Samer Hanini of Hanini Group | Peoples Bank Building in Passaic, NJ | Historical Preservation
Transcript
Atif Qadir 00:07
So we'll get started. My name is Atif Qadir, and this is conversations at Michael Graves. We are recording from the iconic home of architect Michael Graves and Princeton, New Jersey, right next to the office of the world renowned design firm that bears his name. In this series, we will hear the stories of American buildings from the perspective of the architects and developers who are constructing them. They will talk about the process and the product on a deeply personal level, highlighting the teamwork, integrity, ingenuity, empathy and commitment that is necessary to produce these works of art gracing the skylines of our cities and towns. Today, our guest is Samer Hanini. Samir is the Founder and Managing Partner of the handy knit group, a development company with an affiliated architecture firm brick design and construction management firm and in deconstruction. We will be talking about the People's Bank building his recently completed 120,000 square foot mixed use building in downtown Passaic, New Jersey. This historic landmark was originally built in 1931, and after standing empty for nearly 30 years, was completely renovated to include both retail and office. Samer and his team served as developer designer as well as construction manager. Samer, thank you so much for being here with us today.
Samer Hanini 01:26
Thank you for having me.
Atif Qadir 01:27
So I want to turn the clock back to the 1990s When you were a recent graduate of NJIT, the New Jersey Institute of Technology, you and your brother Schaefer decided to purchase a building shell by auction and Newark. By all estimates you both are crazy. Could you talk more about that very first project as a developer and why you decided to make that leap.
Samer Hanini 01:50
So I still remember it was it was roughly 2004 So we were I was in NJIT was working out at the gym, and a buddy of mine, classmate, Pomona was was also working out and meet him always trying to figure out a business model of sorts. So I said, Paul, there's a there's an auction coming up in city of New York, they got a bunch of buildings, let's let's try to bid on him. He's like, Sure, let's let's let's give it a try. So we looked at the list of buildings, we, we toured all of them, we only found one that we really liked. Unfortunately, we actually, we missed the window to view the properties. So we can only bid on them on just from the exterior, which was a little scary when you know, it's your first development. But you know, you know, there's a lot of development, just so you guys know. So. So we ended up we put a we figured, okay, what would the property go for sure, we said it's probably going to not go past 4000 hours. So at that point, we were all just working our, our nine to five jobs. And you know, we're just right out of school. So we scraped together between our family, his family, and a lot of credit cards, we scraped together the 10% deposit that we needed for the for the bid. So we had that check ready, we went we bid on it and ended up selling for $315,000, which was a little more than we, if there was just one lady that didn't bid, we would have gotten it probably closer to 50. And we ended up buying it for $40,000. And I'm sorry, $315,000. And then we started the process of First of all, actually, the funny part is, when we entered the building, there was an actual tree in the middle of the building. Like physically a tree was growing up three storeys in the middle of the building, not a decorative element part of the landscape. Nothing this was this was definitely due to neglect. And the first floor was structurally supported by the tree and the carpet. And it goes to show you that plastic will definitely outlet outlive nature. Wow, the nylon of the carpet was actually holding up the first floor. It was great. It was very scary. We ended up we added to we didn't have the keys, we cut the lock, we enter the property. And then we just started demolition. On the inside. We literally demoed everything, just from brick to brick, and even the roof was off. So we just literally had to show
Atif Qadir 04:12
and when you say we that's you, your brother, a team of workers, what was it?
Samer Hanini 04:16
It was me and my brother, my younger brother, my dad, Paul, his brother, his dad, and any of my friends that I could find. We it was a challenging, it was a challenging project. So over a period of two years, you know, after work weekends, and whatever we were in there, we physically did all of the work in the property. Again, we were we came from fairly humble backgrounds. So it wasn't like we didn't have the check just to write. We had to put in a lot of sweat equity. We couldn't hire contractors. We ended up doing a lot of the work ourselves. We were fortunate to get a bank to finance a portion of it but the rest we had to kind of scrape up together. So a lot of friends and family and you know begging and whatever it took to get the the funds needed to build the property,
Atif Qadir 05:03
how did that hands on experience in that first project influence the subsequent projects you decided to pursue after that?
Samer Hanini 05:11
The the the good and the bad of this project, even though it took us two years, and it took a lot of work, we were able to go to our future investors and say, Listen, this is what we started with. This is what we have, it was a real life model of our ability to deliver. And a lot of investors and a lot of people with like high net worth, want to see the skill set want to see the passion in delivering because they know, development is such a difficult business. And for you to spend two years, and putting all that time and effort and everybody in your family, putting it in investors look at that as a huge, huge up for you as an investor as an investment. So it did help me in our next round, when we did our next project, we actually brought our investor to the building, we had our office on a top floor at that point. And we brought her to the building. And we said, here's what we did, with the limited resources. And here's the delivery, here's what we're able to get out of nothing. And she was very impressed. And then that's when we started on our next project.
Atif Qadir 06:13
So from that first project, through to the People's Bank building that we'll talk about today and beyond your specialty that you've carved out is historic redevelopment projects. So you mentioned already that the developments are pretty hairy process as it is, what would you say are some of the skills that are necessary to succeed in that particular subset of redevelopment as opposed to new construction.
