking report, uh, talking about the future of work and how technology is going to shape the future of manufacturing, uh, and industrial activity in the United States. And what they talked a lot about was that it's not.

The, the simple answers of say robots or outsourcing that is going to perform there. Result in the biggest challenges for industrial and manufacturing job growth. It's a complex mix of all of these things. So over the arc of your career, you've had the opportunity to work in many different types of companies that would be under the umbrella of industrial.

When you are able to look back at all of that. Now what your experience and, um, understanding of the real estate industry, what do you imagine as some of the things that real estate developers should know about when it comes to opportunities, uh, and challenges, particularly for industrial and manufacturing in the United States.

[00:52:50] Ron Schinik: First off I'm. I mean, listen, we're of the opinion. I think, you know, us meaning mark RI myself and we're of the opinion that in some way, shape or form manufacturing is, is coming back to the United States. You, you can't, it's very hard to argue against that. You know, in the context of, will we have conflict with China?

Mm-hmm, , what's going on with freight costs, the increase in labor costs in the far east, which is the original reason, quite frankly, that people went there. Mm-hmm so you have a whole bunch of, and which is why, by the way, we think industrial. The industrial sector as PO, supposed to poised to grow for the next 10 years.

Excellent. Because a lot of manufacturers have found out and I can tell you directly for being at the Vic, that a lot of manufacturers have found out that because of all those issues. And then you top it off with high tech companies who are. Very concerned about their intellectual property, which is why we have certain members of the Thai tech companies here doing research and development here and manufacturing in the near future mm-hmm it's cause they quite frankly, all of those issues is a, is a brutal, horrible cocktail.

For them to swallow. And I think we're going to see the need for manufacturing space, as opposed to just distribution space now, which was Amazon centered. And if you mm-hmm recently, Amazon said they have too much space. Yeah. They just, maybe

[00:54:11] Atif Qadir: that's why their stock has really taken a beating the past six

[00:54:13] Ron Schinik: weeks.

yeah. They, they probably over expanded relative to, to what their, what their needs are. Post pandemic, right? Mm-hmm cause the pandemic, they, everybody thought everything was gonna go to the sky, but we do see the future manufacturing. We know that it's hard to get space in the Midwest out here on the west coast.

And if you're asking about the nature of work in general, I do believe that people need to be together even in the office space. Mm-hmm and I think hybrid work is probably the way to go. So I, we very much believe in manufacturing and we're trying to buy additional land on the west coast. To build, even if it's spec additional manufacturing sites in the, in the state of was.

[00:54:52] Atif Qadir: I think in particular, I like what, uh, governor Phil Murphy has, uh, mentioned about New Jersey. He said that who is a big supportive industrial manufacturing. He said that New Jersey was a Silicon valley before there was Silicon valley. So I think for states like New Jersey, Pennsylvania, Michigan, Ohio, I think a way forward for manufacturing to re utilize all of those assets, both human capital, as well as, uh, physical assets, uh, sounds.

Very very, very attractive.

[00:55:20] Ron Schinik: And I think, you know, and I think the other thing people forget is that in the United States we have 350 million people here. Mm-hmm , which is, I believe it's about the size of the EU, right? It may be a little bigger, a little smaller, but 350 million people in the United States population may be set to grow a little bit.

Mm-hmm so, you know, you have in and of itself, you have a, a captive market here. Mm-hmm right. You know, with 50 states. It's enough for any manufacturer to meet, to set up here relative to what's transpired manufacturing around the world.

[00:55:50] Atif Qadir: And also what's really fascinating is from a population density perspective in terms of available space and land.

We're one quarter of the population density of Germany. So we are a rather empty country overall. So there's plenty of room for many more.

[00:56:04] Ron Schinik: That's an excellent point. I hadn't thought that's, that's a really good add on to the notion of having 350 million.

[00:56:10] Atif Qadir: Yep. So there should be plenty of room for many, many more Vancouver innovation centers all across the

[00:56:15] Ron Schinik: country.

We would absolutely think so and a lot more and a lot more shink drives in Shinnick

[00:56:21] Atif Qadir: streets. Exactly. That, that I would very much look forward to

[00:56:24] Ron Schinik: partners are gonna kill me if

[00:56:25] Atif Qadir: they hear this. So, Ron, thank you so much for joining us today on the American building podcast.

[00:56:32] Ron Schinik: It was my pleasure. Th it was a pleasure speaking to you.

It was a joy. And I look forward to listening to some of your podcasts in the future, including this.

[00:56:41] Atif Qadir: Thank you so much. And if listeners, if you want to hear the behind the scenes stories of how iconic buildings in our country were built, subscribe to this podcast on Spotify, iTunes, Google, anchor, Stitcher, or wherever you like to listen, uh, rate and review us on iTunes to help us reach a wider audience and follow us on Instagram.

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