CrowdStreet's Darren Powderly is joined by Peter Lewis, Founder and President of Wharton Equity Partners, to discuss the future of industrial real estate. Coming off a rather successful year in comparison to other asset classes, Darren and Peter dive into how technology is looking to improve this particular sector, how more companies will start shifting towards online business models that will require additional warehousing to aid in shipping and what both investors and sponsors should keep in mind when evaluating industrial.
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.
00:00:04 Hello, everybody. Happy 2021. Happy New Year. Uh, welcome back to StreetBeats our 2021 edition. We're getting started this year with Mr. Peter Lewis. He's the founder of, uh, Wharton Equity Partners out of, uh, the tri-state area out of New York. New York. And Peter's been, uh, running his own firm there for I think, 34 years. Maybe it's 35 now. Peter, uh, Peter and I have, uh, gotten know each other over the last year, uh, talk about industrial real estate. He participates, uh, not only in industrial, but a multi-family. He's got a very deep background in all asset classes of commercial real estate nationwide. Uh, today we're gonna focus in on industrial and multi-family. And so, Peter, welcome to StreetBeats. Welcome to 2021. Why don't you introduce yourself, please.
00:00:49 Thanks so much for having me. I'm really excited to be on and, and I'm really, um, I'm amazed by what you guys are doing. And, and, uh, just by a quick reference, cause I started my career working on Wall Street, uh, and many years ago. Um, and, and during that era, uh, there was something called syndications, uh, which were basically taking properties and chopping up into thousands of pieces and then selling out the interest to our brokers. Mm-hmm. <affirmative>, fast forward to today, and what you guys are doing is exactly what we were doing those years ago, but was pre, pre-internet. Um, and today what you're doing is providing, um, investors the opportunity to invest, you know, smaller amounts of money, um, in institutional great sponsors. And I've watched a number of firms like yours try to do this, and we know who they are and I've been courted, if you will, um, to be a sponsor, et cetera.
00:01:48 And I made a conscious decision that I didn't like the quality of the work they were doing and the, and the type of people they were attracting. Cuz we're very mindful of our reputation. But I can tell you right now that you guys CrowdStreet are doing it right. And, and the team that I've met are really first class and I'm, I'm honored to be, um, speaking on this platform today. Um, thanks. So anyway, I started this after leaving Wall Street. I, I started my firm, uh, and I don't know what drove me to do this, but I started in the home building business. Uh, my parents are still recovering from that cuz I was a serious finance and accounting major. I didn't know what a hammer looked like. Um, but what I loved about the home building business when I was young is you sell a house and make some money. You know, that's what it was all about as a, as a kid, excuse me. So I grew up in that business and what the great thing about it for me was because I was actually on the site yelling at the sub, learning how to make payroll, dealing with contractors, dealing with municipalities. I really understood the guts of how properties were built. Um, and it's different than being a guy who's sitting on Wall Street who's doling out money and thinks they're real estate guys, right?
00:02:57 They're totally different.
00:02:58 You have, you guys also have, you have real estate DNA inside your firm, which is important when you are an allocator of capital. You need to understand the, where the sponsor sits and, and, and that's how you become a really good, um, you know, person or firm in, in the position you're in. Uh, so anyway, I started out doing that, uh, and really for the first 12, 15 years of my career, uh, became one of the larger tri in the tri-state area, uh, builders of for sale housing. Uh, and, and ultimately we came to an inflection point, uh, where the big issue with, with, with housing is that's ordinary income when you sell a house because you were dealing. And, uh, you know, after a while when you start making some money, you actually think about that. So, uh, we pivoted into self-storage early in my career because I started seeing it.
00:03:53 The institutionalization of self-storage, self storage is relatively a new business in the scheme of real estate. It wasn't around during the Roman times. I, I can assure you. Um, so, um, the, we started moving to, to self storage and we started buying, um, storage facilities in the Hamptons. And one by one going around the different owners, we aggregated 80% of the market. So my firm's theme has been throughout the years to try to be a little bit ahead of where we think things are going. And so we did that successfully with self storage. Uh, we, we became a pretty big player. We sold the P portfolio to a couple of institutions along the way. Um, we did the same thing. We saw, um, pending doom in the credit markets in 2006 with all the liberals, um, debt that was going out mm-hmm. <affirmative>. And we put together an opportunity fund and we had a bunch of money when the markets collapsed to buy real estate.
00:04:48 Um, and then we were big buyers of multi-family, which you alluded to starting in 2012, we started buying southeast value ed multi-family, which today everyone's saying, oh yeah, look at that, you know, everyone, everyone's doing it. But in 2012, people were still licking their wounds and no one was buying stuff in Charlotte, but we were able to buy in Charlotte as an example at a seven plus cat, right? And the cost of debt, whether it's Danny or Freddy, is the same there as it is buying in New York City. It's really one of the anomalies of the world and why multi is so liquid. Mm-hmm. <affirmative>. So we were able to get tremendous cash on cash returns early on. Uh, and we built that business up to a fairly significant amount, uh, and wound up making a decision in 2016 17 to move out of multi, we sold everything, I think it was 500 and something million dollars worth of properties over a period of time and moved everything into industrial mm-hmm. <affirmative>. And, and the reason I made that move into industrial is I really started feeling that this is a secular change in, in the way that our world is going to look in the future with respect to e-commerce and industrial was, was still operating in the 19th century mm-hmm. <affirmative>, you know, these old ugly buildings. You know, it, it's, yeah. Industrial's never been really the, um, the fair hair child of, of the asset classes definitely
00:06:11 Rough around the edge. I like those transitions. Right. I love when things are changing when, when you really feel things are going to explode trying to get there at that point. And that's why, like with the value add properties in the southeast, I just sensed it here, we're feeling the same thing. The difference here is that this is a change where we're still really early, uh, and, and we're seeing the convergence of technology and real estate come together in a way that's never happened in the real estate business ever. Mm-hmm. <affirmative>, uh, now maybe elevators in the office buildings or, you know, like minor things like that. But this is a whole 'nother play, right? This is what is our world gonna look like three to five years from now when you have driverless trucks running around or, you know, like robots, which will absolutely be in these facilities.
00:07:01 We are early in the whole automation of these warehouses. Um, and, and ironically, you know, one of the things I read about the other day where everyone's pushing for $15 minimum wage, what they don't realize all they're doing is heightening companies desire and needs to move to robots by, by unionizing, by pushing for higher wages. What it's doing is ex expediting, uh, automation, besides the fact that we have enough technology that didn't exist before. But, so there is no question in my mind, um, this revolutionary change that's going on, and let's just think about all the other asset classes. They, they don't have this magnitude of change happening mm-hmm. <affirmative>. Um, and, and it's the change that creates the opportunity in the world we're in today with the proliferation of information, it's easy for investors to assess an opportunity that's transparent. Everyone comes to the same conclusions, they're already in the same models.
