Ep #529 – From NYC Project Manager to Successful Real Estate Entrepreneur

Donato Settanni worked for Macklowe Properties as a project manager in NYC before starting his own real estate company. That initial training ground provided valuable lessons that have served him well. Here’s some of what we talked about:

Characteristics of a Real Estate Titan
The value of being a visionary
Having a vision to see what the project can be
Effective partnership models
Surprises when starting your own business
Delayed gratification while building your empire
Sacrifices for success
Support from the S.O.
To find out more about our guest:

Full Transcript Below

Rod: Welcome to another edition of “How To Build Lifetime Cashflow Through Real Estate Investing.” I’m Rod Khleif and I’m thrilled you’re here. I know you’re going to get tremendous value from the gentleman we’re interviewing today. His name is Donato Settanni and he has forgotten more about real estate and project management than most of us will likely ever see but I will not steal his thunder, so we’ll let him tell you about it. Welcome to the show buddy.

Donato: Thanks Rod, thanks for having me today.

Rod: Absolutely. So why don’t you talk a little bit about your background? I mean, you’ve got this resume is very impressive and very long and that’s why I didn’t try to attack it. So talk a little bit about your background in this exciting business.

Donato: Sure, sure. Way back when I went to school for engineering, civil engineering, I came out of school realized that I didn’t actually want to practice engineering. So I went to work in the construction industry in New York City. By a matter of just luck in raising my hand I got put on Yankee Stadium project when they’re building the new Yankee Stadium. For any New Yorker, if you like the team or not it was just, you know, once in a lifetime opportunity so I shipped myself up to the Bronx which was a lot of fun. I think, after that, I really realized in interacting with ownership that I wanted to go the ownership route and went back to school to get a degree, a master’s degree in development, and switched over to the owner’s side. And then from there, did some pretty cool projects. I got an opportunity to work on a 1,400 foot skyscraper in the middle of Manhattan which was just a lot of fun and a huge learning experience but I think every step of the way, it was just about knowing when to take the risk and take a risk to make a jump. And then finally, coming into my own business and again it was just another risk and another jump.

Rod: Well, I mean, okay. Well, you glossed over a lot in that. You know, I mean, you’ve done some huge redevelopments. You know, you worked on the Hudson Yards, you worked on Madison Square Garden, you know, just project management on the property on Park Avenue, and so has your role primarily been project manager in the development or the redevelopment or talk a little bit about where you’ve spent the most time and your knowledge.

Donato: Yeah, while I was working and called the corporate institutional real estate world, that’s really what I was. I was a development project manager is what they would call it. And I really grew into that role when I was working for a company, Macklowe Properties. If you’re really into real estate, I’m sure you’ve heard the name. And he, I went there to go help build his called Crown Jewel Project. It’s a 1,400 foot tower. I got the hard hat right behind me still.

Rod: Oh, I see it there. Yeah, right. Wow.

Donato: And it had a whole ton of challenges and a whole ton of opportunities, right? We’re building the tallest that’s ever been built in New York City during that time. And we’re also doing it with high-strength concrete which also hadn’t been done. So there was just a huge learning curve for every single person working on that project. And it was one of those situations where everyone around you was pushing you and you were pushing everyone around you otherwise everyone knew this thing was never going to come together. But I think sometimes, you know, that’s the best way, right? No one knows exactly the path forward, and you got to dive in, and just do your best, and you watch everyone else do their best, and you get amazing.

Rod: Well, that’s a recipe for success whenever you’ve got that dynamic. And so, how is that background helped you in, you know, now you’ve got your DXE properties, you’ve acquired 500 doors, what markets are you in? But actually, before you do that, how has that background helped you with DXE properties? And the, you know, I’m assuming you’re syndicating and asset managing and so on and so forth. Can you speak to that?

