Commercial real estate development is a high stakes world that is not for the faint-hearted. You have to be brave and savvy enough to deal with all its risks and challenges before you can reap the rewards. Joining Monick Halm on the show is Dr. Stephanie Ardrey, an expert in the luxury, mixed-use and retail development spaces. Stephanie is the CEO and president of Blu Diamond Group, Inc. with Blu Diamond Capital, Advisory and Properties, a full-service real estate brokerage, advisory, and development firm. Building in her mother’s legacy, she has led a tremendously successful career, having done billions of dollars’ worth of various real estate deals. Don’t miss out as Monick picks her brain!

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Luxury, Mixed-Use, And Retail Development – Interview With Dr. Stephanie Ardrey

Our guest has a particularly incredible story. I’m excited to have her on. Most of our guests have done residential real estate. Our guest has done residential but also her main focus has been on commercial. Stephanie Ardrey is CEO and President of the Blu Diamond Group, Inc. with Blu Diamond Capital Advisory and Properties, a full-service real estate brokerage advisory and development firm. Previously, she directed multibillion-dollar portfolios of commercial real estate development projects, luxury, mixed-use, and retail commercial projects. Including quite a few here in Los Angeles, Villa Azure, Villas at Park La Brea, Palazzo and Palazzo East at Park La Brea, Palazzo Westwood, Saks Fifth Avenue Mixed-use and Hollywood Park master plan.

Prior to entering the high stakes high-pressure world of venture finance and commercial real estate development, she was the Founder and CEO of The ArdreyGroup Inc. It’s a full-service advertising and marketing communications agency with eight offices across seven western states. With all that she’s done, she still has time to be a doctoral candidate for the Doctor of Business Administration degree with a concentration on International Business. She’s also an adjunct faculty member at UCLA, Cal State University Los Angeles, and Los Angeles Southwest College, leading the real estate programs. I’m excited that she’s here. Welcome, Stephanie.

Thank you, Monick. Thanks for having me. I’m excited to be here.

I’m excited to have you. You have done a lot in real estate. We’re saying billions of dollars’ worth of various real estate deals. How did you get started in real estate investing?

I got started in real estate investing as an individual investor when I owned my agency. How I got involved in the commercial real estate space was after the untimely death of my mother. My mother passed at 48. I was in the process of dissolving my agency. It was during that time that I had made a personal investment that went bad as a result of how my transaction was handled. I didn’t feel that I had the need to be an expert in real estate. My mother had been in real estate. She had sold land when I was a kid. She was in the real estate business while I was in advertising. I always felt like I didn’t need to know real estate. I needed to love real estate and invest in real estate, but that my mother would be my trusted advisor. I discovered that I made a bad deal. As a result of that, I thought about how much I love real estate but also how I wanted to honor my mother’s legacy. In order to do so, that for me meant reinventing myself as a real estate developer.

Let me go back a bit. Talk to me a little bit about that first deal you did as an individual. Did you get involved in real estate because of your mom or was there some other reason that you decided to invest originally?

Originally, we’ve always been investors. When I realized that I’m a third generation and my son is being groomed to be the fourth generation. My mother was in real estate. My grandmother was in real estate. Her brother was in real estate. We came from a family of investors in real estate. Not only your personal properties but investment properties are part of what you did. I’ve always been an owner. I have these conversations with people, “Stephanie, you know how to fix this. You know how to fix that.” It’s like, “When you own property, you can hire people.” You learn how to do a lot of the handy detail yourself because you don’t want to call someone every time. There’s a simple fix that you can take care of yourself, coming from the standpoint of being a property owner. My first deal away from home was I was here in Southern California. I was running my advertising agency and I was going to have a huge tax bill. My CPA said, “You probably need to buy some more real estate.” That’s what prompted me to purchase some investment properties at that time.

I want to highlight something for people who are reading about how you can buy real estate. It’s making you money, but it saves you on your taxes too. A lot of people don’t realize that one of the big reasons to buy real estate is for the tax benefits of it.

