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The following video is the office panel at Rick TV's Inland Empire State of the Market Conference held on May 9th, 2023. It is comprised of Mike Rat Maker with MG R Real Estate, mark McAdams with J Lll and Clayton McFadden with Harbor Associates. Uh, so Clayton McFadden. I work on the asset management team at Harbor Associates. Um, we've, let's see, purchased and sold about a hundred million dollars real estate out here. Uh, we primarily do Value Add Office. Yeah. I'm Mike Radamaker with, uh, MJ Real Estate and Property Management. We are primarily office brokers. I own probably about 1.8 million feet in the L and Empire, which is all mostly in the Ontario area. We're running 92.7% occupancy. Our year over year rents are higher than even in Orange County. We're at 2 65, uh, a foot. We're really happy with our performer. We are actively buying office buildings today. Uh, and we are actively, uh, into the city for construction of up to a million feet of office in the Ontario market. Mark McAdams, I am a vice president with Jones Lang Lasal, one of the larger national brokerage companies, and I was a pioneer of the Inland Empire. I no longer say the specific number of years I've been in the business. When you're young, you have to say, well, I've been in the business for five years, 10 years now. I just say 35 something. I mu I mumble. Um, but again, it's been exciting to be out here because I've seen the market go from land play to industrial and then in the early eighties, office started to come in and here we are today. Thank You. Uh, mark, we're sticking with you. Oh, okay. Because you provided these slides. So why don't just, uh, you know, we want to get into, uh, you know, I like starting with the, the leasing and tenant activity and how tenants are using space. Obviously the elephant in the room with the office space, but why don't you launch us off with, uh, sure. The, the two slides I brought today is really just to give you a perspective of the office market. I don't want to get into all the stats and the boring details. I did bring some information on the back, put it on the back table. If you're interested. You can stop by and grab something. But this just shows the trend line with a couple of the blips in the economy and what happened. So, supply and demand, there's been no really new supply since the Great Recession, except for maybe medical office buildings in certain residential markets. This shows the overall vacancy with the three major markets. The airport area that Michael owns in is the largest market with about 11 million square feet. And the Riverside and San Bernardino are tied at about eight. So let's go to the next one. Again, just showing trends, overall vacancy with the three major economic trends. And then it shows the tan lines or constructions. You can see all that space that was built in the runup to the Great Recession. And there was a lag out here. So the recession was really over as the vacancies shot up, but there was so much space built that it didn't really help. Um, and again, we've had seven quarters of positive net absorption we're at all time. His at or near, cuz a couple of the submarkets ticked up a little bit this last quarter. But we're at historically low vacancy rates, primarily because of no new construction. And the demand has been, has been good. So again, just trying to give you some trend lines. Well, let me, uh, follow up with question for you. How, how, how are the differences, since this is macro on the entire Inland Empire, where do you see major differences in terms of highs and lows, in terms of rental rates, tenant activity, tenant demand? On the vacancy side, some of the markets are sub 4%. If you need space in Chino, Chino Hill, some of the other submarkets like Redlands, it's gonna be a challenge to even find one nice space, let alone two or three for a competition. Um, the highest vacancy is currently in Corona. That's because of some new construction down at Lake Shore Tower a as well as a couple move-outs. So from a tenant demand, local regional tenants still have strong demand and they're still moving into the area. And some national companies are still moving into the area. But a lot of the existing national companies, they're staying, but a term we use during the Great Recession, they're right sizing. So if they're 10,000 square feet, they might need only eight. If they're five, they might only need 3,500 square feet. So there's a lot of that happening, but there's still, still strong demand. And the pandemic turned a long-term trend into a tsunami. And the long-term trend was people moving from the coasts to the Inland Empire to buy houses, especially during the pandemic when everyone was working from home, kids were homeschooled and it got started to get crowded. And so people, it was a big impetus for people to come out here and buy a house. Um, even small little residential markets