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Building Dreams and Creating Value: A Conversation with Gary Rappaport, CEO at Rappaport

Gary Rappaport Headshot
Episode #: 252
Building Dreams and Creating Value: A Conversation with Gary Rappaport, CEO at Rappaport

Guest: Gary Rappaport
Topics: Rappaport, real estate


Chris Ressa 0:00
This is Retail Retold, the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa, and I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC Management.

Welcome to Retail Retold, everyone. Today I’m excited to announce that I am joined by Gary Rapoport. Gary is the CEO of Rapaport Real Estate, a retail real estate company founded back in 1984. He’s been pretty iconic in the retail real estate industry. I’m excited for him to be here. Welcome to the show, Gary.

Gary Rappaport 0:37
Thank you, Chris.

Ressa 0:39
So yeah, let’s start from the beginning. Why don’t you tell us a little bit more about who you are and how you ended up getting here?

Rappaport 0:49
Well, you know, Chris, you know, earlier my career, the last thing I thought I was going to be doing was anything related to real estate. I come from New York. And I was born in Brooklyn, and and so are my parents. And I’m the first college graduate in my family. I have three younger sisters, the only son, and my dad was a tie manufacturer with his older brother who was a shirt manufacturer.

And what I learned as a young boy, 12, 13 years old, working in a factory in Brooklyn, was top centers, French friends, Dartz yolks, and everything about the fashion business. I never met a real estate person until my senior year in college. And I thought I was going to go into fashion business because that’s all I knew. But I knew I was going to do something for myself. I grew up, my parents moved out to Long Island, to West Hampstead, when I was two years old.

And they bought a house on a 6000 square foot lawn and lived there for 48 years. And my father’s only loan in his whole life was a 30 year mortgage on his home. And the day that he paid off that mortgage was a very happy day in his life. Because he came and grew up in a different time period than I did. He grew up, was born in 1921, sold ice cream on the beach in Coney Island, and had to give all the money to his mother and father.

And because of it, he grew up with a lot of fear of having a roof over his head and food on the table for his family. And thus had a different outlook than I did. The neighborhood I grew up in, which, and the reason I’m spending so many minutes right now at the beginning of this podcast on this, is because it sets the tone of how my life has been set.

I grew up in a neighborhood where almost everybody was an entrepreneur of some part of their life, one once someone was a lawyer, a an accountant, a shopkeeper, and undercapitalized manufacturer, as my father was of ties, but everybody was somehow working, almost everybody working for themselves. And so I always had this desire to take that risk and work for myself, whatever business that I was in. And what happened is I graduated Syracuse in 1971.

And ended up after school getting married at the age of 21. My first wife I was married 10 years, then not married for 15. I’m now married for 27. And we all get along. We all travel together. I have five daughters, eight grandchildren, and my first wife was a Washingtonian. And so I ended up moving to Washington in 1973 and started in the real estate business as a small home builder, and then eventually moved into the commercial side of the business.

Ressa 4:17
Small home builder. What timeframe is this when you were building homes?

Rappaport 4:23
Well, the two families put together to son-in-laws when I was 23 years old in 1973. But I was born in 1950. And we put together a company and built a couple of 100 single family homes between 1973 and 1981. My partner was more knowledgeable in the home building side and I always came out with a very strong financial degree. And in those eight years, we never had an office, but we went from there, I got the job.

And we built homes until 1981, when I said, this is the wrong model, and I need to move from a model of selling everything to going into some part of real estate, where I would have not have an opportunity over a lifetime to build long term assets and stability, that the home building business did not offer me.

Ressa 5:31
God. That’s fascinating. And that’s a stressful business, the homebuilding business, you know, pretty stressful business, when your land, you got to build the houses, you got to flip them and make a profit. And it’s, you know, you were building at a time where interest rates started to rise at that time, right. So that’s its own time.

