Latest / Icons of DC Area Real Estate / Andrew McGeorge: Cultivating a Growth Mindset in CRE (#148)

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Andrew McGeorge: Cultivating a Growth Mindset in CRE (#148) · Icons of DC Area Real Estate

• 0:00
  Speaker A: Foreign.
• 0:09
  Speaker B: Hi, I'm John Ko and welcome to Icons of DC Area Real Estate, a one on one interview show featuring the backgrounds, career trajectories and insights of the top luminaries in the Washington D.C. area Real estate market. The purpose of the show was to explore their journeys, how they got started, the pivotal moments that shaped their careers and the lessons they've learned along the way. We also dive into their current work, industry trends and some fascinating behind the scenes stories that bring unique perspective to our industry. Commercial Real Estate welcome to another episode of icons of D.C. area real estate. In this episode we are joined by Andrew McGeorge who is the City Head of the Washington D.C. office for Global real estate development company Heinz. Drawing from a disciplined foundation as a US Naval Academy graduate and military officer, Andrew built a highly adaptable career spanning residential construction at Toll Brothers, Commercial office development at Mundy Properties and multifamily projects with Fairfield resident. Today, he applies this asset type agnostic expertise to his leadership at Heinz, proudly acting as a steward of the firm's 40 year legacy in the Mid Atlantic. Join us as Andrew details how Heinz is navigating a sluggish office market and high interest rates through strategic debt funds and a major focus on addressing the region's severe housing shortage. He also takes us behind the scenes of complex mixed use developments including the new Life Sciences anchored transit hub at North Bethesda and the historic adaptive reuse of the parks at Walter Reed. Packed with insights on the power of mentorship, the importance of continuous learning and the necessity of fearless growth mindset, this conversation is a masterclass in adaptable real estate leadership. So without further ado, please enjoy this wide ranging conversation with Andrew McGeorge. Andrew McGeorge, welcome to Icons of D.C. area Real Estate.
• 2:39
  Speaker C: Well thanks for having me John.
• 2:41
  Speaker B: I appreciate it very much. Andrew, what does your role at City Head of Heinz Washington D.C. office specifically entail regarding new business of procurement, development, acquisitions and asset and property management activities across the Mid Atlantic region?
• 2:58
  Speaker C: Big question but maybe helpful if I take a step back and Heinz has a rich history in Washington D.C. it's almost 40 years old and we're focused on office, residential, retail and industrial. We have a great platform with some amazing people, nearly 200 people assigned to the office and we focus on really Philadelphia through Virginia. My role as City Head is really focusing on new business development and executing our business well. So so that's where I spend the majority of the time growing it and then making sure we run our business well.
• 3:43
  Speaker B: Well for listeners, let Me just say that I did interview Chuck Waters for the podcast, so people should listen to that. Chuck succeeded Bill Alsop, who was the first, I believe the first leader of the office here back in the 1980s.
• 3:59
  Speaker C: Bill founded the office. We're actually sitting in Heinz's first office building. They developed here in Washington D.C. at Columbia Square, delivered right around 1986 and we're still here. And I really did inherit a great platform that both Bill and Chuck built over the last 40 years. So I feel like a bit of a steward of their great work. It's something I take very personally.
• 4:28
  Speaker D: Mm.
• 4:29
  Speaker B: Yeah. So I did tour with Bill City center, when he just completed it, we did it. We had a ULI tour there. It was really the first time I'd spent some time with him and he was very generous with his time and information. In fact, of all the tours I've done with buildings, he was the most comprehensive, I would say in presenting it. He gave everyone that came along, it was 15 of us, a one page term sheet of the project. And he talked in detailed financials, which I was frankly quite surprised how generous he was with the information that he had shared at the time.
• 5:09
  Speaker C: Bill knew his projects inside and out and certainly nobody ever accused him of being not prepared.
• 5:17
  Speaker B: We'll get into it a little later. But he shared with me that the pre development costs on that project were over $80 million and there was no financing other than Heinz internal capital at the time. So he said that was a real test of their commitment to that project.
• 5:37
  Speaker C: No, for sure. I don't know if we would bite that amount of pre development off right now without financing or capital partners, but they certainly did back then.
• 5:46
  Speaker B: He believed in that project. So what is your long term vision for the Heinz D.C. office, particularly regarding how you plan to diversify revenue streams by expanding development, acquisitions and management?
• 5:59
  Speaker C: As I mentioned, I'm focused on growing the business. We're trying hard to double our eight over the next five years.
• 6:08
  Speaker B: Wow. So that's ambitious.
• 6:10
  Speaker C: New business front. You know, it's a combination of development and acquisitions right now. You know, acquisitions and she can buy for below replacement costs. We're probably going to be doing a little bit more acquisitions, but you know, we're developers at heart and so it'll probably be a combination of development and acquisitions and then we have quite a robust management services business. Property management, construction management, asset management in development management. We do it for our own account, but we also do it for third party accounts. So that is definitely a service we provide and we'll continue to grow that portion of the business as well. But it's important for us to be
• 6:52
  Speaker D: diversified amongst the asset classes.
• 6:54
  Speaker C: Being traditionally an office owner, operator, developer, for a lot of the history of the firm, like a lot of the kind of office owners and operators, the gfc, they realized the need to diversify. And that's when we really pivoted hard to residential and industrial as well. And so we're, to be honest, becoming increasingly asset agnostic and going to continue to grow probably those four food groups, the office, residential, industrial, and retail, through a combination of both acquisitions and development.
• 7:29
  Speaker B: Well, I want to get into that in a lot more detail a little bit later on in the conversation, but before then, I want to get into your background story, if I can, a little bit. Before embarking on a career in institutional real estate, what early life experiences or family values shaped your disciplined approach to business and leadership?
• 7:49
  Speaker C: You know, growing up, I was really involved in athletics, both, you know, football, wrestling, and lacrosse. I went on to play lacrosse at the Naval Academy. So I would say probably the athletics and the military experience.
• 8:05
  Speaker B: Where'd you grow up?
• 8:06
  Speaker C: I grew up outside of the Philadelphia area.
• 8:08
  Speaker B: Oh, sure.
• 8:10
  Speaker C: In Devon, Pennsylvania.
• 8:12
  Speaker B: On the Main Line.
• 8:13
  Speaker C: Yep. My mom and dad are in the same house. We moved.
• 8:17
  Speaker B: Oh, really?
• 8:17
  Speaker C: In 1982. So it's great bringing my sons back to that area and being able to show them, you know, the childhood home. And it was a beautiful place to grow up.
• 8:27
  Speaker B: And did you go to public school or private?
• 8:29
  Speaker C: I went to Conestoga High School in Berwyn, Pennsylvania.
• 8:32
  Speaker B: Okay, sure.
• 8:33
  Speaker C: I'm a public school kid.
• 8:35
  Speaker A: Okay.
• 8:36
  Speaker C: And, but it was a great place to grow up. I, I, you know, Devon, Pennsylvania.
• 8:40
  Speaker B: What'd your folks do? Or what? What did your dad still do if he still works?
• 8:44
  Speaker C: So my dad does still work. They're both turning 79 this.
• 8:48
  Speaker A: Wow.
• 8:49
  Speaker C: This spring. And my dad was in pharmaceuticals with Johnson and Johnson for the first half of his career. And he made a pivot into academia.
• 8:59
  Speaker D: Oh, really?
• 9:00
  Speaker C: And running boarding schools, so independent schools. So a bit of a pivot for him, but he's still going strong.
• 9:09
  Speaker B: It's interesting he's in that. And you didn't go to a boarding school, so that's interesting that he got into that.
• 9:15
  Speaker C: I did not. But he ran a couple military schools. And so for that I'm pretty familiar with. He ran Valley Forge Military Academy.
• 9:24
  Speaker B: Oh, sure.
• 9:24
  Speaker C: Which is the first civilian head of school there in Wayne, Pennsylvania. And then he ran Missouri Military Academy in Mexico. Missouri. And so for that, you know, me and My brothers, we all managed to end up in military school.
• 9:40
  Speaker B: Did he serve, your dad?
• 9:42
  Speaker C: He did not. He did not.
• 9:43
  Speaker A: Interesting. Interesting.
• 9:45
  Speaker D: Yeah.
• 9:46
  Speaker B: So you went to the Naval Academy? Why the Naval Academy?
• 9:49
  Speaker C: What.
• 9:50
  Speaker B: What was the draw there? Just out of curiosity.
• 9:53
  Speaker C: It was a wonderful school. They gave me the opportunity to go. I did not grow up wanting to go there. My grandfather was a career naval officer. Dad and his sister were Navy brats. But I didn't necessarily grow up targeting that school. Lacrosse opened the door for me, and I was intrigued, and so I figured I would give it a shot. It was too good of an opportunity to at least not try.
