John Coe (00:00:00) - So David or. Well, thank you for joining me on icons of DC Real Estate I appreciate it.

David Orr (00:00:07) - Sure. I'm happy to do it.

John Coe (00:00:08) - Could you describe your role as founder and leader of your partners and your focus day to day? Keep it only to your role and we'll speak about your company later.

David Orr (00:00:20) - Sure.

John Coe (00:00:21) - Well, so my role.

David Orr (00:00:21) - Right now is really one of mentorship and strategic planning. And then I get involved in major transactions.

John Coe (00:00:31) - Okay. So as far as strategy talk about that a little bit. What do you what are you thinking about every day.

David Orr (00:00:37) - Well, so you know, the interesting thing about real estate development is that it's got a lot of variables and it's controlled or it's dictated heavily by the macroeconomic conditions that are out there. It's a very interest rate sensitive program, and it's also economy driven, economically driven. So if the economy is doing well, our customers on our project management side have new needs. And that's what drives the business in general terms.

John Coe (00:01:11) - And I assume product costs and things like that are important to you as well.

David Orr (00:01:16) - Yeah. In fact, one of the very difficult things in today's market are hard costs and how you handle hard costs. And we've come up with some some interesting strategies on on how we can reduce hard costs in our projects and give us a competitive advantage.

John Coe (00:01:33) - Maybe we can talk about that in a little bit.

David Orr (00:01:35) - Yes.

John Coe (00:01:36) - So tell us about your origins, youth and parental influences.

David Orr (00:01:41) - Yeah. So, you know, I grew up in the construction side of the business. I did my dad was worked for a large contractor in New York City. I was born in Ohio. I like to tell people I'm from Montclair, new Jersey, because that's where I went to high school. I've lived in the DC area for over 45 years now.

John Coe (00:02:03) - So how did your dad get to New York from Ohio? Out of curiosity.

David Orr (00:02:06) - He was hired by a contract. He started out of college. He went to Columbia University in New York, and he had an engineering degree. And he was hired out of college to be to work with a contract in Ohio based contractor, and then subsequently won.

David Orr (00:02:26) - And he was born and raised in New York City. Oh, okay. And so he wanted to get back to New York and got got engaged by a company called HRH, which was a very large construction company at the time and built a number of high rise projects. So I was raised in a construction environment.

John Coe (00:02:45) - So do you get on site as a kid? Quite a bit or.

David Orr (00:02:50) - You know, not a little bit. Yeah. My dad would take me out and would show me some things. And then ultimately what happened when I was in high school, he helped me get a job as a laborer. I was a union card carrying labor in New York City. Wow. Working really hard, making $5.25 an hour. But I saved that money to buy my first car.

John Coe (00:03:13) - Did you work in Manhattan?

David Orr (00:03:14) - I did, I worked in Manhattan.

John Coe (00:03:16) - High rise buildings, mostly.

David Orr (00:03:17) - High rise buildings, mostly like. One of the projects I worked on was Memorial Hospital. It was a big demolition project, and so we were there with sledgehammers in knocking down block walls and putting it in dumpsters and hauling it off site.

David Orr (00:03:32) - Wow. It was very, very.

John Coe (00:03:33) - Good shape then.

David Orr (00:03:34) - I was in really good shape.

John Coe (00:03:36) - You know, it.

David Orr (00:03:36) - Was very tedious work and but it paid well.

John Coe (00:03:42) - So did you do this and think, you know, I want to do this someday? I mean, this is really I mean, it was in your blood. Was that kind of your thought process that when you were a kid? Yeah.

David Orr (00:03:53) - There were two things I would say that were in my DNA. All right. The construction side of it, because I was raised in the environment. And the other thing that was in my DNA was and being an entrepreneur, I've always wanted to be an entrepreneur. I've always wanted to have my own business. And there's an interesting story about how I went about trying to figure out how to start my own business. So that was really what fueled my, my, my, my growth in the industry.

John Coe (00:04:23) - So you went to high school in new Jersey, and then I guess you were always aiming, I guess, towards that business, it sounds like.

John Coe (00:04:30) - So you went on to get a civil engineering degree? I did about that. Yeah.

David Orr (00:04:34) - I got a civil engineering degree at Syracuse, and actually I went to college on a full scholarship from the Air Force. And my goal at the time was to be a fighter pilot. Really? Yeah. And I was doing some additional coursework at Cornell University and a colonel at Cornell. I was about to start. The way the ROTC works is in your senior year, you start flight training you. Fly Cessna as you get a private pilot license. Then when you graduate, they commission you and they put you right into jets. I was about to start my flight training and a colonel at Cornell Army. This was Air Force.

John Coe (00:05:11) - Air force.

David Orr (00:05:12) - And so colonel at Cornell called me up and said, you got to come down and see me. And you got to realize this is old fashioned dial phones, right? No internet, no cell phones back then. This is in the 70s. And so I went down to see this colonel, and he said, I've got bad news and good news.

David Orr (00:05:32) - What do you want? I said, give me the bad news first. And he said, okay, the bad news is you can't fly. I said, why? And he said, Vietnam War let out. We don't need any more pilots. And I said, okay, I'll be a navigator. Nope. You can't be in the cockpit. Really? He said, I said, well, what's the good news? The good news is you can be anything else you want in the Air Force, or you can get out and you've got a free education in the US government. And I said, well, so I conferred with my dad and I said, look, you know, I really wanted to fly airplanes. I really don't have a desire to do anything else other than fly airplanes if I'm going to be in the Air Force. So I took their offer on on exiting and getting a free education from the government. And so ultimately I finished my engineering degree and I moved on from there.

John Coe (00:06:17) - Interestingly, my son with naval Navy and flew helicopters for ten years from the US Navy in the in the Gulf, went twice to the Gulf.

David Orr (00:06:27) - Yeah. Well, as you'll find out through this interview, we do an awful lot of work for the Navy. And if I had to do it all over again, I would be a naval aviator. Really? Yeah. I've been fortunate enough to go out on two aircraft carriers during flight operations, and that gave me exposure to it. And then we do an awful lot. Our company does an awful lot of work on behalf of the Navy, mostly for the nuclear submarine programs. And I have been genuinely, really impressed by the Navy and the people in the Navy and the way they go about their training and then the hardware that they have that just the surface ships, the submarines and the jets that they deploy are really, truly extraordinary. So if I had to do it all over again, I'd be a naval aviator.

John Coe (00:07:20) - Well, I'll share a story.

John Coe (00:07:22) - I spent six days on a US USS John C Stennis with my son. Awesome. And that was the Tiger Cruise, which is a you're familiar with that program? I am. So I did it from Pearl Harbor to San Diego. Six days on the ocean.

David Orr (00:07:39) - You'll never forget it.

John Coe (00:07:40) - Oh, it gives me goosebumps just to talk about it. Yeah, it was incredible.

David Orr (00:07:45) - Yeah. Same with my experience on the two carriers that I went out on.

John Coe (00:07:48) - Yeah, two airshows over the Pacific. Yeah. Oh my goodness. Yeah I mean it's just there's nothing like it.

David Orr (00:07:54) - Yeah.

John Coe (00:07:54) - It's incredible to see I mean to see the force of that. And there's nothing like it in the world. There's no other. There's another force like that. Yeah. Anywhere. So do you.

David Orr (00:08:03) - Know how many aircraft carrier battle groups we have in this country?

John Coe (00:08:06) - Well, there are 11 carriers, right? Right. So I don't know how.

David Orr (00:08:10) - Each one has about 20,000 men, right?

John Coe (00:08:12) - Right. There are 5500 on a carrier.

John Coe (00:08:15) - Correct.

David Orr (00:08:16) - And then there's the destroyers and tenders and submarines and everything that goes with a carrier battle group. Perhaps the most impressive.

John Coe (00:08:23) - Two most exciting moments I'll mention is leaving Pearl Harbor, the port. They had a special historian tell the whole story of December 7th, 1941. Everyone, all the entire crew was on the perimeter of the flight deck, right in dress, whites saluting as we pass by the memorial there. Oh my goodness, David. Wow, I can't tell you that.

David Orr (00:08:47) - Brought a tear to your.

John Coe (00:08:48) - Eye. Oh my goodness. It was just chills. Yeah. You know, it was just amazing. Well, the.

David Orr (00:08:55) - Two highlights of my aircraft carrier experiences were an arrested landing and a catapult launch. Oh, they were extraordinary.

John Coe (00:09:05) - So you wrote you did a catapult launch off a carrier. Oh, my.

David Orr (00:09:08) - Goodness, I did it twice. Wow. Yeah, I watched it.

John Coe (00:09:11) - I couldn't believe.

David Orr (00:09:12) - It. You can't believe.

John Coe (00:09:13) - It. It's so loud.

David Orr (00:09:13) - 0 to 180 in two seconds.

John Coe (00:09:17) - The G forces are amazing.

David Orr (00:09:19) - That's extraordinary.

John Coe (00:09:20) - Wow. So you went to Syracuse and got out, I guess. And then? Then what?

David Orr (00:09:28) - Well, I started with Morse. Diesel in New York City.

John Coe (00:09:30) - Is that the company your dad worked for?

David Orr (00:09:32) - It was.

John Coe (00:09:33) - Yeah. Okay. Right.

David Orr (00:09:34) - Yeah. So he helped me get a job there and talk about.

John Coe (00:09:39) - The impact of Morse diesel. I mean, I've read a little bit about them, but they were one of the big, big GSEs.

David Orr (00:09:44) - You know, and Karl Morse was what he was really known for. He founded a process called Fast Track, which is really more or less let's the similarity would be just in time, right? Deliveries. Right for the construction of major office towers. And the big one was at the time, the Pan Am building. It's no longer called that, but the Pan Am Building in New York City, 200.

John Coe (00:10:09) - Park Avenue.

David Orr (00:10:10) - 200 Park Avenue was their big claim to fame. And then they went on and built all kinds of buildings on that was.

John Coe (00:10:16) - Built on top of the Grand Central Station. Correct. Really? Right. Right, right.

David Orr (00:10:20) - So they did some really large projects and and then I helped them build a number of those large projects. I was an assistant project manager, and I worked in their office. And in the days when everything was typewritten by hand.

John Coe (00:10:35) - Interestingly, I interviewed Chuck, Chuck Waters of times, and he started his career in Manhattan for Haynes Building. Right, very large buildings as a developer there. And he said he told stories there that were amazing.

David Orr (00:10:52) - They are amazing. They're they're amazing, you know, projects. They're large. And, you know, the interesting thing about those projects, if you think about it, everything comes in on the back of a truck. And so your logistics for the whole how you build those things is really one of the most pivotal things. How do you get.

John Coe (00:11:14) - Cranes of the magnitude that they have into the city?

David Orr (00:11:18) - Yeah, you assemble them in place is what you do.

David Orr (00:11:21) - You bring them in parts and then you assemble them in place. And then what they do, they have these jib cranes that they attach to the side of the building, and they bring other cranes up through the jib crane. So it's very interesting way that they go about that crane on.

John Coe (00:11:35) - Crane, basically.

David Orr (00:11:35) - Crane on crane.

John Coe (00:11:36) - Because, you see, they might put elevators on the side of the building such that the crane goes up on the side. Is that by an elevator? Right? Yeah. Fascinating.

