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Right, welcome to the next episode of commercial real estate talk with Steven Arnie hosted by Steve Bloom and Arnie garfinkle. I'm Steve Bloom founder and president of rent tv.com our 24 year old news and media company for the commercial real estate industry with our news website rent tv.com our email blast the website sublease.com our conferences and this website the review where you're watching this video. Let me bring in our co-host Arnie Garfield with the All-Star group. Hey, honey, how you doing today? Hey Steve. How you doing? Arnie Garfunkel with the All-Star group. We do commercial real estate lending. We also produce a number of conferences including helping out with the rent TV conferences as well the commercial real estate lending conferences and many many more but enough of us. Let's talk about our show today. Yeah, aren't you and we've got a great show and you know with all the craziness going on in the world today thanking crisis, you know interest rates. It's fascinating to bring in Michael Van Every the president and managing partner of Republic Urban properties with a billion and a half of development projects in the pipeline here in California, but we bring him in. Let's give a shout out to the sponsors who make this show possible starting with Paramount Property Tax appeal with inflation causing cap rates to increase and profit margins to decrease one way you can fight back is by appealing the property taxes. Even if you have great income you can still qualify to have your property taxes lower call. 858-225 1200. Ask for West Nichols with Paramount Property Tax appeal. The information is on the screen here eight five eight two two five 1200 West nickels with property tax appeal get your property taxes lowered. Hey, our next sponsor is commercial real estate inspectors in Southern California. They're skilled inspectors provide critically needed inspection information and easily understood terms as well as inexpensive Simple Solutions, whenever possible. Let commercial real estate inspectors help you protect your deal Paul Tiffany simmington and book your next inspection today at area code 818 957-4654. Again call Tiffany at 818-9574654. Excellent. And the last sponsor of the show is Redwood mortgage Redwood mortgage is the direct private money lender with over 44 years of experience lending on commercial mixed-use multifamily and residential investment properties loans range from 200,000 to 10 million dollars and lending in the major Metro areas of California and Arizona Redwood has a long-held expertise in commercial loan transactions contact Redwood at 1-800-6596593 www.redwoodmortgage.com for more info. And as you know, Arnie Redwood mortgage is a good place to go when the banks say no. Okay, Stephen now tell us about our guests. Yeah with that said, let's bring in Michael Van Every with Republic Urban properties. Michael great to welcome you this morning. Thank you so much for joining us today. Thank you. It's it's actually fun to be on the other end of a podcast. It's exciting. Yeah, right conversation you're of that van podcast. So it's great to have another host on board here special in this tumultuous times that we're in so it'll be great to get your take on a lot of what's happening and right. Oh, yeah without a doubt. I mean there's there's a lot of stuff going on with banks. And I mean, you're right in the heart of it down there and Silicon Valley and of course the whole office issues that are going on and we'll talk about that as we get a little deeper into it. But before we get it into those deeper matters Michael wanted to tell us a little bit give us a little overview of Republic Urban and any other businesses that that your group may be involved in. Thanks. So Republican properties is based here in San Jose, California one portion of the Republic family, which is a my whole operation. We also headquarters in Washington. Team, and we're own and operated by our chairman Richard L Cramer. We've been in business here on the West Coast since 2006 and we primarily focus on you know, Transit orientated development Apartments primarily market rate Apartments, but we also dabble in hotel retail and office as my partner Mr. Kramer has a long distinguished career in commercial real estate. And so it's it's a big organization owned by the Supreme. Okay, Michael. Let me ask you tell us what got you involved in real estate What attracted you to the real estate business? Well, I'm a fourth generation San Jose and my family was rooted in the grocery business down grocery stores here in San Jose, California about seven of them private. And so there was a lot of overlap with you know property owners who are customers of the grocery store. My relatives were foundation of the Italian American Community here. I'm telling my mom's side and it just so happened that there's you know land use And local politics obviously go hand in hand. I was fortunate to get an internship when I was a undergraduate at the University of Fresno State Cal State Fresno Bulldogs, and I had an internship with a council member who's also the vice mayor a woman within the Patricia Salcedo in about 1989. And that was really the kind of the end of the subdivision era in San Jose with the great home builders. The Shea Homes Chappelle Industries General William Lyon. I got a chance to meet a lot of those old Builders who left a real big impression upon me. So working in the council office. I was working in an area of San Jose called Evergreen which had two large master plan communities adopted between like 1988 and 1990 the Silver Creek plan residential community and the Evergreen specific plan. So as an intern those two plans really shaped my you know career