CrowdStreet’s Darren Powderly is joined by Edward Griffin, CEO of Griffin Partners, to discuss how long-term trends in office, like a more mobile workforce, will have an impact in a post-COVID world and what rent collections are looking like for their portfolio.
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.
00:00:05 Hello everybody, and welcome to our next edition of StreetBeats. It's our quick hitting video series where we're interviewing some thought Liebers, uh, both on the real estate owner operator side, investors and participants in the capital markets and influencers. Today, it is my honor to have, uh, ed Griffin with Griffin Partners. Uh, we have a multi-year relationship with Griffin Partners that goes back, uh, we've done five deals with them on the CrowdStreet marketplace. And, uh, I have to say that we are absolutely d delighted to be, uh, a partner with, uh, ed Griffin and his team. Uh, they found his team down in Houston, Texas. So, ed, welcome to StreetBeats. Uh, please introduce yourself and tell us a little bit about your experience at CrowdStreet to date before we jump into, uh, the show.
00:00:52 Sure. Happy to do that, Darren. Great to see you. My name's Edward Griffin. I'm the CEO O of Griffin Partners, as you said, we're based here in Houston. We operate in 10 markets, uh, through the center part of the, the country. We are a predominantly, uh, office owner, operators. We have some mixed use assets, uh, and a little bit of, uh, industrial as well. Been in business since 1980. It's family owned firm. Wonderful relationship with CrowdStreet going back, uh, multiple years now, as you indicated. Uh, five successful transactions. We use the, uh, platform to manage some other, uh, investor relationships that we have, and we're pleased with that experience as well. So, uh, nothing but compliments, uh, in terms of our relationship with CrowdStreet.
00:01:43 That's good to hear, and thank you for that. You know, if you go to Griffin Partner's website, uh, you'll see, uh, a letter from Ed, uh, to anyone you know who visits the site. I encourage everyone to do that. Uh, I did it last night and it reminded me of just the integrity and the character that Ed and his father before him. I've stilled in their company, they have just a very long tenured and experienced team, and they speak about their team, they speak about their investors. So, hey, let's, uh, let's talk about, uh, you know, what you're experiencing to date. The office sector is one of the sectors sort of in the scale of like really bad to just playing bad in the Covid 19 crisis, and we are all in it together. Uh, office it seems to me is kind of in the middle. Can you just speak for a moment to your experience and your portfolio from rent collections, uh, and, and beyond, please?
00:02:39 Sure. Happy to do that. I, I would agree with you, Darren. I'd say that the, at least in the near term basis, office is kind of in the middle, maybe closer to the not so bad as opposed to the really bad mm-hmm. <affirmative>. But as you say, there are some, uh, intermediate and longer term trends that are certainly going to have an impact. Um, some of them are countervailing trends. Uh, one of those of course is, is an acceleration of the trend that was already in place towards a more mobile workforce. And, and that's certainly a headwind for office demand. But one of the countervailing trends though, is that in the post covid world office occupiers, uh, are going to be seeking less density, which is the reversal actually of, uh, probably 20 year trend towards higher and higher densities, culminating with what we've seen in the, the co-working, um, evolution over the last couple of years. There's a third trend that's hard to measure so far, but it's clear that it started a few years ago, and it's probably a re a result of the millennials starting to have household form formation, pushing them out of the, the high density inner cities into the suburbs a little more. And so we've seen a strong trend driven by the millennials for jobs to be migrating from the suburbs into the CBDs and the higher density, uh, near in suburbs. And you might see that reverse a little bit here, uh, and an acceleration of that
00:04:11 Reversal. Thanks for the update on sort of some observations and, uh, in, in the office market. Uh, are rent collections, you know, where are those at and how is that impacting, you know, what you're doing to, to care for the existing portfolio to care for your existing investors? What are some of the things that you're implementing right now?
00:04:28 Generally, Jen, we feel very good about where we are. Our office collections are running in the, uh, mid to low nineties. We do have, as I mentioned, some excuse that is office of a retail. Our retail collections are slightly under 50%, which is better than some of the malls, but not as good as, as the grocery anchored. Retail industrial has, has been a hundred percent collection. So, and, and that's pretty consistent with what you've seen in the, from others in the industrial space. So
00:04:58 Let's talk a little bit about go forward. In addition to opening up the office space, how is your investment thesis gonna be changing, uh, through this and sort of post the crisis?