• 10:25
  Speaker B: Did you apply to any of the other military academies or not? Or did you just look at Annapolis?
• 10:31
  Speaker C: Annapolis was the number one school, so I kicked the tires at West Boyne as well.
• 10:38
  Speaker B: Sure. Did you? So four years there. Did. What did you think about when you were there? Were you thinking surface warfare, air pilot? I mean, what were you thinking about?
• 10:51
  Speaker C: I was just trying to get through the day.
• 10:54
  Speaker B: And then ultimately, especially your first year
• 10:56
  Speaker C: to graduation was my major focus. And then I ended up in the Supply Corps of the Navy. So I always kind of envisioned the Navy being a chapter of my life, not necessarily a career. Like many of my friends that did make the Navy a career, I always saw it as a small chapter. And the Supply Corps and the Navy exposed me to business and I always saw myself going that direction.
• 11:24
  Speaker B: Where were you stationed?
• 11:25
  Speaker C: I was in Yokosuka, Japan for a couple years. Really? And then from Japan I came to D.C. and was assigned to the Pentagon for three years. And then I pivoted to the Reserves and was assigned to the NCIS at the Navy Yard.
• 11:43
  Speaker B: Interesting.
• 11:44
  Speaker C: Yeah, the Navy was nothing but good to me. Really was a very good experience.
• 11:48
  Speaker A: Huh.
• 11:50
  Speaker B: So NCIS is kind of the police force of the Navy, isn't it?
• 11:53
  Speaker C: Yes. I was an intelligence officer. I'd done a lateral transfer and I just wanted to try something a little bit different. And it was a good experience, but it was short lived.
• 12:04
  Speaker B: So my son was a Navy pilot and a helicopter pilot station at North Island Coronado.
• 12:12
  Speaker C: Did he do sh 60s?
• 12:14
  Speaker B: Yes.
• 12:14
  Speaker A: Okay.
• 12:16
  Speaker B: Many friends that two cruises to the Middle east on carriers. Was able to ride on the carrier with him for six days on a what they call a Tiger cruise. Yeah, that was fun.
• 12:30
  Speaker D: Great.
• 12:30
  Speaker C: When their family are able to do that. Yeah. That's really neat experience. You really do that.
• 12:36
  Speaker B: It was very special. So then you came out there and then what were you thinking when you went out of the Navy? What were you thinking about Once you
• 12:48
  Speaker C: left, I always knew that the Navy was going to be a chapter, one chapter of my life. And everybody would always mention, do something that will interest you. And I honestly had a lot of friends, fathers, that were home builders in the Philadelphia area.
• 13:06
  Speaker A: Oh, really? Okay.
• 13:07
  Speaker C: And I used to enjoy walking neighborhoods, developments that were under construction, walking homes that were under construction. And I took that to heart. And. And Toll Brothers is headquartered in Philadelphia. I was just going to ask you
• 13:23
  Speaker B: about the Toll family.
• 13:24
  Speaker C: And they had a rotational training program for project managers. So I joined that and cut my teeth in home building. So it was a great firm and one I knew just from growing up in the Philadelphia area. So they gave me an opportunity. They liked the junior military officer background, so it was a very good first stop along the way.
• 13:48
  Speaker B: So you started a Toll right out of the military then?
• 13:51
  Speaker C: Yes, I did. Yes.
• 13:53
  Speaker B: Right here.
• 13:53
  Speaker C: Locally I did.
• 13:55
  Speaker D: So I spent a little bit of
• 13:56
  Speaker C: time up in Horsham, Pennsylvania, where they were headquartered at the time, and was a part of their internal audit department for about three months, traveling around the country, just ensuring that internal processes were being followed. But it was a good way to learn what the expectations were. And then I rotated back to down to Virginia, was in Ashburn, Virginia, Belmont Country Club.
• 14:25
  Speaker B: So you're a project manager for them?
• 14:26
  Speaker C: Yes.
• 14:27
  Speaker B: Okay.
• 14:28
  Speaker C: Doing 16 foot townhomes and 24 foot townhomes. There you go. It was great experience. They're very good at what they do.
• 14:36
  Speaker B: So in 1998 or nine, I was involved in trying to sell South Riding.
• 14:43
  Speaker C: Sure.
• 14:44
  Speaker B: And the seller was Trafalgar Homes. At the time, I was engaged and the only exclusion on my listing was Toll Brothers. So because they loomed out there, the idea was the manager at the time wanted to continue managing it, and he knew that if they sold it to Toll that he wouldn't have that opportunity. So his goal was for me to find somebody else. We had a couple of bids on the deal, but after a while it didn't happen. So Toll Brothers came in and bought the property. It was right around 2000, I think it was. When that happened, were you at Tollbreaker?
• 15:25
  Speaker C: I joined the firm, yeah. End of 04, beginning of 05. And so they had Belmont, South Riding and Dominion Valley with three large master plans that they had going on at the time.
• 15:38
  Speaker B: A lot going on. And then, as I recall, Toll started a commercial division and another Alex and Alex Ross, I think, went and worked on that for them. And doing shopping centers. Yeah, that Sal's writing.
• 15:53
  Speaker C: It was a good firm, good first stop and I really liked the training program and being able to learn in that environment was a nice way to start.
• 16:04
  Speaker B: So you went on and you got your mba. Was that while you were in the
• 16:08
  Speaker C: military or was that after the fact? I went to the University of Pennsylvania while I was still on active duty here at the Pentagon. I just commuted back and forth between D.C. and Philadelphia and stayed at my parents house when I could.
• 16:23
  Speaker A: Oh well, that works.
• 16:24
  Speaker C: Kind of stacked all the classes so that it would work with my schedule. I did a Master's of Science in Organizational Dynamics and really wanted to have a Master's degree before I left the Navy. It was kind of a personal goal. And lo and behold, after I'd left the military altogether, Congress instituted the post 911 GI bill. Naval Academy grads weren't eligible for the regular GI bill since the Naval Academy was already paid for. But because I stayed a little bit extra time to finish my first degree, I actually became eligible for 50% of the post 911 GI bill. And you have 15 years to use it from leaving active duty. So I went to MIT and got my MBA there and had the GI Bill pay for it. And I was working at Monday Properties at the time and they were gracious enough to help.
• 17:23
  Speaker B: Also, did you have to commute back and forth to Boston or what?
• 17:26
  Speaker C: Okay, it was all in person. So it was a great school, great program and I'm really, really glad I did it.
• 17:37
  Speaker B: Did you focus on the real estate side when you were there since you were already in real estate?
• 17:41
  Speaker C: No, that's because I already was in real estate and kind of a little bit farther along in my career I really liked the more general business approach. So that's why I did the MBA in lieu of they have a Ms. In Real Estate Master Real Estate. So I purposely wanted to do the MBA and get a, a broader purview of business.
• 18:06
  Speaker B: That's great. Was there a pivotal point in your educational journey? Military service, organizational dynamics, and commercial real estate? I mean, where was it? I mean, I guess you said you grew up with home building interests. Why getting graduate? I mean, if you're a home builder, why do you think you needed an MBA to do that or in the residential side?
• 18:27
  Speaker C: Oh, there certainly was no seminal moment, but when it comes to education for me, I really think you have to do it because you want to. I do enjoy school, I do enjoy academia. I don't think anybody should go to graduate degree with a certain expectation of an outcome short of say being a
• 18:47
  Speaker D: doctor or a lawyer.
• 18:48
  Speaker C: Where you go to do that but for the most part, for me, it was a love of learning. I think it helps with critical thinking. And I really did it because I wanted to. I didn't necessarily do it because I thought it would advance my career per se, or I would get something out of it, but very glad I did both the programs, though.
• 19:11
  Speaker B: It's interesting. My son came out of the Navy. He knew he would do that because he just didn't know what he was going to do at the time. He had a undergraduate engineering degree, and biomedical was interesting, so he said. But he wanted to be in business, so he decided to go and he went to Kellogg and got an MBA there. And the GI Bill helped. Certainly when you come out of serving 10 years after he was a ROTC guy at the MBA, and that helped. Good setups.
• 19:44
  Speaker C: You don't want to leave.
• 19:45
  Speaker B: You don't want to take advantage of people.
• 19:47
  Speaker C: Why not? But I really. I didn't have any expectation of something happening, or I really did it because I just personally wanted to.
• 20:00
  Speaker B: So you spent time early in your career at Toll Brothers? Of course, we talked about it. And then 10 years at Mundy Properties. Talk about the pivot to Mundy. What was it that made you decide to change there?