Out and led me down the road of working for Home Builders first and then later in the commercial real estate industry. Excellent interesting, you know similar to me. I I got my starting college right in commercial real estate and was you know, never looked back said been a great industry. Well, what was the what was the defining deal that you would say to, you know catapulted your career to the next level when you look back? What's that big defining deal that you point to that? Yeah, it happened here with the Republic Urban properties and I started in 2006. So imagine the Great Recession hit in 2008. However, I was fortunate up to work with some very patient property owners here in San Jose. And so we essentially kind of kept this project going from about 2008 until about 2010 and then we developed 218 apartments and 15,000 square feet of mixed use called we're reading that Midtown. It's in located in Midtown San Jose, but it was really kind of the beginning. We were lucky that we had an entitlements ready to roll and it was shovel ready, which I think is defined my career that you know, we just like we are in today you still have to be entitlements. You know, you still have those ready to go. And in order to take risk out of any deal. You got to know what your costs are. And so we were we had the foresight to keep going during the Great Recession, but this project called Meridian. Down located at Meridian in West San Carlos here in San Jose. I think has been a landmark project. What was that completed that was completed in about 2013 and and then we owned and operated until about 2015 and then we sold it and it's actually still on today by Essex real estate property trusts a long term partner Republic Urban properties. Well, obviously the transition of Republic Urban was big. How did you how did you end up meeting Mr. Kramer? You know I get asked this a lot and through actually the Building Trades Council. So the reunions here in Santa Clara County. We had Mr. Kramer and an associate with Barry Swenson Builder had one project through the valley Transportation Authority of VTA, and the unions were very concerned. It was a union requirement for labor on the project project that we still on. Call me alone located at Sunol and West San Carlos, so Very short that you need labor leaders will concern that. With Swenson, you know all through with with its labor requirements which by the way he did and they hired me on as the Republic because of course Republic at the time only had operations in Washington DC. So that's that's how I came to go Mr. Kramer and how I started here at Republic River properties. That's great. Now, let me ask you Michael what other than the when you just talked about that might have been the one but what major standout projects accomplished did you accomplishing your career? And which one really stands out overall is like one of your brown jewels? Well, that would probably be today known as the Gateway at Millbrae Station and that's another public-private partnership that we're a part of with Baria Rapid Transit Bart along with the city of Millbrae. And that's 320 market rate Apartments 80 veterans affordable housing apartments on 157,000 feet of office along with 44,000 square feet of mixed use retail in the residential and in the office and in a hundred and sixty three key Marriott Residence Inn, so as we sit here today just opened. We're in Lisa stage for everything and the hotel is actually 70% occupied already, but that right now having my crowning achievement only because it's expand, you know over about 13 years and that's how long it actually took to this day. Let me delve in a little bit on this a little bit. How did you? Find out about the product. How did you get involved in that project initially sure a great question. So again around 2010 when the world was still not very good from the Great Recession as you guys know, we decided this would be a perfect opportunity to go after a public private partnership, Mr. Kramer might chairman Richard Kramer has a long distinguished history on working with government organizations in the East whether it's the Congressional land use committee see or to you know places in Florida. And in other parts of New York, he's had a distinguished where working with public private Partnerships. He's been a mentor of mine and so it was under his kind of vision that you know, we should make a serious run for this problem for this project. And as fate would have it we did and we won the award in 2013. Yeah, now let me ask you a follow-up question here as well. You're very involved in transit Orient development. And that's exactly what the Millbrae I mean that's basically has a little of everything. Yeah. Tell everybody about why the why that attracts you what is so great about tods. Well, I mean the fundamentals are usually the location are very good. Right? So take it back to all of our fundamentals location probably pops up is number one. And so most Transit stations are an excellent areas, right and not just served by the rail line. They're served by local network roads and arterials freeways. They're always going to be somewhere where you can get to point A to point B real fast. So the location part of it really I think is just a fundamental for me that Always Rings true. And then I think the second part of it is, you know, what is the marketing area, you know, what are the existing Rants and then you know, whether it's office retail residential hotel and that would be the second fundamental so location and then market area or how I kind of sort and go through through things. I don't think it's rocket science. I think that those are the fundamentals that special today that you're going to be aware of Yeah, I mean you you know, I I