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Speaker 1: This is Mesters in Business with Very Results on Bloomberg Radio.

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Speaker 1: This week on the podcast Yes Again, I have an

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Speaker 1: extra special guest. His name is Michael Levi. He has

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Speaker 1: a fascinating background in real estate, both from a finance

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Speaker 1: perspective as well as an investing and development perspective. He

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Speaker 1: is currently chief executive officer at Croll Holdings, the largest

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Speaker 1: builder of apartments in the United States. They've been around

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Speaker 1: for seventy five years and they have well over thirty

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Speaker 1: billion dollars in investments across twenty one local markets. If

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Speaker 1: you're interested in everything from apartment buildings, industrial space, warehouses,

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Speaker 1: what's going on in the world of office space, how

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Speaker 1: to invest in retail? Right, you would imagine retail is

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Speaker 1: a disaster, but it turns out certain types of retail

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Speaker 1: is doing really well while other types are lagging. The

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Speaker 1: same is true in office buildings. I think you will

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Speaker 1: find this to be a fascinating conversation. I know I did,

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Speaker 1: and so, with no further ado, my conversation with Crow

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Speaker 1: Holdings Michael Levy. I'm Barry Hults. You're listening to Masters

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Speaker 1: in Business on Bloomberg Radio. My extra special guest this

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Speaker 1: week is Michael Leviy. He is the CEO of Crow

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Speaker 1: Holdings and oversees all of their business activities. Crow runs

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Speaker 1: about thirty billion dollars in assets, investing in commercial real estate.

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Speaker 1: They have been around for more than seventy years and

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Speaker 1: operate in over twenty local markets in the United States. Previously,

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Speaker 1: Michael was Morgan Stanley's Chief operating officer for investment management

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Speaker 1: and a member of the firm's management committee. Comes to

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Speaker 1: us with bachelor's from n y U Stern School of

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Speaker 1: Business and a j d from Brooklyn Law School. Michael Levie,

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Speaker 1: Welcome to Bloomberg. Thanks Barry. It's great to be here.

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Speaker 1: It sounds like you are very much a New York kid,

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Speaker 1: with U, n y U and Brooklyn on on that resume.

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Speaker 1: I am. My grandparents settled from Russian into Brooklyn and

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Speaker 1: the nineteenteens, and my dad grew up there, and uh,

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Speaker 1: when we were little kids, moved this out to Long Island,

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Speaker 1: and and I was raised in Port Washington, and I

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Speaker 1: went to n y U. Was the best college I

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Speaker 1: got into, and one thing led to another, and I

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Speaker 1: spent most of my life here. So so let's talk

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Speaker 1: a little bit about your professional career. You started in

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Speaker 1: real estate investment banking. Was this mostly M and A

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Speaker 1: deals or refinancing or transactional what? What was that like? Sure? Um,

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Speaker 1: I came out of law school in n and uh

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Speaker 1: in Wall Street was recapitalizing the real estate industry, and

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Speaker 1: so I got dropped into the real estate group because

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Speaker 1: there was a lot of transact and flow and it

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Speaker 1: was equity offerings at that time, primarily I p O

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Speaker 1: s and secondary offerings. There was some M and A

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Speaker 1: activity that took place, but it was a wave of activity,

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Speaker 1: and as a young guy looking for opportunity, there was

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Speaker 1: a new deal a week, and so we worked really

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Speaker 1: really hard. But you get your chops early on by

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Speaker 1: working really really hard. So it was a great time.

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Speaker 1: Was there a prior interest in real estate or did

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Speaker 1: you just kind of stumble into whatever it was hot

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Speaker 1: at the moment? Absolutely not. I UM. When I was

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Speaker 1: going to law school, I went at night and I

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Speaker 1: worked during the day for the lawyers, and uh, most

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Speaker 1: of the lawyers I worked for said, you don't want

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Speaker 1: to do this, you know, you want to work on

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Speaker 1: the business side. Those guys have more fun and they

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Speaker 1: make more money. So UH, I talked my way into

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Speaker 1: a job and investment banking. I went into training and

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Speaker 1: uh they placed me where they saw fit and dropped

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Speaker 1: me into the real estate group and well well as

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Speaker 1: a recovering attorney myself. I could tell you those guys

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Speaker 1: were telling you that there's there's less tedium and more

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Speaker 1: fun on the business side because every deal, every transaction,

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Speaker 1: there is a framework that you learn, but each one

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Speaker 1: is specific and unique to those circumstances. Yeah, it was.

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Speaker 1: It was great fun. I loved and respect the law incredibly,

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Speaker 1: but it turned out to be a great decision. Uh,

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Speaker 1: I can't can't agree with you. So, so how did

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Speaker 1: you end up at Morgan Stanley for almost two decades. Well,

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Speaker 1: I started out at Prudential Securities and that's where I

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Speaker 1: worked while I went to law school, and they gave

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Speaker 1: me a chance in the business. Um, I had an

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Speaker 1: opportunity a couple of years in to work for Solomon Brothers,

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Speaker 1: and UH. At the time, you know, I knew that

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Speaker 1: there was a pecking order and investment banking and Prue

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Speaker 1: was great, UH and great people I worked for, but

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Speaker 1: I knew that Solomon was to step up, and so

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Speaker 1: I took the opportunity with Solomon Brothers. Well, very quickly

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Speaker 1: Solomon Brothers got gobbled up by Smith Barney, and very

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Speaker 1: quickly Smith Barney got gobbled up by City Bank, and uh.

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Speaker 1: I remember going into the headquarters and uh they were

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Speaker 1: selling me checking accounts. As I was walking into the

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Speaker 1: office one day, I said, I'm not quite sure this

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Speaker 1: is what I was hoping for. So uh, I was

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Speaker 1: lucky enough at the time to have an opportunity to

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Speaker 1: move to Morgan Stanley, and I took it. So Sally

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Speaker 1: ends up at City Prudential is now PIJAM, which is

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Speaker 1: a giant, giant operation worldwide. UM, and Morgan Stanley is

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Speaker 1: still one of the biggest investment banks in the world.

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Speaker 1: You were at one time chief operating officer of their

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Speaker 1: global Investment Management division. I'm assuming that is real estate focused.

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Speaker 1: That was not. That was the investment management division. The

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Speaker 1: first half of my career at Morgan Stanley was real

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Speaker 1: estate investment banking, and the second half of my career

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Speaker 1: transitioned into real estate investing, which transitioned into alternatives, which

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Speaker 1: transitioned into investment management more broadly. So, so you were

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Speaker 1: at Morgan Stanley. If I'm doing the math in my head,

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Speaker 1: right two thousand and eight throughout the crisis. So I

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Speaker 1: have to assume you eventually became an expert at restructuring

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Speaker 1: and all the fund that took place after the Great

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Speaker 1: Financial Crisis. Yeah, I I would describe it a little

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Speaker 1: as the in the in the land of the Blind,

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Speaker 1: the one eyed man is king. It was late two

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Speaker 1: thousand seven, and uh, the markets hadn't yet entirely cracked um,

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Speaker 1: and I had an assignment as an investment banker to

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Speaker 1: work for one of the country's largest pension funds who

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Speaker 1: was on the leading edge of bankruptcies and restructurings in

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Speaker 1: the real estate portfolio. And so I had a lot

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Speaker 1: of advisory work. And then once more once Morgan Stanley

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Speaker 1: is a firm in the winter of two thousand eight

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Speaker 1: hit the wall. Like many financial institutions, real estate was

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Speaker 1: a leading edge of that wall, and so I had

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Speaker 1: a chance to work with the firm on restructuring its

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Speaker 1: real estate holdings in the real estate business. That two

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Speaker 1: thousand and eight experience, How did it impact you and

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Speaker 1: what sort of lessons did you take from it going forward?

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Speaker 1: The most formative period of my career, without a doubt,

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Speaker 1: and I think most people you learn more from the

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Speaker 1: difficulties than you do from the success. UM. It was

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Speaker 1: a reminder of our inability to see the future. UM

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Speaker 1: first point. But within the core business of finance and

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Speaker 1: real estate, the first lesson was leverage. You know, it's

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Speaker 1: leverage that will kill you, and it will leverage. It's

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Speaker 1: leverage that will take you down. UM. There were other

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Speaker 1: things that I learned the people I had worked with

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Speaker 1: and the groups I had worked for, both as an

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Speaker 1: adviser as well as Morgan Stanley sought tremendous growth in

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Speaker 1: the early two thousand's growth without necessarily all of the

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Speaker 1: guard rails, the systems and the processes, and to manage

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Speaker 1: that unparalleled growth, and so between high levels of leverage

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Speaker 1: as well as growth for growth sakes without all of

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Speaker 1: the constraints around that growth, those two things together kind

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Speaker 1: of result in catastrophic events which occurred in two thousand

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Speaker 1: eight and two thousand nine. You know, if you're investing

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Speaker 1: your own capital with no leverage, the worst that happens

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Speaker 1: is the market gets cut in half and it's painful.

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Speaker 1: But if you're using leverage, you get margin holes and

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Speaker 1: you could be pretty easily wiped out. As we saw

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Speaker 1: time and again in oh eight or nine, right and

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Speaker 1: beyond sure, And that's where it comes to alignment and

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Speaker 1: the people that work you know, if if if they

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Speaker 1: have nothing but upside and they're not participating in the downside,

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Speaker 1: then the use of leverage. And so, whether you're an

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Speaker 1: employee of a large firm or you're managing a fund

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Speaker 1: or whatever position that you're in, being fully aligned with

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Speaker 1: investors is a great guard rail with respect to these

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Speaker 1: questions of the use of leverage, which which leads me

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Speaker 1: to the next obvious questions. So, how did you end

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Speaker 1: up at Crow Holdings from? Was it directly from Morgan Stanley?

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Speaker 1: It was? It was again. I was working from real

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Speaker 1: estate into alternatives into investment management broadly um and my

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Speaker 1: career was going well and I was doing interesting work.

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Speaker 1: But in two thousand and fourteen I met this really

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Speaker 1: interesting guy named Harlan Crow who was the patriarch of

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Speaker 1: the family and the son of the founder of the company,

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Speaker 1: and he was looking for someone to succeed him to

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Speaker 1: run the business. And I found him to be a

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Speaker 1: fascinating individual and a and a very kind, benevolent, interesting

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Speaker 1: human being. And we talked off and on for about

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Speaker 1: two years. And then in the summer of two thousand sixteen,

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Speaker 1: my wife and I went to spend some time with

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Speaker 1: Harlan and his family in the business. And we were

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Speaker 1: flying back from Dallas, Texas to New York and my

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Speaker 1: wife looks at me and she says, you need to

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Speaker 1: go do this, and uh, she knew what I knew,

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Speaker 1: which was it. It pulled at my heart. You know,

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Speaker 1: when you work at a firm like Morgan Stanley, or

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Speaker 1: you work on Wall Street, in any given year, there's

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Speaker 1: always someone knocking on your door. There's always an opportunity.

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Speaker 1: And I had always analyzed these opportunities. You know, I

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Speaker 1: made this much money, or I had this much authority,

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Speaker 1: or what would this title mean? And this was the

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Speaker 1: first time in my life that none of that mattered.

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Speaker 1: All that mattered was my heart pulled at me and said,

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Speaker 1: I want to work with these people. You want to

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Speaker 1: work do this work with these folks focusing on this topic. Correct,

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Speaker 1: That's that's really that's really interesting. Since then, in the

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Speaker 1: past day, cade you become very active within the commercial

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Speaker 1: real estate industry. You're a member of the Real Estate

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Speaker 1: Round Table, You're part of the policy Advisory Board at

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Speaker 1: the Fisher Center for Real Estate and Number and Economics

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Speaker 1: at Berkeley, which is not in Texas, California. You're on

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Speaker 1: the advisory board at the Institute for Real Estate Operating Companies.

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Speaker 1: Tell us a little bit about all of this extracurricular activity,

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Speaker 1: which I'm sure is intimately connected to your day job. Sure,

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Speaker 1: you know, the real estate industry is as large and

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Speaker 1: as vast as it is, like many industries, is kind

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Speaker 1: of small, and these various organizations are opportunities both to

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Speaker 1: network as you get older. They're friends of yours. There

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Speaker 1: it's an opportunity for old homecoming to see people, and

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Speaker 1: it's an opportunity to learn to compare notes. And sometimes

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Speaker 1: it's an opportunity to give back, depending upon the mission

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Speaker 1: or objectives of the institution. But most of the time,

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Speaker 1: it's ability to gather with peers in the in the industry.

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Speaker 1: It's hawk about what's going on. Some of them are

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Speaker 1: are very confidential forums, off the record forums where people

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Speaker 1: can speak their minds, where you're not going to read

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Speaker 1: about it in the press. And so you learn as

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Speaker 1: you get older, you find out most of the time

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Speaker 1: that you're not necessarily learning new things, you're confirming what

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Speaker 1: you what you either like to believe or what you

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Speaker 1: thought you believed, and that confirmation is sometimes helpful that

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Speaker 1: perhaps I'm not crazy with respect to these ideas. Really

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Speaker 1: very interesting. It's funny you say real estate is a

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Speaker 1: small um community. Someone described New York City as vast

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Speaker 1: and frenetic, as it is as just a series of

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Speaker 1: small industry villages all staffed on top of each other.

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Speaker 1: And you know, you know most of the people in

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Speaker 1: your business, even if there are thousands of people, you

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Speaker 1: know your peers at your level. I'm not surprised to

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Speaker 1: hear you say that about commercial real estate. It's true

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Speaker 1: in every industry, absolutely. So let's talk a little bit

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Speaker 1: about Crow Holdings. It looks like a pretty fascinating place.

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Speaker 1: Tell us about that history and the patriarch who uh

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Speaker 1: made such a compelling case that you had to switch jobs. Yeah, well, well,

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Speaker 1: thank you, Barry In. There was a young man who

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Speaker 1: built a speculative industrial building in Dallas, Texas, and his

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Speaker 1: name was Trammel Crow and Uh. Trammel went on in

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Speaker 1: the nineteen fifties and sixties to become the largest real

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Speaker 1: estate developer in the United States. And Trammel had a

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Speaker 1: great optimism, great insight, great great foresight. But he also

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Speaker 1: had a way of doing business. He didn't have the

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Speaker 1: means when he started out to employ people. He partnered

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Speaker 1: with people. He had an ability to work with many

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Speaker 1: of the local banks and regional banks to get loans

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Speaker 1: to build real estate. And he partnered with young people

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Speaker 1: all throughout the country and said, look, I'll go into

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Speaker 1: business with you all on a handshake, will split the

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Speaker 1: ups fifty fifty, and I'll help you get started by

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Speaker 1: helping get them financing for these projects. And so, with

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Speaker 1: that trust and with that love that he had for people,

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Speaker 1: he went on to build partnerships all throughout the United States,

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Speaker 1: and that way of doing business was different than others.

