🎙 Passive Cash Flow Podcast EP.182 | The New Jersey Housing Market is in Chaos!
Soco Construction discussed New Jersey’s high-demand, high-cost real estate market on the Passive Cash Flow podcast. The 100% employee-owned firm, known for projects like the Monmouth Mall redevelopment, now faces a skilled labor shortage, a greater hurdle than current material prices. Developers navigate complex affordable housing rules via creative strategies for municipal approval.
The crucial first steps for new developers are building a strong team and conducting a site evaluation well before breaking ground, with early contractor involvement key to cost and regulatory management.
🧠 Topics Covered:
0:00 Introduction & Market State
2:11 Why NJ Housing Demand is Strong
5:14 Repositioning of Malls
8:50 Post-COVID Construction Costs
12:10 The ESOP Company Model
14:23 Affordable Housing Mandates
18:41 Property Tax Impact on Deals
23:08 Client Work: Multi-Family vs. Commercial
27:54 Best Daily Habits & Books
31:17 Wrap-up & Podcast Info
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This is not a solicitation for funds, tax advice, or legal advice. This is not intended to be, and must not be construed to be in any form or manner a solicitation of investment funds or a securities offering. Peoples Capital Group LLC is NOT a United States Securities Dealer or Broker nor U. S. Investment Adviser is a Consultant/service provider and makes no warranties or representations as to the listener or viewer. All due diligence is the responsibility of the investor.
Transcript:
00:00:33:04 – 00:00:58:18
Aaron Fragnito
All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast. I’m your host, Aaron Frag. Neato. And we have a very interesting guest today. A man who builds things from the ground up, manages a huge staff that gets out there early in the morning to, create this construction, to create this real estate. We love living in love, running our businesses in with Soco construction.
00:00:58:18 – 00:01:00:07
Aaron Fragnito
How are we doing today, Dayton Pierce?
00:01:00:09 – 00:01:05:05
Dayton Pierce
I am doing excellent, sir. Thank you very much for having me on. Is great to see you. Great to be a guest with you here.
00:01:05:07 – 00:01:24:10
Aaron Fragnito
Of course, of course. So aside from your, excellent, shirts that you wear, I wanted to have you on the podcast here because you are, an expert in the real estate development space. Now, here, Peoples capital Group, we are primarily by an existing assets and reposition them in the apartment building space here in northern new Jersey.
00:01:24:12 – 00:01:42:18
Aaron Fragnito
But your group so Co Construction does, ground up development, you know, from apartment buildings to commercial and I mean, you guys have been around long time. I’m very impressed with, some of the real estate you’ve built. Just beautiful and and huge. So, I just want to end the show here, by the way, to our listeners, if you’re enjoying our content, be sure to like and subscribe.
00:01:42:18 – 00:01:58:24
Aaron Fragnito
We are on YouTube and all the major podcast platforms and, share it with a friend. Also, if you enjoyed this content, you know some of that might get some value out of it. So my friend Dayton, you know, let’s, break right into it here. Okay. Let let’s, I think the elephant in the room is,
00:01:59:01 – 00:02:15:07
Aaron Fragnito
Well, you know, interest rates are up, land is expensive, building starts are down. So what are you seeing out there? You guys twiddling your thumbs? Waiting for jobs to come in, or are you seeing a pretty healthy, development market, yourselves?
00:02:15:09 – 00:02:30:21
Dayton Pierce
It’s a great question. One of the beautiful things about being a new Jersey company is new Jersey seems to have an insatiable quest for housing demand right now. So, you know, it’s a little bit of a mixed bag. I guess to unpack this a little bit. It’s harder than ever to put deals together, and that’s not on my side.
00:02:30:21 – 00:02:49:18
Dayton Pierce
You know, I’m fortunate that I get involved to come help you build your dreams. Right? Certainly the capital stack seems to be an issue on getting deals out to go through. Getting them to pencil on initial proforma is, you know, that’s difficult. But once you can get through all of that and finally get things moving, there certainly still seems to be huge demand in new Jersey.
00:02:49:20 – 00:03:07:09
Dayton Pierce
I think specifically with some of the things that have been post Covid in New York City, obviously external, things that are going on New York certainly doesn’t seem to be as busy as it once was. But people seem to continue to flood to new Jersey, you know, rent growth has been good specifically in the bigger markets.
00:03:07:11 – 00:03:29:20
Dayton Pierce
And the beauty of my company, Aaron, is that we build a little bit of everything. We’re very well diversified. So our multifamily is obviously a huge staple, very big in the press. A lot of our projects you’ll never see you hear about. We do work for confidential pharmaceutical clients. So campus institutional work, which is a little bit less, cyclical to the overall economic scene back, you know, that’s kind of steady work.