like Big Bear Lake and the, the Lower Desert had a huge instream of new full-time residents because of the pandemic. And so far we haven't seen that trend go backwards. It's cont it's continuing. And I, I would assume with along with that, then though coming into the office because of the nature of the commutes, the nature of the properties and the businesses and the IE hasn't been as severe, uh, as, uh, some of the other markets that, uh, we do these events at With more local and regional companies. During the pandemic, they were back in their space by summertime. And the pandemic, if you look at the stats, it was really just a freezing in time. Nothing, no major changes happened during the pandemic. Everyone just kind of stuck in place with a couple clients looking at the end of the pandemic to get space out in the Inland Empire to get closer to where their employees had moved to. So that's right. Mike, I'm gonna come to you in a sec, but Clayton, I'm gonna skip to you right now. Where, where are your properties in the IE and what are you seeing in terms of tenant activity and keeping tenants in their space? Yeah, so, uh, the two projects that we are actively working on right now is um, Stewart Plaza and Upland. And then we have 4 51 East Vanderbilt in, uh, San Bernardino sizes. Um, one is about 45,000 feet and then the other is about 80,000 between two buildings Typical for the market. Yeah, so the Stewart Plaza Project, um, we're actually seeing a really good, um, mix of tenant demand for those projects. So what's interesting is when we acquired the property, there were some medical, um, occupants in the project and mostly office. And so now what we're seeing is with, you know, not only a lot of people moving out here, um, from other markets, but there's really a shortage of quality office space. Um, not only in this market, but in a lot of markets right now you hear this flight's quality. So Stewart Plaza, you know, we purchased And are people coming into the building? Are they like the Parksville that are coming in? Definitely I would say physical occupancy, which is something you hear a lot of, um, these days in the office world is a lot higher in this market than, you know, typical downtown urban core. Right? So what, you know, we feel that is more or less a, a really positive, uh, statistic for the Inland Empire is the percentage of usage for lease office space, right? I mean, without a doubt, like there's still some headwinds that we're facing in the overall macro environment. Um, capital markets is not great, uh, for office right now. I mean, trying to raise capital for office buildings is challenging as theise, but tenant demand, we feel like is starting to really, you know, show where it's going. Um, and quality's definitely a, a big, big driver for a lot of new decisions. So Stewart Plaza is definitely one that we feel we've improved and created more of a best in class environment. Um, and then 4 51 similar story, except I would say this is a building that, you know, has been primarily, uh, geared towards larger users, which, you know, I would say may have been on the lesser demand side, um, than the smaller tenant market. But again, I think where we've seen a lot of success, not only here in the Empire but throughout our portfolio in Southern California is, you know, Premium, More trophy flights, quality type buildings have, have captured more than the market share with man. For sure. And those both qualify as those? I would say so, yeah. What's the largest vacant space you got in those two properties? So we have 29,000 square feet on the ground floor. Uh, continuous. Yeah, Continuous. What are you asking? Um, you know, the big factor I think that, um, you know, we have to consider when we're structuring deals is what are the tenant improvement costs can be, right? Um, you know, the Inland Empire is not gonna be West la it's not gonna have necessarily top of market, uh, rents that justify spending, you know, $200 a foot on a TI allowance, but, um, you need to have occupiable space for your tenants. So what we try to sell is we have a really good capital stack in our projects that allows us to provide that, uh, amount of, of, you know, tenant improvement dollars to build out a space that tenants are gonna Work. What's the condition of the 29,000? Is it shell or Shell space? Yes. Right. So that's gonna be a hundred bucks no matter what you do. Uh, yeah, I would say that, you know, to get a really good quality space these days, I mean, that's what you're looking at, whether it's this market or you know, other markets, um, I would say that, you know, an empire, you're probably looking at a more favorable environment on the construction side. Um, but you're still at the end of the day of the day subject to all the demand. And has there been tour activity been Pretty? Uh, we actually have seen a decent amount of activity out of this year. Um, the project had two, I think of the largest leases