Donato: Sure. I think one of the biggest values that and it has nothing really to do apples to apples with what I do today but just working for some of these players in New York City, specifically Harry Macklowe. And just seeing that when he had a vision, he was willing to put it all on the line and go for it. And he wasn’t going to let, literally, anyone stop him. No one was gonna get in his way. No one was gonna tell him that his plan didn’t work. So just seeing that and living through it for a whole bunch of years of my career and being the person sometimes to say, “Hey, Mr. Macklowe. Like, I don’t think we could do that.” And he just looked at you and be like, “I didn’t ask if you thought we could do it. Go get it done.” And then you have to change your mind right on that spot because you want to keep your job, right? So then you have to go get it done and you need to figure out a new way to, you know, to do it all together. I think, just bringing that knowledge and that attitude into your own business has helped us tremendously more than, you know, any one skill set I’d say.

Rod: Yeah, no. That’s a mindset right there and that’s a– what an incredible model or personality type to model in this business. It’s, you know, get it done. I love it and, you know, what an incredible opportunity that was for you to be around someone like that, that doesn’t focus on the how. He just make it happen. Loved it. So I know it’s you and your partner Josh, what markets are you in and talk a little bit about, you know, how you’ve got your own thing going? Maybe a couple of, you know, I know you’ve done some projects recently maybe dig into those a little bit as well.

Donato: Sure. So we mostly, we’re from New York, but we mostly invest in the Southeast US. So, we’re in North Carolina, South Carolina, and Georgia predominantly. It’s a far cry from what I used to do. We definitely want to be back in New York and be developing in New York but we just don’t think right now is the time and we think the time is down there. So that’s really why we’re down there.

Rod: Are you developing or did you buy value add?

Donato: No. We’re buying that value add down there.

Rod: Okay.

Donato: I’d say if we were doing something in the New York market, we would be developing just because my hands-on experience. But down there, we’re not willing to take the risk in a market where we don’t really, you know, understand the players in the zoning that well so we do value-add in those markets.

Rod: Okay, okay. And so, you know, talk about maybe the first deal you guys did. Where it was? How you found it? You know, how it’s worked out? Just maybe take us through, you know, a little bit of that first or sec– whatever deal. It doesn’t have to be the first one but one of your deals, and how it came together, and what the reposition is, and so on and so forth.

Dontao: Sure, great. I’ll talk about a deal that we actually did last year.

Rod: Okay.

Donato: So we’re putting the deal together in February of last year. It was going just great. Total repositioning value add project in Augusta, Georgia about 100 units. We–

Rod: Well, we’ve got one there too. That’s really funny.

Donato: We’ll have to compare our notes.

Rod: Actually on the South Carolina side but in Augusta.

Donato: Okay, North Augusta. Yeah.

Rod: Yeah, that’s right. North Augusta. Yeah.

Donato: So, you know, everything was going just, just great. We’re super excited about it getting great debt quotes we’re really coming together with the plan for how we’re going to go about this project. And then, as we all know, Coronavirus hits, right? So, at first we’re, you know, we’re thinking, “Hey, this isn’t going to be so bad but maybe we’ll just add some reserves.” And then, you know, day by day went by, week by week went by, and then we went into a lockdown up here in New York, and we had a whole slew of investors that said, “Hey, we’re with you with this.” But we also had a whole slew of investors that were a little bit nervous.

Rod: Sure.

Donato: Not knowing what was coming up. So there was a huge, huge challenges just– it was a fluid environment, right? And we had a faith in our project and we had a double down on the faith in our project because right now, you know, the whole country looked like it was going into lockdown, and people were going to put money into this project, and no one knew what really was going to happen. So we really had to take a step back and say, “Hey, are we going to be– are we going to pull out of this project try and get our deposit back or are we going to push forward? And we made the collective decision that we’re going to push forward. We really believe in the business plan and although there will probably be short-term hiccups, long-term it’s where we want to be and we still think it’s a good deal.

Rod: Okay, okay. And so, you closed on it, everything. You’re in the midst of your reposition now or yeah?

Donato: Yeah. So we closed on it. We hit the ground running. We still went forward with renovation program. We’ve redone all the exteriors already. We’ve done about 30 of the 104 units, interior wise. And, you know, I’d say we’re definitely filling up the apartments. They’re, it’s going a little bit slower than we would have anticipated a year ago when we’re looking at the project.

