Multifamily Investor Expo - Feb 15th
Multifamily projects that create strong communities with high occupancy rates, stable rent growth, and unique appeal also create value for investors. Scott Lurie, Founder of F Street Group and President of F Street Development, joins the show to discuss creative approaches to multifamily development.
Listen in as Scott walks through unique projects his team has developed, and what investors should know about the outlook for multifamily.
Watch On YouTube
- F Street Group’s investment thesis for multifamily.
- How hotel conversions can make strong multifamily assets.
- The importance of adding amenities that build community to multifamily projects.
- The case for multifamily real estate in Wisconsin.
- The story behind a 199 unit multifamily project in Oak Creek, Wisconsin built around nature based, sustainable living for residents.
- The impact of rising interest rates and inflation on multifamily projects.
- Compelling trends making waves in the multifamily industry.
- What CRE asset class Scott is bearish on given the current macroeconomic landscape.
- The fascinating story behind F Street Group’s headquarters which is part of a conversion of an old Pabst distribution center.
Featured On This Episode
- Still fighting: Milwaukee commercial real estate market not letting challenges disrupt its rise (REjournal)
- Multifamily Braces for Another Fed Rate Hike (Multi-Housing News)
- Will increased borrowing costs dent sky-high apartment valuations? (Multifamily Dive)
Today’s Guest: Scott Lurie, F Street Group
- F Street Group (Website)
- F Street Development (Website)
- F Street Group on LinkedIn
- Scott Lurie on LinkedIn
About The Multifamily Investor Podcast
The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses passive investment offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.
Scott Hawksworth: Hello, and welcome to the Multifamily Investor Podcast I’m your host Scott Hawksworth and today we’re going to be talking about creative opportunities in multifamily and looking at the landscape and more. Joining me to offer his insights is Scott Lurie who is founder of F street group and President of F street development and so glad to have him here Scott, welcome to the show.
Scott Lurie: Thanks for having me Scott.
Scott Hawksworth: Thank you for being here, as I said, we want to talk about creative opportunities in multifamily and cover a lot of ground but I always like to kind of start with a high level question so. You know you have a creative approach to commercial real estate and multifamily specifically what’s your what’s your overall investment thesis for multifamily let’s start there.
Scott Lurie: Yeah multifamily has been you know, obviously a moving target over the last, let’s call it 20 years that I’ve been investing but it’s always been a very solid asset class.
So you’ve taken we’ve taken this approach, Scott, as you can kind of envision we started with a value add approach, where we were buying distressed multifamily buildings we were we were improving them and and retaining them, and that was you know our start into our collection of units from there.
You know you obviously are interested in the ground up approach, and so we We then we have now moved on, in addition to buying value add or opportunity real estate we do find some challenge sites throughout the markets where we can partner with traditionally municipalities that are seeking to have increments increased or created and they’re willing to support our development through through through through a ticket or a tiff, and so we made and we then explore that space we traditionally don’t.
We traditionally don’t find sites where you can build by right we’re traditionally were traditionally getting involved in in multifamily projects throughout.
Our ecosystem, where we need to create a Public Private Partnership and then execute on that plan, which is to build and develop inkerman as well as.
What people always forget about it provide quality housing into a Community is also very important piece of it not so much the increment side.
Scott Hawksworth: Right absolutely and I think we’re gonna dive into some of that that aspect of Community and providing that quality housing, because I think that is something that sometimes people you know, maybe don’t consider they’re just kind of looking at the numbers right.
So okay you’ve got many different projects I’m going to dive into a few of them here because.
You know in advance of this discussion here, I was just fascinated I was kind of going through your portfolio and what I could see and I was like wow I just I there’s so many I want to ask about because they are really unique.
The first one, I want to talk about is, you have a number of hotel conversions I want to see that you’ve got one in akron when an Albany, what can you tell us about turning a hotel into a multi family asset what what’s involved there.
Scott Lurie: yeah so so you know that’s this has been an interesting category and it’s garnered a lot of attention over the past probably.
Five years as the stretch for yield has continued to rise, and people are trying to get I would say savvy or crafty with with investment in.
This category certainly is that category right and say how do you take a hotel and so what happens in the hotel spaces.
As many people probably forget to realize, is that the hotels, have a very competitive business they want the nightly red door they want the highest achievable rental rate for the evening.
Which maximizes the yield.
Outside in the in the hotel space well what happens is when these hotels become call them fully depreciated are not having much value anymore to a hotel operator.
They become a nuisance and why does it become a nuisance right well becomes a nuisance, because what was 100 and 10 or $130 a night stay becomes a non flag hotel right, so the flag, which is, which is a.
