Boroughs & Burbs 189 || Texas New Development

In Season 5, Episode #189 of Boroughs & Burbs, we explore Texas New Development with Benjamin Watson and Leon Trakhtenberg, two leading voices from Douglas Elliman's Houston office. Texas continues to surge in popularity among developers and buyers alike, and Houston is at the heart of this transformation. Benjamin andLeon share insights on the newest luxury developments, who's moving in, what they're building, and why nowis the time to pay attention. From architectural trends to economic tailwinds, we uncover the factors shapingreal estate growth across the Lone Star State. Tune in to understand why Texas is becoming the next frontier forupscale development.

Transcript

SPEAKER_00: 0:00

The Burroughs are New York City. The Burbs are everywhere else. Real estate is the ultimate game of risk and reward. It's the biggest investment most people ever make. Fortunes are made over a lifetime and lost in a day. And we're not playing with monopoly money. How do you stay ahead? Who's buying? Who's selling? And why? What do they know? We want the truth. You need an edge. Burroughs& Burbs is your secret weapon, giving you the insider knowledge and strategies you need to succeed in the high We press the experts to expose the pain, find the deals, and occasionally predict the future. That's Burroughs& Burbs, Thursdays, 3 o'clock Eastern, noon Pacific. Because everyone can make money in real estate.

SPEAKER_05: 0:52

Welcome everybody, Bros and Burbs, Season 5, Episode 189. Today we're doing Texas New Development. I'm joined by my co-host, Roberto Cabrera. Say hello. Hello everybody, from the Upper West Side of Manhattan. Good to have you. Great to have you, partner. You know, we are now over 1 million views here on Bros and Burbs. Pretty amazing accomplishment. You can find Burrows and Burbs, Roberto, if you go to burrowsandburbs.com, and that's where you're going to see 188 previous episodes, and you can catch them all there. Or you can catch them on YouTube, where you can see them in video. I want to thank Grace Farms, our sponsor. It's where we get the fabulous Grace Farms coffee, Grace Farms tea. But my favorite thing about Grace Farms is this 80-acre campus where I go and drink tea with friends Frank in the tea house and go watch amazing musical programs and art programs at Grace Farms. So check it out, gracefarms.org. Again, Roberto Cabrera. You'll find him at robertocabrera.com where you find his market report. And he's at Douglas Elliman. I'm not at Douglas Elliman. Oh, sorry. He's at Brown Harris Stevens. I don't know how I got that wrong. He's at Brown Harris Stevens. at bhsusa.com, and I'm the guy at Douglas Ellman. Thank you, thanks for catching that mistake, Roberto. And today, we have Benjamin Watson, a real estate development expert, and I believe you're in Houston, is that correct?

SPEAKER_01: 2:31

That's correct, I'm in our headquarters in Houston, Texas.

SPEAKER_05: 2:35

Excellent, and Leon Trachtenberg, also, I believe, in Texas, Houston? Yes, I sit with Ben here in Houston. Excellent. So with that, Benjamin, why don't you tell us a little bit about what you do in Houston in new development?

SPEAKER_01: 2:54

Happy to, John, and thank you for inviting us both to be on your podcast this morning and congratulations on achieving over one million views. That's quite the accomplishment. Ben Watson, Vice President of Development for Texas. I actually come to Texas from New York City myself, where I was on the development side and a client of Douglas Elliman's. I worked for an Israeli developer and Douglas Elliman is currently selling out their project called Maverick in Chelsea. And so I specialize in branded residential in Texas where Douglas Elliman is really kind of the front runner representing the majority of the branded residential projects in the state. And we help developers in many different ways, kind of depending on the developer and their capabilities and what the asks are. But oftentimes, a client comes to us with, a piece of land that they're considering doing a condominium project on. And our team in Texas helps them conceptualize what the highest and best use of that product should be, depending on the location, the developer vision, the target demographic, if it's going to be branded with a hotel flag or a hospitality flag, or if we're trying to differentiate it in some other way by bringing in, you AD100 designer through amenities programming. We do a lot of benchmarking at DEDM through our planning and design division. So that is what I do specifically in Texas is work with clients in Dallas, Houston, and Austin. We have active projects in all three markets, either in sales or in pre-development planning, helping them get their projects to market.

SPEAKER_05: 4:56

All right. So the cheat sheet in front of me says Ben is the expert on product trends and buyers. So that's why you're talking about the development of the product. Now I turn to Leon, and he's focused on investment strategy and market forces. Tell us a little bit what that means, Leon.

SPEAKER_04: 5:17

Sure. I'm happy to. So my career started at CBRE in research. and focused on commercial real estate. And after a few years of that, I joined Douglas Elliman. And right now what we do is we use demographic and economic data overlaid with real estate transactions to figure out what's the highest and best use for a parcel of land in terms of new development.

SPEAKER_05: 5:46

Where does it start when Ben comes to you and says, I've got this brand, I've got this developer, I've got it all, I've got the location identified, we want to do 50 units, 500 units, it's going to be branded or not. And then he takes it to you and you say, we're not going to make any money. Back to the drawing board, Ben. I mean, does it start with you who gives him parameters or does it start with the product?