Especially when you’re early in your career. At that time, I didn’t have a child. I didn’t have any major deductions. When you looked at the tax liability, it was a prudent decision to say, “Instead of spending all of this on taxes, I can begin to build a portfolio of some assets that will begin to return me some additional benefits.”

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You became a developer shortly after your mom passed. Tell us a little bit more about that. How did that develop?

For me, I first went in as an executive in a development firm. It was interesting because, by the time that I made this decision and me being me, I had a few people that wanted me to go straight into real estate developments to take on some projects and lead those projects. At this time, my son was about three-years-old. After meeting payroll, having a big business, I was a little bit exhausted with the whole process of meeting payroll that I was not eager to launch my firm. I had gone to USC and at the end of the program, they were like, “You can be like one of the poster children for this whole minority program encouraging real estate developers.” I thought about it and I said, “I’d rather be an executive for a while and let someone pay me while I develop my resume.” It was while I was at USC that I met one of the VPs for a development firm in Beverly Hills. He and I had a follow-up conversation and I ended up joining that organization.

Was it at that organization that you worked on all of those luxury, mixed-use, retail commercial projects?

The first company, yes. We had what was considered the largest privately held real estate investment trust. Our focus was on luxury apartments. When I first entered the space, no one was talking about mixed-use and that’s a sidebar. While I still owned my agency, maybe five years before I made a move into the real estate development space, I tell people I was a closet developer. I was giving advice to many of the mayors, especially in urban cities, on how to attract economic development opportunities. They would commission my expertise from a strategic standpoint. I would also be part of repositioning particular organizations within those towns and/or the towns themselves.

What was interesting to me was often after I finish with some type of recommendation, then it would seem like these developers would show up at the table. It was frustrating to me. I’m like, “Why do they come behind me and how are they getting paid based on what I’m doing?” That’s my running curiosity. “Why are they showing up after I’m here and how do they get paid?” That continued to inform some of my business processes. I was asked to join this company and I went in.

At that time, we were working on the Park La Brea Project while we were finishing up Villa Azure, which had been the old Centinela Drive-in Theater in Los Angeles. That project was under construction. We were planning to do the Park Le Brea Project. We had villas at Park La Brea and we hadn’t started yet on Palazzo or Palazzo East, but they were all planned to happen. They began to take shape within the first 90 days that I had joined the company. I saved $1 million cost overrun on those projects in particular. I hit the ground running.

You did huge projects there. What’s your investment focus? You’re at the Blu Diamond Group. Tell us more about that and what kind of real estate investing you’re doing.

We’re excited. I have a few projects that were looking to push forward. We have to do a capital raise, property in the hospitality space that I’m excited about. It includes hospitality and retail. It will include some residential and part of a master plan opportunity. The ultimate big part of that is finalizing the funding. That’s always the big dance in the process when you’re taking on a development, which I always tell people, “Developments take a long time to pull together.” If you have a site that you’re looking at, the site might be ready to go as is but in most cases, it’s not. You either need to assemble additional parcels to accompany that site or some of what it is you’re looking to develop might not be the right or ideal season for those elements of the development. You begin some of that preliminary work and planning the conceptual plans.

You’re also doing the dance to assemble not only how you’re going to phase in your development but also how you’re going to finance those respective pieces. The last part of the development is when you finally see fences up and people break ground. A lot of times, before you ever see any sign of construction, that project has been in the works for 5 to 10 years, sometimes 15 or 20 years. People have been asking me about the City of Inglewood, for example. I’m like, “When I think about it, many years ago, we had that site under contract.” That was one of the sites that I was working on a master plan. A couple of administrations later and then finally there’s traction and then there’s a whole new season and a whole new set of developers and a whole bunch of developments happening. That’s how it goes. It does take a long planning cycle.

 

For somebody who’s interested in development as an investor and maybe as a passive investor, what kind of investors do you look for? At the level you’re at, maybe it’s institutional. I’m curious, who are the investors that you look for?

