CrowdStreet's Darren Powderly is joined by Rachelle Strole, Owner and Partner at Capital Asset Management, to discuss how their build-to-rent products are focused on making commercial real estate better, the opportunities that can be found in retail and how good management in both business and commercial real estate is the key to pushing through in 2020.
Darren Powderly, Co-Founder & VP Capital Markets
CrowdStreet
CrowdStreet
Darren founded CrowdStreet in 2012 after identifying the need to radically improve people's access to commercial real estate investments via technology. Over his 20+ year career, Darren has transacted billions of dollars’ worth of commercial real estate investments and enterprise software contracts. Darren is a driven leader who loves building relationships based on mutual success. In addition to building businesses, leading teams and advising a prestigious list of national clients, Darren has personally owned commercial real estate, syndicated investment groups and developed properties from the ground up.
00:00:03 Hello, everybody, this is Darren Powderly. Welcome back to StreetBeats. Today I'm with Rochelle Stroll with Capital Asset Management from Phoenix, Arizona. She's joining us today from Kona, Hawaii. So I'm a little jealous of you, Rochelle, and, uh, why don't you take the mic and introduce yourself. Tell us a little bit about yourself and how you became so fortunate to, uh, to be in Hawaii today.
00:00:28 Well, uh, thanks for that, Darren. Um, you know, I, most people, I wish more people were here with me. Let's just, uh,
00:00:35 I know, I wish I was there with you too. I mean, or even in Phoenix, Arizona, which is where you're based. But, uh, you know, you, you've got properties all over the southwest in Hawaii, and so you've gotta get out there and do your job. So, you know, some, some people are, uh, smart about building a portfolio.
00:00:50 <laugh>. Yeah. Well, I'll tell you, I have a lot of people who wanna visit when I'm here. I got, it's funny how many people, uh, become your best friends real quick. Um, but, you know, we lemonade outta lemons in this deal. So Hawaii, you know, when they shut down, we have these two little boutique hotels here, and what do you do? I mean, it, it is what it is, so why not? So we gutted em. So we absolutely gutted em. And, uh, we're redoing 'em. And obviously we never thought of supply and demand. So, um, we gutted em thinking we'd be open when everything opened back up. But I had to kind of struggle to get the pieces over here, so, yeah. Um, that's why I'm here. So good. It's
00:01:24 Not well, and that's, that's smart way to take advantage of some downtime, uh, you know, and, and make lemons at, at lemonade, at lemons, as you said. But, uh, but let's take a step back. Tell us a little bit about yourself and your firm and, and how you became, uh, to be the, the owner and, uh, principal at your firm.
00:01:41 Uh, well, I'm gonna lie about the dates because then you'll know my age. So let's just say way back a while ago, I started in the lending side, actually in commercial real estate and real estate as a whole, um, many, many years ago. And then, uh, right before 2008, well, during 2008, we were fortunate enough to be awarded the asset management side of the first FDIC portfolio, uh, the structured sale portfolio. Mm-hmm. <affirmative>. So, you know, overnight we had 78, 70, no, 780 million worth of commercial real estate that had to be figured out. Wow. And so the company was formed around that, and it was, you know, it was a piece of paper and it was dogs, cats, car washes, half-built buildings, not build buildings, dirt that shouldn't have been, you know, and it became, it was just a, it was a crazy ride.
00:02:27 Yes. A crazy ride, but a blast. But it really, um, taught us a lot about a little bit of everything, Uhhuh <affirmative>, you know, and, uh, and in the hardest way, but the most fun. I mean, every day was a challenge. Um, but in the process, we just learned more out of the box. I mean, there was no box for that time, you know, 2008, nine, and 10. You know, please let let them never happen again. It made you think of things differently. I mean, you were just walking into the fire every day, but I think commercial real estate is really a dinosaur in a lot of ways. Mm-hmm. <affirmative>, I mean, mean we kind of stick into what we know mm-hmm. <affirmative>, and I think that forced us to be more innovative, to really come up with solutions, not go down the old paths. And, and in, in doing that, we've really created a company that, um, now we get to kind of pick and choose as opposed being thrown the dogs and the cats.
