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Hey, Welcome to this new episode of Commercial Real Estate Talk with Steven Arne, where we have what we hope to be interesting and compelling conversations with leaders in the commercial real estate industry. And I am very excited about today's show because our guest is the co-founder and c e o of a real estate company that I have been a huge fan of for a long time because of their creative and impactful projects. And that is Barry d Raimondo, c e o of Steel Wave. But before we bring in Barry, let me first introduce myself and my co-host. I'm Steve Blum, founder and c e o of Rent tv, the news and media company for the commercial real estate industry now in our 24th year with our news website, rent tv.com, where you'll find daily news trans about transactions, deals, developments. Uh, we also have our conference business and our video platform, the review, our new searchable video platform for the commercial real estate industry, which is where you are watching this show. And let me introduce my co-host and the producer of the show, my good friend, Arnie Garfinkel. Hey, Arnie. Hey, how you doing? Steve? Uh, Arnie Garfinkel with the All-Star Group. Uh, we do commercial real estate as a loan broker. We also do events. The All-Star Group does a number of events throughout the state of California related to commercial real estate. We believe in networking, a lot of networking. Actually, our next event is coming up in San Francisco on August 29th, and we hope to see you there. And I'm real interested to talk to Barry about what's happening up there in the Bay Area. Yeah, especially coming, uh, you know, on the morning af on the heels of, uh, another quarter point interest rate hike. And speaking about events, Arnie, you know, we're doing our Greater LA event. Our next one is August 17th at the Hilton in, uh, Culver City on Ella Boulevard. We have a great lineup of high powered speakers, so we look forward to seeing you there. Um, and one more piece of business before we bring in Barry. And that is to mention the sponsors of the show who make this all possible. And let's start 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. The deadline to file is November 30th. So call Paramount Property Tax Appeal at 8 5 8 2 2 5 1200. Ask for West Nichols with Paramount Property Tax appeal. Our next sponsor is Redwood Mortgage. Redwood is a 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 lending in all major metro areas of California and Arizona. Redwood has long held expertise in commercial loan transactions. Contact Redwood at 1 806 5 9 6 5 9 3, or www.redwoodmortgage.com for more information. A good place to go when the bank says no. And last, but certainly not least, is commercial real estate inspectors in Southern California. Their skilled inspectors provide critically needed inspection information in easily understood terms as well as inexpensive solutions. Whenever possible, let commercial real estate inspectors help you protect your deal. Call Tiffany Simington, that's Tiffany Simington. And book your next inspection today at 8 1 8 9 5 7 4 6 5 4. The number's on the screen, 8 1 8 9 5 7 4 6 5 4. Well, Steve, I think it's time to bring in our guests. Yeah, now let's get to the show. I know we're in for an extremely interesting, informative discussion given the backdrop of the challenges in the economy, especially in the office sector, Arnie, uh, and in developing. So with that said, let's bring in Barry de Raimondo, co-founder and c e o of Steel Wave. Hey, Barry. Hey Barry. Welcome to the show. Hey guys, Good to see you guys. Well, you see us now? Yep. See, now, thank You for making the time. Uh, I'm really excited about this conversation. I've been tracking your company for a while and have been a big fan of, uh, what you've been able to, to accomplish. So with that said, why don't we start by having you give us a kind of quick overview of, of the company, the size of the portfolio, geography, and, uh, and how, how, where, where'd the name come from? Well, okay, so we're a West coast based operating company. You know, we buy transition and develop life science office, but not traditional office, what I would call creative office, kind of differentiated stuff, uh, and industrial. And you know, I would say at least 85% of what we do is heavy lift, physically, you know, where where it, it's a radical reposition or ground up development. And our markets are all tech dominated. You know, it's, uh, tech oriented, whether it's biotech, traditional tech, uh, media, tech, you know, go down the list, defense, tech, creative tech. And, you know, the platform really is Seattle, Portland, although I don't see us doing much in Portland for a while. Uh, the Bay Area, uh, la Orange County, San Diego, uh, Denver and Austin. So they're all pretty heavy tech places. And and that's really by design, right? You know, our target customer is in the high growth industry, right? What, whatever that high growth industry is in tech, their real estate costs are generally a small percentage of their operating costs, right? And they view real estate as a strategic asset as opposed to a cost center, something that needs to be minimized. So, you know, that's who we're going for. We're not going for back office, we're not going for lawyers, we're not going for accountants, we're not going for insurance companies. So it, it's a very, it's a very specific, uh, group. And, um, and we've been doing a long time, you know, So let, lemme zero in a little bit gi give our audience a a bit. So currently, uh, how many properties, uh, roughly are, are in your portfolio, uh, that you're, that you're managing now? You know, we're merchant builders, so we don't hang onto stuff, right? Right. I mean, we, we have to sell assets in order to recycle cash. You know, we, we do on an annual basis, new starts or new acquisitions somewhere in the order of 500 million to $2 billion a year. So we're actually pretty sizable. Yeah. Um, so, you know, when I look at how big our portfolio is, I really look more historically, right? Since I've been with the group, I think we've done about 350 deals, Ah, North of 130 million square feet, uh, $18 billion a cost. Um, so yeah, we've been doing it a long time and really almost five decades with our predecessor companies because, you know, when I came out of school, I joined Lincoln Property Company and worked for a guy named Louis Belmont, who was a bit of an icon in the industrial world, you know, so I was building warehouses when I came out of school. And Lincoln morphed into Legacy Partners, you know, in 1998, president Butcher, who was the, uh, patriarch of, you know, the western region of Lincoln, uh, another icon, Preston. Yeah, Preston. And, you know, some of the senior team of which I was one bought out Mac Pogue from the operating company and we changed the name to Legacy Partners. And then in 2013, and we had two companies, they had two operating companies that operated independently. There