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Hey. Welcome to this new episode of "Commercial Real Estate Talk with Steven Arnie," where we have what to hope to be compelling, informative, and very interesting conversations with leaders in the commercial real estate industry, folks that lead companies that own major portfolios of commercial real estate properties. And I'm super excited about today's guest, because I don't know if there's a name that has meant more to its community and its region than the Sudberry name has meant to the San Diego County development industry over the last 40 or 50 years. So to have Colton Sudberry as our guest today is truly an honor. But before we get to Colton, let me introduce my co-host, Arnie Garfinkel. Arnie, how you doing today? Hey, how you doing, Steve? Doing great. What's the latest? We got the news about interest rates today. If you're listening- Yeah, they're staying the same. They're not going up, not going down. Market liked it too much, but how are things going with Allstar Group? Tell us a little bit about Allstar. Well, no, we're doing pretty good. We got our big event coming up April 29th in Long Beach. That's our commercial real estate lending conference, where we actually do a very interactive event. Allstar Group has been doing conferences since 1995, so we're in our 31st year of doing commercial real estate and lending conferences throughout the state of California. But other than that, things are going well. All right, end of the quarter. And excellent. And many of you know RentTV. I don't know if you know all about RentTV, but we have our news website where we're posting stories every day about commercial real estate transactions and deals and developments. Really the West Coast, from Texas, Colorado, to the West. We put on five conferences a year. We're doing our next one next week, so when you watch this, it may have happened already. March 26th, Greater Los Angeles. May 7th will be Inland Empire. We also do, obviously, this podcast, but we also have the video platform you're probably watching this on, the Review, which is our searchable video platform. Takes both YouTube and Vimeo videos for free. Really powerful tool, so check it out, bounce around, check out the search page. And with that, let's move on to the next business at hand, Arnie, the folks that make this show possible are- The sponsors. Yeah, let's hear from them ... so we've got some great sponsors, some new ones too. So the first one that we've got is Rockefeller Group. Boy, am I excited about having Rockefeller Group. They're a great partner of RentTV for many years. Now we welcome them as a sponsor of CRE Talk. Of course, many of you in the audience will know the Rockefeller Group name for nearly a century. They have delivered exceptional experiences, value creation through dedication to quality in the built environment. From the iconic Rockefeller Center in New York City and office buildings throughout the country, to large-scale industrial facilities and multifamily projects, many out here in the Southwest, Arizona, and Southern California. Rockefeller Group develops, owns, and operates truly extraordinary properties. Visit rockefellergroup.com. It's on the screen for more information on the company and their projects throughout the US. Arnie, who's next? Well, we are proud to welcome Provident Savings Bank as a sponsor. Provident's a California-focused portfolio lender with legacy dating back to 1956. Provident Savings Bank is a trusted resource for brokers and investors seeking 350,000 to five million in financing for property types ranging from light industrial to multifamily. Their deep roots in community and longstanding commitment to responsible commercial real estate lending make them an ideal partner for your commercial real estate needs. Please call Gina Conant, Vice President and Sales Manager, at area code 951-403-0567. That's 951-403-0567. Provident Savings Bank is an FDIC-insured and equal housing lender. Learn more about their lending programs at myprovident.com. Awesome. Next one is Chase Partners, a great client of RentTV's for a while. Now we welcome them as a CRE Talk sponsor. Chase Partners, many of you know David Parker, head of Chase, is one of Southern California's leading investors and developers of industrial properties throughout Southern California for over 30 years. As a longtime supporter of RentTV, they are now sponsoring our show to get the word out about an updated strategy for Chase, focusing on underperforming industrial and retail properties, other distressed properties with non-performing debt. If you're an owner, lender, or broker that needs a fast decision, a fast close on your property, contact Chase Partners at david@chasepartners.com. All right. And last but not least, Fidelity Mortgage Lenders. Fidelity is a private lending company specializing in commercial real estate. Founded in 1971 by Chuck Hirshon, it's known for its unique terms, fast funding, no prepayment penalty, and long-term fixed rates. Call Uncle Chuck or John McLean at 800-752-9533. All right. So let's bring in our guest, Colton Sudberry. Colton, welcome to the show. Welcome. Great to see you. Thank you. Good to be here. Thank you. Well, we've got a lot to cover, so I'm going to get right into it. But to start the show, why don't you give us an overview of Sudberry, other businesses you might be involved in, and portfolio size, geography, sectors you're in. Sure. Quick little overview, and then we'll get into it. Yeah. So the company was started about 45 years ago by my father, TomHe primarily was in retail and development throughout San Diego County primary town centers. And about 25 years ago, I was getting out of college. He was sort of semi-retired. So I went a different direction, worked for some different development groups. And then I was at USC in 1999 for my master's, and when I came out of school, my dad was gearing back up again. So I went to work with him in 2000 and been there ever since. We've made a lot of changes. Went from primarily a town center development company to more mixed use. Got pretty heavy in apartments over the last 12 years in particular. I'd say the vast majority of our products right now are either mixed use or solely residential. Doing a few shopping centers here and there still, but not like the old days. So it's been a good run. We've grown our company quite a bit. We've got a few more development partners. We now have about 10 million feet of commercial that we've either developed or are actively developing now. About 2,500 units of residential built over the years and a lot more in our pipeline. So we're excited about it. What states are you in? Oh, so primarily San Diego County is our backyard. Uh-huh. I'd say 90% of our business has been in the county. Done quite a bit in Inland Empire and Riverside as well. Done a handful of projects in Las Vegas. Well, mostly because we had a landowner partner here in San Diego that brought us to Vegas that wanted some help with his town centers. And we have one active project there now in Henderson