Ep 06: REI MBA - Commercial Real Estate Development: Big Vision and Big Ideas
Developer Garett Vassel, and his company Optima Durant Group, is bringing his large development experience, where he worked for one of the largest publicly traded REITs in the county (AvalonBay Communities), to the Lehigh Valley. Listen to this episode as he eloquently discusses why the Lehigh Valley is such a great market and he passionately walks us through the development of The Commodore building. You do not want to miss this episode!
With his "Gateway to Easton" project approved and moving forward, the City of Easton is receiving a gem with the The Commodore building. It is large development project totaling 91,500 square feet along the Delaware River, at Northampton Street and Larry Holmes Drive, The Commodore is an adaptive reuse of the former Kaplan’s building at 100 Northampton St. with a new, eight-story addition. It overlooks the confluence of the Lehigh and the Delaware Rivers and is adjacent to the Easton Farmers' Market.
The plans approved by the City of Easton Zoning Hearing Board include 32 apartments, two ground-level retail spaces, 17,000 square feet of office space on the mezzanine/second floor and a 6,560 square-foot rooftop restaurant/bar.
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Interview Transcripts
Tejas Gosai: Hello, ladies and gentlemen, welcome back to RealEstateInvestorMBA.com. I'm one of your co-hosts, Tejas Gosai. I also have my main man Jeremy Moyer over there. We have the pleasure of speaking with Garett Vassel. And real quick, Garett welcome.
Garett Vassel: Thank you.
Tejas Gosai: Yeah, it's great to be with you. We're going to give you a long-winded introduction so just hang tight real quick. Just for a second. I talked about my father and that was my introduction into the real estate development world. I've built a bunch of hotels and gas stations in my early 20's and all of that started when I was 12 and 13 years old and my dad started buying real estate properties. I will say that the world of real estate development is one of the most difficult places to live in. You have to be able to look light years ahead and be able to predictively indicate risk, so on and so forth. So I am over the moon that we Garett here today and with that, Jeremy, can you give some of his background?
Jeremy Moyer: Absolutely, so Garett has an amazing combination of real estate development, investment banking and private equity experience. He also has an MBA from Columbia University. He's currently developing an amazing project...the Commodore project in Easton (PA). He has worked for one of the largest publicly treated REITs in the country. So Garett, can tell everybody a little bit more about yourself? Give us a better background on kind of how you got started in the industry. And also, I was reading your bio earlier and it's literally seven pages long. So I'm not going to read the entire thing here. It's a tremendous background and it appears that you have a really good pulse on the marketplace. So I'm really curious and I'm sure the listeners are curious why Easton and why the Lehigh Valley is one of the markets that you could have picked from any market in the country?
Garett Vassel: Well, thankfully it's been more fun to live through the Bio itself, than to read it, I guess you might say. Yeah, so it's kind of like, you know where to begin. To me, I think about real estate and my interest in the space from a design perspective, aesthetics even, just properties in general, it started as a little kid. I would beg my mother to drive me around by car. I had this architectural digest, of mansions of the so-called 'Gold Coast' where I grew up on Long Island, so they were sort of inundated all around me. Some of them being museums now; some of them still actually being private houses. So I would ask my mother to drive me around to all these different places and sometimes we would pull up into a driveway and it'd be this, fantastic, historical property and we realized ‘oh God someone actually still lives there. Let's back out.’ But I've always had an appreciation from the time I was a young kid. Everyone thought that I was going to be an architect just by my natural interest. Skipping along just a little bit, in terms of my interest in the Lehigh Valley and entering the real estate development space and my own right with my own company Optima Durant Group. I guess that you could say that you can trace it back to starting with my friend Chris Philly who I went to Columbia business school with. I was investing in one of his projects. I was able to start to get acquainted with the market he was specifically in, which was Bethlehem (PA), among other places, and I personally just started to gravitate to Easton myself. Easton was a very logical fit for me. I started out with introductions. It just kind of happened very naturally, organically, fluidly. ‘Oh Garrett, you should meet so and so. Oh terrific and isn't she so nice.’ You know, and then she would introduce me to someone else. ‘Oh, have you not met the mayor yet?’ And so at this point it's been a few years of being fairly ingrained there in the local market and it really is such a pleasure. I really enjoy my time.