was Legacy Partners Residential, and there was Legacy Partners commercial. And I ran Legacy Partners commercial, a guy named Dean Henry ran, you know, residential. And Preston was always a multi-family guy. He just tolerated us over on the commercial side, you know, we were definitely the black sheep of the program. And in 2013, you know, Preston sat down with me and said, look, given my age, you know, I'm at a point where I need to start playing defense as opposed to offense. So if you can, if you can take me out of the company, I'd appreciate it. So, you know, we ended up recapping Preston out of the company and changed the name to Steel Wave. Okay. Now, how did Steel, how did you come up with Steel Wave? Um, where did that come? Well, We had two mandates, maybe three mandates. One, we needed to be able to copyright it. That was, that was number one. Number two, we didn't want it to sound like a real estate company. Ah, we wanted to have kind of a younger vibe, which meant I didn't wanna have partners in there. I didn't want black, I didn't want rock, I didn't want ventures. I didn't want realty. So we hired this team of gals to come up with all these names, right? And every week they'd come back. They were outside consultants and they'd have about 10 different names, all of which they thought were the best names in the world. And we'd pick two or three of 'em, and then we'd give 'em to our trademark attorney who, you know, would bounce 'em off. And after about three months of doing this, I said, we don't have a name problem. We got a lawyer problem. You Know, so I tossed that guy and, uh, brought in another guy and next thing you know, we settled on Steel Wave. You know, it was just something that was different. Had nothing to do with steel or anything to do with waves. It just, uh, well, They could get, you know, they could give, I know you a whole laundry list of stuff of what it was, but, you know, at the end of the day, it's just bologna, right? It's just, hey, it sounds cool. Well, you know, lemme ask you Barry. It's Like construction, you know, development on the West Coast, you know, that that's what it, you know, what you Think of it's steel and it's bend. You know, you, we kind of bob and weave. I mean, they had a whole litany of stuff of why it works. I have family in the steel business. That's, that's the main reason why I wanted to know. It had nothing to do with, uh, anything other than that. Um, so, Well, the good news, it's not spelt s t e A L. That would definitely cause an issue. So Barry, what got you started in real estate? Now, I know from your background, we talked a little earlier. You, you were in the painting business somewhat, uh, but what did you, what made you start in the real estate business? Might have been painting, might have been anything else, but what was it that got you into it? Well, it, it, it was painting in high school. We ended up starting up a small little painting company. We didn't know what we were doing. And it sort of carried all the way through into, you know, it's, it's what started is painting houses morphed into building fences and decks, which morphed into, you know, kitchens and, and bathroom remodels and ultimately into building spec homes. And so, you know, that's, that gave me at least a look. I, I, I like building stuff. I mean, it's just, that's just how I'm wired. And that's probably what pointed me in the, in the real estate direction. Although that's, that's not what I was trained in. You know, I was trained as a biochemist out of Berkeley. Yeah. And, uh, you know, as we talked briefly about, you know, my path was supposed to be medicine, you know, so I graduated from Berkeley, spent some time, you know, doing research, trying to figure out if I wanted to be a PhD. Uh, ultimately applied to med school, got in and decided that's not what I wanted to do. So I thought, you know, the best optionality was to go to graduate school in business. And that's what I did. And, and I think the goal when I went back east to business school was to do one or two things to either leverage the, the whole biochem thing and go work for a Genentech or someone like that when I came out of school or, you know, go into real estate. And, you know, one thing led to another and I started out a Lincoln Property company and, and just kept going from there. Nice. Uh, well, I'm gonna confuse Arnie here and combine a couple of questions that our next questions here. But, uh, so going, going from there, when you look back, what was your first deal that you think of that really took you to the next level, you know, that you accomplished that said, Hey, you know, now I'm, uh, take, you know, got myself to the next plateau? You know, I think it was just a gradual evolution. You know, when, when I started out, I was building warehouses, actually, what I was doing was leasing warehouse space and managing warehouses. That's basically how the program was set up. And then over time, you know, you start buying land and you become a development. And this was back in the, the mid eighties, right? Which was a complete PhD in real estate, you know, in the mid eighties. You know, real estate was just becoming institutional in nature. But we had no idea what we were doing. I mean, none of us at Lincoln had any, we would have investment packages that were three pages, you know, that we were given to Matt Aetna and these guys. I mean, the, the only thing that saved us is that the Capital Partners had even less idea what they were doing. This, this wasn't an institutional business, right? So, you know, building warehouses sort of morphed in. And then I left for a period of time and, and started doing multifamily and single family for a couple years. And then I came back and I said, look, you know, know rents and warehouse are pretty low and your fees are all driven off the rents. I said, let's step it up and do office where the rents are higher and the fees will be higher. Right? So we stepped it up into office and started doing office and it, and it was very much Silicon Valley centric at the time. Um, Well, let me, let me, and then let me zero in on on on what you're saying now. So, you know, if it was more of a gradual step up to that next level, when you look back over all the transactions you've bought and sold properties you've bought and sold, are there any that stand out as ones that you really, you know, really succeeded on, you know, that, uh, that you really look back as a standout of your career? Look, I don't look, I don't look back on deals as standouts. I look back on deals, you know, is there a story that people can relate to? And, and I think there's a couple that do actually, you know, I think this was back in 19, I guess it was actually 2000. It was 2000. And, and we'd had in the Silicon Valley a gigantic run up and rents and everything through the whole intercom in the whole internet thing, not dotcom stuff. And at the time, we were doing a ton of business with Goldman Sachs White Home, and there was