00:07:58 It's only a question of how fast your rents are growing and what's your exit cap and how much money am I spent? You know, like there's very basic parameters. Um, so, so what's happening is properties that are obvious are getting overpriced and they will continue to get overpriced in my mind. Um, or or priced very, they're taking at the entrepreneurial profit. Industrial is still so early and so changing that I think that if you make the right decisions, um, over the next number of years, there's big rewards here. Uh, and, and, um, you know, things you gotta worry about is obsolescence, right. You know, what are you buying the right properties or, you know, there, there's, there's definitely here. Uh, but you know, again, having done this for 30 plus years, I, I would go on record and saying, this is the greatest opportunity of my career, uh, of what's happening in industrial.
00:08:51 I love bold statements like that, Peter. And, uh, you, you have been around the block block and, and a lot of people would say, you know, single family residential, so full cycle, you could go full cycle and get back into full cycle, uh, uh, love that business residential because they're killing it. Right? That's another major, major trend.
00:09:07 I love that area. Again, big trends, right? Yeah. These are, these are trends that irrespective of interest rates, irrespective of whether it's Trump or Biden or anyone else, this is a force you wanna, you wanna try and invest in forces that, that really have that, that, that, that, and they're not fabs. Yeah. This is a trend. And again, COVID has had an impact in ways which we will feel. We've thrown a little stone in this water and you're starting to see the ripples, but Covid is expediting people's flight from, uh, from cities and other areas, and they're saying, Hey, I could live in North Carolina on Lake Norman, uh, you know what I mean? And have a great life and buy a house for X dollars. It's half like you're people are actually thinking about it, but they're actually doing it now. Uh, yeah. And so it's really, what's so fascinating about Covid is it's, it's, it's forcing change.
00:09:55 Oh, absolutely. So, you know, a couple of big themes in industrial multi-family, and I, I don't know if you want to talk about both because the different themes are, are significantly different, but, you know, let's focus on industrial first. And you mentioned a lot of things. I wanna sort of dissect that a little bit more. You know, what are some of the big themes that you see impacting, uh, industrial specifically? Um, because a lot of people would say, uh, you know, Peter, isn't it a little long in the tooth? Isn't the trend for industrial already a little long in the tooth? It's been hot for a while mm-hmm. <affirmative>, it's kind of the darling asset class. Clearly a lot of institutional investors are chasing, uh, you know, assets per lodges. Mm-hmm. <affirmative>, there's a lot of big money out there, you know, so how does the individual investor, you know, um, you know, get over the fact that they're buying in sort of peak values, you know mm-hmm. <affirmative> and how should they think about that?
00:10:49 Mm-hmm. <affirmative>. So it's a, it's an interesting, uh, question. Uh, and, and here's how I view it, and I don't like investing like this, but I, but I, but this is a, I will, I will go on record in telling you that along the eastern seaboard from New York down to Philadelphia, you will not see single digit rents in within the next 12 months. They will, they will vapor us. We will be moving into a world where rents of 12, 13, 14, $15 a square foot will become the norm. So what may feel like today, you know, FRS is, is going to, you're gonna look back in retrospect and say, why didn't I invest? Now, let me give you a quick snapshot of something. When we wound up buying a building recently in Philadelphia, which was a 280,000 square foot warehouse, uh, which was a former subway repair facility.
00:11:40 And, and we were trying to do comps. The brokers were saying, first of all, why are you buying in this area? It's the desolate area. The building's crappy. You know, it's South Philly, it's dangerous. Um, and, and, and, and by the way, way renting this market is 6, 6 50 a foot. They went from 6 49 1 year and to 6 51 the next year. And people are doing high fives. You know, they, they, they think that's a big jump. But when I started drilling down and said to the brokers, well, tell me what the vacancy factor is for let's say 50,000 feet and above. And they said, well, there's nothing vacant. I mean, you know, that's, and, and the more we dug into it, the more we started realizing that the, the product wasn't there for the audience that was looking. Uh, and so we took a gamble and went in and paid the money for the building, which was not a crazy amount of money, uh, and fixed it up.
00:12:27 We were fortunate than Amazon wound up leasing the whole building at 50% higher than we had projected. Now. So here's the, here's the moral of that story. Where, where you need to be looking is not where everyone else is looking. The, the, the pervasiveness of e-commerce is just starting to permeate through our economy. So markets like, there's, there's markets, old bids. You're gonna see these become, um, interesting op opportunities for, for last mile. Um, and so when people say where it's long in the tooth, it's it for the obvious suspect kind of deals, it's long in the tooth. But I, again, I would argue, what, what seems long in the tooth today? Wait, wait five years. And then you really see, uh, you know, what's gonna happen.
00:13:14 Yeah. Um, just to, you know, that, that's a great point cuz what, what drives value more so than anything else. Mo you know, usually more than interest rates, unless you have runaway inflation, which affects cap rates, which we saw in the seventies, haven't seen since then. Uh, hopefully won't see any time soon that that impacts like, um, you know, uh, you know, taxes, impact values mm-hmm. <affirmative> of government policies changing and we'll talk about that. Um, but what drives values more so than anything else in all real estate is income. And, and that's what individual investors need to think about when it comes to industrial, like pure expensive today. But as you said, you know, we just had this major step function growth in e-commerce Right. And industrial real estate nationwide. Right. And, and the rents are gonna rise, you know, when they have the opportunity, when landlords have the opportunity to increase rents, whether it be new building or turning of leases, right, it's gonna grow way more than 3%, which is often the common sort of annual, you know, increase in rents when you're locked into a release. So, you know, the, the, the, the, the step up in the, in the fundamentals of, of the industry are gonna cause rents to rise dramatically, which will present presumably, uh, some, you know, some interesting investment opportunities. So, great point. I agree with you by the way. Uh, and we are, uh, very interested in, in doing more industrial in 2021 than we, uh, ever have. It's hard to find, and you're right mm-hmm. <affirmative> you to be looking, you know, where pro lares is not looking and, and you know. That's right. Amazing.
00:14:46 It's hard work. You have to have a dedicated team that's unearthing everything. This, and you have to feel the, you have to feel the pace of leasing. Yeah. I'll give you some examples that are going on right now. So, eight A is kind of the epicenter of big boxes on the East coast exit eight A and the Jersey Turnpike Allander costs, which were $70 a square foot buildable a year and a half ago maybe, and, you know, 8 65, 70, 75, they're, they're now touching a hundred dollars a foot.
00:15:15 Wow.
