In this episode, Greg talks with Vin Veroneau, President and CEO of JB Brown & Sons, a company with an incredible local legacy. Vin discusses both the history of the company's developments as well as recent projects. Listen to hear whether Vin thinks Portland will survive a national economic downturn in the near future.
In this episode, Greg talks with Vin Veroneau, President and CEO of JB Brown & Sons, a company with an incredible local legacy. Vin discusses both the history of the company's developments as well as recent projects. Listen to hear whether Vin thinks Portland will survive a national economic downturn in the near future.
Greg Boulos: Our special guest today on The Boulos Beat is Vin Veroneau. Vin grew up in Portland, attended Cheverus High School, then went onto the University of San Francisco to earn a BS degree. From there he earned an MBA degree from the University of Southern Maine. Later in life while running JB Brown & Sons, Vin obtained his JD degree from the University of Maine School of Law.
Currently, Vin serves as director of both Bangor Savings Bank and DBH Management, Inc and as a Trustee at the Waynflete school in Portland. On a personal note, Vin is one of 10 siblings and has been married to his wife, Nancy, for 32 years. Even as a father to eight—count them eight—children who go by the names of Andrew, Margaret, Joe, Catherine, Martha, Anne, John, and Mike. He also has a grandson whose name is Niall. All the kids attended Waynflete, which is a private pre-K school up on the West end. In addition, seven of them went to Boston College. His son, Mike, who is 17 and in high school, may go there, but has not yet decided. The kids are all known to be great athletes.
On the professional side. Vin joined JB Brown as President and CEO in January, 2005 and is involved in all phases of commercial real estate development and asset management. Prior to joining the company, Vin was a partner at North Atlantic Commercial Brokers in Portland and a commercial leasing manager with Northland Development Corporation.
Vin’s been in the commercial real estate business since 1987. Welcome, Vin.
Vin Veroneau: Wow. I feel old.
Greg Boulos: Vin, I understand you're 56 years old. Speaking of old, that's not, but you look like you're 40 and I just want, how is that possible after raising eight kids?
Vin Veroneau: Well, Nancy did most of the raising so I have to give her a huge amount of credit for both the success of our family and the success that I’ve had with JB Brown.
Greg Boulos: Um, you know, it's almost Christmas. We're, we're taping this in December, and I just watched Home Alone, which I tend to do every year. And as you may recall, in the beginning of that movie, there's a scene where the parents end up leaving one of the kids home while the rest of the family flies off to Paris. Has something like that ever happen to you and Nancy with eight kids?
Vin Veroneau: It happens. We actually joke with one of our daughters, Anne, that she's the forgotten one, and we have, my phone rang one time, I think she was in seventh grade, it was a Waynflete lacrosse game, was her game. We're driving down Congress Street and the phone rings and I said, ah, I'll answer it. I don't recognize the number. And it was Anne. She said, “Where are you? She goes, you forgot me. It was my game.” So yeah, it's been more than one occasion that was sort of left someone behind.
Greg Boulos: Now did she call DHS on you?
Vin Veroneau: No. No. They're very smart kids.
Greg Boulos: Um, you are president and CEO of JB Brown & Sons. John Bundy Brown founded the company in 1828 as a sugar manufacturer, food retailer, and hotel owner. With substantial land holdings and properties in all sectors of Portland real estate market, JB Brown eventually developed much of Congress Street, the waterfront, and the West End. Vin, can you give us a history of JB Brown and some of the properties the company has developed over the years before you got involved?
Vin Veroneau: Yeah. I think the most iconic building in Portland that the company built is the JB Brown block, which is across from what some of us still remember as Portus and now as the Maine College of Art. And that was built in, I believe 1881. Uh, but JB Brown had a fairly heavy hand in developing a fair amount of Congress Street from Monument Square up to Congress Square, including the land Lancaster block.
Greg Boulos: And he made his money, as I said earlier in the molasses business?
Vin Veroneau: Yeah, he shipped molasses from the Caribbean to Portland and made brown sugar. And so he had a quite a large facility employed up to a thousand people in the 1800s. It was a 10-story building where currently the company owns the Courtyard by Marriott.
