The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
Learning the ins and outs of commercial real estate development from one of the biggest national players allows you to grow a foundation of knowledge not found anywhere else. Whether you’re a small private investor, or a part of a larger firm, this insight into the world of commercial real estate development is invaluable when it comes to opening up new opportunities or new ideas to grow your career in the commercial development realm. Chad Moss and David Greer sit down to share what they’ve learned working with Moss Construction, a billion dollar per year commercial real estate development construction firm.
Richard Wilson: This is Richard C Wilson from CommercialRealEstate.com, and today we’re doing a frequently asked question interview with two of my friends here, David Greer and Chad Moss. Welcome, guys!
Chad Moss: Thank you, Rich!
David Greer: Thank you.
Richard: Great, so Chad is from the Moss Family and both Chad and David work at Moss Construction, which a real estate construction firm that began in 2004, I think it was. So they’re a 16 year old firm, and they do a billion dollars a year, billion with a B, of real estate construction projects. They’ve spoken at our Family Office Club private investor summits, I’ve gotten to know David and Chad meeting in person many times over the last few years, and before we jump into these questions, which will be a series of 20 rapid fire interview questions, I just want to give you a chance, Chad or David, to kind of clarify anything else you want people to know about Moss Construction. Maybe what makes you unique from other big well established construction firms perhaps.
Chad: Oh, thanks, Rich. Moss is a family business. My father Bob, my brother Scott, and myself co-founded it in 2004, we currently have over 700 salaried employees, and roughly 3,000 hourly employees. We work indirectly with many many more employees through subcontractors around the country. We have a very diverse portfolio of projects, we have a national solar platform, as well as a national stake multi-family platform as well.
Richard: Okay, great, awesome. Well, I’ve enjoyed getting to know you guys, so I appreciate you doing this interview here today. So, first question is how has the real estate development industry changed over the past 16 years since you’ve founded Moss?
Chad: We’ve seen a couple cycles, I would say that the world has seen a couple cycles. Money has been fairly insulated from national trends in cycles in South Florida, so we’ve seen a good flow of work leading after 2010 that much of the rest of the country has not seen, but we’ve seen a big migration of folks moving from the north to the south of Florida. And from the Dallas perspective, our Dallas office, has seen a significant pickup in multi-family construction in the last few years and that’s obviously the migration from California to the Dallas Fort Worth area.
Richard: David, what new real estate trends are you seeing right now in real estate development that are just now emerging and that maybe wouldn’t be obvious unless you were focused 100% on this area?
David: Yeah, I think a couple things on the development side. One is with the migration of a lot of people to these large core areas. We’re seeing affordability for rental products going up and it’s becoming more challenging for people to find nice housing. And so with that we’re finding a lot of these developers that are working with municipalities to put together programs where they can basically deliver A type products at B pricing. So that’s definitely a trend that we’re seeing and in some locations we’re starting to see modular construction come in, especially pre-Covid in the hospitality industry I think it’s becoming more prevalent than it was several years ago.
Richard: Ok, great. What should investors know up front regarding real estate investing within the commercial real estate development project area? I know there’s unique risk, unique opportunities in this area, so what should a new investor know about getting involved here?
Chad: I think like any deal you get into, you need to do your due diligence, you need to work with third party consultants and professionals that would advise you on, you know, the real estate purchase itself all the way to the actual building performer. That you will need help with contractors and real estate professionals to bring it to that point. And you really need to define demand, right? It’s the economics of the deal at the end of the day that that drive projects and is there a demand for the product you’re about to invest in.
Richard: Right. Okay, what if an investor is looking to make their first investment in a real estate development project, what would you suggest them to look at first to get that sort of first experience?
Chad: Geography would be the first thing, I would say, and then you want to look at comps, you know, as far as similar type products that come online.
Richard: Okay, great.
David: Yeah, along with that I think for a first time investor I think it’s really important that they surround themselves with the right team that has experience in their respective markets as well as making sure that they don’t take too big of a bite of the apple that they’re for their first one. Think about who can they connect with to make it an educational type process, which is just as important as what return may be generated from that particular investment so that..
Chad: Yeah, they can learn a lot from partnering with a much larger organization as a joint venture minority partner. And maybe see a couple of those through the process would be beneficial to them.
Richard: Right, right, yeah, great, good point. Versus doing it on their own. So I know, Chad, I know Moss Construction your family’s firm has a track record of getting big projects done on time, even during the pandemic, and you do over $1 billion a year on projects so what’s fundamental to operating such a complex business of that scale successfully over such a long period of time? Like what are the pillars of Moss that allows you to execute so consistently?