Rappaport 5:53
Well Chris, in the times, now we’re talking about high inflation, treasury of 5%. A fixed rate, 30-year, mortgages on homes are seven and a quarter, and seven and a half percent, maybe even now closing up on 8%, while in 1981, prime was 20%, I was borrowing money at 22%, 30-year fixed rate mortgages on homes were 13 and a half percent. And nobody could afford to buy homes. And I knew my costs to the penny. But I could not control the largest line item of expense interest rates, or the interest rates of the buyers of my homes.

And that’s why I said I’m leaving this business, I am creating no assets, whatever I sell is going into a more expensive piece of ground. And I am going to learn the business of owning properties long term, and letting them appreciate slowly over a lifetime. And what it’s done for me, fortunately, it’s created assets at this point in my life, now that I’ve been in the business for over 50 years, greater than I ever expected, or dreamed of.

Ressa 7:24
So, that’s a great jumping off point. So you leave on building walking sand as you get to, you know, the commercial side, and where did you start there?

Rappaport 7:35
Right, well, so we all have different roads that we’ve taken. In my particular case, I ended up working for a company called Combined Properties Shopping Center Company here in Washington, D.C., and worked there from 1981 to 1984. And had the opportunity to learn a lot about that business. Because I was the family that was Combined Property, it was the Faft family, HAFT, Herbert Haft, and he was my ex father-in-law.

And so I ended up taking over as Chief Operating Officer in 1981, got divorced in 1982, ran the company as his ex son-in-law until 1984. And in 1984, I left there, handed over the reins of the business to the my ex brother-in-law, Ronnie Haft, and started this company that I have now in a shared office space, a WeWork space.

Bought my first shopping center on May 31, 1984, where I raised $35,000 from 14 partners, I put in $35,000, borrowed half of my 35 from one of my partners, and bought this center and renovated it and re-merchandised it. And today, 39 years later, the center is 69 years old, and we still own it.

Ressa 9:16
Amazing, which center is that?

Rappaport 9:21
It’s called Milford Mill center. It’s on Liberty and Milford Mill Road, I bought a C-Minus center and made it into a C-Plus, and we are proud today that the center still is a C-Plus center, but a case study on the success of buying the right property at the right price, taking one’s expertise to make it better, and owning it long term and letting it slowly increased in value over many years.

Ressa 9:54
So due to debt, what should your pay look like today?

Rappaport 10:02
Well, let me say that what I’ve done, the most important thing is in the model. I’ve built a management company up for the stability of the business model. Even though there are not great assets ever created within a management company, we have 120 people here now, I own the management company. And we are presently managing 76 properties, 14 million feet, three and a half billion dollars of real estate, a little over 2000 tenant leases.

And I have an ownership interest in about 40 to 45% of that amount of property. We also represent about 75 retail tenants. And we also do the first floor leasing on over 100 high rise, residential, hotel and office buildings. So the model has given us the ability to be the largest manager and owner of retail in the Washington, D.C. metropolitan area. And we are not outside and all in what we own or manage than the states of Virginia, Maryland. And of course, metropolitan downtown D.C.

Ressa 11:23
Got it. And, and so going back. So what are you, what’s your day to day look like today?

Rappaport 11:28
Well, I’d like to say I divide my life up into three parts. The first part, of course, most importantly, is my family. And in the business, I mean, I could set the times whether it’s during the day, or the weekend or at night, to go to the activities that my children and grandchildren are part of. And I’ve done that my entire life. That second half is the business. I love it. I’m passionate. I’m 73 years old, and I’m working every day. And I get up every day I exercise, I come to work, I work a full day.

And I do that every day. But the most important thing I do is this third, third. And that third third is to help others. I have been mentoring people, since I started in business as my father taught me. And I end up talking to anybody for as long as they wish, every day of my entire life. And I teach for the last 35 years. And as you know, I’ve written several books. As an example. Last night, I was at the University of Maryland, teaching your class to the real estate club.

