A Labor of Love - The Chauvet Hotel
Jun 04, 2007
As a practicing commercial real estate broker specializing in office leasing and sales for over twenty years, I made a mistake eleven years ago that has cost me dearly in terms of money and personal upheaval. Every broker at one time or another has had a fantasy of becoming a real estate developer. This dream seems to make sense when they see their clients successfully developing, leasing and selling their buildings. Since we are part of this process it is very easy to believe that we to can practice development as the next step in our career. This usually leads to less than successful ventures for most of us.
Brokerage and development are two different businesses. Yet to brokers development has the same aura as someone that has always dreamed of owning a restaurant. It sounds fun. People always have an idea for a restaurant that seems to be different then the next place, but in the end, if they have no experience, they usually find that running a restaurant is harder and more riskier then they ever expected. So does an attempt at real estate development.
Eleven years ago I was introduced to an abandoned, old hotel in Glen Ellen, California. Located in the wine country this turn of the century-abandoned pile of bricks spoke to me as an absolute success story for a development project. It had charm; it had history; it had “good bones”. My first mistake was the acceptance of my partners. My initial partner who was going to manage this project was a previously successful developer. He had a string of bad developments after some very successful ones that forced him to have to start all over. This project would be the project to resurrect his career.
My second mistake was to accept my partner’s numbers on what the conversion of this building would cost us against what we could sell the units for.
My third mistake was to believe county officials that they truly would do whatever it would take to save this valuable piece of history.
Eleven years later we are now finally ready to sell these units. We have saved a federal historical treasure for Sonoma County and Glenn Ellen. Also we have created fantastic quality condos unmatched by any other project in the county.
Will we make money in the end…probably not. Will we lose money…most likely.
For me the lesson learned was do what you do best and continue to improve your skills at what you do best. Don’t take on projects that take you away from doing what you do best. And if you are tempted, make sure you have done your homework and don’t jump into any development deals unless that deal works through all of your downside calculations. It will save you and your family a lot of downside aggravation.
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Written by: Hans Hansson
Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 22 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email firstname.lastname@example.org or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.