CrowdStreet’s Darren Powderly is joined by Peter Merrigan, CEO & Managing Partner of Taurus Investment Holdings, LLC, to discuss the firm’s history, which asset classes he thinks will bounce back in the short and long-term, and why he thinks investors need to think critically about retail.
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, this is Darren Paty. Welcome back to our next edition of StreetBeats. This is our quick video series where we have industry Liebers join us to share their views about what's going on in the current economy. Today, I'm very pleased to have Peter Merrigan, the CEO in managing partner of Taurus Investment Holdings in Boston, Massachusetts. Peter and I have known each other for about four or five years now, and, uh, really happy to have Peter on the show. He brings a unique view of the real estate, uh, economy. Uh, he has a global view, uh, given that his firm started in 1976, which he's gonna tell us all about. And, uh, Peter, thank you for joining us today. Please introduce yourself and tell us a little bit about TAUs Investment Holdings.
00:00:51 Uh, thank you Darren. Appreciate the opportunity to, to, uh, chat with you and with, with all of your clients. Um, so yeah, TAUs Investment Holdings has been around since 1976. You could probably tell by the video, I'm not that old. So, uh, there was two lives to it. Um, it was originally started by two of my former partners, uh, Lawrence, and went to rivaling, who were about 20 years older than me. And they were two brothers out of Munich and they, uh, they started in, in the mid seventies in originally in Munich. And then they moved to the us the original company's called Tourist Investment Group. And then we formed TA Investment Holdings in 1997, uh, which was basically the same company, but I just allowing me to become the third partner of the firm. Those, uh, two gentlemen retired, um, at the end of last year. And, uh, and I consolidated the ownership of the, of the company,
00:01:42 Honestly. Uh, tell us about, and you guys have done many billions. Uh, you yourself personally, I think is over 7 billion worth of real estate development, investment management. Uh, speak to the portfolio, uh, and your areas of expertise. And then if you would also touch on an important item related to our, our clients is, uh, your history of syndication, which I know goes back to the early days of the firm.
00:02:08 Sure, yeah. I mean, the, the company was really founded, um, off of bringing in very wealthy family offices from Germany into the United States. And they were capitalizing projects that we were doing in the us. Uh, originally we were pretty active in, um, in retail. Um, and we were, cuz there was a lot of, you know, growth and, uh, requirements and particularly in the late nineties as, as the retail formatted in the US and in Europe was changing, that business has changed and was changing quite dramatically, uh, in the early two thousands as it got overbuilt. And so at this point we've largely exited retail, um, and we still own, uh, one asset, um, in Turkey actually that we, that we built some years ago, which is a class a mall. But other than that, we've, we've, you know, very intentionally exited the retail business. We, so our primary focus right now is a multi-family office and logistics. And then we have a, a fairly sizable, uh, renewable energy business as well,
00:03:06 Renewable energy, uh, that is unique. Most of our other customers don't use renewable or don't have a renewable energy platform. How did that come about and how does it benefit the office multi-family and logistics platform?
00:03:20 Sure. Well, we have two businesses. So we have one for new construction, which is called EcoSmart Solution. Um, and that was really came out of one of our club deals, which is Club Deal 120, which is in Austin, Texas. And that is the largest, um, you know, master plan development in the Austin area. I think it's one of the largest in, in the United States at this point. Um, and by the way, <inaudible> was just announced that Tesla is looking, you've probably read in the newspaper that they're looking to relocate to Austin, so that if they do do that facility, it's right next to our facility, our project. So we'd be very happy about that <laugh>. Um, but our product is about 2000 acres and it's 7,500 homes. Um, and we decided to build it all on a net zero basis. Um, so basically we're producing as much energy as we're consuming, and so that we did that through a combination of geothermal for, uh, for heating and cooling, and then solar, uh, for the electricity and the whole, uh, product was built is really electric powered. So, uh, there's, there are no typical fossil fuels like gas and oil on site. Our other business is called renewed communities and renewed communities is meant to decarbonize existing assets.
00:04:31 So what about, uh, just going back to the general real estate market, your core asset plus is, uh, you know, obviously everything has changed, uh, economy is reopening right now. What is your research indicating about, you know, the shape or, you know, length of, uh, the recession that we are currently in, how long it's gonna last and and how does it, what what are your views on c r e valuations or commercial real estate evaluations?
