Brian Malliet of BKM Capital Partners


When you have enough capital to spare, there are many business industries you can get your hands on: Retail, e-commerce, manufacturing, and real estate to name a few.

For Brian Malliet, it’s a different story. Brian started small and worked his way up the ladder when he decided to start a business of his own. As he shares his story with Justin, they also discuss the importance of finding the right operator when investing in multi-tenant industries.



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  • The start of Brian Malliet’s career. – 0:33
  • Believing in the concept of having your money work for you instead of having to work to get money. – 5:53
  • What affected his decision to jump from brokerage to starting on his own? – 8:05
  • Where is he now six to seven years after starting the business of his own? – 9:30
  • What does raising and working within his network look like? – 12:30
  • Into the industry: Are people still dog pilling in the asset class? – 14:19
  • Technology is finally in our space and everywhere: Parts that Brian finds useful when it comes to handling his business. – 21:23
  • Focusing on a tenant-based business. – 25:44
  • What’s the rent growth from the past two to three years? – 30:27
  • The best time to make adjustments. – 34:20
  • What it looks like to continue owning the same assets. – 35:27
  • How to contact Brian and his team – 42:30


Episode Resources

Connect with Brian Malliet

Connect with Justin Smith


Justin Smith: Hey, Brian.

Brian Malliet: Hello

Justin Smith: It’s going good. How about you?

Brian Malliet: Good. Good. How are you?

Justin Smith: I’m hanging in. Yeah, it’s one of those things where there’s so much going on. It’s hard to just sit down and have a moment to focus sometimes. I agree with you there that’s for sure. Figured we’d launch into a little bit of Brian before BKM kind of where you came from. I figured that always fun to here and always good to know and like part of the history of how it all came to be.

Brian Malliet: Sure. I think I got in I don’t even know, 30 years ago, I’m going to say 28 years ago. So my path came from right out of college into brokerage. I wanted to work for somebody that didn’t control how much money I made. So the only way to do that is going to sales and then you determine your own. The difference is January one, you don’t know how much money you’re going to make on December 31st. So it’s a little bit of a risk in terms of believing in yourself. I started at company called Scheer Voit when Bob Voit teamed up with Larry Scheer right out of college. And then did that for about 13 years, three, four years on the leasing side of leasing small base space, just with the space that we’re in now. So I was the one moving 2, 3, 4, 5,000 square foot tenants all over the place and then selling buildings on top of that. Then I moved over to the capital markets, investment sales side for 10 years all in the industrial sector and then sold multi-tenant business parks. So I did that and really keyed off of the Cole Parks back in the day when Don Cole was the champion of really developing this product type and coming up with this product type. He did a lot of deals with Aetna and Cigna at the time and build a bunch of Cole multitenant business parks all up and down the west coast. So I focused on a lot of investment sales stuff with Cole Company and did that for 10 years. And then I flip-flopped to the principal side of the house with Bob Voit and became an acquisition person over there existing in development. And then we did that for about five years, and then I left and started my own firm at that time called BKM Development Company. And basically the same exact thing bought existing multi-tenant business parks, refurb them, rehab them, released them, held them for cash flow and then sold them five to 10 years later. So did that for another six or seven years as well all on the principal side of the house again.

Justin Smith: My wife is like you’re so far and industrial, we’re going to live in an industrial building some day. I feel like this is a, you’ve stuck to the same theme this whole time. I love it.

Brian Malliet: Yeah, that plays very well for investors obviously. You’re not jumping around to different themes, obviously. So having cut my teeth on leasing it, selling it as an investment, getting over the principal side, buying it and rehabbing it, then buying vacant land and developing it and designing it and going through the whole construction and leasing process. So I’ve done it from leasing, a thousand square foot space to building 300 units in a $50 million project as well. Did a lot of it when I had my own firm at one time, we had 15, 16 projects with about 155 buildings that are construction up and down the west coast. So quite deeply dove into the development in the building, ground up stuff of it and did that for about five years and realized it’s a lot of work and that’s where all the gray hair came from. Decided to give up the development side of it and just go after existing products. It could make almost just as much money and then take about half the risk. So that’s why we sort of launched what we did here.

Justin Smith: The risk profile is vastly different. Yeah. I feel like having a background in void is one of those few where you have the development side and you have the investment side and the brokerage side where most firms don’t have that. It seems like that’s probably a blessing to have come up with that firm.

