Ryan Johnson: Culdesac - Building America’s First Car-Free Neighborhood From Scratch

Speaker 1

you The way that we've built our cities has had a lot of negative implications, where we now don't know our neighbors and we're less healthy and we're less happy. My eyes were opened to how much better ways there are to build cities. That gave me the conviction that it was the right moment to build cul-de-sac. This is going to be one of the biggest trends in real estate of our lifetimes.

Speaker 1

Welcome to the Building Culture podcast, where we explore holistic solutions to crafting a more beautiful, resilient, and thriving world through the built environment. I'm your host, Austin Tennell. If you are in the market for high quality windows or doors, whether residential or commercial, new construction or remodels, I highly recommend you check out Sierra Pacific Windows, who we use at Building Culture on a lot of our projects, as well as if you are in the state of Oklahoma, check out One Source. windows and doors and want to thank them for sponsoring this podcast. Ryan, it is awesome to have you on the podcast today. I've been looking forward to this episode for a while. Thanks for having me on. Yeah, well, I think most people listening are going to probably have a little bit of an idea what Cold to Sack is. I'm not sure everyone, but to start with, let's start with a little bit of just who you are, your background leading up to Cold to Sack. Yeah, my background is in real estate and transportation. I've been in real estate for 21 years now and got started using scholarship money in college and built a portfolio of 60 bedrooms, learning how to buy, sell, renovate property, manage, etc. And saw so much opportunity in that industry. And my other passion was transportation, where I visited places like Budapest and Tokyo.

Speaker 2

And I grew up in the suburbs of Phoenix and I had an SUV and my eyes were opened to how much better ways there are to build cities. And that launched a passion for that. I spent a decade working in transportation with trains and helicopters and buses, including for the New York City subway. And later I was part of the founding team at Open Door and that's its own story. But what we saw there, and that gave me the conviction that it was the right moment to build cul-de-sac. because of how clear the demand for walkable neighborhoods are. And we know that the reason that the prices of them are so high in places like New York is because we stopped building them for the most part with the advent of the car. But there's a way to do it now. And there have been enormous transportation innovations and there's a millennia long history of as there's innovations in transportation, real estate evolves. And so there's now the mix in place to build walkable neighborhoods again. in a lot of places, and that was the genesis for cul-de-sac. I have a little bit of a similar story there because I grew up in the suburbs of Houston and it was traveling to Spain and Italy and Portugal for a few months and opening my, you I had no idea going in what urbanism or architecture anything was. And just walking around being like, my gosh, I've been taught that America is at the pinnacle of all human civilization and I'm walking around at stuff that's been built 500 years ago and realizing like, wow, we've lost some things. So yeah, I get that. Well, that's cool. And you've been car free for like what 10 years 12? What is it? How long have been car free now?

Speaker 2

This is your 15. Dude, and you live in Phoenix. live in Phoenix, parts of that were in other places, but it's wonderful living car free even here. And a lot of the reason more people don't do it is because they haven't experienced it they haven't done the math. But with average Americans spending $900 a month on car payments on its way to a thousand, that creates a lot of budget for mobility services. You could take a lot of lifts, a lot of light rail rides, rent cars when you need it, electric bikes, electric scooters, and this portfolio of transportation options. creates a wonderful life. That's awesome. Well, let's jump into cul-de-sac a little bit. So can you describe for anyone that, you know, maybe not be familiar, totally familiar with the project? Cause I feel like it's kind of like this little phenomenon, you know, it's this project in Tempe, Arizona, but it has national attention and even I would say probably some international attention, which I think is really, really cool. Cause y'all are doing something extremely unique, but if you can just describe it for anyone that has not heard about it yet, what is it? What's the inspiration for it? Why are we talking about it right now?

Speaker 2

Koldesak Tempe, we call it the first car-free neighborhood built from scratch in the US. And each parts of that statement are important. The idea was to build a walkable mixed-use neighborhood. And we focus on mobility, community, and open space. And it looks completely different from other new housing complexes in the US, especially in a place like Phoenix. And instead of having a sea of asphalt, we have wonderful amenities. have 55 % landscaped space. As of Saturday, we'll have 21 retailers. I hope you get to check them out sometime. A wonderful gym and walkable paths and a sense of community that's just very different from the type of housing that we build in the US. Today, the US, we largely build two types of housing. We build single-family homes that are lonely and have a painful commute. And we build these mid rises where people park at that are somehow both lonely and claustrophobic and don't have a sense of community. Yeah, what I really find really cool about what you're doing is completely great. Two different housing extremes. You have multifamily, high density, multifamily and low density suburban sprawl and nothing in that missing middle. And then you've got a lot of organizations and people working on some of that missing middle housing and they're doing some infill projects and they're building fourplexes or they're building small apartments and all of that's great. I'm a big supporter of that. We're doing some of that. But what's cool about what you guys doing is it seems like you're taking kind of a multifamily approach or an institutional approach and actually doing this at scale and building some walkable neighborhoods. And also you're doing it in Tempe, Arizona. So it's not like you're doing this outside of New York City or in San Francisco where people might expect a car free community. It's like you're doing it in Tempe, Arizona and it's working. Or, you know, for at least from outside, it certainly seems like there's a lot of people moving in. Y'all are keep going through phases. So can you talk a little bit about