mean, we do conferences, you know both Steve and I and one of the things that's important is being close to let's say in the Bay Area a BART station, you know, we're looking at different properties to do this. One of the ones we want to settling on was at the high Regency Embarcadero because it's literally right at a BART station versus going to top of the Mark or something a little off the beaten path. So yeah, I mean I could definitely see that and then you really blew it up with that the millbray station because you got everything you got office retail Hotel, you know, pretty much almost everything right in that one project, which I still want to touch on a little bit more but on mailbright because you know, I have that development background and how what What's the total all in now now that you can kind of figure it out in terms of the total cost of that project. Yeah. It's all about 25 million dollars and it's all said and how it's a public-private partnership. How is that mainly financed? Well, we have some great Bank Partners along with event a couple fantastic Equity Partners. So principal group out of Des Moines, Iowa is our is the large Equity partner in the office mixed use and in the residential market rate mixed use and then we have a fabulous Hotel partner called Huntington Hospitality out of Dallas, Texas for who's our partner on the hotel along with EB 5 financing believe it or not on the hotel. We maximize that and that hotel investment the premier and then US Bank Western Alliance banks are the construction lenders and then we have a City National on the affordable side. So some fantastic partners that put a lot of money into this team. We're excited for that and hopefully to get their money back here soon. And also, yeah, go ahead honey. Oh, I was gonna say all solid financial institutions as of now, you know. Right and keeping the cross down. I know because we have a video a couple of your videos on our video platform the review and one that's fascinating is the construction methodology. Yeah that you employed there. Tell us a little bit about that. Sure, so, you know Rising construction costs are not exactly the secret and they weren't a secret back in 2019. And you know, we have a union labor component there. I think that's the most important kind of it, you know variable which means you know, everything's constructed through through a union subcontractor and you know, then there's also the issue so we looked at a metal framing technology called prescient. We did a primarily for two reasons a we wanted to increase timeline and efficiencies and so metal framing really allows for you know less oils and it's a lot cleaner. It's a situation where you're you know connecting in, you know versus you've got a great background in construction. I mean from all your different projects, you've got rap and Podium and wood, right? So you've done a lot so you can really add your expertise to this. Yeah. It was really my partner. We have one and block. question that Jesus that the metal technology would be best. There's also the insurance the long term osip insurance in you know, Builders Risk insurance is a lot less expensive due to the back. It's not flammable and that mold in those items are far less to happen long term. So it was a great technology for that time, you know, there's a lot of trial and error during the during the pandemic that we had to overcome water lease and things of that nature, but I'm proud of it it was you know oftentimes in our industry and I haven't critical of sometimes of trying I don't want people to be too Innovative because One of the things fail sometimes when you're too Innovative and I think affordable is very Innovative. It's hard for market rate developers to be Innovative. But in this particular project and at that time, I think we're as Innovative as anybody in the nation. Yeah, you know, let's go back to the finance part when you get a transaction and you got some great financial partners. Do you do do Finance them with debt Equity combined? I mean, how what is your Best way to get a project going. I mean, what is your you know, you know since we're Republicans kind of We are a family shop at the end of the day with Mr. Kramer depending on the deal size. So, you know a deal size like half billion dollars is a pretty big having left. So we typically will finance privately with Mr. Kramer anywhere from you know, 10 to 20% of a project that size right and then we'll look for a large Institutional Investor like principal group to fill the rest of that Equity stack and you know, look you guys know I mean If you can get 55 50 55% of that which is pretty much the case of what we had in this project and then the rest was was funded by equity. And we also like these preferred equity on smaller projects with with people like Essex real estate property trust. They're also in our our JV investors as well. But in those particular cases if it's a smaller say under 100 million dollars deals, we'll use per day Equity that allows 100% ownership and at times can work and if you hit the market right now, you're finding interest rates holding you back right now or is that not a factor? But yeah, it's it's been a factor as you all know, and it's unfortunate but there's a lot of money. It's just sitting on the side line related to equity. The debt side is is you know is really frustrating to be honestly. It's been very frustrating watching things unfold and you know, the banks are are very very much. Are not about like, you know kind of Silicon Valley Bank situation. I think they're worried about that. I think they're more concerned about, you know commercial office and you know holding those whether it's permanent loans or construction loans there. There will be a lot