Samer Hanini 06:36
So I mean, historic restoration for us just came out of just pure necessity. I mean, as much as, as many of us know, Newark, had struggled has gone through some difficult times. And when we started developing, not many large projects were happening, it was still challenging. And they had they have and had awesome building stock. So the buildings that you walk around, if you walk around downtown, or you just look up and you see all the history, see all the beautiful details. That's particularly like Broad Street and market. Yeah, Mark and Broad Street, some of the most gorgeous buildings in this area are built in downtown New York. And I think, you know, we started in New York, we were there, you know, much of it by luck, a little a little skill involved. But we were lucky. I mean, we hit we hit New York, and we hit it at the right time. And we were forced into the restorations because the the market in New York didn't justify new construction. So we were able to find these buildings that had awesome bones, and a lot of history and learn how to make a business model out of it. Okay, now, the beauty of historical restoration. And if you do it right, you're able to qualify for sort of tax credits. So in our construction costs, were those of New York construction costs or Jersey City construction costs, but our income was probably a third of it. So how do you justify building new or rehab in New York, when the rents don't justify it? Got it. So the only way it works is with incentives, or programs like disrupt tax credits. So we were kind of forced into this business. And we learned a lot about, you know, applying for tax credits. I mean, we we've done a ton of different tax credit programs, like for the Hotel Indigo, I want to say it was probably 10 Different capital sources. So you have historical tax credits, new market tax credits, tax abatements, you easy loans, ERG program from New Jersey, EDA, city subsidies, city grants, you name it, we got it to get this project going. Because, again, you're trying to compete with New York with their pricing and you want to build that product in New York. That was good and bad. It was it was good. Because we came out of nothing. And we were able to produce this stuff. It was bad because you needed to make a business model. Sure. Right. So we kind of just, you know, with all that help, and obviously the support from the city, sure the support from the government has offices, all of the entities, the the government officials that where an area really wanted projects like this to succeed. So we had a lot of help, and a lot of programs that they will give us.
Atif Qadir 09:17
So it sounds like the secret sauce that you've that you've been able to develop is a technical expertise in terms of the architecture and engineering of buildings like this, the ability to creatively assemble capital, and they'd be able, the ability to have the city and local government be supportive of what you're looking to do. It's those three things together, and a lot of luck and a lot of luck. I'm sure that's part of the equation too. So in the context of the People's Bank building, so it's a 12 story building that was built during the depths of the Great Depression and in subsequent years it saw in a similar way to Passaic its rise and fall as an industrial city. This is particularly one that's unique because It's so tall in comparison to the buildings around it, that when we went to visit recently, recently, you can see it from miles away. What were your first impressions of that building when you went to visit?
Samer Hanini 10:12
So my first impression is it reminded me of the Hotel Indigo. Okay, similar height your project and that's on North Korea. It was a that's a Casco we're building. Very prominent cornice, it just it's a gorgeous building. But it had similar, similar structure. It was tall and slender. Some of the challenging things with with historical buildings like this is when you build them tall and slender, there's not much real estate that you can rent, right between the elevator shafts between the staircases, you're left with a very limited amount of square footage to make a business model out of. Okay. So when we walked in, we had that in mind. So we wanted to make sure that you're creating, you know, you're creating all this infrastructure, what's the net rentable area that you have? And so that that on a structural level, that's what I saw on a physical like actually walking through the building, it had a bunch of challenges. So the first of all, the whole interior was demoed. Unfortunately, you know, the historical detail that we we cherish and we love and, you know, from our experience in New York, that's what we love most about these buildings, all these little details, all these bronze finishes, and cool stair treads and all this stuff. They they weren't there, it was totally got on the inside, what had remained the exterior, I mean, we had we had, we discovered a few mosaic floors. On the entry that which we restored, we discovered obviously, the prominent detail on the building is this two storey atrium, it's a 25 foot interior volume of space on the second floor, that's that's very, very prominent on the street. So that was there as a volume. And just the exterior details I mean, the brickwork the the limestone details on the outside the coins of the, of the craftsman, the pictures on the outside, there were there,
Atif Qadir 12:12
the terracotta medallions, different friends, different traits
Samer Hanini 12:15
from the area. So I learned obviously afterwards of what they were for they were they represented all the people that worked in the area. Okay, so it was big in industry millwork and steel work and trades like that. So they represent those with those medallions. And, and the provenance of the building was probably the biggest historical detail, like, you could drive down the the adjacent highways. And you could see this building from all around. And it's funny, because when we first started it, it wasn't promised at all. You just saw the building. And when we started construction, we demoed everything. We put construction lights up. And I recall the first day driving down Route 21. And I looked to the left and I saw this tower that was lit. And it was a new detail in my drive because it was It wasn't lit for 20 or 30
Atif Qadir 13:10
years. So it was essentially abandoned for decades, where you can't Yeah,
Samer Hanini 13:13
and it's funny because it that's how I reacted to it. And every city official that I talk to the first 20 seconds of talking about the building, they say you know something, I finally see a lit tower in Passaic and it makes me proud. So just those things is part of the historical details of the building. It was the tallest building, and it's still the tallest building with from all the surrounding cities.
