Biography

Frank Lonardelli is a prominent commercial real estate developer and President of Arlington Street Investments Inc., a Calgary-based commercial real estate investment firm.  

Raised in Winnipeg, Canada, Mr. Lonardelli’s upbringing was not without its hardship.  With his father passing away at the age of three, Mr. Lonardelli’s mother, an Italian immigrant, had little choice but to raise Frank and his three sisters on her own with little to no support from anyone else.  

As a young boy, athletics was Mr. Lonardelli’s outlet for success. Mr. Lonardelli excelled in several extra-curricular athletic programs which presented him with  several scholarship opportunities to which Mr. Lonardelli accepted a scholarship to the University of Winnipeg.  At university, Mr. Lonardelli found interest in political science, a field that he majored in and that prepared him well for his ambitious pursuits after university.  

With a degree in hand, Mr. Lonardelli wasted little time in honing his entrepreneurial skills.  Seeing an opportunity in the vending business, Mr. Lonardelli formed a food, coffee and vending services company in Winnipeg, and for the next five years, he worked to build his business into one of the largest vending companies in the region.

Working to successfully grow a food services company provided the perfect experience for Mr. Lonardelli to make a move into the real estate arena, and at the young age of 27, he bought his first piece of real estate.  Initially focusing in residential real estate, Mr. Lonardelli continued to buy assets in the same street in the city until he was eventually bought out by a developer who redeveloped the site into a Pharma Plus and medical arts building.

It was the right time to make a move, and in 2000, Mr. Lonardelli relocated in Calgary and refocused his ambitions not in the residential real estate, but rather in the commercial real estate market.  He began by forming a commercial real estate firm called Arlington Street Investments Inc. (ASI), a company named after the street he grew up on with his mother and sisters.   

Mr. Lonardelli was still operating various other companies while maintaining a focus on real estate acquisition and development on a part time basis. After successfully selling his other businesses, he shifted his focus to acquiring commercial properties in the downtown and beltline areas of Calgary with his strategic, business model.

 Since their entrance into the commercial market, Mr. Lonardelli and ASI have shown an uncanny ability to make returns on investments for their investors, as well as forecast when to buy and sell property.  As a case in point, in 2007, right before 2008’s dramatic real estate correction, Mr. Lonardelli and Arlington Street Investments chose to sell their entire asset portfolio.

It was an inspired decision and following the market downturn, it provided Arlington Street Investments a strong position from which to re-enter the commercial real estate market.  With the goal of making focused investments ever-present, Arlington Street Investments has since re-entered the industry through a number of high profile property purchases in the Calgary downtown and beltline area and, led by Mr. Lonardelli, the company looks forward to a continued expansion of its investment portfolio, currently valued at over $250 million.

The Discipline of Value Investing vs. Investing in Cyclical Trends

Clearly, the commercial real estate market, like any other market, is one that experiences cyclical trends.  There will be strong moments with properties valuing at higher than average rates, and on the flip side, there will be moments in the commercial market in which properties will be valuing weak.  Many times these peaks and valleys are inspired by the trends of the greater economy.  Now with bringing this topic up, by no means do I want to say that those operating in the commercial real estate industry should not have an understanding of the fundamentals behind cyclical trends.  Understanding why a commercial real estate market experiences a peak and why it experiences a dip is absolutely essential in order to succeed in the business, and, personally, after operating in the commercial real estate business for more than ten years and forming my own commercial real estate investment firm – the Calgary-based Arlington Street Investments – I know very intimately how crucial a greater understanding of the market is.

But, there is a very significant distinction between understanding the reasons behind the trends in a market and basing investment decisions almost exclusively on this understanding.  Highlighting the difference between these two separate modes of thought I think is extremely crucial.

At my firm, we have a well-rooted and experienced understanding of peak to trough cycles.  This understanding is of course incorporated in our investment model and strategy.  But, the major point is that this understanding does not form the basis of our investment choices and it does not form the basis of our investment strategy either. 