Brian Malliet: One of the big things we did is we were allowed, unlike a lot of the big national, a lot of the large regional firms to actually own product that we were basically brokering as well, because people thought you would compete with your clients. But we had a different approach that if we got into a competitive situation with a client, we would always back out. But the company had a policy where we could go out and buy and own existing product that we were selling. As long as we didn’t compete with our clients. Then on top of that, when I left the brokered side and went over to the principal side, when we were buying deals, we then went to the brokers and asked who wants to invest in deals. So we put a whole employee program together for all of the brokers and anybody in the company that when we went out and bought on the principal side, we would go out and pass the hat per se and see who would like to invest in the deals that we were then buying. So a lot of people in the company got the concept of what it is to be an owner and to have a piece of the action. Which the same thing we deploy here at this company, we just rolled that out actually this year where everybody in the company can invest in sort of new deals that we go out and buy. So they can start taking an equity position, seeing what it’s like to be an owner and really start to learn that whole process. So it’s interesting. We’re sort of doing it all over again at this company that we did at my previous company was well.

Justin Smith: Yeah. Ownership, what a way to change your whole mindset and to have to scrape together enough to invest when you weren’t expecting it. Or to feel the regret where you wish you had or you wish you had invested more, when you look back at how it all turned out.

Brian Malliet: Yeah, it’s nice especially for all of our managers and senior managers and even emerging managers and our firm here, they get to invest. You met Emily, she’s obviously is investing in real estate with us as well for this year. They have a lot of the new emerging managers in the companies. To be able to do that and actually have an equity investment and have your money working for you where you don’t actually have to work to get money, but your money is working for you. You go do that a couple of times and flip in and out of them. I remember when I did that, I ended up flipping out of, I think 13 different times. It just rolled it from one deal to the next. And five years later I ended up with $3 million of value that I didn’t really pay attention that I knew I had because I just kept rolling it all the way through. Ownership and having your money work for you instead of you always working for making money. It’s a nice thing to do. So I’m a big believer of that. I’m a big believer in the firm too. I’m not a greedy person. I think the firm itself should be able to offer those types of benefits to anybody that works here and they should be able to capitalize on that. So they are and people are doing it and then I think they enjoy.

Justin Smith: Which is super rare to find that type of opportunity where you can do that. And you don’t have to go out or invest with syndicators you may not know, or not know the product type. Or not have the confidence to know the visibility of how it’s going to work.

Brian Malliet: I always tell them it’s like insider trading, right? You get to invest inside. So you get to know underwriting and execution. You get to go talk to the construction department, the asset manager department, the property manager department and the debt guy. You can sit with their acquisition guy. You can sort of have a little bit of insider information on deals itself. So it brings, I think a lot of company within. And then also the company, we don’t want to go buy a risky deal where people start losing capital. So the company does a good job in terms of making sure the deals that we are buying. You’re not going to lose your money per se. It’s just how much money will you make at the end of the day?

So I think that brings a comfort level when you have that insider view. Like you said, instead of going out to a third party syndicator and you don’t sort of have that same knowledge base.

Justin Smith: Everybody loves to hear the jump to the principal side. And maybe it’s less of a jump with Voit. That was a smaller jump before you then have to start, break out on your own. What did that look like for you when you were like, that’s it we’re done with brokerage. It’s time to move on.

I think I’m always looking for the next challenge but that’s both good and bad, I think in your life. But I think I’m always looking for the next challenge and doing brokerage for 13 years. Okay, been there, done that. I was looking for the next challenge. I was either going to go to the principal side or become a lawyer. And thank God, I didn’t go the lawyer route because we’d see how that ends up. But I thought that’s where the big dollars were made, even though we were making millions of dollars a year in my brokerage business.

Brian Malliet: I felt like that there was something more out there than just money. But then the principal side seemed like an interesting place. Yeah, it was a challenge. I left at the peak of my career, of my prime earning years and went over to go accept a salary and a bonus and then get a piece of the deal. So I’ve always rolled the dice and that would get 25, 30, 35% of every deal that I’ve found. So I felt like I could go make more money by just finding good deals and making good money. Plus I was looking for a challenge. So the challenge was there definitely and being able to do it at the same company that I was at the brokerage side, I think helped as well because I had a lot of deep relationships with Bob Voit. I knew him personally from the days of being a top performing broker and going on incentive trips for 10 years in a row. I got to know him pretty well as a person and a friend. So it was an easy transition for me to sort of come over to the development side of the house.