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Speaker 1: He also took an approach that and I used the

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Speaker 1: word speculative, meaning he built the building in the hopes

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Speaker 1: that someone would lease it. He didn't build the building

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Speaker 1: with a lease in hand. He built the building and

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Speaker 1: then it got leased. Now, now this might be my

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Speaker 1: post Warward two hindsight bias, but I would imagine the forties, fifties,

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Speaker 1: sixties was a great time to be real estate developer

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Speaker 1: in the United States. It was a great time to

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Speaker 1: be a real estate developer, and there was tremendous growth

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Speaker 1: throughout the United States. There was also another dynamic that

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Speaker 1: the banks at that time would would lend sometimes more

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Speaker 1: than a hundred percent of the cost to build a building. Well,

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Speaker 1: you gotta decorate, you have other things you have to

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Speaker 1: do once the building is up. A hundred and ten

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Speaker 1: a h loan to value that seems kind of aggressive

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Speaker 1: these days. These days, that's not available. But in those

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Speaker 1: days that was available. And so why the excess? What

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Speaker 1: was the above the cost of construction? There they are

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Speaker 1: the soft cost, there's the financing cost along the way,

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Speaker 1: and as you said, there's engineering and other costs that

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Speaker 1: come in. And so you I don't I don't know

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Speaker 1: if would have been the norm, but certainly for for

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Speaker 1: discussion purposes, you're borrowing a dent of the cost to

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Speaker 1: build a building, and so you don't need to come

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Speaker 1: out of pocket with any equity. Now, we just talked

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Speaker 1: about leverage a minute ago. When times are good and

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Speaker 1: times are growing, you know that works out well. And

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Speaker 1: as you pointed out, in the nineteen fifties and nineteen

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Speaker 1: sixties in America, those were tremendous times for growth and

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Speaker 1: opportunity and so the company. So, so let's talk a

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Speaker 1: little bit about about the crow family members. You were

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Speaker 1: the first person outside of the family to become a

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Speaker 1: leader of the firm. What made them decide to not

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Speaker 1: stay with the family that they've done for seventy years,

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Speaker 1: And what sort of channe leunges does running what's essentially

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Speaker 1: a giant family office create for you. Well, Trammel ran

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Speaker 1: the business until the very late nineteen eighties, and we

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Speaker 1: had a terrible time for real estate in the late eighties,

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Speaker 1: and his son Harlan took over in the late nineteen eighties,

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Speaker 1: and uh in two thousand fourteen, Harlan began to think

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Speaker 1: about his succession and made a decision that he wanted

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Speaker 1: to go outside of the company and specifically to bring

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Speaker 1: in someone who had more capital markets experience, someone ultimately

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Speaker 1: like me, not me in particular, but someone who didn't

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Speaker 1: come up the ropes from the real estate side, who

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Speaker 1: came up the ropes from the capital market side of things,

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Speaker 1: to augment the great skills and capabilities in the company. Now,

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Speaker 1: it's not self evident that on a piece of paper,

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Speaker 1: this New York guy trained on Wall Street went to

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Speaker 1: Brooklyn Law School would be a great fit with a

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Speaker 1: Dallas based family owned company called Crow Holdings. But it

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Speaker 1: was a right fit and we share very common values.

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Speaker 1: And I find Dallas to be a really fun city.

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Speaker 1: Is that where you're you're working out of where you

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Speaker 1: had correct? So we're headquartered in Dallas, Texas. We have

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Speaker 1: about twenty one offices around the country and other cities,

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Speaker 1: but we are a Dallas based, Dallas headquartered, Dallas cultured company.

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Speaker 1: At our at our core, and at our roots, which

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Speaker 1: means big everything right, nothing has done small, nothing is

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Speaker 1: you know, nothing is tentative. What I love about Texas

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Speaker 1: is when they do something, it's big. Texas think big

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Speaker 1: and Dallas sizes think big. Yeah, no, no doubt about that.

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Speaker 1: So so let's get specific about Crow focuses on multifamily units,

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Speaker 1: office industrial. I would imagine multi family is doing great.

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Speaker 1: Industrial is doing even better. In office not so much? Correct? Um?

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Speaker 1: We uh. We both have a real estate development company

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Speaker 1: and a real estate investment management company, and there are

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Speaker 1: two different businesses with what's the split into arms of

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Speaker 1: activity and assets is it's about half, really, it's about half. So,

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Speaker 1: so half of Crow's work is actually building developing new assets.

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Speaker 1: The other half is investing in existing assets exactly. Exactly

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Speaker 1: and UM but both businesses have a high degree of

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Speaker 1: overlap in terms of their strategies. So as a real

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Speaker 1: estate developer, we have built more apartments in the United

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Speaker 1: States than any other firm. Really correct, that's a that's

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Speaker 1: an enormous uh undertaking. And the US is still dramatically

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Speaker 1: underbuilt when it comes to apartments. Yes, it is, both

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Speaker 1: both in cities and suburbia. We have a big problem

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Speaker 1: in America. We don't produce enough housing, particularly for working

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Speaker 1: class people. And UH, it's a great opportunity from a

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Speaker 1: development and an investment perspective, but it's getting harder and

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Speaker 1: harder to build. And it's an area we have a

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Speaker 1: lot of expertise in. And then and then you guys

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Speaker 1: were very early into UM industrial facilities, warehouses, logistic sort

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Speaker 1: of facilities in the early days of e commerce. Tell

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Speaker 1: us a little bit about that. Well, two things. One,

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Speaker 1: we still own the first industrial building the Trammel built

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Speaker 1: in and it's on Coal Street in Dallas, Texas. And

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Speaker 1: my youngest son is named Cole. So I like incidents

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Speaker 1: or I think it's good. Um. Look, you could see

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Speaker 1: the e commerce trends coming from a mile away. It

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Speaker 1: started in the mid nineties, but it became very clear

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Speaker 1: a decade ago that this trend was accelerating. You say that,

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Speaker 1: and yet not everybody piled into warehouses, logistic facilities, et cetera.

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Speaker 1: Certainly in two thousand to two thousand eleven they did,

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Speaker 1: and today it clearly is the most favored asset class um.

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Speaker 1: But nonetheless, when you're looking at secular trends, that secular

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Speaker 1: trends seemed to us to be very clear, and so

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Speaker 1: we amplified our industrial development activities and today we're one

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Speaker 1: of the largest developers of industrial real estate in the

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Speaker 1: United States. Right, And your structure is you're not to

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Speaker 1: read You're you're more or less a private family office.

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Speaker 1: How does that operate? Sure, so you're not publicly traded, right,

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Speaker 1: We are not publicly traded UM and we have no

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Speaker 1: outside shareholders in the company it is. It is owned

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Speaker 1: by the Crow family. UM. Our real estate development business

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Speaker 1: engages with investors in three ways. We either pursue one

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Speaker 1: off development projects in a joint venture with an investor,

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Speaker 1: or we have a programmatic relationship with an institutional investor

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Speaker 1: where we'll develop many properties over time, or we'll have

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Speaker 1: a com mingled fund with a group of investors also

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Speaker 1: developing properties over time. Are those one off for specific

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Speaker 1: types or specific geographies? Because in my head, I imagine

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Speaker 1: there are endowments that want exposure real estate. There are

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Speaker 1: other large institutions that want real estate exposure. Are they

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Speaker 1: participants in all of crow or is it one off?

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Speaker 1: It's always a defined strategy. It's always a defined strategy,

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Speaker 1: usually demarcated by geograph, fick objectives, or other property size,

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Speaker 1: property configuration objectives. But there is a strategy within industrial.

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Speaker 1: We use the word industrial, that can mean a lot

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Speaker 1: of things. Are a lot of different things to different people.

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Speaker 1: Our real estate investment company invest in real estate across

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Speaker 1: the United States primarily and co mingled funds, occasionally in

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Speaker 1: joint ventures with investors, but primarily and co mingled funds.

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Speaker 1: So so let's talk about that investment process a little bit.

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Speaker 1: What are you looking at? Is it you mentioned geography?

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Speaker 1: Isn't any of the specific sectors? Is evaluation? How do

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Speaker 1: you make the decision? This development, building, whatever is a

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Speaker 1: go And we're gonna pass on that one. Sure well,

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Speaker 1: stepping back, Barry, we've learned over the years that it's very,

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Speaker 1: very difficult to predict the economic cycles, the capital market cycles,

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Speaker 1: and trying to hang your hat on that as an

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Speaker 1: investment strategy is often hollow. And so we're pursuing secular

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Speaker 1: trends and they're in decades long, decades long, and there

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Speaker 1: are several things that to us seem fairly self evident.

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Speaker 1: One of them I highlighted, which was e commerce. And

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Speaker 1: if you believe that e commerce will continue to gain share,

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Speaker 1: then you know that's a positive for industrial and that's

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Speaker 1: a negative for retail. You're also looking at demographics, the

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Speaker 1: age of people. You know, things about young people, things

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Speaker 1: about the trailing ends of the millennials are the leading

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Speaker 1: edge of the Gen Z. Young people rent, they don't buy,

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Speaker 1: and so we have the largest group of young people

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Speaker 1: in history going through in their mid twenties now going

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Speaker 1: through the U S demographic chain and so being long

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Speaker 1: the apartment sector or the multi family sector. And the

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Speaker 1: third main trend that we're looking at is Americans are

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Speaker 1: moving to the southeast and the southwest, the moving a

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Speaker 1: lower tax, better weather, and just generally where there's a

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Speaker 1: little cheaper standard of living and and as well as

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Speaker 1: just overall quality of life. And this is not just COVID.

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Speaker 1: You know, we've seen the impact of COVID, but long

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Speaker 1: before COVID, it became very clear people are leaving the

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Speaker 1: Midwest and the northeast and the west and they're moving

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Speaker 1: into the southeast and the southwest. And so that defines

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Speaker 1: not everything we do, but that drives a lot of

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Speaker 1: our decision making within multi family. So now to take

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Speaker 1: the next layer down, we're pursuing two areas within multi family.

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Speaker 1: One would be Class A beautiful new properties that professionals

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Speaker 1: are renting because they want experiences in life to rent

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Speaker 1: and not own, as well as everything from student loans

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Speaker 1: to other costs are making rentals more attractive to them.

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Speaker 1: But the area we've been particularly focused on is workforce housing.

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Speaker 1: First responders, firefighters, teachers, cops are having a very very

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Speaker 1: difficult time finding places to live, and so we've been

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Speaker 1: very focused on building new supply. There's a lot of

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Speaker 1: arguments about rent control or about owning older properties and

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Speaker 1: making sure that the rents don't don't go up through agreements,

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Speaker 1: but the solution is not taking older properties and holding

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Speaker 1: them there. The solution is new supply. And as the

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Speaker 1: largest developer of apartments in the United States over the

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Speaker 1: past forty years. We view it as both our obligation

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Speaker 1: as well as an opportunity, and so we've been very

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Speaker 1: focused on workforce housing. So, so you you mentioned as

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Speaker 1: an obligation, there's a quote of yours that sticks out

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Speaker 1: in my mind. You said, I don't sit around with

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Speaker 1: Harlan and talk about profitability and returns. We talk about

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Speaker 1: doing the right thing. Explain what that means in the

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Speaker 1: context of developing rental apartments. Sure, Um, two things. One

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Speaker 1: at the company level, at the Crow Holdings level, in particular,

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Speaker 1: because we're not public, we don't have any outside shareholders.

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Speaker 1: We don't run the business according to an earning subjective.

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Speaker 1: We run the business according to creating opportunity for the

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Speaker 1: people that work here in an aligned way so that

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Speaker 1: they can grow in their careers and they can create

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Speaker 1: opportunity and will participate in that opportunity with them. So

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Speaker 1: as it relates to the company and doing the right thing,

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Speaker 1: it's treating the people that work for us the right

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Speaker 1: way so that they love their work and then they're

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Speaker 1: they'll love their clients and they'll love their opportunity. How

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Speaker 1: many people work for Crow, how many people a little

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Speaker 1: over five people who work for Crow, and how many

430
00:24:23,119 --> 00:24:26,560
Speaker 1: of the original family members are still active in the firm.

431
00:24:26,720 --> 00:24:29,400
Speaker 1: There there are no family members active in the firm.

432
00:24:29,480 --> 00:24:33,679
Speaker 1: So so essentially Crow is more or less operating like

433
00:24:33,760 --> 00:24:36,880
Speaker 1: a family office on behalf of I don't know what's

434
00:24:36,880 --> 00:24:39,879
Speaker 1: to call at the estate, the foundation on behalf the family?

435
00:24:40,160 --> 00:24:43,800
Speaker 1: Um it is it is our ethos And the moment look,

436
00:24:43,840 --> 00:24:47,800
Speaker 1: the moment that your company brings an outside shareholders, the

437
00:24:47,880 --> 00:24:51,560
Speaker 1: moment that your company becomes public, things change. The whole

438
00:24:51,640 --> 00:24:55,959
Speaker 1: dynamic changes. You now have a different master. Correct, we

439
00:24:56,040 --> 00:24:58,920
Speaker 1: don't have that, and so we don't have those outside

440
00:24:58,920 --> 00:25:03,320
Speaker 1: forces dry hiving us with respect to how we behave,

441
00:25:03,680 --> 00:25:06,200
Speaker 1: what we do, how we act. All right, So let

442
00:25:06,200 --> 00:25:08,720
Speaker 1: me push back on that, sure, because I've worked with

443
00:25:08,720 --> 00:25:11,120
Speaker 1: a number of family offices, I've worked with a number

444
00:25:11,119 --> 00:25:14,120
Speaker 1: of billionaires, and what always comes up, there's always some

445
00:25:14,240 --> 00:25:18,399
Speaker 1: M B A sending to his left or are left saying, well,

446
00:25:18,440 --> 00:25:21,040
Speaker 1: what's the internal raid return for this? What sort of

447
00:25:21,480 --> 00:25:25,639
Speaker 1: quarterly profits can we expect? What is return on investment

448
00:25:26,200 --> 00:25:29,640
Speaker 1: and um yield that we should see by putting this

449
00:25:29,720 --> 00:25:32,720
Speaker 1: capital at risk? So I need and i'd like to

450
00:25:32,720 --> 00:25:36,760
Speaker 1: distinguish that's at craw Holdings. At the company level now

451
00:25:37,359 --> 00:25:40,120
Speaker 1: almost all not all, but almost all of the real

452
00:25:40,240 --> 00:25:43,840
Speaker 1: estate investment activity and the real estate development activity. We

453
00:25:43,920 --> 00:25:48,240
Speaker 1: are in partnership with institutional investors and individual investors in

454
00:25:48,280 --> 00:25:50,840
Speaker 1: a fiduciary capacity, so that's going to come up. So

455
00:25:50,880 --> 00:25:56,160
Speaker 1: we are very focused on delivering the investment performance at

456
00:25:56,200 --> 00:25:59,399
Speaker 1: every level in what we do. And in that area,

457
00:25:59,520 --> 00:26:02,320
Speaker 1: we again and we are focused on whatever the return

458
00:26:02,400 --> 00:26:05,879
Speaker 1: metrics are, whether it's I, R R or multiple and

459
00:26:05,960 --> 00:26:08,600
Speaker 1: our track record stands for itself over time, and we

460
00:26:08,640 --> 00:26:11,640
Speaker 1: have delivered for investors over time, which is why they

461
00:26:11,640 --> 00:26:15,159
Speaker 1: continue to do business with us. But as it rolls

462
00:26:15,240 --> 00:26:18,160
Speaker 1: up to Crow Holdings, that is not what drives us.