at the end of last year that we signed. So, you know, I think it shows that if you have, um, you know, quality space, that's kind of where the demand has been. And, uh, All right. So five year deal reasonable tis, what's the rate? Uh, I can't comment on that. I have to ask though. All right, Mike, let's slide over to you, Ontario and, and growing outside of Ontario. Tell me what you're seeing with your tenants coming into the building and activity on leasing. I don't think the markets, uh, really changed much in occupancy for us. There might be a shift in the type of tenants. There's definitely a shift by some of the tenants in size, but for every tenant that downsizes, we're finding the tenant next door or upsizes. Uh, a lot of times when somebody has three offices and they're gonna consolidate to one or two, it doesn't mean that you're gonna lose the tenant. You may end up getting the larger tenant. If you take care of your tenant and give them a good relationship, they most likely don't wanna move. Lease renewals, start the day they move in, you establish that relationship and rapport with them. And if you manage it effectively, you generally don't have the major flight to other buildings. We're very fortunate that we have a lot of the class A office in the immediate Ontario market, so it's sometimes a choice between which one of my buildings they want to move into. You know, when you have that kind of flexibility as as a landlord, it makes it a lot nicer. We do offer a little flexibility to our tenants that, uh, very similar to the Irvine company. If they wanna move from one of my buildings to another, we'll usually work with them. I, regardless of the lease term, if they get in trouble and need to downsize, we generally work with them. Uh, we find that that puts chips in the table so that later in life we can get things taken care of. We're continuing to purchase properties at, you know, between 50 and a hundred million a year and hold it in our portfolio with little or any fear of what the market's gonna do. We like everybody else, were, were holding with the trends. You know, I'm buying at seven and a half cap rates today. I bought seven and a half cap rates last year, seven and a half cap rates the year after that. And I'll probably do seven and a half next year. It's just been my formula that works. Financing is extremely atrocious right now for office. Nobody wants to touch it, but you know, you bully through it and you'll be fine. We're not like industrial. We're buying buildings for probably 30, 40 cents and a dollar of replacement cost. Uh, we're now under contract in Orange County to buy 550,000 square foot at one site. And again, our problem there is, is financing, but we're buying it for $150 a foot. Class A, you can't touch anything in the Inland Empire for less than 2 25, 250 a foot. Uh, our lease rates are net to landlord higher here than in Orange County. Uh, we're spending, uh, if you really beat me up, I'll spend 20 bucks On ti on tis. That's it. So what's the typical tenant size? The typical tenant size is probably 5,000 feet plus or minus. So if you had a 5,000 foot tenant either in your building or, or new, you know, looking around at your spaces out there, what would a typical package be in terms of rental rate? Let's say they want to do a five year deal. What would a, are you full service gross on your rates? Yeah, we're Full service gross, 2 65 a foot, and we start out by offering 10 or $15 tis. And most of your, all your spaces are second generation, so you can kind of make 'em work to some extent. Yeah, we, we will not gut any space. You know, we, everything else is second. Not even from Amazon. Pardon? Amazon, you won't cut space. Nope. We're, we're, we're finding ourself, you know, that we're, we're, we're a nice niche. You know, we're, we're not trying to overspend on tis, uh, in Orange County, LA some markets are spending, you know, 70, $80 a foot. Like it's nothing. Would rather spend a little extra time with the tenant and showing 'em how what we have works. And I always tell the tenant that, you know, I can build anything you can afford. Yeah. That usually keeps 'em in perspective. So what are the biggest challenges? If you have someone who wants the space and, you know, they're, they're focused on your space, what's the biggest challenge in terms of getting that deal done in the tenant in the space, The outside broker? Uh, it's the broker. It's the broker that, that causes more problems for the owner. And what they do is, and it's not so much like Mark who's local or whatever, it's the broker coming out of LA or Orange County who thinks that he can get, you know, $80 a foot in tenant improvements in one month per year free. And that was the Norman Orange County. So when they come out here, I've had a little bit of a problem with the brokers, cuz the first thing I tell 'em is, unless they tore the space and come out here and see the building, I'm not negotiating