Buying a building, making sure that tenants are happy, making sure that the building’s maintained, making sure that the marketing works well, making sure that, you know, our relationships with a bank on that property are, are well, and that we’re paying our node and that we’re doing the right thing for investors.

Owning a piece of real estate is, especially if you are an owner, is not very passive, and so there’s all these little things that you do and you just do ’em over and over and over again. And so again, when I think of becoming the best real estate operator in the world, I really think of treating property as how can we most efficiently run this property so that we are as capital efficient as possible, as people, efficient as possible.

And what all that really should accumulate to is a great return for all stakeholders involved, not just our financial stakeholders. We like to tell our team that our goal is to be the best in the world, and, and if we do that, we’ll buy more property, we’ll manage it better, we’ll return better in returns to our investors.

We’ll have a better company, better employees. I mean, it’s just a, a great kind of way of getting the team motivated to do really little things really well over a long period of time.

[00:04:51] Robert Leonard: You’ve talked very positively on multiple occasions about that team. What has been your key to successfully and consistently hiring good people?

I’ve hired a handful of people myself in the past, and I know it’s definitely not an easy endeavor. So what, what have you done that? What has really been the key to successfully hiring and consistently hiring good people?

[00:05:09] Chris Powers: I think it’s something that I had to learn along the way. I don’t think it was immediately apparent, but, um, all businesses are really, they’re people doing things and the byproduct of what those people end up doing is kind of what you get as a customer, as an investor, or it’s what the world sees.

And so what you really realize if you’ve hired enough people is you know what happens when you’ve hired the wrong person. It hurts culture, you’re not as productive. You don’t wanna go to work and see that person. That person brings everybody down. But then you also, on the flip side, you know what happens when you’ve hired the right person.

Everybody wants to work with them. They do great work. They motivate people. They’re self-motivated person. When you really think about it is like all businesses is really people doing things. And my job is to make sure that we have the best team on the field possible and the right culture to do what we want to get done.

And so everything else comes second. So if you really think about business as a people first thing, and then how do you, you know, if you can build the right team. Finance and accounting should work, right? Operations should work right? Acquisitions should work, right? But it starts with getting the people. I think in a lot of ways it’s just how you frame the situation.

We really put a lot of emphasis on the people that we’re working with and you know, lastly, these are people that often you’re working with day in and day out for sometimes years. You see these people and work with these people more than you see your family and friends. Jason and I, my partner, we like to say like, we might as well do it with the people that we would love to be with every day.

And so I’d end that by saying, It’s easier said than done. It’s a huge challenge, but I think the biggest part is the right mindset of like, we understand this is our greatest challenge, but it’s also our greatest reward and we’re gonna treat it that way.

[00:06:55] Robert Leonard: It’s difficult because it’s one of the hardest things to kind of quantify.

But for me, and I think there’s some other people that have done a lot of hiring. Andrew Gaddie from Microwire, I believe he talks about this pretty extensively, but a big factor in his hiring is just, does he wanna work with these people, like you said. And for me, that’s a really big thing, is when I meet with them.

Is, I’m pretty kinda laid back. I don’t have these like more formal interview questions. It’s more like just having a general conversation and do I enjoy talking to them? Do I enjoy hanging out with them? And, and our founder here at t I p, he’s, he thinks about it as like, would I love to like go to a football game with them?

You know, would I wanna, wanna do that? And that’s a good key kind of gauge as to whether somebody would be a good hire.

[00:07:32] Chris Powers: Yeah, and I would add to that, I mean, and my partner says this all the time, and he tells our team, this is always be hiring. And that doesn’t necessarily mean like we have a job description up and a roll open.

But as you go about your day and you’re working with people or you know somebody and you think, This is somebody I would love to work with one day, like build that relationship with them over time so that when it comes time to actually hire, there’s rapport there. And the last thing I would say is I did a podcast episode the other day with Steve Robinson, who was the chief marketing Officer at Chick-fil-A, and he just blew me away.

Chick-fil-A is founder is a famous gentleman, and he used to say like he hires people on the merit that he is going to work with these people the rest of his life. And so he takes a lot of time up front because once you’re in, he’s hoping to work with you forever. Now, I know that as a small business, especially something growing quickly, sometimes you don’t have months, if not years to wait to hire someone.

But I thought it was a really great framework that Chick-fil-A treats their hiring process. Could I work with this person the rest of my life? And that is a really high bar to set. But if you look at Chick-Fil-a’s culture and the people they’ve built, I mean, it’s one of the most, it’s almost a miracle what they’ve created.

I thought that was just a really interesting thing to think about. And we certainly don’t do it to that extent at Fort, but it’s certainly a goal and we like to more think about it as always be hiring. We’re always looking for people that we could potentially work with. One.

[00:09:00] Robert Leonard: I was gonna say, if anybody’s ever been to Chick-fil-A, you’d know that.

You’ve seen that in action, right? Like I know they have a really good training program. I know that’s another like big piece of kind of their hiring process or their talent pool. But yeah, their hiring must be done really well as well. Why is accountability so important as part of a company’s culture?

[00:09:18] Chris Powers: I think accountability is, I mean, you said it.

I think it is the most important thing at Ford. I think when somebody’s accountable, Well, let me take a step back. I think we are, we’re in a world right now where not a lot of people wanna take accountability for really anything, and I think that’s one of the most destructive ways to live. We live in a world right now where it’s everybody’s fault, or fifth place gets a trophy.

I mean, that is a world that that is not, um, it’s not always been that way. And when you work with accountable people, you’re working with people that obviously are taking responsibility for what they do. And when you give somebody work and you know that they’re gonna take responsibility for the work they’re doing, you can trust them more.

