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episode # 14

Developing From the Ground Up with Jordan MacDonald

Have you ever wondered how a property goes from an old house into a new multi level condo building?

This week, Cory and Matt welcome Fabric Living CEO Jordan MacDonald who pulls back the sheets and explains the developing process in detail plus discusses some of his hugely successful East Vancouver projects. From the years of approval and planning that takes place to the “not so big” profit margins developers work off of, Jordan breaks down everything for our listeners giving everyone a first hand look at the development process in the City of Vancouver.

If you have ever driven by a development site and wondered how it transformed from a couple of single family homes into the forthcoming condo building, this is an episode you don’t want to miss!

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Episode Summary


 

Please tell us about yourself.

I’m the CEO of Fabric Living and we’re a multi-family developer that focuses primarily on neighbourhoods in East Vancouver. We develop purpose-built rentals, as well as condos, and a lot of our projects have mixed-used commercial space as well.

Why East Van?

It allows us to develop really creative projects. We like to build projects we’re passionate about. We want to know that the effort we’re putting into these projects will be appreciated by the people in the neighbourhood. 

For example, Strathcona is such a creative community; there’s a reason why artists gravitate towards that area. You have that really creative energy in Strathcona. So if you delivered a vanilla project, you wouldn’t have success. When a property came up, we jumped on it. We actually overpaid for it because we wanted to be there so badly. I was so excited waking up every morning working on Assembly. We believed the community would buy into it. We have this cool artwork on the ceiling, a mews that travels through the building and so many other elements we really loved. We were able to lean into those elements at Assembly because of the neighbourhood. 

How do you analyze a deal? How do you balance the numbers and the passion?

Development is a challenging business because every municipality and every neighbourhood within it has its own idiosyncrasies. We focus on East Vancouver because we need to understand all the policies really well. So when a site comes up, we already know the rules. 

We only work in certain neighbourhoods of East Vancouver where we can lean into the creative aspects and know people will appreciate that, like Strathcona and Mount Pleasant. So when an opportunity comes across our desk, we have a deep knowledge of the policies and neighbourhoods. 

After looking at the rules of the area, we then look at what the property will sell for in that area. We work backwards from there to figure out what we can pay for the land. That’s a very complicated process. You need to have at least a 15% return in order for the bank to finance your project. And without the bank, you’re not able to develop projects of this scale unless you have very deep pockets.

How do you feel comfortable wearing so many different hats?

I’ve always been the person who will jump into the deep end and learn how to swim. So I start by wearing all of the hats and as time goes on, I try to give those hats to other people. I build the team and refine my role to what I’m good at and love doing. At the beginning, you’re just doing everything – juggling until you can build the team out. 

I started in a commercial real estate brokerage. I was doing industrial brokerage and eventually bought my first building. I then jumped into selling investment properties. I started my own brokerage company and then sold that in 2015 and started doing my own projects. I jumped into the deep end, aligned myself with the right partners so I had people to learn from, and eventually found myself in a seat where I’m able to do the things I love and am good at. 

What are the timelines like for your projects?

A lot of it is crystal ball stuff. A four year timeline can turn into five or six years. Once we get an opportunity, we still have to do our background research and run through our processes to capitalize the project accordingly. We work with capital partners, who have to think the deal is worthwhile, and lenders, who have to believe in the neighbourhood like we do. 

But then things can change: construction costs go up, covid happens, timelines get extended. A lot of pivoting is needed.

Timelines are a big concern. You have to be hyper-cognisant of your timelines. Even pushing a meeting here or there can add up to a huge delay. Any timeline creep is always top of mind for us. Even if it’s a long project, you have to stay on schedule every single day.

How has covid impacted your projects? 

The whole world was turned on its head when covid hit and we had no idea what it would mean for us. We knew we couldn’t launch a project during covid so we delayed the launch of Habitat. You can’t plan for stuff like this. Covid ended up working out for real estate as people had more savings, interest rates went down and people had more buying power. But I could not have predicted that in the first few months. 

We had hundreds of conversations about how we could pivot. At the end of the day, we decided to stay the course. But covid changed the type of demand that was in the market. With Habitat, we designed our units to be efficient and cost-effective. Our messaging was that we had X units below a certain price point. But it was our larger and more expensive units that sold right away. We were caught completely off-guard by that. We misread the market. 

Assembly was a huge success and Habitat has sold really well too. Why do you think you have had the huge success that you’ve had?