00:03:29:22 – 00:03:47:18
Dayton Pierce
And that’s built on reputation and relationships with. We’re very proud of our partnerships that we have there, higher education much the same. Some of your big institutional higher education facilities need new athletic fields, dorm room upgrades, things like that. That’s kind of a little bit of insulated work. And surprisingly enough, retail has been extremely strong.
00:03:47:20 – 00:04:08:13
Dayton Pierce
On the small commercial, both renovation and new builds. Retail has been a really strong sector for us. Personally, I’m involved with the redevelopment of the Monmouth Mall in Eatontown, new Jersey, which basically was the demolishing, of one point 2,000,000ft² of retail. So, my firm was hired to do the new retail build. My client is Kushner Companies.
00:04:08:13 – 00:04:31:16
Dayton Pierce
They’re doing, multifamily component as part of the project as well. But, you know, we’ve dug in on a nice bit of retail there, and it’s exciting to see how owners and sophisticated developers are trying to reposition assets. And also this live, work, play concept seems to be, a really hot driver right now. People want to have both their ability to live somewhere with good eateries, restaurants, access to transit.
00:04:31:18 – 00:04:49:15
Dayton Pierce
And, you know, that’s for people much smarter than I to get the deals there. But, you know, I always encourage folks, people look at us, they say, hey, you’re a contractor, right? I’m a service provider, and my best service is mine. And my team’s experience, the sooner you can get a firm like myself involved with your project, we can help guide and advise through some of these issues.
00:04:49:15 – 00:05:06:05
Dayton Pierce
You know, how can you, use your capital that you have before you get to financing to best maximize your early, you know, start of your project? So, you know, always having good dialog, good communication. But, you know, we’re very fortunate as an organization. And at the end of the day, from the capital, one of us or people are our capital, right?
00:05:06:07 – 00:05:17:24
Dayton Pierce
From the contractors perspective, my capital or my staff and the employees that we have at our firm, and we’re very fortunate that we have great talent and we’ve been able to retain great talent, would help, you know, separates us from some others.
00:05:18:01 – 00:05:36:01
Aaron Fragnito
Right? Right. That’s amazing. I love what they’re doing with malls these days. Does make sense. Because there are some malls out there, like I was at the Livingston Mall for, one of my friend’s kid’s birthday party, and it’s like a spooky. It’s almost like a horror movie, you know, you’re walking through. Like I say, every third store is occupied.
00:05:36:03 – 00:05:50:20
Aaron Fragnito
You know, just huge vacancies. And I don’t know how the place is surviving. It’s like falling apart because they’re not getting enough money to maintain it. So you got like, leaky roofs and stuff going on and, it’s, it’s got to be terrible for the stores that are there. So I think it’s only a matter of time.
00:05:50:22 – 00:05:57:24
Aaron Fragnito
Keep your eye on Livingston more. I think that’s the next one to turn. Maybe I’ll call Mr. Kushner there. And, Tom, you know, we’ll do the deal together.
00:05:58:01 – 00:06:14:15
Dayton Pierce
Absolutely. You know, the one area since you mentioned, I see the New Brunswick malls in the press a lot. Looks like Township just authorized that as a redevelopment zone. So now people are trying to figure out what what’s next there. And I agree with the sentiments. I think that the big thing for retail right now is strong retail drives by strong code tendency.
00:06:14:15 – 00:06:31:24
Dayton Pierce
Right. So when you have these malls that don’t have max capacity, of tendency and you don’t have good draw, you know, obviously that’s not attractive to new retailers, but places that are able to reposition seem to be getting big box names, some high end retail clients, and they’re signing good leases. And both parties are happy for us.
00:06:31:24 – 00:06:51:00
Dayton Pierce
You know, we’re happy to help play our part when the, the circumstances, you know, dictate themselves. You know, big mall redevelopment, like I said, Monmouth we’re doing right now. A lot of similarities to our institutional campus work that we’ve done, you know, at the core of our company. So we’re very well positioned to help set up, do some of these, outside of me.
00:06:51:02 – 00:07:06:03
Dayton Pierce
Fellow executive of mine has work going on at the Garden State Plaza right now where we’re not doing the multifamily component there as well, but putting in a ton of site work, doing a bridge. So, you know, two of the big malls that are being repositioned right now, my firm is fortunate enough to be in a position to, to help on both.
00:07:06:03 – 00:07:08:23
Dayton Pierce
So that’s that’s a testament to we are we’re very proud of it.
00:07:09:00 – 00:07:24:23
Aaron Fragnito
Yeah. That’s amazing. Those sound like great projects. And it is incredible. Just the insatiable demand for housing here in new Jersey, the amount of people that are living in such a small place, especially in North Jersey, because Jersey is funny, you go down in South Jersey, you know, down in the Pine Barrens, like I go, dirt bike riding down there.