When you give somebody work and if they succeed, they take credit if they don’t succeed at somebody else’s fault. What you build over time is this untrustworthy culture and you’re afraid to delegate things to people. You’re afraid to trust them with work, and it’s really hard to build a great company when nobody really trusts each other.

So there’s more to trusting someone that just accountability. But I can tell you the greatest people that I work with take accountability for their work. They take accountability for the way they treat people. They take accountability for, you know, the ideas that they have. They take accountability for their mistakes.

And again, that that inherently bakes in a large trust factor that somebody that I would wanna work with more. And I think people on the team gravitate to people that are account. And it really sets a great culture. It flushes out people that aren’t accountable and it flushes out kind of what I call a, that’s like a cancer in the company is when you start having this group of people form or this people form that are pointing the finger all the time, and this wasn’t my fault and I didn’t mean to do this over here.

Really what they’re saying is, You can’t trust me. They don’t realize that, but you can’t trust me, give the work elsewhere. And so eventually work finds its way to the most accountable person. And over time, more people want to be like that person. And I think a core trade of the greatest people, whether it’s athletes, Tiger Woods was accountable to showing up to that golf course every morning and staying till the end of the day.

He put in more work than anybody and the results showed for. I’m not saying we can all be Tiger Woods, but I’m saying if you look at the true people in this world that are most, that we admire most, and they don’t have to be athletes or superstars or celebrities, it could be your parent, it could be, think of who you love in your life the most.

I would almost guarantee that one of the qualities that you love about them is that they’re very accountable for their life and the people around.

[00:11:56] Robert Leonard: I couldn’t agree more. I’m trying to instill that. I know he’s young, but in my four year old son, he just turned four and we were watching cartoons the other morning and they gave a trophy to like, I think it was like 16th place or something like that.

He was watching some cartoon where I think they were racing or something like that. Uh, we were a big racing family here. And so I said to him, I said, Hey, hey, you know that if you get 16th place, you don’t get a trophy, And mind you, he’s only, he just just turned four. And he goes, Dad, I know . And so I was like, it was a really small moment, but it was a proud moment for me because I want him to know that he has to be accountable and he’s not gonna just get things for just for showing up.

You know, you have to have the results if you wanna actually earn those rewards.

[00:12:38] Chris Powers: That’s awesome. I think those are some of the greatest lessons you could teach a child.

[00:12:43] Robert Leonard: What have been some of the mistakes that you’ve made in your journey, whether it be you, your team, your company as a whole, that weren’t necessarily aligned with being a good operator or the world’s best operator?

[00:12:54] Chris Powers: The first one that came to mind, and I think it’s a, There’s been positives to it, but there’s been negatives is trying to force it to happen too quickly. I think one of the traits of entrepreneurs in general is they want to move quickly. I think, you know, I think Mark Zuckerberg or something like that has had this famous quote over the last 20 years of move fast and break things.

And I think there’s a lot of merit to that in some way. But I would tell you again, the more short term mindedness you’re thinking. And so when you’re trying to build something really quickly, you sometimes are just making decisions that feel good in the moment. It feels like you’re making progress, but when you really look over a period of years, you’re not making that much progress.

You’re just really busy. And so I think the biggest, I would say the biggest mistakes I made early on were two things. I didn’t have a focus. So in real estate you can develop town homes, you can buy real estate’s. A big is one word that describes a lot of things where you could develop land, you could buy an office building.

I mean all these different things. So we didn’t have a focus, so were weren’t building momentum in any one thing. We were a jack of all trades, master of none. And the second was things just take time. It takes time for people to be on your team long enough to build those unbelievable relationships where work can get done better for trust to get built.

And again, it goes back to doing the same things, little things really well over and over and over again. When you’re trying to speed that up, oftentimes you can kind of, the system breaks down and breaks down, you know, if I was to do it again. Again, on one end, I, I think there was positives to it, but if I could do it again for the team’s sake, probably would’ve focused first and then kind of slowed down and paid attention and tried to get that flywheel spinning quicker because on the other side of a spinning flywheel, as you can get a lot done without a lot of effort and um, you know, at the time we were just trying to move too quickly and too many things great.

And we were just kind of a victim of our own hustle at the time.

[00:14:56] Robert Leonard: After all, you are a real estate investor. Your company is a real estate firm. This is a real estate podcast. So let’s dive into some of the actual real estate that you’re doing in the asset class that you invest in. I don’t believe we’ve had anyone on the show that focuses on this asset class, so I’m excited to talk about it.

And that asset class is Class B industrial to start, explain what industrial is in real estate and how you define the different classes like Class A, B, C, et cetera.

[00:15:24] Chris Powers: Yeah. Industrial are the buildings that manufacture things. They store product. They help with the distribution of product, They help with the assembly of product.

Everything in, in your room right now, the lamp that I see behind you was probably made in a factory. It was probably stored in a factory, and then when it was time to be bought, it was shipped out of a factory or a warehouse. I’m sorry. When I think of industrial, I kind of think about it as our supply chain.

Things are built, stored, and distributed through industrial warehouses and buildings. Unlike a lot of asset classes, the difference between typically classes are denominated by the vintage and when they were built. When I think of Class B, I’m thinking of stuff built in the seventies, eighties, nineties.

But what you’ve really also seen in industrial is the modern day class A warehouse. Yeah. That’s where you see the Amazon facilities that are a million square feet or target facilities, or chewy.com facilities, the big massive distribution and manufacturing facilities in this country. A lot of the industrial that was built back in the seventies, eighties, and nineties.

