Blake Potolicchio- Profitable Outdoor Storage Investing (#126)

[00:00:00] Speaker A: Foreign. [00:00:08] Speaker B: Hi, I'm John Ko and welcome to icons of D.C. area real estate, a one on one interview show featuring the backgrounds, career trajectories and insights of the top luminaries in the Washington D.C. area Real estate market. The purpose of the show was to explore their journeys, how they got started, the pivotal moments that shaped their careers, and the lessons they've learned along the way. We also dive into their current work, industry trends, and some fascinating behind the scenes stories that bring unique perspective to our industry. Commercial Real Estate before we dive into today's conversation, I'd like to share some exciting news. The icons of D.C. area Real estate Podcast is now part of the Iconic Journey in cre, a nonprofit dedicated to supporting professionals at every stage of their real estate careers. With our new website launching soon, we're expanding opportunities for everyone in the industry. 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To learn more about our community, career coaching or sponsorship opportunities, please visit our new website iconicjourneyincre.org which will be going live probably by the 1st of March. Thank you for being part of this journey and now let's get started with today's guest. Hi and welcome back to icons of D.C. area real estate. This episode I sit down with Blake Poteliccio, Co Chief Investment Officer of Open Industrial, to explore one of the most intriguing niches in commercial real estate, outdoor storage. Blake takes us inside this high demand sector where zoning regulations and minimal lot coverage create unique investment opportunities. Open Industrial has mastered the art of targeting heavy industrial zoned properties, focusing on 2 to 20 acre lots with low overhead and strong cash flow potential. During the COVID 19 pandemic, the strategy proved incredibly resilient and as institutional investment grows, the sector continues to evolve. Beyond investment strategies, Blake shares his personal Journey from a Bethesda upbringing and early aspirations in medicine to discovering his passion for real estate. His career path was shaped by mentors, the global financial crisis, and an unrelenting drive to understand market dynamics. We also talk about the importance of culture, core values, and full contact networking, along with Blake's commitment to giving back through initiatives like Bike to the beach and partnerships with Howard University. And if he had a billboard on the Capitol Beltway, it would read be bold. So join me for this insightful conversation packed with lessons on strategy, leadership and the future of outdoor storage real estate. Thank you for joining me. So, Blake Potalico, welcome to Icons of DT Area Real Estate. Thank you for joining me today. [00:04:37] Speaker A: Thanks for having me. It's an honor. [00:04:39] Speaker B: Thank you. So as co chief investment officer at Open Industrial, can you describe your primary responsibilities and daily activities? [00:04:48] Speaker A: Yeah, absolutely. So maybe taking a step back and explaining what we're looking for and, and how we're doing it. We are focused on aggregating heavy industrial zoned land that has mission critical components through outdoor storage. So you're thinking 2 to 20 acres. These are rough kind of parameters. 0 to 30% lot coverage. So smaller buildings with majority of land, whether it's paved, graveled, concrete, heavy industrially zoned. So zoning is a big factor in all this. We have to be able to do the types of uses that afford in heavy industrial. And you know, with that the deal sizes are pretty small. [00:05:30] Speaker B: So what's the average deal size? [00:05:32] Speaker A: Probably about three or four million bucks. [00:05:34] Speaker B: Okay. [00:05:35] Speaker A: But we'll buy things as small as a million dollars. It's truly a high volume, small check size kind of strategy. But the supply demand imbalances is just incredible. There's not a whole lot of this properly zoned for these uses. And the tenants that utilize these are, you know, think of them as the supply chain of the supply chain. [00:05:57] Speaker B: Right. [00:05:58] Speaker A: During COVID for example, almost every single one of our tenants were essential workers. So we were buying all through Covid, whipping around the Beltway. Right. No traffic. And you really saw the importance of it when we had those supply chain disruptions in Covid. [00:06:14] Speaker B: Well, I'd like to get into the friction of finding sites and meeting demand later. [00:06:20] Speaker A: Sure. [00:06:20] Speaker B: Because I'm sure that there's a real friction on that. You just said zoning. There's a lot of issues. And then finding the right kind of sites that fit all the parameters you need for those users, I'm sure isn't the easiest thing to do necessarily. So what motivated the founding of Open Industrial and how did Your vision shape its establishment. [00:06:44] Speaker A: For me personally, I recognized while I was at Rock Creek Property Group, my prior job, that real estate was becoming very specialized and very niche, I think really driven by Wall Street, I'm sure, and the gfc, the diversified REIT was no longer in vogue because you could get crushed. And I think investors would rather invest in an array of specialized companies versus having all their chips in one basket. So watching that, I was trying to understand where you could find value. We spoke about FCP and how it was hard to find value in Washington D.C. and they went to other markets and really looking for niches that were fractured, not a lot of data around them and something that you could institutionalize and aggregate. Look at cell towers and self storage and manufactured housing. And I was approached by an old colleague of mine, one of my partners, Jared Okun, and he wanted me to study what we were calling then low cover industrial outdoor storage, industrial service facilities. There wasn't any catchy name, you know, in late 19, early 20 and I took the weekend. Within a half a day I'm like, I'm in, Jared. This is an incredible opportunity. The supply, demand, disconnect. It's mostly owner user, not a lot of brokers in the space. [00:08:15] Speaker B: So what was the tipping point? What did you see that made you think that there was a real market for this? [00:08:20] Speaker A: The addressable? So looking at zoning, the way we, we source, we understand what the addressable market is. There's usually only one or two zones in any jurisdiction that allow these types of uses and they're not making any more of it. It's not the prettiest stuff in the world, but it's so essential for the economies to work. And the lack of institutional ownership and the fact that it was mostly owner user driven enabled us to think that it's a niche that we could maybe aggregate a pretty sizable portfolio. And it's scalable, replicable, we can do it in other markets. [00:08:57] Speaker B: How did you look at the economics initially and how did you know the numbers were something that we're viable? [00:09:04] Speaker A: So comparing it to other asset classes, if you look at office as a long term investment, you're spending a lot of money on TI's, right? Leasing commissions. Your cash flow kind of gets rocked every three to five years. This is, this is a niche in an asset class that has very minimal ongoing capex and it's mission critical to the users that use it. So from our standpoint, it wasn't just a great short term opportunity, we think it's a great long term opportunity. From a cash flow perspective, the durability of the cash flow. Right. What is core durable cash flow? [00:09:42] Speaker B: Sure. [00:09:42] Speaker A: It doesn't have to be the sexiest trophy. So looking at that durability and the carry costs, if it takes a little longer to lease up, being so minimal, just had a lot of the ingredients. Got it right. To not only look at it from cash flow perspective, but possibly from a cap rate reversion, compression perspective if it does get institutionalized and people start to understand it better. So those two things, all five of us, there's five partners here at Open Industrial. We thought it was the best opportunity we've seen in our short careers. We've all been in the business for almost 20 years now, so we really leaned into it together. And going back to your original question, my role here at Open Industrial is really centered around the acquisitions, the strategy of which markets we're going to be in. We are north to Boston, south to Tampa, and west in Nashville and Las Vegas right now. And I kind of run the acquisitions team, which is made up of three acquisitions associates that. That are hunting, talking to brokers. They each have a market kind of focus and lead, and the volume is just incredible. I think we're putting out five or six, Lois, every couple weeks on average. So we're looking at a lot of stuff. [00:11:04] Speaker B: We'll get into your process a little later and also your team and how you came together. So let's now flip back the timetable here and share your background, including where you grew up and your educational journey. Sure. [00:11:18] Speaker A: Grew up locally in Bethesda, Maryland. [00:11:21] Speaker B: Okay. [00:11:21] Speaker A: I'm one of five, so a big family, four boys and a girl. I went to the Landon school for. For 10 years, so made a lot of great friends there. My parents really put an importance on education. [00:11:37] Speaker B: What'd your parents do? Or do they still. [00:11:39] Speaker A: My mother's a real estate agent. [00:11:42] Speaker B: Okay. [00:11:44] Speaker A: WCNA and Miller, which is now Long and Foster. [00:11:47] Speaker B: Yeah. I believe in dc, Then in Spring Valley. [00:11:50] Speaker A: Yep. [00:11:50] Speaker B: Yeah, yep. [00:11:51] Speaker A: Off Stmore as well. Yeah. They developed all that stuff. Yep. It's amazing. You see just all the neighborhoods. [00:11:58] Speaker B: That's their headquarters, actually. [00:11:59] Speaker A: That's their headquarters, Yep. [00:12:01] Speaker B: Right. [00:12:02] Speaker A: And then my father's a neurologist, still practicing, still active. [00:12:08] Speaker B: Brain science. [00:12:09] Speaker A: Brain science specializing in sleep and epilepsy. [00:12:13] Speaker B: Interesting. [00:12:13] Speaker A: Sleep's important. You gotta get it right. So, you know, went to Landon, made great friends. And then I went up to college to play football at the College of the Holy Cross in Worcester, Massachusetts. Great time there. Again, you know, my education background is really liberal. Arts focused. There wasn't any specialized. [00:12:36] Speaker B: Did you play ball at Landon? [00:12:38] Speaker A: I did. I did played. You know, at Landon. You. They encourage you to play a sport every season. Very rigorous academic setting as well. I really love to learn how to learn. Right. [00:12:49] Speaker B: That's great. [00:12:50] Speaker A: I think, looking back on it and that's, you know, to this day. Right. Very intellectually curious. And I think that had a lot to do with it, going to school at those two places. Yeah. And was fortunate enough to. I think the biggest moment of my life was meeting my wife up in. In college. [00:13:10] Speaker B: At Holy Cross. [00:13:11] Speaker A: At Holy Cross. Okay. She was a great athlete as well. She played lacrosse there. And we have two great boys, nine and seven. [00:13:18] Speaker B: Awesome. [00:13:19] Speaker A: They are true boys. And it's been a lot of fun. [00:13:22] Speaker B: Probably athletes, if you both were. [00:13:24] Speaker A: They like to. Yeah, I imagine they like to stay active. [00:13:27] Speaker B: Yeah. [00:13:28] Speaker A: We have to take breaks every 10, 15 minutes, concentrating. So that's great. And it's been awesome, you know, doing what I do to be able to spend a lot of time with them whenever I, you know, whenever I can. [00:13:42] Speaker B: So what happened after Holy Cross? [00:13:45] Speaker A: Well, Holy Cross, I truly did not know what I wanted to do when I was in college. [00:13:51] Speaker B: Medicine wasn't interesting to you? [00:13:52] Speaker A: I. I wanted to be a doctor. You did. [00:13:55] Speaker B: Okay. [00:13:56] Speaker A: I don't know if the smarts. [00:13:56] Speaker B: Did you major in Biology? [00:13:58] Speaker A: I. Psychology with kind of a focus on bio side. But, you know, love my dad. But he, you know, he did mention to me medicine is changing, healthcare is changing. If you want to do this, you gotta really love it. You know, you're gonna be in school for another seven years. [00:14:18] Speaker B: Oh, yeah. [00:14:18] Speaker A: You're gonna have a ton of debt. [00:14:20] Speaker B: And, I mean, he had to go even longer. Neurology takes 12 years, I think. Yeah. [00:14:28] Speaker A: Yeah. So it was a little, you know, not discouraging, but he's. Do you really want to do this? Right. So you gotta love it. You gotta love it. But so much respect for that profession and, you know, being at Landon there. There were a lot of older classmates of mine that were in the industry. Guys like Jimmy Barter. I don't know if you know, Jimmy. Matt Corson, Steve Berman, Michael Cohen. They were instrumental in, you know, just having conversations with them about how much fun they were having the competitive landscape that they were in the