that we haven't started yet. But California, Nevada, done a few projects in Texas with a partner, multifamily projects. But our core development is here in San Diego County. Yeah. You'll take an opportunity if it presents it to you, but you like staying in your backyard. That's exactly right. So like these other deals in Texas or Nevada, we had landowners we'd worked with, and like I said, they brought us out there instead of us out there looking for sites. Right. We went out there to help them with their problems. And with your history and everything, you guys are as much of a household name in the real estate industry as there is in San Diego County. So- Yeah. Thank you. Well, we've been around a long time. Right. So, it's been a long time. Tell us a little bit about where you grew up. What brought you to University of Colorado, and tell us a little bit more about that. Sure. So, I spent most of my life in San Diego. Went to high school at Santa Fe Christian, up in Solana Beach. Uh-huh. And I wanted to go to USC, but they didn't want me. Oh. I went up there and, yeah, I played linebacker. So I went up there on a recruiting trip and Junior Sauer, if I remember, was- Uh-huh ... running 40 with his shirt off and I looked at him like, "They're not offering me a scholarship- ... to come to USC." So I ended up going to Colorado and actually picked a pretty good time to be a freshman. We were great that year. Won the national championship. Awesome. The Big Eight Championships. Like I said earlier, I wish I was a little better player, but I made the team and had a lot of fun and loved my time in Boulder. And- Still got the ring. Yeah. Got the ring. Yeah. Exactly. And I ended up meeting my wife in Boulder. My sister came out there, and my now brother-in-law went there. So we have a lot of Buffs in the family. Good. What do you think of Deion Sanders, speaking of Buffs? Ah. Well- ... that's an interesting question because I was all in when we brought him in. Even all the changes he made to the team overnight with all the new transfers, I thought something bold had to be done. Colorado had some dark years for about two decades. So I thought it was a bold move. I liked the energy he brought. Certainly brought a lot of attention. Not real crazy with the way things have been going. Not just the record, but just the way he's coached the team and frankly, some of the retiring of some jerseys that I thought were not appropriate compared to some of the players that played in the past. But, hey, look, we got another year. We'll see what happens. See what happens. I mean, it's time for him to win. And it leads into all the other crazy changes in college, with kids switching around and everything like that. Oh, it's getting crazy now. Yeah. I think it's a disaster, frankly. Yeah. I mean, with the unlimited transfers, all the money. These kids are all mercenaries. Yeah, it takes away so much of the positive aspects. They're making more than the coach. 100%. Right. Some of them make more than the coach. They need to rein it in somehow. Yeah. I agree. Well, we could do a whole show on this. Yeah, let's get back to real estate. Right. So great career. How'd you get from the football career, and you mentioned joining the firm with your dad, but tell us a bit- Yeah ... about that transition. Were you always thinking, "I want to join the company firm," or- Yeah ... were you doing different things along the way? I know you've worked for some other firms in between. Yeah. So it wasn't some big grand plan to work with my father. I got out of college in '95. I went to work at CBRE. I was going fairly well. And then an opportunity to work for two gentlemen, John Gilcrest and- You were a broker at CBRE? Were you doing brokers? Yeah, I was. Yes. Yeah. All right. So I was there for a few years, then I went to work with John Gilcrest and Al Portey. They were ex-Hahn developers. Hahn built 40 malls across the country, including several here in San Diego. And John Gilcrest was the CEO and Al was his right-hand man. And they left Hahn when Hahn was sold to, TriSec, I think, and started their own kind of boutique development company. Right. And they wanted some young guy they didn't have to pay very much, so they offered the job to me and I took it and had a blast and learned so much from those two. And we worked on malls around the country that were kind of B and C malls and tried to help redevelop them. Uh-huh. And did some entertainment centers, a lot of theater business. Great time to do that because- It was a great... It was the heyday- Oh, yeah ... for mall redevelop, entertainment centers. This is the late '90s, early 2000s. Yeah, late '90s. Yeah. That business has obviously completely stopped with the theaters. But IWent to grad school in '99 when we were in a little bit of a lull between our projects, different couple of different phases. One got put on hold, so I thought, "Hey, now's a good time to go to school and get my MRED, a Master's of Real Estate Development." So I did that at USC. And when I was at USC, my dad called me and who had been kind of semi-retired since I got out of college in Boulder and said, "Hey, look, I'm tired of being retired. I want to get back after it. Why don't you come work for me when you're out of school?" And that's how it happened. Oh, wow. So now you're out of school, you're back with your dad. Tell us about your very first real estate deal that kind of, this is it. This is it for me. Yeah. Tell us about the first one. Well, so when I went to work with my dad, we didn't have any deals until... He was doing one or two deals at a time. Keep in mind he was semi-retired. He didn't close his doors, but it wasn't very active. So he was wrapping up another project. We started going after a few different sites, and there was a very good piece of property in a suburban area called Eastlake. And Bill Ostrom gave me my first chance. He was the CEO of Eastlake Company. Uh-huh. He sold us 30-ish acres, and we built a Target/Lowe's shopping center, and that was my very first project. So talk about baptism by fire to go do a Target/Lowe's center as your first deal. And of course, my dad helped me at first, but he kind of moved on to other things pretty quickly. So I had to figure it out and had a lot of support from Bill Ostrom, the seller, and his staff at the city. They helped me get through it, get it entitled, and negotiate the deals with the two anchors, and the rest is history. That's great. Excellent. Well, looking back on the first one, now looking back on everything you've done- Yeah ... what would be the one that stands out to you that you look back... It's kind of like judging your kids. Yeah. You know, you don't want to judge- Which was your favorite? Yeah. But which deal you look back on for maybe the challenge or the way it turned out, or the economic success, which is the one you look back on and say, "That's really the shining star of my career in terms of- Yeah. Gosh. Like you said, it is like judging your kids. I have a couple highlights, and for different reasons. I'd say that my first project