Matthew Segal Designer and Real Estate Developer Part 1

Matthew Segal Designer and Real Estate Developer Part 1


Intro: This is The Business of Architecture. Helping architects conquer the world. And
here is your host Enoch Sears.>>Hey, this is Enoch. Welcome back to The
Business of Architecture. The show for solo architects where each week I bring you an
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Now, on with the show. Hey, everybody. This is Enoch from Business
of Architecture. Welcome back! Today, weíre joined by Matthew Segal. Heís the COO at
the Jonathan Segal FAIA. Heís going to talk to us a little bit about some of the development
projects heís working on right now down in San Diego as well as the project he developed
the Fancy Lofts. So, Matthew, welcome to the show!>>Thank you. Itís good to be on.>>Yeah. Good to have you on. So, tell us
a little bit, first of all, about what youíre working on right now at Jonathan Segal FAIA.>>Right now, were actually working on a project
in an up and coming neighborhood in San Diego called North Park. Itís a twenty-seven unit
apartment building of which two are affordable units for very low-income families. Then,
there are five commercial spaces totaling somewhere in the 5,000-6,000 sq ft range.>>Okay. So, tell me a little bit about the
neighborhood of this project. Give me an idea of where itís at, why you guys chose this
location, and what you think about this particular project.>>Basically in San Diego thereís a downtown
area and there are these pockets around downtown that are slowly gentrifying and becoming more
likely for people to want to live in ñ typically you wouldnít want to live in those areas.
People who are living in downtown now are moving out of downtown because these areas
would be typically less expensive, easier to get in and out of, and there is a new base
of restaurants and outdoor activities that they can participate in.>>So, are you guys the first to break ground
with this kind of project in that part of town?>>Actually, just before us, another group,
Mike and Craig Architecture and Form, bought a post office; probably about $6 [way in 00:01:45]
I think they broke ground before us. There has been some pretty nasty large-scale developments
in the neighborhood, which inadvertently actually helped get the neighborhood to where itís
at, but, kind of, destroyed the texture of the neighborhood. So, I canít say that we
are the first people in that neighborhood.>>Okay. Was it a tear down, a new construction,
or adaptive reuse?>>Itís a tear down. There were a series
of buildings on the site, and I use the term ìbuildingsî pretty loosely because we were
afraid they were going to fall over before we even got the chance to demo them. There
was a lady selling antiques. When I say ìantiquesî I use that loosely as well. There was a house
at the back and a couple of other shacks where people just have their home offices. Itís
a strange environment, but basically, tear down longwinded.>>Okay. Tell me about the process of locating
this property. Were you involved in that process of doing the pro forma, figuring out the numbers?>>Yeah. So, weíve actually been interested
in this property for a long time. The lady who had owned it ñ I canít remember how
long sheíd owned it for ñ was asking, I think, 30%-50% more for the property, maybe,
two years ago. Itís, kind of, this crossroads. Itís at the southern end of North Park and
this really important intersection that we didnít really understand at the time. Now,
we understand how important it is. It ended up being pretty fantastic. Basically, itís
a ñ Iím going to get this wrong ñ I think itís a 30,000 sq ft piece of dirt. Itís
a strange, sort of, L-shaped with a little tooth coming out of it in the southeastern
corner, but thereís an SDG&E transformer station. Basically, itís just L-form that
has a lot of street frontage. I think thereís 300 ft of frontage.>>Wow. Now, I know some places the impact
fees will kill you when youíre on a corner lot like that. Did you have any issues with
impact fees?>>No. I donít think anything in San Diego
has any sort of corner lot implication for impact fees. We were actually able to get
credit for existing buildings, which was helpful as far as water credits, etc. The biggest
impact was actually a complication with parking. In this zoning area, youíre only allowed
to part ñ residential parking on the [rear 00:04:24] 50% of the lot. Because this lot
was ñ I canít remember all these dimensions ñ letís say, 75 ft deep, that only leaves
you 30 ft to actually park residential if you go in the long section. If you go on the
opposite section, on the lower part of the L, again that leaves you, sort of, a strange
segment. But, we were able to use incentives from the low-income housing to offset that
