The CEO of a Western New York state real estate development and services firm shares his insights about the industry.
IN THE 1980s, Ciminelli Real Estate Corp. President and CEO Paul F. Ciminelli’s father started a construction company in Western New York. After his older brother joined that company, Ciminelli saw an opportunity to work with his father in project development, and the two of them launched Ciminelli Real Estate. Ciminelli serves on NAIOP’s Executive Committee, is a governor and a trustee of the NAIOP Research Foundation and chairs the Foundation’s Distinguished Fellows Credentialing Committee. He is also a member of NAIOP’s Upstate New York Chapter as well as its national Office Development I Forum.
Development: Describe the size and scope of your company.
Ciminelli: We have approximately 200 employees and operate from two different platforms, real estate services and real estate development. Our offices in Connecticut, Pennsylvania and southwest Florida focus primarily on the real estate services side of the business, which includes real estate brokerage and property and facility management. We concentrate our development efforts in the city of Buffalo.
Development: Tell us about your connection to Western New York and the renaissance that Buffalo is experiencing today.
Ciminelli: I was born and raised there, and our company is at the forefront of that renaissance and rebirth. Buffalo’s leaders recognize that the city has some strong, inherent assets that they can leverage, and they are propelling the city forward.
In addition, Governor Andrew Cuomo has focused on Western New York and is very pro-business and pro-economic development. The past few mayors have also been supportive, and our current mayor, Byron Brown, is very development friendly. As a college town, Buffalo has a strong health care and educational infrastructure. We also have a growing millennial population. Buffalo has a great quality of life, an excellent cost of living and a true entrepreneurial spirit.
Development: What is your primary role at Ciminelli Real Estate?
Ciminelli: My role as CEO is to create a culture and an environment that attract really good people and allow them to succeed. It all starts with that.
Development: What qualities do you look for when hiring senior staff?
Ciminelli: They have to fit into the culture of our company. We are populating our company with young people who have lived or were educated outside of Western New York. Many of these new hires bring a global perspective to the company.
Development: What economic or market indicators do you follow on a regular basis?
Ciminelli: We focus on what is going on in the capital markets in terms of the costs of equity and debt. On the debt side, we track interest rates; on the equity side, we look at how our asset types are trading. We focus on what we often refer to as the “needs side” of commercial real estate: housing and health care. These product types are more recession resistant than other areas of the business.
Development: Over the next 18 months, what challenges and/or opportunities do you see for the commercial real estate industry?
Ciminelli: The things that concern me are on the macro level: Where are we in the economic cycle? How will that affect our business? As a company, we are very fortunate; because of the way we have structured our deal flow, we have enough projects in the pipeline to carry us for the next three to four years.
Development: What are you doing today to prepare for those challenges and opportunities?
Ciminelli: By focusing our efforts on housing and health care, and then structuring our deal flow over the next three or four years, we in effect prepared for the next recession a long time ago. I actually learned this at a NAIOP Industry Trends Task Force meeting I attended in 2009. Back then, when everyone was trying to figure out what to do next during the Great Recession, I got into health care real estate. Health care is a basic need in our economy; it continues to be a dominant part of the GDP; and it has a positive trend line.
Development: How has the industry changed during your career?
Ciminelli: When I first got into the business in the 1980s, I considered commercial real estate a bricks-and-mortar business. It was primarily made up of portfolio developers who developed for themselves and owned buildings. At the time, there really was not a lot of institutional capital in the business. Today, commercial real estate is a capital markets business as opposed to a bricks-and-mortar one. There are far fewer portfolio developers and many more institutional partners, equity partners and REITs.
Development: What are the most valuable lessons you have learned over the course of your career?
Ciminelli: You need a strong operating company and a strong operating platform. That gets you through the tough times and clearly differentiates you from your competition. The other lesson I have learned is that there is always a flight to quality in a downturn. That is, companies want to deal with businesses that are well run, well capitalized and have products that are well capitalized and well managed.
Development: What advice would you give someone entering the commercial real estate industry today?
Ciminelli: I tell both investors and new hires to always take a Main Street perspective when they look at a real estate deal, rather than a Wall Street perspective, even though the capital markets will eventually get involved. Before you ever get around to putting together the numbers on the deal, you need to make sure that the deal makes sense to the people who will occupy the real estate. From there, you can figure out how to structure the deal so that it is attractive to Wall Street.