Which is a Hampton INN or whatever the flag was at the time that you could essentially.
book on your APP no longer exists so there’s no longer a partnership and what happens is the owners of these hotels say oh geez, we need a rent we need the money, and so, then they become the $50 a night.
nuisance problem, and if you can imagine a $50 night hotel, you know what happens in these in these markets where the hotel flags gone.
And the blight occurs is the nuisance happens right, and so you get into significant issues with police and negative behavior which really impacts, the Community and so.
So, so the opportunity was and is throughout the country is we have several these conversions where we take the hotel we’ve we most of these hotels are nuisance properties or blighted by way of problems and we We then.
meet with the municipality you most of the time you need a zoning variance.
And the hotel, which goes from a hotel to a multi family distinction, but what we what we can effectively do is change the blight within.
An immediate process from a blight to a to a quality, affordable housing unit inside of a community, and so, so what you know you mentioned akron and acura is one of those it was a significant significantly blighted property.
The chief of police was incredibly irritated with the property and there was lawsuits flying all over the place from Community to owner and owner was.
You know owner didn’t care owner was collecting as $50 a night and and he didn’t care, and so, so the opportunity was to change that so you make a capital investment into the infrastructure of the actual assets.
We still focus on amenity rich assets in there in this category, so adding pickle ball courts and swimming pools and clubhouses etc to elevate them to what we would call a B plus status or an a minus category it’s not a new class a apartment but it’s.
it’s certainly getting that rocket.
yeah it gets close to that pocket if you can imagine Scott, you take this blight and you, you fix it up and then all of a sudden it’s you know, and so we see huge leasing velocity out of that market in.
It the model works incredibly well.
Scott Hawksworth: Absolutely and i’m just curious you know, sometimes on this show we talked about you know the regulatory landscape, we talked about you know markets where they are, they landlord friendly or not.
So do you find when when you’ve gone in, and you have those conversations with municipalities that that they’re really.
I guess open to and excited about it, the opportunity to kind of revitalize a blight blighted property like that that’s kind of a headache do you find that just those conversations go much easier.
Scott Lurie: yeah I mean you would think In fairness to the to the discussion, you would think they would go a lot faster right, you would think in my world that.
Scott Hawksworth: Right.
Scott Lurie: I can get rid of the prostitution, the drugs, all of this stuff that’s negatively impacting your community.
And the reality is they’re so deep in the in the trenches of this war between landlord or owner and and problems that it takes them a little bit of time to actually see through and you’re like hey listen I vet my tenants, I can tell you who’s living in each unit.
If someone comes for a daily hotels day they need an ID and a credit card and I I rent to that right for me as well, you need to have X amount of income to follow.
And you need to I need to know who’s staying in the apartment and I need to do a background check on you and run credit on you, and so, when you can execute on that process.
And and explain it to them, then they finally start catching you know you know almost the process and the opportunity for the Community and some go better than others there’s some communities.
There was one in Minnesota where they just you know, there was a homicide at the Community.
There, it was a blighted community and we gave them an opportunity and they’re like, no, no, no, no, no, because they just didn’t want to listen and so you.
You just unfortunately pass and some of those opportunities, because they’re not listening and so so regulatory or those challenges are present, most of the time 95% of the time we can tell the story and they’ll pay attention.
Scott Hawksworth: Absolutely, he said that word community and i’m excited to talk about that, because just looking across your projects, there is such a great Community focus and i’m sure that’s key to your success.
I want to talk about a specific one here green link residences and it’s blends modern townhome style living with a socially connected public gathering space and a beer garden which.
I like beer.
I love that aspect so i’m just curious you know why come up with such a unique feature as a beer garden as part of a multi family development what’s sort of the I guess the idea there.
Scott Lurie: yeah so once again you start with what are you, what are the cards you’re being dealt with, so this was greenlit residents wasn’t was.
An rfp from the village of brown dear Community I happen to live close to growing up and was part of the part of the north shore of milwaukee the suburbs of milwaukee.
And so they had a former dp w site that they’ve already moved in the village.
has done a great job developing what is their their their infrastructure and they were left with this blighted EP w site, which is in the former town Center of the village of brown year so there’s.
You know beautiful and a lot of character around there but it’s it’s certainly has has run its course and so.
So the opportunity, through the rfp was to really connect what is the oakley trail, which is a bike trail to that goes for basically.
All over I mean it’s 100 plus mile bike trails a beautiful bike trail and so it’s a connector to to this site, and so we built this multifamily project and right across the street was another multifamily project and so these two brand new ground up first of its kind.
