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Stephen Ross’ early childhood was spent growing up in Detroit, Michigan. Steve’s mother, Gail, was the daughter of William Fisher (Velvil Fisch) and Mollie Fisher (Malka Brody) who emigrated to the United States in 1907 to escape persecution of the Russian Jews. William would establish himself in Detroit in the oil reclamation business.
William and Mollie Fisher would also have a notable son, Max Fisher. Max was an accomplished business person and philanthropist. Max Fisher played high school football and attended Ohio State University. After working with his father, Max first attained entrepreneurial success in the oil business by raising capital and establishing Aurora Oil.
Max Fishers success allowed him to become a prominent philanthropist and civic leader. He invested significantly in the development of Detroit. Max was an advisor to the country’s political leaders and active in his support of Isreal. He also made significant donations to his alma mater, Ohio State.
Stephen Ross’ grandparents encouraged him to follow his uncle Max’ example, and given the parallels in their lives, it’s easy to see he did so. They both played high school football. They both attained phenomenal success in business. Both Stephen Ross and his uncle Max Fisher invested in the development of the communities and causes that were meaningful to them, and they both gave significantly to their alma maters.
Stephen Ross’ father, David Ross was Canadian, but born in Poland. He pursued a career as an inventor, but despite his various inventions and patents, his efforts never led to financial success. When Steve was 14 years old, his maternal grandfather, William Fisher fell ill. William had acquired the The Martinique Hotel on Collins Avenue in Miami Beach. Steve’s family left Detroit and moved to Miami Beach. Steve’s father, Dave, would manage the hotel.
Stephen Ross helped out in the family hotel, but he rebelled living in Miami Beach. Miami was a different world than what he was used to in the Midwest. His grades in high school faltered. He played high school football, but he also wanted to make some money. He was able to get a job after school as a beach boy at the legendary Fountainebleau Hotel down the way from his grandfather’s Martininque Hotel.
Stephen Ross had always desired to return to Michigan to attend the University of Michigan. Unfortunately his grades prevented him from doing so straight out of high school. Fortunately the University of Florida gave him a path to Michigan, despite his lackluster performance as a student.
The University of Florida accepted applicants if they scored high enough on the statewide exam. Stephen made the cut. After a year, he transferred to the University of Michigan in Ann Arbor to earn his Bachelor of Business Administration degree.
With the war in Vietnam ongoing and his connection to Michigan, Stephen continued with his education. Although he contemplated earning an M.B.A from the University of Michigan, he attended Wayne State University Law School in Detroit earning a Juris Doctor degree.
After earning his law degree, he went to New York. Arriving in New York, he discovered - he came home to a place he’d never been. Deepening his legal and technical skills and education, he earned a Master of Laws in Taxation from NYU’s School of Law
Upon earning his degree from NYU, Stephen Ross left New York and returned to Detroit to work as one of 22 tax attorneys at Lybrand, Ross Bros. & Montgomery (The firm that would become what is Coopers and Lybrand today.) He found the firm had a nationwide practice and was progressive relative to the firms in New York.
Steve had several real estate clients. When he saw his clients were successful upon following his advice, Steve discovered his knack for real estate. In his typical fashion, he also thought - if they can do it, so can I. When one of his partners asked him to go to New York for a foreign tax seminar, he realized he wanted to go to New York for good. He quit his job and returned to New York to establish himself.
Laird Inc. was an investment banking firm in New York. Stephen got a job in its real estate subsidiary, Laird Properties. The company had attempted to develop real estate assembling locations in Manhattan such as 550 Madison Avenue and 803 3rd Avenue.
The problem was Laird didn’t have enough capital to be a real estate developer. Instead, Stephen looked at leveraging Laird’s investment banking capabilities to earn fees by raising capital and creating entities that would develop the properties.
Although the efforts were to no avail, Stephen learned from their mistakes. The development sites were eventually sold off, and Stephen would be let go of the company. A few years later, Laird would be acquired by G. H. Walker & Company, Inc. in 1973.
Bear Stearns was an investment banking and securities trading firm based in New York. Stephen Ross had a friend at Bear Stearns that told him about the business he had put together and brought him in. After going through the interview process, they hired him.