SPEAKER_01: 6:13

It typically starts with the developer. They come to us with an ask, and depending on that ask kind of begins the conversation. What's

SPEAKER_02: 6:25

that ask look like? Give me a sense of what that means.

SPEAKER_01: 6:29

We have a... a piece of property that we are considering purchasing. If they're an existing client, sometimes we sign an NDA or they're a client. They could, again, same scenario. We're looking at this piece of land or we already own this asset, this property. We are thinking of going this direction. What does Douglas Elliman as a brokerage think would be best given kind of these parameters or if they don't provide the parameters it's a it's a blank canvas right um so there's not like one set uh way in which the conversation unfolds you know Our team is active in business development and I think the success of our projects like the Ritz-Carlton Woodlands with Howard Hughes, again, there was a public announcement we did in the first week,$250 million in sales. Obviously that gets attention of, Typical week for you, right? No, I mean, that was a very unique project. The success of that, again, Howard Hughes is an amazing developer. It's an amazing site. It's Robert A.M. Stern. So kind of the stars aligned there. We have a stellar sales team and the product itself, you know, it speaks to the quality and the vision of Howard Hughes. But kind of to go back, I think, to the question. Typically, a potential client or an existing client comes to us with an ask. Obviously, we have to substantiate our recommendations through data. That's where Leon comes in. Texas is definitely an evolving condominium market. I mean, it's not like New York, right? Which is a vertical market or to some extent, Miami. The majority of our purchasers are coming from large single family estates. They're looking for a lock and leave. We call, they're looking for simplicity. They no longer want, you know, the hassle of what, or the, I think, How do I want to say this? When obviously you own a large estate and many of your clients, either in the Hamptons or whatnot, you probably understand what that entails, right? It's a lot of time management. You need staff to help maintain a property like that. And transitioning into a condominium frees up that time and cost. And so many buyers in Texas... are looking kind of at their next phase. They no longer need 10,000, 15,000 square feet. So a three or 4,000 square foot condominium is perfect because they're also traveling. They own multiple homes, typically two or three. They're global citizens. So the Texas condominium landscape is continuing to evolve and the branded residential success is proving that are never before seen price points that can be achieved because the wealth is definitely here in our state. I

SPEAKER_05: 9:46

have so many questions already. First of all, you paint Texas with one brush and I got to think that Dallas, Houston, Austin. very different number two you dropped a few names like howard hughes and uh and robert a.m stern and i'm wondering when when you say i've got this pencil it out leon and and uh who's like i don't know if it's going to work but we have robert a.m stern oh well well then you know i mean very different product you know i'm wondering how much does the brand name contribute and how much difference is there between cities

SPEAKER_01: 10:24

well The answer, I mean, let's start with the first question. Each city in Texas is very unique and different. Austin, obviously, much smaller, also just very different type of, I think, culture than a city like Houston, which is eight times the size. I want to say all of the Texas cities, I feel like have a global footprint, but definitely Houston and Dallas are larger. The depth of wealth is greater here simply because of the population. There are more larger corporations. So while our portfolio is pretty equally distributed, I mean, a lot of our work in Texas, The new development sphere is coming up in Houston and Dallas. Again, simply because of the size. Houston and Dallas, there's some similarities. Again, like in Houston, we've got the River Oaks neighborhood, right? So I'm referencing that neighborhood. portion of buyers that's coming from large historical estates. I mean, many of the estates in the River Oaks were designed by an architect named John Staub, you know. So there's historical significance. Dallas has Highland Park. It's similar comparison. And then Austin, you know, Austin, I will say it's from a condominium perspective is unique because the central business district where you can go vertical in that city really kind of keeps the bulk of the condominium project, especially the high rise concentrated in one area. And also Austin is interesting and unique because that city will absorb smaller square footage condominiums where Dallas and Houston are still tracking to the larger size condominium footprints. So in Austin, unit efficiency, which is still, you know, I think Texas has its own version of efficiency, which is different than Florida and obviously very different than New York, helps Austin developers because you can get a greater price per square foot, right? A smaller unit leads to a greater price per square foot. You know, that's pretty common sense. Not

SPEAKER_02: 12:53

here. It's opposite here.

SPEAKER_01: 12:55

Say again?

SPEAKER_02: 12:56

It's opposite here. What does that

SPEAKER_01: 12:58

mean, Roberto?

SPEAKER_02: 12:59

The larger you get, the more expensive price per square foot you are commanding.

SPEAKER_05: 13:06

Also true in New Canaan, Connecticut, suburbs of New York. So New York City, and I'm in Connecticut. Yeah, we're starting to see the first units to go in a new development project are going to be the penthouse and the larger units, and they're going to go at a higher price point.

SPEAKER_01: 13:26

Yeah, we... Sorry, someone's gonna close this out. Back to kind of my comment across the board, right? If you're looking at an entire building in Austin, they're able to be more efficient and kind of push their price per square foot differently than in Houston and Dallas. But is

SPEAKER_02: 13:52

that because there's a limit on the number of smaller units that there are in those locations?

SPEAKER_01: 13:58

No, I wouldn't say it's a limit. I think, you know, looking at the buyer demographic in Austin, you know, you've got a lot of consumers, potential prospects that are coming from New York, San Francisco, Chicago. If you look at, again, Austin as a city, You can only go vertical at least right now in the central business district. So there's height restrictions outside of that, which make condominium development a little bit more challenging. You have to, if you're outside of the CBD and you don't get a variance to increase your height, you know, you're looking at more of a mid rise type product, which is.