00:15:16 Exit eight, which is south of there is now 65 to 70 where it was 40, let's say a year and half ago. So what that means is rents are gonna have to rise, um, for these developers to meet a threshold return. And what that's gonna do now is lift everything else up. Our deal in Philly, for better or for worse, has now set a new benchmark for where, you know, where rents are going. All the guys who are coming outta the ground are pointing to our comp and saying, Hey, look at those guys. They got that I can and therefore I'm gonna get that. So Yeah. And here's the other important thing. Here's, here's this is this is something really important to focus on in New York City. Retail rents were skyrocketing mm-hmm. Because landlords were paying more and more and they were trying to squeeze them, but, but the, but they, what they were missing is that a boutique or a restaurant could only pay so much in rent per volume staff.
00:16:13 And so as the world has now changed, those stores are staying vacant. They're not getting the tenants because their rents outstripped the demand and the ability to pay this is, this is far from what's happening in industrial because industrial rents are 5%, give or take of the supply chain cost for a company. If they go from five to seven, it doesn't really matter. Right. So, right. They, the, the biggest thing for them is in many ways is a matter of survival is a matter of making sure they maintain their market share with their, with their, with their customers, getting the goods in fast enough, making sure they're, you know, like those kind of things. So the, the four, if you compare the two one rents were driven by landlords who were forcing it upon their tenants and they, it wasn't sustainable. That's the retail play in the city. This is, this is a, this is why it's such a fascinating time to be in this business cuz the, the companies they'll kick and scream, but they can absorb it. And by the way, you're seeing the emergence of new guys like Wayfair and all these other characters come to town and they're looking to get market share. And I mean, may, I think Wayfair has 5 million feet now at eight a maybe five years ago they had almost nothing. Yeah. This is, you know, these are, these are, these are prolific growth rates. Yeah.
00:17:38 You, you, you've, you've touched on a, a term secular change, which is one of the driving factors in industrial and, and it's a great point with regard to, you know, existing sort of traditional retailers who used to spend a lot more on their physical presence and their, um, logistic channel channels to meet sort of, uh, the distribution of, of retail brick and mortar stores. And now they're evaluating all of that of course, and saying, how do we reallocate resources to accommodate more eCommerce direct to consumer trends, uh, that has been accelerated dramatically. And, uh, and you have to build buildings, you know, to, to accommodate those tenants. Um, so, uh, you had mentioned that's, that's, that's an interesting point. You had mentioned a couple of examples, uh, earlier in our conversation where, you know, tenants are, you know, uh, they used to only have a very small footprint for warehouse because they, they were a brick and mortar reliant business, but they're, you know, relocating resources to industrial to service more eCommerce. Uh, I dunno, if you want to, you know, share that story again.
00:18:44 Well, we're seeing this in real time because we have a, uh, we have a park that we bought in, uh, July of last year in South Jersey, which is 32 buildings. Nice and nice. It's, it's a, so it's maybe let's say 10 to 15% off office in the balanced warehouse. And these are mom and pop firms, uh, mom and pop, and some do 50 to a hundred million. So they're not tight in firms, but they're servicing the Philly area, southern jersey, you up to New York. Uh, and I could see firsthand how how much volume is going on now in their warehouses and how their businesses are changing. Um, you know, Nestle's has a, um, is a tenant there where they're distributing water, uh, the, the vine of water is increasing people's homes cuz people are buying this online and like this. So we are, when I, we were, you and I were talking early before this, um, segment started taping, but the, the real engine that's going to drive industrial is, is the headline news is the big guys, Walmart, Amazon, obviously, but the real play, the legs over the next five years, 10 years is gonna be the middle market guys and new entrance who are new companies that emerge outta nowhere to become major players like a Wayfair, uh, which, which, because all they are really is a reservation system.
00:20:00 They're just Uber. They don't, they don't, you know, like they're, they're carrying the goods, but they're sold before they, like, these companies can grow quickly. They don't need like Wal, um, um, like Walmart build out 50 million stores across, you know, it took Sam Walton how many years, right? That we're in a world today where everything's virtual. So you can see the emergence and you will see the emergence of major firms that need warehouses don't even exist yet. We're only looking at the existing world. Wait till the world really taxes on. Yeah. There's gonna be other Amazons.
00:20:35 It's great that there's gonna be middle market players and a lot of strong par, you know, uh, alternatives to, to, to Amazon. Let's talk about the technology factor because all these, all this, um, you know, the skyrocketing internet of things, uh, devices, technology that's impacting the new business. Ver uh, new buildings rather versus the the older stock. Right. Much of which mm-hmm. <affirmative>, uh, needs to be refurbished to, to meet the needs of today's tenants. What do you see some of the key technology drivers, uh, within the property itself and, and what you, what do you look for when building for buying?
00:21:12 All right. That's a really good question. Alright, so there's, there's a bunch of questions in, in this, um, that you need to think about. Let's take a look at Philly one more time. What of the attractiveness of Philly for us, because it was a subway repair facility, the amount of power going into that building and the floor loads were significant. So things that you want to think about, for example, are floor loads. How much weight can they take? Particularly if you're gonna be in with a company that's racking, and particularly if you're racking heavy goods. Um, so things like that. Things like power because, uh, let me tell you something else, which is really fun and interesting. So this building, um, and I, and I'm, I'm only zeroing on this building cause it represents so many different things. Um, this is the building install you bought and then leased Amazon.
00:21:59 Renovated it, right? But, so we poured in a fair amount of money into that building to redo the building. Amazon then went and put in a ton more like double what we put in and where did they put it? They, they outfitted the whole building with conduit. Well, so that they are going to be charging electric vehicles inside the facility. So they're gonna be using this facility for parking and for distribution. So, um, even though these, these vehicles have not been made yet, there aren't electric trucks, they, they're already building out their infrastructure to charge 'em. So what you, what you, what you wanna think about, again, it depends upon where you are, but the, the golden ticket today with less mile, for example, very hard to find is an abundant amount of parking, high ceiling heights, um, good traffic flow around the building. Um, so it, it, it's, it's very expensive to try to find that, let's say in Queens mm-hmm. <affirmative>,
00:22:59 But you might have a better chance of finding that in Trenton, you know what I mean? Or, or some, some areas that have been kind of downtrodden. Um, so, so the things we look for, uh, are are good bones, but we're, we're you are looking at two worlds new buildings and how are they gonna be built and what, what are they gonna look like? Heights are getting higher. So 40 foot now becoming the norm. Mm-hmm. <affirmative>, there's, there's reasons why building heights, um, have governors, um, limits to them because of building codes and other issues. As buildings get higher, sprinkler systems change, other costs get incorporated. Um, which you start getting diminishing returns. But I expect to see ceiling heights continue to grow. And by the way, in the cold storage business, which is an area that we're very fascinated with, we can talk separately about that.
00:23:47 They're really selling cubic feet. I would not be surprised in the future where buildings that have high heights actually charge more per foot or effectively cubic feet. Um, uh, and, and, and, and so the business model may change. Yeah. Um, so I think that we're gonna be seeing better building systems. Um, you may see module come into here. Obviously automation's gonna be key. Um, the, the, the power in these buildings gonna be crucial. Um, traffic is gonna be really important to understand. Yeah. This is a really big issue too. As you start getting closer into cities, everyone's talking about, oh, look at these malls. We're gonna take this mall. We're gonna make it a new in distribution center. This is a really hard thing to do.
