Commercial Real Estate Today: Stephen Bittel Of Terranova Corporation On 5 Things You Need to Create a Highly Successful Career in the Commercial Real Estate Industry Today
An interview with Aron Weiner
1. Hard work — constantly, 7 days a week.
2. Market knowledge.
3. A reputation for integrity.
4. Relationships in your markets.
5. A detailed obsession with your assets.
The commercial real estate industry is a dynamic and challenging landscape that offers enormous potential for success. However, it requires a unique blend of skills, knowledge, and aptitude to truly excel. How does one establish themselves in such a competitive field? What does it take to consistently rise to the top in commercial real estate? How does one rise above the headwinds that are challenging the commercial real estate industry today? In this interview series, we are talking to commercial real estate professionals, brokers, investors, leaders of Real Estate Firms and Real Estate Investment Trusts (REITs), as well as anyone who’s found significant success in this industry. As part of this series, we had the pleasure of interviewing Stephen Bittel.
Stephen Bittel, founder and chairman of Terranova Corporation, is a leader in the U.S. real estate industry and a pillar in his native Miami community. With extensive family roots running deep within the southern coastal city, he has dedicated his life to become a commercial real estate leader which has positively impacted his industry and community.
Thank you so much for joining us in this interview series! Before we dive in, our readers would like to learn a bit about your origin story. Can you share with us a bit about your childhood and how you grew up?
I was born in the public hospital in Miami and am a product of the Miami-Dade County public school system from years 1–12. Of course, I’m a typical middle child, with an older brother and younger sister. My father was an attorney and later a law school professor, and my mother was an elementary school teacher. I had an idyllic childhood focused on school and sports, with a household full of friends and dogs. I had a typical suburban upbringing, walking or bike riding to school each day. Interestingly, none of the schools had air conditioning in that era in Miami.
Can you share with us the ‘backstory’ of how you got into the real estate business?
After attending Bowdoin College, I spent a year in Europe undertaking my Watson Fellowship year, returning to Miami afterward to attend the University of Miami School of Law on a partial scholarship. While in Europe, I mailed in a column every other week that was published in what is now known as the Daily Business Review. I had been invited to speak at a number of conferences in Europe and South Florida, which resulted in several unsolicited job offers in Miami. I accepted a position with a local commercial real estate firm and worked there simultaneously while attending law school my first year. After 14 months, they proposed a different compensation structure, and I responded by going out on my own. The company now known as Terranova was incorporated in the summer of 1980 and became active shortly thereafter, first based out of my home while a full-time law student — hardly a plan for success with too many demands on too little time.
Can you tell us about your company and what makes it stand out?
Terranova is now in its 45th year, having undergone a remarkable evolution over the last decades, from broker to third-party manager to full-time investor/developer. Our focus on a vision for the future and operating details in the present has made a real difference. Laser-like attention to both our cash flow and balance sheet has enabled us to not only survive numerous market cycles but seize opportunities in downturns and harvest capital through recapitalizations, sales, and refinancings when the market dictates. Our president, Mindy McIlroy, is in her 26th year and leads day-to-day leasing and management while imagining the future portfolio plans.
Can you tell our readers about the most exciting new projects you are working on now?
We acquired, along with some partners, a 232,000-square-foot office building in Coral Gables last summer and bought the mortgage on an adjoining building half a year later. These were both opportunistic acquisitions poised to take advantage of a recovering office market. Our two large concentrated holdings are our 15 retail buildings on Miracle Mile in Coral Gables and 6 buildings on Lincoln Road on Miami Beach. The Gables has achieved both record occupancy and rental rates over the last two years, and Lincoln Road is right behind it with a number of great new restaurants under construction.
Ok, let’s now move to the main part of our interview about commercial real estate. What are the 3 things that most excite you about the industry now? Why?