• 20:13
  Speaker C: You know, home building was hot in 05, and it started to slow in 06. Toll Brothers was my first job outside of the Navy. I joined the Navy when I was 18, and my whole adult life was the Navy. And so pivoting to home building was quite eye opening. And I basically loved the time at Toll, but wanted to see other, excuse me, aspects of real estate. And so I started interviewing, to be honest. And Tim Helmig's a dear friend of mine, and he gave me a chance back then. It was a little bit harder pivot to go from home building to commercial real estate and doing office development. But he really was looking for a young guy, that young associate that would just run with things. And like I said, I'm always going to be forever grateful to Tim and Anthony for giving me a shot, because it was not your normal switch from home building to office. And office was hot in 2007 and then it wasn't in 2008.
• 21:36
  Speaker B: No.
• 21:36
  Speaker C: But I did. I joined before things got bad. It probably would have been harder if I had waited. And to be honest, a lot of friends that I worked with, the Toll Brothers who did wait, you know, they ended up having to leave the industry because once we got into 08, 09, everything shut down. So they really did have to leave. So the Fact that I left toll in 06 and it was a bit lucky. I would have made a lot of money if I knew what was going to happen, but it was slowing and so I made the pivot to Monday properties. But, yeah, the GFC was rough on all of us in the industry.
• 22:18
  Speaker B: What did you work on at Mundy when you started?
• 22:21
  Speaker C: So 1812. So Tim was taking it through the entitlement process. So that's when I joined. We were taking it through the Arlington County 4.1 process. I was the associate. Tim was leading the way. That was my baby. We got it entitled and then the world kind of blew up in October 2008. Lehman Brothers was our partner.
• 22:45
  Speaker B: Oh, my gosh.
• 22:46
  Speaker C: Yeah. But Lehman, you know, as we all know, did not do any ill. They actually really worked hard to create value for their investors and they deemed
• 22:59
  Speaker D: that the best way to create value
• 23:01
  Speaker C: there was to continue funding. And we actually built it all equity. So I was there through the entitlement, the design, the construction, and I think it was right around month 35 that we actually put debt on the property. So we actually built Most of the 1812 North Moore with Lehman Brothers Holding. How large was that project entity?
• 23:23
  Speaker B: What was the project set?
• 23:24
  Speaker C: It's a 500,000 square foot office building. It was big for us here in the D.C. metro area. So great project. Very proud of. Was nice to see Nestle come in as the anchor headquarters. It was just unfortunate, our timing when we delivered it. We started it in 2010 and delivered it in 20, 2013, and it was, let's just say, quiet on the leasing front for a while, but they got it done and that was the type of tenant the building was designed for. So very proud of them.
• 23:57
  Speaker B: I think you were at Bundy when you were on. You were my mentor group. Yeah, chair head at the time.
• 24:05
  Speaker C: Yeah, No, I started as an associate. It was great experience and the fact that we were able to develop something, you know, an office building for that fact during the GFC was a big deal. And I learned a tremendous amount while working for Tim and Anthony at Monday Properties.
• 24:26
  Speaker B: So you're there for 10 years. That's a long time.
• 24:30
  Speaker C: It was a good run. We did a lot of different stuff.
• 24:33
  Speaker B: Did you mostly work on commercial property or did you do any residential there?
• 24:36
  Speaker C: We did office, you know, 1812 in Rosslyn and then we entitled what we call the 1400 block. We did that and got that entitled in 2014. You know, took about two years to get that through the process. We had a project out in Fauquier County, a home building project that we worked on for a few years. And then we also formed a joint venture with the Carlisle Group and went to North Dakota and built apartments out there in Williston, North Dakota.
• 25:11
  Speaker B: That was during that oil. Was that the shale.
• 25:13
  Speaker C: Shale oil boom in the Bakken. So spent a lot of time going to North Dakota. Yeah. That's interesting. But was able to go in, acquire the land, assemble the team and build them and lease them up. And then we did a similar play in Charleston, South Carolina. So I did that for them. So interesting. I was able to do a. Mostly office and residential. Got it.
• 25:39
  Speaker B: Yeah.
• 25:40
  Speaker D: It was a great experience.
• 25:41
  Speaker B: So for listeners, I want to share a couple of things about the Westright family that started Mundy Property. So Bob Young and Taub, his first equity partner was the Westright family for Ekin Young and Taub, Terry Eakin.
• 25:54
  Speaker C: And I think honestly because of their affiliation with eya, me coming from Toll Brothers, they understood that side and I do think that played a role and they were just comfortable taking a residential guy.
• 26:09
  Speaker B: And then another even further back in the beginning of my career when I moved here from Washington, from Chicago to join the BF Sol Company, we Aetna had loan on what at that time, what's known as the U.S. news. U.S. what's the name of the USA Today. USA Today. USA Today.
• 26:28
  Speaker A: I'm sorry.
• 26:28
  Speaker B: USA Today headquarters building, which is the tallest building in Rosslyn, may still be. Maybe there's another building taller than that now there, but it overlooked if you got on the top of that building. We used to do inspections every year. You could look right down the Runway at National Airport from the top of that building.
• 26:47
  Speaker C: Thousand Wilson and the 1100 Wilson Boulevard iconic buildings. And you know, definitely have shaped the skyline there. And I think, you know, everybody loves them. I know my understanding that during the time there was a lot of pushback from those on the other side of the river in the District looking back. But ultimately I think people love the buildings and the shape and they're unique. Yeah.
• 27:12
  Speaker B: I don't know what happened when us moved out, but as far as backfilling it, that must have taken time to get that done.
• 27:20
  Speaker C: Yeah, they've been able to keep them leased for sure. Yeah.
• 27:25
  Speaker B: So then you 10 years later, and I don't know what year it was, but you decided to go move on back to the residential side, Fairfield.
• 27:32
  Speaker C: So yeah, it would have been 2016 approximately. And as I mentioned was at that point pretty focused exclusively on multifamily development and had Done the projects in North Dakota and projects in South Carolina and I joined Fairfield Residential to oversee their multifamily developments for the Mid Atlantic. So very similar territories I cover here at Hines, which is Philadelphia through Virginia. You know, at that time Fairfield was owned by Brookfield and calstr, so two huge heavyweights. And you know, Fairfield is very, very good at what they do. And it was, you know, a great place to continue learning, you know, how to, you know, build apartments because they're definitely top in class.
• 28:27
  Speaker B: Talk about the origins a little bit of Fairfield because as I recall, and I'm just going to tell you what I know about them, they started in Southern California and they were an offshoot of the Trammel Crow Company originally. Is that correct?
• 28:40
  Speaker C: Yeah, it was Joe Basler and then it's a Hawaii. I'm not going to be able to pronounce his name, but he had a partner, it was in San Diego.
• 28:55
  Speaker B: They were partners of Trammell Crow at the time, right?
• 28:57
  Speaker C: Yeah, prolific. And then Basler kind of focused on Texas and things east and then the rest of the gang in California were kind of focused on the west coast. And then that's how CalSTRS became one of their main equity partners. And then Basler spun out and it became jlb. I'm not certain the exact timing, but roughly around the GFC or maybe right before it. And then that's when Brookfield came in and recapitalized it with CalSTR still in place.
• 29:34
  Speaker B: And then wasn't there a guy named Chris Hashioki?
• 29:37
  Speaker A: Is that who I'm thinking of?
• 29:38
  Speaker C: Okay, thank you for saying Chris. I was having to see he was partners with Joe Basler and founded the company.
• 29:47
  Speaker B: That's who I remember.
• 29:48
  Speaker C: And then the spin off with JLB and you know, Brookfield came in right around the GFC and really just kept them back to, you know, really focus on mid rise apartment construction and they self perform and you know, very, very good at what they do. And still headquartered in San Diego. And I was there from 16 through 19, three years. Yeah.
• 30:17
  Speaker A: Okay.
• 30:18
  Speaker B: And were you just doing, you know, multifamily development?
• 30:22
  Speaker C: Multifamily development, ground up Texas, donut deals basically.
• 30:26
  Speaker B: Or was it.
• 30:27
  Speaker C: Yeah, five story wraps, five over two podiums. Yeah, we were, you know, had some high rise developments in the portfolio, but the vast majority was mid rise, multifamily. And all my things were wood frame.
• 30:43
  Speaker B: So no concrete structured buildings at all.
• 30:46
  Speaker C: I didn't have any. The firm certainly had some. CalSTRS also owns Elkor and Elkor. Was doing the vast majority of the high rise development for him in Philadelphia and down here.
• 31:00
  Speaker B: I just interviewed Matthew Hard who worked for Elcor where he was at Trammel,
• 31:06
  Speaker C: Crow and then when Brookfield but Forest City, my understanding is calstr's bought Brookfield out of the service company. Takes quite a long time to unwind out of the investment company. But Brookfield brought in Forest City underneath their umbrella and really has been focused on multifamily just as under the Brookfield flag versus using a Fairfield or you know, sure. So it was a very good experience. Great people, but exclusively focused on multifamily.