with you. And that kind of sets the precedence for the broker in LA who's just going to try to represent a tenant, throw some garbage offer at me. Uh, we won't take a garbage offer. I won't buy a tenant. I'll give a tenant a great space, I'll give 'em good service. We're open seven days a week, we're man live, whatever they need, but we're not gonna buy a tenant and we're not gonna waste money on tenant improvements I can't use after five years. Excellent. So yeah. Mark, what, what, what give us your take on, If I can add on to that. Uh, during my career, I've done land sales. I've been an agency or landlord broker, but primarily right now I'm a tenant rep. And so Mike brings up a great point. One of the first things that I do when I get a new assignment sometimes with like another JLL team from Chicago or Texas, is to really teach them about the market because they see the whole portfolio for their client. They see these different markets where the free rent is way up and the vacancies is way up. And part of what I need to teach them is that you may have heard some things about the coastal Southern California, orange County, la but you know, rip that up because the Inland Empire has historically low vacancy rates and landlords aren't going to throw $80 a square foot or even $50 a square foot at you. So part of it is education process. And you know, Michael brings up an interesting, we had a broker from downtown LA come out a year ago with a 30,000 square foot tenant. And again, he was telling everyone he had to have a hundred dollars a square foot, he wanted a huge commission bonus. He wanted this, he wanted that. And you know, the landlord brokers just kind of looked at him and when we didn't laugh, but we in our internally were laughing and, you know, of course he ended up doing his renewal, which was where we thought what, what we thought he was gonna do anyway. But he was just going out to the market to beat up the landlord's. And, and again, he didn't even have that many options there. You know, if you're looking for 30,000 square feet in each market, there's maybe one or two. So thanks Clayton. Let's get your thoughts. After hearing what these guys said, what are, what are you thinking now about what they commented on? I definitely agree that, you know, you have to have realistic expectations. Um, when you're trying to put a deal together. Um, what I'll say is there's been a lot of false starts or deals that have died in the ti stage and brokers are getting better at, you know, solving to the right number upfront. I think, you know, where we see our role within the process is being the group who has the experience and has the relationships with, you know, the architects or the construction team to shape realistic expectations up front. I mean, the last thing that a broker wants and a landlord wants and a tenant wants is to have a space that they're really excited about. You know, you have an agreed to deal, then you get to the construction phase and realize that you have to completely tear up what you've already spent a lot of time on. So I think, you know, being experienced in what true costs are is important. And then understanding the market out here is extremely important. I mean, the headlines that, you know, you read on the downtown Urban Cores is not what we're seeing out here on the, you know, vacancy rates and single digits. Um, you know, lease rates holding relatively flat if not increasing for good quality projects. Um, you know, I think that when you have realistic expectations, you have transactions that you know are successful and that's what, you know, I think our industry's pretty motivated to do and accomplish. Um, you know, we've had a few years where it's been, you know, rough sailing to say the least. And I think what we're starting to see and what I hope will continue to improve on is having a higher, uh, you know, percentage of deals going through businesses being successful, um, and kind of getting through this period of uncertainty, which is really, I think put the cap on a lot of demand that we otherwise should have been seeing these last couple years out in this market. Right. Uh, I wanna move on to capital markets, but any other thoughts on the leasing side, Mike? Uh, Yeah, I, I came out of the residential market. I came out of apartments, I came out of new home sales and ended up in office. But one thing I did learn when I was working in model homes and apartments is, is that when you had a nice model home and a nice furnished apartment, they leased better. We took that theory into my office market and probably 75% of all my vacant space is furnished. When tenants come and they look at the space, they're not wondering if the conference table's gonna fit or if the chairs are gonna work or if they have cubicles. We have it staged and in place many can times. Our tenants when they come in, they're on a budget, it doesn't matter if it's a big company or a small company, they're