Speaker 1

bringing some scale, I call it like human scale multifamily. I don't know if that's really accurate. I don't know if that's how things are set up, but rather being one giant building, it's all these smaller six plexes and stuff that are shaping space and creating the public realm and the civic realm, which is really different than these big multifamily buildings that might have a gym inside and a few amenities inside, but those are really for the lease up. people aren't really using them versus this is inviting people out to connect, to do things, to use things, 21 businesses. I mean, just amazing. So I don't know if I asked a specific question there besides kind of pointing to the human scale multifamily and that you're actually kind of doing this at scale a little bit. Yeah, we have over 300 residents now and we'll have a thousand at full build out. We'll have 400 by the end of the year. And the design is there's 60 buildings and they're arranged in blocks and a couple of them are directly on top of retail and others have... So there's a gate around it and then there's courtyards and intimate paths within that. And then there's some wider paths between the blocks. And then there's one central Paseo, which is car free. We say it's for food trucks and fire trucks. And it's so different of a feel from asphalt. And actually the first thing that you'll notice is that the heat island effect is a big problem in Arizona where it's already hot enough. But our city feels a lot warmer because of this heat island effect. And we have three things that make our neighborhood much more resilient. There's not a drop of asphalt and there's lots of shade and also the buildings being white reflects heat. And so our apartment complex, our project feels 15 degrees plus cooler than the apartment complex next door.

Speaker 1

Amazing. And how many acres is it? Is the project on the total project? acres, a thousand units. What is that an acre? How many units are you doors? Are you getting an acre? 45 acres. it'll be 45 and 8. It's a thousand people and then 700 plus units. Amazing. Okay. And then one of the things I've heard, and I don't know if this is true, is there's virtually no parking on site except for maybe some handicapped stuff and businesses that right? No on-site parking. The that we have is for retail and visitors of residents. you need a lot of people to support retail. And given that the broader Phoenix area isn't walkable, we knew that those retailers would need to be supported by customers with cars. So there's retail parking for them. Got it. And if you do sign a lease, this is what I heard that I'm not sure is true. Like if you sign a lease, you have to sign a waiver that you're not going to park a car within a quarter mile. Is that true? Is that just hearsay?

Speaker 2

Right, there's a specific part and they can't park at all in that visitors lot. Sometimes people say that we tell them that they can't have a car or there's this interesting phenomenon on press because it's about clicks now. And so you can even watch it change sometimes during the day of the article where they'll start off with one headline and then by the end of the day, it's like developer bans cars because that gets more clicks. that's not it. Love that. That's hilarious. Yeah. And are most of the buildings, are they sixplexes? I know you've got some other like retail and some, some residential above retail or what size kind of like buildings are you doing? Most of the buildings themselves have four to six units. Four to six units, okay. You one of the things I think, I mean, we were looking, studying just what y'all were doing, because I think it's some amazing, you know, modern precedent. And I think one of things that's so cool about having these four plexes and six plexes versus a 300 unit building is people actually can feel some ownership of their building. They've got a front door and it looks like you've got staircases, like each person kind of has a private entrance. You know, it's not one central staircase. There's multiple. Exterior star cases, is that right?

Speaker 2

That's right. it's all ground floor entry or second floor. most are three floors and the third floor you walk up within your apartment to it. And so that creates these semi-private spaces where it's maybe you and a couple neighbors and then there's private patios. And it makes the whole thing feel more intimate and it feels more like a home. And the design that we have gets multiple sides of light and a cross breeze, which you don't always get. Yeah, it seems like the design, you guys put a lot of thought into all the little design details and stuff too. know one of the questions I think a lot of people have, especially on the development side or construction side, they're like, wow, that's so cool. We'd love to do that. People see like, but all that exterior wall, must be more expensive than one giant building. Can you talk a little bit about, you know, the cost, you know, are you able to make, is it, is it more costly to do it this way? you make it up by not having parking? Like how do you think about the finances of a project like this? Yeah, lots of different variables go into different designs and having more exterior space per unit does have some cost implications. And for us, it was about making a beautiful design that felt like a neighborhood that people wanted to live in. And it's helped with community. And so that's been really worth it. Obviously there's costs saved from parking, especially with the costs of structured parking these days. Developers are realizing... Yeah, construction parking.

Speaker 2

Yeah, the developers are realizing that anyone building structured parking today is making a big mistake. There's long tailwinds that are going to change transportation dramatically. And 80 ride hails, the biggest of them. And we're right in the middle of the Waymo operating area. And it's very popular here. And it's only going to grow. And it's also going to bring the price point for ride hail down. That's going to create many millions of new car-free folks. so these trends take a while to play out. Still less than half of the US has tried Lyft or Uber. But over time with demographics and as those services expand, people are going to regret having those garages. I completely agree there, like autonomous vehicles. I know people have been talking about it for a while and maybe we're a little behind what people have been saying for a decade, but in Phoenix, Austin, California, you've got Waymo and driverless taxis kind of everywhere and Tesla's not far away. It seems like, I don't know, within the next decade, you're going to see a lot more autonomous vehicles, which is literally going to change what is possible with urban. Well, with building and development in general, particularly urban development, which I find extremely exciting. Yeah, right now they're the worst they're ever going to be. The technology is only going to get better. Scale creates all kinds of advantages. Already they're 90 % plus safer and they're widely accepted. Here in Phoenix, it's the largest AV operating area in the world. cul-de-sac is basically right in the middle. And it's had a different response than say San Francisco. The people like it. The mayor talks to the press about how she takes it to dinner parties.