SPEAKER_02: 14:38

Can I ask you about that? So, so when you say you're talking about, we're talking about condominium development and for me,

SPEAKER_03: 14:44

It's

SPEAKER_02: 14:44

natural. I think condominiums, you know, it's a large, for the most part, high-rise building, you know, very vertical. But then it occurs to me that, of course, you could have a townhouse community that are condominiums, and it's much more low-rise. And we have that, too. One of my questions was, because all these people are moving from larger homes, which are typically in the suburbs, are they selling those because they're leaning more towards an urban environment where there are condominiums?

SPEAKER_01: 15:14

Well, I think in Texas, if you're a consumer that's looking to move to the suburbs, you're doing that because you can get for the same price, a larger, perhaps newer home, you know, maybe with amenities like your own pool, things like that at a price point that just would not be conceivable in the parts of like Houston or Dallas that you might want to be in. And so, you know,

SPEAKER_02: 15:44

I'm thinking more of the empty nester. The person who had a 10,000 square foot home, kids are gone and they're going to a condominium, which would in my, the way at least I perceive it, would be more coming more into the urban landscape of the city itself.

SPEAKER_01: 16:01

Yeah, I wouldn't say our consumer is coming in from the suburbs. If we within like say Houston, we've got like the inner loop, right, which is you've got the highway that's around. So if we are doing an inner loop condominium, which is going to be more on the higher end. Our buyer is coming from adjacent neighborhoods already within Houston. They're not coming from typically outside of Houston. Now there are situations like we, obviously Texas has a lot of farm and ranch families that own massive tracks. And so they might want a city residents more as a peer to tear. They're coming into the cities for art, culture, dining, shopping, those things, right? So you'll have individuals that purchase a condominium in town for more of a city residence, but we don't typically see purchasers that are in the suburbs buying condominiums in the city because the price points are gonna be greater. You definitely would be paying more to come back into the city. You know, our buyers are typically already in the market or they're out of market buyers that are coming from, again, a city like New York, where for them, the price points in New York were typically higher, right? So at least from a condominium standpoint.

SPEAKER_05: 17:27

Yeah. Leon, a lot of headlines about Texas and Florida being two of the hottest markets in the country. Some of the more recent, over the last five years, some of the most recent, a lot of people are waiting for the bottom to fall out. And some recent headlines have focused on Austin and a decline in average price. Now, I think there's a lot of noise out there. When I do a quick search, what's going on in Austin, I'm not seeing that. There's an Austin graph. And here's a Houston, Houston coming down ever so slightly. So can you talk to us about Austin, Houston, Dallas? Can you talk to us about those markets? Are they in decline? Is the bloom off the rose or has Texas got a lot more upside?

SPEAKER_04: 18:26

Yeah, lots of great questions. So I think it's important to first see what were there trends post-COVID over the last few years and what's happened to the market to understand where it's going. Prior to COVID, so say like 2019, 2020, the median price of a single family home in Houston was about$255,000. That price is now closer to$330,000. That's exactly

SPEAKER_05: 18:57

what I'm seeing here.

SPEAKER_04: 18:58

Yep. Right. So that's a 30%, about a 30% increase. However, we do have a proprietary software we developed that looks at affordability based on the monthly mortgage payments. And when you look at it from that perspective, given the sharp rise in interest rates, a family buying a median size home is going to spend almost 100% more on the monthly payments. So The challenge for the majority of people is on the monthly payment front. However, we do see in Austin and Houston and Dallas, a competitive advantage for developers that are able to offer favorable financing, working with lenders that can provide say 200 or 300 basis point difference from the market. And that's, on the new development front for single family homes, that's continues to push the market. You also have a massive demographic changes over the last five years, Texas added close to 2 million residents and 60 plus company relocations in 2021 alone. So the still favorable cost of living and increasing job availability and job growth and with Dallas particularly leading the nation in job creations the last few years, that trend is only going to continue. So

SPEAKER_05: 20:25

a lot of us are getting confused with a headline that might say$6 million house in Austin now sells for 5 million. Oh, you know, Austin's got a problem. But what you're saying is the average home and the average person, we're actually seeing, what I'm seeing is 99.05% sale to list price ratio, average days on market, 46 days, and median sale price goes up every year. And that's true for Austin. So

SPEAKER_04: 20:58

the challenge is that Austin has had substantially more of a material impact because you're starting, as Ben mentioned earlier, it's one of the smaller metros. The population is about 2 million compared to Houston's about 7 million. And when you had massive influx of Californians used to California prices coming to Austin, that drove artificial demand, in my opinion, for housing. And now that the peak, we're coming off the peak slightly, however, long-term trends, There's not going to be a major correction to where you'll find a situation like in 2008 where you don't have enough demand. The demand is there. There's additional challenges that are not able to meet that demand. But in terms of what are the demand drivers of the population growth, that's only going to continue to increase across all the metros.

