Devon Zuegel
speaker
216 appearances
1 recordings
1 series
first heard Mar 2025
last heard Mar 2025
Devon Zuegel’s voice in public audio — every appearance, attributed to the second.
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But as I've gotten really into what's functionally real estate development, there's actually not as relevant of an interest directly for those people, and they don't necessarily know about it. And so I've spent the last few years getting to know various developers and architects and engineers who do work on this kind of thing. And I often meet them through Twitter or through email.
I'm a really big believer in what I call the lighthouse approach, where if you talk about the stuff that you find interesting online enough, people will come to you and they'll often share those interests and values. I'm friends with a Dutch street designer who lives in Harlem, the original Harlem in the Netherlands. We talk about street design and we met online.
I also try to reach out to particular groups that I think are useful. So there's this one group called the National Town Builders Association. And it's people who have done or are doing exactly the kind of thing that I'm doing, where they're trying to build a traditional walkable street. Thank you so much for having me.
Both the way that you can build a much higher level of value is if you do invest more upfront to create incredible public places. And yes, that will cost more money on day one, but people will end up paying way more for it in year five, year 10, than if you just churn out another ticky tacky box.
Actually, that reminds me of a question you had asked earlier, which is why don't people build towns anymore? And I think it really depends on how you define it. People are building a lot of housing in some parts of the country. There's large subdivisions that get built, which are at the scale of towns. But I would never call those towns because they usually don't have very many public spaces.
They're usually just a bunch of homes that all get built all at once. And it's just a place that you can have a private space of your own, but there's nowhere to walk to. There's maybe not even anything that close to drive to. And so the national town builders say, no, the way to create long-term value in places that people actually value and will ultimately pay for is to build that.
And it just takes a bit longer. So that's been an incredibly helpful group.
I had the same question when I first started working on this. When my husband asked the question five years ago, I was like, yeah, it'd be nice if there was another Chautauqua, but is it really a good business?
And the thing that actually got me to think, oh, I should actually work on this was I started digging in Zillow at the property values and realizing that homes in Chautauqua itself are dramatically more than outside of Chautauqua. I think it's two X more. And those are just the homes that are like just outside of the town.
So it understates it, I think, because if you're just outside the town, you still have some access. And then I kept going and asking myself, is that an anomaly or is Chautauqua unique? But then I studied some of these other new towns, the ones that the people in the National Town Builders Association build, such as Serenby in Atlanta or Seaside in Florida or Trillith or Seabrook.
And I have a long, long list of these towns. And Las Catalinas, the one I mentioned in Costa Rica, and started to realize that, no, when people build this way, they actually do make more money. It does take longer, though. So I think the next natural question was, why aren't more of these being built if this is a good business? And. I think it's a mixture of things.
I think one key factor is because it takes longer, it often doesn't fit into the fund length for a traditional real estate fund. Often traditional real estate funds need to return capital in five to seven years. And these projects tend to take 10, 15, maybe 20 years to return the capital. And so just the fund length is a mismatch.
And so when I did really intensive research to be like, for the ones that do exist, how did they get funded? And many of them ended up being things like one wealthy family who just decided to go all in on this project. And they ended up making huge returns, including on an IRR basis, by the way. So I'm not just saying equity multiple.
They ended up making huge returns, but it was 15 years later, which is just a long time for a fund. Or there's another one where in the Florida panhandle of all places, there's a lumber company called St. Joe, and they own a huge amount of the land in the Florida panhandle. And they have long looking time horizons.
So they decided to turn some of their former lumber lands into building these communities. Basically, what I realize is when patient capital comes in, they can and do make a huge amount of money, but your traditional real estate funds don't fit that timeline. So that's one reason that there aren't more of these.
I think another reason from a financial perspective is related to what we were talking about before with comps and all the other forces that cause real estate to be quite conservative. Because a lot of real estate is done with debt, including at the infrastructure level and earlier on, There's a lot of pressure to not try something new.
Even if it sounds like a good idea, it's like, you know what, if you try something new and it wins, we the lenders don't really get benefit from that upside. But we do have to bear the downside. I can't blame them. Like if I was a lender, I would say exactly the same thing. Much of real estate development does assume that you're going to take on debt.
And it's just in the water and part of the culture of how people do projects. I think it also means that when you're doing something, if you're not going to take on debt, you will hurt your returns. And so what you're doing better be sufficiently innovative that it makes up for the last leverage.
And if you make something really incredible like a Chautauqua, then I think you can jump over that hurdle. But if you're only innovating on one or two things, then you're going to end up falling flat. And you do lose out on... the leverage without the benefit of much higher property values.
So I think there's a bit of a chasm basically between more conventional development, which has debt and is more conservative versus taking a really big swing and saying, we're going to do things like really differently. The second one is a little discouraging because it means that there's a lot of players in the ecosystem who don't want to act on this.
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