463
00:26:18,480 --> 00:26:21,199
Speaker 1: Do I report on our financial results, of course I

464
00:26:21,240 --> 00:26:25,359
Speaker 1: do do. I try my best to anticipate what we

465
00:26:25,440 --> 00:26:28,360
Speaker 1: may do in the next year. But and we may

466
00:26:28,359 --> 00:26:30,919
Speaker 1: talk about this later, but your ability to guess the

467
00:26:30,960 --> 00:26:33,199
Speaker 1: future with respect to how it all rolls up to

468
00:26:33,240 --> 00:26:36,119
Speaker 1: the to the corporate entity. The other thing I learned

469
00:26:36,240 --> 00:26:38,359
Speaker 1: in my prior life when I was working on Wall

470
00:26:38,400 --> 00:26:42,359
Speaker 1: Street is that hunt for the elusive earnings this quarter

471
00:26:42,480 --> 00:26:45,520
Speaker 1: can also drive very short term behavior on behalf of

472
00:26:45,520 --> 00:26:48,560
Speaker 1: the institution. That can have a profound impact on the

473
00:26:48,560 --> 00:26:52,320
Speaker 1: people that work there and really break the trust between

474
00:26:52,320 --> 00:26:54,720
Speaker 1: the company and the people that work there. No doubt,

475
00:26:54,760 --> 00:26:57,840
Speaker 1: the hunt for alpha can be destructive if it runs amok.

476
00:26:58,240 --> 00:27:00,440
Speaker 1: And and as we've seen we talked about O eight

477
00:27:00,440 --> 00:27:03,639
Speaker 1: oh nine, it very often does run a monk. So

478
00:27:03,640 --> 00:27:07,200
Speaker 1: so you're hinting at something, but I I and I

479
00:27:07,280 --> 00:27:09,560
Speaker 1: don't want to ask you to talk out of school,

480
00:27:09,640 --> 00:27:12,800
Speaker 1: so to speak. But when you report back to the

481
00:27:12,840 --> 00:27:15,360
Speaker 1: family and say, here's what we did, here's what next

482
00:27:15,440 --> 00:27:19,439
Speaker 1: year looks like. What are they telling you your marching

483
00:27:19,560 --> 00:27:21,720
Speaker 1: orders are? Are they like, go make us more money

484
00:27:21,920 --> 00:27:25,120
Speaker 1: or we're really concerned about this? What can we do here?

485
00:27:26,000 --> 00:27:30,240
Speaker 1: I do present. We have an advisory board and uh

486
00:27:30,440 --> 00:27:33,360
Speaker 1: Harlan as chairman of the advisory board, and Harlan's engaged

487
00:27:33,359 --> 00:27:36,000
Speaker 1: in the business with me, and so I'm keeping them

488
00:27:36,040 --> 00:27:40,200
Speaker 1: regularly apprised with respect to the strategy for the business

489
00:27:40,200 --> 00:27:44,240
Speaker 1: and the financial results for the business. The primary objective,

490
00:27:44,480 --> 00:27:48,040
Speaker 1: if Harlan sat here today, the primary objective we're solving

491
00:27:48,080 --> 00:27:52,560
Speaker 1: for is culture. Culture isn't violent, and that goes back

492
00:27:52,600 --> 00:27:55,520
Speaker 1: to at Crow Holdings. Our culture and the culture is

493
00:27:55,600 --> 00:27:59,200
Speaker 1: based upon creating opportunity for the people that work here.

494
00:27:59,640 --> 00:28:03,080
Speaker 1: And if we do that well, then the other elements

495
00:28:03,080 --> 00:28:06,200
Speaker 1: of our business, our customers being happy with our work,

496
00:28:06,520 --> 00:28:10,119
Speaker 1: the financial results that follow that will come true. And

497
00:28:10,160 --> 00:28:13,159
Speaker 1: that's been going on a crow for seventy five years

498
00:28:13,200 --> 00:28:16,560
Speaker 1: and that works for us. So how do you, as

499
00:28:16,600 --> 00:28:21,800
Speaker 1: an outsider and CEO, maintain and further the culture at

500
00:28:21,800 --> 00:28:24,879
Speaker 1: the firm? Well, I maintain it by pursuing that in

501
00:28:24,960 --> 00:28:28,439
Speaker 1: that I'm not trying to bring my own objective in

502
00:28:28,560 --> 00:28:32,719
Speaker 1: terms of this specific financial result this year. I'm continued

503
00:28:32,800 --> 00:28:35,840
Speaker 1: to focus on how do I continue to one be

504
00:28:35,960 --> 00:28:39,720
Speaker 1: thoughtful with respect to strategies. I mentioned these secular trends.

505
00:28:40,080 --> 00:28:44,120
Speaker 1: There's obviously sub strategies underneath that. So hopefully we're smart

506
00:28:44,680 --> 00:28:47,160
Speaker 1: and we develop strategies that make sense in light of

507
00:28:47,160 --> 00:28:50,480
Speaker 1: where the world is heading. The second thing is I

508
00:28:50,560 --> 00:28:55,000
Speaker 1: work very hard to make sure that the compensation structures

509
00:28:55,080 --> 00:28:58,640
Speaker 1: with our people are aligned so that if we do well,

510
00:28:59,160 --> 00:29:01,120
Speaker 1: they do well. And I would the last thing I

511
00:29:01,120 --> 00:29:03,840
Speaker 1: would comment on this. We have now lived through the

512
00:29:03,960 --> 00:29:07,280
Speaker 1: Great Resignation. I talked to my friends at businesses all

513
00:29:07,320 --> 00:29:10,680
Speaker 1: over America who talked to me about how difficulticult it

514
00:29:10,760 --> 00:29:14,200
Speaker 1: is to attract talent, how many keep them and keep them.

515
00:29:14,360 --> 00:29:17,920
Speaker 1: We have not experienced the great resignation. It has not

516
00:29:18,120 --> 00:29:21,720
Speaker 1: happened at our company and our firm. So whether we're

517
00:29:21,760 --> 00:29:25,200
Speaker 1: doing things right in someone's eyes, are wrong in someone's eyes,

518
00:29:25,280 --> 00:29:28,120
Speaker 1: what I can say is the very talented people who

519
00:29:28,120 --> 00:29:31,200
Speaker 1: work here have decided, amongst the opportunities that are available

520
00:29:31,200 --> 00:29:34,760
Speaker 1: to them in the marketplace, Crow is the best opportunity

521
00:29:34,800 --> 00:29:37,160
Speaker 1: for them and their families. So so it sounds like

522
00:29:37,400 --> 00:29:41,320
Speaker 1: you are creating or maintaining the sort of culture that

523
00:29:41,360 --> 00:29:45,160
Speaker 1: works for both the firm and the employees. I am maintaining.

524
00:29:45,360 --> 00:29:47,720
Speaker 1: I came to Crow and had the privilege that my

525
00:29:47,800 --> 00:29:51,680
Speaker 1: first year, I didn't have the title of CEO, I

526
00:29:51,720 --> 00:29:54,840
Speaker 1: didn't have anybody reporting to me. I had a chance

527
00:29:55,000 --> 00:29:57,920
Speaker 1: with Harlan to get to know the organization, to get

528
00:29:57,960 --> 00:29:59,920
Speaker 1: to know the people, to get to know the culture,

529
00:30:00,240 --> 00:30:03,800
Speaker 1: to build trust and build relationships, and learned and understood

530
00:30:04,160 --> 00:30:08,880
Speaker 1: what made this venerable institution in real estate so successful,

531
00:30:09,240 --> 00:30:11,800
Speaker 1: what made the alumni network that came out of Crow

532
00:30:12,160 --> 00:30:15,720
Speaker 1: have such good will and good feelings towards our firm,

533
00:30:15,760 --> 00:30:18,760
Speaker 1: And it was these elements of culture and the hallmarks

534
00:30:18,760 --> 00:30:21,840
Speaker 1: of our firm, and so I simply said, don't screw

535
00:30:21,880 --> 00:30:24,720
Speaker 1: this up. So so that first year did you just

536
00:30:24,840 --> 00:30:28,160
Speaker 1: shadow Harlan and kind of get a feel for everything

537
00:30:28,160 --> 00:30:30,320
Speaker 1: that was going on. Part part of it was shadowing,

538
00:30:30,360 --> 00:30:33,640
Speaker 1: Part of it was independently spending time across the organization.

539
00:30:33,760 --> 00:30:37,720
Speaker 1: I grew up in real estate finance. Our companies a

540
00:30:37,840 --> 00:30:41,520
Speaker 1: real estate company that came to America through building real

541
00:30:41,680 --> 00:30:44,960
Speaker 1: estate and then developed over time the capital markets and

542
00:30:45,000 --> 00:30:48,600
Speaker 1: financial expertise. I had never built a building in my life.

543
00:30:48,680 --> 00:30:50,560
Speaker 1: I had never leased a building in my life. I

544
00:30:50,560 --> 00:30:52,959
Speaker 1: had never managed the building in my life. And so

545
00:30:53,000 --> 00:30:56,080
Speaker 1: I spent that first year in the field at our offices,

546
00:30:56,520 --> 00:30:59,800
Speaker 1: talking to the people who do those things and learning

547
00:31:00,200 --> 00:31:02,920
Speaker 1: so that when the time came the following year that

548
00:31:02,960 --> 00:31:06,440
Speaker 1: the responsibilities became mine, I had good, good judgment and

549
00:31:06,480 --> 00:31:08,720
Speaker 1: better judge. How how steep was that learning curve that

550
00:31:08,760 --> 00:31:12,720
Speaker 1: sounds like you're throwing yourself into a related but entirely

551
00:31:12,800 --> 00:31:15,520
Speaker 1: different field than you were experiencing. Yeah, it was a

552
00:31:15,600 --> 00:31:18,440
Speaker 1: learning curve. Being around real estate finance for twenty five

553
00:31:18,520 --> 00:31:22,360
Speaker 1: years beforehand, I had interacted with and finance, then spend

554
00:31:22,360 --> 00:31:25,240
Speaker 1: time with real estate developers, so I didn't have to

555
00:31:25,360 --> 00:31:30,240
Speaker 1: learn new industry jargon or lingo or market participants. But

556
00:31:31,800 --> 00:31:35,120
Speaker 1: sitting sitting on Wall Street, the perception is that you

557
00:31:35,240 --> 00:31:38,960
Speaker 1: add value by your financial I'll use the word engineering,

558
00:31:39,120 --> 00:31:42,320
Speaker 1: or your financial acumen. The reality is the people who

559
00:31:42,320 --> 00:31:45,160
Speaker 1: add value are the people who actually build these buildings,

560
00:31:45,360 --> 00:31:50,000
Speaker 1: who manage these buildings. Quite interesting. My extra special guest

561
00:31:50,000 --> 00:31:53,720
Speaker 1: today is Michael Levy. He is the chief executive officer

562
00:31:53,760 --> 00:31:58,040
Speaker 1: of Crow Holdings, a seventy five year old residential and

563
00:31:58,080 --> 00:32:03,880
Speaker 1: commercial real estate developer. The largest developer of apartments in

564
00:32:03,960 --> 00:32:07,440
Speaker 1: the United States, the firm manages over thirty billion dollars

565
00:32:07,440 --> 00:32:11,560
Speaker 1: in assets across twenty one local markets. Previously, he was

566
00:32:11,640 --> 00:32:16,480
Speaker 1: chief operating Officer for investment management at Morgan Stanley. So,

567
00:32:16,480 --> 00:32:20,760
Speaker 1: so let's talk a little bit about commercial real estate investing.

568
00:32:21,160 --> 00:32:23,480
Speaker 1: When I was looking at your website, there are a

569
00:32:23,520 --> 00:32:27,680
Speaker 1: whole run of different, for lack of a better words, subsidiaries.

570
00:32:27,720 --> 00:32:32,560
Speaker 1: There's Crow Holdings, Capital, Crow Holdings Office, Trammel, Crow Residential,

571
00:32:33,040 --> 00:32:36,640
Speaker 1: Crow Industrial Signature Properties. Tell us a little bit about

572
00:32:36,680 --> 00:32:38,840
Speaker 1: these different divisions of what they all do. Sure, well,

573
00:32:38,880 --> 00:32:41,120
Speaker 1: first of all, I'm sorry about the brand confusion. Um,

574
00:32:41,240 --> 00:32:43,920
Speaker 1: not at all. The simplest way to understand us is

575
00:32:44,000 --> 00:32:49,000
Speaker 1: we have a real estate development company called Crow Holdings Development,

576
00:32:49,280 --> 00:32:53,560
Speaker 1: and underneath that we have sub brands Crow Holdings Industrial,

577
00:32:53,720 --> 00:32:57,360
Speaker 1: Crow Holdings Office, Travel, Crew, Residential, and then we have

578
00:32:57,400 --> 00:33:01,200
Speaker 1: a separate real estate investment company that we call Crow

579
00:33:01,240 --> 00:33:04,800
Speaker 1: Holdings Capital and Signature Properties. How does that fit into that?

580
00:33:05,080 --> 00:33:09,680
Speaker 1: Those are properties that that we own without investment partners,

581
00:33:09,720 --> 00:33:12,280
Speaker 1: and those are properties that Trammel Crow back in the

582
00:33:12,400 --> 00:33:16,040
Speaker 1: day or Harlan Crow in more recent years, has developed

583
00:33:16,480 --> 00:33:20,440
Speaker 1: and the family has held onto these properties for decades.

584
00:33:20,480 --> 00:33:23,080
Speaker 1: In many cas the Crown Jewels, so to speak, there

585
00:33:23,120 --> 00:33:29,280
Speaker 1: are some terrific properties. Um. And they're in primarily, not entirely, Dallas, Texas,

586
00:33:29,320 --> 00:33:32,200
Speaker 1: which is says, you know, the fastest growing metropolis in

587
00:33:32,240 --> 00:33:34,040
Speaker 1: the country. So is that true. I did not know

588
00:33:34,120 --> 00:33:37,680
Speaker 1: that the nominal population coming to Dallas, and I think

589
00:33:37,720 --> 00:33:40,240
Speaker 1: it's changing during COVID in any given year. But there's

590
00:33:40,280 --> 00:33:42,040
Speaker 1: somewhere in the neighbor of a hundred and ten hundred

591
00:33:42,040 --> 00:33:44,760
Speaker 1: and twenty thousand people moving to Dallas each year. Now.

592
00:33:46,000 --> 00:33:49,240
Speaker 1: So we we saw Miami, we saw Tampa, we saw Dallas,

593
00:33:49,240 --> 00:33:51,880
Speaker 1: we saw Austin. There has been a ton of growth

594
00:33:51,920 --> 00:33:56,080
Speaker 1: in the South, South and southeast. Um, when does that

595
00:33:56,160 --> 00:33:58,760
Speaker 1: top out? When does that start to slow down? Well,

596
00:33:58,800 --> 00:34:01,560
Speaker 1: I think you're you're at some level you're having now.

597
00:34:01,720 --> 00:34:07,160
Speaker 1: The COVID induced movement out of California and New York

598
00:34:07,160 --> 00:34:09,719
Speaker 1: and Chicago is slowing down a bit. I know in

599
00:34:09,800 --> 00:34:12,960
Speaker 1: New York and folks from Florida are moving back right now.