Greg Boulos: He must've been the man back then.
Vin Veroneau: I think it's been written that he paid 30% of the real estate taxes in the city of Portland.
Greg Boulos: Actually, I did a little research and my understanding is that one time JB Brown owned 30% of the taxable property in Portland from Congress Street to Monument Square, then to the waterfront and the West End. That's a lot.
Vin Veroneau: It's a lot. There's, there are very few title searches that are done on the peninsula that JB Brown does not show up at some point.
Greg Boulos: And so that whole west end of Portland, west end of the peninsula where all the brick homes are, the beautiful homes, wasn't that all part of his estate at one time?
Vin Veroneau: It was a, the Bramhall Mansion that he built was where the West End cemetery is located. Bowdoin Street, Carol Street was all one property.
Greg Boulos: Amazing. What was the first building you purchased or developed for JB Brown?
Vin Veroneau: I think the first project that I developed was the Key Bank and Starbucks in Falmouth actually. Took a group of sort of what I would consider non-strategic assets that the company owned, sold them, and tax-deferred them into this new development.
Greg Boulos: 1031 exchange?
Vin Veroneau: Yes. 1031 exchange.
Greg Boulos: And so did you have those tenants lined up before you built that or did you build it on spec?
Vin Veroneau: No, we purchased the land from Key Bank, so Key Bank, we knew was a tenant and I previously represented Starbucks Coffee when I was with North Atlantic Commercial Brokers and so we knew Starbucks was always interested in that site.
Greg Boulos: Did you put Starbucks on the corner of Exchange and Middle Street?
Vin Veroneau: Yeah, it was the first Starbucks in Maine.
Greg Boulos: Um, I, I don't know if you remember this, but as soon as they opened somebody broke their windows because they were a national franchise and they didn't want to see that in the Old Port. That's going back a while. When you consider purchasing or developing a piece of property, what do you look for that tells you, yeah, this is going to be a good investment?
Vin Veroneau: Well, I think the adage of you make money when you buy is a truism that you can't avoid. And so we look at something that a) we think makes it a reasonable return day one, but also has upside and can weather a downturn in the marketplace. A lot of that comes down to location.
Greg Boulos: Since you've been president and CEO of JB Brown & Sons, you've acquired and developed a number of properties. To name a few, JB Brown repurchased land on West Commercial Street, previously sold by JB Brown in 1879. And it was sold to the railroad. Then you bought it back from the railroad. What was the story behind that?
Vin Veroneau: So we own on West Commercial Street, the graybar building and what is also known as a Star Match building, the multicolored buildings. When I first started the railroad owned the land around the Star Match building, but the company had been using it for parking without really much permission, or any permission to tell you the truth and it paved the property. So I had reached out and built some rapport with Roland Terrio, who was the real estate person at the time and ended up buying that land to protect our asset. And through that, we built some rapport and I kept asking them if they would sell the balance of the site, which is 10 and a half acres, which they did in 2011 and so again, I knew the company had owned it, but I didn't know it took us 131 years to require title.
Greg Boulos: And how long did it take you to work with the railroad to acquire it again, I mean, usually, they're pretty slow in letting things go.
Vin Veroneau: Yeah. So I quickly started a relationship with the railroad in 2005 when I started at JB Brown and we purchased the land behind the Star Match building in 2007, I believe, or 2008, and then the additional 10 and a half acres in 2011. So a long period of time for some people, but a short period of time in the life of JB Brown & Sons.
Greg Boulos: You also developed the 132-room Courtyard by Marriott on Commercial Street. And can you tell us a little bit about that development?
Vin Veroneau: Yes. So again that is a property where JB Brown had the sugar house. American Can was there for a long time, but those buildings were taken down in 1987 and so it was a gravel parking lot from 1987 until we built the Courtyard in 2014. It's the oldest piece of land the company has continuously owned, we’ve owned it since 1845. And so a buddy of mine that I run with every day, Marc Dugas, who is probably one of the best real estate developers in the hotel space. We continued to talk about where we might put a limited-surface hotel in Portland and that site kept coming to the surface.