on a budget. And sometimes if they can walk in and see an office and say, my God, we could actually take it the way it is and we don't even have to buy any furniture, we don't have to do anything. And then they move into the space pretty much in a plug and place status. And when you do that, it saves them money and us money, people laugh at me all the time and say, well Mike, that doesn't work. I've done 20,000 square foot deals with the state of California on plug and play. I've done 10, 15,000 square foot national tenants plug and play. I do three to 5,000 square foot deals every week, plug and play. And the nice thing is, is once they move into my building and they're using my furniture, it costs 'em an awful lot more to move because they don't have any furniture. What, what percentage would you say use the existing furniture versus have you remove it? And cuz they bring In their own, I'm gonna say 50% or better ha keep the furniture. Uh, and that a lot of that depends on how good the furniture is, right? If I'm putting in really good stuff, I never get it back. If I'm putting in kinda second, third grade stuff, I usually get that stuff back. But, uh, you know, we're, we're right now, uh, going around and we've taken buildings and actually, uh, bought truckloads of furniture, you know, from another company or, or actually in some cases we charge them to remove the furniture from, uh, a national firm and we'll charge 'em 5,000 to move the furniture out and then I put up in one of my buildings and lease it. So, you know, we're, we're pretty happy with that. I mean, we'll buy, sometimes we bought as many as 50, 60, 70 executive setups at a time or, you know, and bring 'em into the buildings. And, uh, it makes a difference, folks, when you're, when you're showing a space in this kind of market when people maybe are downsizing or right-sizing to go into something with new furniture to them makes a really big difference. Uh, secure task was the one that I really learned a lesson on their national company. They leased the space from me in Victorville with the condition that they could go to any of the six buildings that they saw and pick the furniture they wanted and have it delivered, which we did. Uh, state of California's done that said, well, we'll take the space, but the furniture in eight 10 is what we want in 8 35. And we'll say, okay, we'll move it around. I have three people on staff full-time moving version. Wow. Well let's slide into, uh, the capital markets. Clayton, start with you. You're, are you net buyer or seller? Hmm. Um, yeah, loaded question for sure because Seems So simple, doesn't it? I feel like, you know, we get on one call, um, in the morning and you got, you know, the seller hat on and then you have the other, you know, call in the afternoon. You have a buyer hat on. What, what I will say is, um, you know, Harbor has a very diverse set of partners that, you know, we have throughout our portfolio and that's really helped us as a firm and an operator, um, you know, seizes opportunities that otherwise, you know, have been hard to finance, um, or structure with more traditional, you know, groups. So what I will say is the environment right now that, you know, Mike had touched on too, is the phenomenal opportunity in our perspective to buy. Have you Personally spent a lot of time looking for properties? That's Right. Yeah. So, you know, like all the office properties around the empire, most likely, most of the major ones. How is velocity in terms of properties that you're seeing come available, uh, in the market and where is pricing and cap rates these days? And the, and let's touch on the differences around the, the Inland Empire too. Yeah, so I, you know, I think the distress hasn't necessarily hit the inland empire that maybe you've seen in other markets. So from a value add standpoint, you know, we might not be seeing the opportunities that we would like to see, um, to really put our full foot forward on that. Um, I would definitely say that cap rates have increased substantially, um, in the office product, but you know, in all product types, right? So as we're heading into some uncertainty right now with other, you know, groups, right, industrial multi-family, sometimes it feels a lot better. When you're looking at an office product right now that, well let's Say a typical office product. In a typical market in the aisle, let's say 50,000 foot mostly leased coming available, what would that price range cap rate be for the average property average? Yeah, so I would say that you're looking at probably north of a seven cap right now. Um, you know, you'd have to say, you know, what type of asset are you looking at? I mean, if you're, if you're trying to buy something that's fairly stabilized and is in a good location, I don't necessarily know that you've seen a big slide in pricing right now. So what would that be? I, I would say one of these guys could probably give you a