Tejas Gosai: Can we unpack that a little bit?
Garett Vassel: We can drill down anywhere you want to go. I'm ready to rock.
Tejas Gosai: Really like the biggest reason we're just straight up spending a bunch of money to create this podcast is not enough people are a vocal enough about the Lehigh Valley. And the metrics and people outside of this market, they're flourishing. You know, they're just trying to get here, find the inventory and things like that. So unpacking it really, why Easton, why not Bethlehem? Why not Allentown? Why over the New Jersey border? Can you talk a little bit about the specifics of the project? Because again going back to what I originally said, you're not thinking about the next one or two or three years. You're you're thinking about a significantly longer period of time and you had to do a lot more work than anyone could understand for anyone to even see those pictures that are outside. By the way, I went yesterday to the little; they had a farmers market and I took my kids and I showed them. I was like guys, I'm going to talk to the guy that's doing this right now, by the pudding.... I forgot the name of the pudding place.
Garett Vassel: Yeah, Khanisa's which by the way is fantastic. Yeah they are the best. I'm quite friendly with them; both lovely people they really are. Fantastic.
Tejas Gosai: And you know, I can be vocal about that. I believe African-American ownership group just killing it in Easton with this super posh upscale pudding factory. So, you know, it's cool for me to see that and I try to show my kids and try to get it in their head. But can you help me unpack why Easton specifically?
Garett Vassel: Yeah. It's a great question. I've been asked this question so many times. I've given so many different answers, but there's a lot of different reasons why. You have natural resources and beauty, right? Which for a lot of people, people gravitate to these types of resources, right? You have a city that is wildly close, within a throws distance to New York City and Philadelphia. It's a walkable city. As I always love to say, the centre of the city, as Mayor Panto has said and I definitely steal that from him wherever I can. But it's the perfect blend where you have a walkable city; people like that of urban footprint. But yet it's at a realistic price. You can get to the larger cities very quickly. So it's just this perfect experience. It's a very creative, design friendly space. There's so many creative people. Businesses are are bustling and launching from this area like Sean and his wife, like Khanisa. I mean, everywhere you turn up and down Northampton Street and South 3rd and so on. You're seeing new businesses being launched. There's just an energy. There's a creative vibe. People have asked me if I think it's similar to Brooklyn. I do and the sense that people are always looking to find a new frontier for lack of a better way to put it. Easton has always been there. But in the sense that as the market becomes more and more expensive, people are pushing out in different directions to find places where they can still live their life the way that they want to, with creativity, with an artistic flair, with a community, with farmers markets like you said. There are so many reasons why it's true. I could go on from here, but I'll pause there.
Jeremy Moyer: I love it. I really like to dive deeper there. Last week, you and I talked on the phone discussing about coming on to interview on the podcast. You really spoke eloquently about and passionately about the project in Easton that you're undertaking at the Commodore. Can you give a taste to the audience, to the community, on what you're doing there and what the the local residents of Easton will have when it's all done?