600
00:34:13,760 --> 00:34:16,520
Speaker 1: But the mega trends are very clear. The mega trend

601
00:34:16,600 --> 00:34:18,920
Speaker 1: is it's not slowing down. And this has been decades

602
00:34:18,960 --> 00:34:23,120
Speaker 1: in the MASCA. This this goes way back. Um. Alright,

603
00:34:23,160 --> 00:34:24,840
Speaker 1: So so let's talk a little bit about some of

604
00:34:24,840 --> 00:34:28,480
Speaker 1: those signature properties. Sure Crow HQ and the main campus

605
00:34:28,600 --> 00:34:32,080
Speaker 1: is the old Parkland Campus, which the pictures look like

606
00:34:32,120 --> 00:34:36,160
Speaker 1: a college campus. It looks astonishing. Do you actually work there? What?

607
00:34:36,160 --> 00:34:39,479
Speaker 1: What is the old camp? Old Parkland Campus? So old

608
00:34:39,480 --> 00:34:44,640
Speaker 1: Parkland Parkland Hospital was built in nineteen thirteen, this beautiful

609
00:34:44,719 --> 00:34:48,240
Speaker 1: red brick building that became derelict in the nineteen sixties

610
00:34:48,239 --> 00:34:51,279
Speaker 1: and nineteen seventies, and in two thousand and five, I

611
00:34:51,320 --> 00:34:54,840
Speaker 1: believe Harlan acquired the site tore down most of the

612
00:34:54,880 --> 00:34:58,640
Speaker 1: buildings except for the main beautiful hospital and built eleven

613
00:34:58,680 --> 00:35:02,240
Speaker 1: new buildings around it, and it's now an office campus

614
00:35:02,280 --> 00:35:05,960
Speaker 1: in in Dallas, Texas. It's part museum. The theme of

615
00:35:06,000 --> 00:35:10,400
Speaker 1: the campus is the American experiment, the foundations of freedom

616
00:35:10,400 --> 00:35:15,960
Speaker 1: and democracy. And there's tremendous manuscripts and art and and

617
00:35:15,960 --> 00:35:20,680
Speaker 1: and statues exemplifying everything from the group starting with the Greeks,

618
00:35:20,719 --> 00:35:24,600
Speaker 1: going all the way through entitlement and the founding fathers

619
00:35:24,680 --> 00:35:28,640
Speaker 1: and and Abraham Lincoln. And it's a beautiful physical campus.

620
00:35:29,080 --> 00:35:32,439
Speaker 1: Is this other businesses and organizations or just grow? Yeah,

621
00:35:32,440 --> 00:35:36,160
Speaker 1: So we occupy about fifteen percent of the space and

622
00:35:36,160 --> 00:35:39,520
Speaker 1: and virtually all of the tendency at the campus are

623
00:35:39,600 --> 00:35:45,280
Speaker 1: other principal investors, other family offices, foundations, private equity firms,

624
00:35:45,360 --> 00:35:48,880
Speaker 1: hedge funds, and so. So it's a little financial center

625
00:35:49,040 --> 00:35:51,680
Speaker 1: right there in the middle of Dallas. Yes, exactly. And

626
00:35:51,920 --> 00:35:54,160
Speaker 1: what is the Dallas Market Center. Tell us a little

627
00:35:54,160 --> 00:35:57,000
Speaker 1: bit about this property. In the nineteen fifties, this was

628
00:35:57,040 --> 00:35:59,600
Speaker 1: a building and they will come. Trammel had the view

629
00:36:00,000 --> 00:36:03,400
Speaker 1: at if I build a permanent building, these trade shows

630
00:36:03,440 --> 00:36:05,640
Speaker 1: that go all throughout the United States, if I can,

631
00:36:05,840 --> 00:36:09,520
Speaker 1: if I can house them there permanently, Retailers will come

632
00:36:10,120 --> 00:36:13,960
Speaker 1: and visit the uh, the exhibitors, and so the Dallas

633
00:36:13,960 --> 00:36:18,040
Speaker 1: Market Center is a five million square foot property that

634
00:36:18,200 --> 00:36:23,080
Speaker 1: houses for various industries, permanent and temporary exhibitions, and we

635
00:36:23,160 --> 00:36:27,239
Speaker 1: hold trade shows where literally hundreds of thousands of individuals

636
00:36:27,280 --> 00:36:31,520
Speaker 1: per year from thousands and thousands of retailers come to Dallas,

637
00:36:31,600 --> 00:36:35,960
Speaker 1: Texas to intermediate and mingle and spend time and examine

638
00:36:35,960 --> 00:36:41,120
Speaker 1: and explore new goods for their stores. What other signature

639
00:36:41,120 --> 00:36:44,359
Speaker 1: properties really stand out, because because the list is is

640
00:36:44,400 --> 00:36:47,760
Speaker 1: not short at all, no um. One of the largest

641
00:36:47,760 --> 00:36:50,000
Speaker 1: hotels in the United States, not the largest, but one

642
00:36:50,000 --> 00:36:53,080
Speaker 1: of the largest is the Anatole Hotel in Dallas, Texas.

643
00:36:53,160 --> 00:36:56,640
Speaker 1: It's proxibly sevred rooms and six hundred thousand square feet

644
00:36:56,640 --> 00:37:00,200
Speaker 1: of meeting space. And so you know, and then there's

645
00:37:00,280 --> 00:37:04,239
Speaker 1: land holdings in Dallas and industrial buildings, and there are

646
00:37:04,239 --> 00:37:07,680
Speaker 1: other properties in in Brussels. We own one of the

647
00:37:07,680 --> 00:37:11,239
Speaker 1: Brussels in Brussels. We own another trade center in Brussels,

648
00:37:11,239 --> 00:37:14,440
Speaker 1: the Trammel, built I believe in the nineties seventies, and

649
00:37:14,520 --> 00:37:17,480
Speaker 1: we own that today. What other overseas properties do you

650
00:37:17,520 --> 00:37:20,080
Speaker 1: guys that that's the main overseas propert there are a

651
00:37:20,120 --> 00:37:23,759
Speaker 1: couple other smaller ones, but the signature properties are again

652
00:37:23,840 --> 00:37:28,120
Speaker 1: properties that Trammel or Harland developed, and uh, they are both.

653
00:37:28,480 --> 00:37:30,600
Speaker 1: There's there's an emotional aspect to some of them, but

654
00:37:30,640 --> 00:37:34,600
Speaker 1: they're primarily good financial investments that compound over many years.

655
00:37:34,960 --> 00:37:38,080
Speaker 1: So we we talked earlier about you were early to

656
00:37:38,200 --> 00:37:42,600
Speaker 1: eat commerce and and logistics and warehousing. I read the

657
00:37:42,600 --> 00:37:45,880
Speaker 1: other day Amazon said they're looking to get out of

658
00:37:46,040 --> 00:37:49,600
Speaker 1: millions of square feet of industrial space. Perhaps they might

659
00:37:49,640 --> 00:37:54,160
Speaker 1: have gotten a little too enthusiastic and overpurchased. Um, how

660
00:37:54,160 --> 00:37:56,640
Speaker 1: do you see the industrial side of things? Is that

661
00:37:56,800 --> 00:38:00,160
Speaker 1: just one company that acquired hundreds of building is and

662
00:38:00,239 --> 00:38:03,080
Speaker 1: maybe overdid it. What what does that space look like? Yeah, sure,

663
00:38:03,200 --> 00:38:06,400
Speaker 1: well there's no Several months ago Amazon had communicated that

664
00:38:06,440 --> 00:38:08,560
Speaker 1: they had they were going to slow down their industrial

665
00:38:08,640 --> 00:38:11,960
Speaker 1: expansion phase and they were going to sublease something in

666
00:38:11,960 --> 00:38:14,840
Speaker 1: the neighborhood a thirty million square feet, and the markets

667
00:38:14,880 --> 00:38:17,120
Speaker 1: on those days they announced it were concerned and the

668
00:38:17,120 --> 00:38:20,080
Speaker 1: stocks pulled back on the industrial real estate companies. But

669
00:38:20,160 --> 00:38:23,240
Speaker 1: the United States has eighteen billion square feet of industrial

670
00:38:23,280 --> 00:38:27,400
Speaker 1: real estate, and even though Amazon has been a major

671
00:38:27,480 --> 00:38:30,560
Speaker 1: player and one of the largest market participants. It's overall

672
00:38:30,600 --> 00:38:34,080
Speaker 1: market share is very small for the industry at large. Now, Barry,

673
00:38:34,160 --> 00:38:36,640
Speaker 1: I did expect when I sat here in January and

674
00:38:36,680 --> 00:38:39,560
Speaker 1: February March and we all saw the capital markets cracking,

675
00:38:40,200 --> 00:38:44,160
Speaker 1: I did expect. I'd imagine the CEOs all over the

676
00:38:44,160 --> 00:38:48,000
Speaker 1: country are going to start examining their usage of industrial

677
00:38:48,040 --> 00:38:50,839
Speaker 1: real estate and maybe leasing is going to soften. I

678
00:38:50,920 --> 00:38:54,279
Speaker 1: wasn't sure, but you you just had to think that

679
00:38:54,320 --> 00:38:57,480
Speaker 1: the market would cause that to occur. Well, sitting here

680
00:38:57,520 --> 00:39:01,400
Speaker 1: as of this morning, leasing velocity and industrial across the

681
00:39:01,480 --> 00:39:04,120
Speaker 1: United States has been as strong as it's ever been,

682
00:39:04,600 --> 00:39:08,000
Speaker 1: and there's no softening in demand that we've seen. I

683
00:39:08,040 --> 00:39:10,839
Speaker 1: know we're all anticipating a recession and we can talk

684
00:39:10,880 --> 00:39:14,439
Speaker 1: about all those things. Good good. Demand for goods has

685
00:39:14,480 --> 00:39:17,080
Speaker 1: not slown down at all. Consumer spending is a record

686
00:39:17,160 --> 00:39:21,359
Speaker 1: highs and the e commerce continues its penetration. So so

687
00:39:21,440 --> 00:39:24,280
Speaker 1: let's let's talk about e commerce and the retail space.

688
00:39:24,440 --> 00:39:27,759
Speaker 1: My friend Jonathan Miller, who is an appraiser and a

689
00:39:27,840 --> 00:39:31,520
Speaker 1: real estate analysts, said, it's not that retail is overbuilt,

690
00:39:31,560 --> 00:39:35,319
Speaker 1: it's that it's underdemolished. I love that line. What do

691
00:39:35,360 --> 00:39:39,000
Speaker 1: you think about about the retails. Sure, well, there's retail

692
00:39:39,040 --> 00:39:40,759
Speaker 1: and there's retail. And what I mean by that, there's

693
00:39:40,840 --> 00:39:44,680
Speaker 1: retail that's focused on selling goods, whether it's your malls

694
00:39:44,880 --> 00:39:48,040
Speaker 1: or your power centers, and these have for years been

695
00:39:48,160 --> 00:39:52,400
Speaker 1: under a duress, and that duress is continuing. But there's

696
00:39:52,440 --> 00:39:55,960
Speaker 1: other retail where their tendency is food and service. And

697
00:39:56,000 --> 00:39:59,799
Speaker 1: so during COVID, for example, grocery anchor shopping centers did

698
00:40:00,000 --> 00:40:03,880
Speaker 1: particularly well. Now some of the tenants adjacent to the

699
00:40:03,880 --> 00:40:08,560
Speaker 1: shopping center, who may sell goods slowly over time, are

700
00:40:08,600 --> 00:40:12,920
Speaker 1: being disintermediated by the Internet, and over long periods of

701
00:40:13,000 --> 00:40:18,200
Speaker 1: time that tendency is being reduced or mitigated. But food

702
00:40:18,239 --> 00:40:20,600
Speaker 1: and service, and so think about in the neighborhoods in

703
00:40:20,640 --> 00:40:23,239
Speaker 1: which you live in. Sure, you're going to have a

704
00:40:23,280 --> 00:40:25,640
Speaker 1: little strip center that's going to have a Starbucks on

705
00:40:25,640 --> 00:40:27,719
Speaker 1: one end, and it's going to have a subway on

706
00:40:27,760 --> 00:40:29,840
Speaker 1: the other end, and it's gonna have a cupcake store

707
00:40:29,880 --> 00:40:33,919
Speaker 1: and a Verizon wireless store, s a t tutoring, some

708
00:40:34,120 --> 00:40:40,120
Speaker 1: taekwondo ballet. It's all services. It's not the usual retail,

709
00:40:40,200 --> 00:40:42,520
Speaker 1: which kind of makes me look around at the big

710
00:40:42,560 --> 00:40:47,200
Speaker 1: box stores, the home depots, the targets, the lows, the

711
00:40:47,280 --> 00:40:52,000
Speaker 1: ones where you're not ordering plywood online, you have to

712
00:40:52,040 --> 00:40:54,879
Speaker 1: physically go and get that. So is that how we're

713
00:40:54,880 --> 00:40:57,279
Speaker 1: going to see this separate? Is that how this? I

714
00:40:57,320 --> 00:40:59,560
Speaker 1: think it's it's not how we're going to see that's

715
00:40:59,600 --> 00:41:02,040
Speaker 1: how it is separating. But I would I would lay

716
00:41:02,080 --> 00:41:04,879
Speaker 1: around another element to the discussion, which is and then

717
00:41:04,920 --> 00:41:08,560
Speaker 1: there is the capital markets. There is fund flows, and

718
00:41:08,840 --> 00:41:15,040
Speaker 1: institutional investors and individual investors have been very focused on industrial,

719
00:41:15,120 --> 00:41:20,000
Speaker 1: multi family and not focused on retail with a big

720
00:41:20,160 --> 00:41:22,960
Speaker 1: army retail, whether it's food and service or whether it's

721
00:41:23,000 --> 00:41:26,920
Speaker 1: goods oriented, and so there there are opportunities and the

722
00:41:26,960 --> 00:41:30,799
Speaker 1: food and service retail space because the underlying property fundamentals

723
00:41:30,800 --> 00:41:35,400
Speaker 1: are strong and the fund flows are diminished, leading to

724
00:41:35,480 --> 00:41:39,200
Speaker 1: less competition for that asset class. So that that's how

725
00:41:39,880 --> 00:41:42,560
Speaker 1: we look at and I look at retail real estate today.

726
00:41:42,880 --> 00:41:45,800
Speaker 1: So so people are painting with way too broad to brush.