00:04:57 Yeah, so it really depends on what and where, um, you know, so what, meaning if it's a, you know, if it's a hotel or, or a shopping mall, you gotta, you got a tough road ahead. Um, if, if it's a, um, hotel less tough than shopping mall, I would say it may get so bad that it becomes interesting. And we are actually buying a, a retail, a failed retail facility right now. That's one of the, that's our next club deal that we're coming out with, um, in, down in Miami. And, but we're gonna take that and reposition it and make it into a medical office. So I would say that medical office and in our, and, and that type of use and biotech and life science and things like that over time will do quite well. Uh, whereas retail will fail, warehouses will do well.
00:05:46 Um, and then, you know, and I think hotels will come back. Uh, I think apartments will do okay. Um, it might be, you know, kind of steady as you go, but I think there's gonna be a cessation of new supply in the apartment business in the short term. And that usually ends up, uh, helping, uh, multi-family. So, you know, and then office is gonna be very interesting. I'm in my own headquarters office right now and <laugh>, you know, I'm the only one here. So, uh, we're just reopened this week in, in Boston. Um, I, you know, we've, we've reopened on a volunteer basis and right now people are, employees are choosing to, to stay at home. Um, and we'll see how that plays out. I don't believe long term that, that dynamic is, is, um, is going to last. I think that, uh, office space, it will do well.
00:06:34 Um, but I think high price office space may suffer a little bit. The, um, I think that the office space, you know, creating a collaborative environment, uh, creating, um, you know, team building and things like that, all those things that people that were important three months ago, I think will go back to being important again. Um, once people get more confidence, um, around the, the statistics associated with, um, you know, with the Coronavirus V-shape recovery. That's a long-winded answer to your, to your short question v-shape recovery. I think economically, I think there will be a recovery and I think we'll be on an upward trajectory, you know, I think is more of a flat v, um, than, than a very steepy um, I think it's gonna be choppy and bumpy and we're gonna have bad weeks and bad months, and then we're gonna have some that are unexpectedly good, but the overall trend will, will continue to be one of recovery.
00:07:30 Yeah, I completely agree with you. So Peter, this has been a great conversation. Thanks for sharing your views. Any other thoughts or, uh, things that investors should be thinking about in a comes private commercial real estate?
00:07:42 Yeah, I mean, so, so there's been some lot of discussion with people about, okay, is there massive distress in the market? Um, is there, is there a huge price correction going on? Um, you know, what's the debt market look like? Things like that. So what I can tell you is that debt market is worse than what before, you know, what, what's happened is depending on the product type, you know, the banks have pulled back, um, they put in floors, they've widened, spreads, all that kind of stuff. So while there may be some price changes on, depending on the asset, well we're seeing the price changes depending on whether it's multifamily or office or, or what have you. It's anywhere between say, five and 20%. Um, and, and we, you know, we have one large portfolio that we're buying back from a REIT right now that's actually in, in senior living, and that's about a 20% discount.
00:08:30 So that's on the wider side of the, the, the, um, price change, multifamily, there really hasn't been much change at all, uh, on pricing, um, because there hasn't been any distress. You know, our collections are over at 98%, um, and there's really, there's really no distress in the, in the business. So, um, so I would say depending on what it is, and there's no distress in logistics, again, collection's over 98%, you know, everyone's doing fine. The collections in office have been good. Uh, so what's happened is that there's, uh, it's difficult to get things refinanced and that's causing some price change. It's difficult to get new leasing done just from physically going and marketing the space. So if you have vacancy, that's a bit of a challenge. Um, so that's causing some, you know, the, the pricing change. Um, but is there gonna be a wholesale collapse?
00:09:19 No, the, the wholesale collapse is gonna be in retail, you know that, but if you're gonna buy a retail, you better have a good idea on what you're gonna do with it because just looking to release it to other tenants is, is not gonna work very well. Um, so, you know, I think it really is, it really is kind of product by product and case by case. But I would say that the, um, that the, the general ones that we're ac the sectors we're active in are actually holding up pretty well, um, with some slight discount depending on the vacancy, et cetera, depending on the financeability. Um, but I think actually that, that changes fairly quickly and closes fairly quickly as the market recovers and the debt market recovers, which I think it will over the next 12 months.