was a very complicated one. Yeah. And big anchor tenants, 800-pound gorillas, and I'm right out of college, and that was my first project. So I was really, I guess, proud of myself that I got that done, looking back on it especially. And financially, we had a great run-up in rents while we were under construction, so it financially turned out pretty well- Yeah ... compared to some others that we've done. Right. So that was a highlight. Probably one of our biggest projects is Civita in Mission Valley, 235-acre master plan. We've been working on it for almost 20 years now. It took us six years to entitle it, two years to get final maps and improvement drawings done, and we've been developing it now for, what, 13 years. Yeah. We got a ways to go. And we have unbelievable partners in that deal. The landowner had owned this sand and gravel site for, gosh, it's probably almost 100 years now. They wanted to stay in. They didn't want to sell. They joint ventured with us, and it's been an amazing relationship with them through a lot of ups and downs, a lot of different markets. And we've held together, and we've built multiple phases and getting ready to start on our next phase here this summer. About 400 apartment units and 75,000 feet of retail, including Jimbo's Natural Market. So we're excited about getting that one going. And I think Civita as a whole, for a lot of reasons, has been a definitely a highlight. We'll dive into that a little bit more in a few minutes. Yeah. Show some pictures and get into some of the specifics. Okay. Yeah. But Arnie, move us along. Yeah. Now you've told us about your wins. Now tell us about the one you wish you never did. Oh, I have a few of those. We always do. Yeah. No, I had a couple deals that... Well, the ones that I never actually built stung the most. I had a project down in National City, about 25 acres. We spent a lot of time and a lot of money entitling it. It was a long entitlement process. The property sat across two different cities, National City, Chula Vista. Had to get a JPA negotiated between the two, which took forever. And by the time we finally got it all wrapped in a bow and ready to get going, we lost our major tenant because the real estate market crashed in 2008, '9. And that was three years of work, countless dollars. I didn't even want to admit it. And that stung. That's only happened to me one time or that bad of a loss when we were so close to getting it pulled off. Yeah. That's tough. Yeah. Yeah. But you learn a lot from those. Yeah. Oh, yeah, you do. That's what gives you the baseline to make the next one even better. Yes. That's true. All right. Well, let's move on to like some positive stories. All right. You were just talking about one of your major projects. But tell us, let's get into the details about your recent projects. Civitas, El Corazon, Watermark, right? Yeah. The different things and we'll show some pictures while you're describing what you've built at each of those places. So yeah, go for it. Okay. Well, let's start up north and then work our way down. El Corazon. That's a 400-acre property that the city of Oceanside owned. Also, a sand and gravel operation that the land was given to the city when they- I love that ... were done mining it. I love that backstory. That's great. Yeah. We've done a lot of sand and gravel operations because a lot of tricky soils issues. Okay. And we sort of have that knowledge now, how to deal with it. Or more so than some. We're still learning, but- Right ... this particular site had a lot of soils issues. A lot of it's undevelopable because the soils issues are so bad. Not hazardous, just old silting ponds, just bad dirt you can't build on.And so we spent the last many years entitling it, and we did a sports park, which is sort of the carrot to the city to get the rights to do the commercial development. So they really wanted a Balboa Park in the middle of this 400 acres. Right. But no one could afford to build a several hundred million dollar park for 60, 70 acres of commercial. So instead, we... It wasn't my idea. I wish it was, but we were approached by the founder of Surf, Mike Connolly, and his partners, and they were looking for a new facility to do soccer tournaments. They thought they were going to lose their facility at the fairgrounds. So we partnered with them, went to the city with this idea that we're going to build this great sports park, and the city will get tot revenue and some ground lease revenue on it and then primarily they're going to get put on the map as a sports destination, Oceanside, and they could have access to our fields during the week. We're going to have tournaments for all their youth sports and for free. Do you end up owning it or do you develop it for a fee for the city? How does that- Yeah, good question. So we own it. It was a ground lease. Uh-huh. So we did a long-term ground lease with the city on 100 acres right in the middle of El Corazon. Built a soccer facility and we rent it out to soccer tournaments. Got it. Surf has some of their tournaments with us. Right. We got pretty big Manchester City, big tournaments there. And we do lacrosse and rugby and others, but primarily soccer. Yeah. We do about 22 to 25 tournaments a year. That's great. And it's been great. Been great for the city. Been well-received. Like I said, youth sports for Oceanside get to use five fields every day for free, which there's a big shortage of athletic fields for youth sports up there- Yeah ... like most cities. That's right. Yeah. And so now we worked our second phase, which was 268 units of apartments. We opened them just over a year ago. And a Front Wave arena. We partnered with San Diego Sockers, Phil Salvaggio. He brought the Sockers up, built the arena with us. He's the primary driver of it. Got it. Did a beautiful job. And next thing you know, I'm in the sports arena business, which I never anticipated. It's a fun facility. Yeah. That's really great. It's been a fun one. And we're doing concerts and other types of events. Ice Capades, actually we're hoping to get. Those types of events. Been well received by the community. So at El Corazon, you've got the multifamily, the Front Wave, the fields- Right ... and some retail, and other retail? Or is it- We have some more to go. Our next phase, which will start in 2027, is about 30 acres. This one's been challenging. It's got a lot of bad soil on it. We got to hog a bunch of it out, dispose of another piece of the property at El Corazon. Pretty expensive. Yeah. What we're going to do, about 16 acres of residential and about 10 acres of commercial. Working on five acres of retail, and actually it's got a long ways to go. But there may be some interest from the city of Oceanside to actually put their police headquarters there. Oh, yeah. Which is basically just an upgraded office building. So we're working with them on that now, but it's early. It's fun to do something different. The one that opened, how did it do lease-up wise? Did okay. It opened a little bit of a tough time for apartments. Apartment market in general in San Diego has slowed