Greg Boulos: And I think the way you structured that deal, you know, if you look at the building today, there are condominiums on the top floor. And the first floor is home to Tiqa. But I'm assuming to help finance the package, you sold off the condos on the top floor and as well as the retail and kept the core-- what's the strategy behind all that?
Vin Veroneau: The strategy was originally we were going to do a 185-room hotel. And it only took half the block, and it just, from an urban planning standpoint, it just didn't feel right to me to sort of split the block, especially with the Baxter Building beside it. And so we looked at: could we fill the box, you know, that would fill the entire length of the block from Maple Street to the Foundry lane? And so we increased the size of the hotel to 132 rooms, we ended up with 7,000 square feet of retail, and then we had the height to do another floor and we didn't want another floor room. So we added a floor of residential. Originally I was going to keep them as apartments, but because we weren't renting any apartments at that point in time, 14 units seem like sort of a small amount to get back into another line of business, so we ended up selling them. So necessarily it wasn't done to capitalize the transaction. It was a result of more of a planning exercise.
Greg Boulos: So there's a development that you recently completed at the corner of York and High Street in Portland and El Rayo, which is a well-known Mexican restaurant was located there. What’s the story behind that development that you did on that site?
Vin Veroneau: Yeah, so that's an interesting site. JB Brown owned a fair amount of property in that Danforth Street area, between Danforth and York Street, but did not own the corner of High and York Street. And so when the Harborview gas station closed, I reached out to Alliance Energy to buy that. And so we were in the process of buying it and Nathan Zanten, who is a great workforce housing developer in Portland, came into the picture in the 11th hour, and it was an important parcel for JB Brown because it was sort of the gateway to land we owned behind it. And so we had enough land in that area that we sold to Nathan and to Bobby Monks where they ultimately built, I think it's 53 Danforth Street, a workforce housing project. And so we were able to cobble that building together. The Mezoian had a building where Portland Builders was located and anyone with any history in Portland, Table Talk Pies was in the front little building. So we purchased that, two small houses and, you know, cobbled together a fairly large piece of property on the peninsula and then developed a building with 63 residential units, about 15,000 square feet of retail space or office space, and then two floors of parking for about 211 spaces. Within that parking structure, we also put in the infrastructure on the footings to add another 70 units above that from the Danforth Street sites. So it really afforded us a fair amount of growth
Greg Boulos: And any plans to develop those 70 units today?
Vin Veroneau: Yeah. So we're under construction of a 51-unit residential building that we will hold for rental units and get into that line of business again. That should be done in November of 2020. Assuming that leases as we fully expect it will, we will be in the approval process for that 70 units on Danforth Street
Greg Boulos: And on this site corner of a York and High, how long did it take you to assemble all those parcels?
Vin Veroneau: We bought two residential houses, I think, again, in about 2007 was our first purchase. And 2010, I believe was our last purchase.
Greg Boulos: Great time to buy, that was when the market crashed.
Vin Veroneau: Yeah, it was.
Greg Boulos: Vin, JB Brown rarely sells a property. But occasionally you do. What typically would motivate you to sell?
Vin Veroneau: If we don't think the property has strategic value or if we think the market is overpricing the asset and I have the ability to find a 1031 exchange.
Greg Boulos: So somebody will have to pay a premium…
Vin Veroneau: A premium, and we can, we can defer our taxes. But otherwise, in this marketplace, it's really difficult to sell despite, you know, some aggressive pricing without a replacement because the tax obligations for us can be substantial in some instances.
Greg Boulos: Because after you pay the tax, you take that money, you reinvest it, you can't get the kind of return that you get by just holding the assets. You know, there are so many properties in the JB Brown portfolio. Let's see how well you know them. I'm going to throw out some property names or addresses and ask you to give us a brief overview and background of each. We have not rehearsed this, right?
Vin Veroneau: We have not rehearsed, this is like a game show.
Greg Boulos: This is a game show. Let’s see. 40 Free Street, Portland,
Vin Veroneau: 40 Free Street. That is what is under construction currently. It's a 70,000-square-foot building. It's in an open space of land between 48 Free Street and 26 Free Street, six-story building, 51 apartments, 7,500 square feet of retail space, and 27 underground parking spaces.
