Jon Peterson & Taylor Chess - Childhood Pals Now Company Leaders (#42)

Bios

Jon M. Peterson is the Chief Executive Officer of Peterson Companies, one of the largest, most-admired privately-held real estate companies in the Washington, DC area. Founded more than 52 years ago, the company is responsible for some of the most prominent and successful mixed-use retail, residential and office developments in Northern Virginia and Maryland including Fairfax Corner, Fair Lakes, National Harbor, Virginia Gateway, Downtown Silver Spring, RIO, Burke Centre and Tysons McLean Office Park.

Jon has been instrumental in the development of National Harbor from an underutilized waterfront property to a mixed-use waterfront destination that is home to Gaylord National Resort & Convention Center, MGM National Harbor, Tanger Outlets and The Capital Wheel.

In 2016, he became Chairman of the Executive Committee which oversees all aspects of the retail, residential, commercial and mixed-use development and management. Prior to that, Jon served as Senior Vice President of Commercial and Business Development which allowed him to develop close ties to the entire metropolitan real estate community. He has led all aspects of build-to-suit, purchase and acquisition, sale, leasing and financing of commercial properties as well as the ground up development of approximately 3.5 million square feet of commercial office product in the Washington Metropolitan area.

Jon graduated from Middlebury College, and he and the Peterson Family believe passionately in giving back to the communities they serve. Jon was a member on the George Mason University (GMU) Board of Visitors as Vice Rector and GMU’s Board of Trustees member from 2014-2018. He was also a board member of Washington First bank from 2014-2018. Currently, Jon serves on numerous philanthropic boards and committees including National Association of Industrial and Office Properties (NAIOP); NAIOP Northern Virginia; Youth for Tomorrow Board of Trustees; George Mason Center for Real Estate Entrepreneurship; Northern Virginia Transportation Alliance; The 2030 Group; The 123 Club; GMU Patriot Club Advisory Board; George Mason Housing, Inc.; Inova Health Systems Investment Advisory Committee; Prince William Commercial Development Committee; Virginia Association for Commercial Real Estate; Prince George’s County Roundtable Board; and Prince George’s County Economic Development Board.

Taylor O. Chess is President, Development for Peterson Companies and serves on the Company’s Investment Committee. Taylor has developed retail projects valued over $250 million. He is a visionary, known for spotting acquisition opportunities, imagining the possibilities, divesting of property, acquiring land, and building joint ventures.

Taylor has been instrumental in leading the company’s expansion into new ventures and development and looks at all disciplines of real estate to find the best use based on market conditions and social and economic changes. Most recently, he was instrumental in the sale of over 330-acres of land to Microsoft.

Prior to Peterson Companies Taylor was Senior Vice President, Investments at Regency Centers where he established the Mid-Atlantic and Northeast offices. During his eight years, he developed 11 centers valued at approximately $660 million and assisted in the acquisition of 140 centers.

Taylor studied at California State University, Northridge. He serves on numerous philanthropic boards and committees including Joe Gibb’s Youth For Tomorrow, Fairfax County Sports Tourism Tax Force and mentors real estate students through ULI’s mentoring programs.   He served as ICSC’s State Director of Maryland, Washington D.C. and Virginia and has been a guest speaker for the GWU Real Estate Program.

Show Notes

Current Roles and Origin Stories

• Jon Peterson: Role is CEO (2.5 yrs. now). Making sure everyone is aligning to the strategic plan that was set forth two years ago. Teamwork is critical to success. (3:45)
  • Taylor Chess
  • Bill Smith
  • Paul Weinschenk
  • Stuart Prince
• Taylor Chess: Role is President of Development. Keeping projects moving forward and look for new projects. (6:00)
• Taylor Chess: Origin in Fairfax, VA- Grew up on a farm and then moved into “Breckenridge” community. Dad was a developer of tennis communities. Parents were divorced and the Peterson family “raised” him. (7:00)
• Jon: States that Taylor and he are childhood friends. Citing a picture in Tysons Corner where Taylor and he were playing on a dirt pile. They had a tree planting business there when they were teenagers. (7:45)
  • “Never going to be another Milt Peterson” Milt worked his tail off many days. He was a fair guy, yet he had his line. (9:50)
  • Jim Todd was a mentor to him and “holding on to the tails of two tigers” (Milt and Til Hazel) (10:45)
  • Worked with David Cheek and Joe Ritchey
  • Went to Middlebury College (like his parents). Played football and lacrosse there. Academics were challenging. (12:00)
  • When school ended he just came in and asked Jim Todd whether there was an opportunity there and he knew he was “in focus” as a legacy (13:15)
• Taylor: He went to college in California after one semester at Hampden Sydney. He went out to California and tried out at Whittier College and ended up at Cal State Northridge. (14:00)
  • Tried acting while he lived in Southern California during the Screen Actors’ Guild strike (15:50)
  • Found an analogy between acting and real estate. (16:55)
  • Worked on set of Falconcrest– Charleton Heston, Ricardo Montelban, and Jane Wyman were fellow actors (17:15)
  • California’s weather was “too good” and he knew he had to come back to Virginia (18:15)
  • Interviewed in real estate as it was always in his mind. (18:45)
  • Land and creation was something he enjoyed (19:15)
  • Reflects at Milt’s driving Jon and him around touring real estate- story about the Fairfax County Parkway location (19:40)
• Jon: Cites story of dedication on Fairfax County Parkway in Burke, VA- Transportation was critical yet the County officials took roads off the map (20:30)
• Taylor: Discussed “Monticello Parkway” (22:00)