a, a user in the Silicon Valley called Silicon Graphics. And they had built, I think they were the absolute front runner in, in the space of creative office. They had built an office building that no one could figure out. It was like a student union. It wasn't an office. It was, it was a completely non-traditional office building that felt like you were walking around the campus at Stanford. And they did it, you know, by design to attract kids, you know, coming outta school. And Goldman Sachs was their investment banker, and they went to Goldman Sachs and they said, look, what we'd like to do is sell the property. And they had three or four other properties and they said, we wanna sell the properties and we wanna scale back out of these properties on a sale lease back. So we're gonna have put options to, you know, move out of these properties. And so we bought these things, they're in Mountain View, and, uh, within about three months, the market imploded. You know, the whole.com thing just came unhinged. And rents literally overnight went from $6 net per square foot per month to a buck 50. I mean, it was a complete implosion. Right? And as part of that, you know, Silicon Graphics needed to accelerate their puts. So they were shrinking back, you know, faster than, you know, we had anticipated. And we were just praying that they wouldn't give us back that damn student union building. 'cause we, we had literally no idea what we were gonna do with this thing. And, and this is probably a year into, you know, the market swoon. And along comes this company called Google. We never heard, they hadn't gone public yet. We didn't even know what a search engine was. We had no idea. Right. And they wanted to take that student union building, and we actually turned them down on a lease 'cause we couldn't understand their business plan. And then about five months later, after talking to Zero prospects, they came back and we said, okay, we'll sign a 15 year lease with you. And it was fairly flat, but because we don't know much about you, we're not gonna give you much of an interior a ti. We'll give you five bucks a foot, that's all we're gonna give you. And, uh, they spent most of it on those Japanese toilets. They took all the bathrooms, yanked out all the traditional, you know, piping and everything, and, and put in, you know, you know, the Japanese blow and do all these kind of toilets in there. It was unbeliev. And today it's their world headquarters. They ended up buying the thing. They had an option to buy it. You know, we had immediately written down the asset by 50 million bucks. Right. And they had an option to buy the asset. They were paying a buck 50 rent. It was flat for 15 years. That was like a 10 cap environment. So that's 18 bucks. And they had an option to pay 350 bucks a foot for it when it was worth less than 200. And they triggered it out of the blue. Um, and that became their world headquarters. And, you know, look, it's, uh, it's always better to be lucky than good. That's, That's a great story. That's Great. On the converse, which one would you like to give back? Which one do you wish you didn't do that? That, uh, well, or did you forget about it? An equity wipeouts. An equity wipeout. Right. And you've been in this business long enough. You've had a couple of 'em, but, you know, we did, we did a deal down in San Diego, and this was actually not to, it's kind of in the same timeframe where if, if you've been to San Diego, most people think San Diego's actually very flat, but there's a lot of topography in San Diego. Yeah. And we bought a piece of land from the cellar who owned this land. There was a building on it, and he was gonna mass grave because he owned, you know, a big site. And we were just taking a piece of it. And the deal was, okay, we'll buy this thing, but you have to mass grade this thing and build two pads for us, right? And then we're gonna build two buildings on it. Um, which he did. We built two buildings on this thing. It's called The Point. And it sits down off of the Highway 15 corridor. And it's elevated, it's elevated above the 15. It sits probably a hundred feet ish above the 15th. And so we build these buildings, we're getting ready to sell 'em. And the parking field, there's this huge parking field in front of the buildings between the buildings and the, and the highway. And all of a sudden we start to see these cracks in the, in the parking field. And, you know, there were, there was part of building that pad was, there was a 20 foot retaining wall that, that he had to build. And we figured that the retaining wall was starting to sell, and the cracks would go away. So like a good developer, we fix the cracks and re respray painted the, the parking lot. And, uh, and then we realized that the cracks were actually coming inboard to the, to the building. And we said, I don't think that's a wall issue. So what we ended up doing was, and we had a world class roster of tenants. You know, we had Siemens, Sony, you know, I mean, it was, the building was fully leased. And so we brought out a geologist and we dug down. We, we basically went down probably about a hundred feet down, and we put what's called an inclinometer down there. And it's a, it's a little device that tells you if there's any kind of micro movement going on. And you check it after about six months. And, you know, if you're moving your, well, it turns out that there was a deep underground landslide under our building that was basically moving towards the freeway that we had to fix. And the fix was gonna be not on our site. It was all gonna be on Caltrans site. So we dug 1830 inch diameter bores around the site and lowered, and, and these are all about 90 feet deep, just a, a hole down. And we lowered a geologist in a cage down these things. And he had his little light on, and he was trying to figure out where the fracture was, you know, of the landslide. And, uh, believe it or not, we were able to stabilize this thing. The fix was 29 million bucks. Oh, wow. And, uh, the cost of the project, you know, Sam's the fix was only 50 million bucks. So we had a $29 million bust. And, uh, believe it or not, we didn't lose any money on the Deal's. Nice. It's a nice piece of property. I know that. I know that. Yeah. That's, but, and it's still there. It's actually hasn't slid down the hill. I'm pretty happy about that. Um, go ahead. You were gonna ask next question, Steve, or Yeah. Well, let's get into, uh, current day. Uh, you know, why don't you, uh, tell us about, uh, I mean, I'm a big fan of, you know, the plant and some of your current projects, but why don't you tell us about some of the current projects you're excited about, uh, that you're working on? Well, look, I think in a nutshell, we're very much design driven. And in a nutshell, you know, what I tell the team is, you know, our mission is to create highly differentiated workspaces that people actually want to come to work in. Right? We're not in the commodity business. And so it, it is