9 questions with Rob Buccini of Buccini/Pollin Group
Rob Buccini, co-president of Buccini/Pollin Group, is a busy man. His real estate development, investment and management firm manages a $5 billion portfolio of apartment buildings, hotels, restaurants, and sports and entertainment venues and is believed to be the largest private landowner in the city of Wilmington. But even BPG wasn’t immune from the effects of the COVID-19 pandemic or recent civil unrest. Buccini’s conversation with Associate Editor Jacob Owens has been edited for clarity.
BPG has done so much to bring some life back to downtown Wilmington, especially in the Market Street corridor. What was going through your head as you surveyed the damage following the civil unrest on May 31?
I was on Market Street [earlier in the day] when it was peaceful, and I was on the sidewalks when it was no longer peaceful. My biggest takeaway though is that the next day people from every corner of the city reached out to me to encourage us to not be dejected. The message I was hearing from those who reached out was, “Please move forward,” and continue the efforts that we’ve been working on for well over a decade now.
It was 3 in the morning and Jeff Starkey, the city commissioner of License and Inspections, was down there helping a group clean the streets. By 8 a.m., the streets and sidewalks were meticulous.
It shows the level of cooperation between the private and public sector. We’re all in this together. We’ve created a steady tax stream for the city, and I look at our investments in the city as benefiting the entire city. For instance, look at ShopRite [on South Market Street], a large grocery store that has unbelievable offerings at great prices. That just wouldn’t have happened without our company; there’s a 0% chance the ShopRite would have been there.
Were you surprised by how quickly and comprehensively the pandemic affected the economy and especially commercial real estate?
We obviously did not see this coming at all. It has had an effect on our business.
Actually, we have an all-time high occupancy in our apartment buildings here in the city of Wilmington and our office buildings have really weathered the storm. We have great tenants here, both in residential and in our commercial side, that are also committed to the city. It’s really had no impact on that portion of the business, our commercial and residential, which is our largest portion.
Obviously, the restaurants were closed for anything other than takeout, and then the events on May 30 delayed the reopenings by a day or two. But if you go down to La Fia, Bardea or Starbucks, the [broken] glass is already back in, and they’re prepping to reopen the restaurants.
Do you feel BPG was prepared to respond to a pandemic? Looking back, is there anything you would have done differently in those first few weeks?
No, I think we, as a company, are probably as battle-tested as any company in our industry. We survived the Dot.com blowup when we started our business in the mid-‘90s. We survived the Great Recession in the 2008 financial crisis. We survived 9/11 and were able to continue operating our hotels even when travel really ceased after the terrorist attacks. I think we feel that we are equipped to handle whatever is thrown at us.
It’s not your first choice of how to spend the last 10 weeks, but we certainly are proud of the work ethic of our company, and that work ethic is ingrained throughout the entire company. I think that makes us especially equipped to handle something like this.
I’ve been at the office virtually every day during the pandemic. I think it’s important to note that we never shut down. Construction crews worked the entire time. Our people who run our apartment buildings were there every day providing services to the thousands of residents who live in our buildings. For the thousands of office workers in our buildings, we provided service to them albeit at reduced capacity. And the hotels continued to stay open.
Each day I visited a different construction site, hotel, apartment building. Part of being a leader is to make sure that you are out there with the frontline people.
What have the conversations with your tenants been like? Have they had difficulty paying rents or leases?
Any tenant that we thought was in need of capital, we sat down with them. We helped dozens of our small tenants apply for the [Small Business Administration’s Paycheck Protection Program] PPP loan. [Barbara Neuse and her team] were very involved in explaining how the forms work and helping to make sure that our tenants were given the appropriate consideration at the various banks that we guided them to.
It hasn’t been much of a challenge for BPG then in terms of your loan and debt service obligations. Are you feeling any pressure?
No, it hasn’t been a problem. The hotels got the PPP and our tenants that needed the PPP received loans.
What do you think the leasing market looks like after the pandemic? Do you foresee changes in duration of terms, or the size of spaces leased?
I think that people are getting Zoom-fatigued. I don’t think working remotely is a long-term solution for most businesses. In the first month remote working was very, very efficient for us, but you start to lose the interpersonal touch. It’s hard to mentor someone. It’s hard to get a great idea when you’re working by yourself at your house.
I think teleconferencing works well for certain technology program companies but over time it probably is not a great way to grow a business. I’ve told all of our people in our company town halls that our competitive advantage as a company is going to be that we will be working in person in the office.
In terms of Wilmington, the densification of the suburban market is very tight, but the downtown market is not. And I think you’ll see these companies have to take more space because they will not be able to have the densification of the office space as they are used to. Over time, even if companies have some people work remotely, I think that will be offset by the need to have more space per employee.
In the end, I think it will be a net benefit for office space because the open floor plan will remain, but it will not be as many people per square foot.
BPG has invested pretty heavily in hotels in recent years, including in Wilmington. With that sector being among the hardest hitting the pandemic, does that give the firm any pause in terms of future investments in the hotel industry?
We put a hotel under contract yesterday, and we have offers in on other hotels. We think it’s a good time to be a buyer.
I think October is when you’ll start seeing some semblance of stabilization in the hotel business, but a real recovery won’t come until 2021.
We have multiple hotels now that are running at about 55% to 60% where they would normally run at 70%. We’re definitely seeing a recovery already, but to get back to levels that we were seeing early in 2020 won’t be until 2021.
Some have suggested that Wilmington may actually benefit in the future as large tenants decide to perhaps downsize from some of the nearby metropolitan cities and seek cheaper leases nearby. What’s your view?
I’m optimistic that Wilmington will benefit from people not wanting to densely populate the large urban markets. We are seeing one company confidentially that has done that or will be doing that. We expect to see Wilmington be the beneficiary of a less densely populated urban area, especially because it’s so proximate to these big cities.
BPG has expanded its reach in investments around the country in recent months and years. At the same time, we’ve started to see an increased number of investors coming to look at properties in Wilmington. Do you foresee BPG branching out more to out-of-state opportunities rather than those in New Castle County?
Wilmington is our home. It is the heart and soul of our business, and I expect that the level of care and effort will only continue to grow here.
I think the difference between what we’re doing a few years ago and we’re doing today is that we have better design abilities and, as we age as a company, I think our people become more capable. So, I think you’re going to see that each new generation that builds in the city will be that much better.
I think our marketing reach has been really tremendous with an ability to really attract residents, retail, restaurants, and companies. I think that’s just a symptom of the company maturing.
I’ve brought friends of mine into Wilmington to invest. We are very fortunate to have many outside companies now invest in the city of Wilmington. The best thing that can happen to the city is that it becomes a more transactional, more liquid real estate market. That’s great for the city and the state obviously with all the transfer tax that comes out it.
I think the best thing that happened to Wilmington from our development outside of the city is that we’re able to import so many good ideas that we see from entrepreneurs and small businesses in other parts of the country.
You go to Makers Alley and there is a very big Nashville inspiration there. You go to Bardea and there is a New York City inspiration to it. I think it’s great to go to other cities.