David Orr (00:11:46) - Yeah. Very fascinating. Those elevators, by the way, are extremely fast. And sometimes on occasion, you would ride them and they'd let them freefall. The operator would let them freefall. It was quite a scary experience going down 50 storeys in just a few seconds.

John Coe (00:12:04) - So my first job was with Prudential Insurance Company, and at that time in 1979, they own they were the owner of of the Empire State Building or they were owned it. So there's a film of the construction of the Empire State Building.

John Coe (00:12:18) - Right. And it was built in 1933 during the depression. And it shows laborers on beams right, 100 storeys up, walking out on beams with no, no, no safety protocols whatsoever.

David Orr (00:12:33) - Now, interesting fact about the Empire State Building is that they built it in 13 months. Yeah, with over 3000 people. Laborers.

John Coe (00:12:41) - That's fast track.

David Orr (00:12:43) - That's faster. But it did it at a time when everybody was desperate for wages and work. And so it was a very advantageous system that.

John Coe (00:12:51) - Several thousand people on the job.

David Orr (00:12:53) - Then over 3000. Yeah. Yeah, it was amazing. Yeah.

John Coe (00:12:57) - I assume you've seen that film.

David Orr (00:13:00) - I think I have, yes.

John Coe (00:13:01) - Yeah. It's pretty incredible. It is. So then you were there for how long?

David Orr (00:13:08) - So. Morse. Diesel I was there. They. When I finished a couple of projects in New in New York City, they transferred me to Memphis, Tennessee. I built the headquarters for the Memphis Publishing Company, really for Morse diesel there, which is two big printing press buildings.

John Coe (00:13:26) - I mean.

David Orr (00:13:26) - Yeah, I was the lead project manager. So you moved at the time.

John Coe (00:13:30) - Was your dad there at the time when you were there or not? No.

David Orr (00:13:34) - He was not. He had transitioned over to h r h I c. And so but I was still there at Morse diesel and and so then my college sweetheart, who is now my wife of 45 years, had gotten a job. She went to Syracuse also undergrad, and she got a job with Time-Life Books in Alexandria. So I was in Memphis, and I really wanted to be with her. And so I transitioned from Memphis, and the Marriott Corporation hired me and brought me to DC. And so we lived in Old Town and we got married there. And here we are for 45 years now.

John Coe (00:14:19) - So I read that you developed their headquarters building, which is now being demolished. So talk about that process and why you came to work for Marriott and all that. Talk about that experience. Well, the primary.

David Orr (00:14:32) - Reason I came to work for Marriott is because I wanted to be located geographically here, and they had this need.

David Orr (00:14:40) - So I was an assistant project manager for them. Jim Davis's Uncle Ed sure was the project manager in My boss, and he's the one who hired Vicki Davis's father, so he's the one who hired me.

John Coe (00:14:56) - That's such.

David Orr (00:14:57) - And that's how I got Small World, and that's how I got. To know the Davises. And we have a very long history with with Jim Davis and Davis Construction. But we work together in the trailer right at the site, and it was about a two year engagement to build that bill is a half 1,000,000ft². It was designed by Hok Marriott, had their own architecture and construction division at the time. It was run by a guy named Jack graves, who was really revered in the company because he really helped facilitate their worldwide growth of their hotels, which was pretty astonishing. I had an opportunity to meet several on several occasions with Bill Marriott. He was a complete gentleman. He would come out and visit the site. We'd walk around, talk about what what the various attributes they would have, test kitchens and things like that for their various hotels and restaurants that they owned.

David Orr (00:15:52) - The Marriott family is a really, really, really good.

John Coe (00:15:55) - Headquarters.

David Orr (00:15:56) - Family. I have not been through it. I've seen it from the outside, but I've not been through it.

John Coe (00:16:00) - Yeah, I did a tour.

David Orr (00:16:01) - Yeah, so it took two years to build it and when I got done with it, Jack graves came to me and he said, son, you've done a really good job here. I want to send you to Saudi Arabia and build a hotel. And I was engaged to be married at the time. And I said, you know, I really don't think that that's what I want to do, you know, being that I'm about to get married. So I ended up, you know, looking for a job. And, and Rich Maher hired me and so and they were an owner builder. And I went over to Rich Moore so that I could stay in this area rather than go to Saudi Arabia. And I ended up building because of my high rise experience. Rich Moore put me on a lot of the high rise condos that they were developing at the time, and I also helped with some of their single family products.

David Orr (00:16:48) - So they are family owned business. They were very prolific in the 70s and 80s. I was a project manager with them and really that's where I started to get exposure to the development side of the business because I was doing construction, but they owned what they built, and so that really started giving me exposure and development.

John Coe (00:17:10) - Which projects you work on with others of theirs.

David Orr (00:17:13) - So old Georgetown Village, big master plan, community community was one of them, the Berkeley and Chevy Chase, the Berkeley, excuse me. In Columbia, Pike was a condominium, and there were several other high rises that did work, do some work on the Skyline project. And Kings Park was another one big single family community in Springfield. Sure.

John Coe (00:17:38) - So the skyline, the Charles Smith skyline, right?

David Orr (00:17:40) - Yeah. So if you might recall, there was a collapse there. And so Charles E Smith was more or less a rich Ma was a sister company of Charles Smith. They were related to each other, I think Christine's.

John Coe (00:17:56) - And the and the.

David Orr (00:17:56) - Christine's in the Smith, I think. I think Dick Kirstein married a relative of Bob Smith or something like that, as I recall. And so when Smith had that collapse, he couldn't build the buildings anymore. So Rich Moore took them over. And because of my high res experience, they had me get involved in in some of those high rises over at Bailey's Crossroads.

John Coe (00:18:18) - Was that just a structural collapse or was there some other issue with it or.

David Orr (00:18:23) - Well, so what happened was this is before now these counties have critical structures programs. And so that collapse is what precipitated the Critical structures program in Fairfax County. Prior to that, there was there was no criteria. There was no jurisdictional criteria for the stripping of forms on concrete. And so in their zealous ness to meet the schedule, they stripped the forms early. And so they still had many floors that were building on top of green concrete. And that's what precipitated the collapse. And I think several people died, if I recall correctly.

John Coe (00:19:08) - What was this in the 70s or.

David Orr (00:19:09) - Yeah, it was in the 70s before.

John Coe (00:19:11) - Yeah.

David Orr (00:19:12) - Right. Yeah.

John Coe (00:19:14) - So then you were Rich Marr for a couple of years. A couple of.

David Orr (00:19:18) - Years. Yep. And then spent one year with Jerry Siegel and Siegel Construction. Oh, sure. He came and recruited me. Siegel.

John Coe (00:19:28) - Zuckerman eventually.

David Orr (00:19:30) - Siegel's. Ackerman eventually. And then Sam made a very strong push at hiring me. I had probably six interviews with those guys. And with Lee, Sam is flying in from California. He was an Irvine, California based developer, wanted to set up shop here, and so he hired Joseph Doss, Mark Haskins or myself, and the three of us ran the DC office, and most of the projects we did were joint ventures. So with New England life, and we had probably a dozen office parks that we developed here, including the one we're sitting in Campus Commons.

John Coe (00:20:07) - So did you guys divide roles up there among the three of you? As far as who did what?

David Orr (00:20:12) - Yeah, we did our own construction, so I ran the construction company.

David Orr (00:20:15) - Make sense? Joe did most of the financing. And Mark did most of the design. And that's kind of how we divided up the roles. But, you know, it was very symbiotic. Right. And I would say of all the things that I did, that was the one that was really where I cut my teeth in development and really came to understand the development business.

John Coe (00:20:36) - So did you get into the land use issues and that kind of thing at that, all that.

David Orr (00:20:40) - All the land use issues going to the hearings, all the entitlements, right, the zoning, getting to know the communities, a lot of coffee table conversations and people's living rooms, which is really necessary to be successful as a developer. So I really cut my teeth in the business, understanding what I call and what I teach now is the dynamics of the real estate equation, and how a financial model works, and all of the variables in that, and how important that is to really be utilized as a guide and your Bible for a successful development project, you always need to check in on your financial model and make sure you're meeting your numbers.

John Coe (00:21:17) - Well, yeah, well, it's interesting how many variables you put into that equation. It could be right. Hundreds, literally. Right? Right. And what you have to watch throughout the job is how things are right. And then what adjustments you have to make. It's it's interesting.

David Orr (00:21:34) - There's and that really makes the business really challenging because many of those variables are out of your control, like the weather. All right. Or if their interest rates or interest rates right, or, you know, getting supplies and labor and cost of labor and all those things are variables, some many of which are outside of your control.

John Coe (00:22:01) - Interesting.

David Orr (00:22:02) - Yeah. So, you know, I've over the years I've taught on a number of real estate development classes, the Urban Land Institute, I've taught there and I've done a number of those. And there's an interesting question that I start. It's the first question I ask of every class. I'm going to ask you this question. I've never had anybody give me the right answer, but I'm going to ask you the question.

John Coe (00:22:32) - See if you know, okay, you're turning the tables on me.

David Orr (00:22:34) - So what is it that makes real estate development so unique?

John Coe (00:22:40) - Well, I, I have my own kind of thought, and this is very first principles. Yeah. So to me and that's why I'm interested in real estate in the first place. It's a three legged stool. There's communications. There's mathematics analytics and there's design function. So to me those are the three basic elements of commercial real estate. Right. And you have to understand all of them. And but in my mind number one is communications among all of them.

David Orr (00:23:14) - I agree with that completely. And but however, that's not what makes real estate development so unique. I mean, you're right, you're three legs of the stool are absolutely spot on, and communications is the hallmark of a successful project. But what makes real estate development so unique is that, without exception, every single aspect of it is negotiable. And that's what makes it such a challenging and invigorating whether to.

John Coe (00:23:40) - Do it at all.

David Orr (00:23:41) - Right. Why? And so so as you're interviewing people like myself and you're interviewing icons and real estate and some of which are developers, what really makes good developers is that they become really good negotiators, and that becomes the skill that you have to refine in order to be a really successful.

John Coe (00:24:04) - The hardest person to negotiate with, though, is yourself. Is yourself.

David Orr (00:24:09) - Right? And having.

John Coe (00:24:10) - Discipline.

David Orr (00:24:11) - Right. Having discipline.

John Coe (00:24:13) - Right. Exactly.

David Orr (00:24:14) - And that's another thing that I teach, is that you can't fall in love with your real estate. No, you cannot do them. Too many people do. And you have to you have to know when to fish or cut bait. You really have to do that.

John Coe (00:24:26) - Well, it's funny how you say that because I just interviewed Gary Rapoport. Yeah. So Gary Rapoport doesn't like to sell property. Just that's his whole mantra never to sell. And he also says why develop when you can buy five shopping centers in the time that it takes to build one.

John Coe (00:24:43) - Right. So it's an interesting philosophy that he has. And it's served him pretty well. Yeah. But it's you know everyone has a different kind of thought process. And looking at that, well, it really.

David Orr (00:24:56) - Comes down to the liquidity. The. One of the things that is challenging about real estate is it is an illiquid investment. It's only when it's finished and stabilized and producing cash flow that you get some liquidity back.

John Coe (00:25:12) - That's the risk of development.