Three weeks ago, I was at the University of Maryland, University of Michigan in Ann Arbor, teaching a law school class on structuring partnerships. And and having lawyers be educated, how they want to maybe spend their career and maybe six weeks or eight weeks ago, I brought a master’s program of real estate class at the Georgetown University here in Washington.

So that third of helping others to reach their dreams, I like to say sooner than they would otherwise might have reach their dreams is a very satisfying and a part of my life.

Ressa 13:20
That’s amazing. That’s amazing, a lot of teaching. There’s some amazing schools you mentioned. And I’m sure that they are lucky to have you come do that. When you talk about that little piece, when you talk about that business piece, how much of your time is spent on running the business versus real estate deals?

Rappaport 13:42
Yeah, well, you know, in a company that no one’s giving you that summary. I’ve been in business now 40 years since we bought that first center on May 31 1984. And we own 36 properties, which means we own less than one a year that we’ve either built or acquired. So we’re not, but we don’t sell very rarely do we sell anything. So when we talk about this company, there is no person that’s running acquisitions.

I’m overseeing that with a strong group underneath me, but I’m making those decisions if we should buy something, or build something, or I should sign a loan on something. And while I am here every day in the office, there is a Chief Operating Officer. There is a President, there is a Chief Financial Cfficer, and I’m in effect. I have put together reports over a lifetime that have given me the ability to understand all that’s going on, but I don’t believe I’m operating this company or the 120 people every day.

What I’m doing as life is going on more is we have two different types of institutional are two different types of partners, we have institutional partners. And we have friends and family, even though I’ve never had family, to give me to invest with me. So it’s always friends. But over a lifetime of from those 14 partners in 1984, today, we have over 500 separate partners in 1000s of units across these different shopping centers that we own.

And a lot of my time is spending time with these partners, making sure that they’re recognized how important they are to make sure we are transparent, and giving them information and of course distributions, but more important that they have access to me, and that they’re ready to invest in the next deal with us.

Ressa 15:49
Awesome, well, thank you for that insight. Let’s move on to today. And, you know, we’re in this interesting time period. Which to me, it’s, it’s pretty fascinating, because we have this what I would call, I think it’s one of the most rock solid times when it comes to the real estate fundamentals, occupancy of property’s high as it’s ever been NOI and strides in demand is outpacing supply, as construction across the country has been muted for the last few years.

Yet, we have this wildly disruptive capital markets, driven by the quick pace of rising interest rates. And, you know, what, we don’t know in office, or if you have any office buildings, obviously, we’re seeing some of the things that are going on in the office industry right now. And there’s, you know, and the effects that might have on the on the sector. But tell me about how you’re thinking about the, the climate we’re in right now?

Rappaport 16:58
Well, it’s surely a dangerous time. And most people in the industry, I’ve never experienced high interest rates before. And they probably, many have thought that there, we weren’t going to even have times like this, or times that could even be worse than this. Even though, you know, 2008 or nine, we definitely had issues as well. You know, one has to plan for it. And one has to recognize that sometimes one can take advantage of these times.

And sometimes one has to sit on the sidelines and be safe, and try to make the properties they have as secure as possible. Yes, fortunately, we’re in a sector right now. It’s doing very well. And we don’t have the problems of the office sector have both high interest rates and vacancies at the same time. But we have to be careful. And I am careful in what I say, as an entrepreneur.

I’m in a very dangerous situation, I have lived my life where I have signed for personal guarantees direct and contingent, greater than my assets from the time I was 22. To the time I was in my late 50s. And today, based on the model we have, I take great risk, because one can’t develop a property in the model I have. We’re not a big public company, we’re not a real estate trust, every property stands on its own. There are no funds here.

And because of it, I have to be very careful that I have I can survive over a lifetime, and especially the bad times we’re in now. And so motto I’ve said is to be ready for these times. Now, I’ve always liked to say that in bad times, you know, the cliche is you can make more money in bad times than good times. And that’s true. And I always hoped to be a opportunity buyer instead of a distressed seller during times. All right. Unfortunately, in the past, most times, I haven’t either sat on the sidelines, or I’ve been a distressed seller.

