Andrew Chung’s first real estate lesson came early in life.
As a child, his landlord raised the rent at his family’s apartment in Bay Ridge, Brooklyn. Unable to afford the hike, the Chungs relocated to more affordable quarters in Bayside, Queens.
“I realized it was better to be on the landlord side than the tenant side,” Chung said.
The founder and CEO of the Innovo Property Group still prefers renting to owning when it comes to his own housing, but he took this lesson to heart in a different way. Three years ago, he left the security of a job in private equity, leading the Carlyle Group’s New York real estate fund, to buy and build on his own.
Chung picked the name Innovo, the Latin root of innovate, because he wanted to pursue fresh ideas that would usher in the winds of change, or at least harness them. His first ground-up development, 2505 Bruckner, a multistory e-commerce
distribution center on 20 acres in the East Bronx, seems to fit the bill.
“I want us to be at the forefront of investing in and developing products that change the way people live and work because that’s where the opportunity is,” Chung told Real Estate Weekly in an interview last month. “Industrial is a byproduct of that, of how people live, how people order goods, how people pick up groceries, all of that.”
Chung is so bullish on New York’s industrial market and last-mile delivery that he has two other projects in the works in Long Island City, one at 24-02 49th Avenue and the other, reportedly, at 28-90 Review Avenue.
“Technology is improving the way goods are stored in warehouses, can be tracked, picked and then placed into trucks and that is creating more efficient use of space, which basically allows the higher cost of real estate to be justified,” he said. “It’s a simple thing and it has mega consequences.”
Innovo, which is partnering with Square Mile Capital Management on the 840,000 s/f complex in the Bronx, is racing two other multistory warehouse projects for the title of city’s first.
Dov Hertz and Goldman Sachs are financing a 370,000 s/f complex in Red Hook while Triangle Equities is working on 300,000 s/f structure near JFK Airport.
Aside from the size of the project, which is large enough to accommodate spiral entrance ramps for 53-foot-long tractor trailers, Chung believes 2505 Bruckner has several strategic advantages over its competition, including location and access to infrastructure, details that might be overlooked by someone less familiar with city’s nooks and crannies.
“Many in real estate in New York know Nashville better than they know the Bronx,” he said. “A lot of them have probably been to Nashville more than they’ve been to the Bronx.”
Though he didn’t know it at the time, Chung’s New York upbringing — both his outer-borough childhood and his years spent churning through Manhattan apartments — groomed him for a life in real estate.
Before he began scouting development sites, before he invested $1.2 billion dollars of equity for Carlyle, he was learning the rhythms of the city. He didn’t know about the importance of location, building type or thoroughfare access, but he saw what worked and what didn’t. Like a dry sponge in a pool of water, he absorbed his surroundings.
“I remember seeing certain retail buildings do really well in Bayside and some do terrible. I didn’t know why, but I just asked the question,” Chung recalled. “Then I would see it renovated and all the tenants would show up. That kind of recognition early on, although I didn’t put two and two together … really helped me understand real estate as a young person.”
Chung’s first formal steps toward real estate came in the mid-90s when he landed a consulting job with CIBC Oppenheimer, later known as CIBC World Markets. With commercial mortgage-backed securities coming into vogue, the Wharton grad focused on debt and construction lending, but he also learned the basics of development.
From there, he landed a job with Carlyle’s U.S. Real Estate Fund and helped launch the group’s New York office, where he served as a partner for a decade.
“We were very active on the asset management side, we were very active on the development side,” Chung said. “So, working at Carlyle and running the New York office was essentially learning how to be a New York City developer with Carlyle’s money.”
Thanks to a string of corporate apartments and a penchant for relocation, Chung’s Carlyle years also saw him live in nine different neighborhoods throughout Manhattan — one apiece in Chelsea, SoHo, Union Square, Midtown East, Midtown West and the Upper East Side as well as three on the Upper West Side.
Taxing as it was, Chung said all the moving helped further his grasp on the intricacies of the city.
“I moved every year and it was a pain in the ass. I don’t know why I did it but, looking back, I loved it because the only way to really understand a neighborhood is to live in it,” he said.
“Where’s the restaurant? Where’s the bar? Where’s the good Chinese restaurant? Where’s the good pizza place? All of that actually helped a lot when I was running the New York Real Estate Group at Carlyle because I’d actually lived in all these neighborhoods.”
During his nearly 15-year tenure at Carlyle, Chung said he learned the importance of an ever-more abundant yet ever-more complicated resource: data.
Though he tries to avoid “paralysis by analysis,” Chung said he favors projects that are backed by demographic shifts, which is why Innovo’s seven-man team has focused so much attention on the growing field of e-commerce.
Chung sees similar opportunities for e-commerce development in Los Angeles as well as residential plays in Boston, but seeking innovative opportunities in his hometown remains his primary focus.
“Getting to do this in the city I grew up in, the city I love is an amazing experience,” he said. “I don’t think in my wildest dreams I ever thought I’d be a New York City developer of major products that will impact the way people live.”