Chad: You know it’s hiring the right people and retaining them. And with that is a big stroke on culture; we hire culture and we feel like we can teach the technical things we want to see at the project level. But hiring the best people and letting them do what they do well and giving them all of the tools and support to do those things – that’s critical.
Richard: Right. And because at so many investment events people always say team is most important, it’s all about the team, et cetera, you zeroed in on culture. So what is it about your culture that’s critical? Like what’s a key part of your culture that’s driven a lot of your success?
Chad: You know, a lot of these people are generally self-starters that we hire, and they’re not reactionary they’re proactive. It’s the entrepreneurial spirit that resonates throughout the entire organization. Honoring relationships, I know some of these things seem kind of simple but a lot of people talk about them but they don’t do them or execute. And it’s really seeing a project all the way through to the end, taking each task seriously because, you know, a critical element to the overall project.
Richard: Right. Great. Where is there an opportunity in multi-family real estate development given how competitive that space has become?
Chad: Dave alluded to it earlier. When you’re looking at offering an A type building at B prices, the way you get there is through tax credits. And whether it’s a municipality offering incentivizing the developer to come up with a project that would help the community and give them relief on whether it’s permitting or come from a CRA fund or whatever, or it could be in an opportunity zone. I think all those little things they help out a performer to make those types of project happen.
Richard: Right, okay, great – yeah, that’s helpful. What’s the most expensive mistake that you see commonly made in commercial property development?
Chad: I think what I see happen is people often work in a vacuum. They don’t trust their consultants. They design something that is way out of line for the area and the demand, and they spend a bunch of money on architecture and planning, and they figure out their job is not financeable because the market demand is simply not there for that type of product. Whether you’re talking gross square foot numbers, sellable versus rentable, or even just something that’s, you know, just doesn’t work for that particular market.
Richard: Sure. Is there an opportunity for sponsors or investment funds to purchase multi-family projects before they’re leased up? Because I know you guys are helping to develop many of these projects, are you still seeing there’s some meat on the bone for people to be pursuing that strategy? Or is that so competitive now you’re essentially paying for almost that stabilized price for a brand new product coming out on the market that’s not fully leased up yet?
David: I think you’re seeing that, that’s a great observation. A lot of these groups are very cash-heavy, they’ve got a lot of capability to execute, and execute efficiently. And when that happens they drive prices in markets, and they’re actually coming downstream. They used to wait until product was maybe at stabilization, or 80% leased before they would entertain an offer. We’re seeing that move further downstream even 50%-60% leased now that they have an interest in that project. Or, if it’s just starting to develop, they’re trying to get in early to be the lead buyer for that particular project. And then on the exit side, just with interest rates so low and EO hard to find, a lot of these groups and family offices, and even institutionals or publicly traded retes are finding it a very competitive space because they’re trying to get in early as well.
Richard: Right, makes sense. In the Family Office Club we’ve seen many real estate development firms with 30 million, 50 million, 100 million in revenue. Your firm is 10 times larger than that; what was the turning point for Moss going from a smaller locally focused team in business to then turning a corner to become a regional developer and doing such volume that you do now?
Chad: We had a significant merger about 7 years ago now with Hunt Development and Hunt Families. That made us more of a national player by picking up the Dallas office, San Diego, and Honolulu, and doing national solar as well.
Richard: Right, okay. What is attracting capital through the pandemic right now that you think will continue to do well after the recovery from COVID? Like what types of assets, or what kinds of real estate food groups are you seeing attracting a lot of capital?
David: Multi-family still, in the right geographic regions, and also there’s a lot of debt funds that are raising capital and anticipating that there’s going to be distress in the market. So you’re seeing a lot of those, they’re sitting on the sidelines and waiting to see, we haven’t really seen it come to fruition yet, but they feel like it’s out there. So I think that’s going to happen. I think also the migration of people from the northeast to Florida, or maybe from California to Texas, you’re going to see those areas continue to grow and attract capital as well. Places like Hawaii have a big shortage in workforce affordable housing, and I think they’re going to look to grow that significantly in that area as well.
Richard: Right, okay. And if an investor is looking to place capital into commercial property development projects, what type of due diligence insights could you provide them? Whether they’re speaking to your team, or to other companies, trying to really vet them but they don’t have the expertise that you guys have. What would you provide them insight-wise with how to conduct due diligence with you and your peers?
David: I think that, again and Chad talked about this earlier, but really surrounding yourself with the right group of advisors. Whether it’s tax and accounting, whether its legal, having strong commercial real estate brokerage advisory folks on your team – I think surrounding yourself with that right team is absolutely critical. And you see it through the Family Office Club and the work that we’ve conducted, you do the seminars, you had 800 people at the last one we attended pre-COVID. There’s a lot of networking that goes on there and a lot of good information is exchanged, relationships are built, and I think just being patient with the process and really educating yourself before you jump in, and knowing the ins and outs.
