O'Keefe in the News

After father’s death, Surnow’s sons build a family plan in real estate

After father’s death, Surnow’s sons build a family plan in real estate

March 28, 2016

As published by Kirk Pinho, Crain’s Detroit Business

Sam Surnow has his hands in $107 million worth of new development projects in Royal Oak and Birmingham and a real estate ownership and management company with a portfolio valued at $275 million.

But about a year ago, it was about $3,000 that was bothering him.

“What the hell is this?” the 29-year-old president of The Surnow Co. remembered thinking when he received a bill shortly after his dad, Jeff Surnow, the founder and owner of the company, was struck and killed by an on-duty police officer on March 1, 2015, while bicycling in Hawaii.

The bill wasn’t for funeral expenses. Nor was it for repairs to one of his Birmingham-based company’s tenant spaces or anything else real estate-related.

The charge: A replica of a 180-pound, 7.5-foot sailfish that Jeff, 63, had caught while vacationing with friends in Costa Rica in December 2014.

A year after Sam opened the bill in the same Martin Street office downtown in which his father worked, he and his 26-year-old brother, Max, are putting the finishing touches on a pair of key projects.

Those are a new $100 million mixed-use development with city hall space for Royal Oak to be ready for occupancy in the first quarter of 2018, and a $7 million redevelopment in Birmingham of the David Wachler & Sons jeweler building, expected to open with tenants including athletic retailer Gazelle Sports, in the third quarter.

Those projects — started by Jeff but reeled back into the boat with Sam and Max’s help following the family patriarch’s death, which is still under investigation in Hawaii — were adrift when he died.

But now the sons seemed to have worked out a number of kinks following the change in the family — and the family business.

Bumps along the way

It wasn’t a foregone conclusion that Sam would take over The Surnow Co., or that he and his brother would transition into new roles as relatively smoothly as they seem to have done.

There were plenty of bumps along the way, he says.

Development projects in the works when Jeff died — including the Royal Oak City Center development and the 18,000-square-foot Wachler building project — were in peril.

Sam, who spent four years in New York City with PricewaterhouseCoopers LLP, most recently as a senior associate, handled some finance-related items and other work for the company after returning home a couple of years ago before his father’s death, but when it came to the nitty-gritty of being a landlord and developer, he knew he was still green.

Among the challenges: Maintaining and strengthening relationships with longtime tenants across the Surnow portfolio, which is about 2 million square feet in some 60 or so buildings; asserting that he was, in fact, the new Surnow in charge; and fending off those looking to buy properties his father had put under contract before his death, for example.

“While I had been working with my father day to day, I had only been exposed to certain areas of the business. I started to get very, very immersed, but I didn’t know the depth and the magnitude of the portfolio until I was actually able to come in and see the picture,” said Sam, a graduate of the University of Colorado, about 200 miles northeast of Aspen, where his family has a home on Cooper Street.

Sam is the first to say that he has had help and guidance along the way, including from his younger brother.

Max, who started Birmingham-based Cooper Street Cookies LLC while in college at Michigan State University with a family recipe, has started taking on more responsibility in real estate, including property management, accounting and tenant relations for The Surnow Co., which employs about 30 people.

“He doesn’t care what the task is,” Sam said of his brother. “It’s always all hands on deck with him.”

Lisa, their 23-year-old sister, handles social media for the cookie company, which had $80,000 in sales its first year in 2010 and has since grown into the “multimillions,” Max said.

She does not currently do any work for The Surnow Co.

Michael Surnow, Jeff’s brother and a longtime partner in real estate deals, has been “vital to our organization and is always there to offer help or guidance and support in any way possible,” Sam said.

Unlikely teaming

When Ron Boji walks into a room, the atmosphere changes.

Boji, the animated and passionate real estate developer who makes a daily commute from Orchard Lake to Lansing, where his Boji Group is headquartered, commands attention without asking for it through sheer force of personality.

The Surnow brothers, by contrast, are assertive and gaining confidence in their real estate acumen, but largely quiet, reserved.

So how did this unlikely group get together? Call it success arising from tragedy.

Boji’s cousin, Randall Denha, is a Birmingham-based estate attorney whose firm is Denha & Associates PLLC. Also, the owner of RAD Development Group, Denha had both Boji and Jeff Surnow on his client roster.

When Jeff died, the Surnow brothers were considering backing away from Jeff’s plan to build a new mixed-use development with Royal Oak city government as a key tenant, Boji said.

That’s when Denha stepped in, introducing the Surnow brothers to Boji, whose company specializes in public-private partnership developments, Boji said.

Central Park Development Group LLC, of which Boji is majority owner, was born, and a year later its project that would reshape the landscape of 11 Mile Road east of Main Street is speeding toward starting construction this year, Boji said.