Rod: Sure.

Donato: But all in all, I think everyone is happy that we, you know, pushed forward and went through with the project.

Rod: Nice, nice. The next question I want to ask you is, I kind of want to circle back just because, you know, being around someone like Macklowe is really such a treat. Can you kind of speak to– I mean, you know, I don’t obviously nothing negative. I just kind of want to– I think he’s a great example of the type of mindset a person needs to have to push through in real estate. Maybe you can speak to some of the qualities that you saw or maybe you could speak to the impact it had on you and how it’s affected your, you know, ability to move forward if you’re comfortable doing that?

Donato: Sure. I’d say, there’s three words that describe him.

Rod: Okay.

Donato: And I truly believe this whenever I used to talk to my dad about him after work. I used to say the same thing. Say ultimate, optimist, and then visionary.

Rod: Loved it.

Donato: And that’s the only way you could possibly get such a big project done in New York City. You got to be the ultimate optimist because everyone’s gonna tell you “No” and then you also have to be a visionary because if you’re just gonna try and build everything that’s already there, at the market in New York City especially during that time has already priced that in. So there’s no profit to be made, right? It’s a very efficient market. There’s so many players in the market. So you need to be a visionary in order to figure out, “Hey, what do people want next?” It’s kind of like, you know, Steve Jobs and Apple.

Rod: Right.

Donato: And that’s really what I learned. You know, one of the things– I just brought up Steve Jobs and Apple. He did do the cube. That is Harry Macklowe’s project on Fifth Avenue. What everyone knows is the Apple store, right? And that design, whenever you walk into an Apple store today, that was Steve Jobs and Harry Macklowe coming together and creating this Apple cube on Fifth Avenue. And it ended up making Harry an enormous amount of money but it all had to do with the vision of, “Hey, we’re gonna put retail where no one else thinks it could go.” Because it used to be, it was a plaza. Before it was the Apple cube. And by the way, we’re going to convince like the best computer maker and retailer to put that retail mostly underground. And we’re just gonna have a light on top with a glass box.

Rod: Very cool. So that was his vision and he brought it to Apple.

Donato: Yeah. So there– it’s a really cool story but Harry had this vision. He brought it to Apple. And supposedly, Harry unveiled this cube and Jony Ives was at the meeting, and Jony Ives literally had like the same idea as Harry of how to make this space activated.

Rod: Nice. Yeah, so how does that translate into what you’re doing now? Talk about how that’s– you know, if you can associate with any of the, you know, either the traits, the thought processes, the personality, the methodologies that translates into, you know, what you’re doing now with Josh.

Donato: Yeah. I think it’s more so than what we’re doing but what any value add type operator is doing. You have to have the vision to see what a project can be, right? And in some cases you’re making a market for that project. So you really have to have the vision and the fortitude to see it through. When we’re looking at a building and we’re buying it at, you know, a sub five cap.

Rod: Right.

Donato: You’re never gonna make any money just buying it that way. So you need to really be able to transform it into something else and you need to be able to think a little bit outside the box on what you can do to attract the tenants and see that business plan through. So I think it’s ,you know, it’s not what we do necessarily but what everyone does that is successful in this space.

Rod: Yeah. Yep, agreed. So, what’s next? Are you looking for more assets in those markets? I would assume the answer is yes?

Donato: Yeah. Being in those markets we’re very bullish on the markets. We’re always diving into demographic data. We’re keeping an eye on what employers are doing. And, you know, more so just seeing what’s going on in our hometown of New York. We’ve seen so many people pull out of New York City. We’ve seen people pull out of the suburbs. Everyone’s, you know, maybe wishfully a little bit but people are talking about from coming from up in the New York area down into the south. Just because of quality of lives, and jobs, and weather, right? So we’re, you know, we’re doubling down on this strategy and we think it’s going to be a very successful one, you know, down the line.