00:24:34 You mentioned an interesting, uh, factor. Let's go to cold storage for a second. And I think it relates well to the grocery, uh, business and, um, you know, tell, tell us what's going on in the grocery business. How did, uh, the pandemic accelerate the trends that we see in e-commerce and groceries and why that fuels cold storage? I mean, even I, about two years ago, I, I paid like no attention to cold storage. I knew it was out there, this micro segment of industrial, but I just didn't really relate to it.
00:25:04 3% of all retail sales, grocery retail sales, um, before this pandemic was online somewhere in that range. 3% us.
00:25:14 Yeah. It's teeny during the pandemic at its height. 40%. All right. Wow. It, it's now gonna slide back to probably 20%, but let's remember now we have, now people have their, um, icon on, on their screen. They've already given the credit card so they can go and hit Whole Foods and just order the same stuff again. Yeah. So even, even 90 year olds, you know, my father is, is, is doing this because he got, he had to do it. Right. So this gonna be stickiness to this, uh, Craig. So what's gonna happen here, and what's happening is it will slide back naturally, but it's gonna come back to a level, let's say 15 to 20% and grow from there as a new generation continues to come through and the older guys get weeded out. Um, and, and so this was this, this growth was projected, but it was supposed to be five years, seven years before we started getting it.
00:26:08 This has now happened within a matter of a year. Um, and so what's happened now, just think about this. This is like a big boxing glove that smashed ferns in the head. You, I, I will bet you, and most of your listeners, how many of them started buying goods online? They, and my wife was one of them. I'd see her at two in the morning trying to get an order in cuz if she didn't get in the next person, it was craziness. What happened from that is you started seeing whole wholesalers company like that was direct business to business. Their model has now broadened and they're doing direct to consumer. They're one company. But, so more and more companies that were strictly B2B are moving now business to consumer. Yeah. Um, and so their, their, their whole business model's changing. They were used to just kind of loading up the trucks, driving down the street and going to a restaurant.
00:26:58 Now they're sitting here, they gotta pack individual boxes or, or however they're doing it to get the stuff out to customers. Right. That's changing your needs inside warehouses. Um, now, so as they start doing that and, and the demand is increasing, they don't have enough space to store the lettuce or, or the, the ice cream. So it's putting pressure on, on that aspect of the business. The, the majority of buildings around the country in cold storage are 1970s vintage. Mm-hmm. <affirmative>, low ceilings, inefficient walls, obsolete equipment. Um, and, and the complexity of, of cold storage and refrigeration is that tenants have varying needs. So it's very hard to build spec, if you will, for these buildings. Right. Um, and so you, you, you have this kind of conundrum of you can't build spec, but they need this space right away. And, and how's this all gonna work?
00:27:57 Um, yeah. I, we are of the belief, um, we're working very hard on this right now to see if we can figure out a way to, to build buildings that are like Lego sets, if you will, on spec. Hmm. Where we can adapt to the needs of a majority of tenants. You're never gonna get all your tenants. Yeah. Uh, and we are actually right now in discussions to build a first spec warehouse up in this area. Our, our first there, there may be one or two, but there's, the vacancy rate is like negative in cold storage. Yeah.
00:28:28 Cause there's, there's a lineup and there's no space and there's a, there's a waiting list for all this, the, this space behind that.
00:28:33 And by the way, add into, add into that, add into that the rise of organic foods from this crisis and the demand now for organic foods, all the different uses. I have a company that we're working with down in, uh, Pompano Beach that imports frozen vegetables and fruit into the US in bulk. And then they break it down into smaller components, which they sell to, to Costco. And those guys, their business is outta sight. They don't have enough refrigeration. I will go on record, and I've said this, I have the benefit of 30 plus years of of, of seeing the world in real estate. And because I've jumped around in asset classes, I've, I have a pretty good feeling for most of these. This is the biggest opportunity of my career. Uh, and, and it's because of this humongous force. Um, and by the way, let's wait, wait, wait.
00:29:18 Till you start seeing, you got tremendous issues with, with what's called reverse logistics products getting returns. 30% of, of kind of clothing gets returned. Where does that go? How's that work? Um, you, you have 5G that's just started to infiltrate our society, the speed of, of the ability to download or, or to view. And that's gonna lead to augmented reality, which is gonna enable you to virtually shop on in a different way than you shop before, where you're gonna be able to dive into these department stores, walk down the aisles, try on the clothing. You know, all this spurs more and more demand for eCommerce. Um, and, and so that's why when, when people say, oh, it's long in the tooth, you know, how, how, how dare you go into this business? I said, you just, just remember five years from now what you said. All right. This is, they, no one has any wait, just wait.
00:30:09 Well, you're certainly bullish on industrial and you've taught us a lot today. Thank you so much for sharing your views. And we're used to the opportunities. Um, you know, Peter is, uh, and his firm, Wharton Equity Partners, uh, they, uh, are active. They are syndicators. Uh, we're really thankful to be getting to know them better, uh, and sharing, you know, our knowledge, uh, of both online syndication, helping individual investors get access to commercial real estate in this case specifically, uh, you know, industrial, which we focused on today. You also have a deep expertise in multi-family, uh, for the mm-hmm. <affirmative>, for the audience members to know. Uh, we hope to see some offerings from, uh, from Peter and his firm in the future. Uh, but, but even if so, uh, even if not, um, you know, it's been great to speak with you, Peter. Thanks for sharing your knowledge of industrial and making it sound so exciting. Not many people can do that. Uh, and we look forward to a continuing conversation with you, sharing with individual investors, you know, you know, what, what you see and, and how they can, you know, build wealth, uh, by accessing some of these opportunities.
00:31:12 I, I, first of all, I'm honored, as I said early on, I, I love what you guys are doing. I'm not just saying this, I really do. I reserve my praise. Um, I'm pretty stingy about it. Um, but this is a new, this this era that we're moving into. Um, and, and the ability to directly got get the guys like us, that you provide that service and then you also vet the deals as intermediaries to help. Um, the folks is only gonna get bigger and bigger. And it's gonna be the cream and the crop that are really gonna win here. And you guys have the platform in place and the technology and the knowledge. It's really a beautiful thing to watch. And I, I wanna wish you guys continued success. I know you had a great year last year and I am positive this year it's been to be better. Uh, so I'm, I'm pleased. I'm, we're working very hard to find product for you guys cuz I, I, it's a big task for us to make sure we do the right product. And I, my guys are charged with, with doing that. So we're gonna do something together.
