Finding Creativity

Finding Creativity

Editor’s Note:  Stephen Barker was the recipient of the 2017 Clifford P. Weaver Award, and this was his submission for the most creative transaction of the year.  The Society of Exchange Counselors presented Mr. Barker with the award on January 23, 2018.

I did not have the opportunity to meet Cliff Weaver, as he passed away several years before I received my S.E.C. designation. However, for those Members who did know him, I was the recipient, as many were, of his stories and a legacy of humor, fun, and creative applications to life and the real estate industry. I subsequently learned that Cliff and Colby Sandlian had authored and chronicled many formulas and tools into a body of work, which eventually became a course called “Broker Estate Building.” They taught the course together for many years, and its prominence in educating real estate practitioners remains legendary.  I always wondered what further contributions Cliff may have left us with if he had not passed away at such an early stage in his life. What he did leave us with remains invaluable.

Cliff was perhaps not the sole divine focus of discovering creativity, but he was the one who organized it and applied it to a new dimension of countless opportunities. Equally, many of my S.E.C. colleagues are due credit for their years of contribution to any small success I may have achieved. I believe as always that helping others to achieve their potential and success in business and in life is the foundational principle that drives the Society of Exchange Counselors and was an underlying motivation for Cliff.

I was shyly humbled at the thought of presenting a submission for Creative Transaction of the Year, as my efforts were not solely mine alone. Certainly, training and experience over many years of trying to perfect my abilities has been influenced by countless others.

Approximately a year ago, after 37 years in the real estate business, I was suffering from a loss in confidence in my capabilities as a real estate practitioner. Was I just plainly burned out after all those years?  I suppose many of us have these speed bumps in life that make us stop and look around. It was a soul-searching time, wondering if I was still relevant to the real estate world and if my journey professionally was coming to a close.  Those were extremely difficult days.  But gradually, through the support of my family, my sister who gracefully was in tune with her older brother’s maladies and shortcomings, and my close S.E.C. friends, mentors, and counselors, I slowly began to regain my clarity.

It was during this time that I decided to expose myself to uplifting reading and interactions, which continues today. I was searching for the answers to many of life’s challenges and what it takes to be your best in difficult times of your life. How do you persevere in the face of daunting challenges? Especially as it related to the subject of hotel development, which is the focus of this presentation.

By chance, I was referred to the works of Julia Cameron, a well-known author with 40 books to her credit as well as being a songwriter and playwright, among other talents. One of Julia’s most notable books is The Artist’s Way—A Spiritual Path to Higher Creativity. Julia’s description and investigation of “Creativity” is profound and should be required reading for every S.E.C. She defines “Creativity” and the elements that block it in a seemingly natural way.  After absorbing her book and others, I began to rekindle and redirect my focus back to the creative process and its effect on the real estate world. It was an instrumental doctrine of how even the most seemingly untalented of us can become creative or refresh our creative talents. I believe Cliff and many others in our group understood the basics of the principles she shares. It led me to a new approach at a time when I needed guidance and a big dose of confidence.
A year or so prior to this time I had received a call from the Economic Development Coordinator of a nearby county. He had heard that we were pursuing hotel development projects and asked if I would meet him to explore hospitality needs in the county. I made the trip to meet with him, at which time he introduced me to and toured me through the many corporate and industrial facilities in the area that were little known to the greater region.  His last introduction was a relatively new convention center comprising 22,000 sq. ft. of state-of-the-art conference space built by the county and local municipality to promote local, regional, and national events. They had created a problem, however, which diminished the use of the facility. The problem was that to gain larger and more consistent bookings for the center, it required hotel rooms. The existing hospitality inventory in the area was somewhat older and generally did not complement the center and the growing industrial and retail components in the county.

Even though we owned one major hotel, my hotel development efforts prior to that event had been woefully unsuccessful as I had gone under contract or designed hotels for select sites for almost 30 other locations around the US. Malcolm Gladwell, in his book Outlier noted that success does not come easy, and repetitive attempts and failure ultimately turn to success. Equally, I noted the concentrated and focused effort of Colby Sandlian in his pursuit of mini storage development and surmised that his journey may have been filled with initial setbacks and difficult circumstances as well. Many in our group have experienced the same effect. Colby’s allegiance to perseverance is certainly legendary. I just kept following my intuition and gaining valuable lessons along the way. I learned that failure provides a resiliency to adversity.

The introduction of a new opportunity provided a new attempt at a hotel. I saw the vacuum created by the market and the growing industry in the county and intuitively felt the need for a good new hotel. My first local attempt was to seek a site close to the center yet be able to attract the heavy concentration of travelers along the adjacent expressway.

Through the efforts of a local real estate friend, I found an ideal periphery site located on the campus of the large local mall, but its limited size prevented development. For roughly six months we negotiated with the owners of the mall for increasing the site size, which altered interior roads and affected many site changes. In the end, the management of the mall imposed strict sanctions on the project, which we were not able to overcome.  Many of those obstacles would eliminate any franchising opportunities. We would not be able to comport to the guidelines of a qualified franchisor. Time wasted perhaps, but the opportunity remained. We had to look for another location.

After several months pursuing sites, we were introduced to an approximately three-acre site that encompassed ownership by two separate families. The site was even closer to the center than the mall site and afforded us incredible site visibility. Additionally, we acquired a small parcel across an access road adjacent to the primary sites from a local bank. By acquiring it we provided a greater potential to the primary properties for extra parking. The result was that we had enough land to build both a hotel and a restaurant on the remaining land. The restaurant parcel sell-off would be used to offset expense on the construction of the hotel. This formula, although an amalgamation of Cliff and Colby’s influence, has now been a favorite of mine when searching other locations. Added for-sale profits through the selling or development of excess land can diminish costs for a hotel or other types of development.

