Powerhouse Principles – Jorge Perez

Powerhouse Principles takes us on an autobiographical tour of Jorge Perez’s legacy of real estate development in the southern United States and Latin America. Jorge illustrates his expertise primarily based on his projects in Miami. He lays out his high level steps and ethical approach to negotiating with all of the parties required to get a project of any scale actually completed. Powerhouse Principles also explores financial leveraging in creative ways, how to sell condos and training your teams to perform.

If you are looking for a deep technical book on the ins and outs of permitting, budgeting, zoning, building pro-formas, and the myriad of other tasks needed to develop even a small project, you will not find that here. This is a book for existing developers that want to see what is possible. You will see how a successful developer solved large problems, dodged bullets, and took the right hits to scale their business. It is much more about people and mindset than technical execution. Jorge shares some great nuggets in his book and I’m very glad I read it, just don’t expect a complete how to manual.

The book has nine packed chapters, but the core messages that stood out to me are as follows.

Real Estate Development

The real value add that a developer brings is to create a project that is ready to finance. This is the hard work of knowing what the market wants, finding the right location, developing the plan for what will go there, and then getting all of stakeholders aligned. This can be a monumental task and even a good plan can fail after you’ve spent a lot of resources on it. Jorge has a lot of experience here and has creatively put together some amazing projects.

You can’t please everyone. Jorge lays out how to get enough of the players lined up so the deal can actually work. His time as a city planner in Miami certainly served him well. Negotiating with people and solving for their concerns about a project is what a developer does. He spells out how he manages relationships and makes deals about more than just the money involved. Integrity and building strong relationships are the foundation of being a successful developer.

Financing

It’s easy to see real estate development as very capital intense. The traditional thinking is you trade risk for leverage by taking on more debt. There are several tactics where you can increase your equity position without cash which gives you options. Value is always added by re-zoning, or being creative with a property for a different use than is obviously intended. Jorge shares a few stories of how he was able to enable more leverage without using more cash. This is another critical skill a developer must learn to create value and spread that didn’t exist before.

Selling

He describes a terrific method for driving the market into his sales funnel for selling condo units in a large building. I found this to be one of the most interesting parts of the book. It is pretty specific to selling condos as it requires stuffing your sales funnel all at once. Getting creative marketing to get people to pre-purchase units is the name of the game. That takes a lot of the risk out. I have never had to market so many units at once in the same location, his approach is very enlightening for that kind of sale. If you sell condo units under one roof, this chapter alone is worth picking up the book.

Long Term Vision

Jorge champions integrity as the backbone of development even to the point of losing money on a deal.  Maintain your brand image as one that follows through with the highest level of quality is paramount. Short term gains at the expense of quality or integrity will burn your brand in the long run. You have to be able to afford to take short term hits to keep your long term vision in place.

Facing Change

Jorge commits to making his buildings unique and beautiful even when he could build the same building over again. This is risky and often developers won’t do this. This is why we see the same apartment designs over and over again. It takes a brave exec to throw away something that worked and continue to innovate with design and style. However when you get it right, you have the property that stands out, that is a signature that everyone wants because it is unique in the marketplace. If you’re going to be outstanding you are going to have to stand out. That means walking that plank above oblivion over and over again.

I always enjoy reading how other successful entrepreneurs achieved what they have. I certainly cannot claim the same success in development as Jorge, so there were many lessons to learn from in his book. If you are on the real estate development path, this will be a good motivator for you. You’re sure to get some great insights out of it no matter where you are in your journey.

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