SPEAKER_01: 21:56

And to jump in on that real quick, Yes, that's a good example, John. So that house that was$6 million, that's now$5 million. Well, in 2019, maybe that house was$3 million, right? So is it at the peak? No, but it's still a significant percentage increase. greater than it was prior to COVID. And I don't think you've seen, it's not like the market has completely retreated back to the pre-COVID price. It

SPEAKER_02: 22:25

experienced like the rubber band effect, which happened 2021. Yeah. Everything spiked and then it's kind of settling, but it's settling still on a rising trend. Are you guys inventory constrained, like in all the cities or not?

SPEAKER_01: 22:41

Well, I think to kind of point, give some clarity, you know, Texas cities, just like New York and Miami, again, you're going to have certain pockets that outperform others. You're going to have certain assets that outperform. Like Douglas Elliman, we typically focus on top of market condominium or other related product. Is that over

SPEAKER_05: 23:04

a million,

SPEAKER_01: 23:05

over two? What is that? We really look at a project more based off of total potential sellout, like the total amount, like what commissions could be earned by the firm, not necessarily like the price point, right? Like Leland, which is an intercorp project that we have, which is really actually, I think, well, not that I think, it's the strongest performing project currently selling in Austin. We've also maintained our pricing there. You know, that is a non-branded project, but interiors and a lot of design by Michael Hsu, a very well-known, respected designer who excels also in retail. We also have three level projects levels of amenities there with a really strong. Yes, thank you. Strong focus on wellness, right? So kind of going back to my comment. you know, you've got to look at, like, we're not Lennar, right? Like, I really couldn't speak to how the suburban markets, you know, like mass product, single family home market is doing currently. You know, I don't think it's doing as well as it was a couple years ago, but how quickly are they moving that product? We're not necessarily tracking that because we're not going after that type of development product actively, right? So, When you're looking at, I think, how a city is performing as a whole, that doesn't really paint the exact picture, I think, that you want. If you're a broker, what is the price points that your clientele are working in? And then we could speak to, okay, what's performing in Texas? the branded residential, the top of market product is still transacting strongly, you know, even in today's market, you know, which is I think trying to find a rebalancing. Other product is more difficult to sell. I think as Leon pointed out, obviously we're not at the peak of interest rates like we were, but they're still high as well as other variables, you know, affect a consumer's monthly allocation towards their housing cost. And so, you know, that consumer, you know, lower six figures that, you know, that if you're designing product towards that type of buyer, it is a bit more of a longer days on market. I think Roberto to your earlier comment. So does that help provide some clarity? You have to look at it like very specifically. And, you know, if we're doing, a project like St. Regis, you know, we're in friends and family stage with that project right now and it's performing quite strongly. Which town? It's in Houston. It's the St. Regis residence is Houston. We actually just got an amazing press piece by Paper City about how it is really the front runner and pushing boundaries and we worked extensively with that developer on the amenities programming to bring never before and kind of amenities that we felt would be most impactful to our purchaser demographic for that specific project.

SPEAKER_04: 26:26

Speaking to the purchaser demographic, when we're doing our market studies, we have a proprietary technology platform where we can see what's transacting on the MLS within say one or two mile radius of the subject property and filtering for a price point of say$2 million and higher. Often the trend is increasing transaction volume, increase in median price points year over year. So if you look at the market as a whole, we were up say 30% inventory year over year, still below 2019 levels. And that's putting some downward pressure on pricing in general, right? We're talking about three and$400,000 homes, but those market segments and locations where the St. Regis development is happening, that market, that demographic is still transacting. It's very strong demographic.

SPEAKER_05: 27:24

It's maybe hard for me to, help me out with this, Roberto, but we just did a show on new development in New York. And I think what I heard was that developers can make more money at the middle tier than they can at the top tier. I'm wondering if you're advising your clients that way in Texas, or is that too big a generalization?

SPEAKER_01: 27:50

I think that's too big of a generalization. You know, um, honestly, I think it's a good question, but, um, Like when you say middle tier, are you talking about like middle tier pricing of all product? Are you talking about middle tier pricing within a building stack?

SPEAKER_05: 28:08

Roberto, you should talk about New York. I mean, I think we were talking about Billionaire's Row, 57th Street. And is that the opportunity or is it in Queens? I mean, is that what I heard, Roberto?

SPEAKER_02: 28:19

It's just different. That's such a such a narrow sliver of the marketplace. And it's it's uber luxury, right? where you're talking 30, 40, 50, 60, 70,$80 million properties. And there's only so many people that are going to absorb that. So in that sense, it is, you have much more opportunity in the middle sector, but also it's not just about price per square foot. It's about unit mix. Are you putting, are you putting one bedrooms in there? Are you putting two bedrooms in there? Or are they all four or five, six bedrooms? You know, there's a whole range. But what I heard

SPEAKER_05: 28:54

was in a higher interest rate environment that maybe some of the ultra luxury projects were of too high a risk and that the appetite for risk was directing these people at what I call mid-level opportunities.