Justin Smith: And then where are we now? You’re eight or nine years in andon fund 2. That’s where we are at the present.

Brian Malliet: No, we are on year six or seven. Right now I’m going to fund three. So we just monetize our first fund about three weeks ago. So first fund is in the books for kicking off this business. Which is a big monumental goal of ours. We kicked off the fund management business. We are one of the three to five percenters that got the business off the ground. We were also one of those three to five percenters that got a first fund done. Got a second fund. Now we’re onto our third fund launched literally, probably the next 60 days. We’ll do some internal fundraising with existing investors and then we’ll go out to outside investors at the end of the year. We did 130 million first fund. We did a 350 million second Bund and we’ll go out and raise a $500 billion third fund.

Justin Smith: Does it change a lot going from number two and number three? I mean, obviously I experienced it does and a track record does and confidence and the team I imagined having more of the team in place and be seasoned, probably changes a bit.

Brian Malliet: Yeah, I think one of the things I’ve always done is put my head down and drove forward. And unfortunately don’t celebrate a lot of the wins, but be humble enough to understand you have a team now that sort of is here to do it. It’s not my show. It’s not me doing it. There’s, a hundred people in the organization. There’s 45 people in the corporate that really make it all happen. So I think now I’m more appreciate of the process than I was early on. It was here and I was going there and there was nothing I’m going to sort of stop you to get there. So now I’m more appreciative of the team and the company and the people and the community that we built. So that’s a little bit different fundraising and finding. It’s all sort of the same. We’re just doing what we’ve always done. And we don’t read dumped for 30 years for it, for that matter. But fund one was identical to fund two is identical to fund three, they’re all our value add series funds. Now we’re going to go out there. We don’t highly leverage. So we keep a low leverage on the books. We should have all learned something during the last downturn is leverage. So we don’t worry about leverage. We don’t worry about losing people’s capital. It’s more of let’s focused on what returns we can deliver and let’s under promise and over-deliver on the returns themselves. And we’ve been fortunate enough to do that every time. So that’s been the culture at my previous company, when I was at Voit, it’s the same culture here. So things are really on path to do what we’re going to go do. We’ll raise a third fund here in the next 12 months and we’ll continue to go buy another 40 or 50 assets and we’ll make good returns.

Justin Smith: What’s fun raising look like? Is this you’re in New York City all day, every day until it’s done? Or are you working with the capital markets folks that are a placement agents or working within your own network or repeat investors? What’s it look like when you go out on the trail?

Brian Malliet: This time around, it will be repeat investors. It’ll be existing investors that we’ve already spoke with that didn’t have the timing to come into our fund two that were wanting to come into our next fund. Then for the first time, the company’s hired an in-house veteran capital raiser that actually accepted a job last week. His first day was Monday of this week, so we’ve got a 35-40 year veteran of capital raising that left the capital raising side of house. And wanting to get him on the principal side of the house. I’ve been using him as a consultant for the last six months. And so it just turned into becoming on board and becoming one of our top executive members in the company. Literally this week is this first week. We’re about to announce it this week in terms of his joining the firm as well. So we’re looking excited where it’s not just me on the road. We have somebody that’s a 30 year veteran who was with us during our fund one invested in our fund one as well as invested in our fund two. So he’s a friend of the firm. He’s now a part of the firm and part of the team itself. So it’s going to be a little bit different. We’re actually just not me out. It’s him out there really driving the show on it. So I think it’ll become more efficient that way. Then have somebody full time, a hundred percent of their time focusing on raising our fund three.

Justin Smith: It’s the power of the team. That’s the next evolution. Do you find that people are still dog piling into the asset class or there are people that are saying. I’m going back into buying office now because I believe people are coming back or the returns are too low. Or where are we at in the general, like a capital flow into industrial?