of workouts over the next 12 to 24 months on that commercial, you know kind of asset. You know on the office stuff. Sorry. I just want to you know, I was gonna focus on that tourney. Go ahead, please. Yeah the office stuff now you got 157,000 square feet of office coming up. That's kind of scare the heck any right now and how much other office do you currently run right now that you're running into a problem? We have office in the East luckily. Most of it's stabilized and it has been for years here in on the west coast. We the only I'm not really a commercial office guy never have been this was this is my only office project here in my career that I did ground up. And yeah, it's been a struggle. There's no question. Right now don't have a commercial office tenant. We are actually trending door towards more life science users. We do have a research and development ability in our project that allows To a class to life science, which is happening next door to us with Longfellow and Alexandria there in the city of Millbrae and let us not forget. I think it's the 13 million square feet or so in South City that continuing to move forward. So look I think in real estate you're you know, sometimes your friend and your enemy is time. And in this particular case or commercial office either either we're gonna have friends in the banking industry that's gonna give us time what we're gonna have enemies with the regulators and and the banks trying to have loans repay that may not be able to be repaid while right away but clearly office is is a massive struggling and we have struggled in overlay to get that but I also want to point out the uncertainty of the pandemic, you know, obviously contribute to all of this and it's now I like to use the effect, you know, we're just gonna hang over that right now in the commercial office because now doubling down with layoffs and there's a you know, the bed is deliberately trying to slow the economy down which is doing a good job and still looking Valley. So when you have that plus work from home, you know, how does the facilities manager of a high tech company your life saying say Hey, you know I can You know five ten years down the road. It's just there's a lot to be sorted out here in 2023. And again, I think time is your is your friend and your enemies commercial office? And there's also adaptive reuse you can always I mean you can always make it into something else. You know, I mean a life science perhaps. Yeah. No, but yeah turn a brand new office building. Is there activity in the lifetime? I mean are their tours who who the Brokers handling that space for you? Give them a little Club shark a great question. So we're working under the god of the leadership of Mike Moran and his team there and the peninsula under CBRE fantastic job. I can't and more before then. We switch Brokers this past year. I'd say all of our brokerage Community is working on high for overdrive to make deals. But you know, it's like until the sweet Executives intact or in life science and I think in my science, there's a there's a path because In the peninsula and specifically normal San Mateo County to find as you know, as part of the state's Daily City to as far south as say, you know Burlingame and of course your your massive the world's largest life science biotech operations in South San Francisco to get the world's largest. There's nothing that comes close to South San Francisco in terms of life science days. There still is about a million and a half square feet a year demand even today for that kind of product. So there's a lot of conversions happening in all throughout the Bay Area. They got to go into the office those people. Yeah. Well, that's true. Yeah, they don't have a lab at home. What some what are the asking what's asking rates for new product in in that market? You know asking rates of or commercial office is still stay quite High anywhere from the high fives for you know, an older product to all the way up to seven bucks to put up your Redwood City and that's a full service. No, that's that's triple not triple that yeah, that's triple that whereas my science is probably in that high five sixes again triple net. So we haven't seen as asking rents inevitably are coming down. For example, if somebody comes to me and said, hey look Michael, I'll take all 157,000 fees for six bucks a foot. Done you work depending on the TI's right because then now TI is become a big issue, you know with all the you know, all the panels. I'm doing in the office world. You know, that's really a big stumbling Point too Steve. You're 100% right, you know. TI's was just speaking about Office right? There were 125 bucks a foot in 2019. Now, it's TurnKey now to make ready space and you can be spending 250 350 a foot depending on you know what that use is so it's life science. It's probably more like 350 to 4 a life science. There used to come in more out of pocket to build their own space a bit aren't they? They will but what we're seeing now with the you know with a there's a lot there's still JV funding for that. There's a lot of noise about where's joint venture investment. Well, guess what? It's it's in a lot of life science products like like, you know AI like Robotics and so some of them will take you know, $25,000 feet. So there's some that will take less than 10. It's just it's all over the place in that particular space, but it's still a space that people are releasing. Wow, it's tough times ahead. Sorry. Yeah, there's an analogy that former County Supervisor told me during the pandemic. His name is the state senator now Dave Cortez. He said Mike love you ever seen the movie Bellman Louise. And so some of your listeners that are millennials won't understand this but you know that Bella Louise