SPEAKER_01: 29:13

John, I would say so much of that. Again, we're all brokers, right? You work... work for Douglas Elliman, we work for Brown Harris Stevens, and we all report to clients. So your clients are in the resale market, or maybe you have some developer clients of your own, but Leon and I just work with developers. Each developer has their own vision, their own concept of what they want to bring to market. Maybe it's a legacy consideration, again, we're working with them to help realize their vision. And that can be vastly different based on the developer, based on the location, based on their financial goals. Is this more of a passion project? Are they part of a major, a massive organization? So they've got a board to respond to. They've got to hit certain returns. It's completely different project to project. And I think you know, to the comparison of, um, you know, obviously billionaires row where you've got, you know, Extel, who's very different from that local Queens developer and both of their projects are equally as important to them, you know? And I think, um, In Texas, we obviously experienced the same with our clients. Some projects, you do want a one bedroom because you've got maybe that price point of buyer and that's gonna be part of what you need to absorb the number of units. Some projects, it doesn't make sense because you wanna start with a two bedroom. There's so many, different considerations. But the first thing that we do is ask ourselves, who do we think would be the purchasers? And in many aspects, we help design the building based off of the purchaser profiles and the price points. Leon's really good about understanding the chunk price, where we need to be in for the various tiers as we go up the building. And it's your podcast. I see you raising your hand, but it's like, you

SPEAKER_05: 31:28

can- When I get excited, I raise my hand. Ooh, call on me. So you said passion project. My passion is to deliver a big fat return. My passion is money. And I got to return to these brokers. So are you going to advise me, right? I've got a hundred million dollars and I need a really great return. So can you help find me an urban infill project or a master planned community in one of these cities that you think is a good opportunity for me? I mean,

SPEAKER_01: 32:01

sometimes we're also not commercial brokers. So yes, like in, within our office where we do have relationships with commercial brokers and brokers that deal in land transactions and various members of our team through family offices have longstanding connections. So do we sometimes come to our developer clients with land opportunities before they come to market? Yes. But are we actively doing that?

SPEAKER_05: 32:29

Um, Usually they've identified the land already to you.

SPEAKER_01: 32:33

Yeah, typically. I mean, that is how it normally proceeds. If we're given a heads up on a good site coming to market, yeah, do we have a short list that we'll go out to? Of course. Can we make capital market introductions? Yes, but it's not really... our primary service as DEDM. Sometimes it happens naturally just because of the business. But I think to your question on making sure developers meet their returns, We're the brokerage. There's a lot of other variables that go into that, like construction costs, their land acquisition costs, the terms that they're getting from their lenders. What we can commit to is maintaining price per square foot achievements and absorption schedule of what we think is feasible based off of, to some extent, their needs and to some extent, obviously, what the market will dictate. But we definitely have a place on the team. Do we have the ability to go beyond that? Of course, but we do like to stay within our primary skill set.

SPEAKER_02: 33:41

Does it ever occur that someone has a project, fully developed, fully realized, and the place they were going to put it, it just fell through? And they say, look, I've got this thing. You've got to find me a place to put this. And do you ever, if that were to occur, do you say, you know what? That would be better in San Antonio than here, or whatever?

SPEAKER_01: 34:08

We have definitely had projects that we've actually worked on for quite some time that get tabled or canceled. That's the nature of the game. It happens all the time in all markets. I think anyone that's in new development, the world of new development just understands it's part of the game. No, I mean, Roberto, if a developer loses their site, and the site was really perfect for one specific thing, it's really difficult to be like, oh, well, the Johnson's next door want to sell too. Let's just pivot over across the street. It would be wonderful if that happened, but it just doesn't. If a site falls through, it can take years That

SPEAKER_05: 34:53

only happens on 57th Street in Manhattan.

SPEAKER_01: 34:57

So, and you've got, these are developers that are in the market for long-standing periods of time, are very sophisticated. So, you know, if they lose a site, their competitors are probably already acquiring the next best site, or, you know, maybe if their own acquisitions teams are quite capable, they've already, you know, they have a backup. But, you know, we would not, Sanit, A project that's penciling in Houston, the concept doesn't necessarily work in San Antonio. San Antonio is a very different market from the other three Texas cities. Now, is there opportunity in San Antonio? And is there a wealth pool there? Of course. But we can't take Houston pricing and just drop it into San Antonio. It wouldn't work necessarily.

SPEAKER_05: 35:45

I'm not giving up on my question. I'm going to pivot to Leon and ask him the question. master plan community gets you excited or urban infill gets you excited i mean where is the trend going leon

SPEAKER_04: 35:58

you know i love it all to be honest uh but the biggest trend we're that we're seeing because we are focused on the condominium infill development is what's really exciting because right now texas it's the wild west of the condominium market literally which means Less than 2% of our residential transactions are condominiums. The bulk of it is single family homes. And this unknown market of Texas is what is providing the opportunity for developers to figure out where to build, what to build, what grants to introduce to the market. Our population is not... as familiar with the product quality that buyers are seeing in other regions, like LA, Miami, and New York. We don't have that type of product here, and that is the opportunity for