Speaker 2

and people think it's really obvious. What's interesting is that the biggest impediment to Waymo adoption here, besides there not being more of them, is that it goes slower because they don't run red lights and they don't speed and humans do both. And so, call it 20 % slower. so, one of the biggest drivers of transportation decisions is speed and the Waymos are significantly slower, but over time, that's going to change. Yeah, absolutely. And I think it's going to make a lot more projects like yours possible. One of the things that I think is really interesting is you've brought some scale to this kind of, I don't know if I call it urban infill, but a project like this where it would be really hard to raise money via syndication just from high net worth individuals or something that's this big, yet at the same time, Institutional money is usually not interested in R &D and doing something different. Can you talk a little bit about your capital stack and how the financing and all of that came together and how you financed it? Equity and debt and all that. Yeah, it has traditional equity and traditional debt. And when you're doing a new concept such as this, everyone has a lot more questions. The city has more questions, investors have more questions because it's not something where you can look at 10 comps down the street. And so being able to show the data and show why this works and why the demand is there was crucial to getting this done. And that changes over time that you start with a new concept penalty. And right now we're probably neutral. eventually becomes a new concept premium. And everybody's going look at their books and say, why did I fund all of these parking garages? And I think that that's something that will happen in the next few years from that transition. But now we're at the moment where there's widespread acceptance that AV RideHail is going to change a lot of things. And to me and to us, was obvious when we started the company that there was a big question of when. But now it's a lot more predictable. so

Speaker 2

people can make more confident bets. Got it. For the equity side, it, can you talk about that? Is it private equity? it institutional? Or is it like individual high net worth individuals or a mix of all the above, family offices or what kind of setup is it? Yeah, it's a traditional lender and traditional real estate investors. Okay, okay, cool. How long did it take you to raise the money and tell the story? We spent a lot of time upfront really showing why the concept could work and walking people through it. I mean, not the least of which is for entitlements. The two big questions that we got laughed out of the room were nobody's going to approve this and the demand is not going to be there. Now, obviously, the demand is there and getting the entitlements. We started the company in San Francisco. We knew we weren't going to there because of how hard it is to get entitlements.

Speaker 2

And so we looked all over the country for where this could work, where it had the right mix of job growth and it had a forward looking government that welcomed growth. And we found a great place in Tempe and a wonderful piece of land. It's right on the light rail. It's a mile and a half from ASU, two and a half miles from downtown Tempe and right where Waymo's first market was. And so that was how we landed there. But there's one thing I kind of want to redo the why, because you started off of like how cold is that started, but I want to... I want to share more about why we're doing it. It's to make cities better. And the way that we've built our cities has had a lot of negative implications where we now don't know our neighbors and we're less healthy and we're less happy. And we get in our car and we have this commute and we all become the worst versions of ourselves behind a wheel. And instead it's a place with community. Please.

Speaker 2

It's a place where you know your neighbors, you're healthier, you're happier. And it also results in lower cost of government. The bills for all of the roads and things for maintenance still haven't come due. And it's a wonderful life that makes people more connected. I think that's a really important point. One of the statistics I kind of throw out a lot was a study just like 2023 from the Belonging Institute that says 74 % of Americans feel a sense of non belonging in their own community. And I'm just a huge believer in that the built world and architecture kind of like architecture is in a very big, being that in a very broad sense, is the human habitat. And we know when it comes to animals and other living creatures, like their habitat's super important to how well they do and whether they flourish or not. But when it comes to humans, for whatever reason, like we don't seem to think about it that way. We build for everything except people we build for the fire departments and the zoning laws and the building regulations and the engineering and the traffic. But we don't actually like build with people in mind. And so like you're really bringing people to the front of why, and then figuring out how to. build the hardware to the software you want to run. I think that's really cool. It's a lot of old ideas in a modern context. And there's a reason why the things that we built before cars are some fantastic neighborhoods. And they're the places that people want to buy today that are really, unfortunately, expensive. But we could build more neighborhoods like that now.

Speaker 1

Yeah. And there are a lot of things in the way of building. You know, there's a lot of reasons we don't build more human centric, human scaled places from zoning and parking minimums and utility requirements and trash and fire and all that. So on that in a city like Tempe, Arizona, what what was the response of the city when you brought this to them? And also what were some of the biggest challenges you had to work through from an entitlement's perspective? Yeah, when you're doing something different, know, most projects, the project that the design for something that, for what became our land would have had, I think, over a thousand parking spots. And that's kind of just how you did things with the city. the, you know, each department has important questions. Fire, especially with what happened in LA last week, is one example. There's also, there's also sanitation. And so, we wanted to make sure that we understood all the different stakeholders and to understand what was most important to them so that when we brought a plan, we had something that everyone could be on board with and excited about. And so there's different specific things that we needed to figure out. For Fire Access, we use a ladder system from Europe and it works great. that was an example. to convince the local fire, like bring them an idea of like, hey, here's how it's done there. And you had a conversation. How did you actually work with the fire department to, you know, implement this ladder system? And what exactly do you mean by that? I should ask. So, first step is listening and understanding what's important to them and what their goals are and what the constraints are. And then taking different options and bringing a plan that works. And so there's a foldable ladder system. So then emergency, they can fold it out. That's to get to the roofs. And there's access points from the different paths. So our central Paseo is accessible by food trucks and fire trucks. And so it all works within the constraints that work. There's also some fire lanes, but rather than being an asphalt fire lane,

Speaker 2

We use DG and there's some grass in there. And so it's much more beautiful than a typical fire lamb. Yeah, it's very cool. Like really coming up with creative solutions. These foldable ladders, where are they stored? Are those, those aren't on the fire trucks. Those are like on the buildings or in public areas. very interesting. Okay. I did not know that. That's a new piece of information. have some of nowadays.