David Orr (00:25:13) - That's the risk of development. And we go through unfortunately, it's a cyclical business, and the scale of the projects that we do is tends to be quite large. And so the cycle for us to get a project from start to stabilization can be upwards of 5 or 6 years. Those are long time frames in the macroeconomics in the world changed dramatically in those 5 or 6 years.

John Coe (00:25:37) - Well, this this thought that you just brought up brings me back to your transition from Least Famous into your own company, because and I'm going to paint a scenario and you can either tell me no or not, but it my sense is that, you know, you took on fee development, which was kind of your main thrust because of the capital markets risks doing that because you had clients that says, okay, certainty here we at least I've cut away the capital part of it.

John Coe (00:26:08) - So now all I have to do is build this project for this client and get it developed in time, help that group with the entitlements with the county and do all those things. But I don't have to worry about the capital markets because they're going to cover the costs. They've set the budget. For me, that's what I have to build under. Am I wrong with that assessment?

David Orr (00:26:29) - No. Well, so it's a little different than that. But you're more right than wrong. Okay. So what happened was so how I got how I got into my own business. Sure. Okay, let's start with that. And I'm going to tell you how I morphed into fee development and what the macroeconomics were that required that. Okay, so I got into the business. I was a partner, at least famous and I started we had made a really good name for ourselves. We had a dozen office parks, and I had people like Bob Smith call me up and say, hey, I want to meet with you, okay? And he started to make some inroads into, you know, would you come work here trying to trying to get me.

David Orr (00:27:16) - And I was like, you know, look, I'm a general partner in what I do right now. You know, I'm pretty happy with where I am. And I was okay. However, one offer came to me and it was from Pete Schemata, and he came to me and said, listen, I want to start a whole new division to my business. I've had my eye on you. Things are going really well. I'll put up some seed capital and you and I can start a company. We'll own it. 5050. And I took the plunge and said, okay, let's do it. And we started this business was that that was 88, okay. And that was 88. I left Sammy's I started the business and it was started as a development company. And I went out and as a developer, I formed a joint venture with till Hazel on a property we put under contract at Sellafield Circle. I formed a joint venture with David Evans. Sure. Okay. Yeah. And I had a joint venture with.

David Orr (00:28:15) - With Pete Sakamoto.

John Coe (00:28:16) - And was it just you and Pete, or did you have some of his team on your team? It was just.

David Orr (00:28:22) - Me and him. Okay. All right. It was a whole separate division. We would meet once a week and irrespective of anything you might have heard about Pete Kamado, I will tell you, he was a tremendous mentor. He was really had very good business acumen. He would sit me down once a week, we'd spend about two hours. And it was a lot of focus on the numbers, a lot of focus on, you know, he had a famous saying that. I remember he said to me, he said, you got he said, your most important thing is to earn a living. He said, meaning, you've got to be able to pay for yourself, right? He said making money is easy. Earning a living is a really hard thing to do, he said. So let's focus on earning a living and then we'll find a way to make money.

John Coe (00:29:09) - Let me pivot for a moment. One of my prior guests was Charlie Nelson. Yeah, Charlie worked for Pete, and he talks about Pete specifically in that interview quite a bit.

David Orr (00:29:20) - Yeah, yeah, Charlie's good guy.

John Coe (00:29:22) - He was there to the end with Pete, basically. He was.

David Orr (00:29:24) - And I watched. So I was there watching Pete's Empire kind of fall apart. So you've got to remember, we formed our business and this is 87, 88 and then 89 was the SNL crisis, okay? And Pete's Kamado was really in the crosshairs of a number of lenders. I mean, big time.

John Coe (00:29:43) - Including our company.

David Orr (00:29:45) - And yeah, big time. Right. And yeah, and so there were all kinds of things swirling around. I was over there meeting with him, and I, you know, you just hear this noise in the hallway. And Pete was hiring. Bankruptcy attorneys, and he was under siege. Okay, I really didn't have anything to do with that, but I just could hear it in the hallways.

David Orr (00:30:07) - And eventually it got to a point where I said to him, I said, Pete, listen, you got a lot going on here, right? You've got a lot of issues that you've got to deal with. It probably be best for you if I bought you out. And he said, I agree with that. I said, all right. And he had of the half $1 million or so that he had said that he would invest, he probably had $100,000 laid out. And I said, I'll pay you back the 100,000 sign over the other half of the company to me, and I'll just I'll exit and we can both go our ways. And we did that amicably and moved on. And that was the genesis of me having my own company.

John Coe (00:30:47) - So for the listeners, I just wanted to share that. Pete's kamado company was called Centennial Development Company at the time. Right. In 19, he started, I think, in the early 1980s and had.

David Orr (00:31:00) - 300 people.

John Coe (00:31:01) - In Northern Virginia at that time.

John Coe (00:31:03) - Just to give some market perspective, was just perhaps one of the two other than Southern California, the fastest growing office suburban office market in the United States. Correct? The KB office here was number one in the nation. Correct. Number one in the nation. Right.

David Orr (00:31:19) - Guys like John McCauley, Steve Spencer.

John Coe (00:31:21) - Just these.

David Orr (00:31:22) - Incredible icons of.

John Coe (00:31:24) - I mean, they were making millions then millions.

David Orr (00:31:26) - Millions in commissions. And we were doing these huge build suits and it was really unique time. I'll give you an example. We were out at Dallas Technology Center, and we were trying to do business with a company called Sit Alcatel, a very large network company that was growing. And I remember standing on the property and the CEO of Sit, Alcatel, said, I'll do this 200,000 square foot building with you guys. But I got to be in in a year and we said, a year, okay. And we had a preliminary design, right? That's about all that we had. And so I went to meet the guy running the county permit division was a Claude Cooper, a real gentleman.

David Orr (00:32:20) - We had good standing with them. I went and met with Claude Cooper, and the county was really keen on growing their commercial tax base. And so they were really rolling out the red carpet to these big corporations who wanted to locate here during these very heady times. And so we met with, with Mr. Cooper and he said, so what do you need? And I said, we've got this bill to suit. They've got to be in in a year. So, so what do you need from me? I said, we need to be able to start now in order to make this. He says, do you have a site plan? I said, we have a site plan. He goes, okay, I'm going to have my staff review it quickly and we'll get right back to you. And within a week we had we had an approval. Within a week we had an approval and we launched. Yeah, I mean, there's no way you could do that today. But those were those were different times.

David Orr (00:33:14) - Fast track, fast track. Big time. Yeah. It's interesting times, no question.

John Coe (00:33:19) - So then how did your company start. Well so what was the impetus there.

David Orr (00:33:24) - Well so so then what happened was as you know I bought out Pete. Right, right. And so there we are. In 1989 the SNL crisis happened. Right? Right, right. And so I had one project under construction. The other two were still under contract, and I had negotiated the contracts to a point where I could get out of those deals and get a deposit return and move on. Right. Because all the banks had melted down, the development community was melting down. But I had one that was under construction. It was a medical condominium called Studley Park, directly across the street from Prince William Hospital. And so there I was, and I had personally guaranteed the $5 million construction.

John Coe (00:34:11) - Loan just in.

David Orr (00:34:12) - Manassas. This is Manassas. So this thing's half done right. And so I've got to sell units. The bank itself ultimately went under that I lent to.

David Orr (00:34:23) - But I'm the kind of person where I don't default on loans. I always pay back my debts. It's part of the integrity that you'll hear about, you know, that is really kind of what we tout as our number one attribute is our integrity.

John Coe (00:34:39) - Which bank was it? I think you remember.

David Orr (00:34:42) - I don't remember the name.

John Coe (00:34:43) - Of the savings.

David Orr (00:34:43) - Bank. No, it wasn't United. I don't remember who it was.

John Coe (00:34:49) - Just out of curiosity.

David Orr (00:34:50) - Yeah, the savings.

John Coe (00:34:50) - Bank. It was a.

David Orr (00:34:51) - Small bank that made this $5 million loan to me. And so, you know and so. Whole market was melting down. And so what I did, right, I was a condo, remember? I had to sell units. I had 87 units of commercial medical office spaces. What is meant to be for doctors and break.

John Coe (00:35:09) - Even point was probably what, about 60 units?

David Orr (00:35:11) - 50 something like that. Yeah, right. So long story short, I would hold seminars at the Holiday Inn in Manassas, okay.

David Orr (00:35:22) - And the title of the seminar was How to Buy Commercial Real Estate With No Money Down. And I'd serve some chicken fingers and I'd sell a unit, and that's what I did. And I hustled and I worked it, and I worked it and I worked it. And then long story short, I paid the loan back. And for now, I lost a half $1 million. Okay. You mean, but I paid the personally. Personally. But I paid the debt, so there I was. Now, you know, I've gotten through that. You're in 1990, 1991, and I'm kind of the last man standing. Scarecrow and under. Everybody was gone. Oh, yeah. Okay. It was a complete collapse of the industry. Okay? I'm the last man standing. So that's when I realized that there was a need. There's still a need for a real estate project. There's all these institutions that need real estate. So I started doing fee development and project management and started to develop a system that ensures predictability of outcome.

David Orr (00:36:29) - It ensures on time and on budget every time. And that was something that really became a pivot point for us and really launched our project management business to where now it's a national company that's built in 35 states.

John Coe (00:36:45) - So who are your first clients?

David Orr (00:36:48) - So one of the largest first clients, I went to a speech that a guy named Knox Singleton gave. He used to run Inova Health System.

John Coe (00:36:57) - Oh, I know that name, right?

David Orr (00:36:59) - Yeah, sure. So Knox gave a system, gave gave a excuse me, gave a speech at it was either a naoc or associated builder to contractors conference. I forget I think it was nay. So he gave a speech and after the speech I went and chatted him up, introduce myself, said hi to him, started talking about some of the medical things that I had done in Manassas and some of the physician practices we had built, and dialysis labs and things like that. And he says, you know quite a bit about this stuff. He said, can you come see me tomorrow? I said, sure.

David Orr (00:37:30) - He said, okay, give me a call and we'll get it on the calendar. I went and saw him and he says, look, I got I'm affiliated with outcomes, affiliated with 14 hospitals. We got this big platform. I have a facilities department. And he says it's just completely broken. Okay. He says, it's just it's just a mess. And I said, well, that's completely understandable. And he looked at me, you know, questioning why I would say that. And I said, well, you're not you're in the business of delivering health care. You're not in the business of delivering real estate. You shouldn't be in the real estate business, quite frankly. And he said, can you do me a favor? He said, take a look at my facilities department and come back to me with some recommendations. I said, okay, I'll take a look at it, looked at it, came back to him with some recommendations, and he said to him, he goes, can you take it over? I said, what do you mean? He said, can you take over the facilities of Inova Health.

John Coe (00:38:20) - System as an employee.

David Orr (00:38:22) - As an employee? And I said, no, I said, I have my own business. He said, don't do it as a consultant. I said, I have my own business. Hard thing to do. He said, then do this for me, take it over for a year and hire your replacement. Hire somebody that you know who's good, who can run the thing. And I did that, and I did, and I did a number of facilities for Inova. And while I still had my own business and ultimately hired a gentleman who took over and stayed with them for many years and really turned their facilities around, and that became the launching pad for doing a lot of institute work. And leading ultimately to the relationship that we have now, that these 20 year relationship, customer based relationships with the likes of Gulfstream and General Dynamics and Electric Boat and, you know, these larger project management clients that our system has has worked so well for.