SPEAKER_01: 36:56

Texas. And John, I think to further expand on your question, it's not that we aren't actively pursuing larger land track developments. We could, I mean, we have a fairly small team here. And so we're pretty specific about the opportunities that we pursue because we only have so many resources available. You know, we want to be efficient with our time. And I just, again, Lennar, companies like Lennar, Discovery, Landco, they really have a well-oiled machine to bring when you're talking 2,000 homes, you know, or 5,000 homes, again, it's a different animal than a vertical condominium development where, you know, you're selling 90 units, right? It requires a very different type of infrastructure, you know, the commitment, and a lot of them, that's why they do it in-house because like they've developed this model and they don't necessarily, need an outside brokerage. And of course, sometimes they might bring in a brokerage or a brokerage ambassador. But to Leon's point, we have so much work. And Texas, DEDM, also coordinates for the Western region for our company. So that includes California, which we have team members, some of our team members based there. We cover Nevada, Colorado, and the state of Texas. So between those four, our group here that's based between houston and austin um in la uh we have a pretty full pipeline um or workload i should say so you're in charge of texas right the state no west west coast i have a colleague of mine in la that covers the west coast but the resources within texas help help the Western region. So Leon will work multiple markets. We have in-house planning and design. So we have two dedicated architects that are actually based in New York. They also service our developer clients in the Western region. I specifically focus on Texas, but my colleagues, we've got our senior VP of marketing. She covers multiple markets. There's four people under her team. So as a group, we cover the four states.

SPEAKER_02: 39:34

But regarding Texas, you're in Houston. Is that because that is the most vibrant market in Texas right now?

SPEAKER_01: 39:42

No, it's because I was actually, when I relocated to Texas from New York, I moved to Austin and worked with our client Intracorp there on the Leland project. But I also got to work during that time with Howard Hughes and our St. Regis developer, Satya, and chose to relocate to Houston in part because of my work on St. Regis and the transition. I was quite honestly just traveling so much. It made more sense for me to relocate here. Also, I'm spending a lot of my time in Dallas now. So, you know, I'm constantly in a car or on a plane and it just, it wasn't necessarily the pipeline in Houston, even though that's now a significant part of my workload. It was, my work was wrapping up in Austin and we have a team there and I needed to be in Houston more full-time. So and I like Houston. I mean, it's a very vibrant city. It has one of the largest collections of art outside of New York City, outside of New York. You know, and it's helpful. My boss is in Houston, Catherine Lee. And again, Leon and I share the same office. And Houston also has the nicer vest. So yeah.

SPEAKER_05: 41:03

I want to get back to trends and market forces. We just had Peter Hernandez and the folks from L.A. on, I think, last week. And he said big buying opportunity. The Palisades, you know, is going to soak up a lot of great architects and builders are coming in to rebuild Palisades. LA and he was very bullish on the prospects in California. But I need Leon to tell me whether that's real or is that hype? We've all heard about the migration from California generally and LA in particular to Texas. Is that slowing down or is it in reversal? Where are we on the California to Texas trend?

SPEAKER_04: 41:55

Sure, so I think it was in 23 or 24 that California for the first time in the century had a population decrease. I believe something close to 100,000 people left California for Texas. However, looking at their real estate market, it makes absolutely no sense because prices are still elevated. They're still growing. And there's such a strong demographic population in California, not only from California, the volume of people where like la county surpasses that of many states to just the economy and the wealth is so it's still so strong and it's just keeps growing that uh you know it's there's nothing wrong with investing in california

SPEAKER_05: 42:42

well Peter made that point. Peter made sure that we knew that LA is doing just fine. California is doing just fine. We're the fifth largest economy in the world, bigger than that of Japan. So he said these headlines are a little sensational when they talk about migration. We still have plenty of demand, plenty of industry, and not just Hollywood supporting the Southern California economy.

SPEAKER_01: 43:09

I would agree with that. And from my experience, again, when I moved to Austin at the end of COVID. And many of the social group that I formed there happened to be transplants like myself coming from larger metros. And what I experienced during my time there, you know, I relocated to Houston for work, but many of them, after a couple years, one, we started to see a transition back to in-office work. So some of them needed to be or chose to kind of go back to a larger city because it was a requirement and they didn't have a local office. And then others, again, as hybrid or remote working is either coming to an end or finding a new place, you know, culturally, many of them relocated to places States like Cal or back to California or New York, you know, for employment opportunity, if they couldn't find that specific in their Texas market. So I did see kind of a natural reversal, you know, as we transitioned out of, out of, out of COVID era remote work, if that's helpful.

SPEAKER_02: 44:31

Can I ask you about opportunity, for example, for big developers here in New York, the opportunities are limited or they're, you know, they don't price out because it's so expensive and the taxes are high and, you know, the zoning, there's issues. Is there ample opportunity for these developers in all of these cities? And which of the cities probably is most amenable or friendly to

SPEAKER_01: 44:59

development? So I would say Texas is just as difficult. And I mean, New York, Maybe you're making that statement because it's landlocked, right? And I understand New York City.

SPEAKER_02: 45:13

And you have vast amounts of property in relative terms to Manhattan.

SPEAKER_01: 45:19

True, but that doesn't mean that the price point extends out to that vast amount of property, right? Like, again, just like any other major metro, our pockets of wealth can be concentrated within certain specific parts of Manhattan. each city, right? I mean, you're looking at Dallas right now, right? So you cannot, if a developer buys a piece of land out in, you know, suburban Dallas, Fort Worth Metro, that doesn't mean that they can get the pricing that, you know, an in-town tract of land would command. So Texas obviously is a very big state. Yes, there's lots of development land available, but it doesn't necessarily mean that it's going to meet the objections or needs of a specific developer, right? So just like New York City, the prime, the super prime development sites, and if we're speaking to what Leon and I focus on, which is the upper end of the condo market, that's, I would argue, just as competitive as in New York. They are few and far between. That's what makes them so valuable, right? So... Yes, Leon?