Brian Malliet: The keyword you said into industrial. I think people are getting fatigued on the big box space because returns and cap rates are getting in the threes, fours. So you’re seeing a heavy push into the small base and the mid base we’ve been doing it for seven years. Nobody wanted to touch the small base or mid base, but now returns are still there. So it is full speed ahead that they’re shying away from some of the big box stuff and really now pushed into the mid base and the small base. And it’s everybody from Blackstone all the way down that’s trying to come into our small base space. So it’s full speed ahead, 100% into the small base space and mid base space. Which is nice since we finally have some wins in our back but it’s also people trying to figure out how to take a position and they realize they need an operator platform to do that. So a lot of the big institutional capital players, like a Blackstone or BlackRock or some of the big PGM or some of the big pension funds that are really pushed in this space. Goldman, JP Morgan all these groups are trying to figure out how to get into the small base and they need to team up with an operator. They need to find somebody like us with a hundred people and 12 offices to really go and execute on the space. So we’re getting a 10 X the push and the absorption of people looking to come into our space that we have seen since we started the business.

Justin Smith: Too management intensive. You’ve probably heard people say that a thousand times. That’s one thing that’s kept people out in that space forever.

Brian Malliet: And that’s gone out the door now. I think as people have leaned into student housing. As people have leaned into the mini storage space. As people have moved in the single family residence where they thought it was too management intensive. The money will find yield and it will then figure out how to eliminate risk of management and how much the intensive management. So I think they’ve now seen with us definitely in the space and we’ve had great returns and then a few people trying to get space and deliver good returns. It’s not the product type that’s the risky piece. It’s the operator just like it is in student housing, just like it is. It’s single family homes. You can go take a position, but if you don’t have the team and the processes and procedures to handle the transactional volume that it takes both the role leases over and the role space is over. That’s where you get caught. So don’t blame the product, blame the operator for not being able to do a good job.

Justin Smith: Well put that’s where you can rely on finding the right operators and that being a huge advantage. Or like it helps you access the product type where you couldn’t do that on your own.

Brian Malliet: And I think there’s a lot of education. People used to blame the product because it was easy to blame the product, but you can’t blame apartments, you can’t blame mini storage, you can’t blame student housing and you can’t blame single family residence. You blame the operators that weren’t or could perform in those product types. So same thing with the small base space, don’t blame the product or the tenant base. Blame the operator that you have that can’t get the execution done because it was very sustainable, especially through COVID. We had great returns from an occupancy and a collections. I’m looking at something on the back of my desk here, where we had 99% collections for the year 2020 in our fund one. And then we had 97% in our fund two, and we had collections in the high nineties as well, averaging for the year. We had a dip in that April-ish March, timeframe and 85% occupancy rate. And then we bounced right back to 97, 98, 99% for the rest of the year. So I think the product type and the tenant base is very resilient during downturns and slowdowns as which is contrary to what most people think. So I think we’ve got some great data points even during the recessionary. We had good occupancies out there as well. And during COVID, we’ve had good occupancies and collection. So again, don’t blame the product. I blame the operator for not being able to do the job.

Justin Smith: That’s a great test, in March and April. Everybody holds your breath and you’re all wondering what’s going to happen. And then to see how that holds in to have it be like a holdup around there strong, or have people like really valued that they’re going to need that to get themselves out of a hole. Or they’re really going to need their space to keep their business going. And that’s not something they’re going to close up shop for.

Brian Malliet: We had 3000 tenants at that time, and I think we gave 30 rent deferrals. Not that we had people not pay, we just put it on the back end of their lease. And so you’re talking about 30 out of 3000. That’s a pretty good average in terms of what we saw. We had 300 people ask because I think everybody was on the news looking to go, Hey, you have to go ask for it. But then when you cut down to them, drive it into a process that we put into place and filling out and submitting things. It came down to about 30 people that actually needed something. And then we ended up doing two or three month deferral at end of lease. Then boom, it pushed right through it and realize that their business is still very valuable to the supply chain and to the maintenance of the supply chain. So you saw a lot of our businesses are very tied into the supply chain and they realized, okay, businesses as usual, we still need to get going. It was definitely COVID was a definitely a a point to prove the product type is very resilient to gets downturns.

Justin Smith: 30 out of 3000. Right, that’s a huge success. I think everybody remembers that. Are you asking for a deferral because you need it or because that’s what we’re asking for these days. And to have to come up with a way to flush that out to know who really needs help and who doesn’t.

Brian Malliet: And we jumped on it internally with our technology of BKM Intel. We put a process together what, the way to do it, sort of a funnel process of what had to get done. And we assigned. Senior asset manager just to that itself. And we had, I think, 55 properties at the time and 3000 tenants. And we did a really good job of managing expectation and then giving resources.