social aspect of real estate. And everywhere you turn in D.C. it seems like someone's touching the industry. [00:15:10] Speaker B: Was Eric Cudlit in your class? [00:15:11] Speaker A: Eric Kudla? [00:15:14] Speaker B: He's one of my clients. Yeah. [00:15:16] Speaker A: Yep. He's one of them. Too. So there's, there's a lot of industry insiders that kind of gave me guidance and was. Was fortunate to have a, an internship with a family friend at JLL where I kind of touched all the different aspects. It was right after Spalding Sly was purchased. So I spent a little time over, over the summers when I was in college, hanging out with the construction team, hanging out with the tenant leasing team. [00:15:42] Speaker B: How'd you find that job? [00:15:43] Speaker A: It was just an internship. [00:15:45] Speaker B: Oh, okay. [00:15:45] Speaker A: You know, really family friend that was a, you know, pretty high level tenant rep broker at jll. And it just so happened that, you know, one of those Landon guys was on his team. Two of them actually, Steve Berman and Matt Corson. So it was, it was great to see the inside and really know what it was about. I mean, the real estate industry is massive, Right. When you say real estate, it could be so many different things from the property management, asset management, investment side, the leasing side, the investment sales side. [00:16:17] Speaker B: So what, what turned you on about it? What, what was it that you interested? [00:16:23] Speaker A: I've always been fascinated with the built environment and being local to D.C. and growing up around here and seeing it change is fascinating to me. And I think the competitive nature, going back to the team sports side of growing up, you really feel it. You know, you have to be a part of a team. It's not a individual kind of sport mentality. And I've always been a part of teams growing up and that's where I feel comfortable. Right. And then the social aspect of it, the networking side of it, I really love what I do. I get to have a lot of my friends are in the industry. We laugh, we joke, we go to games. But we do a little business as well. So it doesn't really ever feel like you're working. Right. And it doesn't. You don't leave it when you leave the office, there's always something to do. So that intellectual curiosity, great side of the industry really spoke to me. [00:17:18] Speaker B: That's awesome. So you were at Spalding and Sly for a while as an interest? [00:17:23] Speaker A: Yeah, just the summer. [00:17:25] Speaker B: Yeah. So that was during college. Okay. And then at the end of college, then what was your next step? [00:17:30] Speaker A: End of college was trying to find a place and open up a door somewhere in the commercial real estate industry. I was introduced to Rich Lane over at Wesleyan and Schlager, who's also a partner at Rock Creek Property Group. And he gave me a shot and brought me on in the end of 2007. [00:17:50] Speaker B: So why there and why not at a Bigger firm, like a more, you know, established firm than that. [00:17:58] Speaker A: Very entrepreneurial, very focused. At the time, I helped out a lot of the tenant rep brokers with analysis and their clients and moving to buildings. And they also were starting to dabble on the investment side through Rock Group, Property Group, which was run by Gary Schlager and Andrew Glick. And although I wasn't hired, you know, to be a part of that team, that's what I really wanted to do. And through timing and hustling, kind of found a spot along with. With Gary and Andy and started to raise equity funds. [00:18:34] Speaker B: And so brokerage was not your first passion. It was more investments. [00:18:39] Speaker A: More investments, more on the investment side. But the, the knowledge that I learned being around, especially the tenant rep brokerage side of things, you really need to know what the end user wants, needs. Pivotal foundation for me in terms of understanding value and you know, the window seal heights being just a little bit too short and the H VAC systems, like the things that tenants want and need. So learned a lot from, from that perspective through the brokerage side of it, but never, never went into the brokerage production side. Focused more on the. [00:19:16] Speaker B: You never sought tenants for your, you know, for your own to be a rap thing hired. You never engaged by a tenant yourself. [00:19:23] Speaker A: Okay, right, got it. [00:19:25] Speaker B: So you're doing more analytical work for them. [00:19:29] Speaker A: Procalc. Have you ever heard of Procalc? The old, the Excel based version. [00:19:34] Speaker B: Right. [00:19:34] Speaker A: Spent a lot of time in Procalc. [00:19:35] Speaker B: There you go. [00:19:36] Speaker A: I did a lot of the market reports. Really learned the market through reports that we would give out to their clients about the landscape, rents, TI packages, how to structure a lease. [00:19:50] Speaker B: Something that was more superior than COSTAR then was at the time, I assume CoStar. [00:19:55] Speaker A: CoStar was there, lived in CoStar, lived in CoStar. And all the market data was through CoStar, but scrubbed because it's not always. Not always perfect. [00:20:06] Speaker B: No, it isn't. [00:20:07] Speaker A: Right. Stacking plans. Yeah. [00:20:10] Speaker B: Okay. [00:20:10] Speaker A: Big part of my life then. Because you have to know what's going on in the building. [00:20:14] Speaker B: Sure. [00:20:14] Speaker A: You know, who's expiring where they're at in terms of. [00:20:18] Speaker B: Did you ever do cold calling? [00:20:19] Speaker A: I never cold called, never did, never cold called tenants. Interesting. No, I didn't. But it was, it was a great learning experience. And the timeline with Rock Creek, I mean, really grew from the GFC on. I mean, I think looking back at it, I was fortunate to start at the gfc. It really created the DNA of finding value and being conservative and understanding how optionality is. So Important just in terms of how you exit. [00:20:52] Speaker B: I started as a deal analyst. Then when you started with them, that's when you started looking at. [00:20:56] Speaker A: Then I started sourcing cold calling owners, which is different than, you know, cold calling tenants. And when we started in the gfc, we had a small equity fund where we were purchasing opportunistically kind of heavy value add conversions, vacancy, all different product types. So the reps were incredible. Middle market kind of size, selling into institutional kind of program, a lot of reps. And I think that that was also very important. The reps. When you're starting out seeing a lot of different things, that's where you get your experience. [00:21:34] Speaker B: Existing assets, no development. [00:21:36] Speaker A: Then at the beginning it was existing and then it started to be a little bit more opportunistic and then some development came and that was certainly different. So a lot of, a lot of time spent with land use attorneys trying to find value and density and, and maybe assemblages and kind of different uses. [00:21:56] Speaker B: What was the value static deal you did there? [00:21:59] Speaker A: Or more difficult, every deal you could write a novel on. I mean, it, you know, the twists and turns. I think the, the most successful strategy that we had at one point was purchasing smaller office buildings in and around D.C. you think trade associations, embassies. Right. That identity being in D.C. at great value and selling to users. So we did a couple embassy deals where the State Department has to clear you and America has to get something if they're going to give something. So it was interesting to see the inner workings of, you know, what India, for example, what we had in India, you know, if they were going to purchase a property to use as a, as an embassy from us. [00:22:46] Speaker B: It's an interesting business, the embassy. I never did a financing for one, but we talked about it. I was in the financing business, of course. And you know, you try and negotiate with them because they have diplomatic immunity. The legal documents are interesting to say the least. And it was fascinating to see that. I imagine you had to deal with that if you were doing work for them, particularly if you sold it to them and they asked you to, oh, we need you to help us, you know, then you had to have an agreement with them that was fair. [00:23:20] Speaker A: Right. [00:23:20] Speaker B: So you wouldn't, they wouldn't try to stiff you, something would happen and, you know, how would you protect yourself is the question. You know. [00:23:27] Speaker A: Yeah, the lawyers handled most of that stuff, but. [00:23:30] Speaker B: Right. [00:23:31] Speaker A: Yeah, it's, it's. You look at just the, the embassy world in D.C. right? Embassy row, Massachusetts Avenue. It's Incredible. You know how many. [00:23:40] Speaker B: I mean, that real estate is very. [00:23:42] Speaker A: Some of the best real estate in the city. [00:23:44] Speaker B: Yeah. [00:23:44] Speaker A: I mean, and even in Van Ness. [00:23:45] Speaker B: Off of the British Embassy is worth, you know, I mean, it's a massive property. [00:23:49] Speaker A: Yeah. [00:23:50] Speaker B: I mean, it's probably analogous to what the White House would be almost. If you've sold it. [00:23:54] Speaker A: Yeah. [00:23:58] Speaker B: One time. It's just out of curiosity, I looked at. So what's the right house assessed? You know, if it were. And it was 100, I think it was. No, it was like several billion dollars. It was like 4 or 5 billion. [00:24:10] Speaker A: How do you count that? [00:24:12] Speaker B: You don't. They just said they had to. It was hypothetical because obviously federal government is not taxed. The federal buildings are not taxed, but it was a hypothetical valuation. So I talked to a few appraisers about it, just out of curiosity, and they said, well, we just do a reverse, you know, reverse land analysis there. And what. What could you build? And, well, it's unique property. [00:24:36] Speaker A: So how do you. [00:24:38] Speaker B: So, you know, it's. It's part of the art of appraisal, not science. [00:24:42] Speaker A: Right. [00:24:42] Speaker B: Let's put it that way. [00:24:43] Speaker A: Right, right. [00:24:44] Speaker B: So anyway, so. So you were there for what, 15 years? Is that about right? [00:24:50] Speaker A: Yeah, just over 13. [00:24:52] Speaker B: 13 years. [00:24:53] Speaker A: So my resume is pretty short. A fantastic time there. I mean, the way I think about real estate was really formed, you know, at Rock Creek, and they're still doing tremendous things. [00:25:07] Speaker B: Talk about the evolution of the firm. I mean, when you first started, how many guys were there? [00:25:11] Speaker A: And I think I might have been the second or third employee. Oh, okay. So it was really kind of taken off. Gary was also doing tenant rep in addition to, know, the investment activity in Handy Glick, I believe at the time was with Vanguard, doing some investment sales and some management stuff. [00:25:30] Speaker B: What was the thesis when they started? Just opportunistic deals. [00:25:34] Speaker A: Opportunistic, kind of middle market. [00:25:36] Speaker B: Okay. [00:25:36] Speaker A: More sophisticated than, you know, maybe some local families or real estate people, but kind of staying out of the way of the JBGs of the world. [00:25:44] Speaker B: But you were not in one product type. You were looking at multiple, which is an interesting. You kind of think the wash read strategy, except you're not a public company, but doing smaller deals, obviously. [00:25:55] Speaker A: Yeah, yeah. It's interesting when you're in a lot of different product types, not having that sole focus helps you think about things a little differently. If you were just a multifamily investor. [00:26:08] Speaker B: Well, JVG back in the day did that. They were in five or six different product types. As an investor. [00:26:17] Speaker A: Yep. [00:26:18] Speaker B: And, you know, I look at other. Like Lerner, for instance, there are a few firms that did a lot of different product types. [00:26:24] Speaker A: Geographically focused. Right. That was the most. [00:26:27] Speaker B: Geography. Yeah. [00:26:28] Speaker A: The constraint was we know Washington, D.C. metro, and it doesn't matter what product type it is. If there's value, we feel like we know this area. [00:26:36] Speaker B: And is that what you restricted yourself to as well? [00:26:39] Speaker A: Yes. [00:26:39] Speaker B: Okay. [00:26:40] Speaker A: So, you know, the alignment with the investors, they're. They're trusting you with the knowledge of really knowing your. [00:26:46] Speaker B: So if you went to Richmond and brought a deal in, that wouldn't necessarily be a fit? [00:26:49] Speaker A: No, at the time when I was at Rock Creek, it wouldn't be. They're. They're expanding, like, currently to other markets or even Baltimore. Always looked, but never ended up doing anything in Baltimore. Yeah. So just strictly here in the greater D.C. area. [00:27:05] Speaker B: Yeah, yeah. And how big did the portfolio get while you were there? I mean, how big was it when you left? [00:27:14] Speaker A: Oh, I'm going to take a stab at that. I think, you know, through the first fund, There were about 8 to 12 deals. In the second fund, a little bit more so, you know, a couple dozen that I was a part