Atif Qadir 13:39
And you had mentioned that similar to that first building where there was a tree growing inside, and that was part of the one of the things needed to address with this building, having been empty for two decades. Could you talk about some of the damage are some of the structural and architectural issues that you needed to address because of the abandonment?
Samer Hanini 14:00
Sure. So nature always plays a role in our buildings. Water so so you go down to the basement and there was eight feet of water. Literally, what is it 10,000 square feet of eight feet of water in a swimming pool that's basically under the building was an old string, they built on top of the string. So they always accommodated it somehow. But because we lost power, and it was wasn't maintained. The pumps obviously didn't work and the only thing you get a lot of water. So the biggest challenge was to empty out the water long enough for PSE and G to come into the basement and give us permanent power. Okay, so it was a constant like we had generators there for months, until until we're able to put permanent power put a permanent sump pump system, a redundant one to that and a redundant one to that. So just in case you know, God forbid something happened. Is there another like large rain or Yeah, you never know. And it's, you go to the basement now. There's a constant stream of water coming into the building. So you have a four inch pipe that we put a underground pump system, and four inches of water constantly flows into the basement. So we have this massive sump pump in the basement that pumps the water out. Yeah. So that's that was the biggest, like,
Atif Qadir 15:17
serious architecture.
Samer Hanini 15:19
So, the other thing is, what do we do with the volume space on the second floor? Sure. So, you know, banks, when they when they were built that time, that that Grand Lobby that grand bank space was important to show the stature of the of the space of the of the teller space?
Atif Qadir 15:39
So do you have a signaling? Yeah,
Samer Hanini 15:41
it just show, you know, to show wealth to show dominance? And what do you do that in present day, in a in a in a city that that has its own issues? What do you do is such a grand space, you can only do a couple of things that either do like a venue space, or you do a very high retail, but how do you heat it? How do you circulate around it? How do you make use of the windows, you don't want to, if you'd lowered the ceiling, you would affect the windows? Again, the most prominent detail of this building is this atrium space, you have to respect it somehow. So and make a business model, you know, as we're doing these projects, you know, we're always doing the numbers. You know, we like going to these cities, we like doing these projects. But at the end of the day, these projects have sat around for a long time for a reason. Because they're hard to work on. They're hard to make a business model, they're hard to pay for the hard to build. So when we're doing these projects, we're layering in the business model, you have to do. And when we're working with, with Shippo, or the landmark commission, local landmark commission, even though they they're the financial portion of the of the of the building, doesn't concern them. But it's reality. And they've always been awesome working with us. So we'll present them the problem and we'll say, listen, here's our suggestion, here's what we could do to make this thing viable, because without that, without making that that volume usable, the building really is not going to be presentable to the street. So we had we had proposed putting a mezzanine space in there
Atif Qadir 17:26
to basically break up that second, second
Samer Hanini 17:29
floor, but we respected the window. So we set it back a whole whole whole day.
Atif Qadir 17:34
And those windows being one of those incredibly unique beautiful architectural elements
Samer Hanini 17:37
and even like the railing was all glass so we try to respect the the, the the windows as much as possible from the Street View. We didn't want it to be too too too pushy. As far as the the the mezzanine goes. So we set the back the mezzanine as far as possible. We ended up signing a fitness blink fitness to the second floor. So they enter from a retail space on the first floor. And then they have two floors of a gym space is a great thing because from the street you see always seeing the light that comes from the from the gym, and people are working out and it really complements walking down Main Street, you get to see activity and the activity helps. One of the one of the things that the city wanted was to activate the building to help revitalize all of Main Avenue. One of their biggest issues was this building. And we were talking before about the scaffolding the scaffolding outside sat for I think close to six years. So that sidewalk a sidewalk shut up for six years. This, you know, plywood up it was painted horribly. And it just sat there and it was real a challenge for neighbors to make to have their business kind of flourished. So they were excited to see this building come back to life and obviously they were they were awesome. I want to say they were probably one of the best cities to work in. They they bent over backwards to make sure that whatever we needed to get done would get done. But the atrium space that that double storey window was important in giving back to the to the streetscape. So I'm really proud of of the end result of it because it actually brings a lot of light to the street. And the more light the more activity helps other retailers on the street. And now they're actually going they I think they were approved to do redo their whole streetscape. So they're going to change all of Main Avenue, not just the one on the whole main avenue. And that was this was part of the application to they I think they got a grant from either state or a federal program to redo the whole the whole main at Main Street for to redo the parking and streetscape and stuff.
Atif Qadir 19:43
So in the context of those first few visits that you made to the building before you signed on to be the developer, you saw these architectural and engineering challenges. You saw the state of historical details that were in the building and Within the urban context of Passaic, low median income, low, high school graduation rates, high crime, what was the that thought process that you mentioned in terms of going through and understanding what you can get for the returns from a project like this and all the financing structures that occurred for you in this context, since you you've been a developer for about 10 years, by the time that you came to this building, did a lot of that happen, just kind of in your head as you're going through it in the first visit, or was there actually a really long, lengthy process before you even decided to pursue the project?