00:03:14 You know, we can choose the, the products we like, um, and, and grow around them, but we also, you know, it taught us to be innovative. And I think, uh, as a whole, that's what the company has done differently. Um, even our build for rent product, I mean, we're doing the herky wall, herky tech, so, you know, why, why build stick anymore? You know, why have the waste, why not do a foam and cement wall that's R 30 from day one? Um, you know, things like that. I mean, just change the way, change the norm.
00:03:41 Tell us about the business today. I was on your site, and I know that you guys provide a variety of different services from property management and brokerage to construction services, uh, even due diligence. And, uh, you still have an element of, of lending or loan assistance mm-hmm. <affirmative>, I saw that. So will you tell us a little bit about your firm as it stands today?
00:03:59 Yeah. Today we've really taken a turn. Um, our, the management side always grows because, um, it's, you know, good management is feet on the ground, uh, people, you know, people, there's good people mm-hmm. <affirmative> in great accounting. So the management side of the company grows. And of course, now we have our own assets. And, um, I think especially during the covid situation, you come to realize that management is a big part of keeping life together when the world is crumbling. Uh, you know, just pe good humans, talking to good humans the entire time. Mm-hmm. <affirmative>, uh, but the other side of the company, we've really gone into the development side. Um, we've really decided, especially learning from the F D I C structured sales stuff, um, to, to just build your own, make your own better. We started just, you know, buying assets and making them better.
00:04:40 Our, our big deal now is cap or, or commercial real estate better. That's a way that's our mantra at the office. How do we do commercial real estate better? That's all we talk about. But now we've really gotten into the development side. Um, uh, retail, uh, we did a retail project and actually opened it during covid, did not lose a lease, uh, did not stop construction. Um, and it's beautiful and fabulous in a great area. Um, and like I told you, the build for rent projects, we've got four of them under tow, and it's just the future. And
00:05:10 So you're doing, you're, you're serving as the developer, which is the, the, you know, one of the main reasons why we're talking today is because you're, you're developing your, your ownership side of your business. You have all these, you know, important other services, aspects of your business as well, which is really nice to provide, you know, a strong company with different revenue streams and services that compliment one another. So that makes a to a ton of sense for me. And, and I know you did just developed the retail center in, in Chandler, correct? Yep. The, what's it called? Steel,
00:05:38 The steel yard.
00:05:39 Steely yard. That's right. Um, very cool. Um, story behind that property, by the way. And thank, thank you. And sort of, you know, uh, tip of the hat and, and honoring the family that owned that, uh, that property prior too. So that, that also is, was a pretty cool part of that. And, and it is impressive that you were able to get, you know, the, the project project leased up and kept leased through construction as we all read the news that like, you would think that like every retail in the world was going away, but you actually completed the lease up of that. What do you think, let's take on retail for a second. Um, you know, what are your, what are your view? People think that retail's going to hell on a hand basket across the country, and it's, it's not right. I mean, there's, there's pain and then there's actually strength. What's your personal experience in, in Arizona and through your development activities?
00:06:26 Well, I mean, you know, Arizona is the Phoenix. It rises out of the fire all the time. But, um, I think with retail as a whole, I think that, um, I'm, I'm, I get disappointed when I hear all, you know, you say retail, especially in the lending world, and people just kind of jump back like you Yeah. You know, got lice, but, um, everyone wants to be entertained. Mm-hmm. <affirmative> people like to be around other people. Mm-hmm. <affirmative>, um, keep that in mind when you're building. I mean, people like to go out for dinner. They like a nice wine bar. Goodness knows. Uh, half my kids' tuition is probably in a wine bar somewhere. Um, but I mean, people love that, right? Uh, and, and that's not gonna change. We are not the kind of critters that like to stay locked up by ourselves. And so I think the creation of retail now is, it has to be unique. It has to have areas that are, um, livable. We call our retail livable. We have, you know, grass areas where kids can run around while mom sits there and has their glass of wine with their friends. So you have to, you make it walkable. Um, you have outdoor areas. It's, it's not a big box with Stle on the outside anymore. It's an experienced, yeah.
00:07:25 Yeah. I totally agree. What are, what are some of the other prop tech? You mentioned some technologies that you're, you're, uh, using, whether it be, you know, green building or some aspect of an ESG or environmental social governance for some, some of the different advances. What are some of those things that you see as a developer today that you're taking advantage of?