at the end of the movie drove all clear, right? That was the pandemic driving off the cliff and now that car wreck is hitting the bottom and it's spreading out. We don't know how far the wreckage is gonna be. But it I think it's hit the ground and now we're starting to look at the wreck. It's just it's not good. I I told County Supervisors back and may have 2020 that was a huge mistake to toe remote work is the Panacea or the world and remote anything for that matter and I'm on record is saying that that was a bad decision back then for commercial for commercial real estate, and I think it's a bad decision today. Um right now you're you're engulfed in in Millbrae, but where are you looking for your next project? Where's a good area that that you think would be a great location or what? Where's your next big thing? Sure, that's good question only and I think that the biggest issue you have to look at is in the core Market San Francisco Oakland San Jose conquer Walnut Creek. All those core markets are still quite compromised by costs since the pandemic. It's well reported. We've seen from 2019 to today. It's about a 30% increasing construction costs. And so it's difficult to make, you know, core projects PUD locations make them pencil because rent, you know, really really want down seven eight percent across the board in these same markets and and then there's the issue of where people are living and working now, so all of those factors have a really kind of clouded and made great. You know Tod locations in San Jose, which I still have two great locations one at the canyon station at VTA and one at the Blossom Hill location with BTA, but I can't make those project pencil right now. So we kind of did a shift in 20 late 2020 towards what I would call build or rent and it's a lower density, you know in the in the Midwest and other areas single family rentals the California version for me is five minute townhomes. And so we're looking in markets like tertiary Market secondary markets in the Bay area that are still no big employment areas and that are maybe traditionally like Fairfield California. We have a project we're you know, there's a lot of single family home builders that local a lot of product in those locations that have now stopped because of interest rates Hollister, California, Lincoln, California. So we're we're looking to provide a five-minute town home that can be rented. So again, imagine I'm a young family. I've lived in a flat I've got I've got a young daughter now, I need more space and I'm not that in you know, most of our core Apartments do not have you know, a lot of amenities for children with you for dogs, but we don't have for children. So it looking for these kinds of spaces and places like Fairfield and Hollister. Okay, what's the smallest number of units you'll consider for a new project? I think yeah, I think. We're from like 50. I've lost project we've done a 83 unit project in the city of Morgan Hill called Sunscreen Apartments. It's been an absolute smash home run. So I think sometimes smaller can be better in this market. Is it always ground up that you're looking for basically? You know, I I love the finding if you've got a value out of apartment. I can really rip and Roar into I'd love to but I always find myself scraping and rebuilding from ground up. It's fun. You can kind of create what you want to create and you created with it, but we'll look at everything. But yeah primarily we've been a ground up developer. Yeah, it's easy on the architecture and construction when you're doing it from ground up rather than redo what's already there? You know, I want to ask you, you know, your your hotels the hospitality stuff that you're doing you're doing select Services appears with the Residence Inn, and they and the Homewood Suites. So, you know the Hilton ends, excuse me. Have you ever done a full service hotel or do you have any intention of doing those? Man, I'd love to do one of those that's romantic. And I I would love to do one of those they're so very difficult as you guys know, it's kind of sad. I don't right now. I don't know. I think the last Full Service Hotel was built up by the San Francisco Airport and that was completed. I think in 2021. I don't see the demand for full service right now. But yes, I'd love to but what the select Services super fun too. And yeah, no, they're really yeah, and and right for what you do like with your projects those fit in perfectly they really do and like I have a dream here in Willow Glen San Jose which which were filming this at my office here. There's a couple we really need some about hotels and we'll have one we need some book Eco sales and Campbell too. I mean, so I think those would be fun to do if they're not they're not easy to do but if the right thing that's to build all in Whoa, man all in probably these days. Seven eight hundred bucks a foot. Maybe it's it's expensive. It depends how much parking you need. I think Steve to qualify that for a minute. You can pull that down a little bit but I I know there's a couple hotels that are looking out there anywhere from 800 to 900 foot. You know what we're seeing. So it's it's crazy expensive right now, and I'm sometimes on the wrong person asked because I feel like you know, We are going to see a major slowdown and there will be a correction that has to be but especially but then again as we transition more towards, you know building things here in the United States and Mexico with some of our prefab. Maybe maybe those costs never come down. I don't know. Okay good. How's that? How's the hotel? You said at Millbrae? It's doing gangbusters. When did it when did that open? Yeah, thanks. It opens in February and in March or actually almost at 80% occupancy with an average