I’m not saying you didn’t have some big box. You have a lot of tenants that need 2,500 square feet or 10,000 square feet where they have a little office and a warehouse in the back. That’s really the big differences are when it was built, the vintage, and then kind of the use case for it. And the only thing I would add that differs from other asset classes, when you hear like Class B apartment or class A apartment, A Class B apartment has two bedrooms, a bathroom, a kitchen, and a living room, and so does a class A apartment.

It’s really more how the aesthetic of one A Class A is typically newer and nicer, but it functions the same way. In industrial, a class A property actually functions much differently than a Class B property based on the size, the way they’re built now, how tall the buildings are, how they can handle robotics, that that can help lift and, and um, rack product higher towards the ceiling.

There’s just a lot of differences in actually the use case, not just the aesthetic. And so that’s how I would define kind of the classes within industrial.

[00:17:42] Robert Leonard: Yeah, I was curious about that because when it comes to multifamily or any type of residential real estate, really the classes are defined by the quality or even like the finishes of, you know, the interior of the property and the exterior.

And I’m thinking about that with industrial as I was pairing for our conversation. I’m like, you know, I just, I don’t really think that people will care if the, the gate or the doors a little bit, you know, nicer, shinier too much, you know, in an industrial proper. You also mentioned the robots. Is that the responsibility of the industrial real estate owner, or is that just somebody that rents the space?

They have to bring in their own robots?

[00:18:16] Chris Powers: How does that work? That’s the tenant. It’s still the early games, but when you look inside a lot of these facilities, I mean, if you’ve seen the latest like Tesla manufacturing facility, I mean a lot of, What’s that? That whole car is made mostly by robots. I mean, if you look at the whole assembly line, there’s, I’m saying they’re not saying there’s people involved.

But you know where Henry Ford was in the early 19 hundreds, where it was all people to now where Tesla is, it’s mainly robotics, but then you could also look inside an Amazon warehouse where they’re not manufacturing product. But they are storing product. They’re distributing it. There’s millions of packages a day going through these buildings, and a lot of the machinery that is racking is when you’re stacking product towards the ceiling or you’re moving it across the warehouse, or you’re pulling it off the shelf and getting it ready to go out.

If you’ve seen videos on YouTube of how a Amazon facility works, a lot of that’s robotics. The top companies in the world can afford to do it, but when you look in these major Class A facilities right now, you’re seeing a lot of the work inside the warehouse being done by robots. You’ve said that Class

[00:19:23] Robert Leonard: B industrial isn’t sexy enough for people to take seriously, and you know that because you used to feel that way.

Why is Class B industrial overlooked by so many? What opportunities are people?

[00:19:37] Chris Powers: Yeah, you did. You’d done some great research. So again, real estate, big word. So lots of things happen in real estate, and what I meant by that was Class B industrial buildings. And look, I own almost four. I don’t own, Fort Capital owns almost 7 million square feet of this, so I, I’m eating my own what I’m talking here, but these are not the sexiest buildings in the world.

You drive by these buildings in every city and there is nothing, there’s very rarely anything about ’em to remember. Sometimes they’re metal buildings, they’re old concrete tilt wall buildings. There’s just nothing sexy about ’em and so on that merit alone, there’s just a lot of people that don’t want to participate.

You know, on the flip side, you, you think of beautiful condo towers in Miami, or beautiful office buildings in New York City, or the prettiest retail in Highland Park Village. And I’m not also saying that people are in it just for the aesthetics, because all those properties they have to make money on, and it’s a for profit venture.

But when I first started my career, I was more interested in the really nice real estate that was in magazines and that people wanted to take pictures in front of. And there’s nothing wrong with that, but I think naturally people gravitate towards things that are more aesthetically pleasing. And so just by way of kind of the rough and tough nature of Class B industrial, I just don’t think there’s a lot of people that are interested in.

You’re not gonna go and take a Instagram photo in front of a Class B industrial building. And so that was maybe a little tongue in cheek, but I fell into that category early on before I really learned the nuts and bolts of real estate. I had no desire to wanna own those buildings cuz they weren’t something you could kind of show off around town.

And what I learned was they fit the, a huge need in society, which we’ll get into now. I think they’re the sexiest buildings ever, but not because of how they look, but because of how they perform.

[00:21:29] Robert Leonard: Yeah, give us the case for Class B industrial. I guess when I was hearing you speak earlier about some of the companies that use it, Amazon, Chewy, et cetera, you know, I think to myself, you know, I could see industrial being around essentially forever because it’s not one of those asset classes like say, storefront like storefront businesses or brick and mortar businesses that are getting disrupted by e-commerce.

You’re actually benefiting from some of these trends, and I can’t really see that ever being disrupted in that way. I’m sure that’s a big piece of. Give us the other cases for

[00:22:02] Chris Powers: Class B industrial. So a lot of what I was talking about with Amazon them, just to be clear, I think that’s a lot of that’s happening in Class A facilities.

So now let’s talk about class B. When you think, if we just take the recent Covid event and you think, what did the world really need to function? It needed rooftops and it needed industrial buildings. It didn’t really need office buildings. It didn’t need hotels. It didn’t, it needed some retail, like, you know, Walgreens and CVSs and things to, to pull up to, but it, you didn’t need restaurants.

If I’m talking about purely basic survival in America, you kind of needed those two things, Something to live under and something to kind of build and get you products to survive. And that was through a pandemic. So if you think about, just sit on that merits alone, industrial has a great place in the world.

Class B Industrial because of when it was built, is usually these buildings are, I say they’re in fill in nature. And for listeners in fill means they’re inside the city and often really near really active parts of cities. And if you go into a lot of the cities where there’s been big revitalizations, anybody listening to this that’s been to Uptown Dallas or the design district in Dallas, or Wynwood in Miami, those were all old industrial parks.