New multi families, since 19 I think 82 in the village of brown deer was was to revitalize the old village.
Square and so part of that was to create this connector and the Community was a very important piece of this.
As part of their rfp process, we propose to them that’s created the Community garden again as can create this beer garden this public space for gathering.
And when we do that we’re going to connect not our project, the project someone else, develop and our project and the bike trail together all to this beer garden.
And it just open and it’s it’s unbelievable the Community really one here by way of they got a beautiful new public green space.
They have a beautiful new modernized building and they’ve got between our project and the project across the street 300 plus.
New multifamily quality units in their community which are leasing up at a tremendous philosophy, right now, so.
So talk about pent up demand talk about need for Community talk about need inside of a community, the Community wins wins wins by providing a small kid.
To a project, and then they yield a new public green space brand new quality apartments by both parties and a connector for the Community to gather and.
So, so that piece of it was amazing we just had the president of the village there for the ground for the grand opening and you know it was great to see everyone was there gathering having a wonderful afternoon drinking a few carbon for his beverage.
yeah it was it was a major wins so.
super great project to be part of it, and we look to do more, of those.
Scott Hawksworth: Do you find that the projects like that you know, maybe decrease turnover when you’re talking about you know leasing up and kind of.
help with that aspect in terms of maybe, providing that community with maybe even more connection and a sense of ownership over their their space, do you find that that’s that’s your experience when you do do these you kind of unique projects.
Scott Lurie: um yeah I would say, you know we don’t have the data at this point, this is a newer project there, so the.
Data points are there yet.
But I think the answer to your to your question is is is does does amenities and Community validate and keep people.
In a Community longer or do they stay longer, and the answer is, of course, you know if.
If there’s no reason to move, why are you moving right Why do people move well sometimes they just have to sometimes they they feel like they’re not in a great place for themselves.
If they’re surrounded by the Community and can be part of the Community it’s such a nice feeling at the end of the day, it’s nice to feel good and they feel good at that.
At that point, whether their tenant tenancy or whatever they happen to be why they’re in this Community, and so yeah absolutely.
I mean their hundred percent is a correlation I don’t have enough data points at this point for the Green link to to share with you Scott, but I can tell you that I think the intuition is 100% absolutely.
Scott Hawksworth: Okay there’s another project here that you have it’s 199 unit multifamily project in oak creek Wisconsin and I just found this fascinating it’s focused on developing a nature based sustainable way of living for residents.
Why don’t you share, about that project and sort of the underlying philosophy there, I mean sustainability, that is one of those words that you know really pops up and gets my ears listening so i’m curious if you could speak to that.
Scott Lurie: yeah so so you have to I don’t want to I don’t want to take the time to share the whole story with you, but this site was a former brownfield site that that the city city 1215 years ago said hey we’re going to be committed to taking back the lake frog.
And toad milwaukee and oak creek increased on a really good job progressive forward thinking leadership that we’re going to take back the lake lake front, and so they built a beautiful lake excuse me a beautiful park right in the lake called like vista park beautiful amazing.
You know top notch park and then there were 66 acres that is that a bunch of that park that overlooked the lake and so the vision once again and it’s been two years we actually broke.
We just closed and I broke ground on that project this week so it’s it’s been a long.
process, we have a 14 month construction cycle, but the point is is that now we have a park as a connector we have amenities inside of a park that a part of the Community.
And then we have the entire surrounding amenities that we’re adding for this community to create this really this sustainable living right, and so, once you get there.
You never want to leave your you’re in a true period of bliss where you get home, you can walk your dog or yourself to the lakefront you can walk on the trails that are part of.
The Park, as well as part of the Community, you can enter the pickup ball course the tennis court, the basketball court, the bike trails.
you’re you’re fully immersed in what is not only nature right because you’re right inside of it, but also sustainable living have.
Everything you could ever really want you have right there as an amenity packed living facility, which is amazing, and you don’t get that in a lot of urban markets but you’re going to get that at lakeshore comments and we’re very excited about this project.
Scott Hawksworth: yeah that’s a that’s a differentiator absolutely i’ve done a lot of urban living myself and and and you don’t see that as much you don’t see that that sort of approach to having that nature there so woven into the fabric of the the property itself right.
Scott Lurie: Absolutely and it’s truly woven in because your front door is is the park your front your back door is the.
Urban trails that we’ve created the your to your out your left window is is the pickle ball court to the basketball courts or the tennis courts and so.
And you want to jump on your bike and go pedal around your your connected right into lake Michigan and you can essentially drive your bike down to the lake and you’re right there so.
I give tremendous credit to the leadership of oak creek because they were they really and I encourage more communities to think about it, the lake is an amazing amenity.