daily rate talking over two hundred dollars and some cases up the 250 and so that and that business travel is still quite strong in California. So that's right next to the airport. You know, it's like you can't get oh, yeah. That was that is that I mean, how does that compare to your projections? It's right. I say that both of all of our we have three select service hotels all of them have recovered to be pandemic ADR and occupancy. So the hotel space is doing real well retails and starting to make a little bit of a comeback. I was just gonna shift to the retail. I was like the perfect ninja horny you get on the hotels. I want no we're good. Yeah now go next up. How much retail space you developing right now. Well, I Much but we've got a $65,000 foot Standalone retail space in Livermore right next to the Livermore Outlets that project has struggled because of you know, just the pandemic and we delivered it in the pandemic but we are now starting to see it really takes shape with more you want your class eight, you know tenants you're Starbucks and you know your orange theories that are your corporate tenants, but what what we're seeing now is is that tenant plus, you know, the stronger mom and pop tenants and that and that particular demographic in Millbury. We have 44,000 square feet of makes use and that's you know, the peninsula always drives the higher rents and we are again starting to see, you know companies now or more access to hey, I'm ready for that second location Third location this franchise me is ready to kind of roll out, you know more location. So there's there's becoming more demand and that most of the second generation. In spaces in the Bay Area that closed during the pandemic having been released or you know or repurposed and so ground up new opportunities are starting to be more and more viable. But we have a little ways to go. It's not as healthy as the hotel Market but it's getting healthier. It's interesting because we just had our Orange County conference and you know over the last couple years, you know, it's gone from you know office being up there then industrial being up there and Retail being kicked around and multifamily being but now it seems like multiple retail is now more of The Shining Star than it has been in the past in terms of activity certainly compared to Industrial which is slow significantly in the office Market, which we know is in you know in the tank. Yeah. I don't know if you I think maybe more in Southern California where we've seen a lot of older retail properties get torn down then perhaps so far in Northern California, but how do you see the retail Market going forward? Great question. I think well Southern California and especially where you're at. There's Steve is kind of a good Bellwether because a lot of the new retail seem to come from Southern California. The new Concepts qsr concept whole service Concepts seems to really be born in a lot of places in Orange County and Los Angeles. So it's nice that that's happening and then typically then it kind of spreads northward. I I would say that value add opportunities are still going to be abundant for retail and we're starting to see that happen more and more up here because but you know the property owner and the tax issues that are still in question right now if they get them they do away with 1031 like they're talking about that could be a very bad thing for retail and you know the binding message here for 2024 like his predecessor and his brother says before him they're kind of posturing get rid of 1031 is as a federal tax. Issue and so that will make a big difference in how retail moves ahead and making sure that no, we still have a viable way to get owners to be entrepreneurial to put money into projects to lure those great tenants. And that really is the bottom line is what kind of property owners you have in your market and are they willing to be entrepreneurial to keep their retail fresh and relevant? I think Mall providers. I've been doing that for years and now will the small shopping center investors, you know do the same thing and do what it takes to keep these things liable. Now just on the California you have every intention of coming down here for anything or you can vacation. Yeah. That's what's fair. And I get it. You're right. You're a you're a Giants and Oakland A's fan versus a yeah and Las Vegas Raiders Las Vegas Raiders. Okay, good. Yeah. Yeah, so we're Lakers and Dodgers here. So no. No, no, I will agree to disagree. That's right, Michael. Um, how have you shifted? You know coming out of the pandemic and now with interest rates and the bank situation. How do you see a heavy shifted your your strategy? Good question still figuring it out. But I think you know, it's it's a lot of the same. It's just that you have higher interest Reserve in your construction loans, obviously and then you know your take out and your cap rates are Drastically affected so I think again it gets back to what I was saying before that. I'm right now. I probably pause all my ground up. Core Urban infill projects at least for the year to see where we end up and I doubled down on the build for rent products understanding that there's more rent growth there. I think long term and some of these secondary tertiary markets that maybe will overcome the cost of your interest reserve and your take out financing so I haven't prove it out yet. But that's my my s*** is focused more on a different product in a different location with a higher, you know possibility of rent which ultimately would make it make up the valuation for the cost that all the interest reserves and to take out financing. Would you look at possibly buying obsolete Office Buildings to tear down and you know those type of sites. I I think