• 31:44
  Speaker B: So then the Heinz opportunity came around. So how did that transpire?
• 31:49
  Speaker C: So yeah, I think really coming from my Monday properties days and focused on both office and residential and retail, I really had an affinity for the mix environment. And you know, Fairfield was exclusively focused on multifamily. I was very happy as you know in the role at Fairfield. But you know, I received a phone call about maybe joining the hind team and there was a lot to like about it. But really one of the big drivers was getting back in a mixed use environment. I really mentally like being able to pivot amongst the different asset types and I do think the diversification is really a good investment strategy. And now it's proven out well, obviously multifamily is slowing and still office is slow. But being able to play in a lot of different asset classes was important to me.
• 32:52
  Speaker B: So what have you learned since you joined Heinz? I mean, what didn't you know before you came here that you learned and you've learned since you've gotten here?
• 33:00
  Speaker C: Just out of curiosity, I'm learning each and every day. Yeah, I bet. And then, you know, you learn I think the most during the downturns or when things go wrong. You know, I learned a tremendous amount during the gfc. And then I think with what we've gone through in the last really six years between Covid hyperinflation, rising interest rate environment to now slowly falling. I think maybe doing business in a rising interest rate environment had been new for many of us really. Not since the early 80s had we
• 33:43
  Speaker B: had the beginning of my career.
• 33:44
  Speaker C: Yeah, 1979, an increase in interest rates like we did starting May of 22. We all hit a wall hitting May of 22. And to be honest, a lot of people in the business had not been in that environment. And so I learned a lot. But that was probably the thing that jumps on how to navigate a rise in interest rate environment especially.
• 34:10
  Speaker B: But you were positioned well, I mean, you're here at one of the maybe top five largest real estate firms in the world. So you're well positioned in this environment to ride through a storm. Plus you have the capital base to take advantage of opportunities, it seems to me, and that's as you suggested up front, you're looking to double your AUM in this market. The only way you do that is to take advantage of opportunities.
• 34:37
  Speaker C: Yes, we're well positioned. We've been really. The firm in about 2018 had a kind of a reset within investment management and has been raising a lot of discretionary capital since then. The firm has had discretionary capitals in the past and fund but they really had never kind of had such a focus on building multiple types of funds throughout the platform, throughout the world. And, and so the fact that we've been really focusing on raising this capital since 2018 is proven to be fortuitous as we now have capital to be able to deploy and take advantage of the dislocation in the market.
• 35:21
  Speaker B: As I recall from my conversation with Chuck Waters, you have segmented capital now so that you can actually look at opportunistic all the way down to core on deals, right?
• 35:32
  Speaker C: Yeah, for the most part we have our non traded REIT and our Core plus fund here in the Americas are kind of flagship funds and we have a recovery fund which is more opportunistic. And then we do have an emphasis on private wealth so we can do private placements and capitalize projects on a one off basis through the broker dealer channels, RIAs and investment advisors. So that's another arrow in the quiver. And then we still have what we call our direct capital, which is our third party, JV Equity partners. So we have multiple different ways to capitalize deals.
• 36:14
  Speaker B: So as I recall, correct me if I'm wrong, you guys got into the back end of the land development business. Is that true?
• 36:21
  Speaker C: Yes. So the firm has been in the land development business really in earnest since 2005, but it's been mostly Texas and Colorado. And then we partnered with our colleagues in Texas and got into the land business here locally in 2020, where Chuck and our partner Rob Witte in Texas, they seized an opportunity called Heartland out in Aldi, Virginia, out in Loudoun County. 775 lots. And that really kind of jump started our land business here locally. And I didn't want that to be a flash in the pan. So we've been able to keep it going and have enjoyed some success.
• 37:06
  Speaker B: So you go back to your beginning of your career.
• 37:09
  Speaker C: I have, I've come full circle and I tell a lot of the younger folks, you know, I navigated my career by going where the action was. Home building was hot and then it wasn't. Office was hot and then it wasn't. Multifamily. Same thing was good but it's made me well rounded and it's honestly one of the reasons I was able to succeed Chuck is the fact that I had played in a lot of different asset classes throughout my career. So I never just focused on one exclusively. But it certainly was more out of necessity, but it was fortuitous.
• 37:51
  Speaker B: So where do you see the business going? I mean we talked in general, but you're doing. I mean how do you see the markets today? Heinz has signaled a strategic shift towards diversifying the east region assets focusing on growing multifamily industrial and mixed use. How is DC Office leading this change charge? I should say given Heinz traditional strength in office properties.
• 38:17
  Speaker C: I think on the office front, you know, we've created a debt fund with Rialto and that's been really keeping our office, you know, underwriting skills sharp and has kept us in the game as office equity becomes like kind of office curious. It's been good to be able to show them that we've been active on the office front. We didn't just head to the sidelines during this downturn. And so I think there will be a moment where office equity becomes more where we do more of it. I think the last one we bought was in 2023 when I bought 105017 when our team did that. But we haven't bought any office since then. But we've been active on the debt fund. But as I mentioned, we're going to continue to be asset type agnostic. Residential is still our highest conviction of our investment thesis. We'll continue to play in office and then we like retail and industrial and then certainly large scale place making mixed use projects would do well because of our scale and then being able to do well in the various asset types. So we still will see what we can find. We had City center, then Walter Reed and we'll certainly find another large scale place making to do. But we're going to continue to remain diversified. We really just have to.
• 39:49
  Speaker B: 1050 17th street is an interesting acquisition. What was the purpose of that buy? Was it strategic?
• 39:55
  Speaker C: It was strategic. We bought it with our opportunistic fund, the Lincoln company Eddie Lincoln had developed. It's a great asset they built, Clark built it, Gensler designed it.
• 40:06
  Speaker B: It was actually built by Melvin Lincoln, his father.
• 40:09
  Speaker C: The first one and then the son knocked it down and redeveloped it.
• 40:13
  Speaker B: We financed the first one when I was.
• 40:17
  Speaker C: And unfortunately, like a lot of folks, the math didn't go his way. Valuations, obviously cap rate expansion in May of 22 really dinged the values and so we were able to take advantage of a unique moment in time. And Eagle bank was the lender and they offered us seller financing and we bought it contingent on them doing the financing, a fixed rate loan for five years and doing the Davis Polk lease. And Davis Polk, we, we built their headquarters, a building for him in Manhattan as a tenant that we knew well. Chuck actually was the project manager on the building.
• 40:59
  Speaker B: He talked about that project.
• 41:01
  Speaker C: Yeah. And so the scale of our business is so large. There's a lot of touch points over those years. Of course, Davis Polk was very comfortable with us. So we actually did the deal contingent on those two and we've leased it up since. And we now have just one 7,000 square foot spec suite to lease and then all the office portion will be completely done. So hopefully the capital markets will go our way. But the leasing certainly has.
• 41:30
  Speaker A: So Andrew Hines was selected as the developer for the Life Sciences anchored mixed use development at North Bethesda Metro station. How does this project, which emphasizes innovation and includes a new Metro entrance, exemplify Heinz vision for future transit oriented campuses in the region?
• 41:53
  Speaker D: We're really excited about the project. Mixed use development is something Heinz does well and we certainly like the transit oriented developments. Actually, ever since joining Heinz, I think every single one of our multifamily developments has been on the, the Metro line, either, you know, the Red Line, the Green Line, and then even out on the VRE rail and Northern Virginia. So we really believe in the transit oriented nature of our mixed use developments. And this is a project that is also a public private partnership with county, the Metro Authority and the state. And so we're really looking forward to it. We have a lot of work ahead of us with the entitlements and we're currently working on a joint development agreement with the Metro Authority. So, you know, these types of projects take a long time to come together. But we are excited about this one for sure.
• 42:53
  Speaker A: Interesting history to that site. I don't know if you're aware of the history, but one of my former podcast guests, Bill Hard, who led the local Elkor office, assembled not only that parcel, but the all the parcels around it and developed at least two apartment projects and the federal office building that's on the corner there of Martinelli and Rockville Pike.
• 43:21
  Speaker D: The gentleman in our office who ran the RFP process. The response, Brandon Siegel, along with his colleague Katie Weisik. But Brandon came from Alcor.
• 43:32
  Speaker A: Oh, so he knew the site well. Yeah, that helps.
• 43:37
  Speaker D: Yes.
• 43:38
  Speaker A: So Bill and I talked about that in our episode some four years ago.
• 43:43
  Speaker D: But what they started is great and we're hoping to continue it. And yeah, you know, like you said, what we do takes a long time. So yes, it does. Build a hole in the donut.