a bit. It's not terrible. Right. Rents are flat. Absorption's a little slow. A lot of new products come online in the last couple months or two years. Right. Mainly in central San Diego. Kearny Mesa, Mission Valley, Hillcrest, Normal Heights, but also even up in North County. Had a lot of new products. So that's hurt leasing a little bit. Most of them are bedroom? But gosh, we're approaching 90%, so we should be in good shape here in a couple months. What is built new these days? One bedroom, studios? What are you building? Two bed. No, they're all two bedrooms usually. Well, that's another interesting question because we build different unit mixes depending on our territory. So in Mission Valley, for example, we do a lot of one bedrooms, some studios, some two bedrooms. Not a lot of three bedrooms at all. Our market research showed us in this Oceanside site, which is right in the middle of Oceanside, it's not coastal, right in the middle, that we should be building more two and three bedrooms, which we did. Ironically, now the slowest lease-up is in our larger two bedroom and three bedrooms. Really? So we missed the market a little bit. Releasing them, just not at the velocity we thought. Right. So. That's interesting. Yeah. Okay. All right. A bit of a learning experience. Sliding down the coast. What's the next- What's next? Okay. Well, coming down to 15. We've got a project I've been working on for many, many years. A lot of the residents are ready to throw me out of town because it's taken so long, but it's called the Watermark. And- So beautiful. Such a beautiful- Yeah. It's going to be a fun one. But I've been talking about this for a long time, and we put it on hold for a variety of reasons, but we pretty quickly out of the gate, we developed two office buildings for MED Impact, who was a landowner. MED Impact's in one building. They never occupied the second one because coming out of COVID, they didn't have the same demand for it. So they're thinking what they're going to do. They either hold onto it and eventually fill it up or lease it. But we did the two office buildings, and the retail stalled out. We were getting close just before COVID. The project was financed. We had the permits ready, construction contract signed, and we were about two weeks from starting construction when COVID hit and everything shut down. And we had a theater, Harkins Theater, and Harkins Theater said, "Hey, we're not moving forward." Yeah. We get it. No one's moving forward. Let's put everything on ice for a bit. Fast forward what, 18 months later, COVID's getting behind us. Go to Harkins and say, "All right, here we go." Say, "Nah, things are a little different in our business." Which it is. Right. And so we had to completely redesign the project without a theater. We removed some office because we have plenty, some more office there, which there's not as much of a demand for in San Diego now either. So-Complete redesign, and here we are getting ready to start, hopefully by October 1. Got it. Yeah. It'll be at Jimbo's as well, like in Mission Valley. Got it. Some higher-end restaurants and shops and a hotel, Element Hotel, 120 rooms. Yeah. Nice, Jim. Great- I notice you're doing some hospitality as well. Yeah. So- We're not necessarily in the hospitality business. We had a site in Imperial Beach that we did a small shopping center on. Right. And we had a couple extra acres that we didn't really have... We didn't think the market was deep enough for more retail, and we didn't want to just sell it, and so we partnered with a group called Thorson out of Nevada. Actually, South Dakota, but their main office is in Nevada now. And we did a Hampton Inn. So they were the main driver. We contributed the land and a little bit of money, and we built it together, and we still own it in partnership. And we're trying to do a second one right next to it that's now fully entitled. But the hotel market slipped quite a bit in 2025, so we're sort of wait and see. Yeah. I'm hoping to get it going this year, but as things are improving. But then also as you mentioned in Watermark, we got the Element. Right. And we are doing that with a group called Intermountain. Right. So, we got good sites, and we don't want to just sell it off. We want to be able to participate in the vertical development. But we're not in the hotel business every day like Federal Center or Intermountain is, so we feel like bringing in the experts was appropriate. Right. So it's part of your master plan, is hospitality in there, because I know you have one in Savita as well. Correct. So, you know. Which is the perfect lead into going on to down in Mission Valley. There you go. Yeah. Tell us about that project. That one's been for a while. Yeah. We have. So that's the 235-acre site that we got entitled for about 5,000 units. Close to a million feet of total commercial between office and retail, which we plan on- This is going back like 15 years, right? When you first started. That's correct. Right? Yeah. Exactly. So we've been developing it out from west to east, and our first project was with Shea Homes. We sold off 20 acres to Shea, used those funds to put in some of the infrastructure to keep our cash investment down, and that's what kicked it off, got the first phase going. We built 305 units, Circuit 37 apartments. And then, every couple of years, we're starting the next phase. We built a 610-unit West Park Apartments, 435-unit Pearl Apartments. We just finished a 200-unit apartment project called Brin. And along the way, we've sold off some more land to the home builders, the Lennars and the new home companies and Sheas. Right. And in that market, you said it's mostly one bedrooms and studios and some two bedrooms? Yes. One- More so than Oceanside. Just out of curiosity, because I rent in Marina del Rey, what do you get for a one bedroom down there in a new building? Oh, gosh. You're pushing $3,000. Studios would be a little less. Right. But one bedroom for $3,000 more. Pools, amenities, dog. Yeah. Because of the trade area, we have looked at some other apartment sites where we didn't go quite as heavy on the amenities- Right ... based on the trade. But here in Mission Valley, we're doing luxury apartments. We've got- Yeah ... all the pools and the movie theater rooms and very large, elaborate gyms. In fact, at Mission Valley, because of the projects right next to each other, and Savita, we've designed different amenities for every project. So one project might have more of a resort-style pool, another part might have more of a kind of a tranquil pool or a party pool. Depending on the demographics, right? Yeah. And then we let the residents of every apartment project have a fob, and they can use the amenities at any of them. Wow, great. So they can have different experiences. That's worked out really well, been very well-received. Yeah. Do you have retail done it? We do. So we did a little bit. Our last project, second to last, was The Pearl. That was the 435 units with about 50,000 feet of commercial. We did a large LA Fitness Signature Club, and then we did