And then we did a lot of towards pointing them towards the PPP pro loan program as well and help them with where to go applications and go through that. So we had about three prong approach where we had a funnel process. We had somebody dedicated for it, and then we have resources to point them to, to help them with their businesses as well. And we did it for about six months and it really pushed everything through with that. So again, don’t blame the product, blame the operator for not getting together and doing what they need to do.

Justin Smith: Yeah. You said tech technology, right? It’s finally in our space and everywhere from fundraising to leasing DAF and management. What parts are most helpful for you’ve found with like new tools you can bring on or new ways of being able to report up or to keep track of assets?

Brian Malliet: I mean, ours is two-fold. Ours is to handle transactional volume and process, and we use heavy technology there with some custom modules that we built onto Yardi or accounting software. I think we have, I think we have six, five or six, because six custom modules that we built to handle transactional volume of leased rollover and transactional volume of attorney to space over . So we spent a couple of hundred thousand on each module to allow that to happen on a very aggressive basis with 3000 plus tenants, the platform’s built for probably about 10,000 tenants. So we could triple in size just with what we’ve built today. So that’s a big piece of technology. So it’s about people not having to touch everything and the technology allowing you to do that. And then the second flip side of that is our marketing and leasing side. Our marketing department led by Emily who you’ve met did a really good job with really a couple of things. BTS property capsule are the two biggies that we use for marketing and leasing in the organization. And then we built an in-house software called BKM Intel that sort of ties it all together. From a lease rate and availability perspective, and then a branding perspective on the marketing side we tied into property capsule and BTS that allows us with our marketing department to have standards and a brand and have the availability for plant availability site plan availabilty really at your phone or your iPad whether you’re a broker or a user or one of our leasing managers in the field you can log into it or a website. It’s all tied in there where you can get to the exact floor plan, what’s available and where. So you could really figure it out on a very quick put point of contact in terms of doing that. Without that we wouldn’t be able to do what we do.

Justin Smith: Small space, when you think of the years spent looking for floor plans and you can’t find it and in a space where you wish more turnover and shorter leases. That’s huge. I got imagined for scale. That’s a big component piece of it.

Brian Malliet: Yeah, being a broker knowing that’s what was determining somebody taking a space right then and there and moving onto your next project. You can imagine the drive to put that into place here. And it’s done very efficiently now through a property capsule and through BKM Intel, our own software and Argus and Yardi, that’s all uploaded now overnight. So when a unit comes available, when we do measuring on the park that we bought all the floor plans are there and done. It’s automatically uploaded. It automatically goes available. You can automatically pull down the site plan. You pull out the floor plan. It’s all right there at your fingertips. And obviously that’s what creates occupancy and creates rents for us as well. So the technology side has been big. We’ve been a big investor in it as well. I’ve been a big proponent of pushing that and putting money into that from day one, since we started the business and we continue to do it today.

Justin Smith: I feel like those two have now it’s that time where everybody’s realizing it. And if you’re already up and running, like you’ve saved so much time and been able to scale probably as a result of that. I feel like that’s such a huge component piece these days.

Brian Malliet: And if you don’t have scale, you’re not going to invest in it. You won’t spend the money or the time. So it’s sort of that catch 22, right? You have to either determine and commit to being in the space in a big way or don’t. And if you’re not going to be able to scale with property capsule or BTS, or BKM Intel software that we built or with even the modules with Yardi, with our accounting software. We committed to this space very early on in year one, that we were not going to not scale from the way we did it. So you got to commit to be in the space and if you do commit and you can scale, then you can spend the money and the time and the people to go develop the product.

Justin Smith: I feel like you’ve also done a better job than anybody, like a realizing you can brand these parks and projects and like image wise in the repositioning, in the value adding component. I feel like nobody was really doing that so much of trying to make the most of this B product or of existing and really like giving a new life. That seems like that’s been something you’ve put a lot of time and attention into and it’s paying dividends and people like attracting better tenants and Ultimately just driving more successful projects.