John Coe (00:39:21) - So what you did is you brought your construction expertise and experience to clients that didn't have it or shouldn't have had it.

John Coe (00:39:31) - Is what you said, right? And they had to build, but there was nobody out there to do it because the construction companies were.

David Orr (00:39:38) - All probably.

John Coe (00:39:39) - Really in deep trouble at that time as well.

David Orr (00:39:41) - Yeah. And that, you know, one of the one of the biggest challenges, if not the biggest challenge to the development industry is cost overruns. Right? Okay. And people do not like to go back to their bosses or to their boards or. You know the decision makers and ask for more money. And unfortunately, the way that, you know, these process that we talked about, the number of variables and how complex these projects are. And, you know, there's a lack of discipline in a number of the various constituent parts that comprise these projects. The construction industry, by way of example. Right. It can can it's not always but can be predatory. And so, you know, if you're not prepared up front to address that, you're going to have some challenges, you're going to have some struggles with your schedule and your budget.

David Orr (00:40:41) - And so what we did and what I did use my construction acumen to realize, understand, to really understand the pain points of development. And how can I make this easy for people? How can we make this process where they have predictable of outcome, where they don't have to go back to a board for money, where they have reassurance that they're going to finish on time and on budget. And that's the system that we've developed that's resonated so well with these large corporations.

John Coe (00:41:12) - So you mentioned pain points. Maybe I did a course for my community on the development process, and I used I brought an experienced developer ended to lead it, I brought the capital markets view. And then I had an attorney that did all the all the document, all aspects of the development project. Right. We didn't get into the specific pain points, more of the process. You know, these are the things, you know, step by step by step kind of thing. But we didn't talk about distill down to pain points.

John Coe (00:41:46) - It could be a whole course to tell this, but I'm just curious if at a high level, what pain points do you see that other people may not be aware of unless they were taught what they were? Well, so.

David Orr (00:41:57) - Let's just I think one of the biggest ones is agreements and how to utilize smart agreements, and how to make sure you have the proper language in your agreement and that you enforce your agreement.

John Coe (00:42:14) - You're talking about the general contract subcontracts all the above here, or what architects.

David Orr (00:42:18) - Engineers, contracts, all of those things. Right? Really, one of the strengths that we have as a company is that we've developed a proprietary set of documents that address the issues that an owner is going to face and allow us to have surety of outcome. So I'll give you an example. Okay. In our construction agreements, we have a phrase that says irrespective of the errors and omissions and the plans and specifications, you, the contractor, are going to give us a complete and functioning project. Now the contractors say, whoa, wait a minute, I didn't design this.

David Orr (00:43:02) - And we say, true, but you've built 300 buildings like this. You know what it's going to take?

John Coe (00:43:09) - Is that different than a construction guarantee?

David Orr (00:43:13) - Well, yes. You know, a construction guarantee is typically what a lender. And it's typically what we call a completion guarantee. It's what the lenders require of us to lend us money. Right. And I have no we generally are risk averse and we try not to enter into recourse provisions on our loan where we have personal guarantees. But there is one personal guarantee I willingly sign because I think I need to sign it because it's our business. It's what a responsible for, and it's called a completion guarantee, right? Where we're telling the lender that we're going to make sure this is done on time, and we're going to make sure it's done on budget. It's our business. We should stand tall to that.

John Coe (00:43:55) - How does that differ from what the language you were talking about earlier?

David Orr (00:43:58) - So the language I'm talking about earlier is the language that's actually in the construction agreement with the contractor.

David Orr (00:44:04) - And so you can enforce with the contractor language like that, that you don't get nickel and dime with change orders. Now the contract is going to come back and say, listen, you know, these drawings, these projects have drawings. It's just thousand sheets of plans. And of course, they're created by humans. There's going to be a lot of mistakes in them, right? Of course, there's no such thing as a perfect set of plans. Right. And so we know that. So what we do is we tell the contractor, listen, we understand there's a certain amount of risk that you're taking by agreeing to that phrase. So we're going to give you a contingency. All right. That will agree to that for you to take that risk okay. And so under that premise the contractors accept that language so that. That in and of itself saves an enormous amount of time and headache. Fighting change orders when we can point to that and say, wait a minute. Okay. And so some examples in the way I adjudicate that or way that we adjudicate that with contractors, as we say, look, we if there's a light fixture shown on the ceiling and there's no light switch in the wall, we expect you to have the light switch.

David Orr (00:45:21) - And they say, of course they do. All right. On the other hand, the term that I use is I can't expect you to be clairvoyant. So by way of example, if the structural engineer has designed, you know, a staircase and he put the wrong size rebar in it, I can't expect you, the contractor, to know that. All right. And so on a situation like that, I'll talk to the architect and I'll talk to the engineer, and we'll look to their insurance. Right. To cover something like that, and I won't I won't ask you, Mr. Contractor, to cover it. So when we give examples like that and we explain the rationale behind this, right, every single contractor says that's fair, we'll accept that. And and so it's there are many, many more phrases like that that we and strategies that we employ in our agreements that help us ensure and deliver consistently on time and on.

John Coe (00:46:23) - Budget strikes me that a lot of developers would learn by understanding.

David Orr (00:46:28) - That.

David Orr (00:46:28) - Yeah, it's interesting that you say that because we're in the process of finalizing a webinar where we're going to teach these principles and we're going to put that online and we're going to we're going to ask people to pay us some modest consideration in return for seeing it. But we want to we think we can access the worldwide market and, and teach people some of these proven principles that have worked again and again and again.

John Coe (00:46:55) - So you've already talked about several of your clients. While many other companies focus on building their own portfolios, it seems that you were focused on serving others development needs. Was it because you were concerned about the capital market risks at the time, or did you have so much business that you believed you didn't need that risk?

David Orr (00:47:15) - Well, so it was a combination of both. So the development business requires a lot of capital. Okay. And I you've got to remember I started as a project manager. I didn't have any money.

John Coe (00:47:28) - And I was a financier. So I know exactly what people.

David Orr (00:47:31) - Right. And so and you know, and on any particular development project, the most of the bank is going to give you is about 60%. You've got to come up with the other 40%. And when you're doing $100 million project, that's a lot of money okay. And so typically in our relationships with our capital partners, they'll give us 90% of that 40%. But we have to come up with the other ten. And so it it took a long time to get to a point where we had enough capital to invest right alongside a limited partner and do some of these projects. And we're fortunate now, and we run the company without any debt. And I can't say that that was true for the whole history of the company. Early on. You take on debt, right? And as these market cycles would, would arise, you know, that becomes a problem. So when did.

John Coe (00:48:23) - You pivot from fee development or doing purely projects for others and do your own private projects?

David Orr (00:48:30) - Well, as you recall, we started the company was founded when I founded it with with Pizza Tomato as a development company.

David Orr (00:48:37) - But we pivoted to project management with the meltdown in 89 and 90 markets. And where our development, where our development process really launched is when I brought in my two sons, okay. And that's when. So my son Ryan, he's a Dartmouth grad, okay. Really smart financially. He's a spreadsheet guru, really good with design. He looked at this whole process. He said, dad, listen, we're making a lot of money for other people. We need to start bringing some of that home. And so we pivoted into more and more under he and Tyler's leadership. All right.

John Coe (00:49:18) - So what year was that?

David Orr (00:49:19) - So Ryan Swan with me for 11 years. Okay. And Tyler's been with me for 5 or 6 years now.

John Coe (00:49:26) - So for about 20 years you really were a feed development shop?

David Orr (00:49:30) - Mostly. Mostly we did we did a couple of developments that were successful. Louden Parkway Commons was a 150,000 square foot warehouse condominium project we did on Loudon County Parkway, right? We pre-sold every unit before we broke ground.

David Orr (00:49:48) - It was an amazing story. And that partnership made about $6 million. Right. And I had some brokers who were investors, and I had my own capital and. It and, you know, high net worth investors and everybody, you know, that was a you know, the way we measure development success. One of the measurements is return on cost and another one is multiple of money. Right, right. So on that particular product the multiple money was a three. That's pretty the three x for everybody.

John Coe (00:50:14) - That's pretty good. It was.

David Orr (00:50:15) - An amazing. There was a guy named Bill Saltz who was our broker who was selling the units for us. And he would call me up and he say, hey, I sold units A, B, C, and D today. I said, okay, let's raise the price on the next, the next four, he goes, I sold them to. And I'm like, wow. So we couldn't raise the prices fast enough. Literally it was they were flying off the shelf was an incredible I don't see that anytime soon.

David Orr (00:50:39) - You won't see that again you know. So but we have another similar success story on our central project, which is a large multifamily project we did in South Arlington. And and really, again, I owe that to my two sons. So Tyler's specialty is construction. And he was out in the field working with Jennings, who was the contractor. Excellent contractor, by the way, of Jennings. I love Jennings and, you know, and I knew Larry before he passed away. He and I were on the board at ABC together, and we did a lot of stuff in our early years. And so to this day, they're a great company. So we built this project 366 units. Ryan was really in charge of the finance and design. Tyler was running the construction. We got the project completed in November of 19. We were methodically leasing it. We had gotten to the point where we were about 40% leased up. And what happened in March of 2020? Covid boom. All of a sudden, we went from leasing 30 units a month to 0 to 0.

David Orr (00:51:47) - Okay, so you're sitting here watching this, you know, and we had I had negotiated a lease with Harris Teeter to put a grocery store in there. All of our retail had been fully leased up. It was all about just leasing it up. And we have this great success story, you know, unfolding before us. And then Covid hit and the leasing, the music stopped. And so to my son's credit, my son Ryan did a deep dive and said, wait a minute, okay, we're getting zero leases, but some of our competitors are getting 2 or 3 leases. So what's going on? Why are they so there's still a market out there okay.

John Coe (00:52:25) - Were they were the units delivered so they could physically walk. The tenants could walk.

David Orr (00:52:29) - Yeah we were done. We were done and moving people in. All right. Yeah. Yeah. We were 40% leased at the time. Okay. And you know, on a 366 unit project, you typically are going to plan for about 18 to 24 months to lease it up.

David Orr (00:52:44) - It's pretty typical that you'll do somewhere between 20 and 30.

John Coe (00:52:48) - And you can lease remodels to you don't have of course.

David Orr (00:52:50) - And we did. Yeah. We had we probably had 35 or 40 pre leased units right when we opened the doors. Right. Yeah. So we were all successful with that. And it was the Covid that really took everything stopped everything in his tracks. To Ryan's credit, what he did is did a lot of research and he discovered, okay, so what was happening in is that and the way the way apartments get leased is people use a filter, they go online, they're all leased online. And they they go they put a filter in. Typically what's the most that they want to spend per month? Where is the geographic location. And then options pop up.

John Coe (00:53:32) - Did you have your own leasing team?

David Orr (00:53:34) - We used Van Meter okay. Van Meter did the property management leasing and they did a spectacular job for us. But working with Van Meter, we're trying to figure out what we could do strategically to reinvigorate our leasing, which had come which had really just stopped in his tracks.

David Orr (00:53:52) - Right. And so what Ryan figured out is, in the state of Virginia, you're allowed to advertise net effective rents. Okay. And so leasing apartment leasing is all about it's a numbers game about traffic. All right. We have what's called a capture ratio. It typically is around 10%. And what that means is the number of people who tour to to about 10% of them.