00:07:24:23 – 00:07:44:04
Aaron Fragnito
It’s it’s open, man. It’s awesome. It’s great for ATV and and off road and, and you know, it’s it’s it’s really the country down there in South Jersey something happens like above 195. You know, you start to, see less and less farms and more and more, condo developments. And then by the time you get up to New Brunswick, forget it.
00:07:44:04 – 00:08:02:16
Aaron Fragnito
There’s no more trees anymore. It’s just all, cities and traffic. But, and that’s where I live up in, like, the Basking Ridge area right here in Somerville. So, you know, it’s it’s really incredible, though, how many people live in such a small place here in new Jersey and how much the demand for housing just continues to grow and grow.
00:08:02:16 – 00:08:27:00
Aaron Fragnito
And it’s often overlooked by investors because it’s considered a blue state. Although actually, 48% of us voted for a Republican governor last time. So we’re not as blue as everyone thinks. But, at the end of the day, you know, it’s considered a blue spade state, a lot of restrictions. So, it’s, it’s interesting, but we see a lot of value here now when, you know, we we saw such an increase in prices with Covid.
00:08:27:00 – 00:08:47:09
Aaron Fragnito
You know, I remember like, lumber shot up like 200% in like four days. And everyone was panicking. It was the end of new construction and the end of the world as we knew it. And, I believe prices have come down a little bit. Where are you seeing, you know, construction prices. You know, you had a pretty heavy inflation there about four years or so.
00:08:47:11 – 00:08:54:15
Aaron Fragnito
So has the price of new development come down a little bit, or it just stopped increasing as aggressively.
00:08:54:17 – 00:09:18:01
Dayton Pierce
It’s it’s a great question, you know, and if I had all the answers I’d certainly be a lot wealthier man for it. But, certainly, I don’t think we’ll ever see pre-COVID levels again. You know, the, the catch phrase it’s out there is the new norm, right? So certainly things came down from, the Covid run, you know, certainly now with a lot of noise in the industry and, you know, the tower conversation that everybody wants to talk about, there’s a lot of noise.
00:09:18:03 – 00:09:42:12
Dayton Pierce
You know, the one thing that I’ll say is, I have a duty as an agent of my owner to represent my client and get them the best value. Right? So unfortunately, noise sounds noisy, but, it has to be substantiated. Thus far, we’ve found very little significant impact of any of this noise actually driving anything. A lot of it is, you know, material suppliers and things like that, either predicting what’s going to happen and, you know, again, our industry is both reflexive on payments.
00:09:42:12 – 00:09:57:09
Dayton Pierce
You know, you’re 30 to 45 days after you put work in, you get reimbursed. Right? These guys are also for thinking, and hey, what’s going to happen in the next quarter or 60 days down the run? So it’s a very delicate balancing act. At the end of the day, you know, we have to evaluate every situation as it presents itself.
00:09:57:09 – 00:10:16:01
Dayton Pierce
But certainly, things are better than they were in Covid. And, you know, one of the things that we try to stress our owners is, you know, what is your capital stack look like? You probably have some position of equity that has to go out before your financing kicks in. How can we best help serve you? Get your project advance quickly with that equity that you have to spend anyway?
00:10:16:03 – 00:10:29:22
Dayton Pierce
Do we want to go after, you know, your electrical gear day one, or do we have a little time on that? Do we want to go after something else? And, you know, that’s really the type of service that we try to help owners in this environment is how can we best utilize your resources to help minimize impacts of your project.
00:10:29:22 – 00:10:31:22
Dayton Pierce
And, you know, that’s that’s really what we’re out here to do.
00:10:31:23 – 00:10:49:06
Aaron Fragnito
Yeah. Yeah. That’s interesting. And then what about, this crackdown on illegal immigration? You know, and ice like, coming to job sites and stuff? Are you seeing an increase in labor costs or a shortage in labor with the new administration cracking down on illegal immigration?
00:10:49:08 – 00:10:57:03
Dayton Pierce
So another great question. You know, admittedly, 60 days ago, if we had this interview, I could have got out of this one. Right. But I can say it is,
00:10:57:05 – 00:11:01:22
Aaron Fragnito
I got you some zingers now, you know, softball. Yeah. That’s Bachelor podcast.
00:11:01:24 – 00:11:17:19
Dayton Pierce
Yeah, man. But, hey, listen, you know, it’s it’s what you sign up for it. It’s a legitimate question. What I can say is I haven’t seen direct impacts in New Jersey on my job sites yet. Again, certainly the noise, in the press is yet, you know, these things are happening in the southwest region and these things are out there.
00:11:17:21 – 00:11:39:12
Dayton Pierce
Haven’t seen any direct impacts yet. Related to the governmental interference or action, if you want, to your question about the labor market, the labor market, no, no surprise should be it anybody, you know, once material prices kind of came back. Now labor is the hot issue, right. And, it’s a reality that there’s not a ton of skilled workforce that wants to work in the construction or commercial real estate industry.