This is the first time in my career that I have an opportunity to be a new opportunity buyer. And so they are properties for sale. The cap rates are definitely higher than they have been in many years. returns are lower, but there’s still still deals to be made. And there’s still lots of money that one can create in times like this, but one needs to be very careful and not get over their skis in recognizing that if one has to balance that risk, and if one doesn’t feel comfortable in a particular deal. Then one needs to stop and wait for it too. You’re not gonna get hurt.

Ressa 20:03
Yeah. Well, sage advice, always been an opportunistic buyer than a distressed seller. So, good line. Well, that was super helpful. I love learning about your story. Why don’t you tell us about your book?

Rappaport 20:20
Yeah, well, about 35 years ago, ICSC came to me, and asked me if I would teach a class at the University of shopping centers. And I asked together on what I do every day, which is putting deals together, requiring a center, leveraging the money I have by raising money from others, and sharing cash flow and appreciation with my partners so that they receive a return relative to the risk they’re taking. And I also can receive a return based on the risk that I’m taking.

And then in 2005, ICSC asked me to write a book on what I was teaching, and it took five years. And the book was published in 2010. And at that time, ICSC was in the publishing business. They published the book, they handled all that, and we had the first book printed, and the first book that ICSC ever printed with the author’s picture on the cover. So I was very pleased and appreciative for what ICSC did, and then in 2013, they asked me if I would print a second edition.

And that took three years, and we printed that one in 2016. And again, ICSC published that book. And then at the beginning of COVID, ICSC, while no longer in the publishing business, also discussed the possibility of writing a third edition, about COVID, talking about inflation that was coming, talking about new case studies that I had learned and the experiences that I had lived through during COVID. And I decided, and reading the book is really important.

When I think, and I tell people, think about how long and hard it is to write a two page, email, or a 10 page report. But a 600 page book takes every day, on the couch and possibly watching TV and multitasking, to write a book with the help of a lot of people here. We wrote it. And we went to four, or one of the best business publishing companies in the country. And they agreed, yeah, publish the book for me. So I have paid all the cost for publishing the book. And all the proceeds are going to the ICSC foundation.

Surely, I don’t want anyone to think I’m writing a book. I’m writing the book, for the same reason that I’ve been teaching this long. I say if I can help someone reach their dreams, then they can reach them. And I’ve done something special with my life. And once that focus, teaching people, generally young people in your 20s 30s and even 40s, leave what you’re doing, and go out and try to do what I’m doing as a true entrepreneur, taking great risk for great return.

Then this book educates them, how to share cash flow and appreciation, how to raise money from partners, how to structure these deals, and where they want to do it in the retail business, which of course is what I’m writing about. In effect, the same thing I’m teaching can be done by someone in any other sector of real estate as well by an example.

While the case studies might be buying a shopping center, renovating, expanding, re-merchandising in value by having money, TI and TA and roof repair, it can be just as much used by a young person in the residential business, buying a 10 unit apartment building and fixing the carpeting and the hallways, the lighting, redoing kitchens and baths creating more value and sharing that upside of cash flow and appreciation wins partners.

Yeah. That’s what this third book that just came out on this past month. I hope for young people to have a dream one day.

Ressa 25:06
Amazing. And for everybody, what’s the name of the book?

Rappaport 25:08
Well, it’s called Investing in retail property. It’s a third edition. It can be purchased on, you know, Barnes and Noble and Amazon and Walmart and Target and many other sites as well. And all the proceeds go to the ICSC foundation.

Ressa 25:30
Fantastic. While the proceeds go to the foundation, one of the things that I heard someone say once before is that an entrepreneur and not in real estate, what leads to well, and getting your name out there and branding. And I think it’s a I think it’s amazing that you’ve written three books.

You know, it’s a fascinating concept. Clearly, you’re helping a lot of people that that’s fantastic, but I think it’s it’s also earned that you have this, you know, place in the ICSC industry with, you know, and you’re so well regarded to you to do this. And it’s out there that you are the one who did this for ICSC when he first happened in the early 2000s.