Samer Hanini 20:36
The interesting thing with Passaic, even though they have their own economical challenges with some of the residents that are there, you walk down the main street, and there is an empty shop. So and that says a lot about the community.
Atif Qadir 20:54
So basically, high foot traffic, people are coming unbelievably high foot traffic,
Samer Hanini 20:57
there's no storefronts that are empty, you go there on a Saturday, you don't find a spot, it got to a point where we had to actually just, you know, rent a bunch of spots for our team, because we never found a spot. And that says a lot. I mean, so as as concerned about was about retail, and I'm very concerned about retail, just across the board. You know, in every development, retail is now the biggest obstacle. I wasn't concerned I mean, because, okay, we might maybe we don't get a national, which is fine. We don't need a national tenant. Having, you know, a local mom and pop, that sort of retailer, is sometimes better than that corporate signature from a national brand. Because a lot of these mom and pops and you go down the street, and you see them everywhere. So you know, they're committed there, you don't get a lot of turnover with the retail. So you know, the the product, the the stores that are opening up, are sustainable. And when you see that the retail wasn't too concerned, too concerning for me. If I walked down, and I saw, you know, for rent signs, every other street every other store, I would be concerned, I'm like, Alright, let me not underwrite the retail at all other than they just assume it's going to be vacant. But in this case, we were comfortable. We were concerned, our biggest concern economic look at the building was, you know, the building, is it going to be office? Is it going to be residential?
Atif Qadir 22:17
Our first Did you consider residential?
Samer Hanini 22:20
We, our first step with every every building is residential. I mean, that's where I want to, you know, the residential is, is what developers are looking for vacancies, easier, less risk, people have to live someplace. So you know, residential will be a safe bet. And office space and retail. It's been a challenge. But what we didn't know is Passaic wants this building to survive wants this building to come back to life. And people from the Board of Education, we were getting squeezed out of their existing office space, so they were looking for another space. So we said, You know what, let's, let's sit down and talk. Let's see if we could accommodate your needs, and bring this building back to life. So early on in the discussion, we sat with the Board of Education, we found out what their needs are. And we ended up reaching some some good terms. And they ended up taking the top seven floors of the building, which, you know, for us was great. We had to now deal with the retail, the atrium space, and a couple of other floors, which was still risky, but was very manageable. So we got started with that. Then we went to the city we talked about, you know, we needed help with the facade, you know, it's a very large building with a lot of exterior facades. I mean,
Atif Qadir 23:38
literally for facades, there's no bad yeah, so
Samer Hanini 23:40
that's, that's another challenge of the building. It's sat on an island on its own, it's on a block and you had literally four sides to deal with. So you know, where where's your maintenance entrance? Where is your backer house, where's all that stuff is, was a challenge. So they ended up giving us a facade grant to change the windows, which was great. So with the city, on that it was through UAC program. So through that, and through the cities, we had, we talked to them about the tax abatement and structure for a tax abatement, we ended up getting that done. I want to say the entitlements from start to finish was probably six months, okay, which was like, you know, record breaking. I mean, the city of Passaic was awesome. I mean, I, I can't say, I can't say more good things about I mean, Joe booga, who, who runs the UEC, and who's was our point person, there was one of the best guys to work with. I mean, the, the, the, the actual, the person who maintained the building was a relative of his and his, he had, he had a room in the basement. So that was his room. So it was great to work with Joe booga. And, you know, you know, and help bring back to life, a building that he was he was
Atif Qadir 24:54
part of great. So in the context of talking about the project from the first time that you visited Due to deciding to be a developer and then getting started with the design strategy, a lot of that story is intertwined with incentives. So in order to get a better understanding of all of these really complicated financing pieces, let's go one by one to get an understanding of of each of them individually and how they combined together. So the first one, so get ready for the acronym soup UEC. So urban enterprise zone you had mentioned, could you explain what particularly the benefits were of that program, what the requirements were of you to pursue that program?
Samer Hanini 25:34
So the UC is a state program, it gave you for sales gave you low interest, low sales tax. So like, you see the 3% sales tax, that's all UEC programs, so any of the stores you see the Jersey City or city or Elizabeth or Newark, they all had that 3%. So that was part of the UC program. It also had 0% sales tax for construction, okay, and services in develop in areas like this. So all of the construction products that we bought, didn't have sales tax on them. And it also had a facade program attached to it. So they would get a pool of money in the city, every city had its own pool. And they're able to use that those use the funds to help revitalize the downtown's, the, the main streets, the the areas that have all the job, the retail jobs. So fortunately, they had some some funds in their UAC program. And this This building has, in the past 1020 years, it's always been an impediment for them to develop their main street. Okay, so they were they were very eager to help us with the windows. So we ended up applying for a UEC grant for that. And luckily, we were able to get that and then that was able to get that done fairly quickly.