and reduce our parking requirement.>>Nice. Because you guys have those two low-income
housing or affordable-income housing units in the mix, you are able to get away with
less parking on the site.>>Correct. In San Diego they give you one
incentive for a single unit, and then for two unitsÖ Itís actually on a percentage
basis, but some of these percentages, they give you two incentives. Thatís the maximum
you can have. Thatís applicable to anything within reason. You have to provide a reason
why. Youíre providing those affordable units, you should be allowed to do these things,
but it really ends up helping in certain circumstances.>>Okay. So, what is the process? Did you
guys have to go to the Planning Commission? How much of this was discretionary?>>It was entirely ministerial. We donít
go by anybody. It was by right that we are allowed to build twenty-seven units. I think
the cut-off was actually thirty-three in that zone where you had to go through.>>Awesome. Well, you know, I think what youíre
saying now brings up two very important points for other architects who want to do their
own developments. The first one is that you can look at this like affordable housing to
get credits, right?>>Yeah.>>Then, another thing is you mentioned the
credits that they can get on the impact fees from already having an existing building on
the site.>>Correct. I donít know if thatís nation-wide,
but in San Diego, if you have house or you have a square foot of commercial, thatís
applicable to impact fees.>>You know what? Thatís the same in my area
here too. Iím not, like you said, Iím not sure if itís everywhere else also. Is there
any other, sort of, freebies or creative things that you guys have found to help get these
projects off the ground?>>Thatís a good question. Off the top of
my head, I canít really think of anything. The key is just to keep it below that threshold
having to go through the public approval process. I think thatís the biggest freebie. So, when
youíre actually following your project out to make sure that you fall below that threshold,
whatever it is, in that zone. Typically, thatís the first thing we look at. Whatís the max
amount of units we can promise without having to go through the public process?>>Okay. What determines whether itís a go
or no go? After you take a look at the units that you can put on the site, what happens
next?>>Fully run a pro forma to make sure that
the land cost is a safe number. Also, construction loan viability ñ will the bank actually loan
on this property? Will it loan on the construction? Weíll typically do a preliminary review with
the city. Weíll draw something up really quickly with a basic scheme. To get this done
in San Diego is somewhere between $350 and $750 ñ to have multiple [Inaudible] review
it. At that point, once we get that back, weíve also been concurrently getting a sales
report, etc, if we feel that there is, more likely or not, plausibility of us actually
buying the site. A lot of things, actually, ended up being concurrent that same time to
discover the viability or the possibility of actually doing this deal and making it
profitable.>>What can you tell us about what the banks
are doing right now in terms of loans? Were you involved in that process at all of financing
the project?>>Yeah. So, weíve actually developed ñ
or my father has ñ developed a couple of relationships with banks for permanent financing
and for construction financing. Depending on the amount of commercial, some will loan
it and some wonít. So, thatís something else. If somebodyís doing a development,
you want to make sure that you have, under their threshold, of commercial, relative or
proportionally, to residential. So, one of our banks likes it to be ñ I canít remember
the figure at the top of my head ñ it may be 15% ñ 20% maximum for commercial. The
other bank will do a little bit more because theyíre not a publicly traded company.>>So, thereís a little bit of leeway there,
have some flexibility to negotiate.>>Yeah. Honestly, I think the biggest thing
is just maintain those relationships with banks once you have them. We use California
Bank & Trust ñ theyíre fantastic. We used them on our previous deal. Theyíre very easy
to get along with; they understand and get what weíre trying to do. They definitely
to take in to account a lot of things that, maybe, a national bank wouldnít ñ the design
aspect increasing the rent cost ñ because they underwrite all these stuff. The likelihood
of a national bank realizing this up-and-coming neighborhood can actually support a $2,200
ñ $2,400 a month, two-bedroom may be less likely than a local bank that you have a relationship
with or you actually have worked with before.>>Sure. It, kind of, gets the vision of what
you do and how the revitalization of the neighborhoods is coming along.>>Yeah, exactly. Whether or not they live