Richard: Sure. And I know you guys are active in both Texas and Florida, many people have Dallas, Austin, on fast growing city lists, those are relatively obvious ones. Are there any niche cities or tertiary markets in the states of Florida or Texas that you think people, maybe, don’t realize how well they’re doing? Whether that’s Jacksonville, or Tampa, or somewhere else?
David: So, I think a hidden one we’re seeing grow is San Marcos outside Austin, and Texas State University is there, there’s a lot of growth going on in that area. We’ll probably open that up now and people start flocking there, but I think there’s definitely going to be some good opportunity there with the growth of the University and a lot of things that they have going on. Sarasota, Clearwater Beach is another area that’s really taken off in the last couple years. And it seems like it’s hard to be on the front end of where these places are going to turn, but I think that with the migration of people we’re seeing out of different locations and different states, it’s going to be more noticeable in a quicker fashion than it has been historically. Because we haven’t seen this rate of change in geographic regions until this point. So there’s a lot of unknowns out there, but I think that you’re going to see a lot of population growth, job growth, in certain areas. And even the existing areas I think will continue to grow.
Chad: Yeah, if you look at Dallas, for instance, there’s parts of the outside the city that you can walk into a new building at every turn. Within the last 3 years constructed, so there’s literally been towns within a city built overnight. Like a McKinney, that’s an interesting sign that you’re seeing right now.
Richard: Right, yeah. For sure. What are some creative ways that you’ve been able to align your construction business with the interest of investors or investment firms that you, you know, close on contracts, or work with?
Chad: Yeah, so when we rolled out the Moss family office investment platform Targa, we work with developers in that multi-family space that are, you know, workforce housing or lower income housing, and we get aligned with them and we co-invest with them as an LP partner. And that does a few things – it helps the developer out with their funding source, their construction loan on terms, and it also helps us raise capital and keep our fund active.
Richard: Right, makes sense. I’ve never heard of anyone doing that, so I think it’s great that you guys are able to do something like that. Everyone is looking for someone who is more aligned with them to the finish line of course.
David: Yeah, and one other thing there, Richard. The – a lot of these municipalities that Moss has worked with for the last 16 years since the company was founded in 2004 knows the reputation of the organization and what we stand for and I think that’s helped us in some of the respective markets that we work in and build those relationships. The other opportunity is a lot of projects come to Moss just for feedback, or for pricing, or whatever it may be, so we build a lot of relationships that way as well. It gives us a pretty interesting look at projects.
Richard: Makes sense. What is another common strategy or approach that helps Moss maintain its competitive edge? You have a tight culture, entrepreneurial sort of self-starters or proactive, you know you value the long-term relationships, you sometimes co-invest – is there one more thing that you think is continually helping you in closing agreements and scaling your firm to the next level that we haven’t mentioned yet?
Chad: I think that the family has invested significantly in technology, and that’s continued to pay off for us. We’re always looking to build a better mousetrap so to speak, so we really have embraced the technology side of it – we’ve written our own software, we’ve had other startup companies spin off of Moss, which has been great, and, you know, always take the meeting, always look forward. That’s what we say.
David: I think one other item that’s really helped the company is diversification, both geographically but also by product type. So I think with, you know, utility scale solar that we’ve become an EPC in and have built and scaled a business inside of Moss, helps us kind of weather the different economic times and helps strengthen the organization to make it through a lot of different economic cycles, versus being totally dependent on high rise condos, for example, building that or just a few product types on the vertical side.
Chad: I think diversity is key.
Richard: Okay. What has your family learned about negotiating large complex real estate development contracts when dealing with institutional sized investment firms or investors?
Chad: I guess that’s one of the questions that you asked that – from what basis are you asking that question, I guess, is my…?
Richard: Yeah, I guess I’m just thinking like a lot of people don’t have the experience that you have negotiating with really large billion dollar plus investors or investment firms, and I’m guessing those contracts get very complex, so I’m wondering what you’ve learned over time about negotiating that might be helpful for others to hear who maybe haven’t played at your level yet, or are trying to grow to the level that you’re at but whatever type of real estate firm they are?
Chad: The quick answer is never be afraid to walk away from a deal. There are some very good construction attorneys out there that do work for some of the biggest and best developers, I’ve seen them literally kill deals, which is not where you want to be. You want to work with business-friendly people, not business prohibitive people. And seek great counsel, you know, if you feel like you’re not getting something from one source, definitely don’t be afraid to go and ask other sources.
