Profitability is a concern for any business, but it’s especially important for corporate real estate transactions. One bad deal can wipe out several good ones. That’s why Quattro Development focuses on working with select clients on a repeat basis so that they fully understand their clients’ businesses but also to remove the leasing risk of a project since the projects are typically fully leased before putting a shovel in the ground.
Since 2008, its co-founders, Rob Walters and Mike Liyeos, have streamlined their small, national firm to be a one-stop shop for any business that needs to occupy a new space anywhere in the country. While every development firm has its nuances, Walters and Liyeos share the four approaches that helped them structure the most profitable real estate deals possible.
Work With Chains on a National Level
Instead of settling for one-time deals, Quattro Development focuses on developing multiple locations for its clients across the United States. In its early days, Quattro Development secured industry relationships that led to several high-profile projects. “We put together a deal with Chipotle and a deal with Vitamin Shoppe and a project with Aspen Dental and some different national chain groups,” Rob Walters shares.
Not only does working with chains help Quattro Development secure multiple sites, but it also simplifies the firm’s operations. For example, most of Quattro’s clients already know where they want their next stores. “They tell us where they want to be and we’d go out and find a property and build it and lease it back to them,” Walters explains. “Our tenants want to find a specific type of real estate within that market. Historically, it's been guys who want the Main and Main corner. Chipotle, Starbucks, the people when you’re driving by the regional mall, and Target and Walmart, they're right up there in your face at a corner with good access and good parking.”
Instead of working in a single state or region, Quattro Development works on a national scale by taking a cookie-cutter approach to development. “For the most part, it’s not all that different across the country,” Walters explains. Thanks to its processes, expert employees, and solid relationships, it’s easier for Quattro Development to scale up nationally.
Boost Profitability by Doing a Great Job
Rob Walters and Mike Liyeos decided to run a different kind of real estate development business when they founded Quattro Development in 2008. “We’re probably fair to a fault,” Walters says.
The duo believes in being paid for honest work, which means they also believe in giving clients a fair deal. For example, Quattro Development hasn’t accepted developer fees on their deals in years. “I think a lot of developers think that's crazy,” Walters says.
Instead of making money on fees, Quattro Development makes money by doing profitable projects. This shows they’re committed to the quality of the work instead of taking on a job solely for the commission. Their fee-free approach gives Quattro Development more incentive to do a great job. “It's going to work out and we’ll get paid. Or if it doesn't, then we should have done a better job,” Walters concludes.
Delegate as Needed
Walters and Liyeos keep their costs down by running Quattro Development as a small business with just nine employees in total. However, the pair will strategically outsource to trusted local contractors for certain aspects of their projects.
“A lot of that is delegation to other people in the company, or third-party people, like our attorneys and architects and general contractors,” Walters says. It’s difficult for Walters and Liyeos to give control to contractors, but this allows the firm to do a great job without the additional overhead costs of full-time workers. This approach alone helps Quattro Development streamline costs while boosting profitability.
Quattro Development had a rough start when one of its founding equity partners pulled out early. “When we started our company, we had an equity partner that was going to be our money. Mike and I did not have any money from our families and we hadn’t raised any. That was really what had us go out on our own and feel comfortable with it. They ended up going bankrupt. We had this business planned and then we didn't have any money,” Walters explains.
Rob Walters and Mike Liyeos worked to secure the right type of funding to grow their company. “We had very limited money. We needed a lender for our first project but they were dropping like flies at the onset of the Great Financial Crisis,” Walters says. “We went and just talked to anybody we could about getting equity or debt for ground-up real estate projects, but everyone was scared and skittish.. Finally, a guy gave us five names and we met with four of them, and none of the four were interested. The fifth one ended up becoming interested and did 40 projects with us on the equity side,” Liyeos explains.
This approach worked out in hindsight, but Walters acknowledges that business leaders need to thoroughly understand financing to maximize long-term profitability. “We just didn’t know what we didn’t know. We didn’t really know what we were doing. We thought we knew what we were doing. I think we thought that getting our first projects financed was a very easy checkbox,” Walters says.
Profitability Is Key: Lessons Learned from Quattro Development
Profitability can make or break real estate developers, which is why it’s so critical for real estate companies to streamline their expenses and maximize income. Today, Quattro Development is a thriving, profitable business thanks to the unique approach Walters and Liyeos take to profitability. By going for national chains, focusing on project quality, delegating, and optimizing financing, Quattro Development is setting an example of success for America’s small real estate developers.