The purchase of the sites became an impasse, however, as my contribution financially to the purchase of the land was partial and the Sellers wanted a quick sale. I needed to raise additional equity. I went to several sources in the ensuing months, both locally and out of state.  No one was interested in a land play for a to-be-constructed new hotel in a smaller market. My efforts seemed faint at the time, and I scheduled a meeting with the EDC Coordinator and a local official in the office of the broker. I informed them that the acquisition of the land and plans for a hotel were greatly diminished as no one was interested in investing in their county.  I mentioned to them that the only way a hotel development would have a chance was if local businessmen and promoters in the area made a commitment financially for the development. I certainly thought this was a last attempt and had little chance of succeeding, as I was aware that many local communities want development but don’t want to invest, especially local governmental agencies. However, I had nothing to lose by mentioning it. I departed the meeting convinced that this was failed attempt 31.

Fortunately, however, I got a call a few days later and was asked to make a presentation to several local investors. The room, to my surprise, was filled with interested parties, and my presentation was based on two principles. The first was a successful enterprise that would provide a significant return to investors and second, it would be a great community endeavor to fill a much-needed void.  After a few more presentations, we were able to solicit our entire remaining equity and proceeded to fund the acquisition of the subject land without the need for debt. Although I did elicit contributions from a few outside sources once we got started, the creative aspect of this pursuit was the recognition that smaller markets are heavily influenced by local investment.  Acres of diamonds in the back yard.

We then began the hard work of assembling our team for the new site. Financial planning, ownership formation, engineering, site planning, appraisals, architectural, construction, and lending were among the main elements. Much the same sequential process that any number of our current S.E.C. developers undergo.

During this time construction costs ballooned by 15–20%.  All our hard work was being jeopardized.  I approached the partners and asked if they wished to proceed or “call it a day”—sell our property for a profit or regroup and attack the project under the new circumstances. If we proceeded it would take much more time to rekindle the project. We were also beginning to feel the effects of a lender slowdown in financing ground-up hotels. It seemed like the headwinds were not in our favor. The lesson I learned here was that you always need a Plan B in any development. You must always protect the principal investment. We had bought and assembled our land for a profit if all else failed. The other lesson was that good fortune can evaporate in an instant and that we should all take stock of any success we may have to ensure that we anticipate even unforeseen future influences.

The partners concurred that we should not give up. We owned the land, we had the opportunity for additional profits in the extra land, we had secured a great hotel franchise, we knew the general costs, and we had an interested local lender.  So, the mission of reconstituting the development proceeded.

After several months of negotiating with our local lender to assist in the development, it became clear that our efforts were futile. We then turned to a mortgage broker we had become acquainted, with and he introduced us to a new lender.

The new lender was most knowledgeable and urged us to rebid our construction costs from that a local builder. By doing so we saved a great deal in overall costs. Our Management Team and Interior Design Team coordinated their efforts and saved substantial costs through their input. The lesson I learned was that to do a great development, you need skilled and trustworthy vendors.

Their influence, no matter their cost, can provide huge benefits.

In the interim, and after almost a year of negotiation with the local community and state road Commission, the small road bisecting our main three-acre parcel and our smaller parcel on the opposite side was in the process of being abandoned. We had long considered this a possibility, which would increase our land holding and connect the two separate land parcels by the condemnation. This pursuit was to provide greater flexibility and a larger intact parcel for the use of the restaurant outparcel and ultimately larger potential for profits. The lesson here is to address all the possibilities with the land, garnering even small pockets of profitability or enhancement.

We began construction in late June 2017. Unexpected new business has come our way whereby upon completion of the hotel, we will be entertaining four to five initial weeks of increased occupancy through new unforeseen business.  Lucky, perhaps, but welcomed without a doubt.

Finding Creativity

In his new book, Walter Isaacson profiles the creative genius of Leonardo Da Vinci.  He states in his foreword, “Sometimes in supernatural fashion a single person is marvelously endowed by heaven with beauty and grace and talent in such an abundance that his every act is divine and everything he does clearly comes from God rather than from human art. In fact, Leonardo’s   genius was a human one, wrought by his own will and ambition (Perhaps indicative of Cliff and many other S.E.C.s). It did not come from being the divine recipient like Newton or Einstein, of a mind of so much processing power that we mere mortals cannot fathom it. Leonardo had almost no schooling and could scarcely read Latin or do long division. His genius was the type we can understand, even take lesson from.  It was based on skills we can aspire to improve in ourselves, such as curiosity and intense observation. He had an imagination so excitable that its edges flirted with the edges of fantasy, which is also something we can try preserve in ourselves and indulge in our children.

Whether this lengthy transaction is “indicative of the skills we can aspire to improve in ourselves, such as curiosity and intense observation” remains to be seen.  However, it is a testament to the value of the ability to use formulas and experiences passed down from Cliff and many others to search out and combine those interactions to alter or engage different applications to real estate problems.

What the exercise really did was provide us with an incredible array of problems, which once solved invariably will benefit us on future projects. In addition, the financial commitment to my investors and the local community in general was an overriding objective. We made a commitment, and we had to make it happen.

Of importance to note is the incredible support that I received from my staff during this long journey.  A cheerleading group that never let me feel the goal was lost. To them I owe much to the success of this transaction, and it is for them and their undaunted perseverance that I submit this transaction.

Over the last year I have renewed my purpose and regained my confidence through this transaction and several others we are now pursuing. The candle of enthusiasm has been lighted once more, and the experience I have lived through this last year has renewed my belief that creativity is a divine right ingrained in all of us. It never really goes away. To recognize its value combined with desire and perseverance in the face of adversity and challenges continues to be an incredible life lesson, and one that I hope to continue to share with others.

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