Stephen Ross – The Demiurgic Developer

03/06/2012 2:07 pm

“In the cutthroat world of New York real estate, Ross stood on top of the world.” (Forbes 2012)

Stephen Ross is the CEO and controlling share holder of The Related Companies, which currently owns and manages a property portfolio valued at $15 billion. Ross is responsible for the Hudson Yards development in New York (last month’s feature).

The Hudson Yards will be the most significant private development project in the Big Apple since, John D. Rockefeller Jr, in the 1930s, who spent $250 million (more than $3 billion in today’s terms) to create the 22-acre Rockefeller center.

“Using every real estate trick he’s learned over his 71 years, Ross is trying to demonstrate that even in a hub of union, regulation and bureaucracy, private developer can still accomplish grand things.” (Forbes 2012)

Nothing about Ross’ real estate career is typical. One of the richest developers in New York (net worth $3.1 billion). However, he grew up far away from New York in Detroit. Ross was inspired by his uncle, oilman Max Fisher, a 23 year member of the Forbes 400 until his death in 2005. “When you can see someone like that growing up, it gives you the confidence that with hard work things can be accomplished.” (Ross)

Ross chose a local college, the University of Michigan, before moving into a career as tax attorney in Detroit. Not convinced about the future prospects of his hometown or his career path, he moved to NYC to try his hand at Wall Street. While the career didn’t fit, Ross liked the opportunities that the big apple presented. “I didn’t want to interview for another job, so I wrote a game plan and really liked real estate”. So with a $10,000 loan from his mother, Ross jumped into affordable housing development. At the time it was almost 100% government financed and, with Ross’ tax background he was able to raise more money syndicating and selling the tax shelters that accompanied the projects.

By 1980 Ross had built 5,000 affordable housing units. That same year in a join venture the fledgling company developed a tract on Manhattan’s East Side, Riverwalk. Over the next 20 years Ross expanded into office development, next market-rate housing, retail development and, in the late 90’s , his first major mixed-use development project in West Palm Beach, Florida.

When the opportunity came up to develop Manhattan’s Columbus Circle, a site with a long history of failed development attempts, Ross moved bodily to secure an anchor tenant. Ross requested a meeting with Time Warner chairman Richard Parsons. Parsons gave five minutes, as he had already been approached by eight other developers. Ross’ pitch focused on branding rather than real estate. By the next day Ross had a tentative deal with Parsons for the new $1.7 billion Time Warner Center, financed with the biggest loan for non-government project in commercial real estate history ($1.3 billion from GMAC, former financing arm from GM).

Hudson Yards makes the Time Water Center look like a suburban strip mall development. It will require four times the amount debt. the Hudson Rail Yards, is to be the eventual home of 560,000 square metres of crystalized offices, spread across three towers; 465,000 square metres of new york city living, including a mix of affordable housing, luxury rentals and high-end condominiums; Over 90,000 square metres of New York City retail space, more than enough space to squeeze in a I Heart New York City shirt vendor or two, amongst the movie theatre and department stores. This 26 acre site will also comprises a hotel, school and 14 acres of parks and open space. The deal has been a complex deal and has been full of challenges and setbacks.

“Ross, not wanting to be another victim of the real estate graveyard, got creative.” (Forbes 2012)

To read more on Ross and The Hudson Yards project check out our post - NEW YORK’S BARANGAROO, OR SYDNEY’S HUDSON YARDS?