Atif Qadir 26:59
Okay, now give us a ballpark of given these are different streams of benefits, what the overall value of partaking in the UAC benefits work to a project like this,
Samer Hanini 27:09
like you're seeing dollar dollar dollar amount. I want to say on the windows, I think we had the we had like half a million dollars. You know, the windows alone were probably double that. So So yeah, so it's not a huge portion of the capital stack. But honestly, we learned from all of our projects in New York, any little bit counts. We even gets, we've even applied for grants for like PSE and G for energy, upgrades and things like that. Those are even smaller dollar amounts. Sometimes it's not worth the brain damage. But again, in these projects, wherever you could find it, you have to go for it, because these projects are hard to finance. So you have to take off as much as you can offer the the equity needs. I mean, one thing that you do learn doing these developments in downtown's, you don't have to read a lot. And to read quickly, quickly, and and know you know where to invest your time with these programs. There's tons of programs? Sure. The question is, does it make sense for this particular project? And sometimes the programs don't mix. So you can't mix two state programs. Sometimes, you can't mix two city programs. You can mix federal, state and city, but you you know, you have to kind of pick and choose
Atif Qadir 28:23
how you put them together. And that's why incentives can be incredibly challenging. Yeah, yeah. So the other the other type of incentive that the other type of incentive that you pursued was tax credits. Sorry, let me say that again. So the building is also eligible for tax credits. And there's two different types of tax credits that you pursued on this project. So there's HTCs historic tax credits, like you had mentioned, as well as new market tax credits. Could you explain what both of them are and what their benefits are?
Samer Hanini 28:56
So historical tax credits is a federal program, they give you 20% of the development cost as a tax credit to the project. Okay. So what does that mean? First of all, the building has to be a qualified landmark, or a contributing building in a historical district. In New York, we have five historical districts, and there's a ton of contributing buildings. So that's kind of easy, you know, easier to do in Passaic. There's no historic district, the buildings there, I think there's probably I could probably get this wrong two or three historical buildings. This building wasn't quite it wasn't wasn't done. So we before we even applied for historical tax credits, we had to make sure the building qualifies to receive the historic tax rate. So this was one additional step typically, applying for surrogate tax credits is a three three part process. Part one is confirming that the building is a historical building. Part two is a Um, is the proposal on what you plan to do with the building while maintaining historical details. And part three is when they come and they inspect everything that was built, and it was according to the plans. So typically, if you're in historical district Part one is done, you have nothing to worry about. With this particular building, we actually have to apply part one and justify why this building is historic, and it's important for the area. Now, one of the biggest problems is that the building was demoed on the inside, there was no more historical details. So we had to justify that the exterior was enough, enough importance to the area to justify that. So that was a little bit of a challenge. And the mezzanine on the on the second floor was also a challenge. So those are two challenges. Luckily, nps northparkes Sorry, National Park Service's and Shippo, the state historical preservation organization both saw what we were trying to do, and they finally allowed us to do this project as a historical taxpayer project. So after receiving the approval, you get 20% of the development cost as historic tax rates. Now, the tax credit is a federal tax credit, we end up taking these tax credit and selling it to a federal program, or for a federal business that could utilize a tax credit. That was us Bancorp, US Bank was in this in this particular ones use bank, and they pay us a portion. So for every dollar, they'll give you, whatever, 75 cents, 80 cents, it depends, based on what the value is of that time. So you take that those funds, and then you use those to build the building,
Atif Qadir 31:44
because they give you money to build a building. And they give it
Samer Hanini 31:47
to you throughout the construction project. So it'll give you a little bit in the beginning a little bit in the middle and a little bit at the end when you're completed.
Atif Qadir 31:53
And what was a rough estimate of the benefits from the HTC perspective that the project
Samer Hanini 31:58
so this project was roughly $2.5 million in historical assets,
Atif Qadir 32:04
and new market tax credits was at the most valuable incentive that the building was really was
Samer Hanini 32:08
almost the same. I mean, there was this, the the challenging part with the historical tax rates is, yes, they give you the tax credits, but the hard part is you actually have to build it to historical levels. So you have to install accurate windows that portray the historical details of the building, you have to clean and repoint the exterior, again, to this to the to the to NPS standards, you have to the circulation has to be done, right. The you can't build any exteriors any like detailed new additions to the exterior signage is important. So even though they give you those tax credits, it does cost you more to qualify for that. Got it. But you know, I mean, for us, we've been big fans of historical buildings, and we were going to do that work anyway. So we might as well get the tax credit to help us build these
Atif Qadir 33:01
projects. And then similarly, for new market tax credits, what were the eligibility requirements that were necessary for this building and was the return structured in a similar way to HTCs.
Samer Hanini 33:13
So new market tax rates is a little bit of a different program. It's also a federal program. You have to you have to team up with a community developer, so a community developer that gets a new market allocation from the federal government. So they have an allocation, and they get to use it on projects in the community. So with new market tax credits, you're doing two things you're job creating, and helping the community. So you have to build that story for them to give you the tax credits. In this particular set. In this particular case, we were helping the the Board of Education, find a new home that centralized to their to their area and create new jobs. So they were able to bring on new people, we will bring on retail on the first floor and the gym on the second floor. So all that job creation is part of the new market tax credit program.