Milt Peterson Story & Peterson Company Evolution

• Jon: Milt’s father bought houses and lived in them while renovating them. Stationed at Fort Belvoir while in the military. Started working for the Yeonas Companies.(22:40)
  • Story about Milt arbitraging book sales in college on resales (23:20)
  • Milt is the “junkman” (24:20)
  • Started building and met Til Hazel who helped with entitlement (24:50)
  • Hazel/Peterson was a community building company when started (25:15)
  • Started building commercial properties in Burke Center, Franklin Farm and then Fair Lakes (26:00)
  • Skip Coston was the first “President” of the company and provided stability (26:45)
  • Giuseppe Cecchi, partner early on (27:40)
• Taylor: Began working with Skip Coston on retail projects in a “satellite” office (28:30)
  • Started as a project manager in the field (29:30)
  • Worked with all aspects initially
  • Switched into leasing and management (30:00)
  • 1990-91 were tough years and they were “not highly paid” (30:45)
• Jon: “Selling birds and bunnies”- Fair Lakes was the first large office park west of Tysons Corner (31:30)
  • Great location at Fair Lakes and it had every major road in the County to converge (32:00)
• Taylor: Cited proposed mall project with DeBartolo adjacent to the Bull Run battlefield that was condemned by the Federal Government and Peterson received a large payment from the Federal Government for that property (33:30)
• Jon: Pursued a portfolio of assets in distress (junkman mentality) after receiving the windfall of capital (34:45)
  • Discussed the Hyatt Plaza transaction that went into restucturing in 1991 when Aetna decided to reduce their space- Jon said they learned lessons from that situation (37:30)
  • Can we do this or should we do this? (38:15)
• Taylor: Discusses the morning of September 11, 2001 when we were in the Washington Hilton (39:45)
  • Bill Kent, a member of our committee
  • ICSC Meeting- Organization was great for breakfast programs and Idea Exchange (42:20)
  • Networking and education at ICSC (43:00)

Downtown Silver Spring

• Jon: Citing story about Downtown Silver Spring and Bryant Foulger approached Milt and Jim Todd with the opportunity. Family oriented business was a good affiliation. Able to get deal done because of Doug Duncan wanting to send an RFP (44:00)
• Taylor: Cited a quote from Milt: “I don’t do windows, I don’t do underwear and I don’t do RFPs”. (46:30)
• Jon: Three other developers had tried but the Foulger/Peterson team asked the community what they wanted. (47:30)
  • Found several key retail needs- “Filling the need of the community” (48:00)
  • Discusses several retail users

National Harbor

• Taylor: Responds about National Harbor– Perseverance was the key (50:30)
• Jon: Only able to do National Harbor after so many mixed use project experiences with many learning experiences (52:15)
  • Find out what went wrong with other projects to learn what not to do. (53:00)
  • Went to Prince Georges County to ask for ultimate flexibility in the development scheme. (53:45)
  • Gaylord Hotel became the anchor to the project (54:30)
  • Locals during the weekend and conventioneers during the week (55:00)
  • Site acquired from the RTC (55:15)
  • Gaylord wanted complementary uses built around it to attract conventioneers to stay or do activities nearby (55:45)
  • Transportation was critical to planning from the Capital Beltway (56:30)
  • Spine of National Harbor was modeled after Los Rambla in Barcelona, Spain (56:50)
  • To raise capital for the project, Peterson sold the Fair Lakes office building portfolio (58:30)
• Taylor: Gave more color to the sale of the office buildings relative to the National Harbor project and then 2008 came and many leases went away. 90% of condominiums were pre-sold with deposits, but no one closed (59:30)
• Jon: Cites that several projects in National Harbor that lost money during the 2008 crisis. (1:01:00)
  • Tanger Outlet Center was a big uplift for the project (1:02:20)
  • The MGM Casino happened only because Maryland passed gambling by “one vote” to allow it to open (1:02:40)
  • The Wheel at National Harbor adds another identity for National Harbor (1:03:30)