00:11:39:12 – 00:11:57:01
Dayton Pierce
Right. You know, this generation’s very big into the tech fields. And, you know, that certainly has a need. But I see, you know, my children’s generation becoming that blue collar trades again, kids going to school to become plumbers, electricians because there’s such a demand already five, ten years from now, there’s going to be a massive shortage. Right.
00:11:57:03 – 00:12:13:21
Dayton Pierce
You know, it’s the next domino that has to be balanced. What I can say, at least from my experience at Soco, employee retention is extremely important. And when you find good workers and good employees, you want to make sure you retain them. So we’ve done a lot as a firm to make sure that we have competitive packages.
00:12:13:23 – 00:12:32:07
Dayton Pierce
Three years ago, we actually bought our company from our former shareholders. So we’re a 100% employee owned company. That’s a huge retention benefit for us. We’ve seen in the last three years of being employees. Guys like myself, I could see myself riding my career out here because of it even before that. What a nice benefit to have as part of it.
00:12:32:09 – 00:12:51:00
Dayton Pierce
And it’s additive, right? It doesn’t take away from our traditional package that we would offer somebody. It’s a total cost free added bonus of being an employee here. You know, stock rates in the company every year based on our performance. And that’s, one hell of a motivator and one hell of a retention benefit, because every decision everyone makes impacts all of our bottom line.
00:12:51:00 – 00:13:08:08
Dayton Pierce
Just 107 employees. Now, we all want to retire one day, right? So we better make good business decisions as an organization. And certainly, put skin in the game for us. And I think our clients that we’ve met since, certainly liked the idea of it and the clients that we’ve had from, you know, before the change, you know, couldn’t be more complimentary for us.
00:13:08:08 – 00:13:18:03
Dayton Pierce
It’s it’s given us the ability to write our own ticket in the industry. And we’re very proud of what our officer, group has accomplished by putting this in play for us as an organization.
00:13:18:05 – 00:13:36:00
Aaron Fragnito
That’s interesting. Yeah. And I love of you guys have done with the, employees owning, you know, part of the company that’s really, shared value there. You know, I try to also structure my company on an incentive based, you know, bonus based, you know, and not, just, you know, give people a paycheck for showing up.
00:13:36:00 – 00:13:56:07
Aaron Fragnito
It’s it’s about the actual performance of your work that matters. And, we do that through, you know, kind of commissions and bonus space and so on. But I love how you’ve gone a step further and, and allowed the employees, to essentially buy and own the company from, from the owners that that’s great staff. I mean, that really is structuring a win win for everyone.
00:13:56:07 – 00:14:14:12
Aaron Fragnito
Where now you’re all in it together, you know, and you have a, a real need for this whole company to succeed, you know, and stay late, show up early, make it work. Do work with integrity and performance based. So, that’s a great model, you know, and hopefully it inspires more companies to do the same as they see.
00:14:14:12 – 00:14:28:05
Aaron Fragnito
So co struction really flourish there. No, that’s that’s great. Now, let’s switch gears a little bit here. You know, a new Jersey is I got, I got some more hard won. So get ready. Yeah.
00:14:28:07 – 00:14:28:23
Dayton Pierce
Go ahead.
00:14:29:00 – 00:14:31:09
Aaron Fragnito
I will continue throwing fastballs. So,
00:14:31:11 – 00:14:37:21
Dayton Pierce
Nobody ever calls me to ask how my day’s going to say hello. Usually when the phone’s ringing, it’s because something’s wrong somewhere. So I’m used to dealing with the fly. You can go.
00:14:37:21 – 00:14:57:08
Aaron Fragnito
Ahead. Yeah, yeah. Well, we’re we’re on the golf course. I let you win. First of all, I’m not that bad at golf. I just pretend to be that bad at golf. Yeah, I’m actually a great golfer. Just not in front of anyone. I do clarify. So I’m always letting you win, just as a nice guy, but, now let’s talk about affordable housing here in new Jersey.
00:14:57:10 – 00:15:18:18
Aaron Fragnito
So, you know, big affordable housing requirements, for the cities. Right? So a lot of them are trying to catch up and meet these requirements that the state has enforced on local municipalities to create a certain amount of affordable housing. And it seems like for the most part, you know, builders have been able to make it work.
00:15:18:18 – 00:15:34:15
Aaron Fragnito
I know in Newark there’s like a 20% requirement or so on it. It just basically becomes part of the project cost, you know, and you’re just like, all right, I’m gonna have 20%. It’s gonna have to be affordable housing. But then a lot of times we’ll throw in a tax incentive like a pilot or an abatement or something like that, to make the numbers work for the developer.