It has been exciting to be able to invest in a market that has excluded so many others. We have invested throughout the pandemic and after, during a time when others were excluded. We closed a number of acquisitions all cash, financing them later. Our operating focus has kept our existing portfolio performing with constant cash flow, and our balance sheet focus has enabled us to access debt capital during a time when little was available.
What are the 3 things that concern you about it? Why? What should be done to address and alleviate those concerns?
The most concerning issue today is the general lack of availability of debt capital from small and mid-sized banks, the primary lenders to small and mid-sized companies. This scarcity has restrained growth, consistent with the Federal Reserve Board inflation reduction strategy. Regional banks continue to blame everything on the regulators when really they seem to be more concerned with maintaining large cash positions to protect them from another run on the banks. The Federal Reserve can start fixing both of these by lowering interest rates. We are equally concerned with the industry’s obsession with generating fee income versus building real long-term equity, which is a hard competitor for us as we are primarily deploying our own capital. The solution for this is again in the hands of lenders that can require more equity investments and limited partners that can give greater value to sponsor performance and investment.
If you had the power to put in place 3 changes to improve or reform the industry, what would you suggest? Please share stories or examples, if possible.
Sponsors need to invest their own capital to better align the interests of the entire capital stack — debt and investor capital alike. We should make money together, not just from each other, which means dialing back a lot of the fee stream and rewarding sponsors more at the time of profit. Similarly, profit sharing should occur during the life of the investment and not only at the end to stop the constant portfolio churn to harvest general partner promotes. Finally, banks should reward consistently performing sponsors with greater access to lower-cost debt versus leveling the playing field and forgetting past mistakes.
How has technology changed the commercial real estate industry, and how do you foresee it shaping the future of the sector?
Lots of opportunities have been created in building operations, design, and engineering, but we are only at the start of this with many more advances soon to come in tenant communications and deal analysis. Nothing replaces experience and market knowledge.
I am hearing the phrase “Stay alive until 2025” a lot. What is your plan to survive in the current market?
We will continue to focus on our existing commercial real estate portfolio and other operating companies, continuing to take advantage of market distress when possible, while maximizing operating profit. We have built a diversified business model that continues to generate profit through every cycle.
For a young person who would like to eventually make a career in commercial real estate, which skills and subjects do they need to learn?
The ability to critically absorb information and communicate is essential. These are lost skills in a world where young people are often thinking about their social media lifestyles and balance in their life. They need to be focused on learning and working the competition, which in the long run will give them balance in the bank account and their life.
Do you have three things you would advise a new real estate professional to avoid?
Avoid living for others and displaying your life, and instead reinvest in yourself and your assets.
When evaluating deals or opportunities in real estate, what are the most important factors you look for and why? Can you provide some examples?
In every acquisition, we focus on the next 5 and 10 years. Our strategy has always been to be a long-term holder, creating asset value over time and not looking for a quick hit or a big fee.
Can you share a story with us about the hardest deal you made that ended successfully for you?
They have all been hard. Miracle Mile has transitioned through two institutional partners, both of whom we bought out, and we have grown from an initial portfolio of just 8 buildings to 15 today. Rents have more than tripled during the last 20 years, with more good news just ahead.
Based on your personal experience and success, can you please share “Five Things You Need to Create a Highly Successful Career in the Commercial Real Estate Industry”?
1. Hard work — constantly, 7 days a week.
2. Market knowledge.
3. A reputation for integrity.
4. Relationships in your markets.
5. A detailed obsession with your assets.
What advice would you give to another real estate professional about improving the work culture, building team morale, and helping each employee thrive?
Hold everyone to the same demanding standards that you hold yourself. Lead by saying: follow me, and don’t ask of others what you are not prepared to do yourself.
You are a person of great influence. If you could start a movement that would bring the most good to the most people, what would that be? You never know what your idea can trigger. :-)
It’s not enough to just succeed and earn; we all have to be engaged in our communities and country, working hard to make our world better so we leave a more optimistic future for our children and grandchildren.
This was very inspiring. Thank you so much for joining us!