creating kind of design forward workspaces that people want to hang out in. So, you know, there's a, a theme that runs through all of our projects. And, you know, people say, well, what's your style? We don't really have a style. You know, we have a process that we go through. And so every project's a little bit different. You know, what we do in Denver, you know, we're not gonna do the same thing in LA that we do in Denver. We may bring some elements, but you know, you, you try and take into account the bones of the asset, what's surrounding it, and you come up with a story, and the design really just expresses the story. So, you know, I think we have a bunch of stuff going on, but I think some of the stuff that's worth talking about is we bought an LA Times printing facility in Costa Mesa. Yep. And, you know, if you've ever seen a printing facility, it is just a gigantic warehouses with these printers inside of it, you know, that are 50 feet tall. And we looked at this thing and we were gonna convert it into mixed use. We were gonna convert it into super cool, um, creative office, and then we were gonna have a 50,000 square foot market hall, something that they just didn't have down in the area at all. Um, and what we did to that building is pretty unbelievable. I mean, it, it is just spectacular. And in the heart of Covid, a group called Andel came by and least that building as well as a new building that we built for them. Another 200,000 feet, 650,000 square feet in, in the absolute heart of, of Covid. And, you know, the, the user, I don't know if you've read anything about, you know, Andro, but you know, they're probably the premier military drone, you know, sort of new wave guys. But I think what we did to that building is, is, is, is pretty spectacular. And it's called the Press. Yeah, I'm looking Really nice. Yeah. Great product. Another deal that we did that we're in the middle of it, we're just finishing up, is a miniature version. It's like a mini me of the press. Um, and it's up in la and we bought, um, these old warehouses, which was just a, you know, they'd been built over a period of time. And, you know, we did something similar to the press. You know, we peeled back the, the roof line, we skeletonized it, we cut holes in it, created all this super cool indoor outdoor space, and it's called Casitas. And it came with some extra land. And, and now we're building another building next to it. I'm looking at that one right now. That, that's amazing. The way, uh, what part of town is that in? It's an Atwater Village, right? That's, It's an Atwater Village. Yeah. That's the Bohemian style, if I recall correctly. Yeah. Yeah. It's, it is Bohemian style and it's, it's surrounded by a bunch of houses. These are like 1100 square foot bungalows that are being completely gentrified. So you've got, you know, some of the Hispanic families that have lived there for 70 years. And then you've got, you know, these younger people, most of which, you know, are sort of in the media content business. So at the end of the day, I think, you know, when this thing leases up, it'll, it'll be all to all sorts of media content, you know, players. It's a very, Without a doubt. Yeah. I, I could tell you because at Water Village, my daughter lives there, and she's in the media business, and a lot of people live there because it's very easy to get to the studios. You just go over to Hollywood through, uh, um, uh, Los Fel where you go right into the Valley to Universal and all the other ones. So it's a great location. And you're right, a lot of the media, uh, there, and she lived in one of those houses that were 1100 square feet, and it was like, really? But that's what she liked. So Yeah. And, and we're gonna have a, an unbelievable restaurant on site there, you know, we've already gotta deal with a restaurant. It's, it's gonna be, it's, it's gonna be a co super cool environment for the neighborhood. Um, and now a couple other ones on, on the large side. Yeah, go ahead. We, we, we've got a, a couple of developments we're doing up here in the, in the Bay Area in life science. One of 'em is, we call Discovery Landing. It's a mixed use thing in South San Francisco where we're building a, a grocery store, about a 75,000 square foot grocery store, uh, about 180 ish apartment units, and then about 850,000 square feet of life science in three buildings. It's a, it's a big deal. I mean, it's, yeah, a billion billion, 2,000,000,003. Um, but I think the biggest deal that, uh, certainly that I've done to date, uh, is called Infinite. And this is land that sits right on the 1 0 1 right across the, uh, right across the freeway from, you know, the San Francisco airport. And this is a, a deal that, you know, at the end of the day, it's two and a half million square feet of life science, um, three and a half billion dollar cost. And we'll be building it over three phases. And I, and I think, you know, it's just gonna be next level. We actually, you know, um, obviously life science is, is a big part of what we do. And, you know, we're probably, you know, when, when you look at what we've done in the past versus what we're doing today, we're probably top 10 in size in the US in the life science sector. And we actually got into life science super early on in the late eighties when it was a terrible time to be getting into life science. You know, none of the users were making any money. They were, they were doing core research. They didn't have any products to sell. And all the interiors were highly specialized. So what worked for Tenant one didn't work for tenant two, right? So it, it, you're tearing this stuff out and, and we literally got our ass handed to us. So we limped out of that space kind of in like 94. And in 2012, we sort of looked back at the space and we realized that the users were now making money. You know, they had, you know, these drug discovery companies, you know, had drugs they were selling and gene therapy, all that stuff was sort of coming together. And all that highly specialized interior stuff was now modular. You know, a lot of that's just furniture. You just wheel it in there, you plug it in and, and you're off and running. So we got heavily back into it in 2012. And then in 2016, you know, I, being a biochem guy, you know, I was still talking to some of my old buddies who are now running drug discovery labs and things like this, and they all said, look, this whole convergence of data science and life science is real, and it's happening right now, and it's reducing the risk profile of investing in early stage, you know, gene therapy or drug discovery companies, you know, radically because, you know, you could speed up the time, the hit rate was like much, much better than it was. And they said, you're gonna see a tsunami of capital coming into, you know, early stage life science, you know, whether it's VC, capital, n i h capital, go down the list. And I said, well, my experience is is there's a 24 month lag between, you know, the capital tsunami