00:15:34:17 – 00:15:59:18
Aaron Fragnito
I just saw a war in new Jersey, like a 200 unit get put in, and I think like 20% was, affordable housing. So, you know, there you go. Right there is a 40 units that can help them towards their goal. So, what are you seeing out there, do you think, like, that’s almost, kind of, it’s almost helping more construction go, and actually take off because towns are like, they need to get this affordable housing down.
00:15:59:18 – 00:16:11:17
Aaron Fragnito
So they’re like, more likely to greenlight a project that has affordable housing, or is it making it harder for the projects to pencil out for the developers and therefore slowing, new development in new Jersey?
00:16:11:19 – 00:16:31:11
Dayton Pierce
It’s a great question. And, you know, obviously with everything in our industry, it’s a very complicated answer. But, you know, I would say this, I think that owners and developers that understand this is the expectation. And certainly there’s been legal challenges for years and years about this. I think generally now the understanding is some level of this is going to be required to be implemented.
00:16:31:11 – 00:16:47:02
Dayton Pierce
I think the plans of grandeur that will get this thrown out in court are kind of gone. You know, Laurel doctrine is all right. So, you know, now they’ve found a way to try to get creative, to your point, with some of these programs, these fighter grant pilot programs, how can you find a way to make a pencil out for your deal?
00:16:47:04 – 00:17:05:17
Dayton Pierce
What I would say is the owners and developers that I specifically have been working with, creativity has been the best solution, right? Affordable can mean a lot of different things. I have a client right now. I’m about to break ground on a 220 key assisted living building. Wouldn’t you know that Medicaid affordable, you know, units count as affordable housing.
00:17:05:17 – 00:17:23:17
Dayton Pierce
So there’s a way to kind of selectively get 55 and older communities, things like that. I certainly see owners being creative on how can they both accomplish this. Maybe they don’t even want the incentives they just want to help the community. And, you know, back to our earlier point about new Jersey, New Jersey’s agreed plays probably the most diverse state in the country.
00:17:23:17 – 00:17:28:10
Dayton Pierce
You have pine barrens and beaches and bogs and mountains and cities. Oh, my right.
00:17:28:12 – 00:17:30:10
Aaron Fragnito
Garden state’s beautiful, bro. Yeah.
00:17:30:12 – 00:17:58:11
Dayton Pierce
But with that we have 500 and some odd individual municipalities that have individual legislation, requirements, ordinances, codes, etc. so, you know, you kind of do need somebody that plays in new Jersey. They can speak the language of these towns and by no means are me, my firm’s expert in all 500. But we work in all the major. So partnering with the right contractor, Expediter architect, whoever your team is that you’re assembling upfront for a project, those initial relationships certainly can help advise you or help get you into a position that does make the deal.
00:17:58:17 – 00:18:16:10
Dayton Pierce
So, you know, a lot of people here, pre-construction, they think I’m just trying to sell service, right? I encourage all of my bigger clients and bigger development. It’s worth the investment the more we can help. Advise you up front, help get your budget right, help get you the product that you need, the better it’s going to be on the back end for you.
00:18:16:10 – 00:18:33:07
Dayton Pierce
When you’re ready to actually go out for financing, whether it’s debt equity, however you’re putting your stack together, you’d rather have the best information possible. That’s actionable. Unfortunately, you know, people that don’t go that route, you know, it’s an estimate and then they’re getting financing of it and then it’s up or down, right. And depends on what’s qualified there.
00:18:33:07 – 00:18:53:06
Dayton Pierce
Right. So you’ve seen it on the big ones. You know, as a firm, right now we have to 200 million hundred and 80, $200 million, big developments in play that both had one year of reconstruction leading up to that, assisted living building, one year, nine months of pre-construction leading up to it. And we really find the value in helping advise clients up front.
00:18:53:08 – 00:19:13:22
Dayton Pierce
You know, that coupled with what again, cap reads, what you’re looking to make on a deal. That’s not my language. You know, that’s the developer side. But guys that are willing to take a little bit less seem to be advancing. And I guess just as an overlying premise, one of the benefits of us is backlog that we expected to go last year that got delayed for whatever reason, financing, putting the deal together.
00:19:13:23 – 00:19:33:19
Dayton Pierce
That’s now actionable revenue this year, right? As long as I can replace that for next year, we’re in a good position to keep. If they shift, as long as you can fill that back shift, you know it’s going to be a good year next year. What you didn’t have this year. You know, we’ve been fortunate in this organization through our relationships, through, you know, our pride basically as a company in our name and our brand recognition.
00:19:33:21 – 00:19:52:03
Dayton Pierce
We don’t market a ton. People come to us and, you know, we’re happy to always meet new people. But, you know, the buildings that we built speak for themselves. The Asbury Ocean Club is an iconic building in new Jersey. We built that about a decade ago. It was huge at the time, one of the, if not the largest, one of the largest nonunion projects in new Jersey.