in that neighborhood, just talking to people and having that comfort of understanding that
is really helpful.>>Yeah. Any sort of gotchas in this project
so far? Where is that, first of all, in the process?>>Weíre actually topping out ñ when I say
ìtopping out,î the concrete portion of the project ñ Itís all integrated parking. All
of the cast-in-place walls on the ground floor have been poured, and weíre now putting shoring
in, and finishing up our [Inaudible] grid. So, weíre hopefully pouring our first raised
decks on Tuesday next week.>>Okay. So, are we talking podium slab with
parking underneath for the entire L-shape? What does the shape of the building look like?>>Itís complicated to explain. I donít
know if you can add a videoÖ Iím sorry, I thought of it as a video, butÖ>>Iíll cut it in, Matthew, as youíre talking
to explain it.>>Yeah, that would be great. Basically, itís
an L-shape, and the entire street frontage is glass. The ground floor, wherever we can
feasibly, is [Inaudible] and glass. Then, in the interior there is actually a courtyard
building. Itís one interactive building, but in the courtyard there is a separate building
where weíre actually moving our office in to. So, itís pretty exciting designing our
new office. Weíre, kind of, in a temporary situation right now, and as [Inaudible] fun
to be there as our previous offices has been. But, basically, there is tuck-under parking,
there is a garage in the back, and there is courtyard parking. So, we try to keep it as
open as possible and where we made tuck under are actually ventilated parking areas.>>Yeah. One thing I noticed, too, about your
buildings is that they, sort of, progressed over time. I also noticed your firm has experimented
with different volumes, different shapes, and different materials. Is there any new
experience on this particular building? Mathew: I donít think weíve ever done a concrete
podium deck before. My first building that I built when I got out of college was The
Charmer. That had a wood [Inaudible] deck. Because of these expenses, we want to have
our volumes without any structural breaking points or conflictions. We have these massive
beams that just became so complicated, so expensive, and so time-consuming to set up,
and all these steps, and everything, we decided that the concrete was a better product both
for the underside of the commercial units, as well as speed, time, and just efficiency-wise.
So, thatís a first for us.>>Okay. Just out of curiosity, what kind
of construction is the raised concrete slab?>>It would be a Type 5.>>Yeah. So, Type 5 construction. Then, is
it cast in place, flat slab, monolithic slab? Iím curious. Down in Texas we used to do
the post tension slabs a lot for those kinds of constructions.>>No post-tensioned.>>Okay.>>We actually, fortunately, didnít do that
on our Cube project. I wasnít around for that, but had we done that, it had been very
difficult. Any time you have to core or any time you have to penetrate, you have to X-ray
the slab. So, itís something we try to avoid. Also, weíve had situations with friends that
have done it, that you actually get deflection a lot more than a typical, just normally reinforced
slab.>>Gotcha.>>It can be thinner with post-tensioned,
but in these circumstances, it ends up being less expensive and easier without the post-tensioned.>>Awesome. Good to know. So, when you talk
about the open spaces ñ thatís down in the commercial spaces?>>Correct.>>Have you guys pre-leased any of those spaces
down there?>>Actually, weíve leased all but one of
them. So, there is our office ñ fantastic place in our previous building called Influx
thatís going to do a cafÈ. Another restaurant in our previous building called Underbelly
thatís doing noodles and yakitori. My dadís best friend is opening a taco shop [Inaudible]
taco shop in one of the little spaces.>>That sounds nice.>>Itís going to be very cool, kind of, a
hip street taco shop. Then, the last space, weíre hoping for a breakfast or a fish restaurant.
Weíre just waiting and choosing.>>Nice. I can start to understand why you
guys are excited about this new offices space.>>Yeah. Itís been very fun.>>Iíve seen a lot of nice cuisine there.>>Yeah.>>Are there any other commercial spaces or
restaurants in that area?>>Yeah. Actually, itís a big nightlife area
and there are some fantastic restaurants too. Itís becoming the new restaurant area in
San Diego.>>Very cool. What do you guys do for marketing
to pre-lease these spaces? What insights can you give us about marketing the project?>>Call our friends. You know, weíre very
picky, and we have a certain design philosophy or requirement that we mandate with all these
people. It needs to be hip and it needs to have something that adds vibrancy to our building.