Garett Vassel: This is certainly one of my favorite topics to talk about. So the Commodore is....it is a big project for me and my company. It is, you would say a marquee project for my relatively young company at this point now. So this is a 32-apartment, rental apartment building. You have two relatively small-ish retail spaces. Actually within the exact footprint that is there now, if you look at the existing building, you have this 1880 building with a 1946 edition that comes out the back of the building, heading south. Right at the front door on either side of the front door are these two show windows. So those will effectively become the start of the two retail spaces on either side of the existing front door. The front door that you see today will be the entrance, the main entrance for the residents that will call the Commodore 'home'. And then on the parking lot as it curves around and go south down Larry Holmes Drive, that will actually be, right there on the corner will be the so-called public entrance where you'll be able to get up to roughly 17,000 square foot of office and then a rooftop restaurant, which is definitely getting a lot of attention and something that I'm very passionate about I guess you would say. One thing to note there and something that I've been very focused on is making sure that the private and the public life are truly bifurcated from one another. So if you live in the building and you have young children or you don't necessarily have to have young children to want your privacy and to want a certain quality of life or you're not sharing the elevator with people that are going to be going up to a rooftop restaurant or bar and they're coming down they've had drinks. So it was very important to me to make sure that it was all an ecosystem. It was all well thought out and connected but yet bifurcated to deliver the kind of privacy that one would need. You have phenomenal views of actually the Lehigh and the Delaware River coming together, right there at the confluence of the rivers, where the falls are; you're overlooking the valley, Phillipsburg; it's truly a phenomenal view, even from what is the third floor of the existing building. The Eastonian Hotel has been a great neighbor. They have invited me into their building on a number of different occasions. But on one occasion, I was actually on their roof, which is fairly service-oriented, right? But nonetheless, you still have an appreciation for what it means to be at that height and to be fairly close to where the site is. It kind of took my breath away. But yes the development, as I said, you have these different compartments but we've been, we've been really focusing on a sort of a very thoughtful offering in all directions, such as certain amenities that were exploring the idea of having a doorman for example. That does not exist in downtown Easton, but we want to get that right. We want to be fluid. We want to be pliable. So these are the kinds of things that we're looking at, the types of finishes. We want to make sure they are upscale and they're going to be built to last but they can't be so nice, for lack of a better way to put it, so that they're impractical and that you can't use them in their everyday life. So we've really been having a measured approach.
Tejas Gosai: It's amazing. I've got to ask about the private equity fund world and how obviously you're a learned man and I think some people in the real estate world don't realize how important it is to have the right advertising, for lack of a better word, for the project that is incredibly important. And Easton, I mean, I'll say the whole Lehigh Valley, the advertising, for a lack of a better word, is the "reason" that you can do something like this and you probably got some investors involved. Is that correct? Incorrect? What does that help you or hurt you?
Garett Vassel: So I'll start here. I'll say this. So actually yes, we do have some investor money. It's frankly a relatively small amount relative to the overall capital structure. At this point now, I've personally put it all on the line, for lack of a better way to put it. I'm being a little bit facetious but in a sense. They are friends and family, private equity money in this deal. I have now, especially in light of COVID-19 and other factors, I've been asked to put in a significantly higher amount of cash equity now myself, which I am doing. Also, I'll use this as an opportunity to kind of round out the rest of the capital structure which you know, it would be lost without really giving credit to some of the partnerships that I've had publicly. So Mayor Panto and I, as well as others from his administration, we went out to Harrisburg. We met with the Governor's office. We met with Senators there and so on. We were able to advocate and speak to the merits of the project, The Commodore. So we've been successful in obtaining a $3 million at RACP grant as they call it, RACP, an EZP tax credit, as well as a so-called PHARE Grant, (PHARE). So we've been successful in obtaining a fair amount of public funding, but the project.
Tejas Gosai: How about tax abatement stuff. Do you have anything like LERTA or any of those pieces?
Garett Vassel: LERTA is in play. Yes, so we are in a LERTA zone. So we have the 10-year abatement, which basically just takes a 10-year period to kick up 10% every year to get to what the fulsome amount of your taxes would be pro-forma for all of the development and investment.
Tejas Gosai: That's awesome. I may have made you lose your train of thought. I'm sorry.