00:19:52:05 – 00:20:06:08
Dayton Pierce
We’re tremendously proud of that. We’re building right across the street from a right now at the same client. So, you know, that’s the testament to who we are. I stay in Hudson in Monmouth County. I don’t seem to be my two hotspots, but, you know, I did a 15 story development and a parking garage for a client.
00:20:06:08 – 00:20:28:01
Dayton Pierce
They called me on a second building, so I’m finishing an entire city block of development in West New York. We just broke ground on the second tower a month or so ago. So us, you know, it’s it’s it’s we value, what we bring to the table and clients and see that certainly we can help you. But, you know, I guess to the original question, it’s all about your risk tolerance as the owner and what your expectation is on making it on the back end.
00:20:28:03 – 00:20:55:16
Aaron Fragnito
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00:20:55:18 – 00:21:03:07
Dayton Pierce
Yeah, everybody finances their deals differently and everybody has a different risk appetite depending on what their investor base is. So you know, it’s kind of case by case.
00:21:03:09 – 00:21:29:19
Aaron Fragnito
Sure. Yeah. It’s interesting because we just bought a lot in Sussex Township up in northern new Jersey. And you know, we at first thought, we can get about 40, 42 units approved on it, but then we, you know, started talking, with some different, builders having some different ideas on it. And like, we realized we might be able to get 60 plus units approved because about 20% of them have to be affordable housing.
00:21:29:22 – 00:21:51:21
Aaron Fragnito
And the city will ideally allow us to have more units approved on the lot and be more likely green light, a variance on the, lot. You know, if we, of course, help them achieve their affordable housing needs. You know, the bigger the project, the more likely then the more, affordable housing units we can build. And the closer they will get to meeting their affordable housing requirements.
00:21:51:21 – 00:22:11:19
Aaron Fragnito
So, it’s really a win win for everyone. You know, we’re loud. We end up getting approved for 25 plus more units. They end up getting another, you know, 4 or 5, affordable units for their, their city. And, that can make a big difference for a small town. So, you know, that’s something that, it turns out to be a positive at the end of the day.
00:22:11:19 – 00:22:29:13
Aaron Fragnito
Right? And then, you know, it’s not like the affordable units are when we go to sell the development to a builder are worth, like, nothing. They’re worth something. And also there’s different levels of affordable housing. There’s your 20% mark your 50%, mark your 80% mark. You know. So some of them, you know, you get 80%. You know, what fair market is is not that bad, right?
00:22:29:14 – 00:22:43:14
Aaron Fragnito
So they’re going to sell for about 80% of their market per dollar, cost, you know, when you go to sell them to a builder. So, so yeah, it could be a, it could be a Win-Win. Of course, the end of the day and I, ideally bring, housing costs down, but that’s a whole different conversation.
00:22:43:14 – 00:22:57:13
Aaron Fragnito
I will I won’t make you explain affordable housing and how, how it works out taking units off the free market will lower housing costs. We won’t get into that one. That’s a touchy subject there. We’ll do a different podcast on the golf course for that one.
00:22:57:15 – 00:23:14:10
Dayton Pierce
Yeah, absolutely. I’m always I’m always happy to come back for a round two. And I would just say I want to summarize that. I think it all comes down to the appetite of the developer and the owner, the needs of the municipality and, you know, the wherewithal to get positive things done. And when good people come together for the right reasons, good business can be done.
00:23:14:10 – 00:23:18:09
Dayton Pierce
And that’s the model that we try to live by it. I believe that, you know, the core of my being.
00:23:18:11 – 00:23:40:19
Aaron Fragnito
Yeah, absolutely. So, All right, so, as we wrap up here, I got one more, zinger for you. Okay. This one will be easy. Let’s just, you know, talk to people out there kind of about, like, the process. A lot of people are curious about real estate development. I mean, most of the people, when I explain what we do, like, we buy apartment buildings and we reposition them and, they’re like, oh, so you do real estate development.
00:23:40:19 – 00:23:59:24
Aaron Fragnito
I’m like, well, actually, real estate developers ground up development there. And there’s like, why don’t you do that? I’m like, well, I guess it’s a whole different beast. And, so, you know, people are really interested in real estate development, you know, and I think people misunderstand the process of it and, you know, probably think it’s easier than it actually is.
00:24:00:01 – 00:24:17:13
Aaron Fragnito
But, you know, let’s say you’re you’re someone that, wants to get into real estate development, you know, and you’re looking at a piece of land, you drive by it every single day. It’s an eyesore. And it’s like a great location, though, to build a nice apartment building on. Or maybe a bunch of storefronts and apartments above that.
00:24:17:13 – 00:24:35:23
Aaron Fragnito
And you have a a grandiose vision in your mind. And you are you are the one who could make this happen. What do you do? Like what’s the first steps to seeing if a lot is good for real estate development? And just like walk us through in general, like the first few steps and then like the next steps after that, to actually become a real estate developer.