No, we have an investment strategy that I’d like to think has a far more sound base of reasoning.  What we do, very simply, is look for property assets that will provide strong cash flow for our firm and our investors and, at the same time, will provide a strong markup in valuation after redevelopment of the property or, as the case may be, a rezoning, increased densification and/or ultimately a repositioning of the property.  Of course, the devil is in the details, and understanding which properties will provide strong value-added propositions and understanding how to best develop or redevelop our property assets are questions that take the experienced and talented minds of my project team to answer.  But, our core investment strategy is actually very simple and we always hope that it makes commonsense to our investors.

Now, of course there may very well be commercial real estate investment firms out there that base the fundamentals of their investment strategy around the cyclical patterns of the real estate market.  But, personally, I’ve always considered such an investment strategy to be highly questionable and, in a hypothetical scenario, as a leader of a firm that used such an investment model, I know I would become very frustrated at the limited control and disproportionately increased risk such a strategy would provide.  After all, yes, you may be able to accurately predict the trends of the market.  But, market trends are ultimately outside of one’s control, which means the times and situations in which you can act on your investment is also limited and outside of your control.  That’s definitely not ideal.

A value-added investment philosophy, such as the one promoted at my firm, not only increases the amount of control a firm has over their investments, it also, in my mind, creates a more stable, more shielded base of investment.  And although we have had several projects that demonstrated Arlington’s disciplined investment strategy, a very good and recent project, as an example would be our 8th Avenue Limited Partnership property.  What we did in this project was find a languishing, building in a high-growth area in the downtown part of Calgary and took advantage of its investment potential through a major redevelopment of the building.  It was a tremendously exciting project and it makes us very proud to know that our 8th Avenue Limited Partnership project has earned the admiration and respect from the greater investment industry.  Most recently, Arlington Street Investments was awarded the 2013 Commercial Real Estate Deal of the Year by the Exempt Market Dealers Association of Canada, as a direct result of our accomplishment on this project, an award that I’m very proud to have my firm’s name and my own, Frank Lonardelli, associated with.

The success Arlington Street has had on our last three projects over the past 2 years including our 8th Avenue Limited project reaffirms my belief in the soundness of our value-added investment strategy and my firm and I continue to look forward to applying this same investment strategy to larger, more expansive commercial projects in the near future. Especially as we are preparing to launch two more projects with the possibility of a third before year end 2014.

Why Construction Design Is So Important

One of the most exciting things about working in commercial development, and indeed one of the reasons why I entered the industry in the first place, was to have the unique opportunity to design and build distinctive buildings and singular commercial spaces.  In 2000, I formed the Calgary-based commercial real estate development firm, Arlington Street Investments, a company which, since its founding, has become known for developing some very exciting commercial spaces in the city.  Naturally, this has made me very proud and I feel very honored to have my name, Frank Lonardelli, associated with Arlington Street Investments. 

As a company, whenever we decide on a property to invest in and redevelop, we seek to bring as much excitement to our redevelopment project as possible.  We want to give our tenants the absolute best, both in design, as well as in creature comforts, and we want all our tenants to be proud when they select our property as their new home. 

But, when we are talking about design features in a commercial development, the important principle to remember, and one that has been ingrained in my mindset and governs all our strategic operations at Arlington Street Investments, is that there always has to be a calculated and understood balance between the design features we add to a property and their cost and potential for return on investment.  After all, every single commercial purchase that we develop at Arlington Street is, at its very heart and core, an investment, one that is designed, from the very beginning stages, to make a return on investment for our investors and valued stakeholders.  So, therefore, design-wise, our team seeks elements that offer the best of both worlds – we seek elements that will provide a return on investment, as well as stoke the excitement of our tenants.  And, ideally, the two should work hand-in-hand.

As I’ve come to understand, the process of deciding on the right design elements that fulfill both investment demands as well as tenant expectations is something that’s unique to every project and something that requires a tremendously experienced project team that is well versed in real estate development.  I’m fortunate enough to have such a team at Arlington Street, and indeed, in all modesty, nothing demonstrates our skill in selecting wise design choices than our redevelopment project at 718 8th Avenue SW in Calgary.