better answer, answer on that. But you're probably north of 200 foot 200? Yeah. Yeah. You're, leave me looking 2, 2 25 to 2 45. We sold a a d minus property on sixth in Haven within the last six months for 2 25 a foot. Uh, we sold, we were involved in the acquisition of one and fourth in Haven at 2 25 a foot, which was mostly vacant. Uh, we purchased like this One, right? Did you sell this one 18 lane? Probably, yeah. Yeah, mic Mike representative and JLL represented the seller. Nice. You know, and then we, uh, we, we also bought the airport, I think, what was it? Ontario Tower, Ontario Airport Towers. I bought that one too. And it, and you know, we bought another one's 147,000 feet and I think I paid about two 50 a foot. Uh, so that's about what the market is. You know, you go in 25, 250, Do you, uh, buy all cash? You go to lenders? Who, who are your lenders? My lenders are my favorite partners. You know, I I I Got lots of lenders in the audience. They want, they watch your business. I went, I was using a lot of community, uh, banks and uh, it's getting a little tougher because a lot of 'em, you know, they're, they're very conservative on some of their problems and because there's been so much negativity on office, it's the one food group that a lot of the banks are saying no to. Have you seen a change since the uh, uh, Silicon Valley Bank First Republic? No, it's, It's, it's dropped off significantly. I mean, we buy buildings at seven and a half cap and they don't want to finance them. We buy seven and a half on actual, they won't finance them. Hey, might Pull the mic a little At seven and a half and they won't finance them, but they don't have any problem financing an industrial building at a three and a half cap. It just doesn't make any sense to me. You know, we're, our office market is the best market, so if there's any lenders out there, I'm buying one for 91.5 million currently and I could use some financing. Yeah. You had a que did you have a question? No, I'm offering, You can get a bidding war going, uh, mark, did you have anything to add on, on what you're seeing in terms of, uh, On The, on the underwriting side and what you're hearing on the, on the sell side from your folks in the capital markets and what you're experiencing out there? So, so what I'll talk about is not the investment side, but the, the owner operator purchase. There, there have been a number of those. Last year I did four from 8,000 square feet, small and Redlands to the building that was just up here, 75,000 square feet that Mike represented the buyer on. And so that owner occupier has been a niche where, especially if part of the building is leased, if it's completely empty, different story. But if it's partially leased, then a professional firm, like a law firm, a CPA can go in and occupy their 5,000 square feet or six or whatever it is and have some tenants to, uh, give them the investment on so to up to a certain level. So up to 75,000 square feet. What Mike has said is absolutely true. We're 2 25 to maybe 2 45. Unfortunately, there's been some owner occupant sales that have been larger that because of their size there was really only one logical buyer in that submarket. And so for instance, out in San Bernard, not to beat up on San Bernardino, but they had an owner occupier sale first of the year. That was like 1 25 a square foot, but the entire building was vacant. So again, a little bit different story, but there is good activity on the owner occupant side, but again, the capital markets have affected that as well. Love it. Um, uh, Mike wanted to touch on you for all, all the years. You know, you've been, we were doing the panels together before the pandemic. I was always thinking of you as Ontario Mike, but now you're expanding. So you're looking in Orange County, you open up a new office. Tell us about the, uh, thoughts, you know, what you're seeing out there that's leading you to expand and go into different markets. I buy real estate, not tenants. And when I'm out in the Inland Empire and it's costing me call it two forty, two fifty a foot to buy an office building and I can go down to Orange County by South Coast Plaza by a class A building per 150 a foot, somehow, it just seems to me like maybe it's a good idea. The brokers in Orange County tell me how difficult it is and I agree with them. Most of the time they forget to put a sign up on the property. They don't an they don't answer their phone calls. And if it's under 5,000 feet, it's an insult. So I think going down to that market and answering the phones and putting a sign up ought to be quite fun. Are you gonna do anything else? Uh, we, we are, we're, we're probably in, in, in the Orange County market cuz we're new. We will most likely cooperate with the national firm because we don't have the footprint we do in the m and Empire. Uh, but we will be on site and we will handle the small two 3000 square foot deals that walk in. They'll offer, the broker can