So, thatís what we focus on. If we donít like somebody, we just wait. I mean, at some
point we canít. For the most part by starting the pre-leasing before you even start the
construction allowed for a variety of people to figure out if they could financially make
sense in that neighborhood, and weíre getting outrageous rents too.>>Awesome. You mentioned that, at first,
when you guys looked at the property, you didnít realize the key aspect of how important
it was, but now as youíre in the project, youíve seen that. So, what did you mean by
that? How is this particular location so great?>>Well, [Inaudible] When it was the antique
shop and all those other strange little shops, it didnít have any, sort of, anchor for that
neighborhood. Because this is the main intersection of how you get in to the neighborhood from
both the southeast and the southwest, the traffic that goes by ñ you just feel it.
Now that those buildings are not there, you feel it even more; you really notice it.>>So, itís on a thoroughfare?>>Yeah. Itís basically the gateway in to
North Park from the south.>>Excellent. Now, for people that are joining
us for the first time, Matthew, tell us a little bit about the history of Jonathan Segal
Architect so that people can sort of get an idea of your firm and get a flavor for what
you guys do.>>Yeah. So, essentially, itís my father
and motherís firm. I think it was 1992 they started their firm. I think heís done twenty
buildings in downtown San Diego ñ pretty much only downtown San Diego. He only works
for himself, he doesnít work for clients. My parents, both, they discover the property,
buy the property, develop the property. Now, my sister also runs the management company.
So, itís all in-house from start to finish and we donít sell any of our products.>>So, itís a true-blue family operation.>>Yeah.>>Where can people go on the web to see the
work of your firm?>>www.JonathanSegalArchitect.com. If you
search Google, you should be able to find it. If youíd like to see the apartment website,
go to www.sdlofts.com. But, www.jonathansegalarchitect.com should be able to direct you to everything.>>Nice. Last time, I heard Jonathan talking
about the prices of construction starting to go up a little bit, a little bit more competition
in the local area. What are you seeing on the ground in terms of the construction prices,
and the availability of contractors, and the overall general mood? I mean, is it now a
good time to build?>>You know, for the most part it seems that
everybodyís swamped. The prices we got, specifically for plumbing, were dramatically higher than
what we were seeing two or two and a half years ago. I think framing is, kind of, stabilized;
although lumber is back up. Weíre just fortunate to be able to lock in our lumber at, I think,
a two-year low. So, it has saved us quite a bit of money and we have a fantastic framer
that framed my little project. What else? I think concrete is, kind of, stable. But,
again, there are so much work out there right now that itís hard to find somebody thatís
willing to take a little bit less money or a little bit less profit, and take the job.
Theyíd rather start to build up their big profit jobs. I definitely feel that there
is a labor shortage and there is a lot of work right now.>>Interesting. So, I guess if thereís any
skilled laborers out there, head down to San Diego.>>Yeah.>>Well, thatís good to hear for Californians
because weíve been suffering for a long time. So, itís good to finally hear that there
is some stuff being built now.>>Yeah. Everybody keeps telling me that theyíre
just swamped with bids. Itís not bids that are future projects that are not getting built;
these are bids on projects that are starting. So, itís very good.>>Excellent. Matthew, youíve had a number
of conversations with your father about getting an architectural license. I know, in the past
that you or at least your father, kind of, recommended people not to get a license if
they want to be a developer. So, Iím curious what your thoughts are on that and your future
path ñ if you want to get a license or what your thoughts are about the trade-offs.>>Yeah. Itís, kind of, funny. I think the
only reason I would get my license is for the respect. I almost feel embarrassed not
to have my license after spending five years in school and three years in the industry.
Beyond that, I donít really see a purpose if you have somebody that can stamp your drawings.