00:07:46 Well, like I said, you know, our commercial real estate better. Mm-hmm. I mean, you just think about it development better. Um, the fact that we are so stuck in the sticks in bricks and, and stucco and that there's no need, there's no reason and there's no benefit. So like for our build for rent projects, we have, we use a, a herky wall is what it's called. Herky Tech. Mm-hmm. <affirmative>. And it is a foam and concrete wall. It's R 30 when you put it up and you put it up like Legos. It is quick, it is gorgeous. And it does not burn no bugs, no mold, no, no. And it does not burn. It will put itself out. So why would you not use that same tech and I can build faster with less crude and make a quality product. Why would we still build with sticks?
00:08:27 Why do we still cut down trees to make them into sticks when I can actually pour foam and concrete? And by the way, my waste is zero. I have zero waste. I have no tools on site. Nobody can get hurt. You know, why are we still doing, I mean, I just, I, I think maybe the, the structured sale taught us a few things, which is think about what you're doing, not, don't just do it. Yeah. Just because your dad did it that way, or your grandpa did it that way, or your neighbor's doing it that way. Think about it for a little bit. And the tech is out there and it's not expensive. Um, it actually saves us money. So, um, that we're really excited about it. Our build for rent products, we expect the, the energy bills for those. Now average in an apartment in Phoenix now granite, it's Phoenix. You're looking 300, 400 bucks a month in the, in the summer we're at 60. Whoa.
00:09:10 Yeah. Well, holy cow, that's an incredible savings for your renters, right? Because usually the, the, the builder rent, these are single family product. For those viewer viewers who don't know what we're talking about, like it is a, uh, think about builder, a rent as a multi-family or apartment building, but on, you know, across, uh, Allander where they're single family homes, they're built si, you know, sometimes a little smaller average footprint, but not always. But a developer goes in and, and builds these single family units. Sometimes they're connected, but they're strictly for rent, right? And so instead of a vertical apartment building, it's spread out over, over a water area of land to create a single family rental community. Are there things that you're looking around the corner, you know, we might have a, a pretty interesting buying window here, uh, through the next 18 months. It's just starting to open, you know, just now. Where are some of the other, um, themes or, or where do you think you'll be deploying capital, uh, and be looking to bring in individual investors perhaps, uh, in the next, you know, 12 to 18 months?
00:10:10 Well, you know, we are, we are those people. So we're out looking every day. If what is where, where should we be deploying our money? Where should we be deploying our resources, even if it's just our intelligence? And, um, I think there's gonna be a lot of repositioning of, of assets that might sell at a proper rate. Now, uh, office is a great example. People are scared to death of office. But you know what, if it's the right amount of square footage and you can convert that to like a Flex Suite executive suite, um, you, like, I think I told you before, I, we've got a hundred thousand square feet of plex and exec. And during this tough, tough time, you never, you didn't have to Lieb. You could get smaller if you needed to get smaller, or you'd get bigger if you wanted to get bigger because you happened to be in an industry that was booming because of this, but you never had to move, leave your building.
00:10:52 So I think that, um, there's gonna be some opportunity in some of the larger office where, you know, it needs to be, it will have to be converted into, you know, not 15,000 square foot face plate or floor plates. Um, but I think there's gonna be some movement there. Obviously the build for rent is big. Um, retail is going to be, I mean, you, you, we always say Amazon proof your retail, but you can't, you know, you, you recreate that. You recreate that footprint so that it is entertainment and enjoy enjoyable. And yeah, you might not get as much, uh, square footage as you used to get, but you'll get the higher rents if you convert that into something that's enjoyable, everyone still wants to go and do. So, um, I see all of that. I mean, I see there's going to be opportunity, um, the ground up when you're in the Southwest, uh, or where, where we are, dirt is still at a price point where you can really create just about anything because your dirt is so inexpensive. So that's very rare. You know, there aren't many places that people want to be, and yet you can still buy dirt and build something neat and cool and different, like our build for rent with the, you know, with the new eco-friendly design. Um, I think that, uh, you know, in the, again, you know, you've chased, you kind of chased where the dirt makes sense.
