How to Invest in Commercial Real Estate

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Episode #031 - Building Relationships and Adding Value in Commercial Real Estate w/ Grant Gary

by Criterion, Braden Cheek, Brian Duck
May 4th 2021
00:00:00
Description

Have you ever wondered how the big CRE firms get their business? It may be as simple as building relationships and adding value where you can. Today we have special guest Grant Gary from The Woodmo... More

another opportunity within the power center spaces carving up pads and I think historically, you know, you had a five per 1000 parking ratio or they really didn't take into account the cross shopping component. So you have what you have is a lot of these shopping centers that were over parked, we say pull up on google earth today, see if there's a certain area of oil slicks in the parking lot, if not, that's probably not being utilized. And I think the retailers were historically resistant to releasing the aria or CCR that said you couldn't develop that section of the parking lot. So, and I think when you look at that coupled with cities recognizing it and lowering those parking ratio requirements, that's another area where you can really not only add interesting, you know, again financial value, you can actually bring another use and another concept of the center that may be just what it needs to kind of revitalize it. Hello. Hello, what's up guys? Welcome back to how to invest in commercial real estate. Super excited about today's episode. We have a special guest Grant Gary with the Woodmont company. Um Grant is, I don't know exactly what the title is.

What's your title? Uh two titles, President brokerage services in principle would want okay, so president brokered services in principle. This is our third. About to do our fourth probably before the end of the year. Fifth maybe sixth joint venture with working with you guys. Um several of those have been kitty academies, there's some other retail opportunities in the pipeline, maybe some industrial opportunities anyway, super excited to have you on the show, Welcome, thanks for coming, great to be here and I'll just say again, Brandon and brian, certainly very appreciative the relationship with the criterion fun and Joel, it's been great to have the relationship with you and your team as well. Thanks thanks for having Yeah, so president of brokerage services, obviously you probably do a decent amount of brokering brokering is you know, putting somebody who needs a building, you know, they need a building, they need something built, it was probably a decent mix between that, but you know, just just getting started in brokering, what's the biggest piece of a piece of advice or what would you give somebody? Um you know, it's just step one certainly, you know, and I think again for, for Woodmont, our focus is and has been retail, you know, for the 41 years now of the company, you know, we operate three primary divisions, the brokerage division, we have a development arm, we also have an asset management, property management arm, but to go back to your question, you know, in terms of brokerage, you know, the key, you know, and really what has sustained our company, you know, while the technical is facilitating transactions, identifying opportunities, I think for us it's really building relationships and adding value, you know, and that's really how we look at it, there's a lot of people that can push paper but to really come in and add value and that value is changing today, you know, I think as you continue to look at the way transactions happen, the amount of data that's available.

So I think but that the key component is where can you add value uh in that commercial real estate transaction cycle, how many, how many years you've been with Woodmont? I have been with Woodmont coming up on 12 Years. 12 years. Okay, so I want to hear how you, how you got started with Woodmont? Absolutely great question, Joel, thank you for asking. I was fortunate in one of those, I always knew I wanted to be in commercial real estate. Uh I'll say I didn't know I wanted to be in retail and so I grew up in Austin and came up to Fort Worth was going to TCU, I had actually gotten my real estate license in high school in high school in high school who gave you the bug, you said you want to be in commercial, I was gonna ask who's who's getting you interested in commercial real estate at such a young age. You know again I kind of often reflect upon that and it wasn't my family wasn't specifically in commercial real estate. I actually started as a caddy in middle school and I think I was you know I kind of look back maybe that was part of what turned me in the real estate direction but as I say I was fortunate in that respect and so what I got to Fort Worth at TCU really after my sophomore year, I was looking at that time for an internship and was looking for commercial real estate internship.