John Coe (00:54:18) - Sign a lease.

David Orr (00:54:19) - Will sign a lease. Right? Right. So, you know, you need hundreds of people to tour, right? If you want to get to a point where you're signing 20 to 30 leases every single month, right. So Ryan discovered that we could we could advertise legally net effective rent. So what that means we're giving concessions at the time. Two months, two months at the time, two months. Right. So you can advertise in Virginia. You can't do this in the District of Columbia, but you can in Virginia. You can say you can take the two months and factored into the annual rent, and you can say 1499 a month now.

David Orr (00:54:57) - What's happening is you're going to tell them that the first two months are free. You're not going to pay any rent for the first two months, but then after that you're going to pay.

John Coe (00:55:05) - 1700.

David Orr (00:55:06) - 1700 a month. Exactly right. And it's all about how potential buyers for the property or potential capital sources for your refinancing when you put your mortgage on, are going to underwrite it. They're going to underwrite that higher level of income. Okay. So we would advertise units at 1499 a month. All right. We least 60 units in May, 62 units in June, 65 units in July, 60 units in August. And in September we were fully stabilized in less than a year.

John Coe (00:55:47) - So what was the differential before and after with regard to the advertising?

David Orr (00:55:51) - It's about $200 a month. And that was and that tripped it. And it was so attractive. And people would show up at our practice saying, wait a minute, I can live here for $500 to $1000 a month cheaper in South Arlington than ten minutes away in the and Boston.

David Orr (00:56:08) - So this was a value proposition experiment. It's an experiment.

John Coe (00:56:12) - And, you know, you weren't sure whether it would work or not. Right. Time which is interesting. Right? So we're not other developers not doing the same thing they did.

David Orr (00:56:20) - They weren't aware of it. Really. Yeah. They eventually they eventually caught on our competition eventually caught on. They couldn't believe it. I mean, our direct competitors were getting three four leases a month. And here we are getting 60 units a month and they're like, what are these people doing? And it took them. By the time they figured out what we were doing, we were full. You were leased. We were fall. Wow. Now we got to 99% on that.

John Coe (00:56:43) - That's a.

David Orr (00:56:44) - Real success.

John Coe (00:56:45) - Story. You must have been really pleased.

David Orr (00:56:48) - Pleased and proud. Yeah. That's awesome. We still are. It's a great, great asset.

John Coe (00:56:54) - So getting into the residential most of your earlier work was in office and institutional facilities. When did you pivot into residential projects and you also doing land development now I understand.

David Orr (00:57:06) - So we we started with a project on Capitol Hill that we, we invested in and actually served as a construction manager. When was that? Um, that was about ten years ago. Ten, 12 years ago I did well, we made good money. The owners made good money. We were a co-owner. Why did you do.

John Coe (00:57:25) - It at the time?

David Orr (00:57:26) - Again, we wanted to really break into. They presented the opportunity to us. They said, look, we'd love to have you construction manage it. It would be really helpful to us if you would make an investment and leave part of your fee in the deal. And so we agreed to it, and it worked out quite well for us and for them. And so that really got us going on the multifamily side of the business. That was a 70 unit deal on Capitol Hill. And then we went on and started doing more and eventually put the central property under contract. And we have about a thousand units in the pipeline right now that'll break ground next, next year in Arlington.

John Coe (00:58:05) - So how is steel and concrete construction different than stick built construction?

David Orr (00:58:11) - Yeah. So stick builds a lot more cost effective. And that's the reason why, you know, we we purchased the Red Lion Hotel a year ago in Arlington. It's a three acre site. We're going to demolish the hotel and put an office, I mean, excuse me, an apartment building there, and we are allowed by zoning. We could build a 15 story building there out of concrete. However, that would mean that the building would be about 600, 550 to 600 units. That's a lot. It's a lot. It's really too many units to dump onto a submarket.

John Coe (00:58:44) - Do it in phases.

David Orr (00:58:45) - You can't do it in phases because it's high rise. It would be very difficult to do in phases. And so and it's concrete. So it's a really expensive concrete. It's a very punishingly expensive commodity right now. So we intentionally built a smaller building. We're building a smaller build, a shorter building that stick built because it's more cost effective and it'll provide a greater return to our investor.

David Orr (00:59:09) - We still get 440 units out of it, which is more than enough, but we are intentionally foregoing density for the sake of building stick built, which has an 84 foot height limit.

John Coe (00:59:23) - So do you think that your return on cost will be better to do it that way than it would be with the other? Or is it just a risk issue that, you know.

David Orr (00:59:30) - The return on cost is better is definite. So you know, the parallel to that is at the same time, we have a concrete building, right, that we've designed in Arlington. It's called Joyce Motors. And that one, the return on cost is not quite as high because it's concrete right. Versus stick, which is less expensive. So we see that there's going to be a pretty significant adjustment in hard cost. Because the underwriting has really dried up on new development, and so it just hasn't hit the subcontractors yet. One of the largest, one of the largest multifamily contractors in the country told me a week ago his business is off 40% this year from last year.

David Orr (01:00:16) - So it's coming. There is absolutely a correction in hard costs. The reason why we haven't seen it yet is because of labor. Labor is still the big challenge, but what's going to happen is there's going to become a tipping point where the subcontractors run out of work, and then they're going to start dropping their prices. I can't tell you when that's going to happen, but I know it's got to happen because all the developers are really struggling with their underwriting on new projects right now.

John Coe (01:00:44) - Talk a little bit about cutting edge technology that you might be involved in. One area that I want to ask you about, if you have any familiarity or done with, is what's known as mass timber, which is a new construction area. I toured a building on M Street in southeast Washington. That's an office building that actually I think Davis Construction.

David Orr (01:01:06) - Davis built it.

John Coe (01:01:06) - Yeah, it was.

David Orr (01:01:07) - In addition to a building top.

John Coe (01:01:09) - Yes. And one of my members of my community is planning a project in Glover Park, which will be 100% mass timber apartment building, right, residential.

John Coe (01:01:24) - Right, with four Grosvenor. Right. And I'm just curious if you explored that, if you looked at it, what are the pluses and minuses of doing it all, that kind of thing. What do you think?

David Orr (01:01:35) - So we have and it's very near and dear to my son Tyler Hart, who's very much into that type of construction. And so we had an interview yesterday with a mass timber company called Beamer, who's located in Indiana, and we're building ski homes on top of a mountain in Utah. Really? Yep. Okay. And we built we have ten lots there. We built three, sold them. And there's a desire to build the next seven. But having come through the first three, we did well on them. We made money on them. But it's really, really challenging to build anything on top of a mountain. Just think about getting a load of concrete up 10,000ft right on the back of a truck. It's really hard. And so we are looking at alternatives and one of them is mass timber.

David Orr (01:02:32) - What I, you know, having gone through this discovery on it, what is attractive about it is that there's a certain amount of prefabrication that goes with mass timber and that they actually build it in their factory and then ship it out on the back of a truck and assemble it. So your construction time gets cut significantly. And in a mountain top environment, you have six months to build. The other six months you cannot. You can barely traverse the roads, let alone try to build anything. So given that you know anything that leads to prefabrication and a more efficient construction, time is very attractive to us. And mass timber fits that bill. So the one thing we haven't figured out yet is the cost associated with it. That's the next step in our discovery of mass timber, but we're very attracted to it. Interesting. Yeah.

John Coe (01:03:26) - Talk about other technology aspects of of the building side that you to share with your clients and then you know, your benefit from yourselves. Well, I.

David Orr (01:03:36) - Think there's I think technology is playing a big role now.

David Orr (01:03:39) - And, and there's two aspects of that that particularly in our apartment communities that I'll point to. Number one is smart buildings. We've been using on our apartment buildings an app called Rise Buildings. They're based in Chicago. And what it does is it uses your phone. It allows your tenants to use a phone to sign the lease, pay the rent, open the door, open the garage door for their cars, allow guests order food through Grubhub or whatever. And we actually can get a revenue share on some of that. So we're seeing we're seeing the advent of smart buildings and really through the PDAs that people carry, there's more and more apps that are coming up on that. And another one that we are we've done a deep dive on. It looks like we're going to utilize in the apartment buildings that we're about to start construction on in Arlington is one of the biggest costs we have is structured parking. Right now it's about $80,000 for a below grade parking space, which is up from 50,003 years ago. And again, it's the cost of concrete.

David Orr (01:04:53) - Right. And the digging. So there are a number of companies. One is called envoy and the other one is called Skip that have apps on phones. And what you do is you lease from them a Tesla vehicle and the data. There's not a lot of data out there, but the data that we've been able to gather in the communities that they've put these in. You can save somewhere between 6 and 10 parking spaces for every Tesla vehicle that you put in your community. So if we put in three Tesla vehicles, we might be able to save, say, 18 or 20 parking spaces. And what you do is you you give your residents access, they pay $25 an hour or whatever the rate is to lease the car. They don't have to have a car, but there's a car always available to them. It seems like that's a new technology driven initiative that we as a company are really looking hard at. That's cool.

John Coe (01:05:56) - So you started developing for your own account several years ago. Did you develop capital markets relationships then at that point? And how did you raise capital for your deals?

David Orr (01:06:08) - Yeah.

David Orr (01:06:08) - So the way that we raise capital is, as I said previously, our projects tend to be larger. The capital needs are pretty significant. Our largest project to date is 300 million. So you had over $100 million of equity. And so that project that was River point where we bought the old United States Coast Guard's headquarters, 700,000 square foot office building. And we converted it to a 488 unit apartment building. And it's completed and it's 87%.

John Coe (01:06:43) - Are you a partner with anyone on that one? Okay. Yeah. Who is.

David Orr (01:06:46) - Your partner? So we had partners. We had Capital Partners. So Square Mile Capital sure was. Our financial partner. And then the Acreage Company and and Western Development were partners in that transaction. Redbrick was in that one also initially. But we bought them out and the projects completed now and and is in Lisa.

John Coe (01:07:12) - Herb Miller talks about it in his interview with me. Oh yeah. Yes. Yeah.

David Orr (01:07:16) - So he did all the retail leasing. I mean herb is I think he's 80 years old at this point.

David Orr (01:07:21) - And he, you know, is really a retail guru. I mean, that's why he was, you know, the retail partner in the project. The story.

John Coe (01:07:31) - Is quite something.

David Orr (01:07:32) - Quite something. And he, you know, really brought a lot of really good retailers to the asset. You know he's he's got these very, very deep retail connections. And so you know that's what they that's the benefit that they brought to the property was the retail leases. So.

John Coe (01:07:55) - What I'm capital markets.

David Orr (01:07:56) - Capital market. Yes I'm sorry. So capital markets. So like I said a lot of capital required for these projects. You have to have very deep capital right. So the way that we go about funding our projects, we put some of our own capital in in each project. And then we typically will go out and to high net worth individuals and raise some capital. All right. And then and that usually represents between their money and our money that we end up coming up with about 10% of the equity that's needed for a project.