• 43:54
  Speaker A: Interestingly, just this week I read what Omada's construction schedule is on the Red Line. I don't know if you've seen that, but they're planning to close the Grosvenor, the Medical center and the Bethesda Stations for construction all along the line, including the downtown Bethesda. Integration with the Purple Line, which has some interesting transportation challenges for lower to middle Montgomery County. But your site is still in the entitlement phase, so it's not going to be affected by this yet, obviously. But, but I think long term it's going to be benefited by it, by the construction of these things. I would guess your thoughts on that.
• 44:37
  Speaker D: No, we agree. All this infrastructure, it's certainly costly, but it's very important and needed for the region and how people get to and from their jobs, to and from their homes is all very, very important to us. And we spend a lot of time, as I mentioned, focusing on various transit lines and being able to answer those questions before we move ahead.
• 45:04
  Speaker A: That's great. So do you have a, you're obviously in entitlements. Do you have a scope and a, you know, in general master plan for the site and what, what your thinking is with regard to a mix of uses, et cetera?
• 45:18
  Speaker D: We have a plan for phase one, which would include the development, the Metro entrance and then a multi family building and a data science building. But we're still working through all of that. The very first step is the JDA making sure we have an agreement with the Metro Authority.
• 45:37
  Speaker A: But I'm sure as you were acquiring the site, you were doing feasibility analysis on scale far. Everything else on this project make sure that it made sense long term. So I'm assuming that you have a boundary on what you know, the limits are to make the deal happen.
• 45:56
  Speaker D: And what we do is iterative. So we're constantly reevaluating the pro forma, the political winds and what the market will bear, so constantly updating and modifying and pivoting as needed.
• 46:12
  Speaker A: The theme is life sciences oriented. Do you have, are you in discussions just out of curiosity with Life science users that are prospectively interested in this
• 46:22
  Speaker D: in the project, we're a little bit focused more on the data science. So you know, we're not envisioning any wet labs, but really making sure we have the power to run more of a data science building. But we do think that there's going to have to be a significant amount of pre leasing in order for us to get the that building going. And we've conveyed that to the county and the Metro Authority. But really probably 2/3 to 80% pre leased in order to get it going. Would probably have to be at a break even occupancy to get it going.
• 47:03
  Speaker A: That makes sense.
• 47:04
  Speaker D: Not going to do it speculatively?
• 47:06
  Speaker A: No. I get that maybe the federal government would help you with an anchor tenant or two that might be helpful as well.
• 47:14
  Speaker D: University of Maryland is certainly stepping up to the plate and we're hoping we can work through that and as is the county. So we do have some activity that would anchor it. And then also we can right size the building to make sure that we're not biting off more than we can chew out of the gates.
• 47:34
  Speaker A: The fascinating thing about that submarket is the success of pike and Rose for office occupancy and leasing. And I'm guessing you're pretty familiar with what's going on or what's happened there.
• 47:46
  Speaker D: But we pointed to that and we did a fair amount of research when making sure that we wanted to do it. So yeah, we definitely like what they did at pike and Rose. Great site, great project and so certainly was a very good comp for us.
• 48:01
  Speaker A: Exactly. Do you see any retail expansion on the site? Because I know there's a. At least there was a Harris Teeter. I think they're closing that store which is right adjacent to the site there.
• 48:11
  Speaker D: Yeah, I believe it has closed. We'll have some retail, but I think it would be measured for sure.
• 48:21
  Speaker A: Yeah, well, Rockdale pike is well known for retail as you know, so there's certainly walking distance to a lot of it. Okay, so let me pivot now to the Parks at Walter Reed, which I've toured with Urban Atlantic, your partner there, more than once actually before it was even the first building was underway and then after the first phase was completed. But now you're on at least phase two or three now, if I'm not mistaken on the project. And when I interviewed Vicki Davis, she explained to me that there are more than 20 limited partnerships on the property allocated amongst you and them. And as well as I think there's a third party involved. And of course then there's for sale ownership to some of the home builders as well on site. So you have a multiple developer activity on that site. So it's an interesting complicated deal. Maybe you can elaborate on Heinz role, how you got into the deal and what your feelings are about the project at this point.
• 49:31
  Speaker D: Well, you know, we've been in the deal since 2014. It's certainly been a challenging project, you know, largely due to the, you know, adaptive reuse nature of historic buildings. It's a, you know, beautiful campus, beautiful history. But that does present challenges when trying to reuse some of those buildings. You know, we have to mention built a couple apartment buildings, a couple condominium buildings. We have a co living building, you know, fair amount of retail. The Whole Foods was a big win. And then we have sold townhomes to nvr. So certainly a mix of uses. But you know, when the army built the base, they weren't subject to a lot of the same building codes that the rest of the city was mandated to. So that just further complicated, you know, some of the reuse of the structures. And it's just proved to unfortunately cost more when you're putting good work over bad work. So. But we worked through it and you know, the market certainly has softened for us, which, you know, as developers, when you know that these are going to be 10, 15 year projects, you're going to go through a cycle or two. So we go into it knowing that, but it has been a challenging project. But we're proud of what's been built to date and think it's a great case study on adaptive reuse of historical, you know, military bases. So, but the, the partnership, we're proud of what we've done.
• 51:07
  Speaker A: Is there more development potential on the site than what's not already there?
• 51:11
  Speaker D: At this point, they're largely with like Building 1, the large historic hospital building that sits at the center of the site. We're still working through various feasibility studies for that. And then more townhome development is definitely in the near future. What we're focused on.
• 51:31
  Speaker A: Well, that's immediate profitability there. So that certainly helps as opposed to having to wait for the income to come in from rents, et cetera.
• 51:40
  Speaker D: So you can, you know, the multifamily market has softened, as we all know. And so getting multifamily to pencil is more challenging. It is in a qualified opportunity zone. But at the end of the day, based on the capital markets, there's been a little bit more focus on the acquisition of multifamily as opposed to the development of it.
• 52:04
  Speaker A: Sure. So I assume you had some historic tax credits and other incentives that you were using there with regard to the development there.
• 52:13
  Speaker D: But we've used everything we can to get the various verticals going. Yeah.
• 52:19
  Speaker A: Vicki mentioned new markets. I mean you've got everything going there if I'm not mistaken. So low income, housing, tax credits, everything.
• 52:28
  Speaker D: A great case study for mixed use development.
• 52:34
  Speaker A: Fascinating. Well, good luck on the next phases and hopefully your income will get improve in that market and things will get better. Regarding the 2023 refinancing of City Center DC which was your probably Heinz first major mixed use development in the city, what was the key strategy in securing that $300 million loan given the significant market headwinds impacting the office sector at that time?
• 53:04
  Speaker D: Yeah, it was certainly a herculean effort. You know, he still was engaged to help us through it. And this was the spring of 23 and as you recall, May of 22, the Federal Reserve started raising rates rapidly, probably quick as they'd done it in the last 40 years. And really we ran into a wall. And values, as you know, rates go up, values go down. Of course, no, nobody's immune to that. And so, but you know, when the debt comes due, you have to deal with it based on the timing. And so we, he still ran a process to refinance it and you know, we had some good interest. It's obviously a trophy building. 100% lease by Covington Burling with a significant amount of Walt, you know, one of the best assets on the east coast. We're very proud of it. But in the middle of the process we were running for the debt refinancing, SVB and Signature banks imploded. And as you might recall, a lot of the lenders got alligator arms. So where we had some bank options, we were looking at cmbs, both Conduit and sasb Single asset, single borrower. And once SVB and signature imploded and then we went for best and finals and then we got a one term sheet. And so at the end of the day we did a CMBS single asset, single borrower deal. And what was unique about that period of time is that we felt confident that we could sell the junk bonds, the lower rated bonds, but we actually were not certain about the AAAs and whether or not people would, the bond holders would believe in the AAA rating. So it just was a very, very difficult time for office in the spring of 23. But nonetheless we were able to do the CMBS, SASB execution. We sold off all the bonds including the AAAs and it was successful. But it was definitely a tough period. And I think maybe it had been like 18 months since the last SASB was done. And I'm going to make them for context, plus or minus. But it had been quite some time since a transaction like that had been done in the us.
• 55:41
  Speaker A: Who was the investment banker that did it?
• 55:42
  Speaker D: JP Morgan.
• 55:43
  Speaker A: Yeah. They know their business. Yeah, yeah, they're as good as anybody. Matt.
• 55:49
  Speaker D: It was a tough time just you know, dealing with, you know, the banks and, and some of those. We hadn't any banks go under in, in quite some a while. So it just, you know. But that's how it goes in our business. You know there are events that happen that we cannot control.
• 56:07
  Speaker A: I'm also surprised the debt fund didn't step up to make a bid on it or a consortium of them because it's.
• 56:15
  Speaker D: This is what probably prompted us to really start thinking and we have since raised a debt fund. Yeah. But at this period of time there was just. The banks still have not been lending on office and so you're really not left with a lot of options. But you know, we were excited to get this one done and you know Guitar EDR is our partner on it. So we felt like we had a good sponsorship. Yes, you did, but it was not. I said not.