And lake Michigan is amazing entity that is very underutilized which is, which is, I always wonder why that’s the case.
Scott Hawksworth: you’re preaching to the choir here, I have lived on the shores of Lake Michigan for well over a decade now, and I always liked being able to look out my window and see the lake or a walk just a block and see it right.
Scott Lurie: The ultimate de stressor take a look at the lake and you’re like all right.
Scott Hawksworth: rough day sit down it’s not so bad.
Scott Lurie: Exactly.
Scott Hawksworth: Speaking of you know location and market specifically many of your assets are located in Wisconsin and you know there’s a lot of hype about other markets Sunbelt we talked about a lot of that on this show.
Of what do you like Wisconsin for multi family, what does what does Wisconsin have that you really compels you from from a multi family standpoint.
Scott Lurie: yeah you know part of it is really where you’re from and where you were you were your origin is so doing deals here is is just in your backyard or the easier to do deals in milwaukee versus in Tyler Texas Of course not, there are the same it’s the same challenges right.
Do you know your.
Political Parties closer in your own hometown yeah, of course, and so you know milwaukee is always been home for me born and raised here i’ve always really enjoyed the values of our of the people here right the people here have always been hard working.
You know i’ve always found it to be a really a real place to live right it’s not built up on on.
there’s no real peaks and valleys we’re really a steady economy we don’t get high growth we don’t get much population growth, but we have a steady position inside of.
Our ecosystem and so it’s nice to have steady right studies got bad right do we see like, if you look at a Tampa market where you’re seeing 35% read growth and.
we’ll never see that here that’s just not you know that’s not milwaukee milwaukee is this steady eddie and part of that is is what makes investing in milwaukee and Wisconsin really a fun place to do.
Scott Hawksworth: Right, and I think there’s that also that piece of you know it well.
Scott Lurie: Right yeah you have sure those relationships, especially when you’re.
Scott Hawksworth: You know, doing developments to have those conversations and be able to maybe navigate some of the challenges that you would face more easily than if it was a market, you were less familiar with is that is that fair to say.
Scott Lurie: yeah I would say, the answer is yes, I think I think times are changing, though, I would say Scott, you know if you think about it.
You know, when you use to go and call a mayor’s office you know, he was who you know and how’d you get them on the phone and I think those days of change, I think.
The elected officials are part are are not so much distant from the business community, I think they’re trying to get closer to the business community, I think they’re trying to be part of communities, and so, when we look at hotel conversions in akron.
You know you’re talking to the chief of police he calls back we’re talking to the Mayor they call you back we’re talking in milwaukee we can go down and speak to our elected officials or we can request meetings and meet with them.
So yeah, of course, you know you do I know a lot more people walk in, and I do an akron Ohio, of course, right that’s the natural.
But, but I will tell you that I think I think the world has changed, I think the political environment has forced.
People parties elected officials to be part of these communities where people want more people want better and people expect better, quite honestly, and so, so the engagement is so high, I think, are higher in and continue will continue to get higher.
Scott Hawksworth: yeah so I guess the do you get the sense than that there’s just more elected officials that may be.
get it when when when it comes to you know, a multifamily development and what you know folks like yourself can bring to the table and how you can help the Community and you’re seeing this across markets.
Scott Lurie: yeah so you know I think you see it it’s interesting the city of milwaukee has has had a former has had a.
flat out no mentality towards kids towards multifamily housing.
Every Community surrounding milwaukee has a we’re open for business for kids and tips for multifamily housing and so we’re seeing explosive growth.
In multifamily housing take oak creek, for example, they probably have added a couple thousand units to oak creek.
it’s much easier to do business in some of those markets where they want you right when when the village of brown here said hey we want to roll out the red carpet for this rfp and for the other folks have built develop next to us, we both got tips.
right but, but the Community wins, and so this is a mentality of a specific initiative walkie is, we will not tip.
multifamily to me, is a broken that’s where the logic is broken right that’s just a one of those old 20 year old, we will not tiff multifamily housing it’s like I think I think we need to get more progressive so so taking a walk or take other communities that have restrictive.
Barriers towards development, I think I think those communities are suffering right in milwaukee has had no population growth for the past 20 years.
I think that’s a direct reflection on those policies, and I think you see the suburban or the suburb counties around surrounding us and they’ve had tremendous growth of quality, housing and people want to live in those.
Scott Hawksworth: Absolutely, and I think that also goes back to you know, we do have this housing shortage.
In so many different markets and you kind of see if there’s that approach to be you know, open and wanting to work with developers, then the results get kind of born out and you see how that positively impacts those communities right.