of. And it ran the gamut. You know, smaller stuff, development stuff, existing income. Yeah, it was tremendous, tremendous learning opportunity. I never got an mba, but certainly it was so much more valuable than, I know MBAs and going to business school is important. [00:27:45] Speaker B: Were you involved in creating a fund there? [00:27:49] Speaker A: Not too intensely. Kind of involved in the strategy. But Andy and Gary and the other partners, Eric and Rich, really ran fundraising. [00:28:00] Speaker B: You were involved in anything? [00:28:01] Speaker A: Fundraising? No, no, I was watching. Absorbing. [00:28:04] Speaker B: You were looking at the real estate? Yes, mostly. [00:28:06] Speaker A: Yes. More on the acquisition, because it's a different business. [00:28:08] Speaker B: I mean, the challenge with fundraising, you know, doing the fund business is it's basically two businesses. [00:28:14] Speaker A: Yeah. [00:28:14] Speaker B: It's not just one business. [00:28:17] Speaker A: We've learned that here at Open Industrial. [00:28:18] Speaker B: It's hard. [00:28:19] Speaker A: Yeah, it's very hard. It takes time. [00:28:21] Speaker B: You have the investor relations that you have to deal with, and, you know, they're as much as important as your tenants, if not. [00:28:28] Speaker A: Absolutely. Yeah. We wouldn't be anywhere without, you know, the investors that we have, which they're all amazing. We don't have a business. [00:28:36] Speaker B: Right. [00:28:37] Speaker A: No matter how great of a deal, you find. Right. That. That access to equity is very. [00:28:41] Speaker B: So it's interesting as you look at the different buckets of ownership in real estate, the. Perhaps the easiest is the family office business. If you have a good cohesive family, because then Everybody's on the same page. You don't have anybody to sell to other than internally. That's. That's probably the easiest structure of all. And they normally have wealth from somewhere, either real estate or other sources of capital. But then you get into limited partnerships and you have a lot of partners and a lot of people to work to. And of course, you. The public route, it's a whole different ball game. Yeah, it's a whole different game altogether. [00:29:19] Speaker A: Yeah. Gotta please the analysts at that point. [00:29:22] Speaker B: Yeah. So when you were at Rock Creek, you got familiar with the fund management business. So as you left there or when you decided to start this new enterprise, was that the model that you were right up front, that you were thinking about? [00:29:39] Speaker A: Interestingly, no. Interesting. Well, as you know, you said it's very hard to fundraise and takes a lot of time to build that network. And there are some restrictions to having a fund. Right. Duration, you're limited in terms of buy box. And then there's. This industry is cyclical. Right. So if you look at a lot of fund vintages, naturally there are not so good vintages in terms of when funds were raised. So the mentality was not to be in the fund business. This strategy, though, this aggregation strategy, really lent itself to have some kind of vehicle, not only to be able to move quickly, but for common ownership. [00:30:25] Speaker B: So when you started, it was LPs on each deal. [00:30:28] Speaker A: Yeah. [00:30:28] Speaker B: And then syndicated. Yeah. When, at what point in time did you realize, you know, this is just too much, managing all these LPs and not having some uniform portfolio structure. [00:30:42] Speaker A: In our proof of concept phase, when we bought four or five of these types of deals and syndicated, the equity and the success that we saw on the leasing side of it, and our inclination to really lean into the strategy in an aggregation kind of way, we realized that we really needed common ownership. We needed each investor in every deal. Because valuing things in portfolios, if you have different structures and different investors, pretty challenging in terms of what and where things get allocated. So the common ownership was a big driver to raise a fund as well as speed. Right. Having discretionary capital, not having to raise it every single deal. This is a high volume, low check size kind of situation where we're closing a deal every month on average. Constantly raising that in a syndication way is not efficient. And I know we're going to talk about friction, but where we can alleviate friction in any way is kind of what we look for. And that equity side and having a fund was one of those ways we can kind of Minimize friction. [00:31:53] Speaker B: So when you first started, what was the thought on deal structure and duration of investment? And then what was your pitch to your initial investors? You know, obviously we talked a little bit about the market per se, but the investment structure and then the lenders to try to get financing for it. How was that told? How was that story told to the lending community? [00:32:20] Speaker A: It's still being told. There's still education around the financing of these. In terms of our thoughts on structure and how we look at deals, you know, we typically look at a time horizon of, you know, five to seven years. We sensitize it up to 10 sometimes, and we're really focused on cash flow at a certain point. [00:32:39] Speaker B: Is that lease driven, lease term driven primarily, or is it just the market? [00:32:45] Speaker A: It's mainly the market. I mean, what we've seen in the past, a lot of these leases were month to months, done with their friend who had a piece of property maybe operating their business. And it wasn't really ever a landlord's market. There was no kind of institutional landlord presence. And when we think of the office world, it's been a tenant's market for quite some time, right? Probably 2005, 2006, it was a landlord's market, but it's been a tenant's market for quite some time. And when we started to buy things and we understood the mission critical aspect and the essential nature of some of this, some of this property for the businesses, we realized that they really needed more duration in terms of their leases. It's too risky for these tenants to possibly get kicked out if they're month to month. So we started to see longer term requests, three to five years and in some cases, you know, depending on how big the company is, a lot of these national United rental types, they want longer, they want 10 to 15 years. [00:33:52] Speaker B: What's interesting is the niche business that you're in, there's precedent for it. So you have self storage, student housing, medical office. I mean you can replicate the deal structures in those deals things once you get a few under your belt to sustain the revenue streams and understand how those are going to work over time in different product types. Because they all seem to align pretty closely to a certain framework. Sure, it seems as niches, which is interesting. [00:34:29] Speaker A: And it's about the data too. I mean, institutions want to see transparent and accurate data that in my opinion, the outdoor storage world needs to work on to fully be institutionalized. We need a little bit more transparency on lease comparables. [00:34:49] Speaker B: What's it going to take to do that? [00:34:51] Speaker A: A lot of hard work. We here at Open Industrial, we actually, through our process, we use a proprietary software which we call Recity, developed by my partner Guggenheim Data in a prior company that he had. And it's essentially our mini costar just for our use. So it's where we aggregate all the data that we collect through owners and brokers. And it's a way our acquisitions team helps source properties. We understand what the addressable market is through zoning and kind of integrate ownership data, deal data comps in this GIS based software. [00:35:32] Speaker B: Is this your idea? [00:35:34] Speaker A: Duggan has had built it. [00:35:37] Speaker B: He's your partner? [00:35:38] Speaker A: He's my partner. I felt like it could be an incredible tool to help us aggregate and to collect and harness the data. Data is very important to us. Even going back to my early days at Wesleyan and Schlager. [00:35:53] Speaker B: Yeah. [00:35:53] Speaker A: Well, that's why you needed, and Gary had a, had a saying, the integrity of the COP database. Right. Like you need to really understand what the real terms are. And it's, it's hugely important if, if you want to institutionalize a niche that might not have, you know, the right data. It's hard for appraisers to understand that. And so there's a lot of education on the appraiser side of what, what is this value? What is this land separated from the building? [00:36:25] Speaker B: Right. [00:36:25] Speaker A: It's, it's more valuable to this tenant because it's so mission critical to have this yard component versus just under roof. [00:36:32] Speaker B: Have you done. And I, I often in retail it's easy to do because you look at sales. Have you done a reverse engineering of your tenants to figure out, okay, what can they afford? [00:36:44] Speaker A: It's a great question. [00:36:45] Speaker B: How do you get behind how to charge and want to pull rent on a vacant facility, let's say, or vacant piece of ground? How do you get to those numbers? [00:36:55] Speaker A: That's a great question and we do think about that. To start the way I went about it, because there's not a lot of data out there and you can't call a company and say, what do you do out of this location? They won't tell you. I looked at a handful of publicly traded companies that could be our tenants and went through their 10ks and their investor reports and understood generally what their rent to revenue ratios were. And if you think about retail, is it 8 to 10% typically? Well, maybe a little jewelry store. [00:37:26] Speaker B: It's, you know, 25% could be higher or 40. [00:37:29] Speaker A: Right. But how, how, what is too much to affect the margins of a business? Yeah. In industrial generally, the Numbers that are getting thrown around are 3 to 5% for typical industrial kind of occupancy costs, percentage wise. What was interesting to me is I saw through the public data, it was typically less than 100 basis points. And if you think about what the costs go into for these businesses, labor, repairs and maintenance, travel time. Right. Really high on the list, not so much occupancy costs. [00:38:03] Speaker B: Right. [00:38:04] Speaker A: So reverse engineering that standpoint. There's a lot of NOI potential, a lot of growth. If a company can handle 2 to 3%. [00:38:16] Speaker B: Well, how mission critical is the assets too? I mean, their products. So to me, the higher you go up that scale, the more margin you should be able to charge for that. [00:38:28] Speaker A: Yes, market share matters too, with some of these bigger sun belts of the world. Right. They don't want to lose their market share. They might push it a little bit more. And they can. They don't just have one location to spread it out in. And if it's. If that market is so important to their overall business and market share, you could push it. But generally speaking, we. Now that we've done so many leases and we have so many tenants over the last four, four or five years, we, we are starting to realize that it's in the 2 to 3% range where it starts to get uncomfortable for tenants and their margins. And that really helps out in terms of the underwriting on the front end. Right. How much do we think we could support? Even though market rents might be. We go by per acre per month. Right. So 12,000. Just throwing out a number. 