Garett Vassel: No, I appreciate the question. The LERTA is a fantastic deal and just tying back to one of the earlier questions, you know, why Eason and so on, that's another prime example, right? I mean these types of programs are phenomenal and they're not in every market. So, these types of data points you start to collect them all and you go. Wow, you know Easton is fantastic place to be. But yeah, so at this point you can say that the base, the shell of the project and I've been quite vocal about this. The project continues to grow in size as things develop, things ebb and flow. The subcontractor bids are actually due back today. So the tribe will speak, so to speak. We are waiting on those bids to come back. The baseline of the project at this point is actually north of $17 million. So, that is before build out of commercial spaces like the office space, the rooftop restaurant, retail. So, yeah just articulate the vastness I guess you would say of the baseline of the project. It is growing and not for all the wrong reasons. We want to get this right. I'm not just going to throw up a building, to throw up a building. It's got to be proper, it's got to be right. So yeah at this point you can say that it's a $17 million project. And yes, when you tally up those different public funding sources, it's a significant amount of money which helps make this possible. But there's a lot of other investment. If you do, you know some basic subtraction, we still have money that's needed. Right and we're doing everything we can to follow through and make it happen and we will.
Jeremy Moyer: That's awesome. I love the location of this. As soon as you come across the New Jersey boarder into Pennsylvania. It's almost like, welcoming you into the city, right?
Garett Vassel: To piggyback on that if I may. I think perhaps that's one of the reasons why it was such an easy project to discuss with a lot of the politicians that be so to speak. And as you come over the bridge and you see this, you know, this this beautiful piece of property. Right...but a blighted building. Perhaps and I can't speak for Governor Wolf, but you know given that he is in charge of programs like RACP and his administration, the RACP administration as well. I would imagine that a blighted building sitting at the entrance to the State of Pennsylvania, to the City of Easton, to the Lehigh Valley as well, that having this blighted building be there. This was a phenomenal project to resonate with with all the different politicians and supporters. And there were so many. I could rattle off a laundry list of names that people that have truly taken an interest in the project and you know, of course that I'm so grateful to their support, for their support.
Tejas Gosai: Awesome. You have a follow-up Jeremy?
Jeremy Moyer: I was gonna go a different direction unless you have a follow-up Tejas?
Tejas Gosai: You can take it. Go for it. I just wanted to go in a slightly different direction. So our listener base, I would say we have a good mix of new investors, intermediate and experienced investors. On the newer side, investors that want to just start getting involved in real estate with everything that's going on right now. What are good opportunities for them? What would you give them advice, wise? Kind of just watch and learn? Get involved...get involved how? Team up with other investors that are more experienced? What words of wisdom would you have Garett?
Garett Vassel: Yeah, it's a great question. I think taking a 'bold action'. However, the individual defines that and holding themself accountable. Making something happen. Following through on something. Letting that sink in. Building on that, right? I know this is wildly vague, but everyone that's listening to this it might resonate differently. Right? I think real estate is one of those industries where a lot of people will be working in computer science or whatever their field is right, but yet everyone appreciates real estate I find, because it's usually pretty near and dear to your heart. It's where you spend a lot of your time, you live there. You might own, you might rent, you might enjoy going on drives and looking at different projects just for fun. So it does intersect and reach a lot of people even almost subconsciously. And then I find that a lot of people; a lot of those people that do not necessarily work in real estate, that they'll say, Oh, but I would love to start or I'd love to start buying certain properties and I want to do that. Perhaps that person will say, oh well I will then graduate off to do that more full-time or I just want to start to build a real estate profile. Either way it doesn't matter. It's about 'action'. Of course, it's got to be measured. You have to really think these things through. But you can do that until you're blue in the face and at a certain point, I've always found that you have to, you have to march forward . For me to.... So I'll take a step back. I'll start to kind of round out other aspects of the question. So I live in Midtown Manhattan in New York City. I grew up on Long Island as I mentioned in the earlier part of the podcast. I am currently based in Long Island right now because of COVID-19. There's construction on both sides of our property here on Long Island. You drive into New York City, you see a different aspect. Right now answering these questions in this exact time frame and this environment could be wildly different from if we were to do this in 2 weeks or 1 month. So that is why I'm trying to speak in generalities to hold value to these words. But I think you want to look at markets that makes sense to you for whatever the reason might be. It could be that you live there and you know it like the back of your hand. You know that street or you know that property because you've grown up living on that street all your life. You know something that nobody else knows or perhaps like say in my case. I live in New York City. I've grown up on Long Island, but I have an appreciation for the Lehigh Valley, unlike somebody that has grown up there because I know what it's like to grow up on that street somewhere completely different and so for completely different other reasons, I have gravitated there. You could argue that there's something, that there's a bold statement in that. You can say that's really strong that I didn't arrive there by chance because I happen to be born in that town. I am there because I want to be there and I'm identifying those data points and it meets my criteria. But for whatever the reason you have to be sure about yourself, confident. You got to know why you're there and when you do, you've got to go after it.