we have to Steve. I think I think in order for these these areas to survive especially San Francisco Los Angeles and the class of these stuff is dead in the water. I don't know reads, but you know, I mean in California, I mean I know in Southern California probably up there in the Bay Area. They're all talking about converting those old office into homeless shelters and and so on and so forth. I know, you know, we had somebody speak on that and they would turn you know, the old Sears Distribution Center in Southern California. They were gonna turn into a big homeless area. Yeah, you know, that's a catch 22. I mean we need to help me on house. But where are we housing, you know, what locations of our city because it's not it's that housing now the economic driver for the retail right housing economic driver. Whatever jobs, you know, maybe these per job centers because they're people working from home. So it's not as just as easy as subsidizing the building and putting people in it. What I would call an old planning director of coin this space here in San Jose warehousing people. Yeah, we can't just Warehouse people because there's empty space and by the way, and most of them don't want to go there. Anyway, they want their freedom, you know, they want to be under the rules of what has to be to build these things. So yeah, you're 100% right? That's the problem is of the day the governor just announced his mental health programs where he wants to spend billions of dollars. For those mentally ill and less fortunate people. So we have to stick to that strategy. But you know again, I'll come back to the word location and strategy. I think what you just said is critical. Yeah. Exactly. Well, let's stick it on that sector down. You know now that we've touched off this retail, you know, the multifamily is is your your belly way so many things happening in California, you know, the the mandate to create enough affordable housing all the different sectors that you see what's your take on multifamily construction multi-family development going forward in the state of California the issues we have to resolve and and how you see that going forward. Great question. We could probably spend the entire program on that question. But you know really I would say it comes down to this and then getting me to convince you to run for office Brad. I didn't have to work on weekends. I always tell people that I probably non-starter, but, you know, excellent question and again fundamentals costs. It's been a 30% increase from 2019. How can you expected Brands up at that pace? It's just you know, when you're spending 2500 dollars for like six seven hundred square feet. I mean that's a lot of money and you know, we're starting to see Tech now and I think the film industry and others in Southern California. Everyone is pulling back on overhead. All right, so everybody's pulling back on overhead people can have less discretionary income to spend on rent and other things what's gonna make them more strategic about where they want to live. So, you know, we as an industry need to challenge. I'm My reputation is pretty much like this either, you know get me what I mean. If you're a general contractor. Stop telling me it's gonna be this amount. I need this amount. This is what it has to be when I see people when I see these subcontractors driving their Yachts, that's their yachtney change order when I see the extraordinary markups that are construction trades have done over the last several years. It's only when those folks are hungry. Are we going to see real change and allow for marketing to go? Here's the problem. The state is throwing all around affordable projects. So if I'm a subcontract. able care about marking down costs for the for the market rate guy when I can get free money from the affordable guy. So, you know, the government has subsidized just like, you know, whether what other side of the island on politically doesn't matter, but we do have an inflation issue in our industry and we have not not because our fed has told us we have a he's stayed in the audience in California. We've added inflation crisis in Contracting and construction costs for about 10 years. And so that is going to be whether we can solve that the people like myself and you guys get back to work if we can't then you better start joining me in Fairfield and Hollister and stocking and all those places there and so how they're secondary markets because we're not going to build anything anytime soon. now are there a lot of the regulations in terms of building and you know various green types of building methods and does that jack up the cost significantly and is that different in different municipalities Well, the one that's just sticks in my crawl that is is the you know here in NorCal. Everything has to be Electric. That doesn't make any cheaper. You know, I can't use gas anymore makes use I gotta use all electric. So yeah, that's a problem. That's a regulation problem is always gonna regulatory issues. We always seem to overcome those right but but yeah, of course you they want, you know that the sequela it's depressing. If you start to read all the variables that affect this, you know, you can be overwhelmed pretty fast. Yeah, yeah. Hey Michael. What advice would you give to somebody? That's just starting out in this business. What would you say to them? I would say really understand Excel. Be worldly and and actually read real news and know your local market and every now and again give back to your community and get involved in your community because a lot of your opportunities can come from you're giving and and not to mention your integrity. Yeah, you know I see you're wearing a Boys and Girls Club vest. So obviously you feel very strongly