That’s a tough question to answer. On the design side, we spend a ton of time there. We want our projects to be cool projects. For example, we looked at over 100 types of brick for the facade of Assembly. And I mean we were ordering the brick so we could feel it and look at it in different lighting, not just browsing online. So we do really lean into the design. 

With Habitat, I think we were the first to launch in the Vancouver market during covid. We’re in Mount Pleasant and 400m from the skytrain station. So it worked! We absorbed a lot of the demand that was in the market. 

Location is also huge for us. The neighbourhood always comes first. You have to buy in the right location. We picture ourselves and our families living in these projects and I think that really drives our success.

Are there any cities you draw inspiration from?

New York. It’s an old city with a ton of energy. Brooklyn has changed a lot in the last few years; I’ve drawn a lot of inspiration from all of these cool, hideaway places that don’t have signs. 

Southeast Asia is another one. The growth in Bangkok is so organic. I haven’t been to Melbourne but have looked at lots of inspiration photos. I love their laneway culture. Cities like Brisbane, Melbourne and Sydney all have very cool design and architecture. 

Let’s talk about scaling. How do you foresee your company growing?

When you’re growing a team, you have the opportunity to still focus on your passions. I love acquisitions and finding new properties. So I don’t think I will ever step away from that role of making sure our properties are in the very best neighbourhoods. I want to have an active role in marketing and design but overtime, I’ll be less on the tools. But I still want to be in the same meetings 30-40 years from now. I plan to always have an active role with a team around me for where I’m weak. 

I do have two partners in the company: a director of development and director of finance. So we have the support systems in play and I don’t have to wear all the hats. 

What is your process for finding a deal?

There’s about 600 active commercial real estate brokers in Vancouver and about 20% do a fair amount of business. I hope all 600 know who I am and I try to make a point of connecting with each one of them at least once a year. And for the top 20%, I try to stay top of mind and connect with them every month. I also get all of the new properties in my inbox. So the brokerage community is a huge part of the process for us.


We also do some direct hunting. We might call an owner directly if we find something we love, or connect with a broker in the neighbourhood to reach out on our behalf. But the brokerage community really is the lifeblood of our business. It’s a very important relationship. 

Finding deals is about maintaining relationships. You have to have good relationships with the brokers, you have to have a good reputation for doing what you say you’re going to do, and you have to be top of mind. 

Another part that is important to us is focus. We’re focused on East Vancouver, and brokers know that. So when an East Van deal comes up and brokers are only allowed to talk to one or two people, I’m hoping I’m top of mind for those opportunities. 

Besides Strathcona and Mount Pleasant, are there other areas of East Van that you’re excited about?

Cedar Cottage is a great neighbourhood. There’s a ton of history there, great amenities and Trout Lake is right there. Commercial Drive is my favourite street in the city, but it’s so hard to find anything there. 

East Village, along East Hastings, east of Clark is going to see a lot of new development. You get great views there and there are lots of breweries. Fraser is another great street. 

There are so many cool neighbourhoods in East Vancouver. As more businesses move east, especially young people with their new, creative businesses, every day East Van is growing and providing more opportunities. 

What is the biggest mistake you have made? What warning would you give to people who are looking to get into commercial real estate? 

I’ve made so many mistakes. The biggest would be any properties I sold. Over time, the value will go up and the cash flow will improve. You’re better off to refinance and keep going. If I had done that from age 23, my portfolio would be massive. It’s okay if you make a bad move today because it will sort itself out in five years. Don’t sell and keep going! 

If you’re buying commercial real estate and it cash flows, you should just keep doing it. Keep buying, keep refinancing and keep growing your portfolio. 

What projects do you have coming up with investment or commercial opportunities? 

The residential side for Assembly and Habitat is sold out but the commercial side still has some opportunities for light industrial, retail, restaurant, office, etc. We have opportunities in both projects starting at under $1 million. You can find out more at https://assemblystrathcona.com/ and http://lifeathabitat.com/.  

What’s next for Fabric Living?

We want to keep doing more of the same. We want to take on 2-3 projects per year and continue focusing on East Vancouver. We want our name to be synonymous with East Vancouver and people outside the industry to know our name.

What advice do you have for new people getting into commercial real estate?

I agree with Drew who said on a previous episode to find a mentor in the business you want to get into. But that mentor should be the best person in the industry. Don’t settle; find the best. And my other piece of advice would be like I said before: start buying right away and keep going. 

Find out more: https://fabricliving.ca/ and https://www.instagram.com/lifeatfabric/

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