Rappaport 26:16
Well, thank you. I appreciate those kinds of kind words. Yeah.

Ressa 26:20
So well, that’s great. So the last thing that we typically do on here is we add, you probably have a million. But whether it’s a case study, or just a story of any deal that you’ve ever, that means something new that you think is interesting, I’d love for you to tell a story on any type of deal you’ve worked on. Because, you know, it sounds like you’ve you’ve worked on a zillion types of deals, whether it’s a partnership deal, whether it’s a you know, buying a property, whether it’s a leasing deal, you’ve been involved in, deals galore. So I’d love to hear a deal story.

Rappaport 26:59
Well, let me start off by people saying to me, Gary, could you do this again today, as you started back almost 50 years ago, and I tell people absolutely, and bullish on not just retail, but real estate, as a sector of our economy, that allows a true entrepreneur who wants to take risk, to go out and create tremendous value for themselves and their family and their partners.

I mean, I give great respect to someone who could start a car company against the competition of that, have that business and that sector. But real estate’s not as consolidated, there’s such opportunity still out there. It’s more complicated, maybe. But that just makes it better for the people that are detailed, educated, and are willing to take the risk. So I tell everyone, I would do the same thing.

Again, I wouldn’t change anything that I’ve done, I am not someone that came from a private school, an Ivy League education, and work for any, you know, large, big, you know, companies on Wall Street, I’m a grassroots guy that started raising money in small increments over an entire lifetime, with a model that stays slowly, carefully over time, one to create long term assets greater than one could one could ever dream about as a young entrepreneur.

And, and so I’m not a merchant builder. I’m not looking for high returns in one or two or three years. And my investors are investing for the long term for their retirement for their children. And it’s a different model than someone that’s looking for high returns and a quick turnover again, and again. And again, when I look at all my properties, I still go back to that first one as the model. I have a C-Minus property and I made a C-Plus.

But I did a deal where I had a big back end promote a preferred return to my investors and the equity that I put in, in 1984. But I returned everybody’s money in 1989. And then I ended up refinancing and in 1999, just a little bit more and took some of the cash out refinance, not a sale and leverage that into another deal. But then I also refinanced it in 2009. And I owe refinanced it in 2019. And I hopefully we’re going to be healthy and alive and I’m going to be able to refinance it in 2029.

So the model is to slowly let the income go up every year. Let the appreciation, I’m sorry, let the amortization on the loan occur. So that if you hit the bad times in one of these 10 year periods, with high interest rates, you still have enough value in the property, that while your cash flow might go down, you’re not having a problem being able to refinance, and you’re not going to lose the property.

And so when I teach the model, what I’ve done, I have to look back at that first shopping center 39 years ago, and say, that’s the most important one. Because even though someone drives down the road, they might not look at it twice, because of what it is. But it is a perfect example of what I do. And why real estate is such a wonderful business to be in, if one wants to take the risk of going out there and building or acquiring property for the long term.

Ressa 30:59
Well, yeah, on that note, that was amazing. Thank you for taking us through that. I want to take us to the last part of the show. I’ve got some questions for you. Are you ready? All right. These are five questions. Question one. What extinct retailer do you wish to come back from the dead?

Rappaport 31:21
Well, you know, the one I mentioned, I don’t think anybody in this podcast is ever going to remember unless they read my book. Because in the beginning of the preface, there’s a picture of me in front of this store in Hempstead, New York, called Abraham and Straus, it was called A&S, it was a department store. And it was where my mother took me to buy my clothes. Before I was a teenager.

And it shows, has a remembrance to me of happy times, of buying things in a store that while the market keeps changing, stores come and go. If that store was around, I’m sure it was owned by one of the big, you know, major department store companies that are maybe still around today. But that particular store is not. But I have very fond memories of Abraham and Straus, called A&S.

