To be a real estate developer, or at least to be a good real estate developer, I think you need to have a certain kind of personality. Specifically, I think you need to be an optimist.
Because if you’re going to take big risks and deal with lots of uncertainty – which is how most development projects work – then you have to believe that you’re going to be able to figure it all out and make it happen.
That is not to say that you’re not worried about risk and you’re not thinking critically about what you’re doing. Managing risk is a hugely important part of the business.
Rather it’s accepting that unexpected things will come up, whether it’s a small construction hiccup or a huge black swan event. And knowing that if and when that happens, you’re going to do whatever it takes to get through it.
As an example, I remember a developer telling me a story about one of his projects in South Florida. This was back when I was in grad school so some of the details are a bit fuzzy.
But basically he had excavated a site for an underground parking garage and they had just finished pouring the foundations and first underground level. (Because of its high water table, underground parking garages are rare and expensive to build in South Florida.)
It’s then 2 ’clock in the morning and he gets a call from his engineer telling him that a hurricane is coming through. And that once it comes through the water is going to lift up his foundation from below and basically destroy it.
They immediately start brainstorming solutions and the engineer ultimately decides that if they fill up the hole with water before the hurricane comes through that it will weigh down the built structure and keep it intact.
So in the middle of the night, before a storm was about to hit, they’re all on-site pumping water into a big hole.
The storm eventually came and went and the engineer was right: the water-filled hole kept everything in place. So instead of spending what could have been millions, the developer probably spent tens of thousands on a water bill. That’s a much easier pill to swallow.
This, of course, wasn’t in the development pro forma or in the construction schedule. But it happened, as stuff invariably does. And for future projects, I’m sure it’ll be something he thinks about it.
But it’s all part of the game. And to be good at the game, I believe you need to be an optimist.