00:24:36:00 – 00:24:51:06
Dayton Pierce
Sure, sure. So, you know, we’ll speak on this isn’t, you know, the the two family conversion. You know, this is on the, on the ground scale that you’re talking about it. You know, the first thing when you find a parcel of land, I can’t stress how important it is for owners and developers to build a good team and obviously self-serving.
00:24:51:06 – 00:25:06:10
Dayton Pierce
I’d love to be a part of it, but if not, you really need the right team of professionals from the industry to help guide you because it is not simple. And you know, everybody thinks development’s easy until you get there. It’s it’s so many complexities. So the first thing you would need to do is you want to do a site evaluation.
00:25:06:10 – 00:25:26:17
Dayton Pierce
So you would hire a geotechnical, firm to come out, give you both a subsurface analysis as well as an environmental phase one and phase two analysis. That’s really the trigger for for real estate development, right? That happens two years before you have drawings. Before I know anything about it, you’re talking to these folks and understanding as part of your due diligence of buying that property.
00:25:26:17 – 00:25:43:02
Dayton Pierce
What do I really have here? Once you get through that, you need to hire a design team. Typically an architect, either who brings their consultants for MHP, structural, etc. or, you know, you hire out individually. You need a civil engineer and you need an architect with their consultants to give you the full package. So then you start developing drawings.
00:25:43:02 – 00:26:01:11
Dayton Pierce
Right? That’s a process amongst itself. And, you know, depending on your level of sophistication and knowing what you need, you got to sit down and really meet with them and get the building that you want. Right. So then that’s going to go to a process somewhere along the way of getting your drawings developed and having drawings finished, you’re probably going to want to bring someone like myself.
00:26:01:15 – 00:26:21:15
Dayton Pierce
And again, you know, it’s easy for me to sit here and say that the earlier you bring me in, the better your project is going to be. I have seven slides with dollar values in the hundreds of millions that the proof’s in the pudding for us. It’s our process. We believe in it because it works. The earlier you have less advising, you’re going to get your drawings, you’re going to go out to market, and all of a sudden you’re going to be $5 million over budget.
00:26:21:15 – 00:26:40:08
Dayton Pierce
There’s nothing you can do now, right? Have you me in early? We offer the process along the way, bringing me in. I also help you navigate the entitlement and regulatory process. So you’re going to need permits. What’s the municipality you’re looking for? What are their expectations? That’s the expertise that we help bring to the table before I even put a shovel in the ground.
00:26:40:10 – 00:26:51:21
Dayton Pierce
I know Jane in the back of the newer building department’s only there on Tuesdays at 1130, so we should go see her. That, you know, as a colloquial example. No disrespect to Jane. She’s not there, you know, just just a throwaway example.
00:26:51:21 – 00:26:59:18
Aaron Fragnito
The officials usually it’s like Tuesday at 11 or like Thursdays at four, and that’s it. And you’ll go in there Thursdays at four and they’ll be like annoyed to be there. Yeah.
00:26:59:19 – 00:27:15:06
Dayton Pierce
Correct. Jersey City in the last two years, they went through an older system. They now have an online portal system which, you know, again, it’s fantastic. I was doing a job in Jersey city. You’re ready to transition. How do we do this? How do we navigate this? Again? Things people see CMG see oh, this guy builds for me.
00:27:15:06 – 00:27:35:23
Dayton Pierce
Yeah I’m a builder at heart. But you know what? I’m also in executing projects from cradle to grave for you. So, once you build out that team, if you don’t have a CRM or a contractor pick, you know, once you get your drawings, you then go to market. You know, typically folks competitively bid it. We give some type of level of estimate or number, and then the owner decides who they want to move forward with.
00:27:36:00 – 00:27:53:12
Dayton Pierce
And then the last part, and always the hardest part of this climate is the financing piece. Right. You’re going to do all of that before you may even know if you can pay to build this job. And that’s, you know, we’re we certainly seen the lag on jobs more so in the last two years. It used to be, you know, one year from when I heard about it, it jobs in the ground.
00:27:53:12 – 00:28:12:09
Dayton Pierce
Now it’s getting towards, you know, two ish years, you know, just because it takes time to put these deals together and, you know, again from the owner’s perspective, it’s capital. You have to invest upfront, probably out of your equity portion for hard costs that you’re paying for consultants and professionals. But the better that you set the job up upfront, the smoother is going to run for you.
00:28:12:09 – 00:28:27:24
Dayton Pierce
And the biggest, you know, risk to an owner is interest. Carry on the back end. Right. By investing upfront, you know, I’m a firm believer projects run smooth top down and then you don’t have as much exposure to interest. Carry on the back end. So you know almost invest a small portion of that upfront and make it easier.