00:05:08 Great question, Darren, and to a certain extent that strategy is still evolving a little bit. I think, uh, capital formation is clearly going to be a little different. Mm-hmm. <affirmative>, you have at the moment, at least two of the major sources of debt are kind of out of the market, the debt funds and cs. Occasionally we've used debt funds on a very transitional asset. So because of the value add space, you want to maintain maximum flexibility for your exit. Uh, that causes us to gravitate mostly towards the banks for, uh, lenders. And we're also very low leverage, thankfully, for our portfolio because we're low leverage and we also have a very conservative approach towards retaining cash reserves. None of the conversations we're having with our lenders, uh, have anything to do with, uh, seeking any kind of forbearance or, um, uh, amendments or alterations to our loan repayment schedules. It's mostly us just informing them about what's going on with their collateral and, uh, and, and assuring them that if that they don't need to worry about our deal. If they've got some other things that they want to go worry about, uh, they, they have time to go do that and, uh, they can, uh, sLiebp well at night. Um, not worrying about, uh, our particular loans.
00:06:31 Well, that's great news, ed. Let's, uh, let's shift, uh, in closing to valuations and, and how you think for, for the asset classes that you specialize in and, and particularly office, you know, the impact evaluations, right? Uh, maybe in three sort of timeframe segments, kind of today, mid-term being, I don't know, a year to two years out, and then long-term sort of beyond that. Um, what do you think is gonna happen in valuations? Uh, for the office property type,
00:07:03 There's two elements. Of course, there's, there's the overall return environment in real estate, which over the long run has some correlation with interest rates, although I would argue that it correlates more towards unemployment and economic health than it does in exactly towards interest rates. But it's pretty clear that we're gonna be in a low interest rate environment for a long time. Mm-hmm. <affirmative>, the other element, of course, is your rent role and the income that your, your property generate. And, and that is taking a hit from Covid and that, that impact varies across property types, of course. And we've discussed the, the types that we're in retail probably impacted the most, uh, office. We've, we've talked about the countervailing trends earlier in our conversation. I, I'm confident that, that the need for office space is not going to zero A really, um, is less efficient when we're all working mobilely mm-hmm. <affirmative>. Um, and b is, you know, we, we really enjoy and, and feed off the interaction and we're, we're better together as a team when we're really able to, to cross pollinate in the office.
00:08:14 Well, ed, thank you so much for joining us. Uh, ed Griffin with Griffin Partners in Houston, Texas. Uh, a great client and great friend of CrowdStreets, uh, appreciate your, your partnership and your business and wish you all the best as Texas reopens here this coming week. Look forward to, uh, reintroducing you to the CrowdStreet community with a, with a future, uh, deal of Griffin Partners. And thanks for sharing your insight with us today. It's, uh, it's really useful and, and really, really valuable to us as we, uh, seek to understand what's going on all.
00:00:52 Sure. Happy to do that, Darren. Great to see you. My name's Edward Griffin. I'm the CEO O of Griffin Partners, as you said, we're based here in Houston. We operate in 10 markets, uh, through the center part of the, the country. We are a predominantly, uh, office owner, operators. We have some mixed use assets, uh, and a little bit of, uh, industrial as well. Been in business since 1980. It's family owned firm. Wonderful relationship with CrowdStreet going back, uh, multiple years now, as you indicated. Uh, five successful transactions. We use the, uh, platform to manage some other, uh, investor relationships that we have, and we're pleased with that experience as well. So, uh, nothing but compliments, uh, in terms of our relationship with CrowdStreet.
00:01:43 That's good to hear, and thank you for that. You know, if you go to Griffin Partner's website, uh, you'll see, uh, a letter from Ed, uh, to anyone you know who visits the site. I encourage everyone to do that. Uh, I did it last night and it reminded me of just the integrity and the character that Ed and his father before him. I've stilled in their company, they have just a very long tenured and experienced team, and they speak about their team, they speak about their investors. So, hey, let's, uh, let's talk about, uh, you know, what you're experiencing to date. The office sector is one of the sectors sort of in the scale of like really bad to just playing bad in the Covid 19 crisis, and we are all in it together. Uh, office it seems to me is kind of in the middle. Can you just speak for a moment to your experience and your portfolio from rent collections, uh, and, and beyond, please?