Richard: Right, okay. What advice would you have if you became a board member of a small real estate investment firm, or a real estate development firm, or a sponsor, looking to grow to a hundred million dollars a year in volume, or a hundred million in AUM, you know with all the real estate investment firm counterparties you deal with, what suggestions would you give them that that maybe we haven’t covered here during this interview series yet today?
David: I’m going to go back, I know we’ve used it twice in some of the questions that you’ve asked but back to the advisors that you surround yourself with. I think that’s a critical component and meeting with them on a regular basis to solicit feedback and also look for that experience that they may have in their respective markets, but just can’t underestimate the power of having the right team around you and utilizing the team. Alright, so one is having it and building it, but continuing to utilize it I think is absolutely critical.
Richard: Right, okay. What advice do you have for commercial real estate brokers looking to do well on selling newly constructed assets?
David: Are you saying from a brokerage standpoint?
Richard: Yeah. For someone who’s looking to, you know, build relationships, maybe they’re looking to build out their commercial brokerage career in getting the brokerage assignment from a real estate developer or real estate sponsor, do you have any suggestions on how to – how for them to kind of break into that space?
David: I think it’s an important person to have on your team like access to on the brokerage side, that can represent you on the sale side, and kind of keep that transaction arm links from the buyer. So I think it’s important to have them. If they’re newer, I would say in today’s environment trying to get and gain experience by being with a team that’s been in the market that’s looking to grow would be a good way to do it as opposed to trying to do it individually.
David: There’s a lot of senior folks in the business that want to continue to grow their practice and I think it’s a good way or a good opportunity to join them and get a couple years’ experience before jumping out on your own.
Chad: Yeah, a lot of my friends in that business are generally with a larger outfit for five to ten years, and then they decide if they want to go off on their own or not.
Richard: Okay, makes sense. My next question is about if somebody is just starting their career in real estate development what would be your suggestion on how to learn the business the fastest way possible? I think you kind of halfway answered it just there about, you know, joining a firm that has a lot of experience and is growing quickly or has a lot of success and getting mentored for five or ten years at one of those types of firms. I’m sure that would be part of your answer. Is there anything else you would add to that for somebody looking to start their real estate development career?
David: You know, starting out on the development side, I think organizations are important. There’s a lot of different trade organizations out there that you can become involved with. Attending those meetings regularly to build your network but also hear about other people’s experiences, different case studies, whatever, you know, there’s many different parts and processes to real estate development and understanding each of those and finding expertise in each of those areas is really important before you just strike out and try to develop something. You can do it that way, but you can make a lot of mistakes, too. And I think one of the things that we talked is that we have new individuals and people we add to the team here at Moss is you’re either going to get one years of experience in three years, or you can get three years of experience in one year. And we do that, we accelerate that, learning curve and growth by getting people involved in different organizations, a lot of training, and a lot of different items that will further their education in a much quicker fashion then just the traditional method of getting out there and trying to learn on the fly.
Richard: Right. Right, yeah, makes sense. My last question is what’s the most valuable piece of advice we could leave listeners with here today? It could be a piece of advice for investors, or investment firms that are counterparties and work with you all of the time; what would be your most valuable piece of advice after all of the projects you guys have worked on?
Chad: I would say stay curious, you know? I mean you have to take that extra meeting, don’t have a premonition if someone wants to meet with you about what the outcome of that meeting is. Engage in that entrepreneurial spirit, and have some good contagious energy behind you when you have these meetings. You never know what could happen from them. Be able to do an audible, if you have to, and adjust to market climates, to opportunities, all of the above. I mean there’s so many things out there that you can be involved in. That said, you need to also be focused, too, on what you’re trying to do and what your goals are, so a bit of a balancing act.
Richard: Right, right. Makes sense. Great, well I appreciate – go ahead.
David: I would just add, you know, sometime we feel like we have to have all the answers before we go out there, and I think that you’ll find that there’s a lot of people willing to help, if you’re just willing to ask for the help. And put yourself out there, it’s okay to be vulnerable, it’s a good way to learn, it’s a good way to educate yourself, but there’s a lot of knowledge out there in the industry that you could pick up. And I think what Chad said, just be curious with it and I think that leads you down the right path.
Richard: Right, great. Well, I appreciate the interview here today, both of you, if anyone wants to learn more about Moss, I believe the best website to send them to is MossCM.com, is that correct?
Chad: Yes, it is. Yes.
Richard: Great. Well, I appreciate your participation here, and on the CommercialRealEstate.com platform. Looking forward to seeing you guys in our Power Players Summit coming up later this week, and our Family Office Super Summit coming up here at the end of the year, December 15th and 16th, and I’ll be in touch. Just thank you again for your time, appreciate it.
Chad: Thank you, Richard.
David: Thank you, Richard, take care.
Richard: Take care.