Speaker 2

Yeah, they collapse to about six inches wide and they fold out to a full ladder. Got it. Okay. That's a really creative solution. I love that. That's Going back to a little bit of the financing and all that, because I mean, this is something I'm interested in doing. We're doing Infill and I want to see more projects like this. You know, you're phasing this project at 17 acres, about 700 units total. How did you thinking about phasing that to kind of mitigate risk both on the equity and the debt side? Because what are you guys in phase three now? Is it phase two? We think of it as phase two is completed. Phase two is completed, okay. And so a big question when you're building these things is absorption. So it's based upon the job and population growth and other new construction is how many people can a place absorb? Now, if you're getting people to move in, then that can go a bit faster. But generally you look at the numbers and so that's part of why, not just us, but other projects will phase. we're a fairly large project. And so just based upon the population growth and the other supply, it made sense to do it this way.

Speaker 1

Got it. And how did you decide on what you were doing first? Did you go heavy on commercial first and phase one or was commercial more phase two, for example? Cause that's kind of a chicken or the egg problem. Yeah, it's a clean rectangle. And there's a light rail stop right at the northwest corner. And so we knew that would be the hub of energy. And so that's where the amenities are and where the retail is. You walk right into an award-winning restaurant. And there's a coffee shop and a wine bar, bike store, a bunch of other great things. And there's a crosswalk that directly goes to the light rail. And then you walk farther in through the paths and then you get to the residential. And You learn a lot when you build these things, right? A lot of the top-down efforts in the past have failed because they assumed that they knew exactly what people wanted. And one of the other reasons to phase is so that we could take the learnings and adjust them for future phases. And so the first couple of phases are locked in and the next one is now, and there's still room to update to an extent the final phases based upon what we learned. Yeah, that's awesome. I mean, we talk about that at Building Culture, just this idea of letting the story unfold a little bit rather than imposing. of course you're going to learn as a project of this scale unfolds. What about infrastructure? you, you because you tied up all 17 acres, would assume, entitled all 17 acres. Did you do a PUD on it? Yeah. Okay. So did a PUD. And then for infrastructure, did you just put in the infrastructure for like phase one or phase one and phase two? Or did you do more infrastructure beyond that? Like you took?

Speaker 2

Mostly phase one and phase two, but the things that made sense to do ahead of time. Okay. The things in Tempe is that they do the math on the hundred year storms and you can't spill water into the street based upon what that would be. So there's retention basins and these kinds of things that you want to get done before. Did you get any other like city incentives or anything? No, mean, a big thing was wanting to go somewhere where the project could happen. so that was part of it. it's not incentives. I'm going to share a little trick we use at building culture. So if you're designing a house, you have to have egress windows or egress in any bedroom, for example. And the problem with that is egress windows are very large, especially if it's a double hung window or something like that. And because of design constraints, sometimes we want a smaller window if it's in a dormer or just for the hierarchy of the elevations. Well, A really cool trick that we use with our Sierra Pacific windows is we'll take something from their urban casement line and we'll put what's called a piano hinge on it. And so rather than a of a normal casement that kind of slides open where only part of the windows open, this is almost like a door hinge. And so the entire window opens and you can meet egress with a two foot by four foot window, a two four window. It's the smallest possible egress window anyone makes.

Speaker 1

And that's a nice little design trick. If you're as nerdy as I am, you will actually think that's really cool. So check out Sierra Pacific windows and if you are in the state of Oklahoma, check out one source windows and doors. We at building culture use both of them regularly. Have you seen any big difference between when you, when did you first break ground on like your first units? What year was that? 2021. Okay. So that's like towards the beginning of COVID. 2021.

Speaker 1

And now, you know, we're well past COVID. And from my experience, things are a lot freaking more expensive now on the building side. Have you guys experienced that or you're like, it cost us about 40 % more to build today than it did four years ago. Oh yeah, every project of a similar build year had the challenge. I COVID was challenging. One person gets sick, the whole crew needs to take time off. But the supply chain was actually even more disruptive from a financial perspective. And it was hard to get all kinds of things. Every project in Arizona had delays from electrical panels. And even things like concrete were hard to get. One of the great things in Arizona is that we have this Taiwan Semiconductor plant, which is a $60 billion fab. where they're building the latest chips. And they had 20 cranes up and they were sucking a lot of the energy out of the construction market. It's going to be such an asset for the city. But that made it hard to get things like concrete. there were, you know, there's all kinds of stories of like specific things that had never been hard to get in construction where, you know, a GC that's been operating for decades, multiple projects at a time is like, I have never had to order those things months in advance, but now we do. Yeah. So do you just kind of like adjust as, as costs go up? mean, you just adjust rents. mean, everything's inflated, you know, all new multifamily is more expensive and you just. raise the rents until the numbers make sense. And obviously people have to lease it up too. So there's all this balancing act is how did you kind handle.