In most cases, depending upon the asset class, we are going to try to match it up with some institutional investors. Oftentimes, there’s a fund and that’s what we’re looking at. We’ll put together a privately held fund that will allow equity partners. Our equity partners can invest by acquiring a unit of interest in that fund value. That fund makes up the equity portion of the overall development, because you’re going to match it up. You’re going to layer your deck with both your equity and some debt in order to pull off your project.

Where do you see the biggest opportunities in real estate investing?

There are three different things that I will look at if I were thinking about the investor. If I’m a beginner, I would say focus on learning the business by acquiring 2 to 4 units. I always try to find new buyers who are saying, “I’m ready to buy a house.” I’m going, “Please don’t buy a house. Why don’t you consider buying a 2 to 4-unit property first? You can buy that property owner-occupied and you finance it in the same manner that you would a single-family residence.” The other thing is if you live in one of those units and you have tenants in the other units, the chances are if something happens to your income stream, which most people buy their first property while they have a job, what happens if you lose that job? They find themselves in jeopardy when they own a single-family residence. Whereas if you have units, the probability of you immediately being displaced begins to be reduced somewhat. In some cases, depending upon the rental rates, you might be living close to free in your unit because of the revenues generated from the other three rental units.

As a beginner, try to get into a 2 to 4 unit and then advanced from there. The great news is although you acquired that property as owner-occupied, you don’t have to live there forever. Let’s say you decide in another couple of years that you still want to buy a house or something. You still have the ability to have that rental income contributes to the mortgage of the new property that you’re looking to purchase as well. For someone that is more middle of the road where they have some experience and they’re looking for a way to advance further, I would say look at joining an investment club, group together finances to potentially acquire an interest in larger assets. If you don’t want to have any management responsibility, you can always participate by owning stock in a publicly-traded rate, for example, as another way to participate. I would move it up from there. If I were someone that’s more advanced, then I would look at redevelopment opportunities.

When you think about it, there’s aged inventory across the country in certain markets. When you go into parts of the country that were developed earlier. You have migration patterns where cities and urban cores become popular, then they lose their popularity and then they’re prime for redevelopment. When you look at what might be happening in the market that would trigger some future growth, it’s an opportunity before that growth happens to look at getting in that market and seeing what’s planned. That’s where you make that trip down to your city planning department and take a look and see, what are they talking about? What are the projects that they are looking at in forward planning? How would that impact a particular area?

I haven’t heard that last bit of advice in particular. You go to the city planning department and you can find out, before things are public, what’s on the rolls, what are the things that are coming. How do you do that?

I do this not only in person but also online. You can look at the city council agenda for the planning department, the planning committee for whatever city. In most cases, when you’re talking about a major project, that project has to go through some level of approval. As a result of that, those things will be published. If I’m tracking an area and I’m not there physically on the ground, I’ll sign up to get their city council alerts for the planning department. Whenever there’s a notice that goes out about a particular project that the planning department has to review, then I know that’s a project that I want to be aware of in that market. I can take a look and then I can get the minutes after that hearing has taken place to see what decisions were made. That’s one way. If I’m in an area that I can drive to planning, I go right on up to the planning counter and find out whose handling forward planning, what’s on the radar and what’s coming up.

You’ve had tremendous success being a real estate investor your whole life. In my experience and what I realize that most people learn not so much from when things are going great but they learn a lot more from their mistakes. What would you say was your biggest mistake in your real estate investing career and what did you learn from it?

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The biggest mistake was prior to my mother passing, I purchased another property. This was before I had decided that I was going to move into the space. I trusted an agent to assist me on the deal. I gave him too much trust because I told him that I was eight months pregnant and I was going to have another tax issue. My CPA said, “You need to buy another property.” I was like, “Okay, no worries.” It was getting close to delivery and I was thinking, “I can’t deal with finding this property.” We weren’t finding a property. I was like, “Maybe I should delay this until after the baby is born and all of that stuff.” I was giving a recommendation that this gentleman was a trustworthy person. I trusted him. He did this deal and it wasn’t a great deal for me. It ended up putting me in a situation that about 24 months later, I found myself in a financial situation where I ended up losing that property as well as some other properties that I owned. That was in a personal investing experience.