At Bear Stearns, Steve was working on ideas to create companies, and he had put together a plan to create an affordable housing business. His idea was approved. The company needed someone to oversee the project. Despite the fact that Steve had put the plan together, his boss said he didn’t have any confidence in him to do the job. Steve took offence and reacted. He was consequently fired from Bear Stearns.
In understanding Stephen Ross’ entrepreneurial leap, it’s important to know the historical background and environment in the era Steve came of age. It was a tumultuous time in American History, but in the turmoil came opportunity.
In the 1960’s, both President Kennedy and his brother Robert Kennedy were assassinated. The American involvement in Vietnam had escalated into a full blown war, despite never being officially declared. The United States government was using the draft to support its military campaigns in Southeast Asia. For those continuing their education, a college deferment was available. This deferment allowed many like Steve to continue their education.
During the 1960’s, poverty and affordable housing had become a crisis for many. Many movements arose to fight for and improve conditions and opportunities for communities that had been subject to discrimination across the nation. People such as Martin Luther King Jr would lose their life in their pursuit of making the world a more just place for others. Civil unrest had spread across the nation sparking riots in Chicago, Los Angeles, Ohio, New Jersey, and even Steve’s home town of Detroit, Michigan.
To fight poverty and inequality, President Johnson embarked on a series of legislative acts that would spawn his Great Society programs. This legislation addressed civil rights, education, poverty, healthcare, the environment, and housing. The Civil Rights Acts of 1964 and 1968, the Voting Rights Act of 1965, and the Social Security act of 1965 that established Medicare and Medicaid are all examples of programs that were established under President Johnson as part of his vision for a Great Society.
The Section 236 Rental Housing program arose out of President Johnson’s drive to address the affordable housing crisis of the time. The supply of affordable housing was woefully insufficient. Public housing programs were failing to solve the problem. Instead of solving the problem, the public housing that was built was seen as creating and exacerbating problems of the people it was meant to help.
Instead of relying on public housing projects, the Section 236 Rental Housing program was designed to provide incentives to the private sector that would attract investment capital which would allow developers to build affordable housing. It was an innovation in that it brought in the private sector and private capital in partnership with government support to be a part of the solution. This is in contrast to public housing which was entirely government funded, built, and operated.
The primary mechanism of the Section 236 programs was to provide a tax shelter for investors while subsidizing interest rates and extending the loan terms so the development could be underwritten and financed. In general, real estate syndicates are established in which investors buy shares so they can benefit from the tax advantages of developing and operating real estate.
Under the 236 program, real estate syndicates or other entity would develop and even operate the affordable housing project once its built. The expenses of the property, such as depreciation, are passed through to the investors so they can deduct them on their taxes. This become especially advantageous when the investors use debt to finance the development of the real estate since they only have to contribute a portion of the capital to build the project, but accrue the full benefit of the tax deductions.
Although the Section 236 rental housing program would come to an end, the program was successful in creating a large number of affordable housing units in a relatively short period of time. Affordable housing programs such as the Section 8 program would follow in 1974 and the Low Income Housing Tax Credit would subsequently come into existence in 1986.
Let go from his job once again, Stephen Ross didn’t have the desire to go through the process of finding another job and working for someone else again. He loved New York and wanted to stay there, but without a job, he didn’t have the income. His mother lent him $10,000 to cover his expenses until he made his way.
If Steve had one trait that would tell us what his next move would be, it would be whenever he saw someone else do what others might think of as out of reach, he didn’t see why he couldn’t do it himself.
Stephen Ross didn’t deliberately set out to be able to take advantage of the overlooked opportunity in affordable housing that lied ahead. He admittedly wasn’t sure what he wanted to do. However, his education and experience set him on the path to gain the skills, experience and capabilities to take advantage of an opportunity many had missed.
Working as a tax attorney at the firm that would become Coopers and Lybrand, Stephen Ross had many real estate clients that allowed him to learn about the tax shelters available to wealthy investors that resulted from President Johnson’s Great Society programs. With his legal background, he learned how to structure the deals and sell the tax shelters. Steve also discovered his passion for business and real estate.
Moving to New York allowed him to discover the world of investment banking, corporate finance, and real estate finance. Although he was fired from his jobs at Laird Properties and Bear Stearns, he got to learn from their mistakes. Working for Bear Stearns also prompted him to develop a business plan before he lost his job.