Ressa 32:31
Amazing. Very cool. So second question. What is the last item over $20 that you actually bought in the store?

Rappaport 32:48
Well, you know, I paid for it in the store. But I don’t think I picked it up. So here’s how things have changed. And I went into, I went into the mall, Tyson’s Corner. And I went into a store called Slma S-L-M-A, to go buy a gift for my wife, and how things have changed. I went in, and I was able to see this, the particular piece of clothing I wanted to buy, but they didn’t have it in the color and size that I wanted.

The person in the store, goes over to their iPad, quickly hits a couple of buttons, and says, we have that piece in the color and size you want in the warehouse. You can buy it right now. And you’ll have it in your house tomorrow morning before noon. And I said, you have a deal. And of course I bought it. When you think about retail, I love retail. It is the most exciting sector, the most detailed sector when I called a sector with the best risk versus return adjustment because it’s so difficult, if you’re good at it.

And when I think how fast it moves and how exciting it is. This example is exactly what wasn’t there in the past. But is what retail is today. When we talked about the mutual complements of the internet, and brick-and-mortar stores, and warehousing in front of store and back of store.

That example shows me exactly why retail is here to stay. It’s not going away. And it’s just going to get better as we balance and complement all the different sectors of real estate together to make something exciting for all of us. And what this did is it got my wife a present that she otherwise might not have gotten, but she got because of what retail is today.

Ressa 35:02
Amazing. Okay, last question. If you and I were shopping at Target, and I’ve lost you, what aisle would I find you in?

Rappaport 35:15
You know, I love puzzles. And I, I love specifically Ravensburger puzzles there because they are cut in a certain way that the pieces are relatively easily to put together. And during COVID, I must have put together two dozen puzzles of 1000 pieces each. Now I don’t do a puzzles that are 5000 pieces, or the ones that are 250. But these puzzles that are 1000 pieces somehow fit exactly what I want. And so I would sit during some of the evenings during COVID.

Even though I went to work every day during COVID, I never worked from home, I always went to the office. But at night, I would sit there at times when I wasn’t writing the book. And I’d be watching TV in front of this big table with 1000 pieces. And I would be doing these puzzles. And then when I finished them, I would turn them upside down. And I would tape them so that they would always be there. So I now sit at my house. And in the room. That’s my exercise room.

I’ve got a couple of dozen puzzles, each one 1000 pieces each on the wall of this period of time that I did during COVID. So when I look to buy something, or I go in the store, I’ll even tell you I like Target. And while of course you can buy them online, but I go to the store, I go to the back of the store where the puzzles are. And I look and see what are the newest Ravensburger puzzles that are available for purchase. And that’s what I would purchase if I went to Target again today.

Ressa 36:58
Wow, what an amazing answer. You’re the first to say that, puzzle section. So I really appreciate it. Gary this was great. What did I ask him that I shouldn’t have that you might want to tell everybody?

Rappaport 37:14
I think the most important thing I said was if somebody wants to further talk to me, I am always available. You know my email address, gdr, Gary Dennis Rapoport, Or just Google my name and send me an email or send something to the corporate website and say I’d love to have a zoom call with you.

I will talk to anyone who feels that it’s worth their time to talk to me, I will try to help anyone to reach their dreams further their career, and I will always find the time to do it. Because I think anyone could find the time to do whatever they want to find the time and I always find the time and then when I say to people, if I help you, then one day you make sure to help someone else.

Ressa 38:12
I, you know, that’s a great line because I thought, I don’t know why I thought this, but I thought you might say if I knew one day hopefully you’ll help me. But I love that you said one day you help someone else. That is a really great line.

Rappaport 38:26
Chris, it’s been a pleasure to talk with you.

Ressa 38:28
It’s been a pleasure to talk to you. Thank you so much.

Thank you for listening to Retail Retold. If you want to share a story about a retail real estate deal that you were a part of on our show, please reach out to us at This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney Also don’t forget to subscribe to Retail Retold so you don’t miss out on next Thursday’s episode.

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