00:32:04 Good. We look forward to it. And, uh, thank you again for the compliments. We really appreciate it. You're welcome. We, we built this business for the benefit of individual investors, but it's, uh, it's part, it's, it's critical that we work with, you know, the very best commercial real estate firms nationwide. Uh, it's a big responsibility for, for both parties, uh, for all parties involved, really. Uh, and, uh, yeah, we're, we're, we're happy to have a platform that, you know, can help you grow your business and help the, all those individual investors get access to, uh, you know, to private commercial real estate. So it's, uh, it's been a thrill and we're just getting started. It's gonna be a great year. Wish you and your, your team the best, uh, in 2021 as well. Let's get some deals done.
00:00:49 Thanks so much for having me. I'm really excited to be on and, and I'm really, um, I'm amazed by what you guys are doing. And, and, uh, just by a quick reference, cause I started my career working on Wall Street, uh, and many years ago. Um, and, and during that era, uh, there was something called syndications, uh, which were basically taking properties and chopping up into thousands of pieces and then selling out the interest to our brokers. Mm-hmm. <affirmative>, fast forward to today, and what you guys are doing is exactly what we were doing those years ago, but was pre, pre-internet. Um, and today what you're doing is providing, um, investors the opportunity to invest, you know, smaller amounts of money, um, in institutional great sponsors. And I've watched a number of firms like yours try to do this, and we know who they are and I've been courted, if you will, um, to be a sponsor, et cetera.
00:01:48 And I made a conscious decision that I didn't like the quality of the work they were doing and the, and the type of people they were attracting. Cuz we're very mindful of our reputation. But I can tell you right now that you guys CrowdStreet are doing it right. And, and the team that I've met are really first class and I'm, I'm honored to be, um, speaking on this platform today. Um, thanks. So anyway, I started this after leaving Wall Street. I, I started my firm, uh, and I don't know what drove me to do this, but I started in the home building business. Uh, my parents are still recovering from that cuz I was a serious finance and accounting major. I didn't know what a hammer looked like. Um, but what I loved about the home building business when I was young is you sell a house and make some money. You know, that's what it was all about as a, as a kid, excuse me. So I grew up in that business and what the great thing about it for me was because I was actually on the site yelling at the sub, learning how to make payroll, dealing with contractors, dealing with municipalities. I really understood the guts of how properties were built. Um, and it's different than being a guy who's sitting on Wall Street who's doling out money and thinks they're real estate guys, right?
00:02:57 They're totally different.
00:02:58 You have, you guys also have, you have real estate DNA inside your firm, which is important when you are an allocator of capital. You need to understand the, where the sponsor sits and, and, and that's how you become a really good, um, you know, person or firm in, in the position you're in. Uh, so anyway, I started out doing that, uh, and really for the first 12, 15 years of my career, uh, became one of the larger tri in the tri-state area, uh, builders of for sale housing. Uh, and, and ultimately we came to an inflection point, uh, where the big issue with, with, with housing is that's ordinary income when you sell a house because you were dealing. And, uh, you know, after a while when you start making some money, you actually think about that. So, uh, we pivoted into self-storage early in my career because I started seeing it.
00:03:53 The institutionalization of self-storage, self storage is relatively a new business in the scheme of real estate. It wasn't around during the Roman times. I, I can assure you. Um, so, um, the, we started moving to, to self storage and we started buying, um, storage facilities in the Hamptons. And one by one going around the different owners, we aggregated 80% of the market. So my firm's theme has been throughout the years to try to be a little bit ahead of where we think things are going. And so we did that successfully with self storage. Uh, we, we became a pretty big player. We sold the P portfolio to a couple of institutions along the way. Um, we did the same thing. We saw, um, pending doom in the credit markets in 2006 with all the liberals, um, debt that was going out mm-hmm. <affirmative>. And we put together an opportunity fund and we had a bunch of money when the markets collapsed to buy real estate.
00:04:48 Um, and then we were big buyers of multi-family, which you alluded to starting in 2012, we started buying southeast value ed multi-family, which today everyone's saying, oh yeah, look at that, you know, everyone, everyone's doing it. But in 2012, people were still licking their wounds and no one was buying stuff in Charlotte, but we were able to buy in Charlotte as an example at a seven plus cat, right? And the cost of debt, whether it's Danny or Freddy, is the same there as it is buying in New York City. It's really one of the anomalies of the world and why multi is so liquid. Mm-hmm. <affirmative>. So we were able to get tremendous cash on cash returns early on. Uh, and we built that business up to a fairly significant amount, uh, and wound up making a decision in 2016 17 to move out of multi, we sold everything, I think it was 500 and something million dollars worth of properties over a period of time and moved everything into industrial mm-hmm. <affirmative>. And, and the reason I made that move into industrial is I really started feeling that this is a secular change in, in the way that our world is going to look in the future with respect to e-commerce and industrial was, was still operating in the 19th century mm-hmm. <affirmative>, you know, these old ugly buildings. You know, it, it's, yeah. Industrial's never been really the, um, the fair hair child of, of the asset classes definitely
00:06:11 Rough around the edge. I like those transitions. Right. I love when things are changing when, when you really feel things are going to explode trying to get there at that point. And that's why, like with the value add properties in the southeast, I just sensed it here, we're feeling the same thing. The difference here is that this is a change where we're still really early, uh, and, and we're seeing the convergence of technology and real estate come together in a way that's never happened in the real estate business ever. Mm-hmm. <affirmative>, uh, now maybe elevators in the office buildings or, you know, like minor things like that. But this is a whole 'nother play, right? This is what is our world gonna look like three to five years from now when you have driverless trucks running around or, you know, like robots, which will absolutely be in these facilities.
00:07:01 We are early in the whole automation of these warehouses. Um, and, and ironically, you know, one of the things I read about the other day where everyone's pushing for $15 minimum wage, what they don't realize all they're doing is heightening companies desire and needs to move to robots by, by unionizing, by pushing for higher wages. What it's doing is ex expediting, uh, automation, besides the fact that we have enough technology that didn't exist before. But, so there is no question in my mind, um, this revolutionary change that's going on, and let's just think about all the other asset classes. They, they don't have this magnitude of change happening mm-hmm. <affirmative>. Um, and, and it's the change that creates the opportunity in the world we're in today with the proliferation of information, it's easy for investors to assess an opportunity that's transparent. Everyone comes to the same conclusions, they're already in the same models.
00:07:58 It's only a question of how fast your rents are growing and what's your exit cap and how much money am I spent? You know, like there's very basic parameters. Um, so, so what's happening is properties that are obvious are getting overpriced and they will continue to get overpriced in my mind. Um, or or priced very, they're taking at the entrepreneurial profit. Industrial is still so early and so changing that I think that if you make the right decisions, um, over the next number of years, there's big rewards here. Uh, and, and, um, you know, things you gotta worry about is obsolescence, right. You know, what are you buying the right properties or, you know, there, there's, there's definitely here. Uh, but you know, again, having done this for 30 plus years, I, I would go on record and saying, this is the greatest opportunity of my career, uh, of what's happening in industrial.