Greg Boulos: And if I drive by there, now, there's a big hole in the ground.
Vin Veroneau: There is a large hole in the ground, there was a fair amount of ledge that needed to be taken out to accommodate the parking.
Greg Boulos: A little bit of blasting.
Vin Veroneau: Uh, yeah. You can't blast in Portland efficiently, but a lot of hole-ramming.
Greg Boulos: And when's that going to be done?
Vin Veroneau: We should be done in November.
Greg Boulos: That's quick. Another property: 102 Hutchins Drive in Portland.
Vin Veroneau: Yeah, that's an interesting one. We sold a couple of warehouses on Quarry Road to New England Public Warehousing, who I sold an operating company to. We used to own an operating company called Fore River Warehouse and Distribution that leased a bunch of our warehouses. We sold the operating company, did a lease back to Drew Gilman and New England Public. Ultimately sold them those two assets and purchased 102 Hutchins Drive. It's a little risky. It was a vacant building, but the pricing was great.
Greg Boulos: Now, the history on that building is, I recall, tell me if I'm wrong, but Porteous, Mitchell, and Braun, a department store, which used to be in the Maine Mall and was a Portland staple at the time, built that warehouse.
Vin Veroneau: They built it in 1995
Greg Boulos: And it was sold to Unum.
Vin Veroneau: And we purchased it from Unum. Right. And we're selling it to Maine Health.
Greg Boulos: Right. 901 Washington Avenue, Portland.
Vin Veroneau: The Rainbow Mall. I got my first ski jacket there at the Rainbow Mall, 1978. Yeah, it's a great project. When I started, Andover College was in a portion of it. Subsequently, now is Spurwink. And we built building 895 in front. We built it from Martin's Point, 18,000-square-foot building, and it really was the last piece to make that look more like a business park, at least from the street, than a converted shopping mall with a big field of pavement.
Greg Boulos: Because be before you got involved, it was the Rainbow Mall, which was it an outlet center?
Vin Veroneau: Yeah, it had a number of, of things. I mean, I grew up in Portland, so I remember there was a ski shop there. There was Martin’s Grocery Store was there. The Department of Motor Vehicles was in there. It was an internal model actually. But when I came on board, it had been converted to office space.
Greg Boulos: Well, it's certainly at its highest and best use now, I would say.
Vin Veroneau: It's a great project.
Greg Boulos: 15 Saunders Way in Westbrook.
Vin Veroneau: Yeah, another good one. We purchased that in 2008, I believe. We got it off the rebound from Walmart was buying that property, I think, for $7.5 million. They got a zone change. The neighbors went crazy. There was a big lawsuit. It fell apart. We ended up buying it for three and a half million dollars, and it has been a great asset. We took a lot of the buildings, the old sort of miscellaneous buildings down, have built a few new ones on site and it's a great,
Greg Boulos: it's industrial.
Vin Veroneau: Industrial and office, yeah.
Greg Boulos: So from seven and a half to three and a half million. Kind of like a blue light special.
Vin Veroneau: Yeah. You make money when you're buying, Greg.
Greg Boulos: Yeah, you do, hopefully. 30 Danforth Street in Portland.
Vin Veroneau: Yeah. That's a building that the company actually built in 1888 and has owned it continuously since then. When I started it had one large tenant. Well, it had a few small tenants, but one tenant that occupied a good portion of the building. They left in 2009 or 10, and we basically split the building up. And so instead of having four or five tenants in the building, I think we have 18 tenants right now, diversified our risk, higher rent. It’s a great building. It's largely a fully occupied.
Greg Boulos: Is that the one across from Yosaku and it's bordered by two streets? By York and Danforth?
Vin Veroneau: Yeah. It looks like a flat iron building if you're looking at it coming from the Old Port. We own the back 77,000 square feet.
Greg Boulos: You know, in high school I worked for Cunningham Construction, which was my uncle's company. I poured the floor in there, at least on part of that building. So if it's a little uneven, you'll know why. 80 Exchange Street in Bangor.
