How Real Estate Developers Think. Peter Hendee Brown

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      Figure 6. Central Station in 2010, with the Museum Park towers at the northern end, facing Millennium Park. Photo by author.

      I Was Hooked

      Gerald Fogelson’s Russian father came to America in 1908 only to find that the doors to traditional professions and businesses were closed to him. Like many other members of ethnic immigrant communities—Jews, Greeks, Italians, and others—he saw that the barriers to entry were lower in other industries like construction, clothing, movie making, and retailing. So he opened a shoe store in the small town of Dover, New Jersey. Fogelson worked there from the time when he was very young and learned the importance of understanding one’s buyer. “One day I said to my father, ‘These are the ugliest shoes I have ever seen and I don’t know why anyone would buy them.’ So my father told me, ‘These are not the shoes your mother or sister would wear but a good marketing person—a good buyer—knows his customer, so the reason that I buy and sell these shoes is that I have my customer in mind and I know what they like.’ His point,” says Fogelson, “was that you have to take your own personal tastes out of the equation, and this has stuck with me. I have always understood my buyer intuitively through all of the many different stages of my life and career even as I have developed different product types.”

      After graduating high school, Fogelson attended Lehigh University, in Pennsylvania, where he studied business and majored in marketing. When he was a second-semester senior, Xerox and IBM and other companies came recruiting on campus. “I did not think much of the kinds of jobs and salaries they were offering,” said Fogelson, “because I had been taught that it is better to make a dime for yourself than to make a dollar for someone else.” Then his father came home one day and said, “There is a guy who lives in the next town over who is building houses and doing well, and if he can build houses, you can build houses, because after all, you are graduating from college and you know everything.” So in the middle of his senior year, Fogelson and his father went into business together and bought two small lots in Netcong, New Jersey. “We built two small houses and from that point on I was in the business and I was hooked. I knew literally nothing, of course, and in fact, the only subject in school I didn’t do well in was shop and to this day I can’t draw a straight line. But I had an instinct.”

      Fogelson sold the first of those two houses for $9,900 in 1955.¹¹ For that first year everything he touched was a success and he made more money than his parents or anybody else they knew. “I thought I was something special and in hindsight, I became arrogant, because I had a lot of success really soon. But life isn’t like that and it all came screeching to a halt in 1956 when I received a two-week notice that I was being drafted into the army for two years.” Fogelson went from being “somebody” to being reduced to a buck private who was just another number doing K.P. and guard duty. He also realized that since joining the army his income had stopped, he had no income-producing properties, and he was “like a salaried guy.”

      Back to School

      In the late 1950s a new real estate product—the farmer’s market—began to emerge. Developers were buying old mill buildings in New England towns, dividing them up, and renting stalls out for farmers who sold meat, fruit, and vegetables and for other vendors who sold dry goods like linens and sundries. Fogelson thought this idea was going to be the wave of the future so he used his weekend passes to visit a couple of them. Although he could not have known it at the time, Kmart, Wal-Mart, and Target would all be founded in 1962. He was a company clerk in the army, which allowed him to resume his real estate business in his off hours, and by the time he was discharged from the army in 1958 Fogelson, his father, and a cousin had purchased a site outside of Chicago together to build a farmer’s market. “And that is what brought me to the middle west—I liked it, got married, and stayed.”

      The project was successful, but Fogelson did not like the farmer’s market business. “I liked building the buildings and leasing up the space, but I did not like the operations side of the business—it was like being a shepherd.” More important, Fogelson really wanted to get back into homebuilding but he also knew that he needed to learn the business. He was self-taught and had only built houses in New Jersey—“you know, ten there, five here”—using conventional financing. He didn’t know anything about developing large-scale subdivisions or the mortgage programs that were being offered at the time by the Federal Housing Administration and the Veterans’ Administration.

      So Fogelson applied for a job with a large company in Indianapolis and was hired as a salesman. “I didn’t care what they paid me because I was getting paid to learn. I became vice president of sales, then I took over the mortgage department, and within a year sales had increased by 150 percent. I worked seven days a week for a year and that was a cram course in all aspects of subdivisions.” When he first took the job, Fogelson told the company that he would stay for one year and that if they didn’t give him equity then, he would leave. When that year was up he was not granted equity, so he went out on his own. “And that was the only year in my life when I have worked for somebody else.”

      Fogelson went on to build garden apartments at a time when there was no alternative minimum tax. “They would throw off cash flow and tax losses and then I would build houses that would throw off tax-sheltered profits, and so I was able to build up equity and cash flow.” As his subdivision projects grew larger, “there was always a leftover corner here or there that could be developed for a gas station or shopping center,” so over time Fogelson learned these other businesses too. “It was almost like being bilingual because I could talk the talk in retail, office, industrial, for-sale and rental residential, and land development. But what I got really good at was land—property.

      “So that is a short version of how I got into the real estate development business—it wasn’t some brilliant master plan, that is just the way it evolved. I liked it and I became addicted to it. And the reason that I liked it is because you can see what you have done—those little houses I built back in New Jersey and everything else I have built since. I like it that my children—and now my five grandsons—can see it and I know they get a kick out of driving by $4 billion worth of work and saying ‘my grandfather did that.’”

      Three Traits of a Developer

      Fogelson has been in the real estate business for more than five decades and he has also helped to start up and shape the curriculum for the School of Real Estate at Roosevelt University, in Chicago, where he endowed a professorship. But with all that experience, when asked what the characteristics of a developer are, Fogelson lists just three: vision, tenacity, and the ability to reconcile many voices and make a good decision.

      First, developers must have vision. “One of the characteristics that a developer must have is the ability to visualize what can be. If I were to have a self-evaluation that was as objective as I could make it, it would be that I have the ability to visualize things much more so than most people. I understand land and property, how to assemble it, how to buy it, how to sell it, and how to zone it. I can see what can be.”

      Second, developers must be tenacious. “For example,” says Fogelson, “you just can’t take a rejection as a flat rejection, because ‘no’ doesn’t necessarily mean ‘no,’ and sometimes ‘no’ may mean ‘yes.’ You have to be persistent and determined, you need to hang in and hang on, and you need to believe in what you are doing, because if you are not persistent and determined, you will get СКАЧАТЬ