SDS has developed a specific strategy in its property acquisition and development.
Below is a summary of SDS’s development strategies:
SDS utilizes a number of methodologies to enhance the value of a project. These include entitlement enhancement (increasing density/FAR) and repositioning (rezoning, conversions, assemblages, adaptive reuse). Success in pursuing these strategies requires in-depth knowledge of the overall regulations, as well as the administrative/ bureaucratic processes required to obtain approvals.
Through repositioning and entitlement, the Company in some instances is able to increase value by 50% to 100% on a per square foot basis. For example, 90 William, a 151,000 square foot office building was converted to residential apartments, and as a result, value increased from $240 per square foot to over $900 per square foot.
Low Acquisition Costs
SDS’s market relationships and reputation allow it to acquire properties at lower costs. Low acquisition costs are achieved through strong relationships with owners, mortgage lenders and financial institutions. SDS can acquire properties at substantial discounts by avoiding auctions and/or through its reputation for certainty and speed in closing.
For example, SDS was able to acquire the property at 209 Warren St. directly from the Diocese of Brooklyn, without an auction, for $88 per square foot, a 30% discount to market.
Low Construction Costs
Low construction costs are achieved through unique planning, design, and strong builder relationships. SDS’s market knowledge and relationships allow the Company to lower construction costs through leveraging volume discounts, utilizing a network of competitive vendors, efficient planning and supply chain management.
Through its corporate structure and supply chain management, SDS reduces construction costs by approximately 15% to 20%. Part of this discount (12% to 15%) is the direct result of SDS operating strategy (e.g., foregoing contractor markups and utilizing efficient management operations).
As SDS funds its projects upfront, the Company is also able to pursue aggressive pricing with vendors and suppliers, significantly reducing construction costs. For example, 322 Hicks Street (completed in 2003), was constructed for approximately $210 per square foot at time when the average was over $260 a square foot, representing a 20% discount.
With 35 years of experience, Louis Greco and SDS have established strong relationships in the New York market. As a result, the Company receives accurate and timely market information for markets where there is expected demand and price escalation.
The Company pursued development in Downtown Brooklyn, Tribeca East Historic District, Clinton (aka Hell’s Kitchen) and the Upper Westside when the demand for high end residential units in those areas was low.
SDS has prospered in market downturns by acquiring assets at attractive prices either directly from developers or lenders or indirectly by acquiring property debt. SDS’s strong relationships with mortgage lenders have provided many attractive acquisition opportunities.
For example, SDS purchased the $2.6 million debt on 72 Reade Street from Home Savings of America for approximately $1.8 million, a 30% discount.. Following restructuring and repositioning, it sold the project for over $11 million netting a 107% profit margin in just over a year.