Rod: Agreed. Yeah, we are too. I totally agree. So let– talk about your team with Josh. What roles do you, have you guys, do you guys each play to your strengths? Talk a little bit about that because this business is a team sport and I I love it, you know, when I come across– Well, let me rephrase that. So, yeah. Let me, I’ll back into what I want to say after you describe your, you know, what you do in that relationship and what Josh does? Is it different things or do you guys both do the same things?

Donato: So we very much started off doing everything together and both doing everything. I think we wanted to just see where things fell out and we had the time to do it. So now, it’s been three years now and we have seen a falling out of, you know, each person’s responsibilities and we kind of gravitate that way naturally, right? I’m sorry. I’d say, he’s definitely acquisitions. He loved putting his acquisition hat on. He loves talking to brokers and he just loves being in front of them. Whereas, I love the project management and the design part of what we’re going to do to a new property. But I’d say, you know, even 10 minutes before I got on with you today, we were just looking at a new marketing for a new building that we just purchased in December. And I was like, “Josh, I gotta get on with Brock Leaf. I’m excited about it. You just make the decision and let’s go forward. So, sometimes we do flip-flop based on time but I think inherently we like, we just trust each other.

Rod: Yeah.

Donato: So–

Rod: That’s a critical component. Now, would you, do you do the analysis? Are you the more, the analysis? I mean, you’re an engineer so I have to assume that’s the case but I don’t want to assume anything.

Donato: I love playing with the model. Well, we love updating our model and figuring out new tricks to be able to model things quicker. But I would say both of us, we actually, when something comes across our desk, one of us takes it and we bring it through the initial. And then, everything that has legs, then the other person goes into it, and basically–

Rod: Fantastic.

Donato: Stresses the model to say, “Hey, where are we falling out on this? If both people go through that process, then we make an offer.

Rod: That’s a great strategy and that’s how successful teams do it. I’ve found that on, you know, many, many successful teams like you just described I mean, again, you bring the engineering background, the project management background, Josh may be more the, you know, maybe not outgoing as it were because you’re very outgoing as well. But really, what the– some of the most successful partnerships I see are someone that’s analytical with someone that’s, you know, out there building the relationships. And so, you know, but that’s awesome that you guys are, you know, the framework that you’re utilizing is very, very effective where you’ve got two sets of eyes on because this business is primarily empirical, obviously. It’s primarily numbers, so you know, other things being equal, so loved it. So let me ask you this. What are some– talk about and it doesn’t have to be with DXE. Talk about a failure or a real, you know, when you really got your nose bloodied on a deal, and what happened, what was the lesson and what did you take away if you can think of something. I’m sure there’s probably quite a few from the project management side. But, you know, what’s a doozy, you know, that you can share with us?

Donato: I would say, you know–

Rod: I know I didn’t prepare you for this.

Donato: I love when people look at this question and take a half failure and make it into success. So I’m not going to do that because I don’t–

Rod: Okay.

Donato: I’m going to think of something where maybe we really failed or–

Rod: Yeah.

Donato: So I’d say, maybe at 432 Park Avenue. We’re building this super tall tower and we’re getting ready to open up the building. And right before you’re getting ready to open up the building, your final signing off of your elevators. And during that time, all of a sudden, we came into the fall season and elevator cables, 1,400 foot length elevator cables, started snapping. And it wasn’t the– so just to be clear, it wasn’t the cable that actually holds the elevator up, it’s what’s called a “Traveler”. It’s all the electrical cabling that goes alongside it to power the elevator.

Rod: Wow.

Donato: What’s happening is we’re, you know, testing these elevators out and we’re running these things up the building at like 30 miles an hour because that’s how fast these things go. And all of a sudden, the emergency brakes would come up and would feel like because the gravity difference happened so fast, it feels like the elevator’s falling but it’s just you’re stopping going up so quick.

Rod: Wow.

Donato: So that was a huge challenge and the failure there was, just that, no one anticipated the sway of the building during the wind with the sway of the elevator cables and it’s something called resonance, right? So as the building is swaying, elevator cables are swaying. And they just so happened when the wind was right to hit the same resonance and these cables would start whipping around an elevator shaft, and they’re 1400 feet in length. So you can imagine, you know, the damage they could do, and the weight of these things going around and around and around. I think, you know, it was a long hard process to solve it, and there was a lot of internal disbelief and discussion about how we got to this place and how to get out of it. But eventually, you know, we had to take the steps and totally revamp these elevators.