718 8th Avenue SW (otherwise known as 8th Ave Limited Partnership) is a Class C commercial building that my company purchased in 2012.  Located directly in the path of Calgary’s South West development plan, we purchased this building using our value-added investment model and with the explicit intention for redevelopment.  And that’s exactly what we did.  We added two additional floors to the building; we updated the building’s once tired façade with a new, more modern looking façade; we installed new mechanical, electrical and plumbing systems building-wide – and we essentially redesigned the building to meet the needs and desires of an entirely different class of tenants.

Some of these updates I consider relatively standard to any major commercial redevelopment.  But, other design choices that our team made were not so standard and required a concerted cost-benefit analysis on the part of my project team.  These are the kind of design elements that can dramatically amplify the ultimate success of the redevelopment project.  Take, for instance, the 16-foot ceilings that we built into the 718 8th Avenue development, as well as the glass elevator and floor to ceiling windows. As I mentioned in the video tour of 718 8th Avenue that our team created for our investors, 16-foot ceilings, (which are 2-4 feet higher than the average ceilings in buildings of the same class), factored together with the floor to ceiling windows, create a dramatic impression of volume and space.  Our addition of these ceilings is a perfect example of an added design element that would succeed in engaging our tenants’ interest and also offer a return on the investment. 

Consider also a second design element that we chose to include in our redevelopment of 718 8th Avenue, and that’s the installation of a large skylight on the building’s top floor.  Clearly, a skylight would add excitement for tenants of 718 8th Avenue’s penthouse floor.  But, once again, a strategic and detailed cost-benefit analysis was executed by my project team to make sure that the cost of installation would ultimately prove financially sound.

When it comes down to it, as much as I want the name “Frank Lonardelli” attached to buildings with sophisticated and modern design, making investment choices that are intelligent, well-grounded and will lead to a healthy return on investment for Arlington Street’s investors is more important, and that is the factor that takes the lead role for myself and my project team in our commercial real estate investments. 

A Q&A With Frank Lonardelli – What Motivates His Professional Ambition

After sitting down and speaking with Frank Lonardelli, a couple observations will likely be made – one, Mr. Lonardelli knows what he wants; second, he’s not afraid to speak his mind; and third, he’s earned every ounce of his success.  This last observation rings particularly true when you learn about Mr. Lonardelli’s modest upbringing – about how his father passed away at the age of three and about how his mother was forced to raise her children on her own as a first-generation immigrant knowing very little English, not to mention the fact that he, his mother and his three sisters spent nearly a decade living just blocks away from an area that was known as the “murder capital of Canada”; Winnipeg, Manitoba’s downtown core.

Mr. Lonardelli has always pushed himself to succeed.  As a young man, he was able to create a name for himself, first as a successful entrepreneur in the food and coffee business, then in the residential real estate business in his Winnipeg hometown. 

And today, Mr. Lonardelli is once more making a name for himself, in arguably a far more competitive, high-stakes industry, namely that of commercial real estate development.  As founder and CEO of Arlington Street Investments, a mid-size, Calgary-based commercial real estate investment firm, this second-generation Italian immigrant now makes investment decisions that have a dramatic impact on the growth and character of the  Calgary downtown skyline and  beltline.

But, that’s exactly what makes Mr. Lonardelli’s level of success so interesting – the fact that he came from such humble upbringings and was able to work his way up.  And that’s what we would like to try to explore today with Mr. Lonardelli.

First off, thank you for taking the time out of your schedule to speak with us.

Frank Lonardelli: You’re welcome.  It’s my pleasure.

Entrepreneurship is in many ways a double-edged sword.  It can inspire great and sometimes quick success.  But, it also carries with it risk and the potential for enormous financial failure.  Your experience in the food services business was in many ways your first stepping-stone to your current position.  Was there any specific quality of yours that helped you become a successful entrepreneur?

