Michael Balanky, Founder, President & CEO, Chase Properties
In an interview with Invest:, Michael Balanky, founder, president, and CEO of Chase Properties, talked about how its client-centric approach has led to strong community support and successful projects, why it takes a risk-averse approach in its business, and how it is politically active to help promote good development practices and shape the city’s growth.
What is the state of the real estate industry in Jacksonville, and what opportunities does it present for Chase Properties?
We are still facing some headwinds. We call it the three I’s: interest rates, insurance, and inflation. These factors have been problematic for a while now, but we think they will start cooling off soon. Jacksonville and Florida, in general, are somewhat insulated due to our geographical location, no state tax, and significant in-migration. We are one of the top in-migration states and cities in the nation, which I believe will allow us to persevere better than most other cities. That being said, many companies in the development business have experienced a slowdown, particularly in multifamily projects, over the last year to 18 months. The good news is, we predict that interest rates will start to decrease by the end of this year and into 2025. This will create opportunities in the next six to 18 months. The one good thing is that it has brought property prices back to reality. During the height of the multifamily boom, prices had skyrocketed, with people overpaying for everything. Now, prices are becoming more realistic. We are looking at many deals and anticipate adding them to our pipeline. We aim to be ready with good sites when interest rates, insurance, and construction costs return to what we would consider a somewhat normal range. If we can buy right now and build later, we think it will be a good combination.
How do you tailor your strategy and services to meet the diverse needs of your clients, given that everyone is different?
Our philosophy is based on understanding the needs of our customers from their point of view, rather than trying to make them understand their needs from our perspective. We listen first and seek to understand before being understood. We take pride in the fact that in 31 years, we have never lost an entitlement or had a failed project. This is not because we are exceptionally smart or good-looking, but because we do not ask for things we should not be asking for.
Our philosophy at Chase Properties is to make the community a better place once we are finished with our development, than it was before we started. As a result, we receive a lot of support from neighborhoods, council members, and the Downtown Investment Authority. We have completed several award-winning projects in Jacksonville by adhering to this approach.
Which projects in your portfolio would you say have contributed the most to the growth of your company?
Deerwood Lake, a $300 million mixed-use project in Jacksonville, was significant. It won a state Award of Excellence, only the second one the city had ever won, which brought a lot of notoriety. Following that, we developed the San Marco Place high-rise condominium on the South Bank of downtown. It was based on a downtown housing survey that highlighted a need for that type of project, and we won a national Award of Excellence from the Urban Land Institute for it. Another key project was a 300-acre active adult community in St. Johns County, which had a record sales pace, selling out 367 homes a year and a half ahead of schedule.
Additionally, River’s Edge, formerly known as The District, is a 32-acre, $600 million project right on the river across from the stadium. Although I sold my interest to my partner, we were instrumental in the design. That project is just now coming out of the ground, and it will have a big impact on Jacksonville. I am proud to have been involved as it will ultimately be world class.
These projects are some of the key ones that put us on the map. We are also working to address the affordable housing crisis. Recognizing this significant issue, we started a subsidiary company called Smart Growth Housing Solutions to tackle affordable and workforce housing needs. We did not want to dilute the Chase Properties brand, which is more of a luxury brand, so we set up a completely different company for this purpose. We have several deals in the pipeline and hope to make some good announcements soon.
With rising vacancy rates and increased supply, how have you adapted your strategy to attract tenants and maintain occupancy levels in the office space?
We do not have a lot of office space in our portfolio, and I am glad we do not right now. We have some retail space, but it is not a significant part of our portfolio. We are typically merchant builders. In this next cycle, we plan to build and hold more multifamily properties. This has not been our strategy up to this point, so we do not have much overhead or many vacancies. This approach helped us make it through the recession and even made some money, while many of my friends faced significant losses.
We are risk-averse developers. People might think we are big risk-takers because we do high-rises and marinas, but we are not. We have an exit strategy for every project. If our due diligence shows that we cannot survive under a worst-case scenario, we do not pursue the project. That cautious approach is why we are still standing today.
What are some of the regulatory or legislative issues that you are keeping an eye on now that can impact your business or your clients?
Zoning is always a topic of discussion. One of my partners is on the Planning Commission, so we have an in-depth view of their thoughts and plans. We are politically active in Jacksonville and often voice our opinions about proposed legislation because we want to weigh in to ensure highest and best uses.
I also helped start the first Urban Land Institute in Jacksonville many years ago. At one point, we were the largest chapter in the nation. We are still one of the bigger chapters. We get involved in city council races, mayoral races, and know most of the key players. We want to promote good development, and seeing major developers like Jorge Pérez from the Related Group coming to Jacksonville is a positive sign for our market. We frequently give feedback to various city entities and have regular discussions about what is best for Jacksonville. There are some really good people working to bring the city to the next level.
What are some of the biggest challenges for Chase Properties?
Our biggest challenge is getting people to move as fast as we want to. We are nimble and outsource most things, so we act quickly. Real estate deals can fade away if you do not capture the momentum early on. We move fast, but sometimes governance and legislation move at a slower pace. After 31 years, we are used to it, but it is still our biggest frustration.
