On a sunny afternoon in March, Soul Rebels Brass Band jammed at a venue worlds away from its gigs with such high-profile acts as Counting Crows, Better Than Ezra, and The Roots. The late afternoon rays glistened off the jazz band’s saxophones and trumpets as the crowd gathered in the still-dusty, post-construction parking lot of The Preserve apartment complex. The reason for the revelry? To celebrate a major New Orleans’ milestone—the grand opening of the first mixed-income community to debut in the city’s underdeveloped Tulane Corridor. The attendees included a who’s who of Big Easy politicians, all eager to congratulate The Preserve’s developers, Chris Papamichael and Matt Schwartz, founding co-principals of New York-based The Domain Cos. “New Orleans lost 44,000 housing units in the storm,” said Walter Leger, Louisiana Recovery Authority’s housing task force chairman. “We are very proud of what you have done and the speed with which you have done it. Matt and Chris helped resurrect a city that was on the virtue of dying.”
Added New Orleans City Council member Shelley Midura: “These guys are tenacious to the max. I can’t tell if that is because they are from New York or because you have to be to get anything done in this city!”
At the ages of 34 and 32 respectively, Papamichael and Schwartz seem to take such high praise in stride. It’s not that the young developers are cocky; confident is more like it. And rightly so. In little more than five years at Domain, the duo has already established an impeccable track record of success for tackling some of the country’s most challenging real estate developments—from being one of the first to successfully piece together new financing vehicles to make projects pencil out in post-Katrina New Orleans to redeveloping the historic Sea View Hospital in Staten Island, N.Y., into housing—a feat several other developers attempted but failed to do.
In recent months, the developers are getting the most press for their work in New Orleans. Their connection to the Big Easy dates back to their college days, when the two were fraternity brothers at Tulane University. After college, Papamichael worked in New York as an acquisitions officer for real estate investment firm W&M Properties, followed by a stint developing high-end condos at Crescent Heights. When Schwartz graduated, he joined Related Capital Co., the predecessor of CharterMac Capital and Centerline Capital Group. The two kept in touch, and eventually incorporated The Domain Cos. in December 2003, a firm they hoped would capitalize on Papamichael’s development know-how and Schwartz’s financing expertise. The founders left their full-time jobs a year later to work exclusively at the new firm.
Their goal: “We set out to build the premier urban infill mixed-use development company,” Schwartz says. Easier said than done. “We knew ultimately to succeed we would need to approach municipalities and be able to present ourselves as an attractive partner with attractive financing alternatives. In order to do so, we needed to build our resume and demonstrate that we had the ability to do that.”
Mission accomplished. The budding entrepreneurs have established a 75-person roster and created a resume that the most seasoned of developers would unquestionably envy. The secret to their success? Smarts, tenacity, and guts certainly help. But it all boils down to one key factor: project selection. “We won’t do a deal unless it can be the top asset in its class,” Schwartz says. “Every deal we do, Chris and I ask ourselves, ‘Will this be an award-winning project? Is this something that is going to be ground-breaking for one reason or another?’”
If the answer is yes, you will find that project listed in the company’s rapidly growing portfolio. Their work runs the gamut—from acquisition/rehabs to the development of new affordable, market-rate, and senior multifamily housing; luxury condos; single-family homes; and neighborhood retail and commercial sites. All work is done in-house; they develop and manage their properties, typically owning the assets for the long term. Here’s a look at three key projects and initiatives that anchor their resume—and the knowledge they’ve gained along the way.
2003-2005 One Hunters Point, Long Island City, N.Y.
Objective: To rezone an underutilized site for the development of a high-rise condo tower
Domain’s resume is all business and no fluff. The firm jumped headfirst into multifamily in 2004 when it helped rezone the Hunter’s Point district in Long Island City, N.Y., a formerly underutilized industrial area that is now one of the city’s most rapidly developing neighborhoods. One of the first firms to enter the market, Domain finalized all construction documents and approvals for One Hunters Point, a 134-unit, 150,000-square-foot luxury condo high-rise nestled on the Long Island City waterfront. The site posed significant construction challenges due to its location directly above the Queens MidTown Tunnel. For instance, the tunnel bisected one quarter of the site and sat directly underneath the foundation. A cantilevered foundation had to be designed so that portion of the building could be built directly over the tunnel without any load bearing on the tunnel.
For Domain, these impediments translated into an opportunity to compete with larger and better-capitalized real estate players. “Most developers—after getting a handle on what would be involved with the site—didn’t want to touch it,” Papamichael recalls. “We looked at that site as an opportunity for us to succeed and stand apart.” The firm completed the pre-construction work after 12 months and then decided to cash in on the condo boom, selling the site in early 2006, and doubling the original price it paid for the land.
