From the Ground Up

Real-World Projects Take Real Estate Development Beyond Numbers

Calling the capstone real estate course for UNC Kenan-Flagler MBA students a “class” is a bit backward. Titled “Real Estate Development Process,” it is more like a real estate development project with some lectures and classwork wrapped around it.

“I thought it would be similar to past coursework I had taken in the real estate concentration — academic but also discussing real-world cases,” says Natalie Smith (MBA ’16). “I knew there was the additional component of the real estate development project. I pictured it being more of a simulation.”

The class is designed for MBA students in the real estate concentration.

“It ended up being more of a real-world project, which was amazing,” she says. “The class far exceeded my expectations.”

Smith is a tough audience, too. She had three years of experience in real estate development before starting her MBA studies, and the course gave her a chance to broaden her horizons.

“It was as if we were the developer going out and doing everything from site selection through vetting the deal, and then ultimately pitching it to an investment committee,” says Smith, who is now a real estate manager at Johnson Development Associates in New York. “It was a much more well-rounded experience than I had gotten previously in my professional experience.”

The course produces real-world development projects. Some of them, like OTO Development’s sleek new AC Hotel in downtown Chapel Hill, have actually been constructed.

That’s because the student teams in the course act just like real developers. They review real sites, talk with owners, develop proposals and work through costs, timing, financing and regulatory details with everyone who would be involved in the project.

Getting Their Hands Dirty

The idea is to provide students an “experiential learning course” that takes them through the same kind of development process many of them will be involved in after graduating, says Robert Connolly, a finance professor who leads the class.

“For the students on the development track, you literally come to class the first day with five to seven potential sites,” Connolly says. “I tell them I want some of my students coming to graduation in a limo because they sold a deal to a developer.”

Over the course of two modules—and sometimes longer if the students create a project that gets real-world traction—small teams of students figure out which kind of project might fit on a piece of property. Then they meet with the landowner, local planning officials, engineers, architects, contractors and potential financing sources to take it from the back of a napkin to, potentially, groundbreaking.

Most of the work is done outside of class meetings. “There’s no textbook on this one,” Connolly says.

In class, Connolly and adjunct professor Bob Skinner, who has a 30-plus-year career in real estate development, bring in guest speakers to explain different aspects of the development process and review the students’ projects as they evolve.

The Leonard W. Wood Center for Real Estate Studies is essential in this process, Connolly says, keeping alumni working in real estate connected to the School.

“Executive Director Jim Spaeth has everybody squared away,” Connolly says. “The Wood Center is just irreplaceable. I can’t tell you how important that’s been.”

Whether students need a local engineer or a finance professional in another market, UNC Kenan-Flagler’s extensive alumni network usually can locate someone with the right expertise, background and availability to work with students.

Students come into the class on one of two tracks: finance or development. For the development track, students take an idea from site to final financing. Those on the finance track learn what’s behind the numbers that could show up on pro formas they might evaluate for their employers one day.

“I tell the finance guys: You have to be able to figure out, beyond the numbers, do they know what they’re doing? Where are the red flags? Why could this go badly? Does this person have their stuff together?” Connolly says. “Where are the numbers coming from, and why should you believe that number? What are processes people should be following if they’re going to get it right?”

Questions Behind the Numbers

Laura Bartos (MBA ’17) gained insights she couldn’t learn any other way—insights that she now puts into practice in her job as a rotational associate at real estate investment trust Welltower Inc.

“In terms of calling a planner’s office or talking with an engineer or going over a letter of intent, I understand how this process works now,” she says. “I’m not in development now, but we do work with developers. It’s just helpful to have that context in your head.”

C.J. Overly (MBA ’17) said the class grounded him in the real estate development process in the way a theory-only class never could—and it permanently changed how he thinks about development deals and real estate.

“One piece that sticks out in my mind is just being creative about how you, as a developer, incent your land seller,” he says.

Overly and his teammates worked on a project that would have converted land in Raleigh owned by a church organization into townhomes—and would have required the owner to move out of an office building on the site. “When you’re trying to get a piece of land, think about not just the total dollar figure that you can offer today, think of other things you could offer to the seller,” Overly says. “What are some things you can do and are comfortable doing that would make your offer stand out?”

Overly, now a project manager at Boston Properties in Washington, D.C., said the class has given him the real estate development bug.

“It left me with this feeling that whenever I’m anywhere and I see a piece of dirt that doesn’t look like it should be vacant, I’m wondering what could go there,” he says. “I really believe that in the long term in my career, that kind of entrepreneurial thinking will serve me well.”

That kind of entrepreneurial thinking also led Smith and her team to a site near downtown Tampa, Florida, where she’s from. Her group wanted to put a high-rise, multifamily building on the lot. Smith met with Tampa real estate professionals to see what kinds of units—condos for sale or apartments for rent—would work best in the market.

“I felt we were potentially close to it being a real deal,” Smith says. “It’s an area where there’s been a lot of multifamily development and a lot of revitalization. We thought the project was a perfect fit for everything going on in that neighborhood.”

Though it didn’t work out for them, Smith says there’s still a good possibility the site will be developed sooner rather than later.

“At some point down the road,” she says, “it could potentially be developed into a very similar project to what we pitched.”