just send stuff to us, just send us an email or a text and we'll respond back. We'll do everything to send you a check. Uh, we believe that the Orange County market is a 4,700 square foot average tenant, but all the brokers are looking really for the full floor users and they're missing the fact that four or five small tenants make a full floor. Uh, we're also, you know, looking at a little diversification, a lot of our tenants in the Inland Empire are asking me if I have anything in Orange County. So I do believe I have a certain tenant base that will, will follow us. But you know, that being said, even on that, that growth and opportunity, we, we do want to be one of the first major developments out of the ground in Ontario for a four lease office product. And you know, we are, you know, in the planning process with the city of Ontario and you know, I don't know if I should say it or not, but we're planning on the first building will be 15 stories, uh, with restaurants on the top, mixtures below and a series of buildings around it. Uh, we're all in on the deal. It makes no economic sense. Uh, but I'm okay with that long term it'll make sense. We believe lease rates are gonna move up. And that might be a question you haven't asked yet, but, uh, I'm moving my lease rates up, you know, I'm 2 65 a foot now. I'll be, and, and some as high as 2 85, 2 90. I've done a few deals at 3 0 5 because they want attended improvements. I can see the market moving to 3 25 a foot on second generation space in some cases three 50 within the next 18 to 24 months. Uh, and then we'll see the new product coming out in the market at probably 3 95 a foot. Full service. Gross. This is the new building. New building. We'll be 3 95 a foot. How big is it gonna be Total? The first phase will be 250,000 feet. First building 15 floors? No, 15. 1515 floors. Right. So that'll be our first, first building, uh, restaurants on top. Then, you know, a little bit of, And this is the first office building built in, in the market in how long? Probably 15 years. That isn't unoccupied, you know, and it goes seven, I think I owned that one, uh, the last one that they built. But, uh, you know, nobody's building. Uh, I think there's a big demand for it. I think there's a big flight to quality. We're not looking at a price per foot, but we're looking at a cost for a great space. You know, we'll be our marketing strategy. Uh, we already know that the two top two floors will be your restaurants and it'll be filled. The third floor down will be my penthouse, so I know that's filled. And then the fourth and fifth floor down are my offices, so I know those are filled. So we got a third of the building already taken care of. There you go. You know, so we're, we're feeling pretty good about that. What do you project as the overall cost per square foot of that building? $450 a foot. All right. Well good luck with that. That sounds, uh, amazing. And with half of, at least they're almost half. And This guy's gonna finance you right down here. You know, I want to, I want take some questions from the audience, but I want to make sure, Clayton, have we covered all the items that, uh, did you want to add anything to what you just heard? Yeah, I, I mean, what I will say is, you know, tenants are gonna be expecting more with their office space without a doubt. Um, and I think adding services and, and being more attentive, uh, and a better partner with tenants is really gonna be, um, who succeeds as a landlord, right? It, it sounds like, you know, a brand new building, like there is room to pull up rent, you know, so it seems like that will have an effect on the rest of the market. Don't you guys agree with that? Right, Mike? Mark. Well, Michael's been smart since he has collected this portfolio class A, he's pushed the rents a little bit, but he hasn't pushed them as much as he maybe could have. Right. Which has kept a new developer out of the market. Cause the new developer is not gonna come in. So Mike's looking at returns not only on this building, but the positive returns he's gonna have on the rest of his product too, right, Mike? Absolutely. There's a, a certain windfall that'll happen if I build this building across the portfolio and that will help me average my extreme cost to build it. You know, so if it's costing me more to build, but I suck up all of my buildings 75 or a hundred dollars a foot because the increase of rents, you know, the new building becomes almost free, Free parking. The building becomes free with the suck up on Free parking though, right? Still in the ia. All right. Any questions? No, there Will not be free parking in that building. No, no. The new thing we're gonna do in the m Andm empire, just let everybody know. Little warning for the brokers here is, I'm a, I'm really starting to like the idea of parking lots and I'm thinking the parking lot should be a separate feature away from your buildings. And the parking lot should be a