727
00:41:46,200 --> 00:41:49,759
Speaker 1: You really have to focus on this group is doing

728
00:41:49,800 --> 00:41:52,200
Speaker 1: well and has a future, and this group maybe not

729
00:41:52,239 --> 00:41:54,640
Speaker 1: so much. I think I think we often paint with

730
00:41:54,800 --> 00:41:58,520
Speaker 1: very very broad brushes. But real estate is and there

731
00:41:58,520 --> 00:42:01,480
Speaker 1: are broad brushes. That makes sense, But Ultimately you need

732
00:42:01,560 --> 00:42:03,920
Speaker 1: to peel the onion back further and it is a

733
00:42:03,920 --> 00:42:06,239
Speaker 1: local business, and you need to look at markets and

734
00:42:06,320 --> 00:42:09,920
Speaker 1: sub markets and the corner of you know, vine and maple,

735
00:42:10,040 --> 00:42:13,879
Speaker 1: and you know, look at these property configurations and it

736
00:42:13,920 --> 00:42:17,680
Speaker 1: makes a ton of sense. So Crow recently announced that

737
00:42:17,760 --> 00:42:21,560
Speaker 1: they appointed Don Brooks as head of sustainability. Tell us

738
00:42:21,560 --> 00:42:26,600
Speaker 1: a little bit about how sustainability affects both development and

739
00:42:26,760 --> 00:42:29,759
Speaker 1: investing for commercial Realistic Absolutely well. First of all, there

740
00:42:29,800 --> 00:42:32,760
Speaker 1: there is no doubt that investors all around the world

741
00:42:33,280 --> 00:42:36,440
Speaker 1: are more and more focused on the carbon footprint of

742
00:42:36,480 --> 00:42:39,520
Speaker 1: their investors, and so the starting point of the discussion

743
00:42:39,680 --> 00:42:43,759
Speaker 1: is an ability to communicate accurately and effectively what in

744
00:42:43,880 --> 00:42:47,920
Speaker 1: fact is the carbon footprint of your investment activity, because

745
00:42:47,960 --> 00:42:50,960
Speaker 1: they want to know. There are some investors who are

746
00:42:50,960 --> 00:42:55,960
Speaker 1: specifically focused on I want to invest in properties specifically

747
00:42:56,160 --> 00:43:00,080
Speaker 1: geared towards minimizing their impact. Where we are as a

748
00:43:00,120 --> 00:43:02,000
Speaker 1: company today is, first of all, we need to make

749
00:43:02,000 --> 00:43:05,120
Speaker 1: sure that our investors understand the carbon footprint of the

750
00:43:05,120 --> 00:43:08,000
Speaker 1: properties that they're investing in and we're developing in. We're

751
00:43:08,080 --> 00:43:11,279
Speaker 1: also by our own accord as well as all of

752
00:43:11,320 --> 00:43:15,880
Speaker 1: the various local requirements increasingly as every year goes by,

753
00:43:15,960 --> 00:43:19,160
Speaker 1: the properties are becoming more efficient in a myriad of ways.

754
00:43:19,280 --> 00:43:22,720
Speaker 1: I'll give you one example. We are building in Frisco, Texas,

755
00:43:22,800 --> 00:43:26,520
Speaker 1: which is in the Dallas market, a mass timber building.

756
00:43:26,560 --> 00:43:29,800
Speaker 1: What that means is instead of using office building, instead

757
00:43:29,800 --> 00:43:33,520
Speaker 1: of using steel, there's now technology that allows you to

758
00:43:33,560 --> 00:43:38,040
Speaker 1: build very tall buildings out of compressed and laminated wood.

759
00:43:38,960 --> 00:43:42,840
Speaker 1: It's a much better carbon footprint. The impact of of

760
00:43:42,840 --> 00:43:46,560
Speaker 1: of trees growing versus the impact of producing steel has

761
00:43:46,560 --> 00:43:49,680
Speaker 1: a profound impact. And so many companies have told their

762
00:43:49,719 --> 00:43:53,240
Speaker 1: shareholders and society at large that we're going to achieve

763
00:43:53,280 --> 00:43:57,080
Speaker 1: a carbon net neutral impact by such and such date.

764
00:43:57,480 --> 00:43:59,839
Speaker 1: One of the ways they can impact that is by

765
00:43:59,840 --> 00:44:02,920
Speaker 1: the real estate that they occupy. And so whether it's

766
00:44:02,920 --> 00:44:07,000
Speaker 1: communicating how in fact your portfolio is doing, or whether

767
00:44:07,040 --> 00:44:12,040
Speaker 1: it's pursuing a specific um building approach to help the

768
00:44:12,080 --> 00:44:15,680
Speaker 1: investor meet their objectives, those are all areas of sustainability

769
00:44:15,719 --> 00:44:19,319
Speaker 1: for us. Really quite quite interesting. Um, it's hard to

770
00:44:19,400 --> 00:44:23,560
Speaker 1: imagine that you could do any decent sized skyscraper with

771
00:44:23,760 --> 00:44:26,880
Speaker 1: compressed wood instead of steel. But it's hard to believe,

772
00:44:26,920 --> 00:44:28,480
Speaker 1: and I don't have the data off the top of

773
00:44:28,520 --> 00:44:31,680
Speaker 1: my head. But city by city and building codes are

774
00:44:31,719 --> 00:44:34,560
Speaker 1: city by city. But you can now build properties ten

775
00:44:34,560 --> 00:44:37,760
Speaker 1: and fifteen stories tall, and in some markets even taller

776
00:44:38,080 --> 00:44:41,320
Speaker 1: given the strength and durability of the technology underlying the

777
00:44:41,560 --> 00:44:45,719
Speaker 1: mass temper. I'm really curious what the composite carbon materials

778
00:44:45,719 --> 00:44:48,680
Speaker 1: are when you see the pencil thin you know, super

779
00:44:48,680 --> 00:44:51,800
Speaker 1: skyscrapers in New York City on on Central Park South

780
00:44:52,120 --> 00:44:55,120
Speaker 1: and fifty seventh Street over there that are told in

781
00:44:55,160 --> 00:44:59,719
Speaker 1: anything around them and a tiny, you know, base footprint,

782
00:45:00,320 --> 00:45:02,960
Speaker 1: I think, but for that materials, they could not have

783
00:45:03,000 --> 00:45:06,520
Speaker 1: done that in traditional steel and alone. It's it's hard

784
00:45:06,560 --> 00:45:08,480
Speaker 1: to believe they're not going to topple over right. They

785
00:45:08,480 --> 00:45:10,640
Speaker 1: look like they're just they're just gonna snap in the breeze,

786
00:45:10,680 --> 00:45:13,640
Speaker 1: but uh not. Apparently it's lighter and stronger than steel.

787
00:45:14,040 --> 00:45:16,479
Speaker 1: Hard to argue with that. Let's talk a little bit

788
00:45:16,680 --> 00:45:21,040
Speaker 1: about how real estate is doing. Obviously it's done very

789
00:45:21,080 --> 00:45:24,200
Speaker 1: well over the past decade, given what's going on with

790
00:45:24,320 --> 00:45:27,440
Speaker 1: inflation and the Federal Reserve. What are you seeing in

791
00:45:27,480 --> 00:45:31,120
Speaker 1: the real estate market today? Yeah, Well, the real estate

792
00:45:31,160 --> 00:45:35,640
Speaker 1: is an asset class is generally leveraged. Now not everybody

793
00:45:35,719 --> 00:45:38,359
Speaker 1: is leveraging real estate, but generally it's leveraged. Most real

794
00:45:38,480 --> 00:45:41,560
Speaker 1: estate investors are using some amount of debt to acquire

795
00:45:41,600 --> 00:45:45,719
Speaker 1: their properties. The most core or stable investors might use

796
00:45:45,719 --> 00:45:49,919
Speaker 1: twenty percent leverage, the most opportunistic might use seventy five

797
00:45:50,000 --> 00:45:53,360
Speaker 1: or eighty percent leverage. But simply put, the cost of

798
00:45:53,400 --> 00:45:57,080
Speaker 1: debt is going up and the attractiveness and availability of

799
00:45:57,120 --> 00:45:59,959
Speaker 1: that is going down, and those two things are having

800
00:46:00,040 --> 00:46:03,960
Speaker 1: an impact on overall asset prices, and they're having an

801
00:46:04,000 --> 00:46:09,160
Speaker 1: impact on overall transaction activity, which has been declining. So you,

802
00:46:09,200 --> 00:46:12,879
Speaker 1: guys are a very very long term investor. You don't

803
00:46:12,920 --> 00:46:16,400
Speaker 1: have shareholders barking at you for quarterly results. Does this

804
00:46:16,480 --> 00:46:19,840
Speaker 1: create an opportunity for you, Well, there's always an opportunity

805
00:46:19,840 --> 00:46:22,759
Speaker 1: in the marketplace. Does this create a unique opportunity for

806
00:46:22,840 --> 00:46:26,360
Speaker 1: a firm like yours, I'm not sure it's a unique

807
00:46:26,520 --> 00:46:30,520
Speaker 1: opportunity in the marketplace. The marketplace today is still hunting

808
00:46:30,640 --> 00:46:34,400
Speaker 1: for that bid ask spread, and the marketplace as well,

809
00:46:34,560 --> 00:46:36,879
Speaker 1: and and and crow as well is looking for what

810
00:46:37,080 --> 00:46:41,680
Speaker 1: new opportunities are becoming available. We're all waiting for anticipating

811
00:46:41,719 --> 00:46:45,760
Speaker 1: some amount of distress for example, that hasn't yet really

812
00:46:45,800 --> 00:46:49,399
Speaker 1: developed in the marketplace at the margin. If you were

813
00:46:49,400 --> 00:46:51,880
Speaker 1: in the real estate debt business a year ago and

814
00:46:51,920 --> 00:46:55,000
Speaker 1: you accepted a certain return or a certain yield, well,

815
00:46:55,040 --> 00:46:57,960
Speaker 1: today those returns and yields are better. But guess what,

816
00:46:58,239 --> 00:47:01,640
Speaker 1: so is every other fixed income instrument out there, And

817
00:47:01,680 --> 00:47:04,960
Speaker 1: so the marketplace for real estate investors has not the

818
00:47:05,000 --> 00:47:08,919
Speaker 1: monstrably changed on that point a year ago. This would

819
00:47:08,920 --> 00:47:11,319
Speaker 1: be a global phenomenon as well as a US phenomenon.

820
00:47:11,600 --> 00:47:13,880
Speaker 1: The vast majority of investors, when you said what are

821
00:47:13,920 --> 00:47:17,920
Speaker 1: your most favorite asset classes, would have said industrial and

822
00:47:18,000 --> 00:47:20,879
Speaker 1: multi family. What are your least favorite asset classes? They

823
00:47:20,880 --> 00:47:24,040
Speaker 1: probably would have said something like retailent office. If you

824
00:47:24,239 --> 00:47:27,160
Speaker 1: pose those questions to them today, you would get that

825
00:47:27,600 --> 00:47:31,880
Speaker 1: same comment. Office has probably fallen further because of the

826
00:47:31,880 --> 00:47:34,720
Speaker 1: impact of COVID in the way that we're using office space,

827
00:47:35,080 --> 00:47:38,000
Speaker 1: and it's really the most interesting area of real estate

828
00:47:38,080 --> 00:47:42,879
Speaker 1: now with respected discussion the uncertainty about how companies will

829
00:47:43,040 --> 00:47:45,680
Speaker 1: use office real estate into the future. So so we've

830
00:47:45,719 --> 00:47:49,239
Speaker 1: already discussed retail in great detail, let's focus a little

831
00:47:49,280 --> 00:47:53,759
Speaker 1: bit on office. Obviously, remote work work from home probably

832
00:47:53,800 --> 00:47:57,239
Speaker 1: here to stay as much as as Jamie Diamond and

833
00:47:57,280 --> 00:47:59,440
Speaker 1: others are jumping up and down saying get back to

834
00:47:59,480 --> 00:48:05,120
Speaker 1: the office. Um, unless you're a giant multinational corporation, most

835
00:48:05,280 --> 00:48:08,600
Speaker 1: companies seem to be going some form of hybrid. So

836
00:48:09,360 --> 00:48:13,200
Speaker 1: a what does this mean to offices around the country

837
00:48:13,280 --> 00:48:16,920
Speaker 1: be what does it mean especially in urban centers. My

838
00:48:17,040 --> 00:48:20,879
Speaker 1: office is on Brian Park in Midtown. You know, it's

839
00:48:20,880 --> 00:48:23,120
Speaker 1: a beautiful day today. When I head back to my office,

840
00:48:23,160 --> 00:48:24,880
Speaker 1: I'm sure they're gonna it's gonna be busy in that

841
00:48:24,960 --> 00:48:28,120
Speaker 1: part of the city. But I would guess Midtown is

842
00:48:28,239 --> 00:48:31,680
Speaker 1: probably of what it was. What what are you seeing

843
00:48:31,760 --> 00:48:34,480
Speaker 1: and what are the opportunities? Yeah, well, look there is

844
00:48:34,520 --> 00:48:37,040
Speaker 1: no doubt and and I'll make a number up to

845
00:48:37,080 --> 00:48:40,720
Speaker 1: prove a point. Let's say before COVID, the average office

846
00:48:40,719 --> 00:48:43,359
Speaker 1: worker was in the office four point one days a week.

847
00:48:43,440 --> 00:48:45,880
Speaker 1: By making that number up, but that sounds about But

848
00:48:45,960 --> 00:48:48,759
Speaker 1: there's no doubt that not only today, but in three

849
00:48:48,840 --> 00:48:51,000
Speaker 1: years from now, it's not going to be four point

850
00:48:51,000 --> 00:48:53,160
Speaker 1: one days per week. Maybe it's three point three days

851
00:48:53,160 --> 00:48:55,239
Speaker 1: a week, maybe it's three points six days a week,

852
00:48:55,520 --> 00:48:59,800
Speaker 1: but fundamentally there's less demand. The second point is we

853
00:49:00,000 --> 00:49:02,040
Speaker 1: are much more in the world of have and have

854
00:49:02,200 --> 00:49:07,040
Speaker 1: nots with respect office space really meaning office needs to

855
00:49:07,080 --> 00:49:09,680
Speaker 1: be more attractive for your people to want to go

856
00:49:09,800 --> 00:49:13,200
Speaker 1: to than working out of their bedroom. And therefore, who

857
00:49:13,200 --> 00:49:15,920
Speaker 1: wants to work in in an eight or nine foot ceiling,

858
00:49:16,040 --> 00:49:20,160
Speaker 1: fluorescent light, no air, you know, no common space, no

859
00:49:20,320 --> 00:49:23,719
Speaker 1: collaborative space. And so you have the best office buildings,

860
00:49:23,800 --> 00:49:27,520
Speaker 1: the nicest office buildings, like your office building here, So

861
00:49:27,680 --> 00:49:30,880
Speaker 1: just for people who haven't been here, Bloomberg is built

862
00:49:30,880 --> 00:49:34,400
Speaker 1: around a courtyard, so there's light north southeast west, the

863
00:49:34,880 --> 00:49:37,640
Speaker 1: all the elevators you have to enter through the sixth floor,

864
00:49:38,040 --> 00:49:41,600
Speaker 1: which is filled with collaborative meaning spaces on five and four,

865
00:49:42,120 --> 00:49:45,560
Speaker 1: and all the food, coffee, everything is on six. Like

866
00:49:46,160 --> 00:49:49,000
Speaker 1: they were way ahead of their time when they designed

867
00:49:49,000 --> 00:49:52,759
Speaker 1: this building. And I'm sure they they also want more

868
00:49:52,760 --> 00:49:56,399
Speaker 1: people in the office. They're probably running they wanted over

869
00:49:57,200 --> 00:50:00,239
Speaker 1: How difficult is that going to be to achieve? It's

870
00:50:00,239 --> 00:50:03,719
Speaker 1: at some level it'll it'll be difficult. It's difficult for

871
00:50:03,760 --> 00:50:06,919
Speaker 1: people today. I think hybrid work. I wouldn't use remote work,

872
00:50:06,960 --> 00:50:10,239
Speaker 1: but hybrid work is is here to stay. But fundamentally,

873
00:50:10,280 --> 00:50:13,920
Speaker 1: imagine that this office building was nine ft ceilings, fluorescent lights,

874
00:50:14,000 --> 00:50:16,200
Speaker 1: no air, whatever that is what it used to be

875
00:50:16,239 --> 00:50:20,040
Speaker 1: fifteen years ago. I remember that building, and I understand

876
00:50:20,040 --> 00:50:22,840
Speaker 1: why they built this sure, and and last point on this,

877
00:50:22,880 --> 00:50:25,120
Speaker 1: and then we'll go to the spaces, these big urban

878
00:50:25,239 --> 00:50:28,520
Speaker 1: environments where your commute is bad. My commuting to New

879
00:50:28,600 --> 00:50:30,400
Speaker 1: York used to be an hour and a half each week,

880
00:50:30,760 --> 00:50:33,719
Speaker 1: each day, it's fifteen hours a week. If I was

881
00:50:34,000 --> 00:50:37,719
Speaker 1: still commuting between my home and New York City, there's

882
00:50:37,760 --> 00:50:39,560
Speaker 1: no way I'd be coming in five days a week.