Experience Gained: Ability to handle complex transit-oriented construction challenges and propose a project that would turn around a depressed neighborhood
2005-PRESENT The Preserve and The Meridian, New Orleans
Objective: To lead the redevelopment efforts in New Orleans’ Mid-City neighborhood
Lessons learned in the Big Apple prepared Domain for the incalculable challenges that lay ahead in New Orleans. Papamichael and Schwartz always had their eyes on their college town. In the summer of 2005, the two were considering a condo conversion deal in the city, but the plan didn’t pan out because Louisiana didn’t have the development infrastructure or financial resources needed. Then came Hurricane Katrina, unleashing her wrath across the Gulf Coast just weeks after Domain’s condo deal fell through. But with that devastation came opportunity—Domain plans to help rebuild the nearly 80,000 units damaged during the storm. Domain’s principals decided to focus their efforts on the Tulane Corridor—a major commercial thoroughfare in Mid-City, just 10 minutes from the city’s central business district, and bio-tech and medical centers. “Local people didn’t think of the Corridor as the best option for development because you couldn’t just drop a deal there,” Papamichael says. “You had to look at the big picture and say this is where a live/work/play downtown redevelopment can take shape.”
Domain, the first real estate firm to tackle the Corridor, purchased three sites—all which formerly housed commercial properties that were severely damaged during the storm and relocated elsewhere—at a value that made sense for redevelopment due to their large size. “A lot of people thought they were crazy,” says Kathy Furey, an attorney at the New York-based law firm, Edwards Angell Palmer & Dodge, which represented lender Bank of America. “But the more I got involved, I knew it was calculated risk. They believed in the city, and they put their heart and soul in it.”
Equally important as heart and soul—brain power. Domain had to navigate through a complicated web of newly launched, post-Katrina financial incentives to get its projects off the ground before the financial meltdown. “Domain has embraced the opportunity to rebuild smarter and more integrated housing options for New Orleans residents,” says U.S. Sen. David Vitter (R-La.).
Its first two projects to open in the Tulane Corridor, the 183-unit Preserve mixed-income apartment complex and the 72-unit Meridian affordable housing community, used $17.2 million in federal disaster recovery funds, which were “piggybacked” by the Louisiana Recovery Authority onto nearly $3 million of GO Zone tax credits, plus Community Development Block Grants, IDB taxable-bond financing, and conventional financing.
Obtaining the capital for these projects wasn’t Domain’s only hurdle. The company wasn’t exactly welcomed to the neighborhood with open arms. “The neighborhood, pre-Katrina, had a very high absentee landlord rental occupancy and very low owner occupancy, and so the area had a lot of social issues to go along with that. We were concerned about putting higher density there,” says Jennifer Weishaupt, president of the Mid-City Neighborhood Organization.
Domain, however, assuaged their worries by involving the community in the design process. Domain promised it would fully commit itself to the reinvigoration of the neighborhood, and the firm’s done just that: It purchased, renovated, and sold nearly 30 single-family homes to add homeownership to the mix and is in the process of developing service-oriented commercial space.
Today, the firm’s New Orleans work continues as it completes a third project on the Corridor: The Crescent Club, a 228-unit mixed-income apartment complex with street-front retail expected to be complete by the end of June. And when its opens, you can bet that Soul Rebels will be there again to help celebrate.
Experience Gained: Effectively use Go Zone tax incentives and other financial incentives while negotiating with the community and rebuilding a blighted neighborhood
2005-Present Markham Gardens, Staten Island, N.Y.
Objective: To leverage capital gains for the purchase and redevelopment of a blighted public housing project
The capital from the sale of One Hunters Point enabled Domain to pursue additional development ventures throughout 2005 and 2006, including Markham Gardens, the large-scale redevelopment of a high-profile, 12-acre blighted New York City public housing complex in Staten Island, N.Y. The community, developed as a joint venture with Floral Park, N.Y.-based The Arker Cos. and Neighborhood Housing Services of Staten Island, will include 240 mixed-income rental units, 25 mixed-income, two-family for-sale homes, and extensive community amenities and recreation space. The development, scheduled to be fully occupied by the end of July, is expected to receive green certification through the U.S. Green Building Council’s LEED for Homes. Largely due to its financial prowess, Domain beat out substantially more experienced developers in the RFP process for redevelopment of the site. “One of the most important reasons we got the project is they ranked the proposals based on the amount of subsidy requested, and we were able to request no direct subsidy from the city and still complete the $65 million transaction,” Schwartz says. Domain resourcefully incorporated nearly 15 capital sources in the funding process—everything from tax-exempt bonds and tax certificate sales to energy efficiency and affordable home building subsidies. “We were able to demonstrate that we can come up with creative financing solutions where others couldn’t,” Papamichael adds. “That is one way we’ve been able to so quickly create the name for ourselves that we have.”