• 56:44
  Speaker A: It sounds like it was almost analogous to 1991, 92 when Ethan Penner started the CMBS market and there was no liquidity whatsoever in the mortgage market at that time. So almost analogous to that. It sounds like. But the sponsorship and the quality of the asset certainly helps. So.
• 57:05
  Speaker D: Yeah, I'm glad you.
• 57:06
  Speaker A: Yeah.
• 57:08
  Speaker D: And we'll get to do it here again in a couple years.
• 57:12
  Speaker A: So it's a short term facility. You didn't do a 10.
• 57:16
  Speaker D: No, it was. I think it's five years.
• 57:19
  Speaker A: Well actually I think you'll have better capital markets at that point.
• 57:22
  Speaker C: Oh yeah.
• 57:23
  Speaker D: We get a better rate today than.
• 57:25
  Speaker A: No question. In fact it's probably good that you didn't lock in for 10 because the terms probably would have been harsh at that time.
• 57:32
  Speaker D: We could definitely do better now, I'm sure.
• 57:37
  Speaker A: So shifting to current market conditions from your vantage point, what aspects of the current environment in D.C. and the mid Atlantic are creating opportunities for thoughtful long term development? And how is Heinz positioning itself to contribute to the region's continued evaluation evolution? I should say.
• 57:55
  Speaker D: Yeah. So our major focus is really residential. We believe that the market is significantly undersupplied the D.C. mSA housing. We think that really between now and 2030, the region needs about 200,000 more homes to meet the demand. So that would, you know, almost be 40,000 homes a year between now and 2030 to get to equilibrium. The historical average for this, our MSA is about 20,000 and it's all, you know, singles and multifamily and you know, so historical average 20,000. And you know, we've been since 21 to 25, only been averaging just shy of 12,000. So we do see there being quite a dislocation in housing. So we're going to continue focusing on addressing that, that demand.
• 59:03
  Speaker A: So I know you're doing subdivisions, some land, land development. Would you consider, and I don't think Heinz has ever done this before, is forming your own home builder in essence?
• 59:14
  Speaker D: No, probably not going to get into the vertical nature of it. You know, we do for sale on, you know, condominiums, right. We had a couple at the parks at Walter Reed and at City center. But I don't think the firm has any plans to get into the kind of the vertical side of home.
• 59:32
  Speaker A: Single family.
• 59:33
  Speaker D: Yeah, yeah, we like to stick to the land development portion of it.
• 59:38
  Speaker A: Got it, got it. So across the spectrum you're doing then Maltese as well as condominium development, Although condos, those are challenging because they are tough. The liability issues with condominiums are difficult, from what I understand.
• 59:59
  Speaker D: Correct. And so we are selling with our partners, Urban Atlantic Kite House at the Park Reed. But that's currently the only condominium project that we have in my mid Atlantic market.
• 1:00:16
  Speaker A: So given the D.C. office vacancy rate, how long do you project this difficult economic time will persist before capital markets stabilize sufficiently to favor new development financing?
• 1:00:27
  Speaker D: I certainly wish I knew the answer to that one and I would certainly share it with everybody else if I knew, you know, if I had a crystal ball, I, I do think it's going to be sluggish definitely for the foreseeable future. You know, the vacancy rate is high. It is nice to see some of the sublease space has burned off. So that, that is good news. And you know, new construction supply is at like 30 year lows for the region. So that is helpful that at least nothing else is being built. You know, conversions are taking some of the antiquated, functionally obsolete buildings offline. So that's good news. But I just think it's going to continue to be soft. It is nice to see New York and San Francisco coming back and definitely some good news there. But I think in the D.C. metro we're going to continue to be a little bit sluggish, but I do think there are some signs, like I said, less sublease space available and return to work has been continuing to improve. The law firms continue to have showed demand for space. But we've always relied so heavily on the federal government and our educated workforce here in the D.C. metro. And we just haven't had the federal or the government be able to bail us out like they did in maybe the GFC where they were taking space and things of that nature. But we do have a diversified economy, do believe capital of the free world. The White House isn't moving. Capitol Hill is not moving. The Pentagon's not moving. So I think long term we're going to be just fine, but in the short term, it's still going to be sluggish. It was nice to see some institutional capital come back on the investment sales side. 1401 New York Car and Bearings doing that transaction was nice to see. It's been private buyers for the most part. It'll be good to see the institutional capital coming back. And I think people are office curious right now.
• 1:02:49
  Speaker A: Another interesting trend I've seen in some venture capital firms are now finding and growing their offices here in the Washington area. And I don't know if that's to connect with the federal government or to really tap into the cybersecurity growth potential here, but to me that's potentially an office growth opportunity. The other side, of course, is data centers. And you talked about data science up in, up in Rockville. But I would assume that the D.C. government is going to be aiming, particularly at some of the older federal buildings, is to bring some tech type uses in to backfill some of that space down there.
• 1:03:31
  Speaker D: You know, the District does need to continue to try to focus on attracting business. It seems like more of the tech has gone to the Northern Virginia toll road side, you know, but, you know, the District does have some opportunities to focus on attracting some more corporate, you know, regional national headquarters. I do think, you know, like it or not, government and business are colliding, more so than we'd ever imagined. And I think that trend's going to continue, at least for the foreseeable future.
• 1:04:08
  Speaker A: Well, I'd like to hope that the District government, the federal government and private sector can all come together, particularly on several large structures south of Constitution and Independence Avenue that need to be redeveloped. It seems to me that that is an area that Heinz would want to look at for potential development opportunities long term. What, what's your Thought about that market?
• 1:04:35
  Speaker C: Well, we're.
• 1:04:36
  Speaker D: We're constantly evaluating markets where we want to play. I. I do think, you know, D.C. has to continue to politically, you know, try to be more developer friendly. I do think some of the. The recent changes to TOPA and rental is good and. And a step in the right direction. But obviously, if there's no incentive for renters to pay the rent, unfortunately, some will choose not to. And it's created a lot of delinquencies and bad debt. I know a lot of the affordable housing players have struggled with that, because at the end of the day, they have lenders that they have to pay. And so that's unfortunate. And I do think that another thing that's unfortunate is we, as developers, build a lot of affordable housing. All of our projects, we're more than happy to include affordable housing within our projects, only to come to find out that they've remained vacant because the process is so difficult to get these affordable housing units filled. And we have this issue at City Center. We have this issue at Walter Reed, you know, other projects in the District. And so, you know, we always, you know, talk about a shortage of housing, and all my affordable units are the ones that are vacant now.
• 1:06:04
  Speaker A: That's an irony I had not heard before.
• 1:06:05
  Speaker D: Yeah. And we're having to pay.
• 1:06:08
  Speaker A: Really interesting.
• 1:06:10
  Speaker D: I'm having to pay consultants to navigate process, you know, annually to try and just get affordable units filled. Nobody wants to talk about it, but the Wharf has the issue. City center has the issue. Walter Reed.
• 1:06:27
  Speaker A: Is it administrative primarily, or is it just okay?
• 1:06:33
  Speaker D: Yeah. And we're having to now hire a consultant to navigate the process to just lease the affordable units which we built. They're there. They're online.
• 1:06:45
  Speaker A: Wow. Now that's a headline story that should come out, actually.
• 1:06:52
  Speaker D: Yeah.
• 1:06:53
  Speaker A: So where do you see the most exciting opportunities within the District neighborhoods or marching quarters? Areas where strategic investment can help strengthen communities and meet evolving needs.
• 1:07:04
  Speaker D: You know, right now, we've been focused on office debt. As I mentioned, we formed a debt.
• 1:07:10
  Speaker A: Right, right.
• 1:07:11
  Speaker D: And that's where we've been playing. As I mentioned, I'm appreciative of the city Council making the changes to TOPA and to help with, you know, being able to evict folks that are not paying rent. So I think trying, but we still have issues and a perception of crime. We still have the National Guard here. You know, we still are short. I understand. We used to have 4,000 police officers. We have only 3,200 now, roughly. But our population's the same so why, why can we do it with a quarter less police and law enforcement? So regardless of what the stats are, I think there's a perception of a lack of policing. And look, I live in the district, I work in the District, you know, want to continue investing in the district. We have a lot of my businesses here in the district. But you know, we're, we're, we do have choices. Like I said, we can go to the Maryland side, we can go to the Virginia side. So we're constantly looking at where we can evaluate things. But as I mentioned, we're probably going to focus on, continue focusing on residential and on the office side, you know, debt for the foreseeable future. You know, I certainly would like to get into and develop another office building to meet the demand that is there because there is so little new construction being built, but we're being measured in our beds.