about 18,000 feet of shops and restaurants. More service- Right ... a little bit of food, not a lot of retail there. This next phase, I'm sure we'll talk about in a minute, will get more heavy into the retail. Yeah. What about office? Do you have office in there, or? We do. So, we don't have a site plan up here- Yeah ... but on the far east part of the property, there's 15 acres. Well, we'll have the picture up while you're talking. You can show it while we're talking. Yeah. We got 15 acres that's currently occupied by a bass plant run by Cemex. So again, this entire site was a mining operation with Vulcan on it. As part of our negotiation to get Vulcan out early, they kept 15 acres for a bass plant. The SUP's finally coming up. So they will be taking that down in the next couple of years, and then we will build that out. The entitlements was for just under 500,000 feet of corporate office, which will probably not happen. And the San Diego, or excuse me, Mission Valley Community Plan has changed since we entitled the property. We do have residential ability there. We'll probably end up doing perhaps another hotel, maybe a little bit of commercial, and then some residential. Okay. That phase will be our last phase. And that's what you were saying just a minute ago, that we get into the future development, the retail also? Yeah. Well, that's kind of our last phase. You asked if we're going to do some office here, and there was a plan to do it- Right ... in a pretty big way. But I don't think with the conditions the way they are that we will. We'll do something different with it. Yeah. Well, that brings me to one of my next questions is office building. Are you- ... doing office or is it just part of a master plan when you do your mixed use, so you're not doing one-off office at all? Well, we did. So I had an office industrial partner named Rich Simons. We developed maybe two million feet together, and we did four class A office buildings, and then the rest was industrial. And we built and sold the office. We usually partnered with groups like Prudential or Morgan Stanley, and there were UBS. They were build and sell type funds. The projects we do on our own, like these apartments and these retail, we try to hold, and we finance them a little differently and bring in the equity a little differently. But a lot of these big class A office buildings we did were build and sell type funds. So we currently don't own any significant office. Okay. We own some boutique office over the retail but nothing substantial. It's part of a bigger plan. Yeah. That makes sense. Right. Yeah. That office market. Yeah. It's sad to see. You've seen a little bit of life here and there in some areas, but it's going to be a long haul, I think. Yeah. You still own the ones you mentioned before up in North County, right? The one- No. We built those with Mid Impact, and Mid Impact ended up moving their corporate headquarters into them, and they didn't really want a partner in their corporate headquarters, so we- Sold them ... were bought out. Yeah. Oh, okay. So we don't own them anymore. Right. Probably glad about that. Yeah. Now you are. Well, they're still in there. They're using it, so it's leased- Yeah. Yeah ... to themselves. But I wish I still owned it, frankly. But they didn't want us in there, and we understood, so- Right ... it wasn't going to be their corporate office where we started. That changed. And did we cover everything on the future projects? On our projects? The plans and everything for your future projects? Was there- No. We got a few more projects we're working on that we haven't talked about. But we have a couple industrial deals. We just finished one and we're trying to lease it up down in Otay Mesa. We've got an industrial project on the west side of Chula Vista that we just started our third phase on. So 100,000 square feet of industrial. We've got one more phase on there that'll start probably end of 2027, another 170,000 square feet. So industrial market's been doing okay for us in most parts of town. So it's been a little slow in Otay Mesa. Hoping for some change this year. We know a lot about that market since Elevation was at our San Diego event. Okay. Ian Murphy was a previous guest, so we've- Yeah. Okay ... covered a lot of that, so. Yeah, did some great stuff down there. It's an interesting market, and I think long-term, it's obviously got its strength. There's the short-term hiccups and everything. 100%. They got maybe a little bit overbuilding, and then you had interest rates going up, then the tariff threat on and off, and the tenants just sort of shut down with the tariffs- But long-term, being in San Diego border ... a year ago. It can't get really better long-term. So all right, good. So I'll move on a little bit. So how do you find new projects? Is it brokers, off-market? Are you tracking cities? Your type of projects, the municipalities probably come to you to some extent. Yeah. But tell us how you look for your new projects and deals. Yeah. It's all of the above. Oceanside El Corazon, that was an RFP. Oh. They put it out there to a bunch of developers like us, and we submitted, and we ended up winning out. We've had brokers bring us-- Most of our projects, I'd say, were brought through brokers that are working on land, have a- I see ... landowner relationship. Interesting. Yeah. Let's get to Eric. Well, you get a reputation. They'll start coming to you. Brokers. Yeah. And then, we know some landowners in town, too. But we just started construction last month on a 140-unit apartment project in Hillcrest. Mm. And that came to us because I did a shopping center in Santee about 12 years ago that went really well, and we're still partners with this landowner. Name's George Salome, and he owned this property in Hillcrest that I didn't even know about. And a couple years ago, he approached us and said, "How do you feel about partnering up on my site in Hillcrest?" We checked it out. I said, "Absolutely." And here we go. So, no. It's all of the above. Yeah. The cities come to us with the RFPs. Brokers, landowners. We've hustled up a few ourselves. So you will look at those one-off individual type properties to buy, as opposed to the multi-phase master plan development opportunities. Correct. No, I love the Sevillas, the El Corazons, and the West Watermarks where you have multiple phases and larger size, but they're not all like that. Well, there aren't many of those around. You can't keep hitting home runs like that. But let me ask you, how do you finance your deals? Is it debt equity? Construction loan and takeout? Yourself? Yes. No. Traditionally, bank loans. Construction bank loans. Okay. Depending on the type of project or size of the project, we use our own equity, or maybe we're partnering with the landowner and we have some land equity in there, and with a little extra cash, we can get it financed. Some of our bigger, more speculative projects, some of the office buildings we talked about, would be built with a UBS or a Morgan Stanley or a Prudential, and they're bringing in large equity. And then