12,000 per acre per month. And the site's eight acres. A tenant has to do X amount in sales. How many tenants could do that on a site that big? [00:39:31] Speaker B: Well, how can you create value for your tenant is my question. So oftentimes a developer and owner of property can create value somehow for this tenant. And that's what the tenant's looking for. They're looking for an owner that they can work with. How can you help me make my business better? So have you ever answered that question for a tenant? [00:39:52] Speaker A: We do. We try to sell ourselves with that. I think with these businesses, interruption. Business interruption is not good. Right. In the office world, you know, you can work from home. Right. Maybe get a sick day. In with these industries, if you're not working, you're not well, it's 27 sites, it's 24, seven. So ways in which interruption doesn't happen, whether it's security, we on most of our properties, almost all of them, we have an understanding of how much security fencing, electronic gate systems we need and it pays dividends. [00:40:31] Speaker B: Do you have 24,7 visual on the site? [00:40:33] Speaker A: We do. We see some interesting things late at night at some of our sites. Yeah, yeah, yeah. And we hope that by being good stewards to our tenants, there's an opportunity to grow with them. Maybe in a preferred developer role like you've seen with CVS's and Walgreens and you know, new sites that they need to open in new markets. We put a lot of time and energy on getting to know our tenants with that in mind. Whether we have a new site that is vacant, we typically always call our tenants to see, you know, if they have any more needs, any more growth needs. [00:41:09] Speaker B: Do you see tenant growth out there? I mean, or are you seeing more consolidation of tenants that understand the business? And similar to the Walgreens CVS type of thought process, they just keep sucking up all the scattered. [00:41:27] Speaker A: That's an interesting question. It's a little bit of both. But I will tell you, the businesses in our world are roll ups in themselves, Right. It's about scale. It's about. So you see a lot of private equity, middle market, kind of industrial private equity rolling up a lot of these family run business and regional businesses. [00:41:46] Speaker B: Sure. [00:41:47] Speaker A: To kind of get better as economy. So we have, we have a lot of that. Right. An example of a tenant that makes a lot of acquisitions is United States Services, the largest porta potty company in the country. You know, you think about Bobby's Potties, right. In every location they grow by purchasing these smaller regional family run fencing and kind of porta potty companies. And they're a very large company. I think they 350 million plus of EBITDA. You'd never think Porta Potties, but they. [00:42:21] Speaker B: Have over a thousand sites, every construction site in the country, from a single family home up to a multi million dollar development. [00:42:31] Speaker A: And when the laws Change to have one porta potty for every 14 workers down to one porta potty for every 10, it does good things for their bottom line. [00:42:45] Speaker B: Another place you don't think about is I walk every day in Rock Creek park and there's four of them on my path. So every park system, this has significant scale needs that. [00:42:58] Speaker A: Absolutely. During COVID they, they actually grew their business with hand washing stations. [00:43:03] Speaker B: Yeah. [00:43:03] Speaker A: Which is a, which is a major, major, you know, portion of their revenue growth. [00:43:07] Speaker B: It seems to me that there's things like EVs stations, things like you could, you could aggregate a bunch of things together on a similar Location, let's say. So let's say you have a 10 acre site. You might have six uses on that site. Five or six, possibly. [00:43:22] Speaker A: Yeah. With one company. [00:43:23] Speaker B: That's what I'm thinking. Yeah. [00:43:24] Speaker A: You know, United, United Rentals has many different business lines and some of their larger sites. Right. Have all of them on one site. And some are just special specialized. Right. Between fencing and generators. And Caterpillar is, is a large tenant of ours and you know, they have a site where they just repair large commercial generators, but they also have equipment sites. [00:43:48] Speaker B: There's interesting uses on some freeway sites I think of. So I don't know if you ever traveled down 95 and crossed the south Carolina, North Carolina border. There's a large tenant there known as south of the Border that has just about all uses you can possibly imagine for travelers and tourists. It seems to me that your business could tie into something like that potentially. [00:44:12] Speaker A: Sure, sure. I mean the transportation logistics, trucking world is a big part of what we do, but not the only part. There's also a ton of services, companies you think about H Vac repair that go along with it in our niche. But certainly logistics and trucking is a huge portion of what we look at for outdoor storage. [00:44:37] Speaker B: So let's go into your team a little bit open industrial. Emphasize a technology driven approach as you suggest the acquisitions. How has the integration of technology enhanced your operations and made decision making process easier? [00:44:52] Speaker A: Comes back to the friction. Having a kind of technology focused strategy doesn't make us. I mean it's real estate. The people still need to find the deals, they need to work them, they need to add the value. But what it has done is kind of make our lives a little easier in the sourcing side and in the collection of data and using that to inform decisions. But we still make the decisions. The technology doesn't do that for us. And as we look at a high volume aggregation strategy, we all do a little bit of everything, but we each have our focuses. Specifically talking about my partners, I'm focused on the acquisition side. Pete Shkreli is focused on the DD construction development side, which is paramount to risk. Zoning and environmental are the two largest risks outside of market risk that we have. So it's crucial. And Jared Okun is heading up our leasing efforts, working with third party brokers, but also working with tenants that we have to do leases maybe on our own. And then Goggin Data obviously is leading our technology push, pushing our operations side of the business. And Michael Raven is more on the corporate finance investor relations has the relationship with the single family office that is partners with us currently as well. So we each have kind of our lanes. [00:46:14] Speaker B: And does he manage the fund as well? [00:46:16] Speaker A: Mostly the fund, yeah. So day to day, our investors, the fund, the reporting, the accounting side of the business. So we each have kind of our lanes that we play in. And from there, the acquisition side of the business is probably the largest portion of our company. There's 16 of us right now. We're growing, we're hiring. So to listeners out there, drop me a line. [00:46:38] Speaker B: Do you have an asset management group too? [00:46:40] Speaker A: We do. We have a director of asset management and Steve Porter, CFO here, has accounting help as well. But the acquisition side is probably five or six of the 11 employees that we have currently. I think as we continue to grow, the asset management side will grow as well. But you know, early on it's heavy. [00:47:01] Speaker B: Heavy acquisition focus is your only office here? [00:47:04] Speaker A: This is our office. Michael Raven, one of the five partners, is based in la, although he grew up, you know, in the area. He lives in LA with his family and we are in the process of growing that office as well. So we'll be in LA and dc. [00:47:18] Speaker B: Well, since you're covering Vegas, you need somebody out there. [00:47:21] Speaker A: It really helps the serviceability of this stuff. Going back to friction for small deals, it doesn't really make a lot of sense to fly out to Vegas. [00:47:31] Speaker B: So why Vegas, not why not LA or San Francisco or Denver or some. [00:47:37] Speaker A: Other all great, all great markets. We think we. We did a very thorough analysis and terms of the attributes that we think would make a great market for outdoor industrial. And a lot of it's driven by simple Econ 101 supply and demand. We look at a number of factors, whether it's your industrial market, your demographics, but also more importantly, how much of this stuff is there we've stayed away from in Atlanta, for example, or Chicago because we feel like the supply demand disconnect that we are looking for is not there. People are doing fabulous there. I'm sure there's a lot of money to make in those markets, but it's not something that we're focused on because of the amount of supply there. So you wouldn't think D.C. metro would be a hot industrial market, right? It's not in the top 10, but it's a phenomenal outdoor industrial market, specifically Northern Virginia. We look at what we call displacement characteristics and we spoke about this in our prior talks. What's going on with the data center industry in Northern Virginia is severely displacing a Lot of these tenants and they don't really have anywhere to go because a lot of the property's not zoned correctly for their uses. And so coupled with the demand aspect of it, we really focus on markets that have those displacement characteristics and that supply demand kind of imbalance. Vegas is one of those markets along with Nashville, Tampa area, Southeast has grown pretty significantly in terms of population. And then the Boston, New England area, there's a lot of similar attributes that we see here in D.C. from the supply demand standpoint. [00:49:26] Speaker B: Interesting. So it seems to me you should tag along with the data center business to some extent, which would be interesting because they need buffer residential people. I mean, single family home residents just don't want to live near data centers. Some of it's perceived electronic stuff, but it's also power supply demand and all that and affects if a data center starts charging up, then the housing might be affected by power surge or something like that. But. And of course that industry is growing just spectacularly. This, this Stargate thing that was just announced by OpenAI and they're going to build like 900 acres out in the, in the Austin, Texas area. I mean, you know, there's going to be activity around these properties, you know. [00:50:18] Speaker A: And we're already seeing it. [00:50:20] Speaker B: Yeah, I would think that, you know, to form a venture with one of these guys or just, you know, to be involved, there could be an interesting opportunity. [00:50:30] Speaker A: We just the nature of where we are, we, we have had a couple full cycles, you know, selling stuff that we've leased up and that we bought for outdoor storage to data center developers and speculators. And it, what it also does is it drives up the cost. So it's hard to find now in Northern Virginia opportunities that don't think, you know, owners don't think are worth, you know, let's call it. People are paying three, three and a half million dollars an acre now for data center land. It comes untenable for a lot of these tenants to stay and stay in business. And so it's driving rent growth. But back to our point on occupancy costs, there is a ceiling at some point for these tenants not to be able to afford it. And unfortunately they'd have to move further out, which increased costs. Right. [00:51:21] Speaker B: And the data center owners don't necessarily need to do something with you because the numbers just aren't that compelling to them per se, or I think. [00:51:29] Speaker A: Or you think the access. I think there's an opportunity. Because if you think about the access to power issue, if you had a site Today I don't think you could actually start operating for eight to 10 years. Transmission lines, substations, takes a long time. I think there are interim uses that we could do and partner with some of these hyperscalers in the interim. Now they're not going to sell us the site. Maybe there's a portion that they don't need potentially. Or we could manage it and lease it up for them until they're ready. [00:52:01] Speaker B: What I think about when I'm thinking about how this would work, it's similar to when I was in the regional mall business at one point. And oftentimes the most profitable part of the regional mall business is selling the peripheral land and or leasing it. The pad sites more profitable to the owner than the actual inline retail space in the mall because of the common area of maintenance, the cam. And you just. The profitability wasn't strong. But these peripheral sites, you did quite well with them. [00:52:34] Speaker A: Sure. And you're sometimes the exit on that is to the big triple net REITs. [00:52:39] Speaker B: Exactly, right, yeah. [00:52:40] Speaker A: Where they're buying the credit. Right. And the cash flow. Exactly, yeah. This. And there is, there is some of that here. I think you're starting to see some Triple Net Industrial REITs getting into the business. There was a recent portfolio sale to a public publicly traded company called Peakstone a couple months ago where they probably one of the more significant institutional data points out there right now. And you've got a handful of industrial REITs that own a lot of this stuff, but don't call it out yet. Like Torino Realty owns just over 50 of these sites as well, along with a lot of regular typical industrial. [00:53:23] Speaker B: So talk about the interaction between the gross industrial market and your market. I read a little bit about your business a little bit ahead of time. And the largest outdoor storage market that I've seen is at ports, am I right? [00:53:43] Speaker A: Yep. That's a major driver for a lot of these. [00:53:45] Speaker B: So you go to the Port of Baltimore, Port of Norfolk, Port of Los Angeles. I mean, these are massive sites. Yeah, we're talking hundreds of acres. Some of them that have, you know, are just stacked with mostly these cartons that go on shipping and on trucks, you know, distribution trucks. I mean, there's now movies with, you know, crime and all this going on within these, within these curtains. It's a, you know. Yeah, it's, it's a culture in itself. The container business. [00:54:17] Speaker A: Container changed the world. Right. And it really did. [00:54:20] Speaker B: The history of that is interesting. [00:54:21] Speaker A: It's fantastic. There's a book written by Mark Levinson that, that I got specifically just talking about the history of the container. Right. And what, what drives do you store. [00:54:32] Speaker B: Containers on any of your projects? [00:54:33] Speaker A: We have in the past, you know, during COVID we had, you know, we had a company like Nordstrom lease out a lot just to store their, you know, their merchandise in trailer loads. That's very cyclical. There's a lot of macroeconomic things that affect it. Right. We're all talking about tariffs right now. There's major economic developments like the port of Savannah and their growth and how big that port