SPEAKER_04: 46:43

Yes, sorry to interrupt Ben. I just want to add to that. I'm a big believer in the efficient market hypothesis. So in Texas, even if there's more affordable real estate, and even though there might be wealth exists for absorption of these high-end product, in theory, you already have the single family homes priced. competitive with the condominium product. So if a buyer is making an educated decision of whether to purchase condominium or stay in their 10,000 square foot home, the market is efficient enough to where that decision is not necessarily a no brainer. The developer still needs to figure out the amenity package, the lifestyle, the offering to win over that buyer. So yes, there's opportunity and I think the opportunity stems from the fact that this is a new young market for condominium development. So there's opportunity to bring the right product. However, in terms of getting that outsized return from development standpoint, it's hard to see that exists.

SPEAKER_01: 47:58

And Leon brings up a good point. I just want to highlight on, you know, our buyers, vast majority of them, again, they are looking at next phase of life and they own, we're going to, a 10,000 square foot house, right? So a lot of our challenge is working with developers to design product that fits their lifestyle vision that they've created for themselves, right? We have to present and provide product that resonates with them so that they begin the conversations of, we think we're finally ready to sell the home that all of our children graduated high school from. We don't need this two-acre, again,$15 million estate. The landscaping alone is$150,000 a year. You've got the pool. You've got a team of 10 people that are required to maintain the home, and that requires a lot of time. So in texas as leon you know so well said it's it's a growing evolving condominium market because the product that's coming is starting to speak to that upper end clientele that's giving them an option they don't need to sell their house they want to and i think that's a difference between new york and miami you guys are vertical markets so people are you know transitioning out of a co-op. I mean, again, if you don't live in a rental building, a co-op or a condo, maybe you live in a townhouse, but that's...

SPEAKER_05: 49:34

I think you just hit the nail on the head. That's what I'm seeing here. And I think it has to do with the demographics the demographics of America right now. But I'm in a town right now where the average price point is$2 million. So when a lot of these seniors who wanna spend six months of the year in a warmer climate to begin with. Florida, yeah. but they wanna be here, they wanna sell that house, that single family home, and they're looking for a luxury condo product, like you're pointing out, they're willing to sell, they can sell their house for two, three, four, five million dollars, and they're willing to spend two, three, four, five million dollars on a new luxury condo product and we don't have enough of them. So there's an opportunity for developers, Connecticut, Texas, Florida, all over. And I think it has to do with the fact that we have 70 million baby boomers all looking for the same thing.

SPEAKER_01: 50:36

And in Texas, I think I like what you said and what we have. And I think that's where our planning and design department comes in because they benchmark product from around the country and to some extent on a global level. When I say benchmark in Texas, we have a database of every floor plan of every high-end product in the state. We're quite good at our data sourcing for the brokerage and various points of contact. So if a developer's like what size master bedroom closet should I place in? We can answer that down to the square footage. We can say for a three bedroom, you need X amount of linear square feet of countertop space, right? So there's these data points that are collected because I think it was a question in what was sent to us. You have to be specific about the product that you're designing. If you're developing a luxury product, you need to deliver a luxury product. Our buyers are, and so are yours. I mean, these are all sophisticated individuals. They need to see that the value and the quality is there. And that actually goes, I think, back to the importance of the sponsorship team. People, especially if they're finally selling the family home, they wanna make sure that the sponsor is gonna deliver the quality that's expected. I mean, in many of our developments, executives from sponsorship even buy into the projects, which is always a benefit because it speaks to the standards that they're upholding and their commitment to quality. But you can't say we're delivering a luxury product at a luxury price point, top of market pricing and deliver something that's not. People just won't do it. They'll be like, that was a nice, you know, good try. Swing and a miss. Swing and a miss, yeah. And unfortunately, people are, you know, not our clients, but other clients are, like, they learn, you know, when they can't go back and fix it. You know, you have a flop.

SPEAKER_05: 52:54

Case in point, I know of one development because there's a development going up in this town. And so it's caused me to look at all of those within a 10, 15 mile radius that have gone up in the last few years and which would compete with it and asking them which amenities resonate. And one of these developers said, I put in a pool. I wish I hadn't put in a pool. And I thought, really interesting. Oh, the people who are buying in that development they don't care about the pool and they don't care about some of those amenities. What they do really care about is the noise insulation between units. Because when you're coming from a single family home, you're not used to hearing

SPEAKER_01: 53:36

neighbors. Yeah. You've got, you know, a lot on either, you know, your house sits on a lot. And I think, yeah, I mean, a pool is a nice amenity, but maybe let's expand that. Maybe it's a hydrotherapy wellness zone. Maybe it's Cold plunge, you know, hot. I mean, there is a whole system of hydrotherapy, you know, is the pool a saltwater pool? I mean, what, like, is it, you know, do you have, I mean, what, what we sell in a lot of our super prime product is actually, and they did this in like 15 Central Park West, we have a you know, residences for owner staff. Like if you have a live in health aid or an au pair, you know, so that type of programming where, you know, you have a need for a member of your team, you want them to live on site, but not. Why are

SPEAKER_05: 54:29

you the first person in the last year to say that on this podcast? Really? I mean, we have 72 million aging baby boomers, lots of money. And you're the first one to say, I might need a health aid. It might be the best amenity I could provide. Because that's what our buyers come to us with their feedback. I'm going to call you up and pick your brain next time I have a new development opportunity. I think you know more than most people have forgot.