busting into an industry and hiring, and you know, obviously the hiring drives the real estate part of it. So we sort of tripled down in 2017, and, uh, and I think we did it at the right time. Now, right now, you know, life science is, is sort of on pause a little bit given the cost of capital, but you know, it'll come back. Well, I've accelerated so much during the pandemic. Yeah. I'm looking at the Infinite Labs, uh, campus. Boy, that, that's a neat design the way you have it. Let Me, let me ask you about that, Barry. How do you market, like when's the first phase gonna be occupied, do you think, for infinite? You know, we'll start construction on that probably next may. Uhhuh. And do you have a brokerage team, uh, marketing for you? Do you have like an asking? Yeah, we, for that space, how do you, how do you market something like that in this environment today? We, you know, e everything we do, we do through brokers, certainly on the leasing side. Sure. Right. And even on the buy side, you know, even if we don't have a broker, we'll insert one into the, into the, into the process. We just think it adds value. Um, but yeah, no, I mean it's, yeah, it's, it's a big marketing effort and, and it's, and it's really an international marketing effort given sort of the size of that deal. Yeah. You know, it's, it is not gonna just be a, a, a local deal, but that design is by, is by design. It's a super windy environment. And you know, if you look at it, it looks like an infinity signal, right? Oh, definitely. And, and it, it, it is done to moderate the wind, Ah, So that those open areas, you know, that are sheltered by the building are windless, right? If you go across the freeway, which is where Genentech's offices is, it's none of the open spaces there you can use because it's so windy. So that was done by design to basically cut down the wind. Beautiful, beautiful. It, it almost mirrors the way the freeway is too, looking at the picture. Yeah. Um, how do you exit deals? I mean, how do you, I mean, do you just, you're in, you're out you go, or most of, from what I understand, you're, you're not in for a long term. I mean, most of the stuff you just, they take their course and then you move on. Is that correct? Yeah, I would say that that's correct. 90% of the time, you know, most of the money that we're using is kind of hot money. It's expensive money, right? Um, and, you know, given the fact that we're doing 500 to $2 billion a year of, of new deployment, we have to recycle our capital. So it just becomes an exercise of, you know, now there's certain a assets that, depending on the texture of the capital, like for example, infinite and, uh, the landing discovery landing will probably be a much longer term hold just because the capital partners U S A A on that deal, and, and they're planning on a long-term hold. So we'll probably stay in a deal like that much longer than we would the press or casitas, for example. Now, do you, do you finance these through conventional sources, or you put together, you know, uh, um, you know, funds to, to finance most of these transactions? You know, we've, we've done it all different ways. You know, in the, I'd say in the seventies and, and early eighties, it was high net worth European syndications. You know, in the eighties it was the insurance companies in the nineties, you know, we had a big platform with, you know, uh, Whitehall, which is Opportunity fund for, for Goldman Sachs. And the, like, in the two thousands, we decided to go directly to the capital. So in the early two thousands, we formed three fully discretionary co-mingled funds. Uh, I think at the peak we probably had 1,000,000,007 of equity under management. And I decided that, you know, as, as an operating group, I don't think the fund business is a good business. As an operating group. It's a great business if you're just an allocator, you know, assets under management, generate fees, all that stuff. But if you're the guys that are actually standing at the tip of the sword, adding the value, and you're throwing all your assets into a co-mingled, crossed up vehicle, and one or two things go wrong in that vehicle, that means you basically have years of work that's down the tube, right? Because you're the last to get paid, you know, the promotes paid. Uh, you know, in the fund business, there's kind of some oddball incentives. You know, in the fund business, you want to sell outta your best deals first so that you can generate a track record for the next fund so you can raise the next fund. So, you know, by design and, and you're promotes the last two or three buildings in your fund. So by design, your promotes getting paid by your three s*******t buildings in the fund, right? Right. And they're usually getting paid, you know, this is over a, an eight year period. I mean, a lot can happen, you know, during an eight year period. So, you know, we actually got out of the fund business and, you know, the fees can be intoxicating 'cause that's obviously the good part of the business. But to promote payouts, especially when you've got a partner in Denver, partner in la, two partners here, partners there, when their deals are crossed up with that guy's deal, you know, you, you get, you get some issues going on. So I think it doesn't work well from an incentive incentive comp perspective. So we went back to basically doing joint ventures with, you know, all the big allocators out there, whether it's, you know, BlackRock, Blackstone, Invesco, Goldman Sachs. I mean, a lot of the guys were still doing business with were, we were doing business with in the eighties, you know, principal, for example. You know, we started doing business with them in the eighties, and we still do business with them. So that's generally how we're doing this stuff. So, so for new, so for a new acquisition, you have the steel wave equity piece, and then you come up with other equity players for each different transaction? Or is it more of a Yeah. Standardized. Yeah. I mean, look, we're not trying to reinvent the wheel on every single deal. So, you know, there's, there's probably 10 groups that we've done a ton of business with, right? That you know, we'll, we will go out and talk to. And, and we have a sense of, you know, who likes big, huge, chunky deals versus who's more interested in smaller deals versus, you know, who wants industrial, who wants, you know, creative office and stuff like that. Each Deal's gonna warrant a different group for. Yeah, I think, so one Of the things I think is fascinating. So you're looking at a deal that's brought to you by, you know, broker, you know, or property you know, about, you get to that point where you've done the analysis, everything, and you have to pull the trigger and not pull the trigger. Are you more of an analysis guy, a numbers guy? Is it more of a gut feel? Like you, you just know intrinsically it's gonna add value? How do you, how do you pull that trigger and sign that deal? Well, look, when you're signing the deal up, that's one thing. When you're signing the deal and going non-refundable, that's a whole different thing. You know, I think when you're signing the deal up, you know, I'm more, I'm not an analysis guy, you know, I'm looking at, I rrr screw all those. I, I'm looking at, okay, what, what's our basis, right? And what's our return on cost? 