How Zev Mandelbaum’s developer family aims to avoid ‘shirtsleeves to shirtsleeves’

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Zev Mandelbaum, chief executive officer and president of Toronto-based Altree Developments, is a third-generation member of the developer family behind H&R REIT.

The family has a multigenerational business model that aims to get around the “shirtsleeves-to-shirtsleeves” risk that can plague enterprising families.

Starting with his grandfather Sandy Hofstedter, founder of H&R Developments, which eventually became H&R REIT, the family has started nearly two dozen development companies.

This includes Altree, which is focused on high-end multi-family and hospitality projects.

Mandelbaum recently spoke with Canadian Family Offices about growing up in the family business, and the challenges and promise of commercial real estate in the U.S., Canada and, in particular, Toronto.

How has your family history helped shape Altree?

“My grandfather came to Canada in 1948, He was a Holocaust survivor coming from Auschwitz; and had lost everything.

He came as a furrier, which didn’t work out, and then sold eggs off the back of a bicycle.

Not speaking a word of English, he ended up building a house, and from there, 20 years later, he became one of the biggest real-estate players in Toronto.

Over the years, some of his friends were a who’s who in real estate – Abe Bleeman (Medallion Real Estate), Paul Reichmann (Olympia and York) and Eugene Kohn (Fieldgate Homes) – and our families inter-married, forging deep business ties.

In 1996, H&R rolled commercial assets into H&R REIT (with $11 billion in assets today).

My father took the high-rise holdings, rebranding them under Lanterra Developments, along with his partner Barry Fenton.

And so we have been a multigenerational family business, operating in various firms for years, and I’m third generation.

About six years ago, I took my expertise in commercial real estate from working in many of these businesses and started Altree Developments.

We build high-rises and low-rises you see in Toronto – for rental, condo and hotel – and in the U.S. and the Caribbean, and now have about $6 billion in projects under development.”

How does the family being involved in multiple development businesses reflect your grandfather’s succession plans?

“My grandfather had this vision where everyone had their own company. The family had that nucleus of capital, knowledge and support, allowing family members to sub-divide into different businesses so each could find their own success.

That’s really the succession plan. As you know, in the family office space, there’s that saying of ‘shirtsleeves to shirtsleeves in three generations,’ and so how do you protect against that?

You create independence, and that was my grandfather’s concept.

We partner with each other from time to time, the benefit of being part of the family, but we’re also independent, able to make our own way.”

Each company seems to focus on a particular type of real estate; what is Altree’s?

“I love lifestyle, and I’ve always believed human connection is just so important. We get so involved in digital communication that we tend to lose real connection.

So, when I develop projects, I always have this ethos of coming together – people meeting with other, real-live people, not just in the digital space.

Take Thirty Six Zorra (a more than $250-million, 36-storey, 459-unit condominium in Etobicoke), for example.

We created this themed game-room with old-school games – video games like Pacman CHK and ping pong – and a demo kitchen where people can cook together.

That experience infusing multi-family with high-end amenities aimed at togetherness eventually led Altree to the hotel space, and our Vie L’Ven Luxury Resort and Residences in St. Maarten (currently under development) is an example of that.

Much of what Altree does is multi-family development – condominiums and rental projects – which you believe in Toronto, at least, are one and the same; why is that?

“We’re roughly 50-per-cent condo and 50-per-cent rental projects.

We tend to do a lot of condos in Toronto and a lot of purpose-built rental in the States, like the Westside Square in Jersey City.

Overall, I am a big believer in purpose-built rentals. Condos are great, but, ultimately, what are they? You’re building 400 individual rental units because most buyers are investors, and most people rent because they can’t afford to buy. So, one way or another, we’re creating rental stock, which Toronto needs.

That said, building condos is very expensive in Toronto, and you have to sell units for a really high price to make up for all the soft costs, like high development and municipal fees.

Purpose-built rental projects are a different ballgame with fewer fees but bigger financing challenges, even with CMHC (Canada Mortgage and Housing Corporation) support. You need double, sometimes triple, the amount of equity to build a purpose-built rental in Toronto than a condo project, and so it’s not nearly as profitable to build a purpose-built rental here as it is in the U.S. Rents are higher there; construction costs are cheaper, and the profitability of a purpose-built rental is better as a result.”

If it’s so challenging to build in Toronto, why do it?

“Toronto is simply a great place with fantastic immigration. It’s a constantly growing and improving city with a huge need for housing that isn’t going away.

Yes, Toronto has an affordability problem that will persist, but that’s the case for all major cities of the world. What it has going for it that others may not is that Canada is a very stable place and, by extension, Toronto is a very stable city.

So maybe you’ll get more return elsewhere, but you’re getting that stability here. It’s not a geopolitical city or a dangerous place, but it is a city that is getting busier and busier, and bigger and bigger, and it needs housing. That makes developing here worth it.”

You believe Altree is up to the challenges ahead for commercial real estate, specifically because of your family history; why is that?

“Simply, real estate is in our DNA. I was born to develop. As long as I can remember, that’s all we did and all we talked about, growing up with stories of good and bad deals – good times and bad times – all of which helps weather storms and navigate problems.

Our family history is one of resilience and perseverance. Both sides survived the Holocaust, and my grandfather got knocked down repeatedly over his life and business career, and always got back up.

I hope I can be that same kind of person – one who can persevere through all the challenges to come.”

Responses have been lightly edited for clarity and length.

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