Through his work, Stephen Ross had made a key insight. He saw the tremendous opportunity and financial gains to be made in real estate development, but with the high rewards came high risks and the susceptibility to the highs and lows of the economic cycles in the real estate market. If he was going to succeed at it, he’d have to have another stream of income to compensate for, and support, the boom and bust business of real estate development.
Affordable housing was the answer. Earning fees by selling the tax shelters to develop affordable housing would provide the development business the income stream it needed to get started and ride through the cycles in the market. It would also let Steve learn the real estate development business, while hedging him and his investors from market rate risk.
In 1971, Stephen Ross reworked his business plan and set out to raise the capital to move forward on his own. Unfortunately, he didn’t have the track record of success others wanted to see to back him. In spite of this, he went ahead anyway, forming a few real estate syndications and realized he could do it himself.
In 1972, Stephen Ross founded Related Companies, keeping with his plan and bootstrapped himself. He dedicated himself to building best in class affordable housing across the country and reinvested what he made back into the company. He subleased an office in 666 5th Avenue, building up his staff and his brand. As he says “People want to do business with people they feel are successful,” and he lived up to the image he portrayed.
He spent the next eight years focused on learning the development business and building on the order of 5000 affordable housing units. He would also build upon the related aspects of the real estate business such as management and capital markets, hence the name “Related”. For example, although he started by selling tax credits, he broadened his capabilities into financial services by also providing debt and equity.
Stephen Ross would expand his business and his success in the decades to follow. Steve’s company would get a big break when the City of New York put out a Request For Proposal (RFP) for a mixed use project on land from 16th Street to 24th Street near Stuyvesant Town near the East River. After having participated in a project at South Shore in Miami, Steve felt he had what it took for the undertaking.
Stephen Ross was introduced to the people at Cadillac Fairview. Cadillac Fairview was a Canadian commercial real estate investment and development company that entered the United States market in 1975. He pitched them on the project, and they accepted. They beat out other developers and they were selected for the project. Stephen Ross and his firm, The Related Companies, was on the cover of the New York Times. The notoriety elevated him and his company to the next level.
Projects ensued and he expanded into office buildings in a development project with Manhattanville College. He then continued with projects in Battery Park and Carnegie Hill. He would eventually acquire 625 Madison Avenue near Central Park South where the New York Coliseum, a convention center at Columbus Circle would catch his eye.
The Coliseum was a Robert Moses project built in the 1950’s. It was functionally obsolete and the property was underutilized. However, the property had a prime location. It was highly visible and accessible at Columbus Circle across from the southern end of Central Park.
The project had been controlled by Boston Properties, but New York was suffering economically along with the rest of the country during the downturn of the 1990’s. Steve initially had an idea to showcase K-Mart at the location, but the idea was rejected.
Stephen Ross saw an opportunity with Time Warner. Time Warner was one of the largest media companies in the world. It occupied space throughout the city, but it didn’t have an iconic location in New York that showcased its brand. In fact, it was located in Rockefeller Center that was identified with its competitor, NBC.
Stephen Ross met with the CEO of Time Warner at the time and pitched his idea and the importance of an iconic property that would uphold the company’s brand. The CEO agreed, and The Related Companies mobilized to acquire the site and build Time Warner Center. The 2.8 million square foot 40 story mixed use project was completed in 2004. Formerly referred to as Time Warner Center, the property includes The Shops at Columbus Circle and the office tower that was formerly occupied by Time Warner, but has now been taken by Deutsche Bank as of May 2021.
Stephen Ross’ most ambitious yet, Hudson Yards is the largest real estate development project in North America with an anticipated cost of $25 billion. Located next to Chelsea over the Hudson Yards Eastern and Western Rail Yard on the Westside of Manhattan, Steve’s vision is to create a live, work, play environment that will appeal to younger up and coming generations making their way in New York.
The area was initially slated to build a stadium in support of New York’s bid to host the 2012 Olympics. When the bid to host the Olympics fell through, the Metropolitan Transit Authority put out an RFP for the location. The city had embarked on extending the subway to service the location. In addition to investment in the surrounding parks, renovation of the Javits Center, and renovation of the Moynihan station, the rezoning of such a large area in Manhattan opened up a huge opportunity to envision a project that could truly be impactful.