'cause the rest of it, you're just making up numbers. I mean, you don't know what your, your I R R is gonna be. You don't know what you're gonna sell it for. I mean, you know, any of that stuff, right? And it's like, okay, can I live with that return on cost? Because we're pretty good at delivering to the budget. Um, you know, what the rents are gonna be, presumably. Um, and, and you either like the location or you don't. Now, when it comes to pulling the trigger to go non-refundable, it's less about what I think and more about what our capital partner thinks. Yeah. Since without them, It's Exactly. Yeah. He is the one that's, we're We're just left holding the bag. Right. So now I wanna ask you, is interest rates affecting you right now on, on your projects? Mean yesterday they raised it again. Uh, so what are the challenges? What, what are the pitfalls you're finding on, on that with the, the projects you have either coming up or, or, you know, because of it? Look, I think when you triple borrowing costs or a period of 12 months, you're gonna fracture the capital markets. And that's exactly what you've seen. And you've seen it across all the verticals. It's not just office that's getting pounded here, right? Multifamily, industrial, I mean, it, I mean, if you look at, you know, the REITs, you know, since year end, 2021, I think multifamily iss off 30%. I think industrial's off 25, I think office is off 50. Um, and so you got two, two things going on. You got your existing portfolio and the opportunity to buy, right? So I, I think anyone in the office space who's been active in buying office, you know, anyone who bought office in, in 2018 19, who's got debt rolling over Yeah. Isn't a big conversation with their lender. Yep. There's no question about it. Anyone that says they're not, then they're unleveraged or they're clueless, you know, because, you know, values are down. If, if you've got a fully leased core building, you don't have any issues. If you've got a partially leased building, you got big issues. Because values that were, when you put the debt in place, that was 50 to 60% of cost. Now today, that 50 to 60% is somewhere between a hundred to 200% of costs. Yeah. I mean, yeah. I mean it's, it's, I mean the, the values are half of what the debt is And the office buildings. Yeah. And the office buildings in the downtown areas are the ones that are really suffering more than any other others. The outlying area office seems to be doing. I'm in the lending business. So I'm, I'm seeing that from the lending perspective where the lenders don't wanna do it, they don't wanna take a chance. But I'm talking to some of the people that, uh, some of the developers and some of the owners, they're finding that their, uh, office space that is not in a downtown area isn't doing as bad. Are you finding the same thing? Well, look, our markets are very tech-centric. Yeah. Right? And the good thing about tech is that it can have these gigantic run-ups, which is what you've seen over the last really eight, nine years. The bad thing about tech is they go through these monster decompressions, like overnight. Yeah. So I would say across all these tech markets, you know, the, the, the suburban markets are probably fairing a little bit better. Um, but I think it's all, it's all, you know, you've got the capital markets part of it, right? Right. You know, that that's one side of the equation. But the other side of the equation, you know, that, that the office market is feeling that maybe multifamily or industrial's not feeling is, you know, you've got this work from home phenomena, you know, people are trying to figure out, especially in tech, less so, you know, kind of traditional corporate America, but in tech, you know, people are trying to figure out, is office space workspace? Is it show space or is it event space? Is it all the above or none of the above? Right? So, so you've got this debate going on. In addition, you know, I I think really in the tech space, you know, they over leased office space. Yeah. You know, over the last three years, I mean years when interest rates are basically zero borrowing rates, right? The focus is on top line revenue growth for these guys. It's not on bottom line, uh, profitability. And, and it's all top line revenue growth. And in order to generate that, they gotta higher people to generate those revenues. And you've seen this kind of over leasing of space, you know, in these tech markets. And, you know, we as developers, we're happy to accommodate 'em by building all these buildings. So, you know, we've oversupplied it, you know, and I think, my guess is there's probably a 30% overhang right now really, really of space. And, you know, we sort of have to burn that sp burn that off. Now, having said that, take San Francisco, which is kind of the poster child for urban Yeah. You know, going from A to Z Declined. Yeah. You've got the handful of class A buildings that are the core assets, that have views, they're leased and their rents are holding. If you've got a commodity building that, uh, has a bunch of space in it, there's no, there's no price that'll clear right now, there just isn't. Right. And you've, you've seen assets that, you know, would've sold for mid, high $700 a foot maybe 18 months ago are trading for mid one to mid 200 a foot. Right. So, you know, I mean, there's some things that sort of have to be worked through here in San Francisco and, and, you know, whether it's San Francisco, Seattle, Portland, you know, I mean, all of these urban centers on the west coast that are sort of tech centric, you know, have, have some challenges. Right? I mean, from, you know, doing the events that we've been doing and talking to the different office panels, certainly the suburban where people could drive, they have easy parking as opposed to mass transit. And some of the issues you have to deal with on your way to work, uh, certainly have been helping some markets like Orange County or San Diego versus downtown or the west side of LA compared to, uh, downtown San Francisco or downtown Los Angeles for Sure. But that's, I think that's right. Yeah. I think that's right. Look, but you know, that's, so that's the bad news. The good news is I think it's the best item. It's gonna be the best buying opportunity into the R T C days. Right? There's no question you're Gonna get it on the Jeep. Exactly. And if you could turn some of them into multifamily, I know on the physical side, it's a challenge. You gotta find the right properties, but certainly, or get the land cheap enough in a place like San Francisco. I mean, there's much no more beautiful a city than San Francisco. So the value's