Another way: The firm goes above and beyond to establish positive community relations. While it was competing for the Markham Gardens deal, Domain organized a meeting with the existing public housing complex’s tenants’ association to get residents’ input on their sorely needed new community. Domain incorporated many of these suggestions, ranging from new street names to the addition of a basketball court, into their proposal. And when the competition heated up and all the developers jockeyed for selection, not only did residents promote Domain’s proposal, but so did local community leaders who were pleased with the firm’s community-centric approach.
Winning the deal, ironically, turned out to be the easy part. The complex, built in 1943 as temporary housing for workers who were employed under defense contracts at a nearby shipyard, later served as housing for low-income families. The existing structures, which were undersized by current standards and had deteriorated beyond reasonable repair, had to nearly all be demolished and rebuilt.
“We were buying out contracts in an overheated market; we were only able to go with nonunion contracts because of prices; we had an incredibly difficult time with the approval processes; and there was tremendous amount of red tape,” says Cary Spiegel, president of the New York-based construction firm Spiegel Consultants, which came on board prior to the development’s demolition.
Experience Gained: Skills necessary to piece together more than 15 financial sources for one deal and generate community support for a controversial project
As development activity grinds to a near halt, The Domain Cos. shifts its focus to operations.
New York-based The Domain Cos.’ impressive resume will no doubt see a gap over the coming year—and quite possibly into 2010—as development activity across the country slows to a crawl. Even on the near-term horizon, there are few development deals out there.
As a result, Domain will use the down time to focus on improving its internal infrastructure, from tech amenities such as offering online rent payment and maintenance requests, to the accuracy and speed of its financial reporting systems, to developing resident retention programs. The company also is heavily focused on staff development and training opportunities.
“It’s impossible to put a dollar value on this work,” says Matt Schwartz, one of Domain’s founding co-principals. “The investments are being made to develop Domain into a company with the internal infrastructure and capability to manage 20,000 units and beyond with the same attention to detail and quality as we manage the 2,000 we currently have. We are putting the framework together necessary to support the growth we anticipate in the coming years, while maintaining the same standard of excellence.”
The Domain Cos. thinks beyond housing. The firm brings music—and jobs—back to the Big Easy.
No resume is complete without community service. The Domain Cos. is involved in a number of organizations that help improve the lives of the people who reside in their neighborhoods. One of its favorite causes is Sweet Home New Orleans, a nonprofit created to revitalize the city’s music and cultural community.
Following Hurricane Katrina, thousands of musicians lost their homes and are now scattered across the country. Domain provided the funding and technical housing expertise necessary to build a database of these musicians to assist in the effort to bring them back to New Orleans.
The database, nicknamed Dr. Domino, was designed exclusively for this project by an outside software design firm. With more than 4,000 participants to date, Dr. Domino includes all of the information Sweet Home New Orleans needs to help identify the musicians’ housing needs and arrange for their return home.
Domain also contributes to Café Reconcile, whose mission is to fuel economic vitality and growth throughout Central City and the greater New Orleans area by supporting youth workforce development programs and encouraging entrepreneurship and homeownership in socio-economically depressed neighborhoods. Domain not only provides financial support but the firm and its construction partners have committed to provide ongoing opportunities for training, mentorship, and permanent employment in a variety of construction trades at Domain’s large-scale development projects located in the Big Easy.
The Domain Cos.
• Founded: 2003
• Headquarters: New York
• No. of Employees: 75
• No. of Units Started,Owned, and Managed: 2,000
• Geographic Coverage: Northeast, Southeast
Best Business Decision: Going with my gut. It keeps working.
People You Most Admire: My parents
Best Advice Ever Received: “No matter the odds, never give up.” —My father
Last Book You Read: Lone Survivor by Marcus Luttrell (Little, Brown & Co., 2007)
Favorite Jazz Place in New Orleans: DBA
Playing on Your iPod: Galactic, Soul Rebels, RL Burnside
Leadership Philosophy: The team with the best players wins. Surround yourself with great people, and empower them to succeed.
Favorite Quote: “You can’t build a reputation on what you’re going to do.” —Henry Ford
Best Business Decision: Getting out of the for-sale market in 2005
Person You Most Admire: Alex Spanos
Best Advice Ever Received: Protect your downside, and the upside will take care of itself.
Last Book You Read: The Old Man and the Sea by Ernest Hemingway (Charles Scribner’s Sons, 1952)
Favorite Jazz Place in New Orleans: Tipitina’s
Playing on Your iPod: Ben Harper’s “With My Own Two Hands”