Speaker 2

The market sets the rents more than anything. so, you know, the construction costs were painful for us and everybody else that was building during the time. Yeah. It's little bit better now, especially in terms of the availability of things. A lot of

Speaker 1

Definitely. Yeah, that's my experience too. Are you seeing, and I think this is just a question I hear a lot of people wonder at cul-de-sac, it's like, but are they getting more rent compared to a multi-family, just a new class A multi-family building? Is it about on par? it 5 % premium, 10 % premium? Like where is that? And of course it might be different now when you're only halfway through the project than when the project's completely done and you really have a truly finished neighborhood. Yeah, when you start and not all the retailers are in, it's actually picked up momentum. The latest leasing is going wonderfully now that we've had the last batch of retailers for this phase open. And so now we're getting a premium to other projects nearby, both in velocity. But a big part is also there's per unit. So the chunk price is a bit lower just based on average units and then the per rent is higher. Got it. The main thing is that this is about how this is going to evolve over time. And our biggest source for leasing is people that visit and they say, this is wonderful. I want to live here. the awareness is still relatively low. And so over time, that's going to lead to a successful project because neighborhoods that are built well are what people want to live in. And the majority of Americans would pay a premium. to live in a walkable neighborhood and that goes across every generation and it's 92 % of Gen Z. And so it's be a demographic tidal wave of preferences.

Speaker 1

Yeah, I there was a 92 % wow, that's that's cool. I know there's a National Realtor Association, whatever survey from I don't know, last year or something that it's something like 79 % of Americans would pay more to live in a walkable community. You're like, Whoa, I mean, that's crazy. What about what is people's re response bet to cul-de-sac? And I mean, like that's people, whether that's businesses or tenants looking to lease up. I've heard people have moved out of state just to come live there, you know, like, don't know, that two people, that, you know, what's been the response of people? Yeah, it's been, people have loved it and the demographics are broad. You saw the data, how broad the demand for walkable neighborhoods is and that's reflected in who lives in cul-de-sac. And most of people say that this, I've always wanted to live in a place like this, or they visit it and say, now I want to live in a place like this. And we just had to build it so that they can see it. Yeah, and I would imagine there's a bit of a self-selection process that happens here where like you, because you're building something that is more, I don't know what the word is, intentional, community-minded, neighborly-minded, health-minded, all of that, you actually attract those people, I would assume, a little bit. Is that true? People love the sense of community that we have. love that it's healthier. They love that there's more energy around. They love the amenities. Different things appeal more to some than others, but collectively, part of the aspect of Great Cities is that it has something for everyone. And so there's a broad set of things that attract people to call the SAC.

Speaker 1

Yeah. It seems like you guys have really, from at least watching on social media, have really been able to kind of blend hardware and software. You've got the buildings and the backdrop that enable a certain type of living and connection. But it seems like you guys have been trying to be pretty intentional with getting businesses in, programming, farmers markets, parties. whatever, that, can you talk about that, kind of the software and the effort that you have made, like, as the developer, and then also what's kind of like happened organically and how you expect that to evolve over time? The biggest aspect for our amenities is our retail program, which as of Saturday, there's a clay painting and craft studio that opens Saturday. That'll be the 21st. And the retail program has been an upside surprise. Initially, the design had six traditional retailers and there were also live workspaces. And there's a story there, which is that a lot of cities, look at Manhattan and they see the ground floor retail. So they want to have ground floor retail in their multifamily. And there's vacant ground floor retail, like on the whole street where cul-de-sac is because everybody just drives. There's no walkability. It has no soul. And we thought that it would take longer for these live work units to get filled because we thought that there'd have to be a lot more people. And it's not just people want to live at cul-de-sac. They also want to live next to cul-de-sac. And so there's been a surge in construction near us and now we're listed as their amenities. And so we thought that it would be more time for more people moved into the area. support the retail. But it happened a lot faster. And that's because it's a great place to have your store. It's a beautiful place instead of a strip mall. It's a great backdrop for what you do. It makes your store look better. And so that took off much faster than we thought. And the retail program is bigger than we thought. And that creates something for cul-de-sac residents. We also have more people that visit cul-de-sac every day than live there. And that energy makes it feel like a vibrant place.

Speaker 1

And do you all host events? think there's some, I don't know if it's a farmer's market or something or do you all, do you all, is that the developer, you know, doing that? Or is it like people starting to put that on themselves? It was both. We throw some events and also the communities throw some of their own events and that actually creates more diversity of events. We started something called Little Choya and we started it when it was actually on the construction site. We erected something temporary and we wanted to start bringing energy to the site and we would have some programming and some retail. And it was a fun place for people to come, people that were moving into cul-de-sac, people in the area to introduce what we're doing to the area. And that went well. So now we actually host that in the plaza. we'll get, you probably average 400 people. And sometimes we'll get significantly over 500. And that introduces more people to cul-de-sac. It creates more things that are going on and makes it the community square. That's awesome. Is that like a daytime thing, nighttime thing, morning thing all day? What is it? Is it like a certain time of- It started off as nighttime. We picked Thursdays. And now we're actually doing a lot more Saturdays during the day. And we've got some farmers markets and others will throw events at different times. So it's both. It started off as more of a night thing just based on how we started.

Speaker 1

That's awesome. there any other? Do you all have a pool? Yeah. Okay, cool. And you all did you already put it in, right? Yeah. Okay, cool. Was that was that pretty important to you that you thought to like get in early? Are you going to do another pool or is like one pool in the 17 acres? probably just the one pool. As you know, these things can evolve. It's Phoenix. so pools are a very popular amenity. And so we knew that we wanted to have a pool. actually it opened sort of at the end of phase one. So we released phase one without a pool. I would actually put it sooner if I did it again. But now it's in there. People love it. It's another community hub. That's cool. I'd like to learn a little bit more about the read. Did y'all, were y'all able to make, is it a corner store, like a little grocery store? Do y'all have something like that? Yeah, so it's called Busan Mart. It's a Korean market. They call themselves a grocery store. They've got all kinds of Korean goods. They've also got regular goods. food to order. They also have prepped meals. And it's a great amenity in the neighborhood. Is there like convenience stuff like you can pick up toothpaste or toilet paper there or is that? that's awesome. Did you have to, how did you land them, you know, like early on when there's nothing there, mean, businesses, they, did you say, Hey, I'll let you sign a one year lease or are you signing five year leases? Are you doing percent revenue share or anything like that to kind of like help the retail early on? How did you kind of get people in there? What did you have to do?