there, Look, we're bullish, we're bullish on San Francisco. I mean, look, it's got its challenges to be sure, you know, it's got its social issues, it's got, you know, rule of law, it's got all that stuff going on, right? But, you know, we just renewed our lease and here in a building, we're a 1 0 1 cal, which is, you know, one of the signature buildings here. And it forced me to go out and look at other space across the city for our lease. And what amazed me was San Francisco and a lot of these urban centers had been living off of this runoff of incredible demand where no one took the time or effort to amenitize their buildings. All these buildings are commodity buildings. You, you got a half dozen that, you know, the, the only amenity in San Francisco is views. Now if you look at our buildings, you know, non San Fran, you know, everything we do, it's hyper amenitized, right? It's like going to a, a resort, right? And I'm a big believer that in San Francisco, you know, although it's harder to do with vertical buildings, you can buy these vertical buildings and turn 'em into something that's super cool. You're probably peeling off the facade. You're punching in indoor outdoor decks, you know, all over the place. I mean, but it's expensive to do. But you can create hyper amenitized buildings that people will want to come to work in, but you have to buy 'em at damn near close to land value, not unlike, you know, if you're gonna do a residential conversion, right? 'cause in a lot of cases, the costs are gonna be like building brand new, try to work with something that's existing. Yeah. And you got the people that own it that don't, you know, they don't want to let it go for that much less, you know what I mean? Unless the bank owns it, and then you got a different, different situation. Well, I think you're gonna see a lot of bank owned real estate coming down the pike here. You know, in Portland, I think there's 32 deals under default. We actually were the first ones to give back a building. You know, people say, well, what are you talking about? And you know, when I was at U L I a year ago, and I run one of these councils, you know, one of these product councils at U L I, and we've got a very senior council, you know, most people are very senior, you know, CEOs and whatnot. And I was asked, well, what are you doing? I said, well, I just gave back a building in Portland, right? And I said, I feel pretty good about it. And people are looking at me like I, I'd lost my mind. I go, you know what? I wouldn't put a penny into that building. You know what we did? We bought this thing in 2018, the downtown Portland and the bones of the building were unbelievable. So we brought a little of LA up to Portland and created this unbelievable, uh, building, right? I mean, it's, it's super cool. You know, we're believers that lobbies are a waste of space. There's no reason to have a lobby in a building. When you walk into a building, you wanna walk in and, and feel like you're walking into a resort, right? So you, you create, you know, f and b and bars and all sorts of stuff in the, in quote, the lobby, right? And we did this, and we immediately signed it, and we delivered it in, I think October of 2019, and we immediately signed a 60,000 square foot lease with square in the building, and then Covid comes along, and this building was a block and a half away from that federal courthouse that was under siege for like, oh eight months. And it was just a war zone. I mean, and nobody is coming to downtown Portland to leave space. And we just said, you know what, you know, I think the loan was 270 bucks a foot, and the value on a good day was probably 130. Hmm. And, and we just said, and, and the lender wanted a $15 million pay down. And we said, uh, I don't think so. Right. You know, look, if you've been doing this long enough, you're gonna, my job is not to give back buildings, but my job is not to throw good money after bad. And On on, on that topic, are you, would you call yourself a net buyer or a net seller today? And if you are looking to buy properties, what, what geographic areas, uh, are of interest to you? I'd say right now we're neutral because institutional equity can't run fast enough away from tech office. I mean, there's a lot of buildings that I'd love to buy, but trying to raise equity right now to buy office is super difficult. I think it's actually a great kind to be buying office buildings. You Just gotta find some creative alternative financing. Yeah. I mean, and, uh, maybe it's foreign, right? I mean, but, uh, look, I, I would buy and everywhere we're located, you know, I mean, our footprint, I think has great assets, great industries, the values are hyper depressed. I just think it's a great time to buy. You know, it's, it's, it is hard to put leverage on it. So you're buying it unleveraged or you know, you're buying it with, you know, seller carryback financing. I mean, if you're buying an empty office building, there is no leverage. You cannot get leverage for that building right now. Uh, and, uh, and it, you know, I mean, you can get structured equity that's gonna cost you 12% or something crazy, but it's, uh, it's tough. But I do think that there's an opportunity right now. Right. Definitely. You know, and, and I've seen, you know, what you've been, uh, you know, some of the pr that that, that you've been putting out definitely a good positive contrarian view and to some extent, so it's a positive to see that. So if you, knowing what you know now, if you were starting out in the business today, what sector would you get in? And on the similar vein, what would you tell someone, a young person who came to you today and wanted to get into the business, what, what, what advice would you give them? Look, if, if you're gonna be in, you know, the office business is the timing business, and, you know, it's, it, it's sort of the opportunity business. But if you were gonna get into business and you were gonna be in business on a long term, I'd do multi-family. I, I just think that multi-family over time, um, is the least volatile. And if, if you can figure out how to, how to own multi-family buildings for the long term, you'll kill it, you know, office, if I bought a multi-family or if I built a multi-family today, 10 years from now, I would know a hundred percent guaranteed that facility is gonna be worth more than I built it for. For office. That's not the case. You know, office does one of these things, you know, it's a sine wave, right? So depending on when you got in and when you're planning on getting out, you may be in the chips or you may not be in multifamily over time you will always be in the chips. And, you know, we do multifamily, but really only in the context of mixed use. Right. You know, we don't want to go out and buy a piece of property and build multifamily on it. It is, it's too capital intensive. And it's, it is too difficult in California, you know, for for, for all the jumping up and down that the politicians are talking