Another experience that turned out negative was a lot of family members, relatives are passing. Oftentimes, before they pass, they’ve not always taken care of what should happen to their real estate. In my family, we thought we had this all resolved regarding a particular piece of property. It had all been resolved while the person was still alive and able to make decisions and thinking that you covered all of the what-ifs. What I didn’t bank on was that if you have equal ownership with a person, if they decide to do something wrong, you have no authority to overrule them. You’re taken hostage in that transaction to the degree that that person is willing to do whatever it is that they’re choosing to do. I found myself in a situation where a family member was misrepresenting the facts of the property and created a fraudulent legal battle. All as a result of personal greed that was completely unfounded. You still have to go through that experience. That would inform how I would structure any type of ownership in real estate.

Always make sure somebody has the means of overriding. We have a property where we have 50/50. In the case that we’re in disagreement, we’ve elected somebody that both parties trusted that will be the tiebreaker. In our case, that’s one way you can do it. Going back to that first one where you put too much faith in that one agent, what did you learn? What will you do differently in the future?

Now I’m in the business. I dot every I and cross every T. When we’re going through contracts and negotiations, my clients always ask me like, “You act like an attorney.” I’m like, “Don’t say that because I’m not a licensed attorney. I have no authority to be an attorney. I read well and I look at all the deal points thoroughly.” If something is inconsistent with what we discussed, I point that out. You can then present that to your attorney because I am not an attorney and that is outside of my scope. However, I am looking at deal points thoroughly and then also considering what-ifs. In all of your assumptions, what if you’re A, B, C, D, E, and F plan all go bad? What would you do in that situation?

This is your exit strategy. When poo-poo hits the fan, what happens?

I tell people, “When we start a relationship, let’s work on the exit first.” Just like you have a prenup in a marriage, let’s create that exit for the business relationship on the front end. That way, we can get through all those issues while we like one another. In the event things go south, you have a buy-sell agreement. You funded that buy-sell agreement in such a way that irrespective of what happens, the financial state of the business or the assets at that time, you have an ability to exit out an ownership position without having to completely dissolve that asset, especially if the timing is not favorable for that asset to be dissolved.

That’s great advice. The flip side of my last question in terms of the mistakes is, what are you most proud of?

What warms my heart is the fact that my son is interested in real estate. He said, “Mommy, you threw me in to swim with the sharks.” I was out of the country in the Middle East. I was in the midst of trying to close on a few commercial deals and it hit me that there’s not anyone that I can make work around the clock because since I was fifteen hours ahead, that means they have to catch you two times in the day. I’m like, “Who could I force to be available?” My son said, “I’ll do it. I want to be a part of it. Let me jump in.” He said, “He was excited. I got a contract signed. I went on a couple of tours.” Suddenly he began to realize the volume and he says, “Mom, this is hectic. This is a real business here that you’re running.” Even after all of that, he says, “I like this.” He began to become part of the business. Even though he has his other interests, he recognizes that he calls this the family business, the family legacy. I’m excited. I wish my mom were here to see her grandson and go, “Now we’re the fourth generation, keeping the family legacy alive.”

She should be a proud mama. That’s great. To what do you attribute your success?

 

What I probably have noticed is business and career, in my case, building an entrepreneurial focus, it’s like a marathon. It’s not a sprint. You’re going to have some different terrain that you come across at different points. Sometimes you’re going to be in a great stride. Sometimes you’re going to trip on something and get knocked on your butt. The thing that has kept me going is I had a certain methodology that I employ. I get focused on whatever it is that I’m interested in, at a point like laser-focused. I have this desire and willingness to learn bottom-up so that I know every element of whatever it is that I’m up to.

When I started off in development, I would tell you I’m working with this team that I’m leading of people who have been working together, 15, 20 years. I’m the only woman ever in this role, in this particular organization. You’re walking in and these guys, they’ve been working together. I used to tell people, “I go to work every day and I have to direct what’s happening with a bunch of millionaires and billionaires at the table.” Imagine those egos and everything else. No pressure. Getting everyone on the same page and then helping them all understand what’s common. It’s all about the dollars and cents. Let’s align everyone to those objectives. I’ve seen that happen.