Speaker 2

So sharing the vision of what we were building, and we were pleasantly surprised by the response that we had from retailers where they said, that's the kind of place that I want to have my project rather than just being in a strip mall or something like that. They think that it reflects well on them. It's an attractive place for customers. So that was the biggest driver for us. Got it. did you have to do any revenue share or anything like that? Like with a base rent and revenue share or was it just like triple net lease or how did you work that out on the retail? the traditional retail leases. Got it. Okay. So it didn't really have to make any concessions to make it work. What like size are a lot of these retail? Cause you mentioned these live working units. Can you kind of describe the live work units a little bit? Are these three story and are they like, you know, 600 square foot footprints or what? Yeah, so they go up to the traditional, the original retail spaces are up to 5,000 square feet on a single floor. And the live work spaces, they were also built to be studio apartments. And so, like I said, the retail took off faster than we thought. they could have been studio apartments, but they're 500 square feet. And a lot of the retailers have...

Speaker 2

they actually wall off the kitchen with something decorative so that it feels like a retail store. And those are doing great. that's awesome. Can you talk about a little bit of the tenant mix? You you said you got your 21st opening with a clay studio, which I think is awesome to have there. What other kind of retail you got the convenience store and not only just what retail is there, but what is your perspective from the developer of retail that really drives kind of success and culture in the community? Yeah, the market that we talked about, the coffee shop is another one people always list that early. It's also a wine bar at night. there's the perhaps the crown jewel is is a restaurant that's got a James Beard nomination and there's an e-bike store. There's a Boba place that also does Vietnamese sandwiches. There's a barber. There's a vintage clothing shop. They started in one of the small spaces and now they doubled their space into a traditional retail space. And the smaller ones are things like there's a Japanese stationery store, there's a permanent jewelry shop, there's a cactus shop, there's a doctor's office, and there's a candle making studio and a handful of others. Man, that is really cool. Are you involved with any of the commercial, like as the developer? it like these are completely all third party? You know, are you, did you do some of them as the developer?

Speaker 2

We didn't do any of them themselves. We did the gym, of course. But these are all third parties. A lot of them actually started from our night markets and they got to dip a toe in that entrepreneurial venture. And watching them grow is wonderful. We care a lot about local retail. These are all local retailers. And then watching people hire their first employee and their second. Now we've had one that moved into a bigger space. We hope the small businesses become big businesses and that we can be a launching ground for them. Wow, that's amazing. mean, I think that is what makes it a part of what makes it so interesting is like you're saying the local identity and culture and not just kind of corporate anywhere USA, the actual people that make and that's amazing. They evolved from the night market too. I mean, that's really, really, really cool in terms of how you design urban design and architecture. Can you talk a little bit about that? Who did you work with? How did you find them? I mean, know Opticos was, I believe, involved on the urban design side. Can you talk about that? Did you all have like a charrette or something? How did that work? Yeah, the charrette, that was such a highlight to see it come together and to get an identity for the first time. So as you know, a new concept, it's really important to select the right partners that really understand it. And we're going to bring the expertise that they had to this new concept. And as you know, charrettes are so multidisciplinary and you have all the different groups in the room to make sure that we have the right landscaping, the right systems, et cetera. And so That was where we, that was where the idea for the, the central spine with the sale came, and where we started to see where the mixed use portion would be. And, but yeah, it was certainly very different. Actually, one of the architects came up to me at the first lunch break and said, Ryan, I've been doing this for 28 years and I can already tell you on day one, this is my favorite project of my career because most of the charrettes, she's like, you start by saying, how's it going to be parked? And so your design.

Speaker 2

First, it's ugly and it's severely restricted. And this one was one that allowed us to design something beautiful because of the way we were doing it. Amazing. and that actually reminds me, meant to ask, you you said you provided parking for retail, which completely makes sense because you got to draw people in from the outside. Like how many spots do you have to support the 21 retail spots you have? There's 150 spots for the retailers. And then course you're seeing an increase in people that are coming from Lyft and Waymo. So over time that'll change. There's also now lots of building around us. So you're getting more foot traffic now. Got it. On the GC side, as a developer, did you just hire a GC or is there any kind of like more integrated partnership there? We use traditional GCs.

Speaker 1

Okay, cool. This is a random, what kind of, just I think about when I think about density, I start wondering about, know, utilities and HVAC and stuff. What did you guys do? It seems like a technical question, I guess, but for HVAC, do you have condensers on the roofs? How did you actually handle that? Yeah, they're on the roof. Centralized air? Okay, and it's centralized air with duct work. It's not like mini splits or something like that. Centralized with duct work. Okay, cool. Cool. Cause y'all did all TPO roofs, right? Yeah. Which makes a lot of sense in, in Phoenix. what have you, you know, you broke ground in, in 2021. What are some of the main things that turned out differently than you expected? Whether you consider that thing that's going wrong or just, you know, things never exactly meet your expectations. You mentioned retail picking up way faster. than you expected. And so that's like a great thing or there are things where you're like, did not work out as I expected or I would do that differently. Yeah, COVID and the supply chain crisis were certainly things that are hard to predict and created significant challenges. And that affected us and it affected the country as a whole. And Phoenix probably got disproportionately worse because of the amount of construction that was going on. Yeah, I bet I bet they did. And you said, you know, maybe do a pull a little bit earlier. You had some, you started the night markets or the markets pretty early on. What is there anything that you thought went like?