about that. Tell us a little bit about your personal interest and your Charities and what you talk about giving back tell us a little bit about what you do and what Republic does thank you. We have a program called Republic cares here and we have several years where we work with many different Community Based organizations. My real passion recently has been with the Valley Medical Foundation and it's Burn Unit. I was born when I was two and a half years old and have carried on the rest of my life as a burn Survivor. And so now I'm working within the community to raise some money for the Burn Unit, which they're gonna have a new facility here in Santa Clara County a little known back with the Valley Medical Foundation of that Valley Medical Center is one of the only Trauma Centers in California, one of two that treat, you know burn victims and of course household accidents are real. And so that's I'm Survivor. And so that's kind of my passion but in general, you know any place that we do business whether it's San Jose Fairfield Millbrae. We're going to work in that Community to make it a better place not just physically but also with the existing infrastructure of community-based organization. So I've learned from the best and and I think it's a big part of our jobs. That we don't get credit for because I know the two of you I'm sure are getting to numerous Charities and I think that's that's a big part of what we do as Developers. Yeah, it's definitely important good answer a couple follow-ups on which you just mentioned on on what used to like. If so, I we got your advice for someone starting out but knowing what you know about the business if you were starting out today what sector of the real estate industry would you go into? I well I think the fun part of being about a developers. You're the Jack of all trades the master of nothing and to me that's that makes your life on because you're able to work on, you know, many different construction one day Finance the next day marketing, you know forward planning. I mean, it's just goes on and on so it's like a Nirvana job. I'm very blessed. if I were to go back though, I would get into construction management because I think construction management gets back to that fundamentals, you know, there's some great programs at Cal Poly at present State Chico State I tried to get my son to go into that. He wanted to go more in the business, but I would encourage someone that wants to be a developer or in the industry go get that construction management degree. It'll make you a very efficient individual and it will give you a really good perspective on budgets which you know in finance and more importantly just project management and I think we're all project managers and what we do for a living and so that's that would be what I would have done if I can do it over again. interesting Uh, how about my last my last question is just to end on on a little bit of a marketing note. What's what's still available at Millbrae in terms of apartments? And how do how would people Find out like the different the different apartment components you have what's available what are rates and and I guess they have websites where they can find out more information. Sure. Thank you. The Gateway station at millbrae.com is our website and thanks for bringing that up and for that plug but you can also go to the Republic family of companies our website, you know to find your way around not just about project but to some of our existing properties and apartments that we own here in San Jose and Morgan Hill and of course anything you want to lease. We've got something incredible Brokers and professionals working on that but there's a lot of Lee said at Millbury station is just open this year. Maybe you guys can check back with me towards the end of the year. I can I can walk around you tour but we go have this year and excited to kind of lease everything up. We will get all the way to the end this year. But probably this time next year will be right if I'm moving up there. What would be the market rate one bedroom? Ah, that would be about $3,000 Steve. All right. Yeah about here in the marina. Yeah. Yeah, you know. Hey, I have a live another question. What do you what do you think about Jimmy G Going to the Raiders? I love it. He knows Josh mccandel's office and not to mention. He's a handsome fellow and he's got a lot of followers coming from the 49ers. But yeah always excited about the off season when you're a Raider fan until the season starts in your disappointed. How about a West Coast favorite in the in the March Madness? Well, I had Arizona they lost and now I went to Cornell ivy league baby coming, you know, what Princeton's doing. And then let's be let's let's take it off. I'm gonna say UCLA's I have them in the front. Yeah, I do too. But Arizona blow up my whole I had them playing UCLA in the final I do too. He's a pair of sheets so much. It's what brings us all together. Yeah, nothing like March Madness. All right, you know Michael I think I'm tapped out on questions, you know that the time was great, you know, thank you for Arnie. How you doing on I'm doing good, you know all my sports questions. So that's all that matters. Well, we'll be looking at doing some events up in Northern California at some point, so we'll tap into your expertise for those and you know, I can't thank you enough for the time and and openness and sharing sharing what you've shared with us. Thank you. I'm very humbled guys. Thank you so much. Thank you, Michael. Yeah nice to be with you. Take care. All right. Take care right now. Bye. You've been watching commercial real estate talk with Steven Arnie sponsored by commercial real estate inspectors Redwood mortgage and Paramount Property Tax appeal.