SPEAKER_01: 54:55

Wow. Thank you. I appreciate it. I've got good training. You can tell Susan, she's got an amazing team. And Catherine Lee, my boss, really guides us well here. So we have strong leadership, and I've been doing this for what seems to be a long time now. But we do a lot of focus groups often. And I've had... individuals sit across the table and they're like, well, you know, I'm selling my 30,000 square foot house, but I don't want to go. I'm thinking about how this will be the last real estate purchase that I make. And they're really thinking long term. So that might require staff quarters in their unit or not, because they don't want to go to a retirement home.

SPEAKER_05: 55:40

I have five buyers right now who fit that profile. I'm going to be calling you up like every couple of days. Go ahead, Roberto.

SPEAKER_02: 55:47

Can I just get a comment? Because it's the entire other half of the state. Is there anything happening in West Texas that we can expect or see that's being developed, that's new, that's creating some level of migration?

SPEAKER_01: 56:00

Yeah. Ask Liz Lambert. She's got the whole... they're doing, she's doing some cool things with Icon, you know, the 3D printed, she's doing a 3D printed hotel out in Marfa. You know, they're, like, she's iconic and quite honestly, her vision, she has a super specific vision for El Cosmico and Marfa, you know, because that's, you know, so important to her and I think the history behind that. Yeah, I don't really deal too much, you know, with, West Texas development. I mean, I'm aware of this one because of the connection with ICON and what they're doing there. But truthfully, I mean, I don't want to speak for Leon, but I really, I'm busy enough with just managing the workload within the Texas urban core and I personally enjoy the branded residential. It's a skill set I've been working to develop for many years. So I'm kind of sticking with that. And then, you know, always opportunities come up. Well, we evaluate opportunities all the time. You know, people come to us with all sorts of visions of what they want to do. Sometimes, you know, it's we have to politely say that's not probably going to work, you know, because here are the reasons why. And then obviously, you know, it's always great when they do because then you get to build something iconic. And I think, you know, what we, what I enjoy personally is being part of the team that's shaping a vision and using experience that I took and learned from you know, cutting my teeth in New York. And I think New York really still sets New York and Florida. I mean, Florida really, I think is giving New York a run for its money in terms of the next phase of kind of the branded residential. I mean, you know, they've got the Bentley building, the Aston Martin. I mean, you know, they've got, you know, Ryan's doing this, the Mercedes structure, you know, so Texas has a lot. I think

SPEAKER_02: 58:12

it's more down. I think it's more happening. That's happening more in Florida than it is here. I mean, it's like, well, it is. Yeah. Yeah. mall of stores like, oh, here's a Bentley.

SPEAKER_01: 58:19

New York doesn't have a Bentley tower. Not yet. It could. Definitely has the appetite for it, I'm sure. But Texas, we just started dipping our toe into the traditional branded residential with your hospitality flags that are pretty much household names, especially in certain price tiers or, uh, wealth categories. Like we have a, probably a five, 10 year run with that. And then, you know, maybe we'll have a Bentley tower too. Who knows? You know, I would love to work on one. It looks, the one in Florida is beautiful. So, um,

SPEAKER_05: 59:02

this has been awesome guys. Thank you so much.

SPEAKER_01: 59:05

Yeah. I hope we answered your questions. Um, that you wanted to cover. We're going to

SPEAKER_05: 59:12

have to get you back for a second hour.

SPEAKER_01: 59:15

Yeah, this was fun. I appreciate your team reaching out and you both asked very challenging questions. So we hopefully our answers. This has been

SPEAKER_05: 59:30

phenomenal. So I want to thank you both. I want to thank our sponsor, Grace Farms. You find them at gracefarms.org. That's Roberto. You'll find him at BHS USA. I'm, of course, John Engel. Thank you, Benjamin Watson in Houston. Of course. Thank you both. Thank you, Leon Trachtenberg, my trend master, and also in Houston. And you can also find us. This is the video as you're going to see it on Facebook. So we're also live on Facebook. So thank you, gentlemen. This has been phenomenal. I want to come back and ask you questions like how transferable are these brands like Bentley, that if they work in New York and they work in Florida, do the same brands work in Texas? But we're going to have to come back for the next hour.

SPEAKER_01: 1:00:25

We do have Bentleys in Texas. We do? Yes. All right. No

SPEAKER_05: 1:00:31

Bentleys in New York, but we've got them in Texas.

SPEAKER_01: 1:00:34

We like a lot of those. Oh, Phillies and Broncos. Thank

SPEAKER_05: 1:00:39

you

SPEAKER_01: 1:00:39

guys. Thank you. Until next time. Thank you.

UNKNOWN: 1:00:43

Bye.