Breathing new life into Baltimore’s historic real estate
Eugene Poverni is the managing partner and CEO of Poverni Sheikh Group, a real estate development company based in Baltimore. Unlike many firms, PSG is vertically integrated and fully manages every stage of its projects, from brokerage and advisory to construction to property management. The company specializes in the sustainable, adaptive reuse and rehabilitation of historic and distressed structures such as The Vault, a landmark 40,000 square-foot bank building that PSG recently converted into a mixed-use retail and residential space.
OFFIT KURMAN: What is your company’s greatest asset?
EUGENE POVERNI: The biggest asset we have are the people we have. We have 24 people full-time. That includes me and my three partners: Ibrahim Sheikh, who really runs our construction business and does a great job at it. We did $10 million last year, $15 million in construction next year. Without him we wouldn’t be able to build the projects that we’re working on. And we have Greg, who is our chief financial officer as well as the president of our property management company. Both make sure that the payroll checks don’t bounce, but at the same time make sure that the buildings that we have built—the product that we have finished—is run efficiently and maintained well. And then we have our partner, Paul, who really runs our debt business and helps go out there and originate and source new loans for us where we think there are good opportunities. When you take them, and you take our controller and our office managers and our associates—it’s them coming in on Monday to Friday, and on Sunday, and at 9pm, that lets us do what we’re doing, and we’re very thankful to them for it.
How do you keep your business growing?
We certainly think that the development part of our business is all about making outsized returns for the risk. We can’t expect to do the same thing every single day, every single year, and still get that outsized return for the risk. We were very fortunate to have stumbled into multi-family in Baltimore in 2009, 2010, and we squeezed as much as we could out of it, but come mid-to-late 2014 we were starting to get worried that there was not as much left to buy. We really stumbled into an opportunity to convert a big, old, hundred-thousand-square-foot historic building to a storage facility and took that opportunity to learn about the storage business, and really for the last two years have been really pivoting our development business to developing more industrial, self-storage type of opportunities while we wait for that multifamily opportunity side to maybe come back a little bit to where we’re comfortable.
For us, it’s all about plateaus. Three or four years ago, we were doing four-, five-, six-unit projects over and over again until we found a really compelling opportunity to take the next step. We found a 60-unit building when the largest one we finished was six. We had to figure out how to put that together. And then we went through that plateau—we did other multifamily projects in that size—and then we found this big empty warehouse and we were able to take the next step and turn that into storage and with that, learned how to both develop industrial and replicate that to build new alternative storage where we had not done new construction before. We see these opportunities come up sometimes twice in a year, sometimes once in two years, to take the next step: grow a little bit, do smarter projects—more profitable projects—and so we’re really trying to stay focused on capturing those opportunities when we see them.
What are some of the benefits of being vertically integrated?
Certainly one of the biggest benefits of having an organization that is vertically integrated is that we try to keep everyone that works for us very informed of what we’re looking for, what we’re trying to accomplish. Sometimes, the opportunities come from me, or a broker that calls us, or one of my partners. Sometimes it comes from somebody that works for our construction company who just had a friend. The way we got our largest retail tenant on a 10-year lease at a strong rent was through a subcontractor who knew we were building a project and told his friend: “Hey, you know you wanted to move the restaurant for a while? This can be a great fit for you.” We try to treat the people that work for us as part of the team and that includes employees, contractors, subcontractors, and service providers, and we hope that they think they we’re reasonable people and would take care them like they take care of us, so that when some opportunities arise that are in our park they call it in.
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