00:08:51 I love bold statements like that, Peter. And, uh, you, you have been around the block block and, and a lot of people would say, you know, single family residential, so full cycle, you could go full cycle and get back into full cycle, uh, uh, love that business residential because they're killing it. Right? That's another major, major trend.
00:09:07 I love that area. Again, big trends, right? Yeah. These are, these are trends that irrespective of interest rates, irrespective of whether it's Trump or Biden or anyone else, this is a force you wanna, you wanna try and invest in forces that, that really have that, that, that, that, and they're not fabs. Yeah. This is a trend. And again, COVID has had an impact in ways which we will feel. We've thrown a little stone in this water and you're starting to see the ripples, but Covid is expediting people's flight from, uh, from cities and other areas, and they're saying, Hey, I could live in North Carolina on Lake Norman, uh, you know what I mean? And have a great life and buy a house for X dollars. It's half like you're people are actually thinking about it, but they're actually doing it now. Uh, yeah. And so it's really, what's so fascinating about Covid is it's, it's, it's forcing change.
00:09:55 Oh, absolutely. So, you know, a couple of big themes in industrial multi-family, and I, I don't know if you want to talk about both because the different themes are, are significantly different, but, you know, let's focus on industrial first. And you mentioned a lot of things. I wanna sort of dissect that a little bit more. You know, what are some of the big themes that you see impacting, uh, industrial specifically? Um, because a lot of people would say, uh, you know, Peter, isn't it a little long in the tooth? Isn't the trend for industrial already a little long in the tooth? It's been hot for a while mm-hmm. <affirmative>, it's kind of the darling asset class. Clearly a lot of institutional investors are chasing, uh, you know, assets per lodges. Mm-hmm. <affirmative>, there's a lot of big money out there, you know, so how does the individual investor, you know, um, you know, get over the fact that they're buying in sort of peak values, you know mm-hmm. <affirmative> and how should they think about that?
00:10:49 Mm-hmm. <affirmative>. So it's a, it's an interesting, uh, question. Uh, and, and here's how I view it, and I don't like investing like this, but I, but I, but this is a, I will, I will go on record in telling you that along the eastern seaboard from New York down to Philadelphia, you will not see single digit rents in within the next 12 months. They will, they will vapor us. We will be moving into a world where rents of 12, 13, 14, $15 a square foot will become the norm. So what may feel like today, you know, FRS is, is going to, you're gonna look back in retrospect and say, why didn't I invest? Now, let me give you a quick snapshot of something. When we wound up buying a building recently in Philadelphia, which was a 280,000 square foot warehouse, uh, which was a former subway repair facility.
00:11:40 And, and we were trying to do comps. The brokers were saying, first of all, why are you buying in this area? It's the desolate area. The building's crappy. You know, it's South Philly, it's dangerous. Um, and, and, and, and by the way, way renting this market is 6, 6 50 a foot. They went from 6 49 1 year and to 6 51 the next year. And people are doing high fives. You know, they, they, they think that's a big jump. But when I started drilling down and said to the brokers, well, tell me what the vacancy factor is for let's say 50,000 feet and above. And they said, well, there's nothing vacant. I mean, you know, that's, and, and the more we dug into it, the more we started realizing that the, the product wasn't there for the audience that was looking. Uh, and so we took a gamble and went in and paid the money for the building, which was not a crazy amount of money, uh, and fixed it up.
00:12:27 We were fortunate than Amazon wound up leasing the whole building at 50% higher than we had projected. Now. So here's the, here's the moral of that story. Where, where you need to be looking is not where everyone else is looking. The, the, the pervasiveness of e-commerce is just starting to permeate through our economy. So markets like, there's, there's markets, old bids. You're gonna see these become, um, interesting op opportunities for, for last mile. Um, and so when people say where it's long in the tooth, it's it for the obvious suspect kind of deals, it's long in the tooth. But I, again, I would argue, what, what seems long in the tooth today? Wait, wait five years. And then you really see, uh, you know, what's gonna happen.
00:13:14 Yeah. Um, just to, you know, that, that's a great point cuz what, what drives value more so than anything else. Mo you know, usually more than interest rates, unless you have runaway inflation, which affects cap rates, which we saw in the seventies, haven't seen since then. Uh, hopefully won't see any time soon that that impacts like, um, you know, uh, you know, taxes, impact values mm-hmm. <affirmative> of government policies changing and we'll talk about that. Um, but what drives values more so than anything else in all real estate is income. And, and that's what individual investors need to think about when it comes to industrial, like pure expensive today. But as you said, you know, we just had this major step function growth in e-commerce Right. And industrial real estate nationwide. Right. And, and the rents are gonna rise, you know, when they have the opportunity, when landlords have the opportunity to increase rents, whether it be new building or turning of leases, right, it's gonna grow way more than 3%, which is often the common sort of annual, you know, increase in rents when you're locked into a release. So, you know, the, the, the, the, the step up in the, in the fundamentals of, of the industry are gonna cause rents to rise dramatically, which will present presumably, uh, some, you know, some interesting investment opportunities. So, great point. I agree with you by the way. Uh, and we are, uh, very interested in, in doing more industrial in 2021 than we, uh, ever have. It's hard to find, and you're right mm-hmm. <affirmative> you to be looking, you know, where pro lares is not looking and, and you know. That's right. Amazing.
00:14:46 It's hard work. You have to have a dedicated team that's unearthing everything. This, and you have to feel the, you have to feel the pace of leasing. Yeah. I'll give you some examples that are going on right now. So, eight A is kind of the epicenter of big boxes on the East coast exit eight A and the Jersey Turnpike Allander costs, which were $70 a square foot buildable a year and a half ago maybe, and, you know, 8 65, 70, 75, they're, they're now touching a hundred dollars a foot.
00:15:15 Wow.
00:15:16 Exit eight, which is south of there is now 65 to 70 where it was 40, let's say a year and half ago. So what that means is rents are gonna have to rise, um, for these developers to meet a threshold return. And what that's gonna do now is lift everything else up. Our deal in Philly, for better or for worse, has now set a new benchmark for where, you know, where rents are going. All the guys who are coming outta the ground are pointing to our comp and saying, Hey, look at those guys. They got that I can and therefore I'm gonna get that. So Yeah. And here's the other important thing. Here's, here's this is this is something really important to focus on in New York City. Retail rents were skyrocketing mm-hmm. Because landlords were paying more and more and they were trying to squeeze them, but, but the, but they, what they were missing is that a boutique or a restaurant could only pay so much in rent per volume staff.