Brian Malliet: When you get to the scale that we’re at, we did 557 leases last year. That was 2.1 leases a day. We rolled over 1.6 spaces per day, every day for the entire year. If you miss a day, then you have to double up the next day and the next day. So to be able to do 2.1 leases per day and roll over 1.6 spaces per day, that gives you the volume of how much we actually do with the technology that allows us to do that. And so when you’re going to tap that kind of transactional volume, you better have some standards put into place like our design standards. Our marketing department, as well as our design department that is run by Kerryn here at the office. She’s been with the firm and with me for 27 years. So she knows the design that we want and the product type and what we deliver. So you’ll see when you’re out in the field of BKM standard and you’ll know a BKM park versus a non park. It’s really taken the old park of yesteryear of the multi-tenant industrial with the electrician and the plumber and then the woodworker and the marble guy, and a lot of old, dirty users. That’s not what we do today. We’re more geared towards the new tenants of today, which are more e-commerce driven tenants and those supply chain. Number one on shore and manufacturing. So there’s a lot of onshoring in manufacturing and then the 3D printing manufacturing that’s going on and then the innovation and biotech side of the house. Those three tenants bases didn’t exist when I was doing leasing 20 years ago. So we’re really focused on the tenant base today, which is really driven by those three. And e-commerce, isn’t a big piece of it. It’s about a third of it, even though it’s getting a lot of the tailwinds in terms of the headlines, but the manufacturing piece of it and the innovation side with the whole chip technology and all that stuff that’s going on that you said you read about it and hear about. That’s about a third of all three tenants that didn’t exist in this product type, the product type of old doesn’t accommodate those types of tenants. One from image and two they want to see both office assembly and warehouse in the same facility. And three, they want to be able to have expansion and contraction and they want to have concrete tiles. They want to have our concrete floors. They want to have carpet tiles. They want to have bright colors. They want to be able to track the talent, keep the talent and keep growing with the talent that they have. And you’re not going to do that in an old industrial park. You need to take it and bring it up to the standards. Yeah we’ve got about seven different standard designs on the exterior and about six or seven on the interior that we’ve developed over the last seven years that we stamp out it’s design a, B, C, D E F or G. And we just pick whichever one and apply it to whichever property we’re buying. And we sort of use it as our standard. And then it’s also upholds our brand and our logos that are out there and our brand for what we see out there. We’ve done a very good job, it’s not driven by me. It’s driven by the people here in the organization for the marketing side, the design side to the execution side to really hold that and hold that standard to the organization and then hold that standard through all our projects. You can see that when you go visit a project. I got a call last week from somebody that was in Sacramento. He was staying at a hotel across from the fairgrounds and he goes, I didn’t know you guys had a couple parts in Sacramento. I know these are your parts because they exactly your brand and your standard. And they were our parks and he was a guy that was here in Orange County and he was gone to Vegas and he’s seen our properties and he knew that was our park in Sacramento. So that just is Testament to what we do is stamped out in all the states that we go up and do it.

Justin Smith: When you look at one that hasn’t gone through that, and you think of the old tenant base and those types of projects and that just not getting it done anymore. It’s night and day.

Brian Malliet: We just bought a project in Portland about a 15, $18 million project, and it’s got all the old tenant base and there’s about eight tenants in there that are all the old tenants and we’ll go through and rehab the project and we’ll roll all eight units over the next three years. And there’ll be a whole new tenant base that comes in with it. So yeah it’s fun to take an old one and see what you can do with it. 18 months later and then see the finished product and then be proud of the returns that we get for it. So know our teams have done a great job in terms of being able to do that consistently over and over again.

Justin Smith: With newer space where all on this rent growth, roller coaster. It’s been interesting to see in different markets, what rent growth has looked like and then in different sizes. In the big box space or in the Inland Empire around here. What’s rent growth in the past, two years or three years or five years? What’s that rollercoaster look like.

Brian Malliet: I think it depends on where you’re at. We’ve seen spreads of 7% to 30%, so depends. We’re in seven different states and we’ve seen that, that growth literally in a quarter or two quarters. We’re not talking about annually. We’re talking to about 90 days, we’ve seen the market move so aggressively. And we adjust our MLA’s every quarter, that’s very strange for most large industrial operators to actually adjust their rents every 90 days. But we have a system in place through BKM Intel. We track our existing rents and it gets loaded into there and we have a dashboard that tells us what size units are getting what rents per square foot. So we can see in any given market, whether a 5,000 square foot unit is getting better rents than a seven or a 10 or a 15 because of their availability in the marketplace. So with that kind of access to our own data and then going through our software and then coming up with a dashboard that shows us we could move rents every quarter. And we do and we have been doing it prior to this huge rent growth. It was just a staple in the organization that we knew the product type allowed us to do it. But now leaning into where we’re at in the marketplace with huge rent movements that we’re seeing. Let’s thank goodness, we as a firm have that put into place and it’s just business as usual. The difference is instead of raising rents two or 3 cents raising rent 15 cents or 20 cents a foot .Down in Mason San Diego rents have moved 30% this year. In Denver, our rents have moved 20% .In Seattle our rents moved 20% itself. Then it’s separate sub markets within California, whether it’d be down in Carlsbad or San Diego versus up in Sacramento, we have different rent movements. But we’ve been seeing huge double rent. The big push for us is we’ve been adjusting rents every quarter. We continue to adjust rents every quarter and we have the systems put into place that allow us to do that.