Vin Veroneau: 80 Exchange Street, another project that I think is going to turn out well for the company. It's about 85,000 square foot office building in downtown Bangor. Bangor is starting to see what Portland has seen for the last 10 years in a fair amount of investment by the municipality and small businesses into the downtown. And so this building came available when Dead River wanted out of the market, and we bought it at a reasonable price.
Greg Boulos: Again, the key is we make you money when you’re buying. And the last one, land on West Commercial Street, which we talked about that you bought from the railroad, which they bought from you years ago. You have a future development plan for that. Can you talk about that?
Vin Veroneau: Yeah. Yeah. We teamed up with FD Stonewater, a group out of Virginia, that has done a fair amount of government leases and developments across the country. And so the VA clinic, when they put out an RFP, we teamed up with FD Stonewater to give our proposal and we ended up winning it. And we’re in the approval process right now, we hope to be on the construction in April or May with occupancy in July of 2021.
Greg Boulos: And that's next to the Star Match building. How many square feet will it be?
Vin Veroneau: A two-story, 70,000-square-foot building and a parking garage of about 380.
Greg Boulos: Nice development.
Vin Veroneau: Yeah, that's a great one.
Greg Boulos: Vin, getting off of properties for a second. We've been in an economic expansion for the past 10 years or so. Some of our younger listeners have never seen a down cycle. I think you and I have been in the business long enough where we've seen three major downturns. Can you give our listeners an example of how bad it can get, can you think of anything?
Vin Veroneau: Yeah. You know. The banks and the lenders are the ones that really control how bad it can be. I mean, you recall Recall in the mid/early nineties,
Greg Boulos: Which took over Maine Savings Bank.
Vin Veroneau Which took over Maine Savings Bank. You know, people were calling in loans that were actually performing, but they didn't feel that they could continue to perform from a cash-flow standpoint, but the asset values a given sales you know, distress sales, made it look like they were undercapitalized. So a lot of these loans that would have been fine over time were called. And I think it just exacerbated the problems for everyone. So the lesson is really what is your capital stack look like? And over leverage really can amplify earnings in the good times, but it can really crush you very quickly in a downturn.
Greg Boulos: So the key is don't be over-leveraged. And I know with the banks, what they did in that time period is, as you said if there was a technical fault, the appraisal came in and it showed that your building wasn't worth with the appraisal was, even though it was cash flowing, that's called a technical default, and then they could call the loan, but it just exacerbated…it was a terrible, terrible time. Given the boom and bust cycles we've seen in the real estate market over the years, I'm sure you're often asked the question: Is it different this time? So, as president of the oldest real estate company in the state of Maine, and no doubt you know the answer to this question, is it different this time? Is this economic boom we’re seeing in the Portland market different than others which have come before?
Vin Veroneau: It feels different, you know, time will tell. Right? But there is a group of users, both from a residential side and from a business side, people are more mobile, people come work remotely. And Portland has a great quality of life. The restaurants are great, the coffee, the bakeries, the breweries, and it's really been all cobbled together. And I think the word is out. And I don’t see it slowing down anytime soon. I mean, it's not going to be gangbusters. Everything has a cycle, but I think the underpinnings of the market are actually pretty strong.
Greg Boulos: So do you think when we have a downturn nationally, Portland should fair okay?
Vin Veroneau: Yeah, I think so.
Greg Boulos: How about on the hotel end? I mean, we see a lot of hotels going up. You own hotels. Is there a bubble in that market?
Vin Veroneau: Yeah, bubble might be too strong of a word. I mean, I think that everyone will feel the pressure when you add another 300 rooms. Same thing was said when Jim Brady, us, and Tim solely built--someone's gonna get hurt. And it has been phenomenal. And so, yeah, we might have a little bit of a pullback, but you're not having a 10% pullback in this market. I mean there's unmet demand.
Greg Boulos: Even at this point. And I think as we speak, there are three or four new hotels that are planned. Looking at Portland, what do you see as Portland's greatest strengths, but also some hindrances to further growth?