Woodmont company was the largest commercial real estate firm in Fort Worth and so I just knocked on the door and uh I guess as the story goes, I was kind of the runner, the intern for that summer, as I said, I clean the fountains, answered the phone to the front desk, I love and uh you know, I, I, I I saw an opportunity, you know, at that time and Stephen the co founded the company fortune to give me that opportunity to start doing brokerage in my junior year. So I was going to school full time and started in the brokerage field from there, wow, that's a really cool story. Great story. Well, it's, it's good for listeners that are, are thinking about getting in the game, it's just knocking on the door and saying, hey, I'm here, I want an internship now. If you're, you're trying to replace, you know, $100,000 your job, it's gonna be a little tougher for you, but just getting in the game and getting around people, I think about breaking your start at precision, you just got in the room and you and you were willing to do whatever it took and that's, that's a key, You start absorbing the knowledge of everybody that's at Woodmont group steven, I'm sure you absorbed a lot from him just by being there, so that's cool.

Yeah, I mean, I think that that's it, certainly. I mean, again, we've always been a big proponent of ego, isn't gonna take anywhere, I mean, it's putting your head down, working hard, not being, you know, nothing's too good for you to work on and our company's still operates in that manner, you know, and I think those are a lot of the keys and we've been fortunate to have a lot of good young new team members come in and they take that same approach, you know, it is especially in the brokerage business, I mean, you get out of it what you put into it and that applies to a lot of industries, but I mean, certainly in the brokerage environment, you know, and being able to kind of chase a lot of things, are not a lot of things all at the same time, really requires, requires that discipline. So in the beginning you said, you know, you guys are kind of compartmentalized in three different boxes, um, asset management, brokerage and, and development, let's just briefly touch on on asset management, what does that look for look like for you guys, um, you know, what is in the portfolio and I guess just briefly, what does that look like before we move on to the other two. Yeah, absolutely, and I'll just say, uh, the gentleman runs the asset management property management division for us Had great foresight, you know, in the 2007, years with the evolution, you know, we're going through maybe our second or third evolution right now in the retail space and really started to forge some great relationships with the special servicers.

And so at that point we really developed specialty teams for enclosed regional malls, outlet centers coupled with our traditional power center background within the retail space. So fast forward to today. I think we operate Between 3rd party as well as our own portfolio, about 26 million square feet of retail and that's across about 26 states. That's a, that's a big number. That's awesome. So it, we're fortunate, as I say, that's forged in relationships and, and hard work and, you know, I think, you know, for us we're able to bring an owner's perspective, you know, to a lot of those assets and so we're not just a third party manager, you know, that that's another key component of how we approach, you know, shopping centers, whether it's when we own and operate or whether it's when we're owning and operating for our operating for a third party. Yeah, let me break that down just in case anybody doesn't know. But just to clarify, you guys, you know, somebody is, is bankrupting or defaulting on the debt maybe that and covers an asset, the debt or the mortgage holders coming in and foreclosing on the property and then they're not in the business of running and operating this real estate.

So they call you and they say, hey Grant Woodmont, we need you guys to run this for us until we can sell it or get off our books, correct? That's exactly right. And I think, you know, well there's certainly complications to all the various aspects of commercial real estate. At least. We like to think retail is one of the more complicated, you know, putting the puzzle pieces together. I think when you look at a lot of these assets shopping centers, you have co tenancy, you have exclusives, you have prohibited uses, you have arias, you have C. C. R. S. When you go through, you know, a bankruptcy or just operating those assets and understanding all those moving parts and how they impact value, how they impact leasing, how they impact disposition. You know, I think you really need someone that's, that has that uh you really kind of expertise and just historical operating history to really know how to navigate all those various really operating covenants governing ultimately the value of an asset brian brian, you remember when we looked at that mall in Northwest Arkansas. Uh yeah, we almost bought, it was a smaller mall.

I don't even know we should look at what happened to that, but if we had bought it, we probably would have turned it over to the lender and these guys be managing. All right, so do you guys buy property? Just the Woodmont to own? We do and talk to me about how a company like yours, how would you guys decide in today's market, what type of asset that you guys would go after versus trying to sell it for the owner? You're gonna, we're gonna buy this. What would that look, what would that look like? Sure. So, I mean, I think it starts with where can we add value? You know, I think in one of the acquisition elements that we're focusing on today Is the power center space. Uh you know, and I'll say there's kind of two channels, one, you know, when we looked at, you know, going kind of back 18 years ago, we said, should we pivot, should we be in the multi family space? It would be in the office. This is the answer to that question. It's not that we don't think those are great spaces. We just said really our relationships where we had values in the retails. We said we don't think it's going away. It's evolving ground of development is a challenge for those large scale projects, but we think there is still a way and there's still a need for, you know, for wall brick and mortar retail.