Diversification into Data Centers, Industrial and Returning to Residential

• Jon: Discusses Northern Virginia strategy during the development of National Harbor. Bought sites prior to re-entitlement to create the most value (1:05:45)
  • Competitive advantage- not building to an IRR and takes more risk (1:07:20)
  • Taylor is “sniffing around” for large tracts that can be rezoned for better uses today (1:07:45)
• Taylor: Cites story about “Aunt Sally” Peterson who said you have to “read the newspaper” to understand what is coming down the pike. (1:08:30)
  • Started looking at industrial about 5 yrs. ago (1:09:20)
  • Bought “data center” land and then sold a large tract to Microsoft for a campus (1:09:45)
  • Pandemic accelerated real estate development (1:10:00)
  • Distribution campus in Stafford, VA (1:10:40)
  • Still active with residential projects- Over 800 units in 2020 (1:10:50)
• Jon: 5 to 6 yrs. ago we were not building residential projects. Pivoted after strategic plan and now back into their origins (1:11:20)
• Taylor: Cites that single family home rentals outside the region (1:12:15)
• Jon: Partnered with Integrity Homes (1:12:45)
  • Story about the PRC building in Tysons Corner about Milt going ahead to build building prior to lease being signed nor a loan in place. Clark Construction agreed to start building a building without either a lease or loan. (1:13:45)
  • Manage their own properties and helped tenants with PPP loan during the pandemic (1:15:50)
  • Relationships are the key (1:16:00)
• Taylor: Not as large assemblies of land as many years ago. Much smaller bites of land than in the past. Anticipate what community needs before taking down land. Partnering in data centers and industrial. (1:17:10)
• Jon: Sellers are more sophisticated than in the past. Peterson knows real estate well enough to put down hard money deposit and close in 30 days for deals they want. We have to do what we say we will do…integrity is critical to doing business. (1:18:20)

Community Activism

• Jon: Dedication to the community is “in our blood.” Milt was inspired by his Mother to give back to the community and it is part of the culture. Treat each other as family members. (1:20:30)
  • Expectations are high as Peterson employees can volunteer and get involved in the community
  • 60-70% have been with company more than 10 yrs. (1:22:50)

Regency “MBA”

• Taylor: Tom Maskey was running development and there was a “glass ceiling” for him there, so he left and went to Regency Centers, a public REIT. (1:23:45)
  • Milt reached out to him to come back to Peterson as the retail market waned and Tom Maskey left the company, so he came back after 8 yrs. away at Regency (1:24:40)
  • He was a bit frustrated at Regency to do more than just retail (1:25:20)
  • He learned a whole lot about the entire development process at Regency (1:26:30)
• Jon: Strategic plan arose when Milt stepped down and that the company processes were well organized (1:27:30)
  • Pipeline is very strong- 10MM s.f. of industrial (1:28:20)
  • Self Storage & Data Centers
  • Employees received compass of the strategic plan (1:29:00)

Surprises

• Jon: Surprising situation was the MGM deal (1:30:00)
  • Had “license” for gambling casino and they picked the right partner in MGM (1:31:00)
  • Complicated process and he did it together with Milt (1:31:45)
• Taylor: New concepts to the area- Top Golf was a big surprise in its scale (1:32:45)
  • Microsoft deal was very surprising, as well- Broker Rob Faktorow brought Microsoft to the table confidentially (9 months) (1:33:20)
  • Technology real estate decisions usually quickly (1:36:00)
• Jon: First deal with GSA at Tysons/McLean- 460,000 s.f. building (1:36:30)
  • Told GSA guy that we will go forward on faith that the official could get it approved in Congress…now they have 8 buildings with GSA through Bill Smith at Peterson (1:37:30)
  • Financed them with CTL financing (1:39:20)

Advice and Lessons Learned

• Jon: Advice to 25 yr. old self- Get involved in industry groups (NAIOP)- build relationships with brokers & vendors (1:39:40)
  • Playing golf with people to understand them (1:40:20)
  • Have broad relationships (1:41:15)
  • George Mason University MRED program recommendation (1:42:00)
• Taylor: Be as diverse as possible in working different jobs. (1:42:30)
  • Cited story of approaching Skip Coston about a property management opportunity (1:43:00)
• Jon: “Work hard, Make some money and give back to the community” (1:44:50)
• Taylor: “Be a part of the community” (1:45:20)
• Jon: Involved with Joe Gibbs’ charity (Youth for Tomorrow)…go out and help others (1:45:40)
• Taylor: Cites story in high school when Milt was building Burke Centre and was asking “Where have the steeples gone?” Where is community building? (1:46:20)

Postscript

• Colin Madden impressed with the interview
  • Advice to a 25 yr. old- Generalist vs. Specialist
    • Financial, Communications, and Art of the businesses
    • Developer needs basic understanding of many disciplines
  • Ability to know what’s coming around the corner
    • Thinking about data centers and industrial
  • Mental Model of Inversion– Flipping a problem upside down
    • Jon’s citing projects to learn what doesn’t work
    • Secret sauce of not doing what doesn’t work
  • Thinking in Bets, Annie Duke
  • Reverse Engineering
  • Post mortem on deals
  • Career Counseling curriculum– 3 yr. plan
  • Milt Peterson- “Best Salesperson”- Attention riveted on the person he is speaking with him
    • Made his luck
  • Trust is vital to their careers- Reputation
  • Integrity is job #1
  • Unique to have two people work together since childhood into their 50s together leading a company