Atif Qadir 34:03
And then there I believe that was New Jersey Community Capital that was involved in
Samer Hanini 34:09
there also another great partner, we've worked with him on a couple of other projects in New York. The good thing is we were able to take a lot of what we've learned. I mean, I call this it's been a 10 year MBA program for me figure out how to do real estate development. So we took everything we learned
Atif Qadir 34:26
more valuable in an actual MBA. Yeah, it would have been cheaper to go to.
Samer Hanini 34:30
But anyway, that's a whole other story. Yeah. I mean, the cost of education and development is is. That's like you said, it's another whole nother story. We were able to take all of our learned mistakes from Norik. And some of the other projects we worked on and apply them to this project. And, you know, fortunately enough with the help of the city, we're able to capitalize on that.
Atif Qadir 34:53
So I think incentives we can agree are an incredibly important part of cake. Starting development in areas across New Jersey and across the country. Now let's talk about the elephant in the room. For example, Amazon in its attempt for getting financing for its headquarters to was able to attract incredibly large sums of money for the development of a new campus. Where do you think, either specifically in that example or more broadly, from your experience? Where do you think the line is drawn between incentives that are necessity versus incentives that can work their way towards a windfall for a developer?
Samer Hanini 35:33
So I mean, you have to look at the the basis of an incentive, what is incentive is to incentivize you, as a developer or business or whatever, to come to a particular location via Passaic or whatever, I mean, that the cities are all competing, the state is all competing, everybody's competing to bring that business. And at the end of day, it's job trying to bring those jobs to a particular location. So you have to incentivize the person bringing those jobs to come to this to, to a location like this. In our particular case, we were competing with the Jersey City Market, we were competing with the New York market, the Hoboken market, the whatever market that's more desirable than the Passaic market. So and, I mean, we have that's on a local level, but on a on a federal level, I struggle building like this architectural II is a gem to to knock it down, or to repurpose it to something that doesn't respect the history is, to me is a loss, you know, nationally, we need to preserve our history preserve our, what we're proud of. So the this, the HTC program, is an incentive for developers like us to say, you know, what, take this building, that's going to be a challenge, here's a few extra dollars and get it done. So that is on the on the on the historic tax credit side, on the city side, I mean, you mentioned Amazon, and all these businesses. When businesses come to locations like this, and I'm not defending, or I, you know, this is not a fan of any side of this, but I believe, for developers like us, in particular, in real estate. These developments are a challenge. I mean, this is this is a five year program, five year project for us, you know, from from that first phone call to to a CEO and to post CEO, it's at least four or five years. You know, you have to do the math on that and make sure it's a viable project. So there's a lot of costs here. A project like this sat vacant for 30 years, because it was a challenge. We're competing with the construction prices of New York, and trying to deliver that same quality in per se, because at the end of the day, we don't want to build something that we're not proud of. So we want to build the New York quality and Passaic, so all of these incentives, help us get to a baseline, that's manageable. We're not breaking the bank here, we're just, I mean, we're, we're a smaller developer, we want to do these projects. And without these products, without these incentives, we wouldn't be able to do that. And, you know, when you look at the new market tax credit program, that's set up for business for creating for creating jobs, a commercial enterprise, but it has to be commercial, if you don't do job creation, then you don't qualify. That's an awesome program. I mean, the more job creation we have, the more pride we have with the residents, with the staff person with whatever. Because once you create, give a person a job, it helps their family in a multitude of ways. Like I look back at Newark, we've done a number of projects in New York, and I did a chart the other day, because, you know, we're always, we're always talking to a lot of this, the city folks and, and I looked at the job creation, we did. And over the past 10 years, we created over 1000 jobs, in all our developments.
Atif Qadir 39:05
This is you and your company. It's impressive, very impressive.
Samer Hanini 39:09
That's something I'm very proud of like to say, and I always complain, I always tell my mom, you know, like, this is tough business. So every once in a while, I'll get a call from her. She's like what's going on with and I'll be she'll call me at a bad time, I'd be stressed out. She's like, what's wrong, whatever. And I'm like this happened has happened. I don't give her a lot of details, but I just get it she could she could hear my voice. And then and then I told her about like the job creation. She's like, you know, something, if anything, if if, you know, if the projects don't go the path you want, at least you're able to create these jobs, at least you're able to give back to the community and to make the make the area a little bit better than when when you came there. So these incentive programs at their bases are meant to do that. There are about obviously, there are people to take advantage of them. And I understand that and I see that But at the essence of it at the end of the day, I think it's it's a net positive. Hopefully the people, you know taking advantage, take less advantage or we could create structures where it would make the taking advantage a little bit more challenging. But for the most part, I think they're a net positive to to the the community.
Atif Qadir 40:20
I want to take a moment to tell listeners about our hosts, Michael Graves architecture and design. This design firm has been serving clients worldwide for 55 years, from their offices in Princeton, New Jersey, New York City, and Washington, DC. They provide planning, architecture, interior design, and graphic design services for many different building types, hotels and resorts, office buildings, cultural and educational facilities, housing, healthcare, and civic structures are all part of their repertoire. With hundreds of awards for design excellence, it's clear that they care deeply about their profession, and are keen to share ideas widely. So you're the developer, for this project, as well as the designer and the construction manager at the outset. And through the course of the project. How did having control of all of those three roles benefit you in the development process?