Frank Lonardelli: Well, looking back on my early childhood, I think many people would consider it something of a curse.  But, for me, it taught me two values which I’ve always thought to be a key to success, especially business success: one, my experience taught me how to overcome adversity; and second, it taught me the importance of maintaining a positive attitude, no matter what the circumstances are.  Despite all the adversity I saw when I was a child, I also saw tremendous opportunity.  And having the ability to see opportunity, and to see opportunity that everyone else misses – that’s something I’ve always focused on personally and something I’ve urged my team at Arlington Street to focus on as well.

After your experience in the food services business and the residential real estate business, what inspired you to jump into commercial real estate development?  Was it just the right time to reach for a higher, arguably more challenging career goal?  And were there any particular experiences you had in residential real estate that helped in your transition to commercial investment?

Frank Lonardelli: Sure, that’s a good question. There were actually two reasons why I chose to move into commercial development: one, having been both a tenant and a small business owner, I knew that at that time, when I was moving into commercial development, there were very few office spaces in the high-end market with any sort of inspiring design work.  The choices were, to put it pretty plainly, very vanilla.  And so I knew that there was great opportunity in the market to build and design unique and inspiring spaces.  So, that was one source of motivation.

Also, I’ve always been inspired by buildings and building design and I knew that moving into commercial development would give me an opportunity to work in designing and redeveloping some very inspiring buildings, which would be very exciting.

To answer the second part of your question, as far as whether there was anything that helped in my transition from real estate to commercial development, I’d say there definitely was.  At Arlington Street, my team and I are always looking to stay ahead of the curve in our investments and in the development of our investments.  We’re always looking to build ahead of Calgary’s growth, so that the market catches up to us and not the other way around.  This is a strategy and investment disposition that I’ve always had and which was the same disposition I had when I was in residential real estate.

A quality of yours that stands out is your level of ambition.  Is there anything that helps sustain your ambition?  Or, in other words, now that you’ve reached a fairly high level of success, what keeps you hungry?

Frank Lonardelli: Well, first off, I don’t think we’ve achieved any high level of success at all.  I’ve always believed that my past would be dwarfed by future success, and so that is always a source of inspiration that keeps me ambitious.  But, the long and short of it is that we at Arlington Street have a long way to go and we have nothing but opportunity ahead of us.

Jumping to present day, what’s your greatest source of pride as founder and President of Arlington Street?

Frank Lonardelli: Another good question. First off, I’m incredibly proud that we’ve been able to build such an incredible team here at Arlington Street in such a short amount of time.  That really excites me.  And a second point of pride for me relates to something completely different.  I learned early on in my career that businesses have to be the vehicle for the founder’s goals and not the other way around.  It’s sad to say, but business owners rarely ever achieve what they set out to do by forming their business – in essence, they become slaves to their companies. Moreover, they rarely achieve what we all want, and that is freedom.  I’m happy to say that Arlington Street has been a vehicle for me to do other things in life that I truly value, such as invest more of my time and energy into my Arlington Street Foundation Scholarship program.  And that truly gives me a source of pride.

Not to take up too much more of your time, as a parting question, looking out five years from now, where do you see yourself and Arlington Street?  Do you have any specific company goals or benchmarks in mind that you would like to see accomplished?

Frank Lonardelli: Absolutely we do.  First off, Arlington Street Investments will have a  billion dollar portfolio.  We will also have Western Canadian assets, including assets in British Columbia, Edmonton, Vancouver and one in a Prairie province.  We will be predominantly funded by pension funds and large institutions in addition to our accredited investor network and family offices.  And, last by not least, we will be a direct conduit for investment education nationally. 

Again, thank you very much for your time.

Frank Lonardelli:  It was my pleasure.

Frank Lonardelli - How he communicates to his investors and why

Ever since Frank Lonardelli formed his real estate investment firm, Arlington Street Investments, he has not been shy in explaining what he and his team value in real estate investment.  More specifically, when speaking with Mr. Lonardelli or reading up on any of Arlington Street literature, one will discover quickly that the relationship he and Arlington Street have with their investors is one of their most valued assets.  Moreover, one will notice that Arlington Street’s ability to provide return on investments for his investors and its ability to keep their investors informed of their latest business developments is considered by the company a real barometer for their level of success.  Frank Lonardelli and Arlington Street even have a motto that encompasses the exact kind of relationship they strive for with their investors – that motto is “Frankly Speaking”.