And the reason why they’re the pallet now for all this redevelopment is industrial tends to be on large pieces of land. They’re flat, they’re in great areas. They need to be next to highway systems, train systems, ports. I mean, they’re in areas of commerce, and so they’re really well located. The case for Class B industrial is you can’t rebuild.

And I’m talking about in the main major markets where we’re buying, so we buy Class B, industrial and Class A markets is what I tell people. And so if you go to these major cities, you’re never gonna see a 20, 30, 40, 50 acre piece of land in the middle of the city. That is zone for industrial. That is going to be what somebody builds there.

If that piece of land still exists, it’s typically gonna be, you know, multi-family, hotels, town homes. It’s gonna be a mixed use. You actually have a, not a, an increasing supply class. We estimate you have a decre, a decreasing supply of one to 2% a year in Texas, but really that’s probably national because these buildings, they’re typically one story.

They’re in good locations, can get converted to creative office, kind of a hybrid retail entertainment showroom, or they just get torn down all together and, and redeveloped and so you can’t rebuild. The only way you could rebuild similar properties is to go on the outskirts of town and find a, which is easier to do in a market like Texas, but not so easy to do in a market like New York City and rebuild.

But, but a lot of the tenants that reside in these buildings, you know, you think of a 10,000 square foot tenant, their whole customer base is probably within a mile, two, three miles of that location. So to just go move to a, a new brand new built location 20 miles outside of town, that doesn’t work. The other part is most of these tenants are not, We are going back to the sexiness of a building.

They need it for the functional use of their business. If you think of an office, covid happens. Everybody work from home for a little bit. But in an industrial building, you can’t tell the people in a warehouse, Hey, everybody takes some product home with you, store it in your garage and like, we’re just gonna do business from our houses even.

It has to happen in the warehouse. The warehouse facilitates business. When you think about that, there is no work from home. You think about there is no like, Hey, we need a joke that the CEO of a business like this doesn’t need a platinum toilet like they would in an office building. They’re showing up to do business, so they’re very sticky tenants.

Unlike other asset classes where if you live in a class B apartment and you get a raise or you make more money, maybe you move to a class, a apartment, or you buy a house, you kind of believe the asset class altogether. In Class B industrial, if your business does better, you don’t move into a class A industrial building.

That would only be if you needed a new function to your business. So what you actually have is the more successful you are, you kind of grow within the asset class. The other thing I really like about it, and there’s several, the CapEx and the TI requirements are very predict. So if you talk to retail owners right now, or office owners or even hotel owners, the demands of the tenants have gone up a ton.

The lobby has to look a certain way. The tenant finish outs. It’s no longer a bunch of cubicles and offices in a, you know, a small kitchen with a coffee pot. Some of these offices are just unbelievably built out, or these retail experiences are unbelievable. I mean, think about what a restaurant looked like in the seventies compared to what it looks like today.

It’s night and day, but if you go look at a Class B industrial space, what it looked like in the seventies and what it looks like today, it’s pretty much the same thing. There has not been a whole lot that’s changed. It’s very easy to go, Hey, you know when a new tenant comes in, this is probably what gonna be what they require.

Our CapEx, we know, is pretty easy to predict. It’s like we need a good roof. All industrial tenants need an amazing roof, needs HVAC systems. It needs a good foundation. So it’s very easy to predict the capital outlays within the the asset class. Those are kind of some high level deals or high level reasons.

We like it. And the last thing I would say is the tenant base. So we’ve talked about eCommerce, but I want people to think about if you’re living in a growing city right now, look out your window right now. There’s buildings being built, there’s buildings being cleaned, there are, there’s product coming in.

If you’re in an office, you’re getting new supplies weekly at your office. If you look at the grass outside, that grass is being mowed. It’s probably being fertilized. There’s equipment being made to facilitate landscaping. All these things, what I’m describing, are the core businesses that help our cities run and grow and maintain.

And a lot of those tenants reside in Class B industrial buildings. And so if you’re living in a growing city, you have a de ple supply class, you have a demand going up. You have industrial buildings that are in the center of town that are facilitating the city’s needs. I’ve recently come up with this quote, but I said like, Am America runs through classs B industrial real America.

The small business, the nitty gritty America is in these buildings. And it is. And it is the companies in here that are helping us live as cities. And so if I say our city’s gonna have more requirements in the future or less, I think it’s safe to say they’re gonna have more. There’s always new standards, there’s always new rules, there’s always new regulations, there’s always new growth.

And if population’s coming, that’s all you need to know is we’re gonna need more of these services and therefore there’s gonna be more demand for these buildings. And the last thing I’ll say is they’re covered land plays. There is these sit on the largest pieces of land at the best intersections in town, and it might not be a development site tomorrow, but again, go to all these cities and look at where’s all the big, big development happened in the major cities.

Almost always it’s in an old industrial park. And so if you hold these things long enough, there’s a lot of value in just the land alone.

[00:29:28] Robert Leonard: I mean, when it all boils down to it Americans or consumers and those businesses that have their products and services running through those Class B Industrial, I think it’s just, there’s just gonna be more of it, right?

People are always buying more things. You can’t really. There’s a lot of things that are going digital, but people just like physical stuff in America. We just like to buy stuff and that’s what a lot of the self storage guys that I talk about talk to say is they’re like, Americans just love stuff and they need place to put their stuff.

And you’re kind of on, you’re on like the beginning side of that. You’re providing the, the real estate to, or initially produce and create that stuff. I wanna ask you about the tenants. You, you said they’re really sticky. And I can definitely see that, but I’ve also just anecdotally driven by some, maybe not Class B industrial, but things like that where you need a tenant that I can only imagine is really difficult to get when you’re, I invest mostly in, in residential real estate and so, It’s typically not very hard to find tenants.