David Orr (01:08:32) - So on the projects we're currently doing, that might be 5 or $6 million. Okay. And then we probably need another 30 million on top of it okay. Plus or minus. And we go to limited partners. Sure. So on the Red Line Hotel, we formed a limited partnership with a company called LV associates. They're based in Boston. And it's it's basically a family office of high net worth European families who invest together. And they actually sought us out and said, we're looking for a new partner for our DC relationship. And we've identified you as a company we'd like to do business with. And that's great. We went through a mating ritual and we ended up transacting with them, and now we're looking at multiple. They want to have a programmatic relationship with us, and we're looking for.

John Coe (01:09:22) - A traditional joint venture limited partner joint venture structure. Yes. Yeah. And then you just go out and bid the bid the construction financing and we do that. Okay. Yeah.

David Orr (01:09:32) - We typically use brokers for that who go out and compete those needs for us.

John Coe (01:09:39) - And you don't have a bank that you just continually go to over and over again.

David Orr (01:09:43) - Then we've generally, you know, we've the company that the bank that we use as a company is United Bank. Sure. There are very well run bank. There are $30 million bank and. They've been very prudent in how they run their their our corporate banker. They serve our needs. Well. I do believe on our local projects they probably will serve as a construction lender to us. We've got some townhouses that we're going to do in Aberdeen, Maryland. We've got these apartment buildings in Arlington. I think that they could play a pivotal role in that. And if not, you know, we've never had a problem attracting capital. Our projects are well conceived and the numbers are strong. So we are always able to get financing. California will require we open an office in LA. My son Ryan runs it, and that will require new relationships out there. And so we're we're starting down that path of the number of financiers right now.

John Coe (01:10:49) - So before we started the conversation, we mentioned one company that you have a very strong relationship with and you've had for a long period of time, and you actually now have an office down there in Savannah, Georgia, and that's Gulf Stream. Talk about how that relationship developed and how you started that.

David Orr (01:11:06) - Well, it really started. You know, Gulfstream is owned by General Dynamics, and it really started when we built General Dynamics headquarters. And that's an interesting story. I mean, so I had formed a relationship. What happened was there was a guy, one of the founders of the internet, a guy named Rick Adams, who had sold his company to Worldcom. He made a lot of money. He bought Fairview Park, bought the remaining land in Fairview Park. He called me up out of the blue one day and said, hey, I've heard good things about you. I'd like to talk to you about developing Fairview Park. I went and met with him, and we started doing some master planning and the General Dynamics headquarters.

David Orr (01:11:49) - You know, they were out with a broker running around looking for a place to be. And so I had an opportunity to meet with the board of directors of General Dynamics. They were looking strategically at properties, and they had identified Fairview Park as a place where they thought that could work pretty nicely for them. And so I met with the board and the board chairman. His name was Nick Gebbia at the time, and we had gone through a couple of interviews, and eventually he had the whole board come in and he had me come and talk with them. And so I got to meet them and socialize with them. And then Nick asked me, he said, you know, David, I can we can pick anybody we want. Why should we pick you? Right? And I said, well, the truth is you'll get me. And I said, you'll get my undivided time and attention and you'll get surety of outcome. That's the best answer I can give you. So okay. Thanks. We appreciate your time.

David Orr (01:12:45) - We'll let you know. So a week later, he called up and he said, get it done. And so they hired us to do their headquarters. We went and built that. It was the original one in Falls Church. We got it done on time and on budget. And at the end of the project, he called me up and he said, hey, David, listen, this one pretty well. Can you help us with some of our business units? And I said, sure. Well, he said, okay. He said, I've recently got the board to approve a capital expansion plan for Gulf Stream, and I didn't even know that they owned them, he says. I said, okay, great. I said, you own that. He goes, yeah. He goes, I'd like you to come down to Savannah with me, and we'll go meet with the powers that be down there, and we'll talk about the campus expansion plan. So we flew down there together. We went I went into the into a meeting of the leadership at Gulfstream, and he introduced me to them and he said they David recently his company recently completed our headquarters.

David Orr (01:13:45) - It went pretty well. I've gotten the board to approve a $500 million campus expansion for you guys. I want to take you guys from 60 jets a year to 130 jets a year. All right. And and I think David can help us get there. So that was the start of relationship. We have been down there for 20 years. We've probably built 5,000,000ft² for that. Wow. That's a big every time they so we have seven full time people in an office in Savannah. And every time they, they roll out a new platform. So we started with the G for 50 and then the G 550, the G 650, the G 750 announced the G 850. So every time they come out with a new platform, they have to create a new plant and new machining associated with that. We so we build all those facilities, we build all those buildings that manufacture those jets. We've built R&D centers for them. We've built testing facilities for them. We've built service centers for their jets all over the country.

David Orr (01:14:54) - It must be.

John Coe (01:14:55) - Extremely. Profitable business.

David Orr (01:14:57) - Their business is enormously profitable. Yeah, they have 10,000 employees. And if you do the math, they sell these jets for 60, 70 million apiece. And they're selling.

John Coe (01:15:07) - How much do they cost to build them? You know, I.

David Orr (01:15:09) - Don't know that that's I don't know that.

John Coe (01:15:11) - That's sure.

David Orr (01:15:11) - That's confidential. That's really confidential. Yeah. They would never show.

John Coe (01:15:14) - But it's at least twice.

David Orr (01:15:16) - I wouldn't know.

John Coe (01:15:18) - That half as.

David Orr (01:15:18) - Much I would. All I can tell you is that I know that it takes about a year to get a jet through the line. Right? They buy all their engines from Rolls-Royce. I think that's the only thing they don't make. Yeah, they buy all their engines.

John Coe (01:15:32) - Manufacture their own engines. They don't make.

David Orr (01:15:33) - Their own engines. That's interesting. Yeah, they do now. They used to sub out wings, but now we built a plant that makes the wings. So they build their own wings. Now they do all of the, all of the bodies and the tail and the impinge.

David Orr (01:15:49) - The. I love Wichita.

John Coe (01:15:50) - Kansas for a year and a half. Beechcraft and not only Beechcraft, Cessna, Boeing I mean it was the aircraft capital. The.

Speaker 3 (01:15:58) - Oh yeah.

John Coe (01:15:59) - Oh yeah. Yeah.

David Orr (01:16:00) - So it's been I mean, it's been a really wonderful relationship with with Gulfstream. We've we've been a go to service provider for them. Their projects finished routinely on time and on budget. There's no controversy. It's dependable. It's surety of outcome. They know it's going to get done. And so and they're centralized.

John Coe (01:16:22) - They don't have plants elsewhere.

David Orr (01:16:24) - They're they do actually they they yeah. So like we've worked on one in Dallas where they have where they. Yeah. And they have some partnerships politically. There's such a big company. They have partnerships like they have a partnership with Israel to build the G 150. And so there's some there's some, you know, some sharing with them.

John Coe (01:16:42) - So they do build elsewhere.

David Orr (01:16:43) - They do build elsewhere. But the majority of it is in Savannah and down at the love Field in Dallas.

David Orr (01:16:49) - They have a presence down there. The 450 I think is built down there, and we're building some new service centers for them and some some other new manufacturing facilities.

John Coe (01:17:01) - What's unique about an airplane factory as far as development, you know, building one and doing that, or are you doing mostly office or, you know.

David Orr (01:17:10) - It's industrial space? I mean, what's unique about it is it's column three. It's huge in column three. And so you've got large spans. Yeah. And these trusses that we that support the roofs on these buildings are so large that we actually fabricate the truss on site. So you bring in all the steel members and bolt them all together to create these enormously long trusses. And then you have a crane that picks them up in the air.

John Coe (01:17:33) - And so there's a civil engineering problem for you.

David Orr (01:17:36) - Yeah, it's a big one. Big civil and structural engineering problem. Yeah. Yeah, yeah. It's exciting. I mean, you know, and then that, you know, so that relationship really went well.

David Orr (01:17:48) - And then they expanded on it and they said, look, we own a company called Electric Boat. They build most of the nuclear submarines for the US Navy. They're having some struggles with their facilities. And they brought us up there.

John Coe (01:18:01) - Is that in Connecticut?

David Orr (01:18:03) - That's in Groton, Connecticut, and Quonset Point, Rhode Island. And so I'm proud to say that we've built most of the major manufacturing facilities for the Virginia class submarines. We built the building that builds the common missile compartment and the halls of the submarines and all various facets of it. It's very, very secret work.

John Coe (01:18:26) - Do you build the I mean, the Naval Surface warfare testing facility here in in Maryland, right. Are you involved in any federal work like that, any of the testing? Testing touch.

David Orr (01:18:40) - Not in that testing.

John Coe (01:18:41) - No, per se.

David Orr (01:18:42) - I would imagine that the submarines get tested there, but I don't know that for certain. It's a very, very you know, it's the most secret part. Oh yeah. Right.

David Orr (01:18:53) - And, you know, even the guys who build them. But Electric Boat do not get to go on the submarines or that secret. Really? Yeah. Very, very select few people are allowed to go on a nuclear submarine. It's the number one deterrent. I mean, it's they really are incredible machines. And, you know, from what I've seen and how various parts of them are manufactured, it's really quite stunning that the technology and the things that we do, we're a world leader in it. It's it's very clear. And I have nothing but pride in the Navy and the people who serve them and serve with them. And what what these vessels represent is really quite extraordinary. And as an engineer and a builder, you know, being able to stand next to a submarine like that when it's in manufacturing is quite extraordinary. Well, it's.

John Coe (01:19:45) - Analogous to the to the aircraft carrier. That's right. And that was the we could tour the carrier when we did it. Right. But one area they would never take you to was a nuclear.

David Orr (01:19:55) - Da. That's right. Couldn't see that. Can't see that at all. They don't want you going near that. In fact, that was an electric boat. They don't make the nuclear compound. They make them elsewhere. And then they plug them into the submarine after they're done. So nobody gets to see that.

John Coe (01:20:11) - I met you when you were scoping the Arlington campus of George Mason University, right? I can't remember the exact context of that meeting, but I could tell at the time you had broad experience at large scale projects. Public RFPs are competitively bid, typically. How did you position your bid there and who are your competitors in that situation? George Mason.

David Orr (01:20:35) - Yeah, I think our.

John Coe (01:20:36) - Campus.

David Orr (01:20:37) - I think our number one competitor might have been Edgemoor, which is Clark's right, project management division. I think they were our number. There were a lot of competitors. Those public RFPs attract a lot of people. Yes. And it's you know, the challenge there is differentiating yourself. Right. And it was really I think the big project we ultimately built, you know, the the George Mason building there.

David Orr (01:21:03) - And we built FDIC headquarters there. You know, we have a very long history of building projects in Arlington. And, you know, we prevailed on that. And I think it really has to do with our track record. And again, our ability to demonstrate to customers like that that there will be surety of outcome, that you won't have any controversy, your project will finish on time and on budget, which is really what institutions want. They just don't want to have to go to the well for more money.

John Coe (01:21:29) - What architect did you work with on that structure? Do you remember? I don't remember who that was, just curious.

David Orr (01:21:35) - Yeah, I Scott might remember he was out there. I'm sorry, I don't remember. That was a long time ago. I just don't remember who that was.

John Coe (01:21:42) - I forgotten how long ago it was.

David Orr (01:21:44) - Their school of law now. Right. And. Yeah, 3434.

John Coe (01:21:48) - The business school is there too.

David Orr (01:21:49) - And the business school, 3434 North Washington is the address.