Tejas Gosai: I gotta jump into this because what you're saying is so much more important than people realize because I think investors; and I'm going to be a little bit negative for a second. You know, you've seen seven or eight 4-unit, 5-unit properties, right. You’re coming from New York. My agents are taking you out and you know go, $3,000 over asking, who cares. You'll make that money back in a few seconds. But if you get the play.... What I've been telling people is just make the mistakes. Find something that is so good and you hedge your bets so much and just know that the roof is gonna collapse or something's going to happen and deal with it. Because there's so many investors that I started with a few years ago and because they bought that 2-unit, they now own the 4-unit across the street and all these little things that kind of happen. But you know, you're like the best example of that. Like, you know, I don't know how you ended up doing what you're doing. But I'm sure you took such a severe amount of risk that you can never really explain it.
Garett Vassel: I can agree with that.
Tejas Gosai: Just pick one risk, right? Like that's, sorry. So, turn it back over. Go ahead.
Jeremy Moyer: It was 'Bold Action', Tejas. I mean, I love that! That was awesome Garett.
Garett Vassel: No, I appreciate that. Yeah. Should we continue to drill down here? Because I'm happy to help.
Tejas Gosai: This is great.
Garett Vassel: So by nature I would say when I think, when I really am honest about things objectively. I look at myself as a person, as a player so to speak in this market. By nature, I am fairly iconoclastic. I'm very, I guess you would say, 'Against the Grain'. If a lot of people I see are running for the exits in a certain place, like say in New York City, and everyone says, oh my gosh, it's never going to be the same. Everything will be different people will never shake hands again. People will never go to the office again. There's always these types of bold statements, right? And people will say 'forever' and 'ever'; it's never going to be.... I'll typically gravitate to something like that. Where if I hear something like that, I almost want to kind of rush in the door as people are flooding out of the door and kind of just see it for myself. Because there's got to be a reversion to the mean, so to speak. There's... Sure there should be movement that makes sense. But to just go completely off the radar from sort of 1 to 3 standard deviation event to another three standard deviation event. It doesn't really make a lot of sense. Surely, there's going to be some middle ground, right? So if anything I would say that you look for opportunities and ways, where, sure if the fundamentals are there and something makes sense. I think it could just be something that resonates with the individual. It doesn't need to be 'oh you know, 1 carry the 4; I did this, you know, very calculated math problem in this model. And it sometimes it can be really fundamental and basic and human, where you say, 'Hey, this makes sense'. And this is actually not a real estate example, but I think it will still resonate with people because people know what it means to invest in Apple stock. In 2004, I was a younger man. And I had come to my father... In fact, we went to the mall together and we went into one of those, at the time, it was a new age Apple Store. And we walked out of there and I said for a whole list of reasons, I said 'Dad, I'm telling you, buy Apple stock.' I guess the takeaway was, it's cool. And telling you, people are going to drill back down again here. People are going to want to get at this. It's cool. I feel it, there's an energy and again, it wasn't like I sat there at the desk at the Apple Store doing some complex model to arrive at this. But you saw that this company had legs again. There was something here again, right? Well, I think and perhaps I'm getting the numbers slightly wrong, but I want to say my father spent something like $20,000 in 2004 at that point. Right and I think you guys understand the point but he spent $20,000 and we laugh about this because we actually did the math recently. He took something like a $13,000 profit, which was by percentage standards was an absolutely phenomenal return in a very short period of time. And he was like gosh Garett...terrific. If you have any ideas again, please let me know. Well, of course. He sold it. I think he sold it somewhere within your 2004 / 2005 quite quickly. If he had held onto it, of course, it split, the the shares split two for one then it split again four for one and so on and so forth. 15 to 16 years is not really a long horizon. Here we are in year 2020. If he had held onto just that amount of shares at the time. That amount of stock would be worth $3.5 million dollars today. $3.5 million.