Scott Lurie: yeah and and you know the housing shortage, you know the number was 4 million, I think, seven months ago, or whatever that was you know that’s a big number 4 million units of housing right a lot of a lot of housing units.
Scott Hawksworth: yeah and and and it’s one of those things where yeah the development is marching along, but it is not going to overnight close that gap that gap is looking to continue to exist, even with all of the development that is happening right.
Scott Lurie: hundred percent and the adaptive reuse them a lot of product is helping to to be creative and crafty I love those you know the adaptive reuse of office to.
office class B office that’s in a glut turning into multifamily housing is such a win for everybody, you know you don’t have to knock down, you know you can create sustainability out of an existing structure.
there’s there’s a lot there so so yeah I think you’re I think you’re right.
I just I always i’m always puzzled by a a leader or leadership that just doesn’t.
understand it from our angle and it’s not my angle saying come help us, I mean you know the construction costs have gone through the roof tests.
And kids are really supportive financing packages they’re important the Community at the end of the day, still wins right and and so long as you believe that so long as that actually is factual which it is.
Why not the these these borrowings are not really that complicated or this indebtedness from a community is never a position of doesn’t put a Community a position of weakness.
And so you know we strongly encourage leadership to to to continue to be active, we wish the city walk you’d be more active with multifamily, but it is what it is.
Scott Hawksworth: Right right.
Scott Lurie: You know the other thing that’s got that that doesn’t that we don’t consider is that affordability without tiff.
Is is is a big question right, and so you can create affordable living but milwaukee things 350 and some of these buildings that are being built brand new 350 foot in red is comparable to Fort lauderdale.
Florida 350 going to four.
But milwaukee Wisconsin should be at 350 going to 365 we should be at you know, two to 20 to two at seems like a fair market place for us but we’re pushing those because new construction without a tip and then everyone So how are they affordable well they’re not they can’t be.
Scott Hawksworth: You know, actually speaking to that I kind of want to take a look at sort of the the larger picture here, I was just looking the CPI print was just announced things like over 9%.
No one yeah it was nine one, and you know, so we have that ongoing inflation general economic uncertainty.
you’re talking about cost of materials we’ve had you know supply chain challenges, all of this swirling around you know the feds going to be rising the increasing those those interest rates again clearly there they haven’t got it under control.
And what’s the impact you’re, seeing as you, you know are looking at your projects your deal flow what what are you seeing multifamily specifically how How is this reacting and and what might What might the outcomes be.
Scott Lurie: yeah I think so i’m going to answer by telling you where I think we’re going to end up.
I think we’re going to end up just fine.
Okay, I think I think the I think this, the end result is going to be.
Success I think the projects that are going up are being started I think we’re going to be fine in those regards.
i’m have tremendous short term concern about new starts sustainability sappiness but but with challenges come solutions right that’s what what makes us great I think it makes America great.
So you know I look at it, I say it’s crazy, I mean if we see another you know we’re going to see another 75 increase on July.
26 27th right that happening and it might be more I wells fargo just said that it might they might think they can see way more than that at the next bed because nine one is the highest inflationary number I think there’s the guy in in 40 years.
Scott Hawksworth: Right and they signaled that that they’re they’re willing to do whatever it takes to try to get that under control right.
Scott Lurie: They have no choice right and we agree that right, so we agree that gets a world so so so short term.
We got problems right, I mean let’s be honest, a lot of us are on a floating rate construction loan that has a for.
That floats and so that’s going to impact profit right that’s that’s a factual statement you’re going to see projects that are that were scheduled to be started in three months that are going to be put on hold.
we’re going to see all this we’re going to see projects that weren’t bought out so we we pushed very hard to get our projects, specifically the.
The oak creek project we bought out our all of our contracts, knowing that inflation is coming, and we want to lock in prices so we’ve already issued cut contracts.
For 99% of our stuff because i’m afraid that in in November when phase two supposed to start what that environments going to look like.
I don’t know but inflation right is causing now we’re going to see nine one hopefully we’ll see some reduction in price to some level, but who knows, but we’re not.
The bigger impact for us in real estate is really gonna be interest rate right and then so that factor is really going to be okay, if you go to do a refinance alone and your pro forma that are showing 4%.
Well, I think you’re going to have to insert those up 75 basis points, quite honestly, or more, and so.
So so so So where do we go what what happened, I don’t know, I think we will be fine we always are fine it just takes.
there’s going to be some short term pain that people, whether new starts are going to get delayed.
Whether pricing is going to you know there’s an impact of pricing and then interest rates and there’s going to be a perfect storm and call it call it the end of July we’re rates are going to be up another 75 basis points and lumber hasn’t come down.