00:16:13 And so as the world has now changed, those stores are staying vacant. They're not getting the tenants because their rents outstripped the demand and the ability to pay this is, this is far from what's happening in industrial because industrial rents are 5%, give or take of the supply chain cost for a company. If they go from five to seven, it doesn't really matter. Right. So, right. They, the, the biggest thing for them is in many ways is a matter of survival is a matter of making sure they maintain their market share with their, with their, with their customers, getting the goods in fast enough, making sure they're, you know, like those kind of things. So the, the four, if you compare the two one rents were driven by landlords who were forcing it upon their tenants and they, it wasn't sustainable. That's the retail play in the city. This is, this is a, this is why it's such a fascinating time to be in this business cuz the, the companies they'll kick and scream, but they can absorb it. And by the way, you're seeing the emergence of new guys like Wayfair and all these other characters come to town and they're looking to get market share. And I mean, may, I think Wayfair has 5 million feet now at eight a maybe five years ago they had almost nothing. Yeah. This is, you know, these are, these are, these are prolific growth rates. Yeah.
00:17:38 You, you, you've, you've touched on a, a term secular change, which is one of the driving factors in industrial and, and it's a great point with regard to, you know, existing sort of traditional retailers who used to spend a lot more on their physical presence and their, um, logistic channel channels to meet sort of, uh, the distribution of, of retail brick and mortar stores. And now they're evaluating all of that of course, and saying, how do we reallocate resources to accommodate more eCommerce direct to consumer trends, uh, that has been accelerated dramatically. And, uh, and you have to build buildings, you know, to, to accommodate those tenants. Um, so, uh, you had mentioned that's, that's, that's an interesting point. You had mentioned a couple of examples, uh, earlier in our conversation where, you know, tenants are, you know, uh, they used to only have a very small footprint for warehouse because they, they were a brick and mortar reliant business, but they're, you know, relocating resources to industrial to service more eCommerce. Uh, I dunno, if you want to, you know, share that story again.
00:18:44 Well, we're seeing this in real time because we have a, uh, we have a park that we bought in, uh, July of last year in South Jersey, which is 32 buildings. Nice and nice. It's, it's a, so it's maybe let's say 10 to 15% off office in the balanced warehouse. And these are mom and pop firms, uh, mom and pop, and some do 50 to a hundred million. So they're not tight in firms, but they're servicing the Philly area, southern jersey, you up to New York. Uh, and I could see firsthand how how much volume is going on now in their warehouses and how their businesses are changing. Um, you know, Nestle's has a, um, is a tenant there where they're distributing water, uh, the, the vine of water is increasing people's homes cuz people are buying this online and like this. So we are, when I, we were, you and I were talking early before this, um, segment started taping, but the, the real engine that's going to drive industrial is, is the headline news is the big guys, Walmart, Amazon, obviously, but the real play, the legs over the next five years, 10 years is gonna be the middle market guys and new entrance who are new companies that emerge outta nowhere to become major players like a Wayfair, uh, which, which, because all they are really is a reservation system.
00:20:00 They're just Uber. They don't, they don't, you know, like they're, they're carrying the goods, but they're sold before they, like, these companies can grow quickly. They don't need like Wal, um, um, like Walmart build out 50 million stores across, you know, it took Sam Walton how many years, right? That we're in a world today where everything's virtual. So you can see the emergence and you will see the emergence of major firms that need warehouses don't even exist yet. We're only looking at the existing world. Wait till the world really taxes on. Yeah. There's gonna be other Amazons.
00:20:35 It's great that there's gonna be middle market players and a lot of strong par, you know, uh, alternatives to, to, to Amazon. Let's talk about the technology factor because all these, all this, um, you know, the skyrocketing internet of things, uh, devices, technology that's impacting the new business. Ver uh, new buildings rather versus the the older stock. Right. Much of which mm-hmm. <affirmative>, uh, needs to be refurbished to, to meet the needs of today's tenants. What do you see some of the key technology drivers, uh, within the property itself and, and what you, what do you look for when building for buying?
00:21:12 All right. That's a really good question. Alright, so there's, there's a bunch of questions in, in this, um, that you need to think about. Let's take a look at Philly one more time. What of the attractiveness of Philly for us, because it was a subway repair facility, the amount of power going into that building and the floor loads were significant. So things that you want to think about, for example, are floor loads. How much weight can they take? Particularly if you're gonna be in with a company that's racking, and particularly if you're racking heavy goods. Um, so things like that. Things like power because, uh, let me tell you something else, which is really fun and interesting. So this building, um, and I, and I'm, I'm only zeroing on this building cause it represents so many different things. Um, this is the building install you bought and then leased Amazon.
00:21:59 Renovated it, right? But, so we poured in a fair amount of money into that building to redo the building. Amazon then went and put in a ton more like double what we put in and where did they put it? They, they outfitted the whole building with conduit. Well, so that they are going to be charging electric vehicles inside the facility. So they're gonna be using this facility for parking and for distribution. So, um, even though these, these vehicles have not been made yet, there aren't electric trucks, they, they're already building out their infrastructure to charge 'em. So what you, what you, what you wanna think about, again, it depends upon where you are, but the, the golden ticket today with less mile, for example, very hard to find is an abundant amount of parking, high ceiling heights, um, good traffic flow around the building. Um, so it, it, it's, it's very expensive to try to find that, let's say in Queens mm-hmm. <affirmative>,
00:22:59 But you might have a better chance of finding that in Trenton, you know what I mean? Or, or some, some areas that have been kind of downtrodden. Um, so, so the things we look for, uh, are are good bones, but we're, we're you are looking at two worlds new buildings and how are they gonna be built and what, what are they gonna look like? Heights are getting higher. So 40 foot now becoming the norm. Mm-hmm. <affirmative>, there's, there's reasons why building heights, um, have governors, um, limits to them because of building codes and other issues. As buildings get higher, sprinkler systems change, other costs get incorporated. Um, which you start getting diminishing returns. But I expect to see ceiling heights continue to grow. And by the way, in the cold storage business, which is an area that we're very fascinated with, we can talk separately about that.
00:23:47 They're really selling cubic feet. I would not be surprised in the future where buildings that have high heights actually charge more per foot or effectively cubic feet. Um, uh, and, and, and, and so the business model may change. Yeah. Um, so I think that we're gonna be seeing better building systems. Um, you may see module come into here. Obviously automation's gonna be key. Um, the, the, the power in these buildings gonna be crucial. Um, traffic is gonna be really important to understand. Yeah. This is a really big issue too. As you start getting closer into cities, everyone's talking about, oh, look at these malls. We're gonna take this mall. We're gonna make it a new in distribution center. This is a really hard thing to do.
00:24:34 You mentioned an interesting, uh, factor. Let's go to cold storage for a second. And I think it relates well to the grocery, uh, business and, um, you know, tell, tell us what's going on in the grocery business. How did, uh, the pandemic accelerate the trends that we see in e-commerce and groceries and why that fuels cold storage? I mean, even I, about two years ago, I, I paid like no attention to cold storage. I knew it was out there, this micro segment of industrial, but I just didn't really relate to it.