Speaker 1

really well, almost like exactly according to plan. We were like, yeah, we would totally do it this way again if we were doing it. I mean, the biggest reflection is that this works. And this shows not just us, but it shows everyone that you can get projects approved and the demand is there. And one of the reasons we did this is because it makes cities better and brings all these other benefits. And so we want people to copy this, to put this all over. We need to be building many millions more walkable homes. And so we want this to be something we get lots of developers in cities that visit. We want this to show cities that this kind of project, not only is going to be okay, but you're going to love it and neighbors are going to love it. And the city of Tempe, they took a risk on us in a sense, and they look great for it and they love having it and the neighbors love having it. And we want other, other city, civic leaders understand that we want other developers to understand that these can work. How long did it take to get through entitlements? Like once you kind of really first had a, I don't know, preliminary design that you were kind of sitting down with a sitting and say, hey, here's what we're wanting to do to actually being able to pull permits. Yeah, so the process looks just like other projects in Tempe. Like I said, we put in groundwork to understand what all the departments would care about so that when we had a plan, people could get around it. There were the three parts between zoning, development agreement, and design review, but it went similar to other projects, passed unanimously.

Speaker 1

awesome by city council or I guess, guess every city's different, but city council was all that's awesome to get unanimous support for something like that. Yeah, that's great. So, you you mentioned, you kind of hinted at a future projects is, you know, so it's called the sack, called the sack. It's like cold, the sack Tempe. And then there's, or is that like the company, your development company that you call cold the sack. Yeah, Coldesac is our company. Coldesac Tempe is the project that we're building in Tempe. And we have a couple for sale townhome projects in Atlanta. Those are not branded Coldesac. Those are more like a pocket neighborhood and smaller. that's showing for sale and bringing a great amenity to the area. There's also an affordability component. And there's other exciting projects that... have to have you back on to share more about. But this is something that the demand is widespread. And we have cities that are asking us to come there. The number one feedback we get from people is, I wish this was in my area. And so we want this to be the way that many developers build. And we also want to grow ourselves. Yeah. Can you tell just so people kind of know, like, I mean, I know they can also just go online and look, I'm pretty sure. But, you know, like a one or two bedroom, what are the rents on that for a unit? So the rents are something like $1,400 to $2,200.

Speaker 1

Okay, so like, what is that two? Is that like 250 a foot or something? I don't even know what do you have that off the top of your head? But it's about 230 a foot. 230 a foot. That's pretty great for brand new class A multi-family, particularly in this kind of really walkable environment like you've been able to create. That's amazing. And you're still able to hit that even with new construction and your new stuff that you're building in phase three and four. Yeah, leasing is actually as better as we build more because there's more community, more sense of that and more amenities. And the biggest thing is that people love it and they refer their friends and they're like, I'm happier, I'm healthier. And so that's the biggest force. While all the transportation, more people are using Waymo, more people are using Lyft and this portfolio of transportation options. It's a big shift in lifestyle. we also save people a lot. A lot of people save money on... what they're spending for transportation.

Speaker 1

Yeah, that's cool. think Rob mentioned this latest phase leased up really fast and you hinted at that earlier, just like the velocity of it's really kind of picked up as it, can you talk about early phase one versus how fast did this last phase kind of lease up? mean, the leasing in general has been very good and faster than other projects and that shows the kind of demand. And we've seen it accelerate as the amenities opened. We also have a beer garden that now you can sort of feel that there's more people walking around and it makes it an even better place. And so it's picked up. Do you have your own internal sales and leasing team or is it someone you've contracted with? We do our own property management. that's because what we do is so different. And we wanted to deliver a great experience and we understand all the aspects of this lifestyle. And that's why we're managing it. That's awesome. It gives you a lot of control to be able to deliver the type of experience and storytelling I imagine that you want to. So I'd love to hear a little bit about you in terms of what is your kind of normal, I don't know if you have a normal day to day, because I imagine you're doing a lot of different things, but what is your main role now? Like what do you spend your time doing on day to day?

Speaker 2

The most important thing is to have the right vision for what we're doing for the big and small decisions and to have the right people around the table. And we have a wonderful set of leaders at cul-de-sac. That's been a big part of how I've got where I am in my career is being able to find great people, give them the room to succeed and then watch them grow. so the key things are making sure that the right people are there and making sure that we have the right vision and continuing to spread the word about what we're doing. How big is your team now that cul-de-sac? 20 people. Wow. That's awesome. In-house marketing, would assume. Property management. And property management. Okay. Cool. You mentioned new forms of transportation on the horizon and obviously autonomous vehicles are on the way. I was recently ran across Swift cities. Have you heard of them? We have 20 people.

Speaker 2

Yep, and development.