00:10:02 Great, great summary. And thank you for going through the different prototypes and, uh, where there's winners and losers in this post covid economy as we reopen and, um, try to find where the best, most attractive opportunities are for investors, uh, Peter Merrigan, tourist Investment Holdings, Boston, Massachusetts. Thank you for joining us today on StreetBeats. Thanks for the relationship that we've had over the years and looking forward to expanding it in the future.
00:10:28 Great. Thank you Darren. Appreciate.
00:00:51 Uh, thank you Darren. Appreciate the opportunity to, to, uh, chat with you and with, with all of your clients. Um, so yeah, TAUs Investment Holdings has been around since 1976. You could probably tell by the video, I'm not that old. So, uh, there was two lives to it. Um, it was originally started by two of my former partners, uh, Lawrence, and went to rivaling, who were about 20 years older than me. And they were two brothers out of Munich and they, uh, they started in, in the mid seventies in originally in Munich. And then they moved to the us the original company's called Tourist Investment Group. And then we formed TA Investment Holdings in 1997, uh, which was basically the same company, but I just allowing me to become the third partner of the firm. Those, uh, two gentlemen retired, um, at the end of last year. And, uh, and I consolidated the ownership of the, of the company,
00:01:42 Honestly. Uh, tell us about, and you guys have done many billions. Uh, you yourself personally, I think is over 7 billion worth of real estate development, investment management. Uh, speak to the portfolio, uh, and your areas of expertise. And then if you would also touch on an important item related to our, our clients is, uh, your history of syndication, which I know goes back to the early days of the firm.
00:02:08 Sure, yeah. I mean, the, the company was really founded, um, off of bringing in very wealthy family offices from Germany into the United States. And they were capitalizing projects that we were doing in the us. Uh, originally we were pretty active in, um, in retail. Um, and we were, cuz there was a lot of, you know, growth and, uh, requirements and particularly in the late nineties as, as the retail formatted in the US and in Europe was changing, that business has changed and was changing quite dramatically, uh, in the early two thousands as it got overbuilt. And so at this point we've largely exited retail, um, and we still own, uh, one asset, um, in Turkey actually that we, that we built some years ago, which is a class a mall. But other than that, we've, we've, you know, very intentionally exited the retail business. We, so our primary focus right now is a multi-family office and logistics. And then we have a, a fairly sizable, uh, renewable energy business as well,
00:03:06 Renewable energy, uh, that is unique. Most of our other customers don't use renewable or don't have a renewable energy platform. How did that come about and how does it benefit the office multi-family and logistics platform?
00:03:20 Sure. Well, we have two businesses. So we have one for new construction, which is called EcoSmart Solution. Um, and that was really came out of one of our club deals, which is Club Deal 120, which is in Austin, Texas. And that is the largest, um, you know, master plan development in the Austin area. I think it's one of the largest in, in the United States at this point. Um, and by the way, <inaudible> was just announced that Tesla is looking, you've probably read in the newspaper that they're looking to relocate to Austin, so that if they do do that facility, it's right next to our facility, our project. So we'd be very happy about that <laugh>. Um, but our product is about 2000 acres and it's 7,500 homes. Um, and we decided to build it all on a net zero basis. Um, so basically we're producing as much energy as we're consuming, and so that we did that through a combination of geothermal for, uh, for heating and cooling, and then solar, uh, for the electricity and the whole, uh, product was built is really electric powered. So, uh, there's, there are no typical fossil fuels like gas and oil on site. Our other business is called renewed communities and renewed communities is meant to decarbonize existing assets.
00:04:31 So what about, uh, just going back to the general real estate market, your core asset plus is, uh, you know, obviously everything has changed, uh, economy is reopening right now. What is your research indicating about, you know, the shape or, you know, length of, uh, the recession that we are currently in, how long it's gonna last and and how does it, what what are your views on c r e valuations or commercial real estate evaluations?
00:04:57 Yeah, so it really depends on what and where, um, you know, so what, meaning if it's a, you know, if it's a hotel or, or a shopping mall, you gotta, you got a tough road ahead. Um, if, if it's a, um, hotel less tough than shopping mall, I would say it may get so bad that it becomes interesting. And we are actually buying a, a retail, a failed retail facility right now. That's one of the, that's our next club deal that we're coming out with, um, in, down in Miami. And, but we're gonna take that and reposition it and make it into a medical office. So I would say that medical office and in our, and, and that type of use and biotech and life science and things like that over time will do quite well. Uh, whereas retail will fail, warehouses will do well.