we'll have a co-invest, and then we'll do- Okay ... traditional debt. We did an interesting deal with Nationwide not too long ago that just finished up in November. The 200-unit apartments that they financed the whole thing. We've been doing a couple deals with them. They did a little pref equity piece for us, almost like mezzanine financing. Right. And then our last deal, they said, "Hey, why don't we finance the whole stack?" And so we had some equity in it. That's great. But they did a stretch senior, and that worked out really well. So I love those programs. No, you can't deny those. Yeah. So the answer to the question is that we've done it in all different kind of ways. Okay, good. And are you finding a lot of capital out there? Looking to- Yeah. There's plenty of capital out there. I think the deals are pretty tough right now. The construction costs just soared coming out of COVID. They've pulled back a bit, not a lot. You don't have a lot of rent growth right now. We don't really see, at least in our projects, rents coming down. Right. We're not seeing the kind of growth we used to have. So the winds and I are back like it used to be. So these deals are a little thinner, harder to underwrite. Fees are bigger with the city. Some of these areas, the fees are... You can't build. I mean- Got it ... they're too, they fee us to death. Yeah. And with the construction cost, and of course, you got interest rates. So you got a big, large apartment project that might have a couple year absorption, 500 or 600 units, and now you're clicking your interest away at 7% instead of 3.5 or 4. It eats you up. Oh, yeah. No. More markets. So you got to put more equity into it. We don't even have to talk about insurance costs, right? Yeah. Oh, my God. Yeah. We just had a big meeting on insurance this morning. Becoming a whole topic on its own. Yeah, it is. And I was telling the story the other day, when I first got in this business, an insurance cost is almost like a rounding error. You didn't even really spend much time thinking about it. Right. And now it's front and center, and it's a large percentage- And it's dictating everything ... exactly. Not just builder's risk- Yep ... which has gotten outrageous with the fire zones we have in town. That's really a problem. Mm-hmm. I think, the fire marshals are coming out with these maps that are practically the whole county is in a high fire zone. Oh, yeah. And that has real impacts on insurance, insurance costs, or the type of construction. And I think there's going to be something that's going to have to get looked at again if they're going to continue to have housing growth. Right. But- Common sense into it ... yeah. But our insurance costs and premiums have gone up year after year. Finally, this last year, we've seen a little bit of a pullback- Mm ... for the first time in, gosh, five, six years or more. All right. Well, that's good to hear. Yeah. I love this next question. So I was- Well, you wrote it, so of course you'd love it. When I was out of school, I was an analyst for developers. It was my first gig before becoming a broker for big developers out in New York City. And so it's always interesting to me to get into the mind. Your name's on the door, you sign the checks Right ... you sign those deals. So when you're about to green line a deal, you're about to put your name on that, is it IRR, return on equity? Is it a gut feel? How many different scenarios do you have to run, I can't even imagine, for some of your more- Yeah. ... complex projects, to come up with a yes or no decision. Yeah. So what goes into the processing? Is it at the end of the day cash flow or how do you- Well, we aren't merchant builders. We do like to build and hold, so we try to find projects that we can create enough value where we can put a permanent loan on the end of the day to pay off the construction loan, get at least some of our cash equity back out so not all trapped in it, and then hold it for the long term and have cash flow. Those are harder and harder to come by for the reasons we just discussed. The deal's a little thinner right now. So we're being more selective in what we're working on. Where we really make our value is buying land or tying up land early, or maybe it's got some entitlement issues or these soils issues we discussed so we can get in the land at a pretty low basis and then create value through entitlements, through fixing the environmental issues, what have you. And then now we got land equity, so when we go get financing, we can get better financing. And then get a better return and then hopefully hold onto it for a cash flow. Right. And we've done small deals and big deals. It just depends on the risk/reward. If I can have a little side of a few drugstore deals over the years, or a little couple acre or an acre, but I can get a lease signed before I have to close on the land and close on the loan and so it's pretty safe. Small, but it's safe. We've done a few of those. But it's got to make economic sense for you to do it. Yeah. Make economic sense. Yeah, exactly. Okay. Now, you talked about partnerships with a number of your projects and everything, but where does your equity come from? How do you structure your deals? When you go into partnership with a strategic partner, is it a corporation, an LLC? Each deal different or does it go under one-- No. All of our deals are standalone. Generally LLCs. We do have some partnerships, but generally LLCs. Every partner comes up with a pro rata share of the cash needed. Like I had mentioned, some deals, it's a small co-invest, sometimes it's a much larger investment. And so it's something we all talk about before we form the LLC is what are our partner's capacity, where are you at, what can you afford right now based on the other projects you have going on. And so every deal is done independent, and we have those conversations with on every deal. Now, can Steve invest with you if he wanted to? Because everyone's asking that question. That's what Jack keeps asking me. Can I sell you some money right now? I'll take whatever money you want to give me. There you go. Go, Steve. But an interesting side question is, is it almost like a part of your job to fundraise for the equity piece, or is that built in with your partners and everything already, and it's on a roll? I know some firms exhaust a lot of time raising those funds. I've got people that hit me up all the time to refer them to people that they could raise funds for. Right. And I've personally put some money into other people's funds like that. Right. We have not done that. Not to say we won't in the future. But what we've done historically is just that all of our deals are standalone. We look at what the financing or equity needs are for that deal, and then we either raise it with our partners or we go bring in an institutional company and do a co-invest if it's too big for us.But we haven't actually done a fund where we've raised millions of dollars from friends and families or syndicated deals. And, yeah, with the relationships you have, I'm probably sure a lot of those