David Orr (01:21:53) - Yep yep yep.

John Coe (01:21:57) - Any other large relationships or projects you'd like to highlight in our conversation today? Anything else that's of magnitude that you want to chat about?

David Orr (01:22:06) - Well, I mean, I think that, you know, I just think just as a general statement, I think that what we've been able to do is develop a really strong system for that provides surety of outcome on our projects. And I think, you know, one of the questions you asked that I saw previously was if there was a billboard.

John Coe (01:22:32) - Right. I'll get to that. Yeah.

David Orr (01:22:34) - Okay. So I won't preempt that, but.

John Coe (01:22:36) - I'll get to that.

David Orr (01:22:37) - Okay. So, you know, I think that really that we spend very little money in marketing. Right. And I think what I'm really proud of and as I as I said, it takes a long time to get to a point where you have quality people. And right now we have the best people in our company than at any time in our history. We have some real superstars here, and the only way you can attract them and keep them is if you create a family like culture in your business.

David Orr (01:23:14) - You treat them like family, right? Right. And and then you give them a certain amount of latitude to work on your projects. And so we really if there's anything we're guilty of, it's not touting our horn and not marketing. We've been very much under the radar. And a lot of the big companies we work with like that. Right. But if we're going to grow the company and scale it the way that we want to, because we have all the we have really good systems that are proven with a great track record. I think now the company is ready to take its next step in growth.

John Coe (01:23:49) - Your company is pivoted also in a couple other areas. One is you're doing interiors, and maybe you didn't talk about that much before, and you're also a property manager, which is interesting.

David Orr (01:23:59) - Right? So we started the business back. You know, the company is 35 years old at this point. And we started when we started doing office buildings. I've always had a piece of a property management company.

David Orr (01:24:15) - When I was at Sam's, we had our own property management, and it's a relatively easy revenue stream that you can pick up on as you develop office buildings. And so when, you know, when we founded the company and all the initial projects we did were all mostly office related. And so our, our property management company has 15 properties under management, and they're all office or retail. We don't manage residential and we've done that intentionally. Residential is a whole different kettle fish, but our critical mass and residential is getting to a point where we may at some point pull the trigger and say, let's let's also add residential property management here. Um, but it really has to do with customer service. And if you have property management and you have engineers on staff like we do, we can service our customers and we can take care of issues that arise and be there for them. And so you present your providing for them a more complete platform of service. That's right. Really why we we branched into property management.

John Coe (01:25:19) - And the interiors business. Yeah.

David Orr (01:25:21) - Interiors. So that's run by Bryan Kaplan. And again it's about the quality of the people. And Bryan is a real superstar in terms of interiors. In fact, we just hired another project manager to work under him. He's starting to you know, it took him about two years of really sowing the seeds out there in the brokerage community, in the in the user community, to have awareness that we have expertise in interiors. We've always done interiors, but we've never really separately approached it as a separate business unit like we are now. And so Bryan runs that. He has project managers that work underneath him. He just picked up a big law firm job, 50,000ft². He's picking up. He's gathering a lot of momentum and delivering a lot of quality projects. So yeah, interiors is a key component of the in one of the main divisions we have alongside institutional and multifamily and so on.

John Coe (01:26:16) - One of the other key areas on your website that you talk about is Leed and green building projects.

John Coe (01:26:23) - Talk about the evolution of that in your in your culture.

David Orr (01:26:27) - Yeah. So you've you've got to you really have to adopt sustainability in every project that you do. It's really being mandated jurisdictional. Right. But a lot of it makes sense. Now. The challenge for sustainable initiatives is that they can be costly, right? They can be expensive. But at the end, in the long run, if you're a long term holder of assets, it's the right thing to do. And so we are a green company. We've we've adopted sustainability standards and we employ them in every project that we do. So like as an example, most jurisdictions take Arlington County, right? They will give you an increase in density for if you increase your sustainability. We always pursue the increased sustainable our projects at a minimum or Leed gold and we strive for higher levels.

John Coe (01:27:21) - Expand on that in the ESG. Totally. So the other aspects of ESG, which I'm sure you're familiar with.

David Orr (01:27:28) - Yeah. So holistically, as a company, again, the jurisdictions are looking for you to demonstrate that you've adopted ESG standards, and we as a company have.

David Orr (01:27:37) - And so you try to be you know, we really seek out hiring more people of color to be honest about it. And we really try to diversify our workforce intentionally. We work very hard at that. That's a very, very important consideration, particularly in the public RFP arena, that people are looking for that. Sure.

John Coe (01:28:03) - Great. So you talked a little bit about it earlier, but let's pivot to culture and your company a little bit. You need a comprehensive team to take on the scale of the projects you developed. Large scale development is one of the most challenging endeavors among human activities in general.

David Orr (01:28:19) - Yeah.

John Coe (01:28:20) - Analogous to a space mission or medical research project. And you we talked about the definition of development earlier. So with your brand broad experience and clear discipline, talk about why you believe it's a worthy endeavor for young professionals and how you train your team to learn the business.

David Orr (01:28:39) - Yes. So, you know, really what I've come to learn, it's most beneficial to the younger people in our company is mentorship and really providing a platform where it's safe for them to ask what they feel might be a dumb question.

David Orr (01:28:57) - That's really important. With any new hire, the first thing I say to him is, hi, welcome to the company. It's really we're really glad to have you here. My door is always open and I want you to know that no question is too dumb. Ask it, ask it. It doesn't matter. Nobody's going to laugh at you. We'll give you the answer, okay? It's really important that you feel comfortable. So creating a safe environment for your employees from that perspective is one of the most pivotal things. The other thing I will tell you, that is a hallmark of our company that we really stress is integrity. And we really, really that kind of permeates throughout. And, you know, not everybody shares that philosophy. We bump into some bad actors probably more often than we would like in this business. As I said, there can be some predatory pricing on things and some difficulties. And so we I tell everybody we've got to set the standards. That's. It's our job.

David Orr (01:29:56) - We're the conductor of the orchestra on these projects. It's a good analogy for our role, of course. Okay. And as the conductor of the orchestra, we've got to set the standard for everybody to follow. And it really comes down to your integrity.

John Coe (01:30:08) - Well, you could choose who you do business with and who you don't do business with, right? Right.

David Orr (01:30:12) - Yeah. You've got to pick your partners carefully. And, you know, that's one of the things that I think could help. Our industry is a repository of information on various firms and people you're considering, particularly when you're going into a new market. How do you know who's a good architect? How do you know who's a good engineer? How do you know who's a good contractor? Right now it's all done pretty much by word of mouth. It's reputation. Right. And so perhaps something that provides a little more discipline on that would be helpful.

John Coe (01:30:42) - Well, I didn't have a question about this, but I'll bring it up because it's become almost as pervasive as the internet was when it first came out.

John Coe (01:30:52) - And that's what's known as I and the LMS are you in at all exploring that corporately or personally, even that aspect of.

David Orr (01:31:02) - Yeah, I've looked into it. My daughter, who's not in the business, she's she's an attorney, she's based in San Francisco, and she's in the leadership for AI at Intuit, one of the largest tech companies. And so she's really up to speed on all of that, and the ethics associated with it and the privacy and how that all goes hand. So we have a keen interest in that. We have not started to employ AI, but I see that that's in the not too distant future. So I do think that there's a role for it. It's generally repetitive tasks. Right, is where I think I can be beneficial, the.

John Coe (01:31:45) - Analytical side of the analytical.

David Orr (01:31:46) - Side of the business, I think. I think where you still need the personal touches is in, you know, interacting with jurisdictions in the various approvals and, you know, just the the day to day interaction with people and getting things done.

John Coe (01:32:01) - Putting a proposal together could take could it could be half the amount of time to put approach.

Speaker 3 (01:32:06) - It could.

David Orr (01:32:07) - Yeah. Absolutely. Yeah. So those are exciting things that we as a company, everybody is looking to be more efficient. And that would be one of those initiatives. Yes.

John Coe (01:32:21) - It appears that you built a legacy with your two sons and you've obviously very proud of them. And you talked about them already. Expand a bit about your culture, as you said, a family like environment. What do you look for in prospective employee? Well, so.

David Orr (01:32:38) - You know, the there's a couple of things. Number one, we tend to gravitate towards people who have some level of experience. All right.

John Coe (01:32:47) - We we do. And construction both.

David Orr (01:32:51) - All the above, all the above. We find that people who come from a construction background tend to make better project managers because it's the most intricate part of the business, not to, you know, discount the design and the financing. Those are both very intricate and detailed, and you have to have an understanding of them.

David Orr (01:33:16) - But I think the construction side of the business probably poses the most risk. And so we tend to gravitate towards people who have that, that kind of awareness and knowledge. And then we shore them up with our training specific to our agreements and how we run our projects and our system for project management and our system for communications, which is really another hallmark of the company is, is you have to have really strong communications. And then finally, it has to do with their character and their integrity. We we look at that very heavily as well, because they're going to reflect on us and we want people. And I think, you know, several of the people here like Karim, who, you know, really do us a great amount of justice and honor by, you know, how they carry themselves out there in. And I think it's our family culture and our our recognition of their strengths that allows that to come forward here, here at the company.

John Coe (01:34:18) - You know, I've interviewed a lot of developers and you and maybe 1 or 2 others come at it from the construction side, different, you know, whereas other people have the deal making, structuring, you know, the financial, you know, let's get a partner, let's go, go in together.

John Coe (01:34:37) - I'll hire an architect or I'll engineer. I'll sit down with a general contractor, make sure I know what I'm doing there. Right. But the economics and the deal structuring right up front, it's really the critical aspect of the business. But you combine it a little differently. It's interesting. You come at it. You know the construction. We want to make sure this is right physically. And we then we'll go get the capital and do it that way. It was just interesting. It's, you know, there's a lot of ways to skin the cat in the development business. Yeah, but.

David Orr (01:35:08) - The deal economics, you're right. The deal economics have to work. Of course. Right. But like you're in a you're in a point in time right now, okay. Where the hard costs are really a struggle. And so what's happening is, you know, those developers who don't really focus that much on construction, they're more deal oriented, okay? They're collecting data from general contractors and wherever else you may be, cost estimators who are telling them it's going to cost them this much, and then the project doesn't pencil.

David Orr (01:35:40) - Okay. And so what do they do. Right. They're in a they're in paralysis. Basically they're they're they're static. They can't really do anything with their project. We on the other hand, are saying we we see that as a challenge. Say, okay, how do we how do we make this equation work? Now what? It's it's it's more than that, right? It's more than that. And it's a lot deeper than that. And, and we we dig deeper into the relationships with the subcontractors and the suppliers and the vendors, and we reach that deeply into seeing what we can do to help decrease our costs and bring value to them and to ourselves. And that process is working quite well right now. So that's what's unique about having a very deep construction background versus an analytical. You've got to have the analytical side. You need to be able to run a financial model. You need to understand it. You need to be able to iterate it. You would be shocked at the number of developers who cannot do that.