You can see this tagline on Arlington Street’s website; you can see it ending the blog posts that Frank regularly writes to his investors; and you can see its influence in the abundant investor literature and videos that Arlington Street produces for each one of its development projects.

But, the question remains – one that will undoubtedly enter the minds of those unfamiliar with Arlington Street – and that question is – what does “Frankly Speaking” mean?  And how does it relate to Frank Lonardelli’s model for leading a successful commercial real estate investment firm?

“A common sense approach to real estate investment combined with investment intelligence”.  That’s how Frank Lonardelli describes it.  He continues on, “Our motto at Arlington Street – ‘Frankly Speaking’ – really means one thing: it means that I want my investors to understand what they’re investing their hard earned capital into.  When they come to Arlington Street and choose to invest their capital with us, I don’t want them to have to face any ambiguities or obscurities as to what they are investing in which includes both the opportunities and the risks associated with that opportunity.  I want to give them clear information and precise updates on our development projects.  It’s always been to me, a really simple equation which is twofold: Firstly, don’t assume that an investor knows the details that affect him or her just because you are living it every day. Secondly, an educated investor is significantly more meaningful to the long term best interests of the company.  These two fundamental principles of investor engagement directly serve the best interests of both the company and all of our valued investors.”

Frank Lonardelli then adds, “That’s why I value so highly the literature, annual shareholders meetings, and consistent updates that my team produces, which describe in detail the latest in our development projects.” 

Indeed, taking a look at Arlington Street’s website, arlingtonstreet.ca with its multiple project pages and investor education pages, one can see just how much the company values keeping their investors informed of the latest company news and milestones.

One article of investment material, produced by Frank Lonardelli and his team, demonstrates a simple example of how Arlington communicates the meaning of “Frankly Speaking”. It is a short video featured on their website shot for their 8th Avenue Limited project.  In less than 20 minutes, the video discusses in pretty clear detail, the full gamut of the development of the project from the asset selection process to project management and construction, innovative design features that create value to the project and subsequently to its investors, leasing, financial modeling, return on investment and investment structure and the transactions between all of these.

The video is indeed a real example of a C.E.O. of a company who understands how important his investors are and who is more than willing to take the time to directly communicate to them.

“Shooting that video was tremendously exciting,” Frank Lonardelli adds.  “And more importantly, it proved to be very informative for our investors.  It doesn’t take a lot to communicate and I’ve always been somewhat blown away by how most investment companies seem to never want to get into the real meaningful aspects of an investment as opposed to just the flashy sales and marketing brochures.”

Frank Lonardelli’s Take on the Current State of the Exempt Market

It’s well-understood and well-documented that the Canadian exempt market suffered an enormous and widespread failure in 2008, one that left those in the market in a raw state of introspection amidst the loss of investment dollars and loss of confidence.  As many people in the exempt market now agree, the market's failure stemmed from a number of things, including a lack of oversight, a lack of formal market regulation and a lack of accountability from those operating in the market.  In response, in late 2009, the Canadian Securities Administrators put in force a bill known as National Instrument 31-03 which was aimed at addressing and correcting some, if not all, the above-mentioned deficiencies that were at the heart of the exempt market’s 2008 failure.

As has been generally agreed upon, prior to the implementation of Bill 31-103, the exempt market was almost a completely deregulated investment space.  In the pre-2008 exempt market, an issuer of an investment product would sell their investment product through agents and would enjoy very little scrutiny from any sort of regulatory body.  To add to this, agents themselves had little obligation to obtain any sort of financial education or certification.  Agents with little financial knowledge, issuers with no oversight, a marketplace with little regulatory input equals a perfect recipe for the failure in 2008.