Right so imagine those two variables that are going to you know it takes to take the cycle right I don’t know what the cycle is 134 months of cycle.
To get you know everyone says lumber prices are down, they are, but not not at the field where the guy just bought lumber right he paid and he’s telling you he can sell this to you at a loss, and so, so I you know.
short term pain long term opportunity.
Scott Hawksworth: In terms of rental rates, I know a lot of folks you know we’ve seen these.
Rates increasing across markets, and I was actually just having a discussion, the other day about well How has it peaked is it’s it’s starting to you know.
Go back down in some markets are slow rather in terms of growth.
Do you think that that is you know I know a lot of folks in multifamily think well, that will be the savior.
You know, because the rents are are going up, so you know that’ll that’ll protect us from inflation, a little bit and and we’re still Okay, because of that is that faulty thinking or are you seeing.
Maybe you know, a point where that might change in the sense that you know gas prices are what they are groceries are what they are, at a certain point, you know folks aren’t going to be able to afford certain rents i’m just curious to your take there.
Scott Lurie: yeah I mean, so I I look at it, to say so, the answer is.
is the only natural way that real estate developers can logically continue to build is that they believe in the can make sure that rental rates are going to continue to rise, and they can afford.
The projects like that, and the rising cost right and the rising interest rates, if you don’t believe in that.
I mean you still ice cream, you should do some other stuff.
You know what i’m saying if you’re not convicted, to the idea that so so that’s one of the bigger question really.
I see as part of that direct connector to ride the rental rates is just supply and demand right So if you look at our projects, whether it’s an Albany New York or whether it’s it’s you know here are least our Lisa was scheduled for 12 months.
And in four and a half months we’re over 60% occupied right so so the demand is there demand is 100% there and so until they can see starts creeping down into the low 90s, and maybe you mean to the high 80s.
Demand or pricing is going to continue to rise right and there’s a lot of very good software out there, that is showing demand pricing right so so.
So we use those and we’re seeing for demand in some markets, a studio is renting for more than a two bedroom.
Because the demands of the studios are just off the charts right so Who would ever thought you’re getting 1415 verses two bedroom and 1550 per studio you know, I was blown away I said how.
Scott Hawksworth: that’s amazing.
Scott Lurie: it’s amazing it was it’s actually a revelation now half the reason is that we have no more two.
bedrooms available right, so the only available unit in the project is a studio today but it’s renting for more than what it was six months ago for the.
Two bedroom so so those demand numbers, I think, are really important right, I think, in the south right so take the big markets where you’re seeing huge increase of people right Tampa take the south Florida market take Texas markets.
Scott Hawksworth: Dallas.
Scott Lurie: or want to live there, people are just changing where they’re spending their discretionary dollars.
so that they can have a quality of life right you don’t want to live in in in Chicago in January when is negative 40 polar vortex Of course not, who does.
Scott Hawksworth: right here.
Scott Lurie: Right that’s how we live here right Scott.
The way you say Oh, I can go down to Tampa Florida and it’s 85 and sunny today.
But I gotta pay 390 of foot people make that decision and they’re getting thousands of people addicted to move to Florida still so that migration, the great migration out of.
Certain markets and even out of California, is where political environments might be changing and causing people anger or taxes.
or court crime that you’re seeing I mean we just saw.
A pretty large company move out of Chicago do to crime.
Right, these are real problems guys this these things are this is real, but all of those people all that workforce just vacated an apartment or some of them and they’re all going to move down to Florida and they’re all going to occupy apartments right.
Here we go and so so so so So the answer is, I do think demand for multifamily remains, I do think pricing will continue to rise.
But I do think there is a point when enough’s enough, but when is that point I don’t know I mean 350 for Fort lauderdale.
which I thought was insane and i’m seeing 350 in milwaukee today, some of these buildings and you’re seeing now for a lot of those are four bucks and so, how do you make it work I don’t know it’s crazy.
Scott Hawksworth: yeah it’s gonna be interesting to see.
Shifting gears a bit you know we’ve been talking a lot of multifamily but.
You know your unique in that multifamily is a big part of your portfolio, but not the only part and you actually have a rather diverse.
You know, spread of assets and I wanted to dive in to a few but are there any asset classes that you’re particularly bullish on right now that aren’t multi family.
Scott Lurie: So yes, the answer is industrial we are incredibly bullish we’ve got tons of projects that are either under construction or about to be under construction or about to be completed or.
You know the industrial segment our world, once again, you know you look at all the pivots of the world, the world has changed so significantly right you remember you know the Amazon effect is is huge, but it’s also everyone effect right think about.