883
00:50:39,880 --> 00:50:43,040
Speaker 1: And so fundamentally, I think the urban environments with long

884
00:50:43,120 --> 00:50:48,120
Speaker 1: commutes are more impacted than the suburban environments. And then

885
00:50:48,120 --> 00:50:51,480
Speaker 1: on top of that, imagine and let's say Manhattan on

886
00:50:51,560 --> 00:50:55,480
Speaker 1: Sixth Avenue, the old nineteen sixties white brick buildings right

887
00:50:55,520 --> 00:50:59,440
Speaker 1: are older buildings. There's gonna be a tremendous cost to

888
00:50:59,600 --> 00:51:03,000
Speaker 1: retro fit and upgrade these buildings, some of which will

889
00:51:03,000 --> 00:51:06,480
Speaker 1: make no economic sense. So there is a really fascinating

890
00:51:06,520 --> 00:51:09,080
Speaker 1: and I want to just keep harping on Bloomberg, but

891
00:51:09,120 --> 00:51:12,600
Speaker 1: there's there are three articles I sent you this morning

892
00:51:12,600 --> 00:51:16,320
Speaker 1: that I wanted to go over. One was Wall Street Journal,

893
00:51:16,320 --> 00:51:19,200
Speaker 1: one was New York Times, and one was Bloomberg. The

894
00:51:19,200 --> 00:51:23,480
Speaker 1: Bloomberg pieces really fascinating because it's interactive. New York City's

895
00:51:23,520 --> 00:51:28,640
Speaker 1: empty offices reveal a globally global property issue, and they

896
00:51:28,840 --> 00:51:32,600
Speaker 1: exactly what you're talking about. These older buildings, not from

897
00:51:32,640 --> 00:51:36,360
Speaker 1: the thirties or forties, but from the seventies and eighties,

898
00:51:36,400 --> 00:51:40,280
Speaker 1: that don't have the modern amenities, don't have the higher ceilings,

899
00:51:40,360 --> 00:51:43,680
Speaker 1: don't have all this light coming in. How do you

900
00:51:43,840 --> 00:51:46,000
Speaker 1: how do you bring those buildings up to speed? Well,

901
00:51:46,040 --> 00:51:47,920
Speaker 1: I think it's gonna be a very long, slow grind,

902
00:51:48,120 --> 00:51:50,839
Speaker 1: and some of them depending upon the zoning. I saw

903
00:51:51,040 --> 00:51:53,360
Speaker 1: a month or two ago that silver Stein Properties in

904
00:51:53,360 --> 00:51:56,360
Speaker 1: Downtown Manhattan was taking an old office building and converting

905
00:51:56,360 --> 00:51:59,480
Speaker 1: it to apartments, and I think you'll see some of that.

906
00:51:59,640 --> 00:52:03,160
Speaker 1: So so let me interrupt you. Right there post nine eleven.

907
00:52:03,320 --> 00:52:07,320
Speaker 1: I have a vivid recollection of that whole downtown space

908
00:52:07,800 --> 00:52:13,000
Speaker 1: around the Merrill Lynch Winter Garden and the towers or

909
00:52:13,040 --> 00:52:17,160
Speaker 1: where the towers were, an enormous conversion to residential. And

910
00:52:17,200 --> 00:52:21,359
Speaker 1: now what was once like a semi office like mini

911
00:52:21,480 --> 00:52:27,160
Speaker 1: Downtown is almost residential. It's mostly residential. What do we

912
00:52:27,239 --> 00:52:30,440
Speaker 1: do with something like Hudson Yards that was just built

913
00:52:30,600 --> 00:52:34,359
Speaker 1: right before the pandemic? Can you really convert that much

914
00:52:34,400 --> 00:52:38,040
Speaker 1: office space to residential. Well, Hudson Yards is a beautiful,

915
00:52:38,160 --> 00:52:42,439
Speaker 1: modern respect that's exactly the kind of place people want

916
00:52:42,560 --> 00:52:46,120
Speaker 1: to to work at. And ultimately but is half empty

917
00:52:46,239 --> 00:52:49,200
Speaker 1: or or worse. Yeah, I don't, I don't know specifically. Well,

918
00:52:49,280 --> 00:52:51,200
Speaker 1: New York is taking it on the chin more than

919
00:52:51,239 --> 00:52:54,120
Speaker 1: most cities as a result of COVID because of the

920
00:52:54,160 --> 00:52:57,200
Speaker 1: transportation networks and the trains and and so I think

921
00:52:57,200 --> 00:52:59,400
Speaker 1: New York City is a bit unique across the United

922
00:52:59,440 --> 00:53:03,960
Speaker 1: States entirely. But it will be a very long grind.

923
00:53:04,440 --> 00:53:07,520
Speaker 1: You talk about downtown Manhattan that was twenty two years ago,

924
00:53:08,120 --> 00:53:10,880
Speaker 1: right twenty one years ago, and so this is a

925
00:53:10,920 --> 00:53:14,279
Speaker 1: matter of decades, the fundamental transition, and so there will

926
00:53:14,320 --> 00:53:17,040
Speaker 1: be a lot of pain to be experienced over a

927
00:53:17,160 --> 00:53:21,240
Speaker 1: very long period of time as the leases roll over

928
00:53:22,040 --> 00:53:25,320
Speaker 1: that we're in place and you're not able to release

929
00:53:25,400 --> 00:53:28,680
Speaker 1: the space at similar rents for an increase, you know,

930
00:53:29,239 --> 00:53:31,279
Speaker 1: or an amount of capital you're going to need to

931
00:53:31,360 --> 00:53:35,960
Speaker 1: spend to renovate the property. There will be properties that

932
00:53:36,000 --> 00:53:38,480
Speaker 1: are handed back to the lenders. There will be new

933
00:53:38,480 --> 00:53:41,160
Speaker 1: capital sources who come in. Some of them will get

934
00:53:41,160 --> 00:53:44,600
Speaker 1: redeveloped to apartment buildings. Some of them will get scraped

935
00:53:44,600 --> 00:53:48,000
Speaker 1: and torn down, and some of them will be um

936
00:53:48,280 --> 00:53:53,760
Speaker 1: uh made nicer and attractive to the office tenant. Going forward,

937
00:53:53,800 --> 00:53:56,359
Speaker 1: it will be a combination of all these forces at work.

938
00:53:56,520 --> 00:54:00,160
Speaker 1: All right, New York Times today, factory jobs or boom

939
00:54:00,160 --> 00:54:04,120
Speaker 1: like it's the nine seventies. US manufacturing is experiencing a

940
00:54:04,160 --> 00:54:08,239
Speaker 1: rebound as companies they had thousands of workers. That's industrial.

941
00:54:08,480 --> 00:54:10,640
Speaker 1: What do you see as as new factories going up?

942
00:54:10,800 --> 00:54:13,960
Speaker 1: That is terrific. There. Look, there are three forces driving

943
00:54:14,040 --> 00:54:16,560
Speaker 1: demand for industrial real estate. We talked about e commerce.

944
00:54:16,600 --> 00:54:20,000
Speaker 1: The second is this on shoring trend. Hundreds of thousands

945
00:54:20,000 --> 00:54:22,359
Speaker 1: of jobs are coming back to the United Many. It's

946
00:54:22,360 --> 00:54:26,640
Speaker 1: that huge. That article doesn't highlight. I don't believe all

947
00:54:26,640 --> 00:54:28,560
Speaker 1: the data, but there are jobs coming back to the

948
00:54:28,600 --> 00:54:31,200
Speaker 1: United States. And when those factories are built, there's gonna

949
00:54:31,200 --> 00:54:34,880
Speaker 1: be part suppliers and you're gonna need to store inventory,

950
00:54:34,920 --> 00:54:37,919
Speaker 1: and that's a big driver with respect to industrial real estate.

951
00:54:38,080 --> 00:54:41,520
Speaker 1: And the last driver is the transition from just in

952
00:54:41,680 --> 00:54:45,440
Speaker 1: time inventory to just in case inventory. So you go

953
00:54:45,560 --> 00:54:49,360
Speaker 1: from a very fragile system to a much more robust system. Correct.

954
00:54:50,120 --> 00:54:52,600
Speaker 1: And then the last article that caught my eye Wall

955
00:54:52,640 --> 00:54:56,759
Speaker 1: Street Journal. The US is running short of land for housing.

956
00:54:57,200 --> 00:55:01,080
Speaker 1: Land use restrictions, lack of infrastructure, nimby have all made

957
00:55:01,080 --> 00:55:03,720
Speaker 1: it harder for developers to find sites to build homes

958
00:55:03,719 --> 00:55:06,680
Speaker 1: and apartments. Without a doubt, it is out of land.

959
00:55:07,080 --> 00:55:09,600
Speaker 1: Every single year that goes by. It's becoming more and

960
00:55:09,640 --> 00:55:13,120
Speaker 1: more difficult to build housing for Americans. Whether it's the

961
00:55:13,160 --> 00:55:17,360
Speaker 1: availability of land as we become a denser society, or

962
00:55:17,400 --> 00:55:21,640
Speaker 1: whether it's the local nimbism and the entitlement process to

963
00:55:21,840 --> 00:55:24,520
Speaker 1: build new buildings. That's why we have a housing crisis

964
00:55:24,520 --> 00:55:26,640
Speaker 1: in America. So you and I both grew up in

965
00:55:26,680 --> 00:55:29,600
Speaker 1: Long Islands. I have family in Chicago and their view

966
00:55:29,680 --> 00:55:32,960
Speaker 1: for Thanksgiving, and I, as a Long Island New York kid,

967
00:55:33,560 --> 00:55:38,080
Speaker 1: was always surprised driving around suburban Chicago where there's a

968
00:55:38,160 --> 00:55:40,680
Speaker 1: couple of houses here, and then there's a small office

969
00:55:41,200 --> 00:55:44,440
Speaker 1: building here, and then there's a big apartment building here,

970
00:55:44,560 --> 00:55:47,680
Speaker 1: and it seemed like there were none of the land

971
00:55:47,760 --> 00:55:51,200
Speaker 1: use restrictions that we have in Long Island. Now there

972
00:55:51,200 --> 00:55:54,920
Speaker 1: have been more and more apartment buildings going up, but

973
00:55:55,040 --> 00:55:57,880
Speaker 1: they're pretty few and far between. How do you change

974
00:55:57,880 --> 00:56:01,799
Speaker 1: those restrictions to allow Greater down City. Well, this is

975
00:56:01,840 --> 00:56:04,120
Speaker 1: the this is the challenge we have. There's no doubt

976
00:56:04,120 --> 00:56:08,960
Speaker 1: that single family homeowners and do not want apartment buildings

977
00:56:09,200 --> 00:56:12,759
Speaker 1: built in their communities all across the United States and

978
00:56:13,239 --> 00:56:15,799
Speaker 1: uh land entitlement and the ability to build is a

979
00:56:15,880 --> 00:56:19,440
Speaker 1: local issue. The states and the federal government are not

980
00:56:19,520 --> 00:56:23,319
Speaker 1: driving the decisions with respect to what's get built in

981
00:56:24,040 --> 00:56:27,480
Speaker 1: on main street in your village. It's your local community

982
00:56:27,920 --> 00:56:30,640
Speaker 1: and the city council and the city planning people live

983
00:56:30,719 --> 00:56:33,880
Speaker 1: in those same local communities, and so the system is

984
00:56:33,880 --> 00:56:37,120
Speaker 1: not developed to deal with providing housing for the working

985
00:56:37,120 --> 00:56:39,640
Speaker 1: class in America. Now, whether the states are going to

986
00:56:39,680 --> 00:56:42,840
Speaker 1: be willing to step in. When Governor Newsom and California

987
00:56:42,880 --> 00:56:45,479
Speaker 1: a few years ago was elected, he had some big

988
00:56:45,520 --> 00:56:47,680
Speaker 1: plans for the state to come in and to tell

989
00:56:47,719 --> 00:56:51,799
Speaker 1: the municipalities what to do. That didn't quite happen. I'm

990
00:56:51,800 --> 00:56:54,160
Speaker 1: not aware of any other state I know. The city

991
00:56:54,200 --> 00:56:57,759
Speaker 1: of Minneapolis has put some regulations in place. You know,

992
00:56:57,800 --> 00:57:00,680
Speaker 1: there's regulations both in the state of Offornia and in

993
00:57:00,719 --> 00:57:06,680
Speaker 1: Minneapolis to allow for UH dwelling units on single family properties,

994
00:57:06,719 --> 00:57:08,880
Speaker 1: so it's no longer single family z owning. So you

995
00:57:08,920 --> 00:57:12,000
Speaker 1: can convert your garage into an apartment, you know, for

996
00:57:12,040 --> 00:57:15,560
Speaker 1: someone to live there. That's not the answer. The answer

997
00:57:15,640 --> 00:57:20,560
Speaker 1: is to allow density in transit oriented places where people

998
00:57:20,800 --> 00:57:23,480
Speaker 1: where the jobs are or where people can get to

999
00:57:23,520 --> 00:57:26,280
Speaker 1: their jobs. But this is a very difficult challenge, and

1000
00:57:26,320 --> 00:57:29,240
Speaker 1: it's a large apartment developer. It's very difficult to have

1001
00:57:29,280 --> 00:57:33,600
Speaker 1: any confidence in America today that we're gonna solve this problem.

1002
00:57:33,600 --> 00:57:35,640
Speaker 1: And it's a real challenge for the working class, in

1003
00:57:35,680 --> 00:57:37,560
Speaker 1: the lower class in this country. So you and I

1004
00:57:37,680 --> 00:57:41,040
Speaker 1: both uh grew up on the island. You were in

1005
00:57:41,160 --> 00:57:43,640
Speaker 1: Port Washington. I live in Locust Valley. We're both on

1006
00:57:43,680 --> 00:57:47,080
Speaker 1: the northern shore of Long Island. The two towns in

1007
00:57:47,120 --> 00:57:50,960
Speaker 1: between us one is Sea Cliff, which it used to

1008
00:57:50,960 --> 00:57:54,560
Speaker 1: be a summer community, but right on the water across

1009
00:57:54,960 --> 00:57:58,440
Speaker 1: across Hampstead Harbor from them is Glen Cove. And Glen

1010
00:57:58,480 --> 00:58:02,240
Speaker 1: Cove had these wonderful plans to build um low income

1011
00:58:02,280 --> 00:58:05,360
Speaker 1: housing on the water, create these high rise apartment buildings.