investors have been with you for a while. Right. Yep. So. Each one's his own. Yeah. Go ahead. Yeah. You got the next question, Steve. Well, exiting deals. Do you ever sell? What's the reason, and how do you go about it? Yeah. We have sold. We try to hold, as I mentioned, but some projects, like the larger office buildings that we did with these institutional investors, they were in their build-and-sell fund. Right. So we've definitely sold. We've had a few properties that weren't really core for us, like a few of these smaller drugstore deals that I mentioned, were the kind of one-off deals where we would build them and sell them. We get a pretty good value for them. Right. And so we could generate a little bit of cash for other projects. But our core development, these apartment projects, these town center developments, we try very hard to hold on to them. Okay. And not exit. Right. Well, tell me about what sector trends you see right now in the retail, multifamily, office, industrial, and even hotel. Although, you're really not into hotels as much, but- Right ... do you see... You mentioned you saw that trend going down. Yes. Do you see it coming back or- Yes ... is that something... Okay, good. Yeah. So we'll take hotels. So again, we're in the limited service space. Right. We saw EBITDA come down in 2025 for the first time in many years. We don't have a large portfolio to gauge, but for us personally, saw it come down. We looked like we hit bottom and bounced back a little bit. A few of my hotel developer friends that are in limited service, I can't speak for full service or high-end or five-star hotels, but they're seeing a bounce as well. Things are coming back a bit. I couldn't tell you exactly why it's changing these last few months, but it has been. Mm-hmm. Industrial trends are, in San Diego, and this is more micro, not macro, but in San Diego, it's fairly healthy still, except for some traded pockets. Like Otay Mesa is a little difficult to discuss. But the balance of the stuff we're looking at and have done is the trends are positive. Apartments, if you can get something on the coast, up or down the 5, do it all day long. Central San Diego's a little tough, where see the trend is flat rents, a little more concessions. We're still leased pretty well. We're not 98, 99 like we had been forever, but still pretty well leased, but with some concessions. Retail's been the most interesting one for me. It's changed so much in my career. Right. Yeah. It's a- Yeah. For a variety of reasons. I think, one, you saw the overbuilding of big box centers. Forget Amazon for a second. You had three tenants in every category, office supply, electronics, bookstores, you name it. So there was three big box centers built for every one that should've been built, right? Especially in trade areas where you had a lot of land, like a Phoenix or the deserts and stuff. And so you got way overbuilt in that category. And then you had the advent of Amazon come on, and those guys were very susceptible to the Amazon, and it just became if you had a secondary or tertiary site, you're in trouble. The A locations absolutely gotten better. Right now our retail portfolio is 99% leased, and it has been for years. Very little turnover. Sales are as strong as ever from the tenants. Our rent growth's been great. Oh yeah, I got to ask you a question on that. So, your highest rent, where is that these days in San Diego County? Well, the highest rents you're going to get are probably UTC and Fashion Valley Mall. Those are fortress malls. Right. They're just- What are they- ... big numbers ... quoting? Oh, gosh. It depends so much on the size of the tenant- Yeah ... the type of tenant, where in the mall, center core, end zone. So it's all over the map, but a good location in the middle of the mall is, gosh, I wouldn't be surprised if they're a couple hundred dollars gross. I mean, it's- Wow ... I mean, they're big numbers. Yeah. Right. Nice. I cut you off, but you were continuing on the vacancy. Yeah. Oh. But we are definitely seeing when we do a new project, we're doing a lot more service, F&amp;B, a lot of grocery still, but there's not a lot of straight retail being done- Right ... in our type of centers, in our daily need center and our power centers. It's F&amp;B, food, and service. Okay. And we haven't seen the core grocers, the Ralphs, the Albertsons, the Safeways, the Krogers, what have you. Haven't seen them have a lot of growth. But we are seeing growth in the natural and gourmet markets. The Whole Foods and the Jimbo's of the world. Nice. Well, I think you covered a lot of the leasing challenges- Thanks ... that we've laid out here. I want to shift gears a little bit. How involved do you get with elements like architecture and construction? It seems like architecture's pretty important to the company. Are you- Sure ... thinking through those elements? Oh, yeah. So, as build-and-hold owners, long-term owners, we take a lot of pride in our projects. Right. And we want to make sure they're best in class, and so we spend a lot of time and money to build them to a little higher quality, better landscaping. I believe we maintain our properties as well as anybody in town. We put a lot of attention to it. We don't use property management as a big profit center for us. We-We have a lot of managers for property just to make sure they're managed well. Right. And I think it shows. And I think that's why over the years, a lot of these master plan community owners, like I mentioned, Bill Ostrom at Eastlake Company, they like to do business with guys like us because we do take a lot of pride in what we build and we're very particular with the architecture- They're all beautiful ... and the management. Yeah. Thank you. Yeah. Watermark. I love the mix. All right. What about prop tech? Use of AI and tech tools. So, the real estate industry in general is always a little slow to new technology, I think, and we're no different. We are trying to automate a lot. We have a consultant we're working with that's helping us find some different tasks within the organization, whether it's in management or accounting or even development, where maybe we can automate a little better, use AI to our advantage. But I'd say we're still scratching the surface of it, but we have been doing it with success, and I think it's going to continue, and we're spending a lot of time thinking about it. Okay. But I wouldn't say for us, it's been a game changer yet, but I think it's coming. So it's a little new right now. People are warming up to it, I think. Yep. Yeah. Yeah. How about hiring initiatives? People watching the show may be thinking about changes or some new- Oh, hiring initiatives? Hiring initiatives. Yeah. What kind of needs do you have these days? Are you looking to hire new people? Well, so we're fortunate in that our corporate office has been very stable. We had a lot of people with us for 15, 20, 30, I think we have one even over 40 years now. So we're fairly well-staffed at the corporate office. Where we are growing and we're always in need of as good help and