Samer Hanini 41:13
Well, it goes back to when we started our first projects, I don't think we had an option. I mean, again, we were competing with the North Market, the New York market, how do we do all of this and still build these these buildings. So having these services in house was out of necessity. I mean, ideally, you know, nobody wants to do everything. But I think because we did everything, we were able to keep it tight and be able to deliver at a reasonable reasonable price tag, because having all these third parties outside of our business wouldn't have made this thing possible, especially with rehabs rehabs, you're constantly changing. It's funny when whenever we submit a permit set, I know for a fact, it doesn't really matter, because we end up redesigning the thing. Because once you get in there, you're doing them all you're removing, you know, things that don't belong, and you're redesigning the building as you as you as you work on.
Atif Qadir 42:19
And you mentioned earlier that you mentioned earlier that you have the opportunity to work with your brothers safer and Ammar. Could you talk about how you divided responsibilities amongst the various team members at your company? Sure.
Samer Hanini 42:34
So it's a very family oriented business. Even our office, I mean, we have a small office that and we try to we try, we try to bring on team members that that are passionate about what we do. At the end of the day, if you're just coming to for a job, we're not interested, we want you to really believe in what we're doing. And fortunately, we've had some good luck getting the right people on board. Internally, we kind of divide it in a couple of ways. I usually take care of the construction and design side of things my brother pay for works on the all the operations, all of the taxes, the insurance, all of the making sure things are paid, you know, he's on more on the accounting side. And Amir works on the property management side. And we all work on business development, because we're all have to go out there and make sure that we're either bringing we're finding new deals, or bringing investors or working with with City guys to to make sure these projects are viable.
Atif Qadir 43:40
And you mentioned earlier that blink, that number of your tenants have made commitments to hiring locally, for example, blink fitness, their entire staff lives locally here in Passaic, this community minded approach that we've talked about earlier. How do you see that mindset being a part of your entire business process?
Samer Hanini 44:00
So being being a local community developer, and that's I mean, that's, that's definitely what we are. We've always hired locally, I want to say on average, over 50% of our workforce, and our subcontractors are either Newark, or Passaic based, and this particular project was a lot of it was specific. What we try to do, we've done this another project, we've done projects outside of the Newark area. And typically if we go to a certain city, we'll hire the local architect maybe for entitlements, or we'll hire the local attorney for approval process. And the local you know, we'll we'll ask and find out who the local contractors are. We'll ask them for their help. So we've learned being in New York having that logon and fortunately for us, Newark has a ton of resources. There's a lot of contractors very high skilled labor force. We've been fortunate be able to get a lot of those contractors to work with us. And on average, where we're we're over 50% Local and minority workforce for us.
Atif Qadir 45:07
And in that case, that's something that you are not necessarily required to do something that you're choosing to do as well.
Samer Hanini 45:13
We've been doing that since we started. Now it's becoming a requirement for the city of New York. So if you want to do tax abatements, or get any subsidies, you have to do local and minority participation. And I've always told the councilman or the mayor or whoever we speak to at City Hall. Look at our track record. We've been doing this since we started before you asked us to do it. And I think they really appreciate that.
Atif Qadir 45:34
So you mentioned earlier in terms of the building and how its operating now that the eyes on the street, this idea that having activity be visible from the streetscape is an integral part of improve improving our urban environment. So in this context, blink fitness opens at 5am Mama sushi sometimes closes at 3am. And there's a constant flow of people through the building, from your perspective, having been there before the project started and now after it's completed and successfully finished, do you see a visible change in the physical environment by having this building be occupied as opposed to being empty?
Samer Hanini 46:16
Yeah, definitely. I mean, it's it's definitely motivated the the surrounding retailers to upgrade their facade. I know new building new building was built across the street. A lot of the the streetscape, which I mentioned before is getting done the park next door, which they actually call them the Joe Buddha Park. So they're redoing the park, I think it's going to start in the spring, they're gonna redo the whole park. They now have I've been told the only one in the world, it's the New Year's pin yada dropping. So they dropped the Pinjarra off of this building on New Year's and last year, even in the rain, it was very chaotic came down the vinyasa came down. So we're doing it again this year. We're looking forward to it. The mayor has been awesome doing this. And he's, he's, he he's, he's been a driving force on this project. He sees the importance of the building. And he sees that the activation of this building really helps the main street. So he's invested a lot of time and effort and even just having, you know, we say jokingly but this this, this, this new year's event is great for the whole area. If he starts building a yearly event around it, it helps the restaurants, it helps the retailers, it brings attention to the city, it might bring in new retailers that never considered Passaic. So all of this stuff really helps. And it all started because they helped support this building, and bring it back and make it active again.
Atif Qadir 47:47
So it's this idea of this incremental approach to improvement building by building. And so now the lights are on the landmark clock is working again. And this is essentially the beginning of a new era of development for Passaic and the end of your five year adventure on this project. As developer, architect and construction manager, where do you place this project in the arc of your own personal career in the projects that you've worked on?