Vin Veroneau: Well, location is great, right. I mean, the physical beauty of the area is fantastic. The accessibility is good. So all of that stuff is good. It is expensive to live here. I mean, you have an infrastructure that is expensive to maintain—it's old. So both the state and municipalities are going to have to tax in order to fix things. So that it's a little bit of a headwind. Construction costs right now are certainly a headwind in future growth. The one savior is interest rates, which are just incredibly low. I mean, historically, and have been for a while now.
Greg Boulos: Speaking of interest rates, I remember I saw you in Bard coffee one day. This was a year or two ago, and I,
Vin Veroneau: That could have been any day.
Greg Boulos: Yeah. Could be any day. But at that particular time I asked you I said, you know, what's it going to take for construction to slow down or not happen in Portland at least for, say, JB Brown. And at the time you said, you know, if interest rates get to 5% or above, then that's kind of a point where the faucet gets turned off. Do you still feel that's the case and what are the rates you're seeing now?
Vin Veroneau: Yes. I'll give you an example of 40 Free Street. We started looking at the pro forma in that in February of last year. So February of 2019, we were running a pro forma rates at the point where 4.1%. We had a budget, pick a number, 15 million. Started to get pricing back from the contractors, ends up being a million more, say 16 million. We would not have moved forward at 4.1%, believe it or not, with an extra million in costs.
But in that intervening time until August when we close a loan, rates went down. We locked in at 3.1%. So that 100 basis points really mitigated $1 million of excess costs. And so we moved forward and I think at 5% it would be really tough to make the numbers work on new construction.
Greg Boulos: Unless you had a big drop in construction costs.
Vin Veroneau: Yeah.
Greg Boulos: Vin, looking into your crystal ball, which I know you have, for the next 10 years, what do you see happening to commercial real estate here in Maine? In Portland in particular?
Vin Veroneau: Yeah, I still think, I think you're going to see a fair amount of residential development continue. I think you will see some build-to-suit for on the office side, like we've seen with WEX and with Covetrus and with SunLife.
It’s really tough to make numbers work on an office space right now with the added cost of parking. So you might get a tenant that will pay you $30 or $35 a foot, which is what really what you have to get on a net basis to make the numbers work. But I just don't know how many companies can actually afford long-term to pay that.
And so if you lose that lead tenant in, you know, 5 or 10 years, it's going to be tough to replace those, those numbers, which is another reason why your capital stack has got to be not overleveraged.
Greg Boulos: You touched on parking. There’s not a day that goes by when somebody doesn't talk to me about parking in downtown Portland, how difficult it is. And I mean, how much of a hindrance is that to further growth?
Vin Veroneau: You know, for the smaller tenant it's a problem. And we've lost a couple of tenants to the suburbs that normally, in creative economy type, advertising firm types, that would prefer to be on the peninsula, but then say: at the end of the day we’ll go to, you know, the Sparhawk Mill in Yarmouth, or we'll go out to the Dana Warp Mill and pay a little bit less per square foot and don't have to deal with the parking. So it's, it's a problem.
Greg Boulos: And we find parking adds in anywhere from $5 to $7 per square foot onto the occupancy costs of a tenant. So it's not a small price and it's going up. As a former commercial broker and someone who deals with brokers all the time, what advice would you give brokers just getting into the business? Don't do it?
Vin Veroneau: No, I think it’s a great business.
Greg Boulos: I do too, I've been doing a long time.
Vin Veroneau: I would say think of the long-term. You know, don't make decisions short-term. If you have to yield on a fee or you're in a conflict with someone over something, you know, use the LL Bean approach, which is that the customer is always right and it will pay dividends long-term. It might feel not great at the time, but I think long-term you will have a very successful career.
Greg Boulos: Well, that's it for today's episode of The Boulos Beat. A special thanks to Vin Veroneau for being my guest. You can learn more about Vin and JB Brown & Sons at their website, which is www.jbbrown.com and if you'd like to learn more about The Boulos Company, please be sure to visit us www.boulos.com. You can find us at The Boulos Company on Facebook and LinkedIn and @theboulosco on Instagram and Twitter.
And lastly, if you want to know the secret to owning real estate, it's pretty simple. Just make sure you outlive your debt.