At least right now there’s a lot more people looking for housing than there is housing available. So it’s not usually super difficult. But when I think about these types of tenants, I can only imagine that it’s really difficult to get somebody in there. So I’m curious, how does that process work with Class B industrial?

How do you get your tenants?

[00:30:41] Chris Powers: So I would say it’s actually really simple right now in, in today’s market, but I think it’s, that’s the case in general with the demand. But we hire a leasing broker. We do our own property management, but we hire market leading leasing brokers. So we’ll go into a submarket and we’ll find out, We’ll interview two or three of the top leasing brokers, find out who knows the area really well and when.

When you think of what knowing the area really well is, is think of a submarket where there might be 2 million square feet of industrial in it. 200 tenants. I’m just making this up, but that broker probably knows who all the tenants are. Knows how long they’ve been there, what they paid to lease their space, what their expansion plans are.

They know who’s out touring in the market, and so they just kind of know where the demand’s coming from, how to generate new demand, and really what the top prospects are for that submarket, why somebody would want to be in that submarket. Sometimes you might wanna be here rather than there. And um, they all, there’s always different reasons.

Maybe you have to be close to a port or you have to be on a railroad, or you have to be close to this major highway cuz most of your major customers are along that highway. So there’s lots of infrastructure reasons why you might wanna be in an area. Or it could be because, you know, if you’re in manufacturing, it could purely be because there’s incentives for you to go in that area.

The city’s willing to give you an incentive to go to that area or your customers are in that area. I mean, lots of different reasons, but, uh, a good leasing broker will know what the demand drivers are. Know what the type of tenants are that would want to be in that area, Know who the tenants are currently in that area and can facilitate a marketplace.

And so we’ve decided that it’s better for us to partner with leasing brokers that are experts in those markets. So if you take Houston, Houston might have 30 submarkets within the whole city of Houston. Not every leasing broker is great in all 30 of those submarkets. A lot of ’em will specialize in four or five of them.

And so our job is to sniff out who the best leasing broker would be in that area and hire them, and then we focus on property management and managing the property.

[00:32:52] Robert Leonard: How long does it usually take to fill a unit? I’m sure it depends on the location type of unit or type of space that you have, but just generally speaking, are you looking at couple months a year?

What does that turnover period look like?

[00:33:04] Chris Powers: I would say the general thumb is the smaller the space, the quicker it fills. On our 2,500 square foot spaces. I mean, you literally are gonna have people that are calling us on a Monday, signing a lease that week, and they might be moving in within the next week to 30 days all the way to like an Amazon facility.

They might be in the market two years before they need it. It’s a long process. You gotta build the building, but there, there are two, three years out to when they’re actually gonna be there. And so that’s kind of the range. But I would tell you in the stuff that we deal in, which are smaller bay, you know, a lot of our sweet sizes are 10 to 30,000 feet vacancy.

Right now your probably days on market are less than 90 days, and right now we’re not really having to give any free rent. The market’s just been really good and a lot of times if we know at tenant’s gonna be moving out even before they’ve moved out, we’ve already listed that property. There might not be any vac.

A tenant might give us six month notice, Hey, we’re moving out in six months. Well, we can start marketing that either then or shortly thereafter. And so by the time they move out, we’ve already backfilled that with a lease. A lot of it is like, how many days have we been marketing it? We underwrite probably six months to nine months, but in today’s market, we’re seeing it happen between zero to 90 days.

That’ll soften eventually, but we haven’t seen it yet. You know what I’ve been telling people is interest rates have gone up. Capital markets have definitely created a much bigger slowdown in the transacting of properties. But if you just looked at the leasing reports, the on the ground day to day reports and the markets that we’re in, it continues to.

We continue to set record after record each month, and that record would be rental rates being signed, continue to go up, tours per vacancy, continue to go up. And days on market continue to go down.

[00:34:56] Robert Leonard: One of the most expensive parts of residential real estate is turnover. There’s just so much you have a lot of times, there’s so much you have to do with when tenants turnover, what does that look like with class B industrial?

Is there any, like, I’m sure you probably have to go in and clean, maybe touch up a couple of things, but like what does generally turnover look like in terms of like getting the property and or the space ready to re.

[00:35:17] Chris Powers: It’s one of the advantages of how we create value. I mean, this doesn’t sound like rocket science, and that’s because it’s not.

A lot of prior landlords that we buy from will have a space go vacant and they won’t kind of turn it over and get it ready, as you said. They’ll just kind of leave it in the condition it was in and they’ll tell tenants looking, Hey, we’ll fix it up once you sign a lease. Well, one of the things we’ve realized back to what I told you is a lot of these tenants, especially on the smaller, smaller stuff, like they need to be in in 30 days.

So if you really think about the times I tour the property, we spend a week or two negotiating an loi and then we get a lease. Like that whole thing could take 30 days. And then for me to sit here and tell you, Oh, by the way, then I gotta get the whole space ready, which is usually getting the office painted carpet, lighting, making sure that’s good, and then clearing out anything in the warehouse or fixing any broken components in the warehouse, making sure lighting’s there and that all major mechanicals are working.

That could, in today’s world where construction’s backed up and it’s hard to find labor and everything else, like that’s even drawn out. And so a lot of what we’re doing is if you’re telling me you’re going vacant, one, it’s easier to show a space to a new tenant when there’s somebody actively in it. If the prior tenant hasn’t left yet and we’ve signed a lease, that’s easy.

What tenants don’t like to see is a space that’s vacant totally in shambles, even as a landlord, promising that we’ll fix. It’s just not a, a great thing. So a lot of what we do when we buy vacancy in a portfolio, we’ll go in and immediately start turning ’em, getting ’em painted, getting ’em cleaned out, getting ’em ready so that the day at tenant says they like it.