has gotten and the travel time where goods are coming from. And you see spillover effects. The E commerce side of things, I think has enabled companies to have a lot more reach. Instead of like one or two regional hubs, they want to be places faster. So you saw a lot of demand on the, on your typical industrial side, opening up new kind of facilities. Amazon is probably one of the most famous and there's repercussions that are beneficial to our world through that. A lot of it is displacement as well. A lot of these developers that are building big boxes are taking away inventory that is useful for our tenants, which goes back to the supply demand kind of characteristics. So you see a lot of these larger industrial areas, like a Savannah that has had a tremendous amount of industrial development. Well, that has displaced a lot of the product that we're looking for, which creates potentially more value for the sites that we do have. So that's one way that it's affected us. [00:56:04] Speaker B: Have you ever got in the lease leaseback business at all? And you understand what I'm talking about. [00:56:10] Speaker A: There on lease, leaseback on land? [00:56:12] Speaker B: Yeah. So in essence, what I'm suggesting is go to some of these big companies like say Clark Construction Company. So Clark has to store all their stuff somewhere. It may not be all on site. They, you know, where are they putting all their cranes and all their things, you know, and you know, maybe you do a deal where you lease from them and then release or be able to structure something so that they can generate some revenue from their own land that they don't wouldn't otherwise. So I'm just thinking big picture here. I'm sure on that. Is there any thought of that? [00:56:49] Speaker A: I think absolutely. I think if we. That's definitely a growth initiative. We actually, we spoke to Merriweather in the past during COVID and the parking lots that are there and maybe there's interim uses. The challenge potentially might be on the reversion side. I think in a management agreement there might be some Cash flow. That could make it worth it. But could you sell that? Is there an opportunity to sell that on the reversion side? But you also aren't buying it. So it could be a straight cash. [00:57:21] Speaker B: Flow management, I think of one site here in Montgomery county that, you know, it's just sitting fallow and it shouldn't be. And that's where White Flint Mall sat. So why couldn't that site be used for something other than just sitting there as a grassland in the middle of a very dense market? [00:57:39] Speaker A: Zoning complications. Yes, that's probably, that's one major hurdle. And the nature of some of these businesses in terms of environmental impact is a risk. Right. You have to have great lease language if you do something like that. If you get special exceptions. Right. If the learners were to get a special exception for that to store trucks. [00:57:59] Speaker B: And what's interesting is there was an industrial site that's on Nicholson Lane that is now a residential property was redeveloped. Vanguard was the prior owner of the boat and the family name Folger Pratt. [00:58:13] Speaker A: Was involved in that. [00:58:14] Speaker B: Well, they now own the, they're the built. But they bought it from Vanguard and their partners. [00:58:19] Speaker A: Pro Mark. [00:58:20] Speaker B: Pro Mark. Yes, it was industrial. I toured the property. I was going to finance it a long time ago. Right. Adjacent literally to White's Point Plaza, the combined properties and the mall. [00:58:32] Speaker A: Sure. [00:58:34] Speaker B: And so there's precedent there. So, you know, temporarily storing, you know, containers there. If you build a fence around it wouldn't be ugly. Why wouldn't Montgomery county agree to that? You know, you know, they, they should. [00:58:51] Speaker A: They, they really should. And you know that higher and better uses, this is what we're doing is probably the lowest impact use that you could do. [00:59:01] Speaker B: You could structure it as a temporary deal. Yeah, but it's revenue. [00:59:05] Speaker A: Sure. It's, it's. [00:59:06] Speaker B: Why not use the land use? It's commercially zoned, it's not residential and they now have a mixed use residential zone on it. But you know, until you get all the entitlement work done temporarily, why not do another use? Like you're a temporary, temporary zoning use of some sort and structuring that type of language and I assume you have a pretty good zoning attorney. You could take that to jurisdictions and sell. [00:59:36] Speaker A: Sure, yeah, it's a great idea. [00:59:39] Speaker B: It's a great idea because there's value there. There's value to the existing landowner, there's value to the community, there's tax revenue that they, there's a lot left on the table that you know. Now again, you know, parkland is nicer so, you know, people say, well, why not leave it fat, leave it nature, let nature have it. But, but you look at a site like White Flint, that's not a nature preserve there and it shouldn't be. It's not designed to be a park. [01:00:10] Speaker A: No, you want to see some activity always on sites. [01:00:14] Speaker B: Whereas Rock Creek park is designed as a park and it's designed, it's all set up that way. I mean that was the original plan. [01:00:21] Speaker A: With how long it takes to get things zoned and entitled around here, it could be a great interim situation. [01:00:28] Speaker B: It's just one of a billion opportunities like that. You know, there's a ton around the country like that. [01:00:35] Speaker A: So if you have success in one location, you could show a case study for many others. [01:00:41] Speaker B: I mean, you look at. When I think of temporary sites like that, I think of high freeways, ports, you know, where is there a high volume of physical activity going on that is. Has temporary type uses to it. [01:00:56] Speaker A: Right. So I love it. [01:00:58] Speaker B: Airports is another one. [01:00:59] Speaker A: Airports. Yep, yep. Yeah, it's a great idea. [01:01:04] Speaker B: You know, I just. And then military bases. Another place, you know, military base. I don't know if you ever been to one. I mean so much land is not used and it's, you know, the buildings are not the prettiest buildings. So you know, you could do that. You know, the government obviously does uses it a lot for, you know. [01:01:24] Speaker A: Well, there's a. Contractors and so we own a 200,000 square foot portfolio down by Pax river neighborhood. [01:01:30] Speaker B: Yeah, there you go. [01:01:30] Speaker A: And it's government contracting market. So there's not just, you know, United States of America, it's the khakis, the miters, the all contracting businesses that are actually carrying out, you know, the contracts. [01:01:46] Speaker B: Well, that's an interesting market. [01:01:48] Speaker A: Yeah. [01:01:48] Speaker B: So how did you find them or did they find you? [01:01:51] Speaker A: We found them. We'll have one of our team members looking for outdoor storage type of opportunities around military bases because the zoning. [01:01:59] Speaker B: There you go. [01:02:00] Speaker A: Is typically the same right around them. And you know, the only driver really is the contracting world. So you're kind of limited in terms of your optionality. But again it comes down to supply. [01:02:12] Speaker B: So Fort Belvoir for instance, I mean. [01:02:14] Speaker A: They'Re just off of Richmond Highway. Right. There's, there's a lot of opportunity. [01:02:18] Speaker B: I mean you can even go down to places for Bragg, which is. [01:02:21] Speaker A: I don't. [01:02:22] Speaker B: It's not called that anymore. But you know, in the middle of West North Carolina there is going to be demand for uses around those. Those. [01:02:30] Speaker A: Oh yeah, huge Economic drivers, the bases. [01:02:33] Speaker B: Yeah. So that's a big market, I would think. Fascinating. So what are the primary challenges facing the industrial real estate sector today and your niche, how is open industrial position to address them? [01:02:48] Speaker A: So specifically for our niche, I think it's about education and I think we've been hearing a lot about it. There's a lot of panels now. I think the buzzword is out there that this is real kind of segment of the industrial space. Educating lenders is kind of where I spend a lot of my time now on the financing side to date we've typically again back to friction. We typically are purchasing all cash and as we lease properties up, we bundle or kind of collateralize a few of them at a time to take out for refinance at one time. Doing it every single time on every single deal. Deal. Right. A lot of friction. And the check sizes for lenders are more interesting if you have a few of them. So that's where we've been focusing. Now there is because of the education that's been around this space and some of the institutions like a JP Morgan is in the space. Real term is a really big player in the space. There are discretionary funds being raised in the hundreds of millions of dollars dollars. Pension funds, endowments are now, you know, waking up to this niche, this alternative asset class. And we've seen starting to see the CMBS market wake up a little bit. There's been one deal that was done by Fortress, but there's a lot of work to do. So I think why couldn't this be. [01:04:13] Speaker B: Analogous to the self storage business? [01:04:16] Speaker A: I think that's the hope. I it's gravitating a little bit towards the triple net business. [01:04:22] Speaker B: Okay. [01:04:22] Speaker A: The industrial triple net business more so than the self storage. We like single tenant or you know, no more than two or three tenants. You start to get into what I'll call a core factor. If you have a multi tenanted site, there's a little bit of a management headache if you have too many tenants on a site. So the nature of how many tenants and the credit quality. We've seen the industrial triple net kind of folks gravitating towards it faster. But that's kind of where it's going in my mind versus versus self storage. [01:04:56] Speaker B: So more of the like the retail net business. [01:04:58] Speaker A: Yeah, that's interesting. [01:05:00] Speaker B: And of course that opens up the opportunity for the 1031 market. [01:05:03] Speaker A: Absolutely, absolutely. There's a user market too. I mean we have, there are tenants out there that would prefer to own. [01:05:12] Speaker B: Right. [01:05:12] Speaker A: So there Is, you know, one of the exits is to a user. Not portfolio, you know, size of stuff, but one off deals. [01:05:20] Speaker B: Well, you never know. I mean, somebody might want to aggregate like the retailer says, oh, I want six locations, you know. And have you ever had a user come to you say, can you help me find sites for what I want to find? [01:05:31] Speaker A: All the time. Okay, all the time. And that's where our software comes in handy. So we have a, we have a tool, we call it Tenants in the Market. Where you know, a tenant could come to us and say this is where we're looking for a site. We overlay that and we can actually see what we've worked on in the past or what we have offers out on to try to marry that up off market. Helps out on the risk side of things. Having tenants in hand is fantastic. Yeah, I'm sure you read, you know, Boston Properties does an incredible job of this on the office side. Right. They will have tenants and leases signed before they build their Marriott headquarters or the new law firm that they signed up downtown. So that's an opportunity for us. Absolutely. To work with tenants early on to kind of find things for them. [01:06:22] Speaker B: Well, that's the institutionalization of your business. And it seems to me that you should build some kind of a public relations format to go out nationally, do that to tell people about the business enough so that users think, oh, I need to find a site to expand. You know, I need to expand. Yeah, I need to find. So here's a, here's a, a way to do it. And the other thing is to introduce, introduce maybe even the retail net lease brokers to your business to some extent. You know, Cale, or you know John, John Hip. John Hip. His business, you know, the net lease. [01:07:00] Speaker A: Yeah. And they are, they're starting to get into it because the fundamentals are the same. And you look at, and I keep on bringing up United Rentals and Sunbelt. I mean they have thousands of locations and it's investment grade quality stuff, so. [01:07:16] Speaker B: And the franchise businesses too. [01:07:19] Speaker A: Absolutely. It's incredible. I mean looking at some of the Caterpillar franchisees and the businesses that they have created is mind John Deere, you. [01:07:29] Speaker B: Know, I mean your sites would be ideal. [01:07:31] Speaker A: A lot of trucking franchises as well. Sales. Sales and equipment rentals. Yeah, it's a, it's, it's a very large market. I mean no one really knows, but the numbers that have been thrown out are 200 to $300 billion. You know, is that totally accurate or not? Just the publicly traded real research That I did. [01:07:51] Speaker B: Right. [01:07:51] Speaker A: You know, I touched maybe 30 tenants. They own 10,000 sites and they lease another 8,000. And that's. That's a small segment of the universe. Right. Public, publicly traded companies are, what, 5% of, you