For me, in terms of how I evaluate and lead an organization is that I focus on what’s the critical thing that we must master and accomplish at this particular time. Until I feel like that has been accomplished, I don’t move to the next thing, which is funny. A lot of times, people will look at my resume and background and they go, “You do all this stuff.” I’m like, “Don’t let my resume fool you.” When I was in advertising, I was all in on advertising, 200% that’s all I did. I ate it, slept it, and drink it. When I left advertising and went into real estate, I didn’t keep one foot in advertising and go over here. I was all out of advertising. I started all over with a clean slate and reinvented myself. I wanted to be a master in this space. I didn’t want to just barely know it. I wanted to master the space before I went forward.

I could talk to you for another five hours here. You have so much wisdom to share. Before we get into our trinity, which is how we conclude every episode, I want to ask one last question. You already talked about what you would suggest women who are starting, who are in the middle point or who are more advanced, what they should do. My question for you is, what do you wish you’d known at the beginning that you now know?

It’s a lot about trusting my instincts. I’ve had a lot of good instincts about business even before I came into real estate development. I remember years before, I was talking to this one guy and I said, “I want to be a developer.” He says, “What would you do?” I said, “I would do mixed-use.” He says, “Nobody is doing mixed-use. That’s passé. Nobody is doing mixed-use.” Now, look around. You can’t go to a city without seeing mixed-use. The reality was I was speaking to someone who I consider to be an expert like a mentor, but he did not have the market knowledge that I had. When he said, “Nobody is doing mixed-use.” When I entered the business, probably the first three years that I was in the business, no one was doing mixed-use. I was like, “That’s interesting. You’re thinking about this. Nobody, who are all the professionals, they’re not talking about this.” Lo and behold, everyone caught on in mixed-use. That’s all you’re looking in urban cities as a solution.

That’s always great advice. I’m a big proponent of trusting your instincts and trusting your intuitive guidance. Lastly, what’s the best way for people to reach you and find out more about what you do?

Look me up on LinkedIn. I’m Stephanie Ardrey on LinkedIn. That’s probably the touch point number one or at my office in Orange County.

We have time for our famed end of show trinity, which is a brag, a gratitude, and a desire. What is one thing you’re celebrating? What’s a brag you have for us?

I will be Dr. Ardrey soon.

Well bragged. That’s amazing. What’s one thing you’re grateful for?

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I’m grateful to be healthy, happy, and to have this beautiful young man that I get to say I birthed into this world and proud of our continued relationship. I’m grateful for that.

Last but not least, what’s one desire?

I would love to meet my love partner and be able to connect and enjoy this next season of life.

So shall it be or so much better than you can imagine, under grace and in perfect ways. Thank you so much for sharing your story and your experience. If you want to connect with Stephanie, you can find her on LinkedIn, Stephanie Ardrey. You can connect with me at RealEstateInvestorGoddesses.com. Do you want to join an investment club? We have an investment club at Real Estate Investor Goddesses connecting women with investment opportunities. You can check that out there and join our online community. Meet Real Estate Investor Goddesses virtually and in person. Thank you for being on the show and we will catch you next time for another Real Estate Investor Goddess interview.

Important Links:

• Stephanie Ardrey – LinkedIn

About Stephanie Ardrey

Entrepreneur | Executive | Educator

I have spent over two decades developing and executing innovate business strategies which created measurable economic impact across business sectors. From working in fashion, entertainment – film, television and music, to technology, hospitality, and commercial real estate finance, development and construction the constant is that in each sector organizations must have a clear understanding of: capital requirements, capacity and customer acquisition strategies.

For early-stage and hyper-growth firms – capital, capacity and customer acquisition strategies are critical. In the current economic climate, recognizing the impacts of globalization and how to create a sustainable venture becomes essential.

As a real estate developer, I’m described as an “innovative high-tech holistic developer” creating innovative SMART communities for people to live, learn, heal, work and play!