Wisdom

There was a boatload of wisdom in Wilson Hall Monday night, words from three true leaders in New Jersey Real Estate at the Monmouth University Kislak School of Real Estate’s Stephen B. Siegel Lecture Series. The featured speakers included:

  • Ara K. Hovnanian, CEO and Chairman of Hovnanian Enterprises, Inc., a national homebuilder;
  • Ronald S. Ladell, Senior V.P. of AvalonBay Communities, a developer and operator of luxury apartments; and
  • Mitchell E. Hersh, CEO of Mack-Cali and Roseland Properties, developers and operators of office and multi-family properties, respectively.

That’s a lot of firepower in one room!

Mr. Hovnanian spoke first. His theme was simple and compelling. New housing starts are at their lowest level since World War II (in gross terms – forget that the population has more than doubled) and household formations are at record highs. Mr. Hovnanian wisely played down the prospects for his industry, but I will come out and say it: there will be explosive demand for housing in the next ten years. As Mr. Hovnanian put it, “Demographics are destiny.” Well said, sir!

Mr. Hersh, whose company only relatively recently entered the residential market, pressed home another theme. Urbanization is real and it is the trend of the future. People, young and old, are moving back to the cities, seeking to work, live and play in an amenity rich and collaborative environment. This is an important trend, and one that is likely to morph quickly. Stay tuned.

Mr. Ladell, who is being honored on May 29th at the Monmouth University Kislak Real Estate Institute Leadership Awards Dinner, echoed Mr. Hovnanian’s comments about the lack of new home starts and demographic trends. All to the good for AvalonBay.

Mr. Ladell went further, though, and discussed AvalonBay’s ¬†business strategy. AvalonBay’s primary market areas include the northeast from Boston to Washington, DC, Seattle, and Northern and Southern California. These areas were chosen deliberately. They the highest barrier to entry markets in the United States. In these markets it takes AvalonBay five to seven years obtain approvals, build and stabilize a project. According to Mr. Ladell this laborious process ensures that, “Our properties keep their value.”

AvalonBay deliberately chooses to take the most arduous path, creating a unique and difficult-to-duplicate niche. And creating value.

When an entrepreneur starts a business, the advice is often to capture the “low hanging fruit.” And while this is good advice for a start-up, developing a niche, especially one that others reject as too difficult, is, long term, probably the most profitable and stable.

So what are you doing that is difficult? What is your niche?

Wisdom

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