know, the business community. [01:08:07] Speaker B: So you go to these franchise fairs, you know, one of these big national franchise, you know, show trade shows. It's like Las Vegas, for instance, these gigantic. [01:08:18] Speaker A: We have a reason to go there now, right? We have property there. Yeah. [01:08:21] Speaker B: I mean, you can actually go to icsc. You could probably go to ICSC and find, you know, retail users that would want outdoor storage. [01:08:30] Speaker A: Yeah, that's a great idea for some of our acquisitions guys to get the name out. For a while, we wanted to be quiet. Right. We wanted to do our thing and secretly build a portfolio. Now it's about brand awareness for us. Yeah. And getting our name out there with users and brokers and. [01:08:48] Speaker B: Yeah. So the new federal administration is planning to impose tariffs, you brought it up briefly, on selected imported goods. This may be disruptive to the supply chain for both retail and manufacturing. How do you suppose. How do you see open industrial taking advantage of it, potentially, if it is seen as an opportunity on the opposite extreme, how could it be a threat to your business? [01:09:13] Speaker A: Well, I wish I had that answer. [01:09:17] Speaker B: Well, you don't know until it happens. [01:09:19] Speaker A: You don't know until it happens. We have been discussing with our tenants because we ask questions, try to learn about their business, what pain points, what's coming down the pike. And so far the consensus has been we are going to pass it along to the end user. Which scares me from the standpoint of taming inflation. Right. Because these are things that we're trying to control. One school of thought would be that it's going to start. Inflation is going to start rising again because of this. Potentially. That's one school of thought for us. Looking back at how Covid affected the business, looking back at some of the strikes that have happened at the ports, which will continue, we've actually seen that volatility help because people are making decisions faster when that sort of stuff happens. And, you know, to date, we haven't seen a negative effect with the headlines of the terrorists. [01:10:13] Speaker B: Well, it seems to me that you would look at more domestic producers of goods. [01:10:18] Speaker A: Reshoring is a big. Is a big thing here. What scares me, and we've seen a lot of reshoring near shoring from when Trump was in the administration last time, moving factories and businesses into the United States. Again, what scares me about that is labor. We don't have enough skilled labor, pushing. [01:10:39] Speaker B: Labor out the door. [01:10:40] Speaker A: Now it's counterintuitive, you would think, right? I mean, I think I read somewhere last week that to handle the construction volume in 25, we need over 400,000 more construction workers. And that that labor shortage is something that I think people understand, but they don't really understand. [01:11:00] Speaker B: We also have an underemployment of a certain age segment in this country as well. [01:11:05] Speaker A: So that it's interesting if you, if you peel that back a little bit. I think I mentioned this to you. You think about silver tsunami, right? You think about senior housing. These businesses and these industries have their own kind of silver tsunami going on. A lot of the people that we purchase from are making life decisions about secession. Either their company's getting purchased, their kids don't want to be in the business. And it's very situational and it's naturally a little bit older blue collar kind of industry types. And we think that is going to continue. I mean a lot of, a lot of our acquisitions team, they, they follow up, they check back in and things change year to year. Especially if someone is in their mid-60s. Right. Life decisions sneak up on you quicker later in life. And we see that just in the short time we've been in business, we've looked at deals from two or three years ago that now are ready because of a situational circumstance from the ownership. So going back to the tariff question, we are also focused on markets that we love long term. And if these tariff discussions restrict our conviction, we shouldn't be in that market. We think it's whatever is going to happen is going to seesaw back and forth and it's kind of business as usual for us because of the markets that we're focused on as well. [01:12:38] Speaker B: Well, I read an article yesterday talking about going to cities like Pittsburgh, Detroit, Chicago, the places where there's more manufacturing here. And you know, a lot of those companies offshored a lot of theirs. Now they're being, they're going to be penalized for not bringing them back. You know, especially the auto industry, the steel industry, things like that that have. [01:13:02] Speaker A: Offshored a bunch of stuff and it takes time. [01:13:05] Speaker B: Canada and Mexico obviously being the beneficiaries of that in the past. And now they're looking at huge tariffs. So if General Motors has a plan in, in Toronto or outside of, in Ontario and they try and ship cars to the United States, that's not going to be good. [01:13:22] Speaker A: And you can't press a button to make it happen either. It Takes time. And I think what we went through in Covid, we saw businesses say we can't get caught like that again. And you saw a tremendous amount of growth with new product coming online. And we always overbuild if things are good. So there will be that cyclical nature. But flipping a switch and saying I need to open a factory takes years and years and years. [01:13:49] Speaker B: Of course. [01:13:49] Speaker A: And if it's not already in motion, most likely for it to happen is going to be outside of this current president's term for when it is actually in production. So we'll see. We're watching it, we're talking with our tenants. There's nothing better than interacting with the actual businesses that are affected. Of course, you know, reading the headlines. [01:14:14] Speaker B: And they don't know either until it happens. [01:14:15] Speaker A: They don't know until it happens. Yeah, right. [01:14:17] Speaker B: And what impact that's going to mean. [01:14:20] Speaker A: Right. [01:14:22] Speaker B: But you got to be ahead of things. At least you try to be. [01:14:26] Speaker A: Skate to where the buck's going. [01:14:27] Speaker B: Right? Yeah. So we did talk a little bit about the capital markets. But in the realm of capital markets and deal structuring, what innovative financing strategies has Open Industrial adopted to enhance its portfolio growth? [01:14:42] Speaker A: Nothing crazy, nothing outside the box. We had the luxury of having some great regional banking relationships. A couple that come to mind, Founders bank and Burke and Herbert John Marshall Bank. You know, there's a handful and educating them was important for them to understand the thesis and luckily they're very smart people and they got it pretty quickly. I think we need to do more of that in other markets. We can't necessarily move with regional banks to CNBS yet. I don't know if we would want it. And the way, the reason I say that is it's the access to it, the liquidity, all very important. But unwinding it is, is an issue. And I think in a new niche where we don't know where it's going to go or how fast it's going to go, we want flexibility. [01:15:38] Speaker B: You have volatility sometimes with your tenants, right? [01:15:41] Speaker A: Yeah, sometimes. You know, sometimes again, the downtime if a tenant were to leave is typically pretty short and the carry costs are as minimal as you can get with real estate just because you're not operating a big office building and it's usually maintenance shops and land. But there's, there's a little work to do. I think the CMBS market will, will. They'll gravitate towards the triple net nature of it. So I think duration, lease duration needs to get to a point where you're. [01:16:11] Speaker B: At scale, you could probably do your own security and that would make some sense then because then you could control the risk. Internal security instead of being bucketed with about 25 other different owners and properties instead to property types. [01:16:26] Speaker A: Where do you think that skill needs to be in terms of like dollar size? Are we talking. [01:16:31] Speaker B: I would talk a billion, your friendly neighborhood cmbs, you know, originator. But I would, I would think, you know, I would if you, if you have any institutional relationships like JP Morgan and your attorneys would have just say, you know what, what would make sense in a niche market like this to, to aggregate to. Because that could be very efficient for your business. Because then you put it all in a pool and you just keep building for the pool and you structure it so that you could do it that way then you don't have to worry about. Because you're not doing construction so you're not looking at that kind of a financing. And it's, you know, it's. To me I'm talking about the debt side. Now on the equity side you could actually form an open ended fund like the retailer, the retail, you know, the big net lease. Retail guys are open ended because constant flow of deals and fun and income. It's not like you're doing a lot of big ti work or you know, there's a lot of tenant risk, you know, once you have the deals flowed you're just kind of this afloat flow going on. And that's why a REIT might make sense long term if you build enough. [01:17:53] Speaker A: Scale potentially and collaring redemptions and those sorts of things is important. Having the history I would imagine of second gen, third gen in this world to get retail and institutional investors alike comfortable with it. The redemption side of things. We saw that when the capital markets went haywire, a lot of these open ended funds had a lot of redemption requests coming down and it restricted the liquidity of what they could do with stuff in their pipeline and commingled open ended REITs. They could have a portion of their portfolio in a great asset class but it could be weighed down by the office. [01:18:36] Speaker B: You talked about one of the limitations of scale. It's just the size of each deal is so small but to some extent on the other, on the flip side of that, that's actually a good thing. [01:18:44] Speaker A: From a diversification standpoint. [01:18:46] Speaker B: Right, right. Diversification of income, duration, all these different things. You've got a big mix, a big bowl of the big thing. And that's why I think long term CMBS and or a REIT might make sure the most sense to do it because of the, the nature of the business to some extent. Am I. If I'm. [01:19:08] Speaker A: I would think so too. I mean, I think, you know, how, how big does it need to get to have that interest? [01:19:14] Speaker B: Yeah, that's the question. You know, the advantage of, as I said, to have all kind of uniform like that, it just, it reduces friction on transactional things. [01:19:24] Speaker A: Yeah. [01:19:25] Speaker B: So in essence you just put it in the bucket. You just, it all just kind of blends together as opposed to saying each deal you have to do your own, all the documentation. Now AI is going to help with that. You can more or less uniformly build everything with AI and have a lot of your back office type things being done systematically to some extent, I would think. [01:19:48] Speaker A: Yeah, I'll wait for that AI and then, then we'll jump in that, that would be great. I mean the, it's, it's exhausting. [01:19:55] Speaker B: Needs to work on that if he hasn't started yet. Because the nature of your beast is somewhat replicable. [01:20:01] Speaker A: Yes. [01:20:02] Speaker B: So I mean every replicable process known to man is going to be institutionalized. [01:20:10] Speaker A: In AI if you feed it the right data. [01:20:14] Speaker B: Well, that's the key. [01:20:15] Speaker A: You need the right question to ask. Yep. The right data. [01:20:18] Speaker B: And that's what people are going to be taught in school going forward. [01:20:21] Speaker A: I would think so. [01:20:26] Speaker B: Let's see here. In our earlier conversation you mentioned that the outside storage market is fragmented. We just talked about it. Do you see a way to organize portfolios? I mean we talked about street and cmbs. I mean, is there any other thought as far as how to put, I mean, common use? Is that something, I mean, is there. How are you kind of looking at your portfolios internally? [01:20:48] Speaker A: It's a great question. I think we're still feeling it out. My prediction is that it might be a tenant type. Right. If you look at the building materials, building supply businesses, there might be a tenant type in terms of portfolio. It might be regionally based. Some companies might want exposure to Northern Virginia and we can kind of curate a regional kind of co. Mingled with a bunch of different outdoor storage type of units. I think we're watching the movements of the industrial triple net REITs, the big JP Morgans. [01:21:27] Speaker B: Prologis. [01:21:28] Speaker A: Prologis, right. We're watching them pretty carefully to understand because that from our point of view is supreme liquidity. If we start to see the REIT segment putting time, effort and energy with this niche, we know that institutions will see an exit that way. And so we're watching