Rod: How long did that delay the project?

Donato: So we, what happened was, we probably delayed opening the building three or four months because of it. And then we brought the elevators online much more slowly because of it so we’re closing on units much slower than anticipated.

Rod: Well, but that went over really well.

Donato: Yeah. But at the end of the day, when you’re building such a luxury product, you can’t, you know, you can’t go into it halfway, right?

Rod: No.

Donato: Because these clients are just going to get so upset so we needed to figure out the right solution. We finally did. And I know for a fact, the new skyscrapers going up in New York City literally all took the same technology that we had to come up with and use them in their buildings going forward.

Rod: Wow. That’s quite an example.

Donato: It’s a cool outcome but it was very, very painful.

Rod: It was no fun at the time. I can imagine.

Donato: No.

Rod: No. Wow. Well, that’s probably the most dramatic example I’ve ever had for that answer. So let me ask you this, you know, you obviously want to build your own portfolio. You’ve done it for other people. You know, you’re built, you’re well on the way. What are sacrifices you’ve had to make to make this happen? I know we had to stop the tape a minute ago because your baby was making some noise upstairs or in another room. And so, you know, talk about that a little bit.

Donato: Sure. So I think one of the things when you’re going into your own business and you’ve finally made the leap, you start getting phone calls all over the place from people that you never thought you’d talk to before about owning their own business. And you realize that a lot of people do have the dream, they just don’t know how to go about it.

Rod: Right.

Donato: And they always ask me, you know, how did you do it? Why’d you do it? And I think one of the things is, you have to be frugal where you can be.

Rod: Yeah.

Donato: You obviously–

Rod: With your time, you mean? Yeah.

Donato: Yep. Through and your money.

Rod: And your money. Yeah, okay.

Donato: Because you have to put the money into the business, right? So especially before going out into your own business if you have a corporate job, you need to really understand that, “Hey, the money’s good right now.” And I’m leaving all of that to go try and, you know, eventually make more money than you were making before obviously but–

Rod: Sure.

Donato: There’s going to be a period of time where you don’t. So, it was really a conversation with my wife and I, and a joint family decision called it of, “Hey, everyone around us is, you know, buying a brand new house or, you know, buying the apartment in New York city or, you know, buying a sports car.

Rod: Right.

Donato: We’re not going to do that. We’re not going to go to Europe. We’re going to go to my parents’ place in Florida or we’re going to go on a, you know, short ski weekend.

Rod: Right.

Donato: But we’re not going to go on these crazy vacations because we’re going to go build a business. And I really do look at my wife as a partner like that. And, you know, she agreed and she’s, believe me, she’s more frugal than I am.

Rod: Nice.

Donato: But, yeah. I think that’s the biggest sacrifice that we’ve seen.

Rod: Well, so you went to the money but what about the time with her and with your child? How do you manage that?

Donato: Yeah. I think that, in all honesty, the time aspect was a little bit easier for us than the money aspect because working in New York city, I was working ungodly hours at all times. Friday night, got to get something done. Sorry, we’re not going out to dinner. Saturday morning, gotta get something done. Sorry, we’re not going to soccer. Whereas now, you know, I’m still working a lot of hours but it’s on my time. So I could, you know, make sure I run up for dinner at six o’clock and then I’ll get back on the computer at eight o’clock, nine o’clock because I know it’s my own deadline that I need to fulfill. I think the biggest challenge would be the traveling though.

Rod: Yeah.

Donato: And that’s something that you just can’t make up. So there’s always a conversation around with the wife around, “Hey, what would be best for you if I could go this week, this week, or this week down South. I need to go, you know, at some point in the next three weeks. You choose and I’ll book my flight. And I think that works pretty well because it really, it gives the significant other the, you know, the flexibility and the choice rather than, “Hey, I’m going tomorrow.” I think it goes on right well.