Justin Smith: That’s so unique. I feel like nobody does that and that is such a missed opportunity for operators. When you think of can you better manage a park than someone else? That would be a one way that the large majority they don’t think about it that way .They don’t adjust that frequently and then they miss out. And maybe don’t think so much about it. I feel like that’s a great differentiator.

Brian Malliet: If you’re in this product type allows you to do it. You better be doing it. If you’re not doing it, you’re missing the whole concept of the product type. So if you’re going to be in this product type and you have the leases that are one to three years, you better be rolling a third of your rent roll every year. And take advantage when the market does this, when the market talks out or the market comes down again. You’ll also grind down as well, but you won’t drop where your whole product is 50% of it’s leased to one tenant. You’re 50% vacant. We don’t ever have that. So you have to constantly . Even write it down to write it back up again, and your average will be better than the ups and the downs of the big box space. And CVRE has done great research to show that you actually get better yield in the small and mid base product than you do in the big box. It’s a mathematical equation of being able to take advantage of the ups quicker, and then being able to take advantage of not everything going down to market with one tenant. You get to ride it slower down as you ride a slower up again. So it’s just a nature of the product type yourself and if you understand that of the product type and you put things into place where you do this, that’s how you deliver great returns.

Justin Smith: Yeah, that’s a great insight there. How do you know when it’s time to turn into a seller?

Brian Malliet: That’s always the debate question.

Justin Smith: Thinking of timing and thinking through like, when is the best time and making adjustments. That’s the difficult one.

Brian Malliet: You’ll always have the argument of levered IRR versus multiple. Which one do you want levered IRRor multiple? You want both. So in ours we have co-mingled fixed end funds that have certain fund. So people give us capital. They invest for a certain period to give a certain return, and that’s what we do. Definitely when we do sell there’s a lot of meat left on the bone and delivering great yields. But that’s the capital committed to go do as a fiduciary. We obviously follow through with that timeline and that’s what tells us when we discipline where to sell, going forward. Do we still believe in the market during sometimes when we sell absolutely. We’ve sold $400 million worth of assets in the last 12 months. We ended up recapping a good majority of that with new investors going forward. And our other investors made double returns and what we promised that we would give them. There’s always somebody ready to take advantage of a market. That’s still in major growth and that people feel for the next two or three years that we’re going to see growth in this space.

Justin Smith: Can you walk the recap thought process of why you would do that or what it would look like to continue to own the same assets, but to go from one fund to the next. Yeah. I mean, the easiest thing is you have a group of investors that invested with the thesis that you were going to buy here and sell here and deliver these returns.

Brian Malliet: And you’ve obviously we’ve made that happen. There’s an uptake in the market for another five years. that owning the assets, you can do the same thing and deliver a similar type of return. So it’s a matter of us staying involved or engaged. It also helps us on when we sell was we as an operator. If we stay involved, the new money that comes in feels comfortable, that we’ve had somebody operating in for five years. So they’ll pay a higher because it takes more risk out of the equation by staying with the existing operator. So we will do that or existing investors will stay involved going forward, which helps return a higher price on the sale, deliver better returns for our existing investors and then go operate it going forward. As long as we believe in the market and we believe in the capital partners that are coming in. So the recap process is a great process to really push pricing on your existing investor in existing. Especially in a heavy management attend space where it’s risky and you can take some of that risk by putting the platform out there for the new money.

I imagine there’s a healthy tension between the two and making sure it’s good for both. Think of that, like when we bought our office building where the tenant and we bought the building. So the two bodies or two different bodies, but we had to agree on what were the terms. They were going to be good for both sides.