1012
00:58:05,800 --> 00:58:09,960
Speaker 1: Twenty five years of litigation, and eventually what they end

1013
00:58:10,040 --> 00:58:14,080
Speaker 1: up building is this huge run of luxury condos. They

1014
00:58:14,120 --> 00:58:16,880
Speaker 1: go for a million dollars each in Glen Cove, which

1015
00:58:16,960 --> 00:58:20,960
Speaker 1: is not Brookville or SAMs Point or any of the

1016
00:58:21,480 --> 00:58:25,040
Speaker 1: you know better known Shishi neighborhoods. It was the only

1017
00:58:25,040 --> 00:58:26,960
Speaker 1: way they were able to get it through. People in

1018
00:58:27,000 --> 00:58:31,000
Speaker 1: seacliffs still screamed for years and it's ruining our view.

1019
00:58:31,560 --> 00:58:33,760
Speaker 1: I'm sorry, but if you want the few, you have

1020
00:58:33,840 --> 00:58:37,000
Speaker 1: to go buy that property and leave it undeveloped. They're

1021
00:58:37,000 --> 00:58:40,080
Speaker 1: allowed to build and and that's exactly what happened. You're

1022
00:58:40,080 --> 00:58:43,120
Speaker 1: saying this is a door to door ground war. There's

1023
00:58:43,160 --> 00:58:45,959
Speaker 1: no easy way to fix this at the present time.

1024
00:58:46,400 --> 00:58:50,480
Speaker 1: Clearly the state could step in and and take control

1025
00:58:50,520 --> 00:58:53,880
Speaker 1: over these decisions, but elected officials want to get reelected.

1026
00:58:54,480 --> 00:58:56,480
Speaker 1: And if you want to shore fire away in your

1027
00:58:56,480 --> 00:59:01,400
Speaker 1: local community to not get reelected, go pursue policies that

1028
00:59:01,480 --> 00:59:04,919
Speaker 1: the single family home owners don't support. So let's talk

1029
00:59:04,960 --> 00:59:07,160
Speaker 1: a little bit about single family homes, which I know

1030
00:59:07,240 --> 00:59:11,880
Speaker 1: you don't build and and don't necessarily own. Um. All

1031
00:59:11,960 --> 00:59:15,400
Speaker 1: the data I'm looking at is uh time on the

1032
00:59:15,440 --> 00:59:18,680
Speaker 1: market is longer, Bidding wars have more or less gone away,

1033
00:59:19,280 --> 00:59:23,840
Speaker 1: People getting over asked have been cut in half. Uh So,

1034
00:59:23,920 --> 00:59:26,800
Speaker 1: clearly mark downs are happening on single family homes. Doesn't

1035
00:59:26,840 --> 00:59:30,640
Speaker 1: mean it's gonna be like the financial crisis with stuff

1036
00:59:30,680 --> 00:59:35,760
Speaker 1: fell thirt but not. Wouldn't be surprising to see single

1037
00:59:35,800 --> 00:59:39,720
Speaker 1: family homes, especially in the hotter areas, soften a little bit.

1038
00:59:40,360 --> 00:59:42,480
Speaker 1: What does this mean for you when you're looking to

1039
00:59:42,640 --> 00:59:45,520
Speaker 1: do a commercial deal put up an apartment building. How

1040
00:59:45,560 --> 00:59:49,919
Speaker 1: does residential single family homes affect multi family? Well, the

1041
00:59:49,920 --> 00:59:53,080
Speaker 1: the irony of it is, those factors which are driving

1042
00:59:53,120 --> 00:59:57,520
Speaker 1: down home sales are helpful with respect to rental properties

1043
00:59:57,720 --> 01:00:01,080
Speaker 1: because if you're not gonna buy a home a place

1044
01:00:01,120 --> 01:00:03,240
Speaker 1: to live, and at some point you're gonna want to

1045
01:00:03,280 --> 01:00:05,880
Speaker 1: leave your parents basement, and at some point you're gonna

1046
01:00:05,920 --> 01:00:07,560
Speaker 1: need a place to live, and you're going to rent.

1047
01:00:07,920 --> 01:00:09,680
Speaker 1: Now you're going to rent an apartment or you're going

1048
01:00:09,720 --> 01:00:13,200
Speaker 1: to rent a home. But these forces are positive with

1049
01:00:13,240 --> 01:00:17,440
Speaker 1: respect to the underlying demand for rental housing in America.

1050
01:00:17,560 --> 01:00:21,680
Speaker 1: And the past five years we've noticed UM household formations

1051
01:00:21,680 --> 01:00:25,040
Speaker 1: have increased, which means more and more people are living together,

1052
01:00:25,080 --> 01:00:28,840
Speaker 1: getting married, which eventually means a house, a baby, or

1053
01:00:28,920 --> 01:00:35,560
Speaker 1: what have you. Um. How much more residential housing does

1054
01:00:35,600 --> 01:00:40,040
Speaker 1: the United States need, especially the denser multi family How

1055
01:00:40,040 --> 01:00:45,480
Speaker 1: many units can we build before we overbuild? Well? UM,

1056
01:00:45,520 --> 01:00:48,520
Speaker 1: depending upon whose data you're looking at, it's somewhere between

1057
01:00:48,640 --> 01:00:51,320
Speaker 1: two and seven million units of housing that we're under

1058
01:00:51,320 --> 01:00:54,440
Speaker 1: housed in America. I mean, look at the homelessness that's

1059
01:00:54,480 --> 01:00:57,760
Speaker 1: taking place in our major cities. This solution for that

1060
01:00:57,880 --> 01:01:00,920
Speaker 1: is supply. The solution for all of this is supply.

1061
01:01:01,320 --> 01:01:04,480
Speaker 1: And so Americans remember two thousand and five, six seven

1062
01:01:04,800 --> 01:01:07,160
Speaker 1: when we had the subprime crisis and all these houses

1063
01:01:07,160 --> 01:01:10,640
Speaker 1: were built, and arguably we were over housed at that

1064
01:01:10,720 --> 01:01:14,520
Speaker 1: point in time, but then we were chronically undersupplied in

1065
01:01:14,560 --> 01:01:17,520
Speaker 1: the decade plus and that deficit has grown year over

1066
01:01:17,640 --> 01:01:21,720
Speaker 1: year over year, and so there's millions of houses or

1067
01:01:21,800 --> 01:01:25,560
Speaker 1: apartments or housing units that we need to create again

1068
01:01:26,200 --> 01:01:30,040
Speaker 1: for the working class and for the less affluent in America.

1069
01:01:30,440 --> 01:01:33,160
Speaker 1: But it's very difficult. In the same exact places that

1070
01:01:33,240 --> 01:01:35,480
Speaker 1: we need this, it's the most difficult to build it.

1071
01:01:35,520 --> 01:01:38,160
Speaker 1: I'll give you one example and then then the numbers

1072
01:01:38,160 --> 01:01:41,480
Speaker 1: are fictitious, but they'll be illustrative. We build a lot

1073
01:01:41,560 --> 01:01:44,280
Speaker 1: in Houston, Texas, which arguably is one of the easier

1074
01:01:44,320 --> 01:01:46,280
Speaker 1: markets in the United States to build in, and we

1075
01:01:46,320 --> 01:01:49,080
Speaker 1: can build an apartment building for let's say, a hundred

1076
01:01:49,120 --> 01:01:51,920
Speaker 1: and fifty thousand dollars per unit. If we go to

1077
01:01:51,960 --> 01:01:55,960
Speaker 1: build that same exact physical building in southern California, that

1078
01:01:56,000 --> 01:01:59,160
Speaker 1: will cost four hundred and fifty thou Half of that

1079
01:01:59,240 --> 01:02:02,320
Speaker 1: might be land and labor, but half of that is

1080
01:02:02,360 --> 01:02:08,160
Speaker 1: related to the regulatory fabric requiring us to undertake certain

1081
01:02:08,200 --> 01:02:12,800
Speaker 1: building design and construct to meet the local requirements, such

1082
01:02:12,840 --> 01:02:16,640
Speaker 1: as like capturing all the rainwater, and you need to

1083
01:02:16,680 --> 01:02:20,200
Speaker 1: capture all of the rainwater your property and funnel it

1084
01:02:20,240 --> 01:02:23,760
Speaker 1: into a water filtration system type of right, Well, they

1085
01:02:23,800 --> 01:02:27,200
Speaker 1: do have a massive water shortage. I understand. I'm just saying,

1086
01:02:27,800 --> 01:02:30,200
Speaker 1: what are we solving for in America? Are we trying

1087
01:02:30,240 --> 01:02:33,320
Speaker 1: to produce housing for the less affluent in the working

1088
01:02:33,320 --> 01:02:36,439
Speaker 1: class or are we not? If we are, let's get

1089
01:02:36,560 --> 01:02:42,160
Speaker 1: serious about it. Huh. So what other states are especially easy,

1090
01:02:42,200 --> 01:02:47,960
Speaker 1: like Texas or difficult like California to add additional residential units.

1091
01:02:48,120 --> 01:02:50,240
Speaker 1: I think the most difficult is the West coast of

1092
01:02:50,240 --> 01:02:52,560
Speaker 1: the United States, whether it's you know, parts of Oregon

1093
01:02:52,640 --> 01:02:57,440
Speaker 1: or Washington or California, these cities, these urban California, you know,

1094
01:02:57,560 --> 01:03:03,080
Speaker 1: But I always think of um like, uh, Oregon is

1095
01:03:03,120 --> 01:03:07,560
Speaker 1: sort of like a libertarian wilderness. First of all, it's

1096
01:03:07,600 --> 01:03:09,640
Speaker 1: not a it's not a rural issue. This is in

1097
01:03:09,720 --> 01:03:13,840
Speaker 1: the dense, you know cities. But nonetheless, it goes back

1098
01:03:13,840 --> 01:03:16,760
Speaker 1: to this point of yes, we wanted for the people

1099
01:03:16,840 --> 01:03:20,800
Speaker 1: live here, but not in my backyard. Or if our developer,

1100
01:03:20,840 --> 01:03:23,720
Speaker 1: you're gonna build that, but we're gonna require you to

1101
01:03:23,840 --> 01:03:26,439
Speaker 1: give fifty of the units at this rent, You're gonna

1102
01:03:26,440 --> 01:03:28,480
Speaker 1: have to build a park, You're gonna have to pay

1103
01:03:28,520 --> 01:03:33,000
Speaker 1: certain fees, and they put on you elements that make

1104
01:03:33,040 --> 01:03:38,040
Speaker 1: it development perspective and capital This isn't the real estate

1105
01:03:38,040 --> 01:03:41,240
Speaker 1: developers point. The real estate developer is responding to the

1106
01:03:41,240 --> 01:03:45,440
Speaker 1: capital markets and investors investing in real estate are seeking

1107
01:03:45,480 --> 01:03:48,400
Speaker 1: a certain return profile. What about the Midwest. I know

1108
01:03:48,480 --> 01:03:50,640
Speaker 1: there's been a little bit of a renaissance in cities

1109
01:03:50,680 --> 01:03:56,360
Speaker 1: like Pittsburgh, Um, Cleveland, Milwaukee, they all are. Detroit even

1110
01:03:56,440 --> 01:03:59,400
Speaker 1: is starting to recover from where it was. How do

1111
01:03:59,440 --> 01:04:01,800
Speaker 1: you put up new units, especially in a place like

1112
01:04:01,880 --> 01:04:04,440
Speaker 1: Detroit that what is half the population is left of

1113
01:04:04,520 --> 01:04:07,800
Speaker 1: the best there? Yeah, I know it's um Farmland is recovering,

1114
01:04:07,880 --> 01:04:10,400
Speaker 1: retaking parts of the city. Look, this issue is most

1115
01:04:10,400 --> 01:04:13,000
Speaker 1: pronounced in the big cities where people want to live

1116
01:04:13,600 --> 01:04:15,880
Speaker 1: and so When you go to some of the smaller

1117
01:04:15,920 --> 01:04:18,120
Speaker 1: cities or the Midwest cities which aren't experienced in the

1118
01:04:18,160 --> 01:04:21,440
Speaker 1: type of population growth, these difficulties are not nearly as

1119
01:04:21,520 --> 01:04:25,000
Speaker 1: much of a challenge. And and and so those cities

1120
01:04:25,040 --> 01:04:30,000
Speaker 1: are doing relatively okay. Nowhere is perfect. There's homelessness everywhere,

1121
01:04:30,040 --> 01:04:33,480
Speaker 1: there's challenges for young people everywhere. There's challenges for teachers

1122
01:04:33,520 --> 01:04:37,720
Speaker 1: and hospital workers and cops and firefighters all over America.

1123
01:04:37,800 --> 01:04:41,360
Speaker 1: But it's most pronounced in your high cost of living markets,

1124
01:04:41,360 --> 01:04:44,360
Speaker 1: whether it's the New York metro area, whether it's the

1125
01:04:44,400 --> 01:04:50,280
Speaker 1: southern California area, Northern California, Seattle. It's cheaper and easier,

1126
01:04:50,480 --> 01:04:53,480
Speaker 1: all things being equal, to develop in the southeast and

1127
01:04:53,520 --> 01:04:57,320
Speaker 1: the Southwest, and so the problems are less pronounced as

1128
01:04:57,360 --> 01:05:00,360
Speaker 1: well as you'll have from a entitlement p fact of

1129
01:05:00,840 --> 01:05:06,200
Speaker 1: more pro business um entitlement policies in place that allow

1130
01:05:06,320 --> 01:05:09,520
Speaker 1: for the development of real estate for these needs really

1131
01:05:09,560 --> 01:05:12,320
Speaker 1: really intriguing. My last question before I get to my

1132
01:05:12,360 --> 01:05:16,400
Speaker 1: favorites are is it safe to say you're pretty optimistic

1133
01:05:16,520 --> 01:05:20,440
Speaker 1: about real estate development in the United States going forward,

1134
01:05:20,520 --> 01:05:24,880
Speaker 1: despite the challenges that it faces. I think these fundamental

1135
01:05:25,000 --> 01:05:29,640
Speaker 1: demand trends and industrial real estate are here for the

1136
01:05:29,680 --> 01:05:33,600
Speaker 1: foreseeable future. I think America is under house, particularly with

1137
01:05:33,680 --> 01:05:37,360
Speaker 1: respect to the working class and attainable housing that we need.

1138
01:05:38,120 --> 01:05:43,520
Speaker 1: I think that office buildings again, going back to the modern,

1139
01:05:43,520 --> 01:05:47,240
Speaker 1: open light, collaborative space, I think there's a demand for

1140
01:05:47,320 --> 01:05:50,360
Speaker 1: that that will grow in time. And there are other

1141
01:05:50,400 --> 01:05:52,440
Speaker 1: areas of real estate that we're going to continue to

1142
01:05:52,560 --> 01:05:55,680
Speaker 1: need to increase the overall supply in America, And there

1143
01:05:55,680 --> 01:05:57,800
Speaker 1: are other areas of real estate or other markets where

1144
01:05:57,840 --> 01:06:01,280
Speaker 1: we're not going to And so like all topics, there's

1145
01:06:01,280 --> 01:06:03,800
Speaker 1: a broad brush to paint and then there's smaller paint

1146
01:06:03,840 --> 01:06:07,040
Speaker 1: strokes within that canvas. The devil is always in the details.