But, what about now, post-2008?  To provide a brief summary of the major changes authored in by Bill 31-103, many of which are common knowledge within the market, issuers of investment products in the Exempt Market now have to sell their product through a dealer.  In turn, exempt market dealers must hold a license and are under the direct governance of their regional securities commission.  In a similar vein, exempt market agents or representatives now have to fulfill a certain educational requirement in order to be a representative.

It’s clear what Bill 31-103 was trying to do.  But, five years after its implementation, the key question is this: has the bill done enough?  Are its mandates accurately and effectively addressing what was the wrong with the market pre-2008?  And to add another question to the list – if another large-scale correction hits the private investment market, will it once more expose a house of cards – will it once more expose the kind of high-risk, uninformed investments that we saw in 2008 in the exempt market and which made the 2008 financial turmoil that much worse?

Frank Lonardelli and his commercial real estate development firm, Arlington Street Investments, have been working in Alberta's exempt market ever since Arlington Street’s founding in 2005.  Most recently, Arlington Street Investments was a winner of 2013’s Exempt Market Dealers Association of Canada (EMDA) Award.  So, it’s clear that Frank Lonardelli, along with his team at Arlington Street, know fairly well the effects of Bill 31-103, as well as, more generally, the current state of the Canadian exempt market.

And as Frank Lonardelli equitably points out, “Bill 31-103 is a good first step to improving and safeguarding investors in the exempt market.  However, in the end, more work still needs to be done.” 

Following this general appraisal, Mr. Lonardelli quickly points out some specifics as to what can and should be done to improve the current exempt market.  He cites the educational requirement of the exempt market representatives, which in Mr. Lonardelli’s mind is still too insufficient given the responsibility that representatives have to the integrity of the market as a whole and to the investment public.  “The reality is that the exempt market contains investments that are fairly sophisticated and fairly complicated”, Frank Lonardelli points out.  “And part of the problem that we had in the market pre-2008 was that we had too many representatives with low levels of financial education and proficiency.  And that was very problematic.  So, yes, I don’t want the same thing to happen twice, nor does anyone else.  And that means I would like to see the education requirement for representatives increased, and not just initially, but I believe that there is a requirement for ongoing education.”

Frank Lonardelli then mentions one more feature of the current exempt market that needs to change, which is the cost of capital.  Currently running at 6% to 12%, the cost of capital in the exempt market right now is much too high according to Mr. Lonardelli. “By cost of capital, I’m referring to the amount of commission in which dealers are demanding from their issuers, and in many cases, are fanning. The reality is that if a product sold in the exempt market is going to be successful, the cost of capital has to be reduced,” Frank Lonardelli mentions.  “This is both for the well-being of the dealerships, as well as the issuers.  In the end, even if we have a perfectly balanced and perfectly regulated exempt market, no one will want to be a part of it if the cost of doing business is too high – that’s just the bottom line.”

Frank Lonardelli’s intuition for his community’s needs

Being successful in the commercial development business clearly takes more than just a lot of capital.  It takes patience; it takes an understanding of the trends in the commercial real estate market; and it takes a keen understanding of the growth patterns of the given urban area one is working in, this latter skill being perhaps more overlooked than the others.

Take Calgary for example.  Calgary is a city located in Alberta, Canada.  With a population of just over 1 million, it’s like most mid-size cities – it has an outlying suburban area, it has a downtown corridor area populated with large and medium high rises, and it has a beltline that surrounds downtown.  

Also similar to many cities in Canada, Calgary has many opportunities for commercial real estate development.  But, where in this urban area these opportunities are and what kind of opportunity for development they offer – that’s the million dollar question, and indeed the answers to these questions is what separates the successful commercial real estate developers from the not-so successful ones.

Frank Lonardelli and his commercial real estate development company, Arlington Street Investments, work and invest in the commercial development industry in Calgary, and since Arlington Street’s founding in 2000, Frank Lonardelli and his firm have become particularly well-known for their ability to not only select wise real estate investments, but also for their timing in when to invest and redevelop and when to be less exposed in the market.