Tejas Gosai: Amazing.
Garett Vassel: So I guess you know, what is my point? My point is sometimes if you buy quality, you cry once, you hold on to it and if you're sure about why you are doing something; if there is a fundamental reason and it doesn't have to be this elaborate model or something. If you are sure about what you are doing and why and you stick to that thesis and you're willing to be tested under that thesis, knowing that it could come down. But you stay strong, it goes down even further, you stay strong. Eventually, it could be worth an incredible amount of money. And real estate is one of those types of businesses where it's passed from generation to generation. And it's one of those things where you could look at a piece of real estate where it was bought, say in the 1990s like for my lifetime for you. Wow, that was a reasonably long period time ago but it's not astronomical. You say, wow, so we bought something for $300,000 and today it's worth $6 million or something. I don't know a lot of other asset classes where you can purchase something like that, own it for generations to have that type of mindset and to gain that type of wealth generationally. It is a beautiful asset. That's one of the reasons why I'm drawn to it. So I'm like, yeah, you're right.
Jeremy Moyer: Everyone just needs to just rewind that and watch that on repeat. That was tremendous.
Tejas Gosai: I hate to do this. I want to be respectful of time. But Garett first I'm going to ask. Can you please invite us to the opening of The Commodore?
Garett Vassel: Of course, of course. I cannot tell you how excited I am to be there. The Commodore to me really, very directly, I would say it is everything to me. This is....I see my family there. All of my time is spent there, even when I'm not there I'm thinking about it. It's in my dreams, so to speak. I'm living and breathing this on another level. It is an entire lifestyle at this point for me and I mean that at all the right reasons I love being there. I love spending time there. It means everything to me.
Tejas Gosai: Well, it's the next question, is the last question and it's going to be a little annoying. So we ask this every show. What's your favorite restaurant in the Lehigh Valley?
Garett Vassel: Wow. Oh gosh. I've been to so many different restaurants. You know, the wonderful thing about Eason is that there's an incredible concentration of phenomenal restaurants right there within walking distance. So for me, I park myself in Easton and walk around anywhere. I love going to the Public Market and hopefully you guys don't give me any flack here because I'm spreading some, I'm spreading out the risk because there's about have about 14 different restaurants in there.
Tejas Gosai: Ya know, no one has said Easton Public Market yet. So that's the win. I want to be respectful of time again, but I know I personally might have some investors that would be interested in something like this. If someone wanted to get a hold of you or work with you on something else, how do they get ahold of you?
Garett Vassel: Sure. So my website is www.OptimaDurantGroup.com That's the company website OptimaDurantGroup.com If you find the website...there you have it there on the screen. My email itself is Garett. It's my first name garett@optimadurantgroup.com That's a good place to start. You can find the contact. there. All of those numbers and basic email boxes and things, they'll all find their way to me and I'm very responsive. I think people can attest to that that have found the sign, the advertising sign on the on the side of the building and so on. They've typed info@optimadurantgroup.com or what have you. And perhaps some of them have been surprised that we will actually get right back to you.
Tejas Gosai: It's brilliant. Awesome, Jeremy we gotta go but this was like, I go to say. No disrespect to any of the previous guests, but you know, we get better and better. This was an awesome interview Garett. Garett, we're super excited to have you back one day and cannot thank you enough for sharing what you've shared. But that is Garett Vassel. We have his bio, which you want to read on our website in our information. And that's my co-host Jeremy Moyer over there. This is RealEstateInvestorMBA.com We love the Lehigh Valley and we're excited for everything that happens here. Thank you guys very much.
Garett Vassel: Thank you so much. What a pleasure to be with you both. Really.
Tejas Gosai: Cheers.