Speaker 2

have. Yeah, there's a lot of potential developments in transportation. And the biggest underlying thing is that we've built our cities for cars. And it's a geometry problem with congestion. And the knock-on effect is that people don't want more traffic. They want the road to be as free as possible. When you have more people, you get more amenities and it makes the neighborhood a good place. But people don't want the traffic. And that's one of the reasons why people love living near cul-de-sac. One of the big challenges... Now, when I started my career, I looked at trains and I was like, trains are wonderful. They take a long time to build. And so when I was in college, I was passionate about bus rapid transit, still am. Where for a lot faster and lower cost than rail, you can get most of the impact. And if we could do that... Now, I looked at trains and said, look, takes 20 years to make a train. When I was in middle school and grade school is when we were doing the light rail in Phoenix. And that was inspiring to me to see a place like Phoenix get rail. But I said, that takes a long time and life is short. So let's do BRT. And now 20 years later, we also haven't built much BRT in the country. And so a lot of the innovations are all trying to get at the same thing, which is how do we get past this congestion problem and have dedicated routes? And that's the lens of which I think about BRT. That's the lens about which I think of Swift cities and other exciting innovations. The thing that's interesting about AV Ridehale is that it's more or less perfectly compatible with today's built environment where it can drive on the same roads, get to the same pickups and destinations, and it can do it much more safely and it can do it for ultimately a much lower cost. And because of that compatibility, doesn't require massive infrastructure investments. They basically just need to have permission to operate. so that is the one that I call inevitable. And so I bet my career on that. And that is the one that works with the different systems. people discuss trade-offs of it increases VMT and it can cannibalize a bit from systems. so there's real things.

Speaker 2

those trade-offs, there's other ways to work with this. And of all these transportation innovations, basically all of them are better than building sprawl where we have painful commutes that make us less happy, healthy, we become the worst version of ourselves behind the wheel, we're killing each other and our children through that. And so whether it's BRT or Swift cities, or EV ride hail, the world's gonna be a better place and we're gonna be able to build better neighborhoods. So you got the AV ride hail as cars, but it eliminates the parking spaces. And that allows a very different design. And it's not just the first order effects of what AV ride hail is, it's the second and third order effects. And so it's going to be the biggest change to real estate in our lifetimes. And that's a big part of what's going to make more walkable neighborhoods work now. Yeah, I agree. And I find it very, very exciting and exciting time to kind of be alive and be working in this industry. Are there any other major disruptions or how do you see the next 20, 30 years unfolding in terms of the built environment across the country? you see whether that's technologies or policies or culture? Any other things that you think about? Well, yeah, I mean, the world's changing a lot. On that kind of timeframe, you go back and there wasn't widespread internet by that kind of timeframe in the past. AI is changing things. mean, AVRideHail is one of the biggest physical manifestations of that. The future of work will create different patterns, but it's so human to want community and to want interaction with people that in some sense, it just reinforces, we've been building walkable neighborhoods. for millennia and somehow we've sort of forgotten in the US. We've also largely forgot how to build new cities in the US. I think that that can restart as well.

Speaker 1

Do you live at cul-de-sac? Yeah. You do? Okay, that's awesome. What's that like? one for myself and then I have one that's a guest unit because I want to show everybody. And so I have visitors. If you're over there, you could say my guest. love to come. I've I it's I don't know if it'll be this year. I've got a one year old and a five year old and and and and some big projects getting off the ground. But I'm really hoping to do it whether it's this year or next year. I'd love to come visit and and walk because it's funny I talk about it a lot and point to him like see this is possible which was what I love about someone creating the first kind of alternative of like this is actually possible. And that's that's huge. Do you have any thoughts or suggestions for say other developers, whether they're kind of like bigger developers or small developers who want to take a step towards doing something like this. Is there a recommendation of like, I would read this book or I would talk to these people or here's what I would be thinking about. Yeah, the first of all, development is hard for new folks and to think seriously before pursuing it because it's a lot of work. thought about wearing my construction hat today because day to day, those are the kinds of things that you're thinking about and so many things have to go right. But the biggest thing is that believe in walkability. This is going to be one of the biggest trends in real estate of our lifetimes. A.B. Rydhale is going to be the single most disruptive force.

Speaker 2

these changes in transportation, leading evolutions in real estate go back millennia, going back to Roman roads, street cars, for better or for worse, cars in the highway network. And this is going to be of that magnitude. basically, all real estate developers now have worked in that car era. so understanding where these trends are going is going to be a big one. And understanding that cities with the right plan, maybe not everywhere, but are going to love it. Yeah. Do you go to any, don't know, workshops or conferences or anything tipped like annually that you're like always go to or regularly go to? I try to do as few conferences because I really want to focus on cul-de-sac. But getting the message out there is important. Early on, we got laughed out of the room. And now going to speak, it's important because we want to share that this can work. And maybe the number one thing that I want current developers to hear is don't build structured parking garages. It's making the cities worse. And it's going to start showing up in your numbers. And those are going to be mistakes. Yeah, that's a good one. Well, is there anything else you'd like to share about cul-de-sac before we wrap up?

Speaker 2

No, I hope you get the chance to visit. Check out our retailers. If you're interested in living there, check that out. And excited to share more about what we have in the future. It's gonna be wonderful future. Awesome. so how do people find you? what is it cul-de-sac.com or Hold the sack.com. Coldisac.com, y'all are on X and Instagram, Coldisac. Anything, any other ways to follow you, check you out. Yeah, and then you're on there too, Ryan Johnson. Yeah, so. Well, Ryan, really appreciate you coming on. I'm super excited about what you're doing. I think a lot of people are. And keep up the great work. I can't wait to come visit. And I also look forward to having you on again to learn about your new projects at some point. Thanks for having me on. I enjoyed the discussion.

Speaker 1

All right, thanks, Ryan. If you've been enjoying this podcast, please like, subscribe and share with your friends. And if you're listening on Apple or Spotify, please leave us a five star review. Thanks so much for listening and catch you on the next episode.