The Advertising Agency

My first “real job” wasn’t in real estate.  I was the man in the gray flannel suit.

I rode the subway downtown every day to the famous birthday cake building at 375 Hudson Street, headquarters of Saatchi & Saatchi Advertising.  It was great learning experience and a strange tumultuous time to be in advertising.

375 Hudson St. /photo credit to:
http://images.skyscrapercenter.com

We had 3 or 4 computers in one office on the top floor of the about 10 floors we had in the building that had internet access.  I would go up there to browse and be the only one in the space.  Pages took minutes to load and there wasn’t much content to find.  Something was coming but no one knew what.

It was still a world dominated by the three classic departments of the advertising biz…account executives, media planners, and creatives.  Account executives were the client people, the supposed hubs of the wheel, pulling together the resources of the agency to deliver a strategy and a product. 

The media folks were the data geeks of the industry.  They spent their time talking about reach, target audience, demographics, impressions, and Nielsen ratings.  They were sequestered on the lower floors with messy offices, but they got invited to some cool parties hosted by television networks and magazine publishers.

The creatives had it the best.  They were the precursors of today’s tech cultures.  They had no dress code, no real work hours, and anyone who went up to their floors had to be careful not to disrupt their creative flow.  They had ping-pong tables, leather couches you could nap on, and I’m pretty sure they had a beer fridge.  They came down, rarely, to see the suits to show off their latest creative genius. You had to be careful not to bruise their egos if their product wasn’t good.

The clients were freshly minted MBAs from Kellogg and Wharton and Michigan.  They worked hard.  As far as I can tell they were expected to live in their offices at corporate headquarters and compete with their colleagues and peers viciously for a bigger chunk of the company’s marketing budget.  I worked on the Johnson & Johnson account, selling Children’s Tylenol.  It was and is a great product.  But its world was being rocked by the introduction of pediatric ibuprofen.  It was the middle of the great Advil vs. Tylenol marketing wars.  It felt important.

photo credit to www.tylenol.com

One of my main responsibilities as junior account executive was to race to the nearest FedEx dropbox every night before the last pickup so that a strategy memo or sample of new creative could be delivered to the client the next day.  We used the fax sometimes for memos, but the resolution quality was low on that slippery paper that rolled up and fell to the floor when it came of the machine.

I did go through the MTP, the legendary Management Training Program.  It was like a fifth year of college.  All the new account execs and media planners were like a freshman class.  We were expected to stay late and work on semester-long projects for presentation to senior management by the end of the class year.  I can remember getting a little loopy one night and realizing the modern idea of a brand comes from a cattle brand.  A brand is a way to say this is mine, this is what I stand for, these are my qualities and attributes.

It was a rewarding experience though I only stayed two years.  I couldn’t wait to get to back to the mountains of Colorado after a couple of years in the city.  I’ll write more about lifelong business lessons learned in future blogs.

photo credit to www.vail.com

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HOAs

Homeowner’s Associations are such a mixed-bag when it comes to real estate development.  When a buyer hears HOA it can sometimes communicate a superior product, with lush maintained lawns, sparkling pools surrounded by towel draped chaise lounges, and shiny new fitness equipment always empty and available to help you change your life for the better. 

photo credit to http://www.cnn.com

HOA may also communicate lengthy Board meetings full of contentious issues, know-it-all Board presidents who like to impose their will on unsuspecting neighbors, and lawn police.

photo credit to http://www.rebelcircus.com

One of the first questions I hear out of many real estate shoppers when informed the property they’re looking at is part of an HOA is, “How much are the dues?”

Many of the real estate projects I’ve worked on through the years have included HOAs.  The appeal to developers is they can put in that fancy entrance gate and signage, they can include a park with bocce courts and firepits, and they can add the pool/fitness room/men’s and women’s locker/spas and not have to pay for them forever.  The facilities are very attractive in the sales process and many buyers are truly attracted to an amenitized community that will have certain standards enforced on new construction within the community.

photo credit to http://www.mlentrygates.com

Developers build the amenities, hope to recover the costs with increased sales revenue, and know they can turn the facilities over to HOAs to maintain and manage in the future.  In theory, it’s wonderful.  In reality it can be, too.