When you use to go, and you know do whatever you normally would do you not you don’t do that anymore now you’re doing that online.
you’re then somebody fulfilling it whether it’s a three bl or whether it’s a manufacturer that’s.
customizing something for you locally and delivering it to you, who knows, but the world’s changed it just has you can get a T shirt or you can go get a custom Nike shoes, or how you can get custom oreos I saw.
An m&ms I mean the world’s changed, but those are all fulfillment facilities that are delivering this product to you and so.
So, so we we watch the industrial segment great we focused on we have 10 markets that we’re focused on for industrial.
we’re building a lot in the fox valley here in Wisconsin and that we’re seeing great demand, so the demand for the product that we’re building is incredibly high and we’re we really.
see a very long future in industrial and so so that category is certainly where we’re spending a lot of our time, absolutely.
Scott Hawksworth: Are there any maybe categories that you’re a little more bearish on, given the current landscape and all the big changes that we’ve seen.
Scott Lurie: I mean obviously office is certainly certainly a category that that causes a little pause it’s not so much the pause that causes me the concern it’s really the whole process of offices, a little bit just combined related.
In terms of how one Lisa is it, how the process is done to to rent it, how much money has to go into even a class B renewal and a five year lease you know it’s just a it’s a very I to me it’s a very challenged business.
But there’s tons of demands, so far, we have a lot of office, we have a lot of we have office we have you know, a couple hundred thousand feet of office and.
We do we are looking at building more class a office for specific.
reasons but it’s not it’s a challenge market obviously with getting people back to the office still is an issue I wish, quite honestly, Scott, I wish that all leaders would just say get back to the office.
But it’s been a.
it’s you know the people when people don’t realize the impact of.
Getting back to the office or not being in the office impacts, the lunch restaurants it impacts, the happy hours that then don’t impact the restaurants that impact.
The bars and impact of sustainability of that restaurant that you know it, we see it all over the place, but in milwaukee specifically has been impacted people 50% of our restaurants, are not open Sunday Monday, Tuesday.
And so, so knowing that that they can’t make a profit on Sunday Monday, Tuesday and they’re trying to make it a Wednesday through Saturday it’s not sustainable.
Scott Hawksworth: My gosh so restaurant margins are what they are those are tough so.
Scott Lurie: Right it’s the toughest business in the world right, we know that, and if you just can’t make it work.
Because there’s no one there right the streets are are are not there, I was in Dallas three months ago, and I was like where is everybody.
Now I I hope the thesis is this.
This is my silly thesis I hope that the leaders are saying, our TEAM members matters so much to us we’re going to let them enjoy their summer.
and on September 1 get your butts back to the office I hope that’s the underlying message, because.
It would be great to see not only milwaukee but Chicago and all of the other markets get everybody back downtown downtown.
The CBS need to have people which the support so many other people in the markets.
Whether it’s the little 711 convenience store guy or whether it’s the restaurant that’s going to serve lunch, or is the food truck that sits outside who.
Whatever it might be, we need people back in the office and I hope that I wish I could call everybody all the leaders of these companies and.
Just just get back to the office right the public safety is is not changing we are where we are, we are where we’re going it’s very defined.
let’s get back to the office and that’s that’s, in my opinion, the coddling of the I want to be able to go work from home because I really want to walk my dog and go play golf three days a week, have to come to an end.
Scott Hawksworth: I mean I couldn’t agree more, and and you know even my own experience, I was so glad when I could finally start getting back into the office i’d had a lot of.
Work from home time and just the the whole experience of OK now i’m going to the office and i’m going to go have my lunch and.
I have my own space that’s not in my house I think there’s a lot to be said there and then from the business perspective, I mean, I think that when you look at.
Certain levels of productivity and just little things like the conversations that can happen when you bump into someone in the hallway in an office setting.
Scott Lurie: Yours is.
Scott Hawksworth: Oh, I had to specifically schedule a zoom meeting there’s a lot of organic creativity and productivity, that you do lose when you don’t have that sort of an office setting, so I think that’s another side.
Scott Lurie: Where I right right.
Scott Hawksworth: with you.
Scott Lurie: i’m a big believer in this guy I actually you know we’ve been an m word in person office right i’m an in person, business and the energy that you provide me as a team Member and I provide you and our ability to co work together gets us.
makes us successful, and so, but I do see a lot of businesses that are that are so discombobulated and it’s like wow how are you guys gonna make it and maybe they’re making right now, maybe it’s the Cobra effect but.
there’s another guy coming up behind them that kicking their butt and so you know I I totally 100% agree with your thoughts and i’m really hope that we can we can push to get that happening so getting back to the opposite is important to us.