to see how they curate their portfolios as well. But for us, we don't have any intention to be in 30 different markets. We want to know the markets that we're in and create what I call internally flywheels. We've seen a lot of value out of what we've built here in the Northern Virginia area. If you have the supply, you can you add a lot of alpha and value by moving tenants around, understanding what people's needs are. Because you have, you know, economies in one market almost, I think you mentioned it's almost a little bit monopolistic in a way. But we want to know the markets that we're in. So we, our ambition is to maybe be in 10 to 12, you know, over the next few years and kind of go from there. There not be in 30 to 40 different states, but really understand the micro nature of each market that we're in. [01:22:44] Speaker B: Well, I think it's a strategic question. You have to ask yourself what is your exit somewhat dumb day going to be and are you going to be regionally focused or are you going to be a product type that's going to be everywhere kind of thing, kind of universal material, McDonald's type thinking? [01:23:02] Speaker A: Right. [01:23:02] Speaker B: You know, is that what you're going to be doing? [01:23:05] Speaker A: Yeah, I think it'd be great. I mean, there's so much of this product all over the country. I think what is important to us are the drivers that I spoke about. You know, the supply demand, the zoning aspect. Simplistically, in my opinion, this is a land use play with massive macro tailwinds, but it's really a land use play, a use play. What can you put on that site by. Right. And so I think that's going to drive a lot of our focus. Instead of buying something just because it looks, smells, feels like outdoor storage. It's deeper than that. [01:23:46] Speaker B: Well, that's the question. You have to. That's where you probably should be spending most of your time thinking about, other than looking at the real estate, is what users are the best opportunity for this type of use, this type of outsource, you know, what are the. And what's coming that we haven't seen yet? And you know. [01:24:05] Speaker A: Yeah, the more mission critical our site is to that user, the better. [01:24:10] Speaker B: Yeah, I mean, I think of, you know, you mentioned mission critical. Skiff space is an interesting business. And I know somebody that's trying to do a, you know, a. [01:24:22] Speaker A: We work of skiff. [01:24:23] Speaker B: Right, Exactly. [01:24:25] Speaker A: That's it. That's very interesting. Yeah, that's very interesting. [01:24:28] Speaker B: So that you have, you know, multi tenant, skiff type instead of just, you know, you might have government uses, but they don't necessarily always want to have the space at the same place at the same time. So you want to. So the question is, can you do that in your business? Is there there such a thing where you have a temporary use, kind of a Airbnb type of thing for your business? You know, if there is such an animal. [01:24:53] Speaker A: When we purchased a couple sites there, we inherit some of that. Most specifically, you know, RV storage, for example, they're paying monthly. [01:25:03] Speaker B: Right. [01:25:04] Speaker A: Not the greatest management, you know, for US because it's 100 people sending in checks, you know, for, for their RV to be stored on our lot. We much rather prefer one or two tenants or boat storage. Right. That is another niche that's booming marinas and kind of boat storage. So we inherit a little bit of that, but we're not set up to manage that as a business. I think we need more of an operating business. [01:25:29] Speaker B: Well, that's where you might do alliances. [01:25:31] Speaker A: With other firms, partnerships with other operators. [01:25:33] Speaker B: You know, I mean, and the other thing is poor ports. I mean, have you. There's probably peripheral land around ports that could, you know, potentially. [01:25:43] Speaker A: Yeah, absolutely. [01:25:44] Speaker B: So the question is, are the ports, are they governmentally owned, are they private sector? [01:25:48] Speaker A: They're typically authorities and they're very just like, you know, your local economic development groups. They're very open and willing to speak to you. And so we've learned a lot by talking with some of the ports. [01:26:01] Speaker B: Then they have these inland ports, ports too, which is interesting. And then they had these intermodals. And I financed a building in Memphis, Tennessee, a million square foot building. And they had inside the building, they had a trade zone in the building. Physically inside the building was a free trade zone where they had ability to do commerce and international type stuff. You know, where there's like where you have, at an airport, you have places where they have liquor and stuff and they sell it. It's that. What do they call it? I forgot what they call it. [01:26:34] Speaker A: Duty free. [01:26:35] Speaker B: Duty free. Duty free within an industrial building in Memphis, Tennessee. [01:26:40] Speaker A: That's wild. [01:26:41] Speaker B: Yeah. So I mean, just think about the, the trade offs of opportunities like that. [01:26:48] Speaker A: Yeah. [01:26:48] Speaker B: You know. [01:26:48] Speaker A: Yeah. What incentives could we utilize with sitting down jurisdictions? [01:26:52] Speaker B: For instance, you could do certain areas that are different than the port that would fit a different niche from a legal standpoint, if there's a land use that unique to that situation. I don't know, just a lot of interesting opportunities, it seems to me. So Reflecting on your career, what pivotal moments or decisions significantly impacted your professional development? [01:27:19] Speaker A: I touched on this a little bit, but I think learning the business, business during the GFC was, was the most pivotal. Just the way I look at real estate, maybe some of my peers that are a little bit younger than me have not really experienced something like that. And Covid was every time it's different. But learning through that crisis was an actual opportunity for me because helped structure my DNA and how I looked at stuff. Right. Whether it's optionality or value. And so just thinking about that last night, that's what really stands out to me. And obviously Rock Creek had a enormous part in that too. The way that those guys look at deals all during this crazy, crazy time. Personally I didn't know anything other than that because that's when I started in the business. It slapped you right in the face. I didn't know what it was like in 2002-2003-2004-2005. [01:28:18] Speaker B: What's interesting is that in early 1990s our business went almost disappeared for young people. I mean people said why should we? There's nothing, there's no demand. So the industry really got shrunk as far as personnel. [01:28:37] Speaker A: Right. You had a whole peer group then. Yeah. Was not in the business. [01:28:40] Speaker B: Yeah. I mean people 10 years younger than me, you know, they're now 60 or maybe late 50s. They, you know, other businesses were more interesting at that time because you know, this wasn't a demand for employment right at that moment. [01:28:57] Speaker A: Yeah. [01:28:58] Speaker B: The GFC didn't quite do that per se. Which is interesting. [01:29:02] Speaker A: Yeah. That it's. It's hard for me to compare it obviously because that's when I started. But there was certainly a lot of pretend and extend and can kicking. We all thought there would be tremendous amount of opportunities in the CMBS world. The servicers just held on to everything. [01:29:21] Speaker B: Yeah. When I interviewed Ethan Penner, Ethan was one of the founders of cmbs. He started Mirror securities. And he said when I first started, you couldn't finance anything. Nothing. There was nothing that was that a lender would not. There was no financing, no takeout for any debt, anything whatsoever in 1990, 91, 92 until the industry, until that was created. So he was a bond trader at Morgan Stanley and he went to forgotten who he talked to. He wants some somebody in the markets and said, you know, we should, you know, because MBS had been around a long time which was mortgage residential. He said at some price the Empire State Building is going to be financed. You know some loan, 20%, 10%. Would I do a $5 million loan on the Empire State Building? Would you do that loan? If you. And this is back, you know, when there's no, no, no activity. So at some point there's a market. And that's what. When you look at today in downtown Washington, if you're looking at a mid block building that's a class C space, is there any value there? Eventually there will be. The question is what and how's it going to look? It might just be a land play. If you're a family office person today and you have more money than you know what to do with, I would look at aggregating sites in downtown Washington at a price. Once there's the reconciliation on the site. The big one that just happened recently was L'Enfant Plaza when it went into foreclosure, something like that, you could buy at a significant discount. And there's been a lot of those deals happening. In the last, I mean, Boston Properties. [01:31:15] Speaker A: Deal, the one that you write the. [01:31:18] Speaker B: Lease, we paid $120 a square foot for the building. It was appraised at 600 bucks a foot, not six, seven years ago. So that's the kind of price. And so those are, that's what drives markets, those kinds of opportunities. [01:31:33] Speaker A: Discovering that bottom is. There's your question yard. Are we there yet? I think Blackstone, John Gray said we have bottomed. I don't know. Depends on what market you're in. [01:31:44] Speaker B: Well, he's traveling around the world because I see him on LinkedIn every other day. Seems like he's a great continent. [01:31:51] Speaker A: He's a great cheerleader. Yeah. [01:31:53] Speaker B: For his company, his perspective is very big. But I think he would tell you that every individual market has its own dynamics. So you got to really be careful on that. Obviously, looking ahead, what are your aspirations for open industrial and how do you envision the company role in shaping the future of industrial real estate? [01:32:16] Speaker A: Big picture. Our goal is to be the best in class operator of outdoor storage. And I think we're working towards that goal every day with our internal processes, with the culture that we're building. It's the first time in my career and life that, you know, I have employees and their success is very important to me. In the culture that we build here, we, we live by these core values here on the wall. They're, they're in everybody's office. And this, these are the things that we look for. [01:32:46] Speaker B: We. [01:32:46] Speaker A: The first is hungry to learn, never complacent. Intellectual curiosity. You brought that One lifelong learner. Like, it's not. You're not a nerd, right? It's, It's. It's fun to learn grit. With what we do, you gotta have perseverance. You gotta have grit. Gotta roll up your sleeves. What we do is not sexy. It's a lot of hard work. So having that attribute, you know, on our team is huge. Always do the right thing. It's integrity. Everybody knows, do the right thing, whether it's with your investors, with your employees, your employers, the vendors that you have. Right. And then the last is brutal honesty, which is just transparency, being able to have a conversation with anybody in the company about what's really going on. And that's. That kind of defines what we built. Probably the most proud is the culture that we built here at Open Industrial. And it's great to see guys like Chad grow and, you know, handle five closings in one day. Right. And see that growth and see that success has been tremendous. And if we. If we continue to do that, the success on the property side and on the real estate side will come. So that's what we're focused on. [01:34:00] Speaker B: So talk about the origin of those four principles. [01:34:03] Speaker A: So Five Partners is a lot of partners, right? You don't see that very often. It's got a lot of CMG companies, and we knowing that and getting out ahead of it, we really focused on setting up our company from the partnership level down to our accountability chart the right way, instead of being reactive. And we actually brought on a business consultant really early on to help guide us through that process. And one of the exercises was developing a true set of core values that we live by as partners, but that we can infiltrate into our company culture. And that's kind of how, you know, we came up with this. [01:34:50] Speaker B: Did that help with your fundraising as well, having those? [01:34:53] Speaker A: I think it absolutely did. I mean, because everything we do, we do with this in mind. And what's so important, I think investors see that, they feel it. They can. They can understand that energy and alignment of interests is paramount. Right. To any investor or manager relationship. And that's kind of what we hold, just like our core values. You know, are we doing the right thing? That's great at all points. [01:35:20] Speaker B: That's great. [01:35:20] Speaker A: So it's been great, and I think it's helped us grow as fast as we have. I mean, it's been a little over four years, and we've done a lot, a lot in that time. We've learned a lot as well. We're