The thing that’s not holding them up is, is the space gonna be ready? It’s more like, can we get the lease done and get everything papered up? And so a typical turnover is making sure that the property mechanicals are all working and then doing kind of a light rehab on the, mainly the office portion where people will be.

And then, you know, making sure this the warehouse is safe and that everything’s working in the warehouse.

[00:37:22] Robert Leonard: What does property management look like for a Class B industrial?

[00:37:24] Chris Powers: It’s probably the easiest asset class to manage that I could think of. Property management looks like the typical building, great relationship with tenant.

I think no matter what asset class you’re in, it is important to build a great relationship with the tenant. It is collecting rent when the lease calls for it. It’s providing maintenance in a timely manner. It is doing annual or semi-annual inspections on major mechanicals to make sure HVACs working, plumbing’s working.

You know, roof isn’t leaking. It is being, you’re pretty much on call all the time, so having somebody that can take a call if something’s going on at the property. Sometimes you might have a tenant dispute. You put lots of industrial tenants in a building. There’s sometimes there were one tenants over parking and you know, it’s making it tough to get through the property.

I mean, there’s lots of things, so you need to be able to dispute when possible. And then doing a lot of the accounting work and providing accounting and reporting to finance so that we can get that out to our investors.

[00:38:25] Robert Leonard: What types of maintenance is the property management company or the owner of the asset we’re responsible for?

Are the tenants triple net? So are they responsible for some maintenance themselves as well?

[00:38:36] Chris Powers: Yeah, I didn’t mention that earlier. A lot of the, uh, what we try and do is convert gross leases to triple net leases. And so in those events, the tenants responsible, what we’ll be responsible for and oftentimes are just the major structures.

So maybe the roof a again, that’s negotiable. Making sure the foundation is, is in good order. So it really depends on the lease. If it is a gross lease, I mean, we could be fixing lighting, we could be fixing broken HVAC systems. We could be fixing kind of anything that makes it to where they can’t run their business.

You know, one of the cool things about industrial tenants, because of the nature of their business, And because if your toilet breaks at your house, that’s like an emotional thing. You’re like, I cannot go to the restroom this morning. But if a toilet breaks at your business, I’m not saying it’s not the same deal, but business owners are like, We need to get this toilet fixed quick.

We’ve got employees, we’ve got customers. And so I’m not saying it’s not on the property manager’s job to, to get it fixed, it just comes from maybe a different emotional side of the brain than when it happens in residential. And so, but again, these buildings are big boxes. They’re rectangles, they’re flat.

They’re the least complicated buildings out there. And so the requests and the maintenance requests are probably the least complicated out there as well.

[00:39:57] Robert Leonard: What you mentioned with the toilet is actually something I wanted to ask you about because, and maybe, maybe I think about this wrong, but just generally speaking, I think when people hear the idea or wanna become a real estate investor, the first thing they think of is just residential real estate.

I think it’s just the first place people go and so that’s how it was for me. I didn’t really spend much time thinking about any type of other asset class that I could potentially invest in that don’t include somebody’s home. And I had a guest on the podcast who was explaining to me that he just doesn’t wanna be responsible for the place that somebody lives.

He’s like, there’s just, there’s just a lot of responsibility and I just don’t want that. And you can get great returns in other asset classes with real estate without having that responsibility. So I’m curious, was that any part of you wanting to get in into Class B, Industrial, and what else really drove you into Class B Industrial?

[00:40:46] Chris Powers: I would be lying if I said it wasn’t. I’ll premise by saying some of my greatest friends in the industry own thousands of apartment units and, and do extremely well. But I would tell you, my mentor, and I know you have a question about mentors that, that we might get to. He used to tell me the greatest day in his real estate career was the last residential property.

He got off his books. Look, on paper, everything looks good. But when you really get into the real world of business, you are dealing with people and like, it’s just like hiring at a company, what we were talking about earlier. When you are dealing with a place where somebody lives, you’re just dealing with a big part of their life, and for some people it’s the biggest part of their life.

It’s the most important part of their life. You take a mother that ha uh, I mean, of a family that has three or four kids. If the house isn’t working, it’s a huge problem. It’s easier, maybe if you’re a single person for your house not to be working than it is if there’s four kids. If there is, if you live in an area with weather and it’s hot outside and the air conditioner’s gone out, like people are getting upset.

I’m not saying they’re not getting upset in the business world, but it’s, I don’t know how to describe. It’s just a different kind of upset when it happens at your house. The other part is, you know, we live in a world today where, again, I’m ju maybe just getting more into like worldly things, like nobody has patience for anybody.

We’re not on the forgiveness train and they provide grace train. And your landlord is, it’s easy to kind of go for the landlord’s jugular and god bless residential property managers. It’s a tough job. Nobody calls their residential property manager and goes, I just wanted to call and say, You’re doing an amazing job today.

Those people are fielding usually one type of call and that is a complaint. And then the second time it’s a complaint with I’m coming for your ass type of complaint. Threats. Yeah, threats. And if we get to the third call, I don’t think this podcast can handle what’s set on that call, but again, when you’re also doing where somebody’s, uh, livelihood in their place of businesses, it’s just a different relationship.

They want to have a better relationship with the landlord because at the end of the day, if they are, can’t operate their business and they can’t make money and they can’t feed their family, that’s a much different situation than somebody at home And. I don’t wanna get into like philosophy and everything, but if you just look at where the world’s going, watch some of the narratives and the headlines you’ve seen places like LA and, and places in California that still have a moratorium where, where landlords of residential properties can’t raise rents.