Scott Hawksworth: hundred percent hundred percent okay as we’re winding down here, I have to ask about this project, because I said I said earlier, when we were talking about the beer garden I enjoy good beer Wisconsin.
well known for for brewing great great drinks up there you have a project that it’s a was a conversion of an old pabst distribution Center into mixed use commercial real estate asset, what can you share, about that project, I thought it was so cool.
Scott Lurie: yeah you know, this is one of those projects that you hang on to is I don’t want to say legacy project that’s not really how I look at it, but it’s one of those projects that we’re super proud of and i’m.
i’m proud enough that I get to come to it every day and call it, my home for work right, so this is where our team is based, out of and so so PAPs left.
milwaukee in 1900 and 96 at the end of 1996 and basically abandoned, what is this area, right here.
You know, so we have silos which you can see, but they’re often the distant future, and you have production across the street from us.
is, as I read the science is pabst brewing co bottling department which was directly across the street, where they bottled the beer, and it was made up in this Hill and it was amazing.
And so the distribution Center that we’re in today that we acquired in 2016 was a was a DC right so imagine what a distribution Center is there was not a single window in the place.
Two floors top and bottom on a full 2.9 acre development site and no one knew what to do with this site, because this site sat it was a last building the set.
The zebra group and Joe sober Mr Zuckerberg built this beautiful parking garage and was a very he’s was there developments are amazing, but they were very forward thinking.
Take some investment and be successful with this project, you know, was the last one, and so.
You know the creativity of it was we took the basement floor so we kind of the building the building is now two condos we sold the basement floor which.
Part of it is built into the into the into the ground, and so there no windows on the West side of the first floor.
So if you imagine a building, there was no way to ever put a window on the on the backside of the building, it can only be used for one use.
which was storage, and so we sold we kind of the building we sold the first floor the basement floor with the no windows, to the storage facility.
And then took the second floor, which has 28 foot clears ceiling heights and we added a second floor two to 30,000 feet of office, to give a 60,000 feet office.
So now we have 30,000 square foot facility that now 60,000 feet and then we took a a a Center chamber and it’s a restaurant event space, and then we least 46,000 feet of it to a local brewery who is who who make beer, and so, so the use of making beer still exists.
The event space electrified and brings people to the gathering space of the building and the office space is is 100% lease to a great mix of tenants.
And so the building when you come to it, it whether you’re here for lunch or you work in the facility is is electrifying and people walk in, and we were able to take the creative juices of needing to have you know what you see in Chicago.
It doesn’t exist in milwaukee right, so a Maggie rich office space is a thing in Chicago it’s a thing in New York City it’s not a thing in milwaukee.
And so we wanted to meet me want us to me I wanted it to be a thing in milwaukee because selfishly I want to use the amenities, and so.
We added a gym we added a yoga room we added a CAFE we have a limited coffee bar unlimited T wall a beer fridge rater that stocked all day long for anybody who wants to use it.
We have common areas space like you would see in your facilities with conference rooms and huddle rooms and so, so the whole space, when you walk into it is electrifying it’s it’s vibrant and so it’s an amazing project super proud of it love talking about just because it really.
was one of those projects that that you know, as I look at the building could have been nothing right, this could have been probably torn down, it was.
Scott Hawksworth: Right exactly.
Scott Lurie: And no one knew what to do with it, and so you challenge yourself as a developer you’re like come on let’s make something great here and we did it and so total great success and really, really happy to be part of that project.
Scott Hawksworth: that’s incredible and you’re really making me want to hop in the car and drive up there and check it out.
Scott Lurie: Come on up we’ll get the beer ready.
Scott Hawksworth: I love it I love it Scott Thank you so much for joining me on the show today sharing so much great insight and perspective.
much needed perspective when we’re talking about multifamily and if our listeners and viewers want to find out more when I connect where can they do that, where, should they go to find out the latest with what’s going on at F street development.
Scott Lurie: yeah so so you can catch us always at FStreetGroup.COM we’re also on social media.
At at real estate scullery under instagram we have Facebook page and obviously we have.
a bunch of websites for our specific project, so if you visit FStreetGroup.com, you can certainly find us I love meeting and interacting with anybody so.
If there’s if there’s any follow up to this or anyone like to connect I love connecting with people and certainly Scott appreciate you having me on your show and the opportunity to to share our story with your audience.
Scott Hawksworth: Absolutely, and we will of course have links to all of those great resources in our show notes on multifamily investor.com thanks again Scott.
Scott Lurie: amazing Thank you have a wonderful day.