talent is at the property level, the apartment level, the building engineers, the leasing managers, general managers. So we're all growing. Every time we add a new project, we add five, six, seven, eight new hires for those properties. So we are in the market of hiring quite a bit at the apartments. At the corporate office, we're pretty- It's interesting. We hear that a lot. Yeah. That people are hiring at that- Right ... those levels. It'd be a great opportunities for people to get in there. It seems like there's a bit of a shortage for a quality- That's right. Absolutely there is. Yeah. So if you were just starting out today, what kind of advice would you give to somebody that's new in the industry and hearing from somebody that's been successful at it, what kind of advice would you give them if they were to start today? Well, good question. I've got kids starting to come out of college and thinking about what they're going to do, and some have interest in real estate, some don't. But I think that San Diego development's going to be a lot different for the next generation, the kids' generation versus mine. I think harder, frankly. Looking at San Diego County, and again, I can only really speak for my backyard and not other states. The amount of developable land is a lot less now than it was 25 years ago when I got started. I had a list of 50 potential shopping center sites on my spreadsheet when I got in the business that I was tracking and following in terms of making sure I always get my hat in the ring if there's a deal to be done there. That list is down to about five. There's just not that much land left where you're going to go build a 20, 30, 40 acre project. We even have some as big as 60, 70 acres. That's just not happening. So you're looking at more infill, you're looking at more capital-intensive projects, more higher density. So structuring yourself in a way to take advantage of that opportunity versus what I was doing in my career is very important. Right. I think it's going to be more capital-intensive- Yeah ... for most people. It's going to be harder for young men and women to get started in the business without, I believe, partnering up or working with a larger firm that's more established and has more of the financial resources. Right. And a lot of the gateways to the business, like me, I came in through brokerage, there's issues in the brokerage industry right now with technology. So I think the people are going to have to get more creative in how they get into the business, and certainly with properties too. Yeah. The use of technology and- Same thing in lending industry as well. That industry has completely changed. Sure. All right. So a great thing we like to hear about and give time to our guests is a couple charities that either you personally or your company's been involved in that is important to you that maybe some people listening could get interested in as well, cut you a checks, devote some time to. But tell us a couple of things that your company or you personally are involved in that we should know about. Yeah, happy to. So, we do a variety of different charities. I would say as a family and as a company, we've been primarily focused on Christian education and helping support some schools, local schools, Christian schools. And most of companies like ours, you see them associated with residential developers are more focused on their charitable work or their funds with the homeless, which we have done as well. But I'd say by and large what's been tugging at our family's heart and our company's heart is some of these Christian education- Mm-hmm ... schools, churches. Very good. Excellent. Now let's get into your hobbies, the teams you root for. Yeah. What do you like to do on your free time? Well, I still root for the Chargers even though they left. I got to have a football team. They're still the San Diego Chargers to me. Yeah. I love that organization and have been a big fan of theirs for a long time. I can't just stop- Right ... of cheering for them if they move to LA, although a lot of people have. Hey, my team's 3,000 miles away, and I still root for them. Yeah. Right. Of course, the Padres. Padres. A handful of games a year. Yeah. Interested to see who ends up buying them here soon, it looks like. My hobbies, pickleball, which I'm terrible at. And then golf. And golf. Okay, good. I'm not terrible, I'm not great, but I do love it, and I spend most of my free time playing both those, golf and pickleball. Very good. And it helps with industry. So many industry events on the golf course. Yeah. So certainly. Yeah. Excellent. Well, how about goals for the future? Any things that you're saying, "All right, I've had this great career, I've done all this. Now I'd like to stretch for something higher." Is there any future things that you're looking at possibly doing that you could break news with us here? Well. Tell me again. I haven't quite gotten there yet, what's in the next chapter of my life. I'm still focused on this one. I'd like to shoot a round of scratch golf someday in my life, so maybe that's something to look forward to after retirement. But- No, right now, I'm just focused on the business, focused on my kids and my family. Nice. And I've got one left in high school, and not knowing where they're going to be in five, six years, if some are going to be in the industry or not. I would love to have a company that I could work with my kids on, if they so choose. If not, it might convince me to retire a little sooner. Right. Well, you know what? Well, having kids go through college is a fun period of time. It is fun, yeah. And the next phase is grandkids. And believe me, I got four of them. You did. Yeah. It's fun. You get to do things with your grandkids that you could never do as the dad. Very much looking forward to that. Yep. That is fun. I think I'm a few years away still, I hope, but- Yeah, well... But soon. Well, Colton, this has been great. We've exhausted the questions that we had. I don't know if there's anything you want to share as a closing comment, but we really appreciate the time. Yeah. I know our audience is going to appreciate the information you shared. So, we'll have to have you again in a year or so to catch up on- I would welcome that. Yeah, and I appreciate you taking the time and having me on. I was looking forward to this, and it was a lot of fun, and anytime. I'm all for that. Well, we love doing this. We get to meet a lot of new people and find out a little bit more about what's going on in the world, or at least the commercial real estate world. So, thank you. No, and also show a bit more of a personal side to some people who, it could be lonely having your name on the door, being a founder. Yeah. So it's good to see the personal side, what makes you tick. So we really appreciate that. Yeah. All right. Thank you. Thank you. Take care. Talk soon. Take care. You've been watching "Commercial Real Estate Talk" with Steve and Arnie, sponsored by Rockefeller Group, Providence Savings Bank, Fidelity Mortgage Lenders, and Chase Partners. Start to ignite