Rod: I like that. That’s a real partnership. I like that. So, you know, one or two final questions. Was there an “Aha!” moment in your progression? I mean, you’re a young guy. I mean, I can see it. I’ve got socks that are probably have a decade or two on you, but so was there a defining moment in this? I mean, you’ve got this incredible background. The engineering and then you’ve done all these big projects but at what point did you have an “Aha”? And it’s like, you know what? And maybe the “Aha” and I don’t even want to put it in your mind what that aha was but does any answer come to mind for that question?

Donato: Yeah. I know exactly when it was. It was still crystal clear in my head. So in 2013, I took my wife and I’s wedding money and I went and built my own condo project up in Westchester, New York while I was working full time. It was very difficult to manage both a full-time job and this. But I did it in 2015. I sold out all the condos and I was just super proud and happy about it. And then when I had a kid, I got a promotion at work and kind of put the whole, be my own boss on the back burner.

Rod: I see.

Donato: But it kept nagging at me, and it kept nagging at me, and just eating away at every bit of my existence. Finally, I was– I told a friend, a buddy of mine, and I said, “Hey, let’s get lunch today. I need to bounce some things off.” You know, it feels like, “Hey, I’m just, I don’t know what it is. I’m so unhappy at work. What’s going on here?” And he’s like, “Here’s what we’re doing. And next week, we’re gonna go out with this guy Josh that we both knew. He just started his own business. You need to quit.” He’s like, “You need to quit. Screw this corporate stuff. You know you could do it. I know you could do it. Let’s talk to Josh. He just went on his own a year ago and let’s see if we can make something happen.” So I just got super excited and, you know, something went off in my head. Sure enough, I went out with Josh that night with my buddy James. And by the end of the night, Josh was just like, “Let’s just start the company together. My company is new. We’ll just rename it into whatever we want to come up to it together and we’ll go off on this journey together and we’ll do it.” So I got home at like 12, one o’clock that day, that night. And I told my wife and she’s like, “Go to bed. You drank too much.”

Rod: Oh, no kidding.

Donato: So I was like, “Honey, I’m telling you tomorrow morning, I’m gonna be rip roaring and we’re gonna talk about this.” And sure enough tomorrow morning I talked about it. The next day I talked about it. That weekend I talked about it. And finally, she was just like, “You’re really serious about this.” I was like, “Yep.” And she was like, “Let’s do it.” And that was it. But it was really, it was being unhappy where I was and–

Rod: Right.

Donato: Just talking to a friend that–

Rod: Right.

Donato: Just like, “You gotta get out of this.”

Rod: But the support from your wife is so critical and you just don’t know how much value you just added to probably tens of thousands of my listeners. Because, you know, they’re in that same place and wondering about time. And guys, you know, you’ve got it. You’ve got to get that support from your significant other. Let them see your passion. Let them, you know, feel that and when they do, you’ll be able to influence them to get behind you. And that’s he or her, this is non-gender specific obviously in this conversation guys. But the point is, you know, when you’ve got that support and that framework behind you, you’re unstoppable. And as evidenced by your story here Donato, so. Well, listen. You know, this is probably not where you thought this conversation was gonna go but I try to direct it towards where I feel the people, my listeners, need the most help and it’s definitely in the things, the questions that I asked as it related to time, and building team, and you know, the mindset. Because, you know, once you get to– if you listen to my podcast and you’ll see that I really believe 80% to 90% of this is mindset and psychology, only 10% to 20% is the real estate knowledge. Yeah, we could have dug deep on the project management, or due diligence, or but that’s the easy stuff. It’s actually taking action with what you learn, and pushing through, and having that support like you have that makes all the difference. But listen, I appreciate you being on the show my friend and taking time, and it’s definitely a pleasure to meet you.

Donato: Thanks so much for having me. And agree, you can learn the skills, it’s the mindset that’s going to make it happen.

Outro: Rod, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. I know you’ve been hard at work helping our warrior students do just that using our ACT methodology which is Awareness, Close, and Transform. Can you explain to the listeners how they can get our help?