00:12:02 I think you're in, uh, I love your positive attitude and I think, uh, you know, you see opportunities where others seas challenges. And I know you're realistic as well, and you stay away from a lot of things because you do see the, the, you know, hurdles too big to overcome. But I love that you see opportunities out there and you're going to find 'em for yourself and, and, uh, and for the investors that are, are with you. Really appreciate you joining us today. And, um, we'll look forward to working with you here in the near future. Uh, all the best to you and your family. Stay healthy, stay strong. And uh, to the guests out there, thanks for joining us for this episode of StreetBeats. Thanks.
00:12:38 Same to you. Appreciate everything. Thanks for your time.
00:00:28 Well, uh, thanks for that, Darren. Um, you know, I, most people, I wish more people were here with me. Let's just, uh,
00:00:35 I know, I wish I was there with you too. I mean, or even in Phoenix, Arizona, which is where you're based. But, uh, you know, you, you've got properties all over the southwest in Hawaii, and so you've gotta get out there and do your job. So, you know, some, some people are, uh, smart about building a portfolio.
00:00:50 <laugh>. Yeah. Well, I'll tell you, I have a lot of people who wanna visit when I'm here. I got, it's funny how many people, uh, become your best friends real quick. Um, but, you know, we lemonade outta lemons in this deal. So Hawaii, you know, when they shut down, we have these two little boutique hotels here, and what do you do? I mean, it, it is what it is, so why not? So we gutted em. So we absolutely gutted em. And, uh, we're redoing 'em. And obviously we never thought of supply and demand. So, um, we gutted em thinking we'd be open when everything opened back up. But I had to kind of struggle to get the pieces over here, so, yeah. Um, that's why I'm here. So good. It's
00:01:24 Not well, and that's, that's smart way to take advantage of some downtime, uh, you know, and, and make lemons at, at lemonade, at lemons, as you said. But, uh, but let's take a step back. Tell us a little bit about yourself and your firm and, and how you became, uh, to be the, the owner and, uh, principal at your firm.
00:01:41 Uh, well, I'm gonna lie about the dates because then you'll know my age. So let's just say way back a while ago, I started in the lending side, actually in commercial real estate and real estate as a whole, um, many, many years ago. And then, uh, right before 2008, well, during 2008, we were fortunate enough to be awarded the asset management side of the first FDIC portfolio, uh, the structured sale portfolio. Mm-hmm. <affirmative>. So, you know, overnight we had 78, 70, no, 780 million worth of commercial real estate that had to be figured out. Wow. And so the company was formed around that, and it was, you know, it was a piece of paper and it was dogs, cats, car washes, half-built buildings, not build buildings, dirt that shouldn't have been, you know, and it became, it was just a, it was a crazy ride.
00:02:27 Yes. A crazy ride, but a blast. But it really, um, taught us a lot about a little bit of everything, Uhhuh <affirmative>, you know, and, uh, and in the hardest way, but the most fun. I mean, every day was a challenge. Um, but in the process, we just learned more out of the box. I mean, there was no box for that time, you know, 2008, nine, and 10. You know, please let let them never happen again. It made you think of things differently. I mean, you were just walking into the fire every day, but I think commercial real estate is really a dinosaur in a lot of ways. Mm-hmm. <affirmative>, I mean, mean we kind of stick into what we know mm-hmm. <affirmative>, and I think that forced us to be more innovative, to really come up with solutions, not go down the old paths. And, and in, in doing that, we've really created a company that, um, now we get to kind of pick and choose as opposed being thrown the dogs and the cats.
00:03:14 You know, we can choose the, the products we like, um, and, and grow around them, but we also, you know, it taught us to be innovative. And I think, uh, as a whole, that's what the company has done differently. Um, even our build for rent product, I mean, we're doing the herky wall, herky tech, so, you know, why, why build stick anymore? You know, why have the waste, why not do a foam and cement wall that's R 30 from day one? Um, you know, things like that. I mean, just change the way, change the norm.
00:03:41 Tell us about the business today. I was on your site, and I know that you guys provide a variety of different services from property management and brokerage to construction services, uh, even due diligence. And, uh, you still have an element of, of lending or loan assistance mm-hmm. <affirmative>, I saw that. So will you tell us a little bit about your firm as it stands today?