So we leaned in and one of the areas was again starting to identify power centers that we can acquire at the same time, we shifted our ground up focus really to the single tenant at least space as one of the areas where we, we had had that in the, within the portfolio, you know, as another skill set and another value add component. It hadn't been a primary focus. So we moved that into more of a primary focus and identifying ground up singleton and at least development opportunities really across the country where we historically operated as well. You're not buying any freestanding, you're, you're developing uh single 10ant predominantly developing that said, when we have a relationship that's in place and where there's an opportunity where there could be to acquire an existing facility and backfill it or retrofit it. We are looking at those opportunities as well. And mostly think if I may, I think there will be a number of those within the restaurant space. You know, you're seeing these larger restaurants that have had challenges are these, these concepts that just are no longer viable. You know, the same thing for some of these larger banks.

You know, we think there's gonna be a number of redevelopment or repurposing of those assets really across the country. The power centers that you guys are looking to buy, I guess there's some vacancy that you're gonna bring some value to by finding a new anchor. That's one of the avenues it is, I think in looking at whether or not you can return it, you know, another opportunity within the power center spaces carving up pads And I think historically, you know, you had a five per 1000 parking ratio where they really didn't take into account the cross shopping component. So you have, what you have is a lot of these shopping centers that were over parked. You know, we say pull up on google earth today, see if there's a certain area of oil slicks in the parking lot. If not, that's probably not being utilized. And I think the retailers were historically resistant to releasing the aria or CCR that said, you couldn't develop that section of the parking lot. So, and I think when you look at that coupled with cities recognizing it and lowering those parking ratio requirements, that's another area where you can really not only add interesting, you know, again financial value, you can actually bring another use.

And another concept of the center that may be just what it needs to kind of revitalize it. It's a genius idea. It's so easier said than done. It does take time were for the investors that are listening, they were on the perimeter square deal. We're actually working on putting a pad there. But as you stated, we have to get wal mart to agree to release whatever hold they have on the parking ratio or that part of the parking lot, that should be easy, should be really easy to just call up SAM and say, hey, I want to make some money on your parking lot. I think they're gonna charge us. Maybe you can speak just for a second, what do you think I'm gonna encounter there? They say they're open to doing it, but I think there's just gonna be a some type of monetary fee. You know, I'll say one of the values that we see from a lot of the retailers, they must have a whole actuary department within their uh within the real estate section that deals with the waivers and restrictions. And so, you know, I think it's changing again historically, um they didn't want it and then, you know, again, it was, well we'll allow it, but it's almost at a cost that wasn't financially viable.

And I think you're starting to see more of a partnership there where there may still be an ask, but it may not just be a hard financial ask. And I think part of that is they're saying, okay, this is actually adding traffic to the shopping center and not taking away parking. I think that's one of the biggest changes where you're starting to see more of the data that's available out there to be able to really demonstrate. Okay, today, if I bring in this, you know, fast food concept of this coffee concept, it's gonna bring x amount of more traffic and actually increase my store sales and that, that was one of the missing pieces. I think historically and being able to unlock more of that value. But I would be prepared and underwriting in your Proforma some additional consideration. Payable at walmart, interesting. All that's fascinating. I've really appreciated watching the partnerships with with criteria and hopefully precision equity can do some stuff with you as well. That would be awesome. Yeah man. Um Thanks for coming on the show again. I really appreciate it. Absolutely. No, we're certainly appreciative, certainly look forward to having the opportunity to work with precision as well and uh continue the relationship.

Absolutely, yeah. Thanks for your time. All right guys, well we will see you next time on how to invest in commercial real estate. Thanks again. Thanks. Thank you. Yeah.

Episode #031 - Building Relationships and Adding Value in Commercial Real Estate w/ Grant Gary
Episode #031 - Building Relationships and Adding Value in Commercial Real Estate w/ Grant Gary
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