One common trend I’ve observed amongst masters in real estate students is that they have entrepreneurial aspirations. And not surprisingly, as real estate is an entrepreneurial field. However, it’s much easier said than done.
Well for three recent graduates of the MIT Center for Real Estate, it’s not just something they casually talk about over beers after class. Bryan Lee, John Sullivan, and Mike Tilford combined their diverse backgrounds to form AspinWall Partners. With opportunity costs at an all-time low, it leaves a great opportunity for smart young guys to join forces, get down in the trenches, and start doing deals.
What led you guys to giving up your secure jobs, amidst the worst recession we’ve experienced, to start the MIT/CRE program?
It takes quite a bit of courage to give up a secure job to attend graduate school. Many of our classmates moved across the country or across the world to call Cambridge home during school, leaving behind family and friends in an endeavor to advance a career and knowledge base. But the program is rather self-selecting. It takes a remarkable degree of commonality among individuals to join this program at such an advanced stage in their career…those individuals inherently have a similar educational background, the same intense interest in real estate, are all of a similar age group, and are willing to risk giving up a regular paycheck in pursuit of a Masters degree. This high degree of common interest makes it easy to learn from one another, to challenge each other.
How was your experience with the program, did it meet your academic/networking expectations?
The program was intense, and learning from some of the leaders in the industry can be initially intimidating. But the professors at MIT do an incredible job of relating advanced concepts in an understandable way. We were challenged and expected to perform to advanced levels. The work load was at times relentless. It demanded students to rise to the challenge, to learn more, and to push themselves. After all, that is the reason you come to a grad school like MIT. Students want that challenge. Anyone who has attended graduate school will tell you that it is an expensive endeavor; we wanted our money’s worth and that’s what we were given.
I remember the first day of class sitting in Dr. William Wheaton’s lecture after just reading his biography, which left me feeling altogether intellectually inadequate. I drew an analogy of his class lecture to swimming underwater in a pool. You can see the end and you are swimming as fast as you can, desperately trying to get there before you run out of air.
What lead to the founding of AspinWall Partners?
The three founding partners of AspinWall (Bryan Lee, John Sullivan, and Michael Tilford) all come from entrepreneurial backgrounds. We have each pursued various entrepreneurial endeavors in the past and knew this is where we wanted to be in the future: in charge of our own destiny. We looked around and saw middle aged professionals with families who built a career and had dedicated their life to a company for 20 plus years, and when the economy fell precipitously they were laid off. We knew we did not want the share that fate in 20 years. Instead, we met in the midst of a rapidly changing economic environment and asked each other where we could provide value. In a quickly changing capital market atmosphere, we knew there would be opportunity.
You guys all bring different experiences to the table. How has that worked to your advantage?
We came together for that specific reason. One problem we found with the hiring process of some companies is that recruiters were looking for potential employees with the same experience and skill set as the rest of the company. We think it is better to have three people with all different viewpoints and experiences in commercial real estate all attack the same problem from different angles and perspectives. This dynamic allows a much more compelling and comprehensive approach to a challenge and allows us to think outside the box.
John Sullivan has over 5 years experience as a project manager with Bovis Lend Lease. Bryan Lee has 5 years experience in commercial real estate valuations. Michael Tilford brings 6 years experience in mixed use development. When we are helping a client solve a financial feasibility assignment, we are not seeking only to solve for financial feasibility, but how we can maximize the process from a development viewpoint; how we can streamline and create efficiencies in the construction management process. These perspectives allow us to save money for our clients before the project ever breaks ground.
In what ways have you leveraged the MIT CRE network?
The MIT network has been immensely helpful. Much to our delight, our network has welcomed us to the industry with open arms, offering to help wherever possible. We have sought the advice of our professors such as John Kennedy, Todd McGrath, and David Geltner on how to find opportunity, how to capitalize on those opportunities, and how to differentiate ourselves in the marketplace. We are in the process of forming a Board to offer feedback quarterly so we may further leverage this unique circumstance. Alums, professors, and fellow classmates have offered enthusiastic encouragement every step of the way. We are in the process of speaking to the MIT network to raise capital for acquisition opportunities. Chances are, if you are affiliated with MIT you have already received a call from us. And if you have not, you can likely expect one soon.
Can you talk about a project that you guys are currently involved with?
We just finished a very interesting engagement with a client, a high profile architecture firm in Boston. Our confidentiality agreement does not permit us to mention the parties by name, but our client wanted to breathe new life into a development proposal that had been sidelined for some time. The project needed a fresh look and the architect wished to combine his renderings with our financial engineering to determine its feasibility. We worked closely with the architects in an iterative process where their designs were integrated into our feasibility analysis, and vice-versa. Ultimately, we were able to identify and target an under-served market demographic. The designs were altered to cater to this specific demographic set, and thus maximize absorption and profitability and mitigate competition. We were able to utilize creative debt and equity structures to increase the returns for the project.
Additionally, we are pursuing value-add acquisition and redevelopment opportunities, searching for off-market deals and working with brokers to find opportunistic deals with where we can acquire an asset at what we believe to be an appropriate time. We are seeking assets in gentrifying neighborhoods, where we believe strong community pride and increasing ownership ratios will improve values over the long term. Although we run painstakingly detailed financial projections and numerous scenario iterations and sensitivities to mitigate potential downside, the overall concept is not complex….it’s sensible real estate investing.
What are your future aspirations and visions with AspinWall Partners?
Ultimately, we formed AspinWall Partners as a real estate development/redevelopment firm. We aspire to create buildings that enhance their surroundings and build community; buildings for which we are proud to play a role. We hope to create interesting places where people like to spend their day. Additionally, we hope to use our knowledge and perspective to create value for our clients.
If you guys won the $150 mega million jackpot, what would you do with the money?
Commission a time machine, go back to 2004, leverage it up 4:1 with acquisitions of office buildings, and sell in early 2007.
On a more serious note, we believe now a great time to acquire for the long-term holder. Although cap rates are returning to historic averages and capital is aggressive, prices are still off 35-40% from peaks. If you believe in population growth and an eventual rebound in the employment markets (essentially, if you believe fundamentals will one day return), NOI will spike and there will be tremendous upside potential. Concessions will burn off, occupancy will stabilize, and capital markets will soon return to provide more liquidity. As interest rates rise, investors that lock in debt at today’s rates will win while simultaneously hedge pending inflation. Those with well-positioned assets in place at an attractive basis will find themselves in an advantageous position.
If you weren’t involved with real estate, what would you be doing?
I think we would all be traveling the world and discovering new cultures, but inevitably we would find an interesting, creative building, see an opportunity, and find ourselves in the same line of work. This is not just a job or means to a living, but something we truly enjoy.
I want to thank the AspinWall team for taking the time to do this interview and wish them the best of luck in building their new company. There’s no doubt that they’re going to be successful and hopefully I’ll have the opportunity to work with them one day.