But when things go south with the HOA it can tear a community apart and be hunting grounds for construction defect attorneys.

One risk a developer takes with constructing and operating HOA amenities is that sales pace could slow dramatically and leave the developer paying tens or hundreds of thousands in dollars in annual dues for units that have yet to sell.  In California, developers are required to provide financial instruments that guarantee the viability of the HOA until the point when enough units have sold to buyers that the expense of the HOA is not concentrated with the developer.

Another problem HOAs create for developers is they provide a gathering place for buyers to complain about problems with their units.  Developers and builders generally offer warranties on their products and successful developers stand by their product and take pride in what they do because they want to continue doing it.  It’s relatively easy to deal with one buyer and their complaint(s).  When a group of buyers convene in the HOA and share complaints they tend to feed off each other.  Suddenly, an innocent design or construction mistake can transform into the belief that the builder and seller conspired to construct a low-quality product and commit fraud upon their customers.

Next add a construction defect attorney to the mix, who gets paid a percentage of whatever he or she can recover from the developer and their insurance company.  There exists an entire industry based on hijacking HOAs and convincing them to enter lawsuits that cost millions and take years and tear apart many relationships.  There may be ultimately be siding repaired or windows replaced but when the motivation becomes the largest possible legal victory instead of fixing simple construction problems, much is lost along the way.    

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Opposition to Development

There is much opposition to new development in this world, some of it warranted, much of it not.  This is one of the most difficult parts of the development process.  Developers like to work on a level playing field but so much of what happens when plans materialize for previously undisturbed land is highly emotional and can become a political issue.

Two of the major opposition groups to developers are environmental groups and the classic NIMBYs.  I’ve worked on development projects in the mountain resorts of Colorado and California.  It’s amazing how much local sentiment can affect the ability to create new communities in certain locations.  As far as I can tell, there is not an acre of land in the US that is not spoken for by someone or by some entity.  And as mentioned in a previous blog, every parcel of land in this country falls under some jurisdiction, whether it be a county or the federal government.

photo credit to http://www.forbes.com

Most developers study and understand the rights vested in land when they purchase it with an eye for future development.   Land must make sense physically.  You don’t want to have to move a mountain or fill in a lake if you don’t have to (though projects like that start to make sense in certain cities).  But after you determine the land makes sense you need to make sure the governmental entity in charge allows for the land use you would like to build.

In today’s world, most cities and towns want to grow and have a plan for that growth.  Commercial in certain locations, dense housing (apartments) in others, parks, schools, single family residences, and roads, trails, and public transportation corridors that connect it all together.   You can tell when you’re in place that’s been planned versus a place that grew up in fits and starts and doesn’t make sense.

Most developers would like to create a place that functions well for their customers and that starts with fitting into the bigger plan for the community.  But when someone sees the empty field behind their house that their kids rode dirt bikes on, or that they walked their dog in, sometimes something snaps when they find the current usage might change.

Mountain towns are infamous for the “pull up the drawbridge, we’re full” mentality.  I’ve seen it so many times.  There are many folks who have their house on the lake, near the creek, or in the dense forest, who object to anything like their very own property ever being built again.  It’s remarkable how emotional folks get in their effort to deny additional opportunities for people to live the lifestyle they so love.

photo credit to http://www.colorado.com

We cannot poison our waters and cut down all our trees and I’ve never met a developer who wants to do that.  Most understand the reason people want to live in a specific place and the goal is not to ruin that.  A major part of development expense (which ends up in the home price) is when a developer buys land with certain rights, but the plans to develop are objected to by members of the community, and local politicians and government officials don’t play by their own rules or even change them midstream.

There exists a perception of the big bad developer who would poison the environment to make a buck, but I haven’t seen it.  There is however now a whole industry motivated towards fighting development and the professionals who engage in it are no less motivated by financial gain than the developer.

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