You’re just dealing with a different part of society, which is where someone lives. And again, the people that do it really well can do financially well. Everybody can win. Tenant does well, landlord does well, all the vendors do well. But I just think that you’re dealing with a lot more of the human element to life in residential.

Then maybe you are in commercial or maybe it’s you’re more rational in commercial and more emotional. And residential is probably a better way to put.

[00:43:45] Robert Leonard: Are there still opportunities in commercial, like what you’re doing, say class B industrial for things like cash out refinances and, and things along that nature?

Cause I know a lot of, a lot of value and a lot of wealth is created in residential real estate, and I’ve even heard in self storage. But I’m curious, is it work the same in industrial?

[00:44:04] Chris Powers: Oh, the beauty about residential is you have government backed programs for debt like Fannie, Freddie that can get you high leverage, non-recourse.

So it’s easier, I think in residential, I don’t wanna say easier, but it’s a better loan program for long-term debt. I mean, who doesn’t want 30 year notes on a big pieces of property that you can pull out all your equity or close to it? And commercial, the length of a loan tends to be five to seven years, sometimes longer, 10.

But the leverage tends to be much lower, but certainly there are cash out refinances. We do ’em all the time, but I wish. If there was one thing that could change a commercial real estate industry forever would be, you know, Fanny and Freddy Loans on commercial property would be great. But even if you take it down to the, the, the beginning, how I started in this business, my first loan was an FHA loan, three and a half percent down, bought a duplex, did the whole house hack thing.

We could talk about that. But that doesn’t exist for commercial. You can’t go get a, now you, there is an SBA loan that you can get. I’m not as familiar with it, which is higher leverage. But I think they’re, you have to be an owner occupant of the building, so you have to have a business that’s gonna be in the building and take up more than 50%.

I know in FHA you have to live in the property, but I think that’s easier for most Americans to buy something they can live in than buy something that they have to have a business that’s 50% of the building.

[00:45:26] Robert Leonard: Tell me a bit more about your house hacking experience. I know this is, you know, we’re talking more about your Class B industrial business, your private equity firm, things like that.

But I actually, the day we record this, I wrote a book called The Everything Guide to House Hacking with Simon and Schuster, and it just released yesterday. It’s all about, it’s all about house hacking. So I’m curious to hear like your experience, what, what was your experience with house hacking?

[00:45:49] Chris Powers: So this was ’05.

[00:45:52] Robert Leonard: Before house hacking was even a thing.

[00:45:53] Chris Powers: Before house hacking was even a thing. This was before the great financial crisis. This was no magic. This is in hindsight what happened, but it’s not like, at the time I felt like I was house hacking. I was just taking advantage of what was out there at the time. Got an FHA loan, three and a half percent down, got cash back at closing, negotiated that with the seller, so got 6% cash back at closing.

I was 18 years old and the deal was basically you had to live in the house for a year and then you could move out and rent it. And so that’s what I did. I moved in for a year with my buddies in college, and then I moved out a year later and I bought another house with another FHA loan. And so I think my first two or three loans were FHA loans.

So again, three and a half percent down. I mean, we’re in Texas, so properties at the time cost a hundred grand, 120 grand. So you do three and a half percent on that. That’s like four or 5,000 down. Some closing expenses, call it seven, but then we were getting cash back at closing, which was used for repairs or kind of a slush fund of, you know, any unforeseen issues that came up.

And so I just kept doing that. I’m not here to tell anybody to, uh, I don’t, I actually don’t know what the actual law is. I’ve never read it, but the way it was explained to me was, I don’t even think you have to live in it a year. I think you have to have the intent to live in the property. That is correct.

And so, so there would be some people that say, well, like I intended to live here. And then 24 hours after I moved in, you know, something, life came up and I moved out. I’m, again, I’m not here to tell you what to do, but I don’t actually know what the law is, but I think-

[00:47:30] Robert Leonard: So there are, there are like defined criteria that like specify what those kind of outs can be.

So yes, you’re a hundred percent right that it has to be the intention and you could technically leave 24 hours later. But there’s only a short list of things that that could cause and it could be from like job loss or, or job being forced to move, needing more space like a child being born, things like that.

So there is a small defined list of things that are technically what you would consider, uh, the legal ways to get out of that.

[00:47:59] Chris Powers: So that’s how I, I technically house hacked. Uh, I don’t even know if I was really house hacking, cause I actually did live there a year. And that was my intent, but I kept doing that.

I used the FHA program as long as I could and then moved on to countrywide loans, which were, Those were great too. Countrywide’s not around anymore, but maybe the, the moral of this story is look at what the world will give you and what’s available and most, I’ve heard so many great stories of people that started in this industry with the FHA program or some type of house hacking program early on.

You learn a lot about being a landlord, even if it’s a single family property with a couple bedrooms. The same like core tenants of managing a single family home are the same core tenants of managing a million square foot building downtown. Now, obviously there’s nuance to that, but you gotta treat your customer, your tenants well.

Maintenance has to be done on time. You gotta collect rent, you gotta get reporting done, and those things carry with you no matter the size of the property. Obviously there’s probably more you do in a building downtown, but the same core fundamentals exist, and I would tell you I learned so much those early years that are still important today.

[00:49:07] Robert Leonard: I really love that because that’s what I try and tell people is I’m like, listen, house hacking is not the end all. When I try and teach people about this, I’m like, House hacking is not the end all be all for you. Like this is not where you have to stop your real estate career. I just think it’s such a great way to get started it.

I call it landlording light or landlording with training wheels because it it does, it does exactly what you said, right? It gives you an easy way to learn all of those things, and, and so I’m a big, big fan of house hacking, obviously. I have a couple other things I wanna run through before we, we wrap up here.