1147
01:06:07,320 --> 01:06:09,560
Speaker 1: All right, Let's jump to our favorite questions we ask

1148
01:06:09,640 --> 01:06:13,280
Speaker 1: all of our guests, starting with what kept you entertained

1149
01:06:13,360 --> 01:06:16,280
Speaker 1: during the lockdown? What did you watch or listen to

1150
01:06:16,360 --> 01:06:21,400
Speaker 1: either on Netflix or Amazon Prime or podcast or whatever. Well, um,

1151
01:06:21,440 --> 01:06:23,760
Speaker 1: I think, like a lot of parents of of of

1152
01:06:23,800 --> 01:06:27,360
Speaker 1: older kids, that March April May period was just brilliant

1153
01:06:27,520 --> 01:06:29,960
Speaker 1: because every night I sat on the couch with my

1154
01:06:30,040 --> 01:06:33,720
Speaker 1: three kids and we binge watched The West Wing with

1155
01:06:33,760 --> 01:06:36,440
Speaker 1: Mark Chene, which is just fabulous. To watch that again,

1156
01:06:37,000 --> 01:06:39,520
Speaker 1: and a show called Royal Pains, which was about a

1157
01:06:39,560 --> 01:06:42,400
Speaker 1: doctor out in uh the east end of Long Island,

1158
01:06:43,120 --> 01:06:46,120
Speaker 1: and uh that was really just a terrific family time

1159
01:06:46,200 --> 01:06:49,240
Speaker 1: for us. Really interesting. Tell us a little bit about

1160
01:06:49,320 --> 01:06:53,840
Speaker 1: your early mentors who helped to shape your career. I

1161
01:06:53,920 --> 01:06:58,400
Speaker 1: have always been lucky and blessed through my job to

1162
01:06:58,520 --> 01:07:02,440
Speaker 1: have someone seen or to me, wiser to me along

1163
01:07:02,480 --> 01:07:05,120
Speaker 1: the way that would look out for me and I

1164
01:07:05,160 --> 01:07:07,120
Speaker 1: would look out for them. And so from my first

1165
01:07:07,200 --> 01:07:09,439
Speaker 1: job as a legal assistant, there was this great lawyer

1166
01:07:09,440 --> 01:07:11,880
Speaker 1: and a marty hunger, you know, all the way through

1167
01:07:12,000 --> 01:07:14,800
Speaker 1: most of my career at Morgan Stanley. But something happened

1168
01:07:14,800 --> 01:07:18,320
Speaker 1: at forty years old. I was working at Morgan Stanley

1169
01:07:18,440 --> 01:07:21,479
Speaker 1: and a guy, a terrific guy who's a mentor to mind,

1170
01:07:21,800 --> 01:07:25,120
Speaker 1: went up and quit. And he walks into my office

1171
01:07:25,120 --> 01:07:28,240
Speaker 1: and says, hey, you know, uh, last day here, you know,

1172
01:07:28,360 --> 01:07:30,800
Speaker 1: still call me kid. I'm at forty He said, listen,

1173
01:07:31,000 --> 01:07:32,840
Speaker 1: I just want you to know I'm going over. I'm

1174
01:07:32,880 --> 01:07:36,120
Speaker 1: going to do this. And I was so deflated and

1175
01:07:36,200 --> 01:07:39,280
Speaker 1: that I sat at my desk and realized, Okay, maybe

1176
01:07:39,280 --> 01:07:41,920
Speaker 1: you're just old enough now and you're just gonna have

1177
01:07:41,960 --> 01:07:44,080
Speaker 1: to figure this all out for yourself. But the truth

1178
01:07:44,080 --> 01:07:47,120
Speaker 1: of the matter is, even today I work with the

1179
01:07:47,160 --> 01:07:50,680
Speaker 1: senior partners at at my firm or terrific people. I

1180
01:07:50,800 --> 01:07:54,240
Speaker 1: learned so much from them, and I whether it's Harlan

1181
01:07:54,440 --> 01:07:56,880
Speaker 1: or a couple of the senior guys, I I consider

1182
01:07:56,920 --> 01:07:59,840
Speaker 1: them mentors as well. Today. The guy who quit and

1183
01:08:00,120 --> 01:08:03,960
Speaker 1: left you deflated, Yeah, he very much though, mentored you,

1184
01:08:04,040 --> 01:08:07,200
Speaker 1: showing you there's life outside of a giant organization. And

1185
01:08:07,240 --> 01:08:10,160
Speaker 1: you eventually followed in his footsteps. Absolutely, and he's a

1186
01:08:10,240 --> 01:08:12,439
Speaker 1: terrific guy and I love him dearly. So let's talk

1187
01:08:12,480 --> 01:08:15,640
Speaker 1: about some of your favorite books. And what are you

1188
01:08:15,680 --> 01:08:19,080
Speaker 1: reading right now? When you pose a question, immediately comes

1189
01:08:19,120 --> 01:08:21,960
Speaker 1: to mind. I RAN's Outlas Shrugged. There's no book that's

1190
01:08:22,000 --> 01:08:23,640
Speaker 1: ever had such an impact in my life. And I

1191
01:08:23,680 --> 01:08:26,360
Speaker 1: read that when I was a young man in college.

1192
01:08:26,560 --> 01:08:29,040
Speaker 1: I read it in college. I had to fight my

1193
01:08:29,120 --> 01:08:31,759
Speaker 1: way through that book. There's a speech in the middle

1194
01:08:31,800 --> 01:08:35,080
Speaker 1: that's like eighty pages long. It just goes on. I

1195
01:08:35,120 --> 01:08:37,559
Speaker 1: think the book is over a thousand pages. It just

1196
01:08:37,640 --> 01:08:39,800
Speaker 1: shaped the way that I thought about the world, and

1197
01:08:39,800 --> 01:08:42,479
Speaker 1: it was and it affected me in very profound ways.

1198
01:08:43,160 --> 01:08:46,400
Speaker 1: Really like no other book. There was another book I read,

1199
01:08:46,560 --> 01:08:48,360
Speaker 1: By the way, you're not the first person to refuse

1200
01:08:48,439 --> 01:08:50,920
Speaker 1: that example. A lot of people say that that was

1201
01:08:50,960 --> 01:08:53,759
Speaker 1: a formative experience for them. There was a book I read.

1202
01:08:54,040 --> 01:08:56,559
Speaker 1: You know, I think there's all professionals we read books

1203
01:08:56,560 --> 01:08:59,280
Speaker 1: on leadership and management. And in two thousand and five

1204
01:08:59,320 --> 01:09:01,840
Speaker 1: I read a book, The Radical Leap, which was a

1205
01:09:01,920 --> 01:09:05,200
Speaker 1: leadership book read written by this terrific guy named Steve Farber.

1206
01:09:05,720 --> 01:09:11,400
Speaker 1: And The Radical Leap was love, energy, audacity, and proof um.

1207
01:09:11,439 --> 01:09:13,400
Speaker 1: And it was just a great, easy read and it

1208
01:09:13,680 --> 01:09:17,600
Speaker 1: stuck with me. Basically, you know, love in business is

1209
01:09:17,640 --> 01:09:21,680
Speaker 1: fundamentally the source of of of being successful. And that

1210
01:09:21,760 --> 01:09:25,599
Speaker 1: was also by coincidence how Trammel Crow viewed our business

1211
01:09:25,600 --> 01:09:28,160
Speaker 1: in our industry, that love was the most important factor

1212
01:09:28,200 --> 01:09:30,880
Speaker 1: in terms of success. The books I've been reading a

1213
01:09:30,920 --> 01:09:34,160
Speaker 1: more more philosophy and history recently. So I wrote this,

1214
01:09:34,320 --> 01:09:36,200
Speaker 1: read this great book called The Cave and the Light,

1215
01:09:36,800 --> 01:09:41,200
Speaker 1: which is about Plato and Aristotle. There's this terrific thinker

1216
01:09:41,320 --> 01:09:44,639
Speaker 1: named Jordan Peterson who written several books, and I'm reading

1217
01:09:44,640 --> 01:09:49,120
Speaker 1: a book called Beyond Order right now. Occasionally I read fiction, um,

1218
01:09:49,800 --> 01:09:52,160
Speaker 1: but not that often. I used to read a ton

1219
01:09:52,200 --> 01:09:54,280
Speaker 1: of fiction, and I just never get to it these days.

1220
01:09:54,360 --> 01:09:57,080
Speaker 1: If I'm on vacation, I'll bring a couple of fiction

1221
01:09:57,080 --> 01:09:59,600
Speaker 1: and a couple of nonfiction books and see what what

1222
01:09:59,720 --> 01:10:02,640
Speaker 1: gets the time. Um, what sort of advice would you

1223
01:10:02,680 --> 01:10:06,000
Speaker 1: give to a recent college grad who is interested in

1224
01:10:06,000 --> 01:10:10,400
Speaker 1: a career in real estate investing development? What would you

1225
01:10:10,439 --> 01:10:13,040
Speaker 1: tell them? Well, look, I think some of the basics.

1226
01:10:13,080 --> 01:10:15,360
Speaker 1: First of all, you know, if if you want to

1227
01:10:15,400 --> 01:10:18,880
Speaker 1: be successful in these worlds of investment, broadly speaking, you're

1228
01:10:18,920 --> 01:10:21,519
Speaker 1: gonna have to work really hard, and you're gonna have

1229
01:10:21,600 --> 01:10:24,200
Speaker 1: to make sacrifices with respect to your life. And are

1230
01:10:24,240 --> 01:10:26,640
Speaker 1: you prepared to do that? And and and that's the

1231
01:10:26,680 --> 01:10:29,160
Speaker 1: first thing. The second thing, with respect to young people

1232
01:10:29,160 --> 01:10:32,040
Speaker 1: looking to go in an industry, my my first argument

1233
01:10:32,080 --> 01:10:35,400
Speaker 1: to them is go geographically where the epicenter of that

1234
01:10:35,479 --> 01:10:37,879
Speaker 1: industry is. And so, if you want to be in fashion,

1235
01:10:38,000 --> 01:10:39,800
Speaker 1: you want to be in New York. If you want

1236
01:10:39,800 --> 01:10:41,439
Speaker 1: to be in music, you're gonna want to be in

1237
01:10:41,520 --> 01:10:43,920
Speaker 1: Nashville or New York or in l A. And so

1238
01:10:43,960 --> 01:10:46,639
Speaker 1: if you want to be in finance or investing, these

1239
01:10:46,640 --> 01:10:49,680
Speaker 1: cities like New York still remain the epicenter of this,

1240
01:10:49,960 --> 01:10:52,200
Speaker 1: and so go where there are lots of people in

1241
01:10:52,200 --> 01:10:55,519
Speaker 1: the industry doing what it is that you want to do. Now,

1242
01:10:55,560 --> 01:10:58,880
Speaker 1: the nice thing about real estate development and even real

1243
01:10:58,960 --> 01:11:01,400
Speaker 1: estate investing is it's highly fragmented and all over doing

1244
01:11:01,439 --> 01:11:04,720
Speaker 1: any states you can, you can do it anywhere. Um

1245
01:11:04,760 --> 01:11:07,920
Speaker 1: really really interesting. And our final question, what do you

1246
01:11:07,960 --> 01:11:11,160
Speaker 1: know about the world of real estate investing in development

1247
01:11:11,200 --> 01:11:15,400
Speaker 1: today that you wish you knew thirty years ago? This

1248
01:11:15,439 --> 01:11:19,280
Speaker 1: one's easy. I remember in training, sitting and training and

1249
01:11:19,280 --> 01:11:23,439
Speaker 1: listen to Ralph Alcimpora, Oh technical strategies. Great guy, and

1250
01:11:23,479 --> 01:11:25,639
Speaker 1: he sat up in front of all of us, young

1251
01:11:25,840 --> 01:11:29,559
Speaker 1: smiling faces and showed us these charts predicting the future.

1252
01:11:30,160 --> 01:11:32,719
Speaker 1: And I hung on his every word, and I could

1253
01:11:32,720 --> 01:11:35,559
Speaker 1: have sworn that Ralph could predict the future. And then

1254
01:11:35,600 --> 01:11:38,000
Speaker 1: I went and worked in these firms and listened to

1255
01:11:38,040 --> 01:11:41,839
Speaker 1: the brightest people talk about the future, predicting the future

1256
01:11:42,200 --> 01:11:44,840
Speaker 1: with respect to the capital markets, the stock market, the

1257
01:11:44,880 --> 01:11:48,639
Speaker 1: GDP growth. And finally, at some point along the way,

1258
01:11:48,720 --> 01:11:53,080
Speaker 1: I realized that none of these people, irrespective of their models,

1259
01:11:53,800 --> 01:11:57,040
Speaker 1: know anything about the future. And so we sit here

1260
01:11:57,040 --> 01:11:59,800
Speaker 1: today worried about the future. We feel it's a time

1261
01:11:59,840 --> 01:12:02,800
Speaker 1: of tremendous uncertainty with the future. You know what, a

1262
01:12:02,840 --> 01:12:06,559
Speaker 1: maximum point of uncertainty was what everybody felt certain December

1263
01:12:08,120 --> 01:12:12,320
Speaker 1: because nobody anticipated that COVID would come. And so the

1264
01:12:12,439 --> 01:12:14,599
Speaker 1: thing I know now that I didn't know that is

1265
01:12:14,920 --> 01:12:17,640
Speaker 1: how do you run your business when you know you

1266
01:12:17,760 --> 01:12:21,200
Speaker 1: don't know? And those of us who spend time trying

1267
01:12:21,240 --> 01:12:22,880
Speaker 1: to think that we know what the future is going

1268
01:12:22,920 --> 01:12:27,000
Speaker 1: to hold with respect to these cyclical activities, fundamentally are

1269
01:12:27,000 --> 01:12:30,240
Speaker 1: setting ourselves up to either just be lucky or just

1270
01:12:30,360 --> 01:12:35,520
Speaker 1: wrong a lot of the time. Really totally fascinating, um,

1271
01:12:35,560 --> 01:12:38,320
Speaker 1: really really interesting. Michael, Thank you for being so generous

1272
01:12:38,640 --> 01:12:42,519
Speaker 1: with your time. We have been speaking with Michael Leavy.

1273
01:12:42,640 --> 01:12:47,000
Speaker 1: He is chief executive officer of Crow Holdings, a commercial

1274
01:12:47,680 --> 01:12:51,840
Speaker 1: real estate developer and investor. If you enjoy this conversation,

1275
01:12:51,840 --> 01:12:54,120
Speaker 1: we'll be sure and check any of our previous four

1276
01:12:54,200 --> 01:12:57,880
Speaker 1: hundred such discussions we've had over the past eight years.

1277
01:12:58,320 --> 01:13:01,919
Speaker 1: You can find that at I Tunes, Spotify, YouTube, wherever

1278
01:13:02,040 --> 01:13:05,639
Speaker 1: you feed your podcast fixed. We love your comments, feedback,

1279
01:13:05,720 --> 01:13:08,920
Speaker 1: end suggestions. You can write to us at m IB

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Speaker 1: podcast at Bloomberg dot net. Sign up from my Daily

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Speaker 1: reading list at Ridholts dot com, follow me on Twitter

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Speaker 1: at rid Halts. I would be remiss if I did

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Speaker 1: not thank the crack team that helps put these conversations

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Speaker 1: together each week. Sebastian Escobar is my audio engineer, Paris

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Speaker 1: Wald is my producer, Attica val Bron is our project manager.

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Speaker 1: Sean Russo is my head of research. I'm Barry Ridholts.

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Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.