• 1:08:45
  Speaker A: It's interesting. So let's just say there's a loan coming due on an office building downtown. The two like the location, but it, you know, for various reasons it needs work, probably redevelopment more than likely. Would you lend into that? On with the opportunity then to own it if something happened, would the asset.
• 1:09:06
  Speaker D: We have not been focused on loan owned. We've been focused on newer assets built in the last 10 years. You know, more core if you will. Not necessarily value add opportunities but acquisition loans or refinancing. But we really have not focused on loan to own. We have purchased some loans and we could do that as well. Most of them have been new originations, you know, like I said, for either acquisitions or refinancing of, you know, high quality, stable assets. Correct. Got it. Significant wall and things that we would actually like to own is kind of the approach we take.
• 1:09:52
  Speaker A: Got it. As is not necessarily redeveloped is what you mean.
• 1:09:55
  Speaker D: Correct.
• 1:09:56
  Speaker A: Got it. Okay, let's see. As a lead accredited professional, how do you integrate sustainability and placemaking experience into the conception and execution of large mixed use projects like North Bethesda? And what measurable impact does that focus have on long term asset value?
• 1:10:17
  Speaker D: We really believe in it. I think the firm has been leaders in sustainability. You know, Jerry Hines was an engineer and you know, that was certainly his, his philosophy and we've really embraced lead and other environmental credentialing things, you know, across the globe. But it is a big part of what we do. Every project we embark on the development side, we want it to be, you know, at least lead certified and really trying to focus on gold and platinum. We do feel at the end of the day you know, you end up with a better asset. You know, the mechanical systems, et cetera are, are often, you know, higher quality in order to meet the, the different performance requirements necessary to meet Leeds. So we've really embraced it also with reducing our carbon. As a firm we're trying to certainly reduce our carbon footprint. And so it's something that we as a firm really believe is very important. We're going to.
• 1:11:19
  Speaker A: What about you personally and your background before you were at Heinz?
• 1:11:23
  Speaker D: I said I, I became a, a lead accredited professional back in the early 2000s when it first came out. Actually mentioned previously that I worked with, you know, Tim Helmig and Anthony Westrake at Monday properties on 1812 North Moore and. Right. We agreed back in, this was 2008 to build that as a lead platinum building that was certainly one of the first in the region or definitely one of the first in Virginia. And so I took the time to, you know, become accredited myself and, and that design and you know, never looked back since and really have embraced it. And I believe in you end up with a better asset and an asset to where the tenants want to be. I do believe in the increased worker productivity with the better air quality and more natural daylighting and just I really do think it's a win win between the tenant and the landlord.
• 1:12:26
  Speaker A: So it's a return on investment thing. So you make the investment in doing all this and the tenant is willing to pay the premium for that. I have to assume after they see all the benefits to it.
• 1:12:38
  Speaker D: I think our investors lead the way. They definitely believe and want us to be focused on sustainability. I think our tenants, the corporations are willing to do their part. I think some of them are willing to pay a bit of a premium. I wouldn't say they would be willing to pay a huge premium, but I think many of the corporations will be willing to pay a premium and want to be in sustainable buildings. I think the general public is probably a little bit slower to be focused on it. You know, our tenants of our multifamily buildings. It's a little bit harder ask for them to pay a premium to be in say a LEED platinum multifamily building. But they do believe as a whole that it's a good thing and we certainly advertise it and we certainly, you know, build our multifamily buildings with leed, you know, gold in mind. But that's kind of the pecking order. I, I would say I don't think
• 1:13:49
  Speaker A: I've ever seen a lead platinum residential building.
• 1:13:51
  Speaker D: No, there aren't many of those.
• 1:13:54
  Speaker C: Yeah.
• 1:13:56
  Speaker D: On the office, it's a little bit easier to do. Yeah. With one building system for the multifamily because of each one having its own usually mechanical system.
• 1:14:07
  Speaker A: Yes.
• 1:14:08
  Speaker D: Its own water heaters. It is certainly more difficult. For sure.
• 1:14:14
  Speaker A: Yeah. Heinz itself has a strong family legacy and its leadership. How much does this organizational structure influence your own personal business philosophy regarding long term planning and ethical conduct?
• 1:14:29
  Speaker D: Look, I think the leaders of any organization set the tone. I do think the Heinz family has led by example. Jerry Hines built a very reputable firm with a great reputation. His son Jeff and now Laura have followed in Jerry's footsteps. And I always say that, you know, we talk locally that we're not going to be the ones that mess up the reputation that has been earned over decades. So I really do think the Heinz family has made a concerted effort to lead by example, do the right thing, treat everybody fairly. And I do think that permeates down. And so I really applaud them and they have really created an amazing brand and it's really because of the reputation of doing the right thing.
• 1:15:27
  Speaker A: What have you learned since you've been there from that?
• 1:15:33
  Speaker D: I, I've learned a lot. You know, it's been a challenging time, obviously with COPA and Covid. Hyperinflation rise in INTEREST RATE ENVIRONMENT Many of us, my peers, you know, we didn't grow up in a rising interest rate environment. A lot of us, you know, just, we were always in the kind of a falling interest rate environment or, yes, prolonged because we just hadn't had it, you know, really since the early 80s. And so just learning to navigate real estate in a, in a high, you know, interest rate environment, which still our interest rates are. Yes, historically, not as high, not as
• 1:16:17
  Speaker A: when I started my career.
• 1:16:19
  Speaker D: Exactly. So, you know, even with mortgage rates at 6%, it's not. Those are not off the charts for.
• 1:16:28
  Speaker A: They were nine when I started.
• 1:16:30
  Speaker D: So, yeah, you know, I think my parents bought their home. It was probably 15, you know, in 1982. So, yes, I think learning, you know, navigating a rising interest rate environment and, you know, elevated interest rates and an inflationary period, which typically inflationary periods are good for real estate. Typically. But, you know, there's, there's some opposing dynamics with elevated interest rates too, you
• 1:17:01
  Speaker A: know, so Heinz has helped you understand that because they've obviously been through multiple cycles as a company. In fact, I think Jerry goes back to the 1960s when he started the firm, so.
• 1:17:14
  Speaker D: Correct. You know, there's a lot of lessons learned over the decades. And the company does a good job harnessing those and trying to not, you know, recreate mistakes and learn from our mistakes and grow. And I think the firm has done that. We do take a data driven approach to our decision making and investing.
• 1:17:40
  Speaker A: So how do you manage and prioritize the immense demand zone of leading a major institutional real estate office like Heinz in D.C. while ensuring time for your family and personal life?
• 1:17:53
  Speaker D: It's a conscious effort to ensure that you're, you're spending the appropriate amount of time on, on work and your family. I have two boys that I have a 14 year old who's an 8th grader and a 15 year old who's soon to be 16 tomorrow who's in the 10th grade. And so they're a huge priority of mine. And you just really have to make sure you're making a conscious effort to balance your, your, your work life, your home life and then taking time to, to work out and treat your body right. And so it, it is a conscious effort to make sure that all three are, are in balance and, and nothing's getting out of whack.
• 1:18:40
  Speaker A: In an industry that rewards tireless work and advice, what advice would you give or offer to young professionals about establishing a sustainable balance among work, family and personal well being in their careers?
• 1:18:54
  Speaker D: As I mentioned, it is a balancing act, kind of a three legged stool between work, family, in your personal life. If one leg of the stool is longer or shorter than the other, it's not going to be imbalanced. I do think at the end of the day, for the young people that want to advance in this industry or any portion of corporate America, you do have to do the work, you do have to put in the time.
• 1:19:25
  Speaker A: So you got to figure out sleep too.
• 1:19:29
  Speaker D: No, sleep is important. You know, make sure you get the eight hours of sleep and make sure you try to keep it consistent when you go to bed, when you, when you wake up. But sleep is a very, very important, you know, just like eating well and you know, working out and staying in shape. You know, sleep is just as important as those other elements and making sure you're getting enough. So it's certainly something I am conscious about, making sure I go to sleep.
• 1:20:02
  Speaker A: I have to assume that your military background helped you with discipline with regard to time management and allocation of your focus.
• 1:20:11
  Speaker D: Yeah, I think athletics, I think academia, I think the military all kind of sharpened my time management skills and learning to prioritize how I spend my time. We spend a lot of time here talking about return on time yes. Where are we going to? You know, it's easy to go down a rabbit hole and spend a lot of time and come back with nothing. So we try to avoid that. But I really do think, you know, athletics, academia and the military is probably where I really sharpen that time management skills because it is important and it is a skill and that's great.
• 1:20:55
  Speaker A: So you are an active member of organizations like ULI or Midland Institute. How important is networking and engagement in professional groups beyond just technical skill for young people seeking advancement in institutional real estate?