00:03:59 Yeah. Today we've really taken a turn. Um, our, the management side always grows because, um, it's, you know, good management is feet on the ground, uh, people, you know, people, there's good people mm-hmm. <affirmative> in great accounting. So the management side of the company grows. And of course, now we have our own assets. And, um, I think especially during the covid situation, you come to realize that management is a big part of keeping life together when the world is crumbling. Uh, you know, just pe good humans, talking to good humans the entire time. Mm-hmm. <affirmative>, uh, but the other side of the company, we've really gone into the development side. Um, we've really decided, especially learning from the F D I C structured sales stuff, um, to, to just build your own, make your own better. We started just, you know, buying assets and making them better.
00:04:40 Our, our big deal now is cap or, or commercial real estate better. That's a way that's our mantra at the office. How do we do commercial real estate better? That's all we talk about. But now we've really gotten into the development side. Um, uh, retail, uh, we did a retail project and actually opened it during covid, did not lose a lease, uh, did not stop construction. Um, and it's beautiful and fabulous in a great area. Um, and like I told you, the build for rent projects, we've got four of them under tow, and it's just the future. And
00:05:10 So you're doing, you're, you're serving as the developer, which is the, the, you know, one of the main reasons why we're talking today is because you're, you're developing your, your ownership side of your business. You have all these, you know, important other services, aspects of your business as well, which is really nice to provide, you know, a strong company with different revenue streams and services that compliment one another. So that makes a to a ton of sense for me. And, and I know you did just developed the retail center in, in Chandler, correct? Yep. The, what's it called? Steel,
00:05:38 The steel yard.
00:05:39 Steely yard. That's right. Um, very cool. Um, story behind that property, by the way. And thank, thank you. And sort of, you know, uh, tip of the hat and, and honoring the family that owned that, uh, that property prior too. So that, that also is, was a pretty cool part of that. And, and it is impressive that you were able to get, you know, the, the project project leased up and kept leased through construction as we all read the news that like, you would think that like every retail in the world was going away, but you actually completed the lease up of that. What do you think, let's take on retail for a second. Um, you know, what are your, what are your view? People think that retail's going to hell on a hand basket across the country, and it's, it's not right. I mean, there's, there's pain and then there's actually strength. What's your personal experience in, in Arizona and through your development activities?
00:06:26 Well, I mean, you know, Arizona is the Phoenix. It rises out of the fire all the time. But, um, I think with retail as a whole, I think that, um, I'm, I'm, I get disappointed when I hear all, you know, you say retail, especially in the lending world, and people just kind of jump back like you Yeah. You know, got lice, but, um, everyone wants to be entertained. Mm-hmm. <affirmative> people like to be around other people. Mm-hmm. <affirmative>, um, keep that in mind when you're building. I mean, people like to go out for dinner. They like a nice wine bar. Goodness knows. Uh, half my kids' tuition is probably in a wine bar somewhere. Um, but I mean, people love that, right? Uh, and, and that's not gonna change. We are not the kind of critters that like to stay locked up by ourselves. And so I think the creation of retail now is, it has to be unique. It has to have areas that are, um, livable. We call our retail livable. We have, you know, grass areas where kids can run around while mom sits there and has their glass of wine with their friends. So you have to, you make it walkable. Um, you have outdoor areas. It's, it's not a big box with Stle on the outside anymore. It's an experienced, yeah.
00:07:25 Yeah. I totally agree. What are, what are some of the other prop tech? You mentioned some technologies that you're, you're, uh, using, whether it be, you know, green building or some aspect of an ESG or environmental social governance for some, some of the different advances. What are some of those things that you see as a developer today that you're taking advantage of?
00:07:46 Well, like I said, you know, our commercial real estate better. Mm-hmm. I mean, you just think about it development better. Um, the fact that we are so stuck in the sticks in bricks and, and stucco and that there's no need, there's no reason and there's no benefit. So like for our build for rent projects, we have, we use a, a herky wall is what it's called. Herky Tech. Mm-hmm. <affirmative>. And it is a foam and concrete wall. It's R 30 when you put it up and you put it up like Legos. It is quick, it is gorgeous. And it does not burn no bugs, no mold, no, no. And it does not burn. It will put itself out. So why would you not use that same tech and I can build faster with less crude and make a quality product. Why would we still build with sticks?