Unfortunately, on my little project, didnít realize it at the time, but because I was
above two stories, I needed a stamp. That took me a month, a month and a half to find
somebody that would stamp them after viewing them, which is legal in California. I forgot
what the term is, but an architect can review your drawings and stamp them.>>Right. During that time were you like,
ìOh, man. Now, I wish I had my license.î I mean, how sweet would that be just to be
able to stamp and move on?>>Yeah. I definitely think itís something
I want to do. I think before I get my architectural license, Iíll get my contractorís license.
A stupid as that may sound ñ it will save a lot of money on insurance, and workers compensation,
etc, being a licensed contractor.>>Tell me about that. Why would that save
insurance money?>>Insurances donít like to insure a project
of X-dollar amount because an owner/builder is not [GC 00:21:16] heís a liability. So,
if you have your general contractorís license, itís less of a liability and theyíll insure
you. It opens up the doors for more insurance companies, whereas weíre limited to just
a few.>>Very interesting. Thatís a very good tip.
Like you mentioned, itís difficult for architects to get insurance when they venture in to the
development world. So, thatís maybe a little tip that someone might be able to use.>>Yeah, definitely. I havenít taken it yet,
but from what I understand itís a study over the weekend and take the test program. So,
hopefully, thatís the case.>>Yeah, I know. I took it a couple of years
ago. Compared to anything we do in school, youíll walk out of there with a big ëol
smile on your face, Iím sure.>>So, youíre a licensed contractor then?>>Yeah. I have it right now. I figure itís
what they call, ìinactiveî because I donít use it.>>Yeah.>>But, I definitely wanted to get it, and
I think thereís just a small fee to reactivate it once I have a project I want to build.>>Yeah. Iíve been told by so many people
to get our contractorís license. My dad and I have it at the top of our to-do list, itís
just setting aside the time. So, good for you.>>Excellent. Thatís a great tip. Now, any
other words of wisdom before we end this segment about your current projects, about development,
and architects that want to get in development, things youíve learned from working with Jonathan
Segal Architect?>>I think the most powerful thing that we
have is the ability to change everything during construction. For instance, because our process
is so accelerated, we arenít able to pick up on everything; we arenít able to detail
everything. We realized that the bedrooms in our building were too small. I donít remember
how we did it. I donít know if I was looking at it and, ìWell, thatís too small.î So,
we are able to, actually, extend the second floor a foot and make the bathrooms a foot
smaller to accommodate a larger bedroom. So, itís something that typically would be a
big process, but I made one phone call to the structural engineer, ìHey, is this going
to work?î ìYeah, it should work. No problem.î I adjusted one unit, and then Greg, in our
office whoís managing the project, adjusted all the units. Heís still finagling all the
elevations, and sections, etc. But, within a three-day period, we increased bedrooms
by a foot each and decreased the bathroom by a foot with a nominal process ñ no paper
pushing back and forth, no RFPs. Itís allows you to change things on the fly.>>Yeah. That is golden. I think architects
right now are probably salivating hearing that because of the request for information
that we get, and then we have to our terms in to a change order, thereís an add to the
project, the owners throw up their arms and say, ìWhere is all these money coming from?î
It just turns in to, well, architects look bad.>>Yeah. I do feel bad for some of the contractors
when weíre constantly changing things, but weíve got some great people we work with,
specially the framer who is very accommodating.>>Good. Well, Matthew, thank you for joining
us for this episode of Business of Architecture. I want to ask everyone to tune in to next
week when Matthew is going to tell us about his project that he developed ñ the Fancy
Lofts. So, Matthew, weíll catch up with you next week. Mathew: Thank you. Itís great
talking to you.>>Yeah, great having you on the show. Outro: Well, that puts a lid on a another
show about the Business of Architecture. I really hope that you’ve got something out
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I’ll send you other resources like the Architect Marketing Guide and information on how to
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agreement, affirmation, pledge, warranty, contract, bond, commitment except to help
architects conquer the world. Bump music credit to Ben Folds Five – Do It Anyway.

2 thoughts on “Matthew Segal Designer and Real Estate Developer Part 1

  1. Again, great interview.
    Thanks

  2. ط

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