• 1:21:09
  Speaker D: Look, I think they're very important. I think, as you and I mentioned, you were my mentor of a ULI mentor group and that I don't know, John, 20 years ago or very close to about that. Yes, we are today talking. So I'm a huge advocate of things like uli. NAOP was another one locally, naop, Northern Virginia, that I got to know. A lot of the other developers, architects and engineers that I still do business with today. And we've grown up in the business together, so I'm a big advocate. And ULI has a lot of educational programs that are great. And so I definitely focused a lot of my time early on to make sure I was a regular attendee at those events. We all know that there's a lot of real estate events and you could spend all your time going to them. But as I, as we mentioned then, some of those other things might get out of balance. But I do think you have to be a regular attendee. You don't have to go to every single event. But I would encourage folks to go and do things like uli, naop, the DC Real Estate Group, et cetera, because they will be people that you do business with over the course of your career. My whole real estate development career has been in the D.C. metro area. So there's a lot of folks that, like I said, we can remember 20 years ago when we were just getting started.
• 1:22:43
  Speaker A: Relationship management is the key. And if you don't manage and foster those relationships, your career is not going to go very far in this industry.
• 1:22:56
  Speaker D: You don't want to just reach out and call people just when you need something.
• 1:23:01
  Speaker A: Right.
• 1:23:02
  Speaker D: You know, you want to be, you know, it needs to be reciprocal, but, you know, organic and over a period of time, it's very important. And I certainly encourage young folks in my office to get out and meet their peers in the industry.
• 1:23:18
  Speaker A: Giving back to the community is a major component of healthy business environment. In what ways do you prioritize community service or charitable engagement with in your professional life or personally, look, it is
• 1:23:31
  Speaker D: very important to give back. You know, we also look to, you know, pay it forward when we can. But the firm does do a lot of charitable giving. The office here locally does. We, you know, DCBIA is one. And the different community events that they have, we do something around 9, 11, a food drive, which we like to do each and every year. So we. We make sure that we do a few different charitable events each year as the office here locally. So it's very important to give back to the community.
• 1:24:05
  Speaker A: Based on your experience moving between varied roles from military officer to residential development vice president to city head at a global firm, what single key piece of advice you offer to professionals looking to make pivotal strategic career jumps?
• 1:24:25
  Speaker D: You know, I. I've always focused on a, you know, doing things that interest me, that that's really how I made the leap from the naval officer to real estate development. People, you know, would counsel me to, you know, we'll do something that interests you. And. And real estate was always something that, you know, I enjoyed walking in homes that were under construction near where I grew up, and I just really thought I would give it a try. And our careers are a marathon, and you want to do something that gets you out of bed in the morning, that's not a chore. So I think it's really important to take roles and jobs that interest you and that, you know, get you out of bed each and every morning.
• 1:25:19
  Speaker A: What's the most fascinating part of the real estate industry? That person that personally attracts you to it? Just out of curiosity, for me, the
• 1:25:28
  Speaker D: dynamic nature of the development projects and all the moving parts and putting the deals together. And, you know, I'm sometimes amazed that we ever build anything in this country because it is a big chess board. And so it's. I find it really intellectually stimulating and challenging. All the various moving parts, all the various stakeholders, and then kind of bringing them all together to create something is something that I really, really enjoy about our. Our industry.
• 1:26:04
  Speaker A: The analogy I've heard from many developers is you're either a conductor of an orchestra or you're a marionette or you're a puppeteer, where you're actually controlling the stage with regard to what's going on in front of people. And I think they're both pretty good analogies.
• 1:26:25
  Speaker D: Yeah, they're pretty good analogies. And I often ask people, especially those who want to get into development, if they're a marathon runner or are they a sprinter. And I said, if you want to be a developer, you gotta be a marathon runner.
• 1:26:39
  Speaker A: Exactly.
• 1:26:40
  Speaker D: Willing to do long projects over a long period of time and not get bored.
• 1:26:48
  Speaker A: Yeah. If you have adhd, I don't think the development business is for you, honestly. But if you're a broker, that is a good fit. I think so, at least from my experience, for sure. The patience for development takes, I think, a lot of fortitude and resilience. Because of what? Of the nature of things that you cannot control. I believe. I think that's the biggest challenge is managing things that are out of your control
• 1:27:21
  Speaker D: and really understanding what is in your control and what is not.
• 1:27:26
  Speaker A: So. Exactly.
• 1:27:27
  Speaker D: Certainly all use the serenity prayer quite a bit in our industry, but to be able to differentiate between what you can control and what you cannot is. There are forces that we cannot control.
• 1:27:42
  Speaker A: Exactly. So if you could place a single message, perhaps a core philosophy or crucial piece of advice on a billboard visible to all real estate leaders and developers in the mid Atlantic region, in essence, my billboard statement, what would that message be?
• 1:28:00
  Speaker D: No, it's a. It's a. Excuse me. A great question. You know, I, I really focus a lot on. On growth and, and having a growth mindset. I really do think at the end of the day you either have a growth mindset or a fixed one. And I saw a quote recently at an Might have been from social media, but I really resonated with me, but it said, you know, the magic is in the work that you're avoiding or something to that effect. And it really resonated to me because I often find that the things that I'm avoiding are the things I exactly need to be doing. And there is a lot of magic in that. And you know, I do, a lot of folks know I do a lot of yoga. And one of my yoga instructors said, you know, being comfortable is nice, but nothing ever grows there. And you know, similar to, you know, just you need to be willing to push yourself and put yourself in circumstances that might not be comfortable, you know, might not want to be doing them, but they're often the times that. Or the things that you need to be doing. And so it's something that I really take to heart because like I said, I'm always trying to evolve. I'm always asking what I could do better. I really do think a growth mindset is so important for all of us and be understanding, but really just kind of look at the things that we're avoiding, things that are making us feel uncomfortable and try to run to them as opposed to run away. It's certainly Easier said than done. I'm the first to attest to that. But I'm trying to really focus on those types of things because self improvement and having a growth mindset is what we all really need in the industry and in society. And I'm trying to teach my two young boys at home that lesson as well.
• 1:30:07
  Speaker A: Your statement reminds me of a book that I read by Nassim Taleb called Anti Fragile. I don't know if you've read that book, but.
• 1:30:16
  Speaker D: No, I have not. I have to add it to the list.
• 1:30:19
  Speaker A: The definition of antifragile is, you know, the fragile, of course, is being your very, you know, that you can't. So you would think that the opposite of fragile would be, you know, tough and resilient and, you know, just being able to withstand things. But antifragile is the ability actually seeking to be tough and that and actually growing from that. So it's, it's kind of like building muscle in a way is the antifragile approach. And it's an interesting way he, he parses it well and the book, so it's something to consider reading.
• 1:31:03
  Speaker D: I really do mean it. Just growing constantly. Even old dogs can learn new tricks and I can do better. And really, just what am I avoiding? Why am I avoiding it?
• 1:31:15
  Speaker C: And it's probably what I need to
• 1:31:16
  Speaker D: be doing because it's uncomfortable, but, you know, there's no growth there. So that would probably be my, my billboard.
• 1:31:24
  Speaker A: John, that's great. That's great. Well, Andrew, thank you. Is there anything else you'd like to add before we stop the conversation about,
• 1:31:34
  Speaker D: you know, look, I really appreciate the time. I know that was a little bit hard to get a hold of, but I do really think it is unique that you were my mentor a very long time ago and there's certainly been a lot of growth between now and then. And so, you know, I love the fact that we're able to do this. You know, I still, I'm still going strong in my career, going to keep it going.
• 1:31:59
  Speaker A: Of course.
• 1:32:00
  Speaker D: I, I, I do love that you were my mentor and I, I hope folks do take it to heart that those programs are great and you know, it's a small world and it's a small community and it is, it's neat to be able to do this podcast together with you.
• 1:32:17
  Speaker A: You're the third mentee I've interviewed for the podcast now.
• 1:32:21
  Speaker D: Definitely your favorite, I'm sure.
• 1:32:23
  Speaker A: Of course. So I, I actually had 70, maybe 80 mentees in my 16 year tenure doing that. And then of course, the community we did, I had another 60 and this iconic journey which I've just closed down last year. So mentorship is important and I'm encouraging everyone that gets to a certain point in their career to start mentoring. And I hope you do and you do, I'm sure internally all the time you're mentoring.
• 1:32:51
  Speaker D: Yeah. So it's great. And it's a way to really, like you said, pay it forward. People help me out along the way and I want to do the same. So. But no, John, really amazing that we were able to do this podcast together.
• 1:33:05
  Speaker A: Yes. Well, I thank you very much and have yourself a great day day. Thank you, Andrew. I appreciate it. And I will get you a draft of this to look at for you before it goes live. Take care. Have a great day. Take care.
• 1:33:18
  Speaker B: Bye.
• 1:33:18
  Speaker D: Bye.