Samer Hanini 48:15
So this compared to my, like I mentioned before my 10 year MBA program, this was, this allowed us to take everything we learned and really apply it. In development, you're just making, you're always making mistakes, the idea is just to make less of them and to stop making the same ones. So this one I thought was good, I would change a couple of things. But for the most part, I'm very happy. We had great people on board like we had. We had Jeff moinian I'm sorry, Jeff, my money, who, who helped us on the financing on this. We had US Bank, we had New Jersey Community Capital. So our financing team was solid. Our contractors were were were some of the same contractor be used in New York, so they knew what we what we'd like and we like to build. So we were making less mistakes, and doing it much more efficiently. So the construction on this project, I believe was a little less than 15 months for a project the size that's great under 20,000 square feet or 20,015 months. It was awesome. I want to say like our construction team, and our design team was was stellar on this. And now you know this, I think, you know, for us as a company allowed us to show more investors and more banks what we're able to to deliver. So now we're you know, fortunately doing more projects, similar size, similar challenges. And it just It builds more confidence for us also, I mean, just for us, my team myself, it allowed us to say, okay, okay, this is a large building, it's 100, over 1000 feet, I have more confidence now to do one bigger or one more complicated or whatever. So, you know, as much as I sometimes, you know, joke about that what I've learned and other mistakes we made, I don't think we're able to be who we are today without all those mistakes. There is no quick way around development. You can't just wake up one day and say, I want to develop, you know, I always tell people developments like you're the the ringleader in a circus. It's not something simple. I mean, you have lions on one side, you have trampoline, guys, you have clowns, you have cars you have. And you're the guy in the middle making sure nobody crashes.
Atif Qadir 50:45
Or the lion doesn't eat
Samer Hanini 50:47
the ropes people, people, lions are not jumping and biting. There's, there's so many. There's so many challenges and developments. So I think the what we've learned in the past is what's making us today. So you know, unfortunate to say that, you know, we've learned a lot and now we're trying to implement those will always make mistakes, maybe just less of them and maybe less expensive ones. That's that's all I could do. That's all I wish for.
Atif Qadir 51:16
We have time for a few questions I
51:21
was wondering about where you started out in New York was a time when there was a lot going on in New York, but a lot of potential did you have particular role models or mentors or TV relationships that helped you build all the knowledge that you have?
Samer Hanini 51:41
I want to say like my favorite mentor was probably Clem price. Unfortunately, he passed away. And I didn't know him very well. But we we met a number of times, and we got very friendly, near like, the couple years before he passed. And he was the one guy who said, We know how hard this is. Just be patient. And there's people who really care about what you're doing. And, you know, along with him, and I think maybe the the whole landmark committee in New York, I think it was probably the most comforting in this business. Because all these buildings were tough. And they knew and they've seen the history of Newark, they seen the obstacles, the all of the Miss hits, and all of the challenges and all of the issues that they had. And when we're taking one building at a time and bringing it back to life, they appreciated the most. Like they would always be the people that asked for tours after the facts. Less so the other the business folks, as long as you made a couple of dollars, it's fine. But these this group of people, like you have Liz Liz del Tufo and Zemon Zang, and all these people really loved what we were working on. And some people don't even know would come out of the blue sometimes like, Oh, I love what you did with that building. I'm glad you kept the the lobby of this building. I'm glad you restored this you'd like and we saw it. And I knew how difficult it was to bring these things back to life. And it's nice when somebody actually appreciates it. So I want to say in New York without them it would have made the whole process a lot more difficult.
53:34
Samer, given your background in architecture, how hands on and sleeves rolled up? Are you in the design process? Or do you just say,
Samer Hanini 53:45
No, it's at a point where it's a little too much I've learned how to deal with it now. Less design, more construction, more business? Like we, in the first few projects we kind of over designed and I love them. I mean, the the the end product was great. I mean, you look at the Hotel Indigo today. I'm very proud of the end results. Unfortunately, sometimes the the business model doesn't make sense with the detail. I mean, you have to and now I see why certain developers which I hope we never take the path the shortcut to anything. But I understand sometimes you have to make sure your design makes sense with the the the end product, if you're over designing something or over building it, it may not be utilized with the historical buildings of glad that we always try to restore restore the historical aspects. But sometimes we have to just be realistic with the the end product of what what will be used for. And is it a is it is that a profitable end result? And I'm not saying to just build for the profit. I'm just being just saying be more conscious of it. You might not need to do certain things that are not going to change the experience of the building. But we're very hands on. I mean, we're, I want to say, I spent half of my week doing design with the team like we have a, we have a staff architect who takes care of all the architecture. Brandon's an awesome designer, great architect, very involved. He's involved with a lot of the AIA committees and with with NJIT, we're very plugged in to NJIT, we make sure that we try to give back as much as possible. They've been they've been awesome support also, that's another you know, besides the landmark folks, that object he's been awesome support. It's been good. I mean, the but but at the end of the day, it does take a lot of our effort to actually deliver these products.
Atif Qadir 55:50
So thanks so much for joining us today Samer. Thanks for having me. Next time I'll be interviewing John Picard, the founder and partner of Picard Shelton, an award winning design firm based in New Haven, Connecticut, with clients like Uber, Exxon, Mobil and Google. My name is Arthur F Calder and this has been conversations with Michael Graves