00:05:46 Um, and then, you know, and I think hotels will come back. Uh, I think apartments will do okay. Um, it might be, you know, kind of steady as you go, but I think there's gonna be a cessation of new supply in the apartment business in the short term. And that usually ends up, uh, helping, uh, multi-family. So, you know, and then office is gonna be very interesting. I'm in my own headquarters office right now and <laugh>, you know, I'm the only one here. So, uh, we're just reopened this week in, in Boston. Um, I, you know, we've, we've reopened on a volunteer basis and right now people are, employees are choosing to, to stay at home. Um, and we'll see how that plays out. I don't believe long term that, that dynamic is, is, um, is going to last. I think that, uh, office space, it will do well.
00:06:34 Um, but I think high price office space may suffer a little bit. The, um, I think that the office space, you know, creating a collaborative environment, uh, creating, um, you know, team building and things like that, all those things that people that were important three months ago, I think will go back to being important again. Um, once people get more confidence, um, around the, the statistics associated with, um, you know, with the Coronavirus V-shape recovery. That's a long-winded answer to your, to your short question v-shape recovery. I think economically, I think there will be a recovery and I think we'll be on an upward trajectory, you know, I think is more of a flat v, um, than, than a very steepy um, I think it's gonna be choppy and bumpy and we're gonna have bad weeks and bad months, and then we're gonna have some that are unexpectedly good, but the overall trend will, will continue to be one of recovery.
00:07:30 Yeah, I completely agree with you. So Peter, this has been a great conversation. Thanks for sharing your views. Any other thoughts or, uh, things that investors should be thinking about in a comes private commercial real estate?
00:07:42 Yeah, I mean, so, so there's been some lot of discussion with people about, okay, is there massive distress in the market? Um, is there, is there a huge price correction going on? Um, you know, what's the debt market look like? Things like that. So what I can tell you is that debt market is worse than what before, you know, what, what's happened is depending on the product type, you know, the banks have pulled back, um, they put in floors, they've widened, spreads, all that kind of stuff. So while there may be some price changes on, depending on the asset, well we're seeing the price changes depending on whether it's multifamily or office or, or what have you. It's anywhere between say, five and 20%. Um, and, and we, you know, we have one large portfolio that we're buying back from a REIT right now that's actually in, in senior living, and that's about a 20% discount.
00:08:30 So that's on the wider side of the, the, the, um, price change, multifamily, there really hasn't been much change at all, uh, on pricing, um, because there hasn't been any distress. You know, our collections are over at 98%, um, and there's really, there's really no distress in the, in the business. So, um, so I would say depending on what it is, and there's no distress in logistics, again, collection's over 98%, you know, everyone's doing fine. The collections in office have been good. Uh, so what's happened is that there's, uh, it's difficult to get things refinanced and that's causing some price change. It's difficult to get new leasing done just from physically going and marketing the space. So if you have vacancy, that's a bit of a challenge. Um, so that's causing some, you know, the, the pricing change. Um, but is there gonna be a wholesale collapse?
00:09:19 No, the, the wholesale collapse is gonna be in retail, you know that, but if you're gonna buy a retail, you better have a good idea on what you're gonna do with it because just looking to release it to other tenants is, is not gonna work very well. Um, so, you know, I think it really is, it really is kind of product by product and case by case. But I would say that the, um, that the, the general ones that we're ac the sectors we're active in are actually holding up pretty well, um, with some slight discount depending on the vacancy, et cetera, depending on the financeability. Um, but I think actually that, that changes fairly quickly and closes fairly quickly as the market recovers and the debt market recovers, which I think it will over the next 12 months.
00:10:02 Great, great summary. And thank you for going through the different prototypes and, uh, where there's winners and losers in this post covid economy as we reopen and, um, try to find where the best, most attractive opportunities are for investors, uh, Peter Merrigan, tourist Investment Holdings, Boston, Massachusetts. Thank you for joining us today on StreetBeats. Thanks for the relationship that we've had over the years and looking forward to expanding it in the future.
00:10:28 Great. Thank you Darren. Appreciate.