00:08:27 Why do we still cut down trees to make them into sticks when I can actually pour foam and concrete? And by the way, my waste is zero. I have zero waste. I have no tools on site. Nobody can get hurt. You know, why are we still doing, I mean, I just, I, I think maybe the, the structured sale taught us a few things, which is think about what you're doing, not, don't just do it. Yeah. Just because your dad did it that way, or your grandpa did it that way, or your neighbor's doing it that way. Think about it for a little bit. And the tech is out there and it's not expensive. Um, it actually saves us money. So, um, that we're really excited about it. Our build for rent products, we expect the, the energy bills for those. Now average in an apartment in Phoenix now granite, it's Phoenix. You're looking 300, 400 bucks a month in the, in the summer we're at 60. Whoa.
00:09:10 Yeah. Well, holy cow, that's an incredible savings for your renters, right? Because usually the, the, the builder rent, these are single family product. For those viewer viewers who don't know what we're talking about, like it is a, uh, think about builder, a rent as a multi-family or apartment building, but on, you know, across, uh, Allander where they're single family homes, they're built si, you know, sometimes a little smaller average footprint, but not always. But a developer goes in and, and builds these single family units. Sometimes they're connected, but they're strictly for rent, right? And so instead of a vertical apartment building, it's spread out over, over a water area of land to create a single family rental community. Are there things that you're looking around the corner, you know, we might have a, a pretty interesting buying window here, uh, through the next 18 months. It's just starting to open, you know, just now. Where are some of the other, um, themes or, or where do you think you'll be deploying capital, uh, and be looking to bring in individual investors perhaps, uh, in the next, you know, 12 to 18 months?
00:10:10 Well, you know, we are, we are those people. So we're out looking every day. If what is where, where should we be deploying our money? Where should we be deploying our resources, even if it's just our intelligence? And, um, I think there's gonna be a lot of repositioning of, of assets that might sell at a proper rate. Now, uh, office is a great example. People are scared to death of office. But you know what, if it's the right amount of square footage and you can convert that to like a Flex Suite executive suite, um, you, like, I think I told you before, I, we've got a hundred thousand square feet of plex and exec. And during this tough, tough time, you never, you didn't have to Lieb. You could get smaller if you needed to get smaller, or you'd get bigger if you wanted to get bigger because you happened to be in an industry that was booming because of this, but you never had to move, leave your building.
00:10:52 So I think that, um, there's gonna be some opportunity in some of the larger office where, you know, it needs to be, it will have to be converted into, you know, not 15,000 square foot face plate or floor plates. Um, but I think there's gonna be some movement there. Obviously the build for rent is big. Um, retail is going to be, I mean, you, you, we always say Amazon proof your retail, but you can't, you know, you, you recreate that. You recreate that footprint so that it is entertainment and enjoy enjoyable. And yeah, you might not get as much, uh, square footage as you used to get, but you'll get the higher rents if you convert that into something that's enjoyable, everyone still wants to go and do. So, um, I see all of that. I mean, I see there's going to be opportunity, um, the ground up when you're in the Southwest, uh, or where, where we are, dirt is still at a price point where you can really create just about anything because your dirt is so inexpensive. So that's very rare. You know, there aren't many places that people want to be, and yet you can still buy dirt and build something neat and cool and different, like our build for rent with the, you know, with the new eco-friendly design. Um, I think that, uh, you know, in the, again, you know, you've chased, you kind of chased where the dirt makes sense.
00:12:02 I think you're in, uh, I love your positive attitude and I think, uh, you know, you see opportunities where others seas challenges. And I know you're realistic as well, and you stay away from a lot of things because you do see the, the, you know, hurdles too big to overcome. But I love that you see opportunities out there and you're going to find 'em for yourself and, and, uh, and for the investors that are, are with you. Really appreciate you joining us today. And, um, we'll look forward to working with you here in the near future. Uh, all the best to you and your family. Stay healthy, stay strong. And uh, to the guests out there, thanks for joining us for this episode of StreetBeats. Thanks.
00:12:38 Same to you. Appreciate everything. Thanks for your time.