Mitchell Schneider is still energized by the art of dealmaking nearly 30 years after he created First Interstate Properties. But his perspective has changed a bit over time.
“In the early stages of my business, I loved the process itself and even the stress of that process,” says Schneider, who founded First Interstate in 1989 and serves as the company’s president.
From Legacy Village, a 600,000-square-foot mix of upscale retail, fine restaurant and entertainment venues that opened in Lyndhurst in 2002 to Avon Commons, which went up in Avon in 2000 despite a number of challenges, to Steelyard Commons, which brought retail shopping to the outskirts of downtown Cleveland in 2007, Schneider played an active role in changing how people shop and creating multiple new tax bases.
He understands and acknowledges his role in these projects, but he’s learned to take a broader view of what transpired.
“Yes, I was there and it was my idea and I worked my ass off on each project and focused like a laser to get it done and brought the parties together and created the opportunity for financing and put the partners together and convinced everybody along the way to do whatever it is that we did,” Schneider says. “Yet, I look back on it and I am just so grateful that I found myself in a situation to be able to do that.”
In 2004, Schneider shifted his focus from retail to private equity investments. He and his business partner, David St. Pierre, started Legacy Capital Partners, which targets middle market real estate investments. The firm has done 58 projects in 17 states that are valued at more than $1.5 billion.
“We’re taking apartments that in many cases are less than what they could be and we’re improving them to provide a high-quality living space for working class people,” he says. “To provide a great investment vehicle for investors and at the same time, do good for the people who need those spaces, is a great piece of satisfaction. It’s grown beyond the thrill of dealmaking to the satisfaction of serving the constituents that are involved in the transactions that we’re doing.”
Smart Business Dealmakers spoke with Schneider about the role his team has played in transforming Northeast Ohio’s retail culture, his own evolution as a dealmaker and a valuable piece of strategy he uses to close a deal.
When I started 30 years ago, it was the very beginning of power center development in the U.S. My idea was to become a power center developer. In the months leading up to launching First Interstate, and even in the first couple years of the business, I was on planes traveling to Virginia and Florida and other markets to look at real estate to see if there was an opportunity for development. I had my eyes open to any opportunity. I was hungry. As things evolved, I found a piece of land in the Greater Cleveland area. My first development project became one in Northeast Ohio, Hawthorne Valley in Oakwood Village.
By the time we got that project launched, I saw there was an opportunity in Northeast Ohio. In 1989 when I started this business, there was not one power center — meaning three major anchor tenants — in the entire marketplace. Power centers started off in larger markets across the country and some were fast-growing marketplaces. But there was nothing in Cleveland or Northeast Ohio. After that first project was underway, I thought there could be an opportunity to stay more local. I also saw some of the benefits of dealing with more local people and putting together a team that we could execute with repeatedly on a series of shopping center developments.
My strategy really narrowed geographically and I stuck with it. After a decade or so, after seeing the risks involved in the process, I decided if I had to drive more than 90 minutes, it was too far away. I was going to stick to places I could drive to or that my people could drive to so I could have my team that I could count on involved in every step.
Faith, persistence and tenacity
Almost all developers are optimists by nature. This is a business based on faith, persistence and tenacity. Some people say persistence and tenacity are the same thing. I don’t believe that’s true. Persistence is the ability to keep working toward a goal. Tenacity is not only to keep working at that goal, but to figure out new approaches in working toward it.
There are so many factors outside of your control in the real estate development process. I believe things work out when you’re trying to do a good thing for everyone involved. Does it always break that way? Not always. But way more often than not. That’s my personal approach to the world, not just to business, but to life in general. If what you’re trying to do is good for others, it can be good for you too. Generally that helps make things happen and the chips fall in the right places.
Don’t spend a lot of time with things that you don’t view as essential. It takes some experience over the years to make sure you’re comfortable in determining what is essential. When you’re not confident in determining what is essential, everything is essential and that bogs you down. You need to train yourself to remain focused on what’s most important and not get too deeply engaged in those less consequential matters.
The Last Word
If you care less about the outcome than the person you’re negotiating with, it often leads to you getting what you want. In other words, if you’re prepared to get up and walk away, he who cares least often comes out getting what they need in a negotiation. Caring less about whether you make a deal is often a great way to secure what you want and make a deal. If you care less about the outcome and you’re prepared to live without whatever it is the negotiation is trying to accomplish, you’re more likely to end up with a deal. If someone sees that you care about something more than they do, they can take advantage of it and extract more from you to their advantage. It’s a great negotiating skill, even if it’s not completely sincere.