“Jeff approached us a couple years ago with some great ideas,” said Mayor Jim Ellison, who campaigned on the need to address the aging City Hall in 2003. “He passed and we were disappointed, but his sons picked up the ball and came back with a great plan.”

Details of the plan

It’s still just a plan. The city could opt not to proceed with the development and instead rehabilitate the existing building. An April 18 meeting is scheduled for 7 p.m. to present the plan to the public as proposed by Central Park Development Group, the entity formed for the development.

The 190,000-square-foot building would include 30,000 square feet for city government operations and about 130,000 square feet of leasable office space with 20,000-square-foot floor plates. It would be completed in time for the city and other tenants to occupy the building by the early part of 2018, Boji said.

The building would also include a rooftop garden terrace and event center, along with leasable space for a specialty grocery store and a restaurant with a liquor license, Boji said.

Also included in the project plans are a 533-space, six-story above-ground parking deck, a park with an amphitheatre and playground, and new Royal Oak Police Department headquarters on the eastern edge of the site north of the existing 44th District Court building.

It is expected to be financed with about $50 million from the city raised through the sale of bonds, and another $50 million from Central Park Development Group, including a construction loan secured by the development entity. Twelve-year property tax abatements are expected as part of the project financing, the overall package of which is expected to close Sept. 19, which would have been Jeff and his widow Elaine’s 32nd wedding anniversary.

Forging ahead

It wasn’t until months after their father’s death that Sam and Max had time to absorb what happened.

Real estate experts who have worked with the Surnows said the brothers rebounded admirably and, although there was a learning curve, have slipped into the family business as guiding forces for the 38-year-old company.

The Surnow Co. is perhaps best known for its redevelopment of the 19,000-square-foot former post office building at 320 Martin St. in downtown Birmingham; and the redevelopment of the 31,000-square-foot former Birmingham Public Schools Board of Education building at 550 W. Merrill St. into office space.

After Jeff died, “you’d think to put all the business on hold, but that’s not the way we were raised, and we were really focused on making sure our family was going to be OK,” Max said.

Dave MacDonald, executive vice president in the Royal Oak office of Jones Lang LaSalle who has been tapped to lease out space in the Royal Oak City Center and Wachler building projects, said the two sons have taken over the family business with the same determination that Jeff had.

“Their dad was a very seasoned real estate guy,” said MacDonald. “They are both very hard-working — there are different personalities, but there is the same drive to get these done.”

Things could have gone far differently for the Surnow sons, said Pat O’Keefe, CEO of Bloomfield Hills-based turnaround firm O’Keefe LLC, which has worked with a number of real estate companies in the past.

“The family is lucky that they had someone within it to step in, pick up the ball and run with it,” he said. “Not all siblings have an interest in doing that.”

Matt Farrell is a real estate executive and friend of Jeff’s. “They both have done a very, very nice job of getting control of the organization,” said Farrell, who is CEO and co-founder of Bingham Farms-based Core Partners LLC, which was a tenant in the former post office building.

Finding a new home

The Wachler jewelry building, which is expected to be rebranded as the Woodward Building when complete, is as much of an institution in Birmingham as Jeff Surnow was.

David Wachler & Sons was founded nearly a century ago in 1922 and the third-generation business has called Birmingham, and that location, its home for 33 years.

But after Jeff died and Sam took over The Surnow Co., what would happen with the jeweler was up in the air.

Would owner Buzz Wachler be allowed to stay in his location at Maple Road and South Old Woodward? Or would he have to set up shop elsewhere due to the extensive reconstruction?

The answer was two stores down, where Sam helped Wachler find and build out new space while construction was taking place.

It’s in its new location at 112 S. Old Woodward Ave. that the jeweler will remain, Wachler said.

“We like it here,” Wachler said of the site owned by Gwynn Building LLC.

He knew of Jeff’s plans to remodel that Wachler building, but he thought there was a chance the construction would allow him to remain open in that space during it.

“As I see what had to be done and the extensiveness of the construction, obviously there was no way,” Wachler said. “I accepted and understood that. I had a great relationship with Jeff, and I have a great relationship with Sam and Max. … I’m fortunate in that regard.”

A father’s presence

The grief remains palpable with Sam and Max.

Sam, who married his longtime girlfriend just a few months before Jeff died, recalls an overjoyed father at his oldest son’s wedding. His eyes watered briefly when describing it, but no tears were shed; he choked them back.

“We were all getting ready and drinking Scotch together, and his speech was incredible and my brother’s speech was incredible,” Sam said.

Last week, Sam looked at photos throughout the office, now his. They paint a picture of a father who was loving and adventurous (he was an avid cyclist and climbed Mount McKinley), philanthropic and devoted to community.

But most of all, he was devoted to them, his sons said.

“I sit here,” Sam says, looking around his father’s former office, “and Max sits there,” looking out and pointing to the office area connected to his, separated from the rest of The Surnow Co. space by a door.

Jeff’s name is still on it.