about how we need more housing and we need less expensive housing. There's not a city, city in California that actually wants to see more housing built there. Not one. No, you, you're, you bring up a good point. Would love to tell us, tell us about some of your personal interests, your hobbies, favorite sports team. Um, tell us a little bit about you personally. You know, I like to play golf. I like to snow ski. Uh, I used to be a co competitive water skiing competition, water skier, you know, way back when. Um, you know, I like spending time outdoors. I like to travel. Um, you know, I've got, you know, one kid who's actually working for me, which is a lot of fun. That's good. That's always good. Yeah. You know, we, we did something a little bit different. You know, we, he's crypto native, so cryptocurrencies, and through his lens, he sort of looked at what was happening in the digital security world and kind of what we're doing over here in the hard asset world. And he said, you know what, all the offer offerings and digital securities, you know, all these different coins and stuff, he said, they're, they're just backed by garbage. And he said, if you could take institutional product like you guys do and introduce it into this space and have that be a coin, he said you would kill it. So we basically started up what we call steel wave digital. Ah, right. And, you know, we started looking at, we started looking at the ecosystem thinking, well, okay, fine, you know, it's this, it's this whole, you know, fractionalization, tokenization, democratization, you know, all that stuff going on where you know, you in, instead of, you know, having restocks or whatever, you could buy, you know, small pieces of, of a property through smart contracts and, and whatnot. Blockchain enable stuff. We looked at that kind of naively saying, well, you know, let's, let's see if we can raise a a hundred million dollars on some exchange, you know, and you know what? We realize what the, the infrastructure is nowhere near deep enough to allow that today. It's got regulatory, it's got all sorts of issues, right? It, it's going to happen. I mean, it really will, but the institutions have to lead the way. It can't be retail investors, right? So we said, okay, let's take a little different tack here. You know, US institutions are probably five years behind European, Israeli and Middle Eastern institutions relative to this, this whole ecosystem. Um, we said, let's go do a complete risk-off fund. Let's raise a risk-off fund and let's just target high net worth Europeans, uh, who sort of view this ecosystem pretty interesting. And so we're raising a $500 million fund, and I just said, I don't wanna be a fund manager, but this is a complete risk off deal, right? Where we're, we're, we're buying assets with long-term leases in place to tech companies. You know, what was a five cap is now an eight and a half cap for buying a eight to 10 year lease, right? I said, you know, we're not gonna raise a fund doing the complicated stuff that we're doing, but we'll, we'll raise a fund doing the, the very benign stuff, and we're gonna give the investors the option, but not the obligation. So it's, it's all traditional LP investors, but we're giving them the option to convert their LP interest and do digital securities at a future date when the ecosystem allows 'em for secondary liquidity. Interesting. And, uh, you know, it's a, it's a no cost option to sort of play in the space. Right. And, uh, we're, we're getting actually a lot of traction in Europe, Israel, and u a e. Uh, so yeah, it's, uh, Well, when we do the follow-up interview and, you know, yeah. In a few months, we'll, we'll see how, how that is going. Yeah. We'll get, we'll get more on the, uh, the digital part Of it, but we are, we are bumping against up the clock, you know, that we gave you. But I did wanna, you know, before we go, you know, close out the show, are there charities, uh, things like that, that Steel Wave as a company, are you personally, you know, are, are involved in that? We could promote a little bit, uh, here, uh, to our audience, possibly get some, Well, look, if you go to our website, there's a, there's a, there's a spot on our website. What, what we do is for each of our different regions, because, you know, we're indigenous, you know, we, we've got people living in Orange County, we've got people living in Denver and Seattle and, you know, all these different regions. You know, what I do is I go to, to each of the regions and I say, look, you need to pick four charities excellent. That you think, you know, are, are are the right things to invest in. And every year we invest in, in those whatever four, they decide regionally. So, you know, we're probably investing in, you know, 20 different groups, you know, across our, and, and it's all, it's all regional and it's all geographic. You know, we're really not doing anything on a national basis. We're, we're trying to really make it community based. That's fantastic. Excellent. Well, Barry, thank you so much. You've been, uh, it, it's been a real pleasure talking to you and we learned a lot about you, uh, and, uh, more about Steel Wave and, uh, we, I definitely think it's worthy of a follow up, don't you, Steve? Oh, Definitely, definitely. I think our, our audience will get a lot of information. We'll learn a lot out of this. And, uh, It's a crazy time. Yep. It is a crazy time. And, uh, you know, the, and you know, the time you afforded to us, uh, today, you know, really appreciate it. Uh, I think it's something that, uh, people will look at for a while and, and get a lot out of. So, uh, if you had any closing remarks, uh, thoughts about, uh, where you're taking the company, uh, you know, feel free to share those, uh, with us. Yeah. Look, I think, I think my only closing remark is as dark as it seems today in the space, I've been through this enough to know that it snaps back way quicker than, than you tend to think it will. And you know, my sense is as soon as the rate hikes stabilize, and even if they tick down, you know, after two ticks down, 25 basis points, e as soon as that happens, it's gonna be Katie Bar the dog. You, you've got $350 billion of equity dry powder sitting on the sidelines, and all they're looking for is, is that downtick? They're not looking for it to get back to 2% rates. They're just looking for that simple downtick. And when that happens, you know, this whole thing will start to spin back up. I don't know when that's gonna happen, but you know, it'll, good point. Fantastic. Hopefully we're, we're close to that plateau soon. So, you know, again, great interview Barry. Thank you for the time. Thank you. Yeah, Happy to do it. We'll Be in touch soon for sure. Thank you. Thank you all guys. Great day. Good luck with the projects. Yeah, you guys take care. Bye. Hey, You've been watching Commercial Real Estate Talk with Steven Arne, sponsored by commercial real estate inspectors, Redwood Mortgage and Paramount Property Tax Appeal.