charged feature in the future, just like it is in LA in Orange County. Uh, it's a process that'll take some time, but I'm hoping I'll take my 23 buildings, break 'em off and start the process all at once in the next three to five years. Yeah, well we Like the free parking here. Yeah. You guys Wes, Yeah. In the last years or is it changed? I'd say it's changed a little bit. I think more regional and local companies are a bigger percentage than the corporates. But back in the eighties and nineties built, filled up, most of the buildings that Michael had, they were mainly corporate tenants. Not, not totally, but it's still all across the board. A lot of construction firms, a lot of, you know, related to be residential as well, law firms, CPAs, insurance and banking is still here, but especially the really large offices, a lot of those that move outta state. Excellent. George, Hear Silicon Valley area, is that, is that a factor? Go ahead. I think it's the, the culture is whether or not they want to be employed or unemployed. Um, The younger generation, we kind lost them in the pandemic because they never really had to work, you know, in a traditional office environment with structure, they got paid to be at home and in some cases they even worked, they took care of their kids, they took care of their families, they re remodelled their house and they got a paycheck on top of it. They got a stimulus check. As that stuff is drying up, a lot of 'em still have money in the bank and say they'll never go back to work, but the first time they can't make their rent payment or their mortgage payment, they, they will go back to the office. And, and I believe that's gonna happen. But it's a, that's a growth process Going through the same thing with my kids, George going through the same thing with my kids. It, it will Go through it, it will change. I think that my daughter helped me understand it. She's 27 as well and she said to me, you know, that the market's forever changing and that people got used to being at home and people got used to not having to commute on the freeway as much and their personal lives had got in the way of business. And so I believe the four 10 that she talked about makes a lot of sense. And companies that tried the four 10 have been very successful that way. The employee gets three days off instead of two. The employer gets us 40 hours during the week and I still get my a hundred percent occupancy. So can I pull up on that? Yeah, mark, close it out for us cuz we gotta wrap it up. Sure. I'll be quick on this. So again, I think it goes back to the type of tenant during the pandemic, the local and regional companies. By summer 4th of July, they were telling their employees, if your butt is not back in the seat, you're fired. Whereas I worked for big national company, we were locked out of our office, I couldn't go in if I, you know, had a, my favorite photo of one of my daughters on my desk that I want, I couldn't go. And This is a tenant rep from Right be just because corporate America was trying to figure this all out. So I think because of the nature of Mike's portfolio plus the commute times to downtown LA to Orange County where people from Temecula are spending two hours one way, if the employer would give people the chance to have an office closer to where they live and not spend four hours a day in their car commuting, maybe people would want to go back to work. I don't know. What do you Think? There's also issues with mass transit and crime and things like that which are affecting downtowns, which you don't have as much in the ie, which is great. So last one, we gotta make it quick. One word answers for Mike, Youre active, We Question question. I think it's gonna be a home run. All right. I think that anything you buy today is going to significantly go up in value. As the m and m fire continues to grow and prosper. The expansion of all the freeways is big. Enormous cost of industrial space is driving a lot of the industrial office component into traditional office and they're convert so they're coming out of the warehouse, which we're benefiting from. Uh, and I do believe that a lot of the people that are tired of the commute are coming out this way. I think the employers are finally starting to pay people in the M and empire consistent and appropriate to what they pay in LA and Orange County. Uh, we've boasted and pushed to a lot of the groups that I'm involved in. If you have a job in LA and you're paying 50 grand or a hundred grand, you should have the same job in the m and Empire at 50 or a hundred grand. Then you will have a lot of pool and a lot of people that wanna work for your company. So we're seeing a lot of higher price jobs in the M F Empire, better quality, better retention, and the younger generations starting to realize they can't afford the beach community. All right, I gotta wrap it up there. Great conversation. Grab these guys afterwards if got more questions Tonight.