00:02:39 Sure. Happy to do that. I, I would agree with you, Darren. I'd say that the, at least in the near term basis, office is kind of in the middle, maybe closer to the not so bad as opposed to the really bad mm-hmm. <affirmative>. But as you say, there are some, uh, intermediate and longer term trends that are certainly going to have an impact. Um, some of them are countervailing trends. Uh, one of those of course is, is an acceleration of the trend that was already in place towards a more mobile workforce. And, and that's certainly a headwind for office demand. But one of the countervailing trends though, is that in the post covid world office occupiers, uh, are going to be seeking less density, which is the reversal actually of, uh, probably 20 year trend towards higher and higher densities, culminating with what we've seen in the, the co-working, um, evolution over the last couple of years. There's a third trend that's hard to measure so far, but it's clear that it started a few years ago, and it's probably a re a result of the millennials starting to have household form formation, pushing them out of the, the high density inner cities into the suburbs a little more. And so we've seen a strong trend driven by the millennials for jobs to be migrating from the suburbs into the CBDs and the higher density, uh, near in suburbs. And you might see that reverse a little bit here, uh, and an acceleration of that
00:04:11 Reversal. Thanks for the update on sort of some observations and, uh, in, in the office market. Uh, are rent collections, you know, where are those at and how is that impacting, you know, what you're doing to, to care for the existing portfolio to care for your existing investors? What are some of the things that you're implementing right now?
00:04:28 Generally, Jen, we feel very good about where we are. Our office collections are running in the, uh, mid to low nineties. We do have, as I mentioned, some excuse that is office of a retail. Our retail collections are slightly under 50%, which is better than some of the malls, but not as good as, as the grocery anchored. Retail industrial has, has been a hundred percent collection. So, and, and that's pretty consistent with what you've seen in the, from others in the industrial space. So
00:04:58 Let's talk a little bit about go forward. In addition to opening up the office space, how is your investment thesis gonna be changing, uh, through this and sort of post the crisis?
00:05:08 Great question, Darren, and to a certain extent that strategy is still evolving a little bit. I think, uh, capital formation is clearly going to be a little different. Mm-hmm. <affirmative>, you have at the moment, at least two of the major sources of debt are kind of out of the market, the debt funds and cs. Occasionally we've used debt funds on a very transitional asset. So because of the value add space, you want to maintain maximum flexibility for your exit. Uh, that causes us to gravitate mostly towards the banks for, uh, lenders. And we're also very low leverage, thankfully, for our portfolio because we're low leverage and we also have a very conservative approach towards retaining cash reserves. None of the conversations we're having with our lenders, uh, have anything to do with, uh, seeking any kind of forbearance or, um, uh, amendments or alterations to our loan repayment schedules. It's mostly us just informing them about what's going on with their collateral and, uh, and, and assuring them that if that they don't need to worry about our deal. If they've got some other things that they want to go worry about, uh, they, they have time to go do that and, uh, they can, uh, sLiebp well at night. Um, not worrying about, uh, our particular loans.
00:06:31 Well, that's great news, ed. Let's, uh, let's shift, uh, in closing to valuations and, and how you think for, for the asset classes that you specialize in and, and particularly office, you know, the impact evaluations, right? Uh, maybe in three sort of timeframe segments, kind of today, mid-term being, I don't know, a year to two years out, and then long-term sort of beyond that. Um, what do you think is gonna happen in valuations? Uh, for the office property type,
00:07:03 There's two elements. Of course, there's, there's the overall return environment in real estate, which over the long run has some correlation with interest rates, although I would argue that it correlates more towards unemployment and economic health than it does in exactly towards interest rates. But it's pretty clear that we're gonna be in a low interest rate environment for a long time. Mm-hmm. <affirmative>, the other element, of course, is your rent role and the income that your, your property generate. And, and that is taking a hit from Covid and that, that impact varies across property types, of course. And we've discussed the, the types that we're in retail probably impacted the most, uh, office. We've, we've talked about the countervailing trends earlier in our conversation. I, I'm confident that, that the need for office space is not going to zero A really, um, is less efficient when we're all working mobilely mm-hmm. <affirmative>. Um, and b is, you know, we, we really enjoy and, and feed off the interaction and we're, we're better together as a team when we're really able to, to cross pollinate in the office.
00:08:14 Well, ed, thank you so much for joining us. Uh, ed Griffin with Griffin Partners in Houston, Texas. Uh, a great client and great friend of CrowdStreets, uh, appreciate your, your partnership and your business and wish you all the best as Texas reopens here this coming week. Look forward to, uh, reintroducing you to the CrowdStreet community with a, with a future, uh, deal of Griffin Partners. And thanks for sharing your insight with us today. It's, uh, it's really useful and, and really, really valuable to us as we, uh, seek to understand what's going on all.