David Orr (01:36:40) - Well, okay, you'd be shocked. But you must do that and you must use that as your guidepost. Okay. But then if you take a look at the components of a project, okay, what are your major cost components? You have your land, but there's not so much. You mean once you have your land deal done, your deal is done. It's really understanding what's in the land. Okay, that might provide a potential risk. That's where your due diligence comes in. But your single biggest component in the total cost of a project is your hard costs. Okay. And so that's where your biggest risk is. And so that's why our focus is so intent on that because we know if we manage that well the project is going to meet its numbers. Right. And I would venture to say that in your interviews, as you talk to developers and you talk to people who are in this industry that they would share with you, that their biggest challenge is getting things done on time and on budget.

David Orr (01:37:37) - Right?

John Coe (01:37:38) - No question. Yeah, yeah. So you've worked in the DC market for 35 years. How do you see its future? What are you focusing your new business efforts on now?

David Orr (01:37:53) - Well that's an interesting question. I mean, so the company's been 35 years. I've worked in the DC market for 45 years. Oh, that's true right. But you know, as far as new initiatives are concerned, we still we see tremendous opportunity in in housing and in multifamily housing. Eventually, the capital market situation we have right now, which is really topsy turvy, will correct itself. There's an election year coming up. I think some some good things will probably happen. I think hard costs will correct. So we still see a strong opportunity. The industrial side AI is driving the need for data centers. Loudoun County is kind of full and there's some power challenges with Loudoun County. So you're starting to see more proliferation of data centers moving to Prince William County right now. So we see industrial is still as you know, e commerce is here to say we see industrial as a kind of a strong opportunity.

David Orr (01:38:54) - We see multifamily housing as a strong opportunity. We see single family housing a strong opportunity. Those are the asset classes that we see. We see offices being very challenged. And for those, there's a big push in this in the country right now to take, you know, really obsolete office buildings and try to convert them to residential and have, you know, I just did that. We as a company who just did one of the largest one, in fact, it won the national award from the National Association of Homebuilders as the number one adaptive reuse project in the country.

John Coe (01:39:32) - Which project was that?

David Orr (01:39:33) - River point? River Point won ten awards. Okay. Won every award we entered. It's great. Right? And I mean, it is an astounding project, but I can tell you it is. You know, if you don't have you're trying to convert an office building to an apartment building. If you don't have a rock solid construction manager who understands the. Cases of that, you're going to really struggle with.

John Coe (01:39:57) - How old was the original structure?

David Orr (01:39:59) - 60 years. Okay, so it's obsolete. So the building's too deep. The cores are not in the right place. You don't have enough pipes for your plumbing and your kitchens and everything. There's it's a major undertaking, okay? And it's not for the faint hearted. And so there's a big push by the brokerage community. Let's just sell these buildings and have developers convert them to residential. It's a very difficult process.

John Coe (01:40:24) - What was your contractor on that job?

David Orr (01:40:26) - That was CBG? CBG did an excellent job for us. They're really stand up people. They came through Covid. There were there were times during the course of that project where I'd get a phone call and they'd say, the foreman for the glass crew got sick and we had to send them home. And back then it was ten day quarantine. Yeah, so we'd lose 30 men. Okay. And then, you know, two weeks later, you know, we had four guys from the electrical crew get sick or the elevator crew, and it just went through and it decimated.

David Orr (01:40:58) - It decimated. You know, no matter what we did, we put in all special sanitizing stations and handwashing stations and separating, no matter what we did, it just kept proliferating. And it was really had a big impact on that project. Wow. Yeah, we worked through it and got it done. To their credit, to CBGB's credit, they stood tall to their obligations and they finished the job. Oh yeah. Oh yeah. There were definitely delays as a result. I mean, our glass, we bought our glass or the building from a company called Schluter there. It's a German company. They're renowned for really building an excellent product. So when you say I'm going to put Schluter Windows in here, people in the business would say wow that's a good product okay. It's got a great brand name associated its quality. Their factory for our building was in Turkey okay. And so we had huge delays when Covid arrived of getting the ships to get to Baltimore so we could get the product. I mean, months and months of delay associated with that.

David Orr (01:42:01) - And so you had to bring in extra manpower and you to accelerate your crews. There are all kinds of workarounds that you end up doing. It was really you know, it hit us halfway through the project and it was it was a tough hit.

John Coe (01:42:13) - We've been through a lot of downturns. Was that the toughest one for you guys? Covid?

David Orr (01:42:18) - Yeah, I would say Covid on that particular. That was tough. I would say I would say zero eight was tough too, because it was a capital market meltdown. Yes. And so and as I've explained in this interview today how capital intensive real estate is, you need a lot of cash and it dries up like it is right now. It's really hard to access capital in this market. So those downturns are tough.

John Coe (01:42:49) - So the pandemic obviously left society with a lot of changes. I mean, how does that how is that affected other than that project, how did it affect your business and long term? How do you see it affecting the business.

David Orr (01:43:02) - Well so yeah, so we you know, we have a pretty strong work at home program.

David Orr (01:43:07) - And so from that perspective, I think technology and zoom meetings, you know, has really helped our business. I mean it's to a point where, you know, we used to I remember when we were in design on our Joyce Motors project, which is being designed by Nunavik, and they have an office in DC. We would have to make a journey, you know, every other week, and it would take us an hour each way and a couple of hours in the meeting. You spend the whole day. Now we're able to do a one hour or 1.5 hour or two hour zoom call and accomplish the same thing and eliminate the travel and have all the players on the screen. So I think from that perspective, it's really made our business a lot more efficient.

John Coe (01:43:54) - Well that's interesting. That's kind of the reverse of what I'm, you know, obviously for team building and all that. Everyone wants to have everybody in the office and all that. And it's the I think it's the big societal conversation right now in our industry and in the world.

David Orr (01:44:09) - Well, the interesting thing is you look at here and you see quite a few people, right. And so what happens is that people really still have the need for human connection and the ability to collaborate. So the default position is that most people still come to our office. I think a lot of companies, you know, are struggling like Amazon, by way of example, recently announced that they all their people have to report to the office. Right. It was just there's too many people away and there wasn't enough collaboration. And so we haven't had to make that kind of announcement. And generally people gravitate towards being here and collaborating and understanding about projects or agreements or getting advice from Scott or myself or Ryan, or there's a lot of that that's necessary.

John Coe (01:44:52) - All right, let's shift to personal things now. Sure. Conclude here with a couple more questions. Yeah. What are your life priorities among family work and giving back?

David Orr (01:45:01) - So, you know, one of the things that my wife and I are looking real hard at right now is, as we are soon to march towards retirement, would be more of an emphasis on giving back.

David Orr (01:45:15) - If you look at our website, you'll see a landing page for all the charities that we we donate to. We give each employee both an allowance of money and time that they can donate to the charity of their choice on an annual basis. And then we as a company, we give a lot back. So that's a priority for us is giving back and helping others. You know, I came really you know, other than the initial seed capital that Pizza Kamado offered to me, I really started with nothing. And, you know, built the company through a lot of hard work. There are a lot of sacrifices that my family had to make, and in particular, my wife, to allow this business to flourish. Right. And so it's time now to recognize that and to really place more of an emphasis on her and the family going forward. And you have.

John Coe (01:46:04) - Your two sons, right? Yeah. Down the hall.

David Orr (01:46:06) - Right to take over. Right. And so, you know, that's the so we're developing a succession plan right now and we'll transition into that.

David Orr (01:46:15) - That's great. Yeah.

Speaker 4 (01:46:16) - That's awesome.

John Coe (01:46:18) - So what advice would you give your 25 year old self today David.

David Orr (01:46:24) - You know so don't give up okay. Whatever it is that you love pursue it and don't give up. There's always going to be setbacks. Learn from them and press forward. Always deal with a high degree of integrity. And, you know, be honorable and the things that you do. And that would be the advice that I would give. I mean, when I was when I was 25 years old, right? I always had this entrepreneurial DNA and I, and I wanted to have my own business, but I did not know how to get there. Now, I rode on the crew team at Syracuse, and so when I got out of school, I was this big, muscular guy. And one of the things that that did for me is it allowed me to hit a golf ball a mile. Now I can't come anywhere close to that now. But back then I could hit a golf ball really far.

David Orr (01:47:28) - And so what I found out is that there would be older gentleman who would want to play with me to see that. Okay. And so what I did is utilize that to play with entrepreneurs who had started their own business. I play a round of golf with them, and when you play a round of golf or something, you're having for four hours, and I talked to them about, well, how did you start your business? One guy had a printing company, another guy was selling paint. There were all kinds of different entrepreneurs, and I wanted to know, how do you get started in THAtrillionEALLY planted the seeds in me as to to shape my how. I would go about trying to get started and as an entrepreneur, started my own company.

John Coe (01:48:17) - You didn't have my podcast to listen to at the time, did you know?

David Orr (01:48:22) - That's right.

John Coe (01:48:23) - I didn't. I think this podcast has helped a lot of people in that. In your age group, I hope.

David Orr (01:48:29) - Yeah, I hope so, yeah.

David Orr (01:48:31) - Yeah, I think it would that would be really good.

John Coe (01:48:33) - Because I've interviewed now 90.

David Orr (01:48:35) - Plus. Have you really.

John Coe (01:48:36) - People. Wow. Yeah. Yeah. It's it's been great. I've enjoyed it. And that's the whole purpose of to get 25 year olds to listen and learn from it. Right. Which I think is hopefully helpful.

John Coe (01:48:50) - So I'm going to get to the question you anticipated if you if you could post a statement on the on a billboard on the Capital Beltway for millions to see, what would it say to you?

David Orr (01:49:02) - It would say it's all about your integrity. That's great. That to me that's everything. It shapes our culture. It shapes our business. It shapes our relations with people. I'll tell you, I played golf with a young man. I guess he's like 37. He's got two kids. He's a member at the club that I'm at, and I played golf with him last Saturday, and he said to me, he paid the greatest compliment to me that I think I could ever have.

David Orr (01:49:30) - We're out in the golf course. We're talking me. He runs a he runs a private office, a family office for one of the wealthiest families in D.C. I won't say who it is, but that's what he does, okay? And we're friends. And he's, you know, he's a really good golfer. And so we were out there playing golf, and and he says to me during the course of this, he says to me, he says, David, there's something I want to say to you. I say, what's that, Rob? And he said, well, he said, you know, I got to tell you that in the past five years or so, everywhere I've gone, okay. And I've gone to a lot of places, but everywhere I've gone where you have some affiliation with it, people always ask me, oh, do you know David or. And he said, I've never heard a bad thing. I've heard nothing but positive things about you and the way you conduct yourself.

David Orr (01:50:18) - And I said, well, I really appreciate that. That really is a testament to what we as a company are trying to espouse. And and, Rob, I got to tell you, it all comes down to one thing. It's all about your integrity and how you approach people. You know, we pride ourselves on the fact that we're straightforward, right? We look people in the eye. We tell them what we can do and can't do. We're honest and up front about it, and people really, genuinely appreciate that. When we make a mistake, we admit it all right? When we deal with it, we take responsibility and we're human beings. We're going to make mistakes, so fix it. That's what we do. We just fix it. We go in there and fix it. We're sorry. Okay? And we go in there and fix it. So I think that that integrity is really what defines us as a company. And I'm hopeful that ultimately my legacy will be about the integrity of our company and and the people that we serve.

John Coe (01:51:09) - That's great.

John Coe (01:51:10) - David.

John Coe (01:51:11) - Thank you very much. Appreciate your time. You're welcome and effort on this. Yeah, this is fun. I really appreciate.