00:25:04 3% of all retail sales, grocery retail sales, um, before this pandemic was online somewhere in that range. 3% us.
00:25:14 Yeah. It's teeny during the pandemic at its height. 40%. All right. Wow. It, it's now gonna slide back to probably 20%, but let's remember now we have, now people have their, um, icon on, on their screen. They've already given the credit card so they can go and hit Whole Foods and just order the same stuff again. Yeah. So even, even 90 year olds, you know, my father is, is, is doing this because he got, he had to do it. Right. So this gonna be stickiness to this, uh, Craig. So what's gonna happen here, and what's happening is it will slide back naturally, but it's gonna come back to a level, let's say 15 to 20% and grow from there as a new generation continues to come through and the older guys get weeded out. Um, and, and so this was this, this growth was projected, but it was supposed to be five years, seven years before we started getting it.
00:26:08 This has now happened within a matter of a year. Um, and so what's happened now, just think about this. This is like a big boxing glove that smashed ferns in the head. You, I, I will bet you, and most of your listeners, how many of them started buying goods online? They, and my wife was one of them. I'd see her at two in the morning trying to get an order in cuz if she didn't get in the next person, it was craziness. What happened from that is you started seeing whole wholesalers company like that was direct business to business. Their model has now broadened and they're doing direct to consumer. They're one company. But, so more and more companies that were strictly B2B are moving now business to consumer. Yeah. Um, and so their, their, their whole business model's changing. They were used to just kind of loading up the trucks, driving down the street and going to a restaurant.
00:26:58 Now they're sitting here, they gotta pack individual boxes or, or however they're doing it to get the stuff out to customers. Right. That's changing your needs inside warehouses. Um, now, so as they start doing that and, and the demand is increasing, they don't have enough space to store the lettuce or, or the, the ice cream. So it's putting pressure on, on that aspect of the business. The, the majority of buildings around the country in cold storage are 1970s vintage. Mm-hmm. <affirmative>, low ceilings, inefficient walls, obsolete equipment. Um, and, and the complexity of, of cold storage and refrigeration is that tenants have varying needs. So it's very hard to build spec, if you will, for these buildings. Right. Um, and so you, you, you have this kind of conundrum of you can't build spec, but they need this space right away. And, and how's this all gonna work?
00:27:57 Um, yeah. I, we are of the belief, um, we're working very hard on this right now to see if we can figure out a way to, to build buildings that are like Lego sets, if you will, on spec. Hmm. Where we can adapt to the needs of a majority of tenants. You're never gonna get all your tenants. Yeah. Uh, and we are actually right now in discussions to build a first spec warehouse up in this area. Our, our first there, there may be one or two, but there's, the vacancy rate is like negative in cold storage. Yeah.
00:28:28 Cause there's, there's a lineup and there's no space and there's a, there's a waiting list for all this, the, this space behind that.
00:28:33 And by the way, add into, add into that, add into that the rise of organic foods from this crisis and the demand now for organic foods, all the different uses. I have a company that we're working with down in, uh, Pompano Beach that imports frozen vegetables and fruit into the US in bulk. And then they break it down into smaller components, which they sell to, to Costco. And those guys, their business is outta sight. They don't have enough refrigeration. I will go on record, and I've said this, I have the benefit of 30 plus years of of, of seeing the world in real estate. And because I've jumped around in asset classes, I've, I have a pretty good feeling for most of these. This is the biggest opportunity of my career. Uh, and, and it's because of this humongous force. Um, and by the way, let's wait, wait, wait.
00:29:18 Till you start seeing, you got tremendous issues with, with what's called reverse logistics products getting returns. 30% of, of kind of clothing gets returned. Where does that go? How's that work? Um, you, you have 5G that's just started to infiltrate our society, the speed of, of the ability to download or, or to view. And that's gonna lead to augmented reality, which is gonna enable you to virtually shop on in a different way than you shop before, where you're gonna be able to dive into these department stores, walk down the aisles, try on the clothing. You know, all this spurs more and more demand for eCommerce. Um, and, and so that's why when, when people say, oh, it's long in the tooth, you know, how, how, how dare you go into this business? I said, you just, just remember five years from now what you said. All right. This is, they, no one has any wait, just wait.
00:30:09 Well, you're certainly bullish on industrial and you've taught us a lot today. Thank you so much for sharing your views. And we're used to the opportunities. Um, you know, Peter is, uh, and his firm, Wharton Equity Partners, uh, they, uh, are active. They are syndicators. Uh, we're really thankful to be getting to know them better, uh, and sharing, you know, our knowledge, uh, of both online syndication, helping individual investors get access to commercial real estate in this case specifically, uh, you know, industrial, which we focused on today. You also have a deep expertise in multi-family, uh, for the mm-hmm. <affirmative>, for the audience members to know. Uh, we hope to see some offerings from, uh, from Peter and his firm in the future. Uh, but, but even if so, uh, even if not, um, you know, it's been great to speak with you, Peter. Thanks for sharing your knowledge of industrial and making it sound so exciting. Not many people can do that. Uh, and we look forward to a continuing conversation with you, sharing with individual investors, you know, you know, what, what you see and, and how they can, you know, build wealth, uh, by accessing some of these opportunities.
00:31:12 I, I, first of all, I'm honored, as I said early on, I, I love what you guys are doing. I'm not just saying this, I really do. I reserve my praise. Um, I'm pretty stingy about it. Um, but this is a new, this this era that we're moving into. Um, and, and the ability to directly got get the guys like us, that you provide that service and then you also vet the deals as intermediaries to help. Um, the folks is only gonna get bigger and bigger. And it's gonna be the cream and the crop that are really gonna win here. And you guys have the platform in place and the technology and the knowledge. It's really a beautiful thing to watch. And I, I wanna wish you guys continued success. I know you had a great year last year and I am positive this year it's been to be better. Uh, so I'm, I'm pleased. I'm, we're working very hard to find product for you guys cuz I, I, it's a big task for us to make sure we do the right product. And I, my guys are charged with, with doing that. So we're gonna do something together.
00:32:04 Good. We look forward to it. And, uh, thank you again for the compliments. We really appreciate it. You're welcome. We, we built this business for the benefit of individual investors, but it's, uh, it's part, it's, it's critical that we work with, you know, the very best commercial real estate firms nationwide. Uh, it's a big responsibility for, for both parties, uh, for all parties involved, really. Uh, and, uh, yeah, we're, we're, we're happy to have a platform that, you know, can help you grow your business and help the, all those individual investors get access to, uh, you know, to private commercial real estate. So it's, uh, it's been a thrill and we're just getting started. It's gonna be a great year. Wish you and your, your team the best, uh, in 2021 as well. Let's get some deals done.