And you mentioned your mentor and you asked him what he thought about Twitter and he had a very simple response and all he said is, I just, I don’t have Twitter. And despite that, you’re pretty active there. I wanna ask why. And then I also wanna know what value you’ve gained from being active on Twitter from a business perspective.

[00:49:58] Chris Powers: It’s funny, I probably would’ve answered this differently years ago. I’ve actually, I I, I am active. I’ve become less active. I would say a few things I’ve learned. One in today’s world, Elon Musk, I, I don’t wanna be Elon Musk, I don’t wanna invent rockets, but I did really notice part of my inspiration to get on Twitter was going, Here’s this guy that is pretty much the marketing for like five of the biggest companies in the world that don’t really have marketing budgets.

It’s just Elon Musk, like doing his thing. But then you’ve kind of seen that happen a lot of times where the world now is falling in love, you know, wants to follow a person or somebody they can relate to, not just a marketing department that’s gonna put out, you know, marketing stuff. And so when I first started was, hey, there’s just not a lot of people in the real estate world kind of taking that approach.

And it just so happened that I met, you know, Moses Kagan and a lot of the, the folks in, in Rewet and, and we formed this online community and, and participated in it. And a lot of times I’m there to learn and, and to share. I think a big core tenant of, of mine or core principle is I love kind of paying it forward and, and helping in any way I can.

That’s why I do the podcast. That’s why I’ve tweeted. The other thing I would say though, that I’ve learned is there’s a lot of noise in the world, like so much noise in the world, and I think my mentor would just tell you, A lot of times maybe you feel like you need to read everything online in order to keep the train going.

And I, so I think where I said I would answer it differently is I’m now at a point where it’s like I want to use the Twitter to engage with a small group of people that I’ve become really close with to help my companies in any way that I can. But not necessarily to form all my opinions about the world because I think it’s becoming more clutter and more you can get on there and become paralyzed pretty quickly.

You can think the world’s ending. You can think lots of things, and I think the message that I got from him was like, When you really strip back a lot of, if the internet turned off for like a couple weeks and nobody could get on it, we would all survive. In fact, we would probably learn something about ourselves that most of what we read online is not helping us out.

It’s actually probably stopping us or hurting us, or scaring us or fearing us. I think his message was the things in life that are really important, or in business or in anything, you don’t need to be on the internet to. And the other part is, especially in what I’m doing, like I don’t think Elon Musk would tell you, Tesla’s amazing because I read Twitter all day.

No, the, the work has to get done. So when you go to the factory floor of a Tesla or you, nobody’s on Twitter going, How do we build this car? They’re like, putting in the work. And so I think there’s just a, a diminishing returns at some point online where you’re almost over educating yourself or getting distracted.

And the world is not short of shiny objects or distractions. I don’t even know if I answered your question, but what I took from his message was, don’t think for a second that your success comes from like reading that last thing on Twitter.

[00:53:13] Robert Leonard: How about books? How does that apply to books? Do you feel the same way about those? Are you, are you a reader? And what kind of books do you like?

[00:53:20] Chris Powers: It’s changed over time. I, I think if I just had to list a couple of my strengths, I would say one of ’em has always been, it’s always been really obvious to me to have mentors or go to people who have walked the walk in front of me and just pick their brain.

I mean, you can skip like years of problems or you can learn so much quicker. And unfortunately a lot of people just are nervous to, to kind of ask people questions or the dumb question. And so for me, what I like to read are like non-fiction. I’ll start there. I probably need to read some more fiction, but non-fiction.

And it’s about what people have done, how they did it, that’s anywhere from the Bible, which is what Jesus did and how he did it all the way to business leaders, how they did things, and why they were successful. Biographies. Just getting a peak inside somebody’s brain, but kind of going in, I think going in with the idea of, my goal here isn’t to emulate this person, it’s to pick and choose.

It’s to hear them, see what might work in my situation and use that. I think probably the, I think this is the typical answer most people give, but I really have done it. I’ve read so much. Warren Buffet, I can’t handle it anymore. But if I really had to take all of his books and really break him down into a few core lessons, like it’s a pretty simple message, which is think long term, don’t make emotional decisions.

The whole like buy when everybody’s fearful, sell when everybody’s greedy like that. Everybody says that. But when you really think about it, like there’s a lot of truth to that. I really just try and find people I admire and read as much as I can about how to get inside their brain, and that’s kind of been my philosophy.

And sometimes I read all the time and then I’ll go months and not pick up a book. I’m not very like, it’s not like I read 30 pages a night. I either am devouring books or I’m kind of just chilling out for a little bit.

[00:55:13] Robert Leonard: Chris, as we wrap up the show, I want to give you a chance to tell the audience where they can go to connect with you, follow you on Twitter. Basically direct them anywhere that you would like them to find.

[00:55:23] Chris Powers: I’m on Twitter at Fort Worth. Chris, you can go to our company’s website, www.fortcapitallp.com. Or if you’re done listening to this amazing podcast and you still have time for an extra episode, you can check out my podcast, The Fort Podcast with Chris Powers on all major Spotify, Apple, YouTube, all all the things. And so that’s where you can find me.

[00:55:49] Robert Leonard: Awesome. I’ll be sure to put links to your Twitter, your podcast company website, everything in the show notes below for anybody that is interested in heading over there and checking that stuff out. Chris, I know it’s a little bit early for you. I really appreciate you taking the time out of your day to meet with me.

I really enjoyed the conversation and, uh, looking forward to doing it again in the future.

[00:56:07] Chris Powers: Robert, thanks so much, man. This was super professionally done. It was a great convers.

[00:56:14] Robert Leonard: All right, guys. That’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

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