To some, finance is simply balancing the books and getting bills paid, but in the real estate industry, it is so much more than that. Financial needs are present throughout every step of the development process and our fearless CFO, Michael Johnson, seamlessly guides our clients through the complexity.
Michael started his career as a property accountant in Chicago where he gained experience with the duties of a financial analyst. This position paved the way to Michael becoming an analyst for a different Chicago-based development company. After years of hard work and dedication, he eventually became their CFO. Some time later, after he began looking for a change, Michael jumped at the opportunity to join the KDG team and has never looked back. As CFO of KDG, Michael oversees all aspects of accounting and finance for each development and operating property, as well as KDG’s corporate functions. He also assists with the acquisition, refinancing, and disposition of projects. This includes purchasing a vacant land parcel, or one with existing improvements that will either be demolished or renovated. Since relocating to St. Louis, Michael has worked on more local projects than his time in Chicago where half of his developments were located on the east and west coasts. And while many of those former deals were larger projects requiring more capital, he has found that the fundamentals of real estate finance essentially remain the same.
The real estate and development industry is unique as each project is financed on its own rather than finding a general, blanket solution for the firm as a whole. This has allowed Michael and the rest of the KDG team to work with a variety of different capital sources and structures as the projects dictate. Over his career, Michael has worked with many different financing structures, but most projects have been conventional with a lender that loans 60-80% of the project’s cost/value, with the remainder of capital coming from equity. In the simplest cases, projects had had a single equity source, but there have been deals that have as many as 20 investors. This presents Michael with the challenge keeping all capital participants informed on their investment, as well as navigating the variety of ways to distribute money these investors.
Along with the development and construction side of the business, finance can be met with challenges that can also change with real estate cycles and time. This makes things interesting not only for him, but his entire team. What he finds most exciting about the development industry is that the KDG team acts as the quarterback between architects, contractors, municipalities, and the individuals investing in the project to help bring it to life.
Since Michael’s position allows him to work through every stage of the development process, he has learned about each phase and worked on many different types of deals. If he could give one piece of advice to someone wanting to start a career in finance in the real estate industry, it would be:
“Try to work for a firm with which you will see a lot of deals, preferably across the different asset classes. Real estate is notorious for being cyclical, so knowledge in a variety of projects is great to have in your back pocket.”
KDG is experiencing tremendous growth and Michael is looking forward to the future. He is excited to continue growing KDG’s development volume, which will lead to the need for a variety of different financial transactions. As KDG continues to develop high-quality, successful projects, Michael and his team will be exploring new financing structures and a growing number of capital sources, opening up new and welcomed opportunities.