Being ahead of the curve is how Frank Lonardelli describes his company’s approach and philosophy when it comes to selecting properties to invest in.  As Mr. Lonardelli elaborates, “My team and I at Arlington Street are always striving to look ahead and to look at where the city is going.  And that’s the area we want to invest in.  Our strategy is to always be ahead of the curve and to invest and wait for the market to catch up to us, which is when we start our redevelopment program.”

It’s an ingenious investment strategy, but at the same time, it takes an enormous, not to mention a very confident, understanding of how the urban area will grow and in which direction as well as a tremendous amount of focus, discipline and patience.  That’s something that Frank Lonardelli understands and agrees with. “Yes, that’s true.  As a developer, you definitely need to have an understanding of the growth patterns of the city.  And, also, you need to have an understanding of what kind of space will be desirable once the market catches up with you.  Five years out from now, will a certain area of the city want high-end office space?  Will more mid-tier space be what’s desirable?  Make no doubt about it – these are questions that our team at Arlington Street ask way before selecting any sort of property to invest in.”

And it’s clear from one of Arlington Street’s more high-profile investment projects, namely its redevelopment project at 718 8 Avenue SW, that the company’s investment selection process is working out very well.  “I’m confident and happy with all our property selections,” Frank Lonardelli mentions.  “But, our 8th Avenue property is a real stand-out case.  We were fortunate enough to get this property, and the fact that it lies directly in line with Calgary’s downtown growth aligns perfectly with our investment strategy and creates an exceptional investment.  We waited and tracked this property for 5 years before we were able to secure it at the price point we purchased this property at. The energy, time and investment that we put in redeveloping the property has already begun to see returns.”  

Mr. Lonardelli then makes a final comment, “As a company, we’re continually looking for property assets that provide strong cash flow and excellent development potential, and our understanding of Calgary and its growth has allowed us to do just that.”

Frank Lonardelli: Here’s Why Project Partners are So Critical

In twenty years of entrepreneurial experience, I’ve discovered one very basic but very crucial business principle: nothing of significance will ever get done without teamwork.  Now, of course, that may be a bit of hyperbole – I’m sure certain important business tasks can be achieved through solo efforts.  But, when we’re speaking about developing and expanding new businesses or when we are talking about companies working to accomplish large, multi-stage projects, effective and cohesive teamwork is essential.  This is a principle that was further reinforced in my mind when I entered the commercial real estate development industry in 2000, and it’s one that I try to engrain in my project team at my Arlington Street Investments firm.  

I think it’s fairly clear why teamwork is so crucial in commercial real estate development.  Lots of big, multi-stage projects; lots of team members working on various parts of projects with differing responsibilities and roles; lots of projects points where confusion can arise and tasks can get mishandled.  Effective communication between each and every team member is, needless to say, essential for any kind of major commercial redevelopment project to stay ahead of timeline and to finish on time and under budget.  And with all humility, at Arlington Street Investments, I have the opportunity to work with the some of the best and most talented individuals in the industry, individuals, who also, I’m happy to say, work very effectively as a group.  And I’m very happy to have my name, Frank Lonardelli, associated with this talented roster of professionals.

But, like I said, when we are talking about commercial redevelopment, we are talking about large projects that require the input of many individuals from many differing professional backgrounds.  If you think about it, it really is amazing.  Most property developments require project managers, engineers, architects, interior designers, plumbers, electricians, and the list just goes on.  But, the reality is that commercial investment firms, like, for example, Arlington Street Investments, can only have so many individuals on their direct staff.  So, most professionals who are essential to making a property development happen must be hired from outside the firm.

This is fine; this is the reality of the real estate development business.  But, based on my experience in the industry, a firm’s relationship with outside project partners is just as important as the level and quality of teamwork that’s found within the firm.  Consider how important project partners are to the timeline of the project as a whole.  What happens if the development project requires a substantial upgrade to the property’s electrical system?  Or what happens if the electrical company that is hired fails to deliver?  Or in perhaps a worse scenario, what happens if, for some reason, the relationship between the electrical company and the commercial development firm sours?  Not only would these scenarios have the very real potential of delaying the project timeline, they can also have the potential for adding to the budget of the project.