still learning. [01:35:34] Speaker B: Yeah. So what Advice would you give your. [01:35:36] Speaker A: 25 year old self outside of having, you know, your own core values that you believe in? I think I'm going to coin a term. I don't know if it's going to make sense or not, but full contact networking, it's not really enough to go out and shake hands, but to really understand who you're speaking with. Active listening, follow ups that might be useful for that person, the quality of your networking relationships. [01:36:05] Speaker B: So how do you prepare for a meeting? [01:36:07] Speaker A: You always do research, right? I think I've listened to almost every one of your podcasts and I always try to find some kind of common link. Right. We both know Chad and Colin and so there's that common link and what interests somebody and whether it's at that meeting or a follow up, passing along a note, a book idea, a podcast idea, something where I can be useful to them, that person, not just to impress them, but to actually make a difference in our meeting. Right. I think that's kind of the takeaway. [01:36:44] Speaker B: I would say to the listeners. That's very sage advice to understand who you're talking with and it certainly helps not only in just your long term relationships, but if you want to do something together as a team and, or you know, if you're trying to negotiate something, understanding what the other party's thinking about and what's important to them is really critical, very critical. [01:37:06] Speaker A: And we talk about what's the psychology of an owner. Right. Like what matters to them and thinking through that before maybe, and this is on the acquisition side of course, but before making an offer, like really trying to understand that through conversation is very important, not just throwing something out, you know, seeing if it sticks. [01:37:29] Speaker B: Sometimes it's stepping back for a moment and thinking things through before you make a statement too. [01:37:35] Speaker A: Right, right. Yeah, yeah. Twitter and LinkedIn and not fly off. [01:37:42] Speaker B: To see your pants too often. [01:37:44] Speaker A: Yeah, yeah. Temperance, having, having, you know, being thoughtful is, is extremely important. So. So that's what I would say. And I think what you're doing with the young professionals, you know, I see it firsthand like they're taking that full contact networking approach and it pays dividends. [01:38:03] Speaker B: Yeah. So I'll do a quick advertisement here before I. The next question. Every month I have a theme now for my community. February is going to be. This next month will be negotiations. So I just, I'm in the middle of reading a book called. It's. It's an unusual title, but it's original Love. It's called and it's about Zen. Interesting And I his the author's name, Henry Shookman. And I'm actually going on a meditation. He's a meditator and not Buddhist Zen leader. And I'm taking those principles and putting that into negotiations. And it's an interesting, an interesting approach to negotiation. So I'm taking that course forward with the members to talk about. So one of the first lessons is take three seconds before you respond when somebody makes a proposal to you. And silence, softening the conversation is uncomfortable for some people. [01:39:11] Speaker A: Yeah, yeah, 100. And practice maybe even longer than three seconds, three to five seconds. [01:39:18] Speaker B: Practice that and see what it does. Because people then try to fill the gap and they often share things that they may not want them to share or explain things that, you know, they. [01:39:32] Speaker A: Reveal a little too much. [01:39:33] Speaker B: And the other book I'm reading now is, Is, and I think anybody that's been in business should have read this book if they don't. Is Never Split the Difference by Chris Voss. [01:39:42] Speaker A: Never Split the Difference. I have not read that. [01:39:46] Speaker B: It's probably one of the two or three best negotiation books I've ever read. And I'm actually reading it again for the second time now just as preparation for this course. And he talks about several tactics in there. He's an FBI hostage negotiator, so. [01:40:04] Speaker A: Interesting. [01:40:05] Speaker B: Yeah, very interesting. He wrote, he took that, he teaches courses and negotiations and was trained at Quantico. And you know, all the, went through all that hole. But you know, I mean, he's talked people off ledges, he's gotten people through hostage, hostage situations. [01:40:23] Speaker A: Yeah, yeah. [01:40:24] Speaker B: He's negotiated with terrorists. [01:40:26] Speaker A: He, you know, life or death negotiations, which is another level. [01:40:31] Speaker B: I mean, I just read a case in the book. Filipino terrorist wanted $10 million. He had kidnapped this young 24 year old diplomat or whatever. He was American and he wanted $10 million. And he kept wanting to. He's Arab, Arabic. And he said they were being persecuted because all the Catholics had come in to change the Philippines and taken away their culture. And he wanted all this retribution, which had nothing to do with holding this guy. So he figured that out and he negotiated. He said, oh, let's separate that. And he got it. And sometimes all people want is to be understood, not necessarily, necessarily sure to accomplish, to get the money. That's not as important as the, the other message. [01:41:24] Speaker A: They want to be heard. [01:41:25] Speaker B: Yeah, they want their message to get. Anyway, I, I bring that up, you know, that's great. It's interesting. [01:41:34] Speaker A: Are you okay on time, John? [01:41:35] Speaker B: No. Good. Can you share any mentors or Role models who have influenced your approach to leadership in business. [01:41:43] Speaker A: Yeah, I, I have a coach, teacher, coach that spent a lot of time with me on and off the sports fields, in the classroom. And the interesting thing about Landon is this mentor coach aspect. You get to know the boys not just in the classroom, but on the playing fields. And one thing that really stuck out is his name was Drew Johnson. His name is Drew Johnson. Still really good friends to this day. Was doing the little things right. You know, whether it's. I remember him parking the bus at games and it being just perfect inside the lines. It sounds silly, but it's habit forming and you know, it stuck with me 30 years later. Just always taking pride in doing the little things right. [01:42:36] Speaker B: Does he have a military background? [01:42:37] Speaker A: He does. He doesn't. He does not. [01:42:39] Speaker B: It sounds like a military background. [01:42:41] Speaker A: It does, it does. But you know, it's stuck with me this whole time and whether I'm shoveling snow or, you know, back when I was changing diapers. Right. You take pride in what you're doing and you do it right. [01:42:54] Speaker B: So I hate to bring another personal thing to the table. My son was a helicopter pilot in the US Navy and he and I moved from Southern California. Actually he was in San Diego and we moved. He went to graduate business school in Northwestern and so we drove all his stuff in a trailer and in the back. And his new condo in Evanston, Illinois had this loading dock that was extremely narrow area to back and he backed that sucker in within with inch on each side right to the nit. And I'm convinced that his military helicopter. [01:43:42] Speaker A: Pilot training attention to detail and concentration, right? [01:43:48] Speaker B: Yeah. I mean when you try and land a helicopter on a carrier or a smaller vessel in the middle of the ocean that's rocking like this with waves and stuff, that's a challenging thing to do. [01:43:59] Speaker A: You have to be an athlete. Not, not just intelligent, but absolutely. [01:44:04] Speaker B: It's, you know, it's a certain discipline to it. [01:44:07] Speaker A: Sure, sure. [01:44:10] Speaker B: Anyway, how do you balance the demands of a high paced career with personal life and giving back to the community? [01:44:15] Speaker A: Oh man, my, my wife is incredible. I, I would love to do more, you know, and just in terms of giving back, I think she is a dietitian at Children's Hospital and we've spent some time with our younger boys there and the level of care, you know, anything Children's Hospital related, we're involved in when we can. So that's very important to me. I also do something called bite to the beach every year in conjunction with a friend of mine who lost his son tragically in a bike accident on Old Georgetown Road. And it's been a tremendous success. And a lot of industry professionals in the real estate, local real estate market participate. We bike. They have a couple different legs, but you bike to the beach, you bike to Dewey Beach. Whether it's taking off from Gonzaga or closer, it's just a really nice, fun recognition of autism, and autism specifically speaks, and that's great. And so that's. You know, we try to do that every year, every summer, and, you know, through partnership, through one of my partnerships, a legacy thing outside of open industrial. But I'm partners with low, formerly Low Enterprises, and Fred Green iii, flga, and we have a program with. With Howard University called CRE Access, where we, you know, provide internships to students. And there's now a curriculum starting for real estate at the university. [01:45:50] Speaker B: That's great. [01:45:50] Speaker A: We've had some great, great kids come through, and we have some amazing partners. A lot of the people that are on our project. [01:45:58] Speaker B: Do you know Leslie Hale? [01:46:01] Speaker A: I know of her. She's still on the board, right? 100 yards of here, she's still on the board, I believe. Yeah. [01:46:08] Speaker B: Rlj. I'm gonna be hopefully interviewing her in the next couple. [01:46:12] Speaker A: Oh, that's great. [01:46:13] Speaker B: She was a mentee of mine at ULI way back when she was. [01:46:18] Speaker A: Wow. [01:46:18] Speaker B: Head of capital markets at RLJ, and now she's CEO. So. Yeah, I've known her for 20 years now, almost. [01:46:26] Speaker A: Yeah, that'd be tremendous. [01:46:29] Speaker B: Yeah. But she. We talked about that, about Coward, about doing something with Howard, and so I. I would think that you'd want to talk to her. [01:46:40] Speaker A: Yeah, absolutely. I'll send you this link, too, when we leave. But there's been. I think we've placed around 50 internships over the last three or four years. [01:46:48] Speaker B: She's a trustee of Howard. Knew that. [01:46:50] Speaker A: Yeah. Yeah. It's been phenomenal. I mean, the kids there are energetic, bright, a true value add, and. [01:46:58] Speaker B: Yeah. So. So part of my community goals once we. I want to build a core, which I've got a core now. I'm trying to get up to maybe 100 or so. We've got about 35 active members, 40 to go to the universities, and, you know, there's six of them here that have real estate programs, at least maybe seven. And I did some career counseling at George Mason and University of Maryland, and that's kind of how I met Chad. [01:47:25] Speaker A: Okay, but from the Maryland side? [01:47:27] Speaker B: Yeah, yeah. Several of my members are from that program, but others are ULI mentees of mine as well, so. But I want to try to do more with the universities to help grow the community. [01:47:41] Speaker A: Yeah, absolutely. Great idea. Yeah. [01:47:44] Speaker B: If you could post a billboard on the Capitol Beltway for millions to see, what would it say? [01:47:51] Speaker A: Great question. I think back to these moments of advice from people that I look up to. My side story, my uncle, my mother's brother, has been or was the broadcaster for the Boston Red Sox. Radio broadcaster for a very long time. He's since retired last year, but I mention it because it afforded me the opportunity when I was at school and Holy Cross to attend a trophy ceremony when they won the World Series and came back from the. In Worcester, Massachusetts. And part of that, I got to meet, you know, some people on stage. One of them was a man named Larry Lucchino, who recently passed away not too long ago. Larry was involved with the Orioles and Camden Yards and all of that, but also was one of the owners of. Of the Red Sox with John Henry. And his first time I met him. But his. His words have spoke to me since, and I. I even mentioned them to younger people around the office, too. But he essentially said, be bold, and that's probably what I put up there. And that can mean a whole lot of different things to. To many people, but take chances. Get outside of your comfort zone. [01:49:10] Speaker B: That's great. [01:49:11] Speaker A: Be bold, you know, in life and business with your family. Life's short, life's great, and you should attack it every day and with boldness. So that's great. [01:49:21] Speaker B: Well, Blake, it's been great. It's been a pleasure, this conversation, very much. You built yourself quite an enterprise here. [01:49:28] Speaker A: Thank you. [01:49:29] Speaker B: Looks like it's gonna. [01:49:30] Speaker A: A lot of help. A lot of help with great people. [01:49:32] Speaker B: That's what's important. [01:49:33] Speaker A: Yeah. [01:49:33] Speaker B: So thank you very much for your time. [01:49:35] Speaker A: Thank you. All right. [01:49:37] Speaker B: And thank you, listeners, for listening. Have a great one.