00:28:28:01 – 00:28:46:18
Dayton Pierce
But you know, every deal is different. Every owner’s different. You know, you have the sophisticated, institutional firms that don’t even need to go to banks because they have, you know, family investors that they could just call for their next deal. And then you have, you know, folks that go to the traditional institutions and, you know, JPMorgan Chase probably wants to see different things to pencil out.
00:28:46:18 – 00:29:04:08
Dayton Pierce
Then, you know, maybe a family office would. So it’s it’s a very fluid and variable situation. But nothing is more important in development than the team that you pick. You know, obviously I put myself against everybody in the industry in my firm. We work with a lot of great folks. Not that I ever have a dog in the fight because I don’t hire them.
00:29:04:08 – 00:29:22:20
Dayton Pierce
But we work with a lot of great architects, geotechnical firms, MEP consultants, waterproofing consultants. So hiring folks like us, or even knowing folks like us, you get a good resource to a very wide range of the market and, you know, help advise you along the way. At the end of the day, we don’t self perform. I’m strictly management.
00:29:23:01 – 00:29:29:02
Dayton Pierce
I’m the fiduciary of the owner, and I’m here to represent you and make your dreams come true. And that’s that’s what I get up every morning to do.
00:29:29:04 – 00:29:41:01
Aaron Fragnito
Right I love it. That’s great man. That’s beautiful. Our thing. Well, how can people reach out to you and and learn more about your services and, maybe get that piece of land developed into a beautiful piece of real estate, make their dreams come true.
00:29:41:03 – 00:30:01:19
Dayton Pierce
I appreciate it, sir. You can always find our our company website. So co construction.com. You can see our great resume and our portfolio of, you know, breathtaking projects we’ve done in new Jersey, Pennsylvania, Maryland, upstate New York. You know, we, we do play in a lot of states in the area, but 95% new Jersey. Personally, my email, you know, I’ll throw it out there for your listeners if they’re listening to you.
00:30:01:19 – 00:30:21:16
Dayton Pierce
They’re obviously very sharp, and I should know them. It’s my full name. Deacon dito and Dot Pierce, PRC at Soco construction.com. Don’t do the socials, but a very big LinkedIn guy, so feel free to drop a search. Dean Pierce on LinkedIn. You’ll see the one handsome man there in the suit. That’s me. And feel free to stop by.
00:30:21:17 – 00:30:39:15
Dayton Pierce
Drop a, like drop, drop a comment, shoot a message. You know, happy to be a part of this great industry. I love what I do, I love building, and I love the relationships and the interaction I make with very smart men such as yourself, the great men and women I meet in all different disciplines. I love being a resource on the community, so please feel free to reach out if you’re interested.
00:30:39:21 – 00:30:43:07
Dayton Pierce
And if you want to build, definitely reach out. You know I’d love to make it happen for you.
00:30:43:09 – 00:31:04:20
Aaron Fragnito
Yeah, absolutely. And to our listeners, you know Dane Pierce today, Dane, I’ve known for a number of years he is a decent golfer. I would say, one step above mediocre, which beats me on the course, that’s for sure. But, Soco construction, you guys are the real deal. You know, they’ve built some really beautiful, serious, Class-A real estate, and these guys, do a great job.
00:31:04:20 – 00:31:21:00
Aaron Fragnito
So I didn’t want to just have any, Joe Schmo on the show here. You know, this isn’t a guy just swinging a hammer and a pickup truck. These guys really do a professional job. They put together some beautiful real estate. So check out their website, Soco construction.com. Reach out to Dayton Pierce. He’s the man to talk to.
00:31:21:04 – 00:31:39:12
Aaron Fragnito
To get an idea of what it takes to get something built. So get something going on, off the ground. Even if you are a real estate developer and you have your relationships in place, check out Soco. They’re really a good group. And, to my, listeners out there, if you’re enjoying this content, be sure to like and subscribe on the podcast platform that you’re listening to us on.
00:31:39:14 – 00:32:05:22
Aaron Fragnito
We’re on YouTube as well. We have webinars and the over 180 podcast episodes there. We have masterclasses on real estate investing and building and preserving your wealth. We come out with a new episode every two weeks right now on the Passive Cashflow podcast for all major, platforms here. So all types of the professionals on here, investors, service providers here, construction experts like Dayton Pierce and, one more time, I dig.
00:32:05:22 – 00:32:07:18
Aaron Fragnito
What’s that website for? To go to.
00:32:07:20 – 00:32:09:21
Dayton Pierce
So co construction.com.
00:32:09:23 – 00:32:11:21
Aaron Fragnito
All right. Awesome. Thanks a lot my friends. Thanks.
00:32:12:02 – 00:32:14:11
Dayton Pierce
Thank you so much I appreciate it. Have a great day. So.