In all the property developments that I’ve been a part of, none of them would have been completed without the help of businesses and professionals outside of Arlington Street Investments.  This statement may be a truism for those in the industry, but I think it’s a critical fact that commercial real estate development firms should always keep in mind.  And in keeping this in mind, I think it’s also very useful for firms to periodically take a step back and evaluate how their relationship is with these outside parties.  And more generally, evaluate how their perception and reputation stacks up in the industry as a whole.  Is their firm perceived as honest and easy to work with?  Or does their reputation have some points of issue?  I know I often try to step back and make sure that my firm and my own name, Frank Lonardelli, has a solid reputation within the real estate development industry as a whole.  After all, in commercial real estate development, it’s not just about developing or redeveloping the best property asset, it’s also about knowing how you’re going to find and attract the help you’ll need to get that development or redevelopment done.

Frank Lonardelli: Selecting the Right Real Estate Investment Size

Entering commercial real estate development, and more specifically, working to build my commercial investment firm, Arlington Street Investments, has to be one of my most challenging and at the same time most enjoyable things I’ve done in my professional career thus far.  I came into commercial real estate development from the residential real estate industry, and in 2000, when I moved to Calgary, I established the commercial real estate development firm, Arlington Street Investments.  I established it with the intention of executing a very specific investment goal, a goal that in fact characterizes Arlington Street’s entire investment philosophy – that is to find and purchase commercial properties that may be positioned for an increase in value and then take advantage of this opportunity through development, redevelopment and/or repositioning of that property.

This is an investment philosophy that I happily ascribe my name, Frank Lonardelli, to and I’m happy to say that my company has been able to execute this investment strategy successfully since 2000. I’d like to think that a major reason why we’ve been able to execute this strategy is because of our fundamentally sound property selection and investment process.  And one of the components in our asset selection process that I think we’ve been particularly successful with is choosing the right investment size. 

Clearly, even in a mid-size city such as Calgary, there are many commercial properties for a development firm to purchase and invest in.  But, it’s equally clear that not every property will demonstrate a return on investment and even those properties with value-added potential may not be a perfect fit for a given development firm.  Besides location, besides the potential a property has for offering an increase in value, another fundamentally  important aspect that must be considered in any asset selection is the size of the property investment.   
When speaking about investment size, we are not only speaking about the total cost of the investment, including any redevelopment cost, we are also speaking about the actual physical size and square footage of the property.  And based on my experience with forming and building Arlington Street Investments, both these parameters have to fall in line with the capacities of the real estate development company that is executing on the plan. 

I know when Arlington Street was first formed and when we were making our first asset purchases, my project team and I wanted to make sure that our asset selections made sense with where we were as a company.  That means that, as a young commercial development firm, at that time we didn’t want to select an asset that was too large and potentially too costly for fear of overextending ourselves financially; never mind, operationally.  We also didn’t think it would be advantageous for the growth of our company to tie too many of our assets into one single project.  Many development companies fall into the trap of “over optimism” and although the idea of optimism is truly subjective, one must think rationally and practically about its ability to perform and performance. This is something I would highly encourage any developer to consider as the consequences could be dire when that over “optimism” slams up against reality.

Now that Arlington Street Investments has grown and now that we’ve achieved a fair amount of success in the Calgary market, we’re at a point where purchasing and developing larger properties is within our comfort zone and, indeed, introducing into our asset portfolio larger, more expansive commercial projects is the current focus of my project team.  However, the point is that this took time (over a decade in fact) and I really feel that if we had taken on a property asset that was out of step with our development as a firm, it could have seriously hindered our growth.  With my name, Frank Lonardelli, proudly and firmly attached to the success of Arlington Street Investments, that’s not something I would have let happen, nor would I want my very capable team members to be exposed to any potential downside that we could have mitigated. 

The reality is that finding and selecting commercial properties that are congruous with the capacity and development of the real estate development company is a delicate and involved process.  But, this is one other reason why talented project teams full of capable professionals are so absolutely vital to any commercial real estate development firm.