Yeah you go hire and you hire a third party process. We hired third party people. We run a process. You run a competitive bid set. The best buyer comes into play. What we found is we had about two thirds more buyers. That would actually write an offer because they didn’t have an operator and now they did have an operator. So we actually opened the buyer pool to allow more capital to come in and create more of a competitive environment to push price even further. Yeah, there’s always, you have to manage conflict if you have a conflict and then it’s third party run a process, arms like transaction. Very basic stuff that’s done in the industry that as long as you become a fiduciary up to the Capitol and to your investors. You always do the right thing and that’s what we did going forward.

Justin Smith: We just sold a big project of seven buildings in the Inland Empire. They were all 25. So a little bit larger, all single tenant, but is a magically still in this small bay.

Brian Malliet: Yeah I saw that. I saw that offering.

Justin Smith: So that was an interesting one to think through what the landscape is for capital and for people and how people are viewing that type of asset. And getting into the portfolio of freestanding buildings are getting like a trickling down into the smaller and smaller space and that being more institutionalized.

Brian Malliet: We bought four or five of those projects. And when you have a couple of those projects, I think three in our three or four in our fund too. Love that play because you have an alternative exit strategy to sell up to users I don’t have to tell you that. We took advantage of that. In our fund one. In Las Vegas, we sold a large project off into individual unit users. We’ve taken advantage of that in Arizona. We have a couple of projects in Arizona. We have a couple projects in San Diego. We’ve sold off a couple of single buildings in Fremont. We’ve sold off a couple of single buildings here in LA. So we liked that project when we a portfolio on separate buildings and separate parcels, and we take advantage of what we buy for an investment to what a user will pay for it. And we make usually double the spread of what we underwrite on an investment spam.

Justin Smith: It’s interesting also to see how many players were for that. So I’m sure you guys are always creative about how you can be a buyer and how. Don’t have to be one of 30 going into buildings that you’re trying to purchase going forward. So I’m sure you’re pretty creative with how to source new opportunities and how to find an angle or find something that’s a not publicly available.

Brian Malliet: We’ve been in the market. I’ve got pipelines on my desk right here. And when we’ve been in the market, as long as we’ve been in. We bought an asset on average every 21 days. So we’d bought just over 60 assets I think it is. I think we might be up to 70 assets now in the last six, seven years. So when you’re that active of a buyer, the phone rings quite a bit first from a lot of different programs. I think we’re currently tracking about 18 off market deals currently right now. That I look at, we actually track on our pipeline off-market pipeline, current pipeline and then small pipeline. So we actually track on our pipeline off-market deals quite a bit. I think we always have five or six offers out on, off market deals at any given time to try to help push seller and get to pricing and see if we can get to a deal. And they do for my, about a third of what we buy as off.

Justin Smith: It seems like that’s just how we have to do it these days. That’s where there’s room for creativity and there’s room for finding someone that can’t go public with their sale yet, but they are open to it or they’re getting close to their timeline where they haven’t made that intentional decision yet, but it’s coming soon.

Brian Malliet: Yeah. It’s like anything, if you’re in the space long enough, you become one of those people where the one that top three people that people call. So when we bought 70 plus assets over the last six, seven years, we’re one of those people that get it called fairly quickly. We’re still small and nimble enough where we can jump on. We can close on it very quickly that most brokers don’t have to educate us on the market, which is a big lift. Brokers like to deal with people that actually know what they’re doing and know the market places. So they don’t have to drive around and try to educate them on the marketplace when you have as many tenants as we do and do as many leases as we do. There’s a marketplace that we’re in now. Just because we’re doing 600 leases a year in our marketplaces. I mean, we’re an easy buyer, I think from that perspective. And we’re still small enough where we can aggressively go hard quicker, close quicker and commitment quicker to assets as well. So it gives us a sort of a leg up against some of the larger players out there.

Justin Smith: Oh, that reminds me, I don’t want to take your time from the phone ringing cause people will be calling you. But I’m appreciative of you making yourself available and spending the time with me to go over your background in the business and it’s all such exciting stuff. If people have opportunities they can reach out I imagine to Emily, who could get in touch with you or can direct people to Brett or anyone else for acquisitions opportunities. And then we’ll post the website on the show notes and whatever contact information you think is.

Brian Malliet: Yeah. Brett’s obviously on the acquisition and disposition side of the house. So anything to do with real estate Brett’s the person, Brett Turner. He’s been with me from the beginning, so he’s a good guy to, to go there. Emily runs our entire marketing and PR campaign here. So anything that evolves on the company and marketing and PR that could reach out to Emily with those they’ll get in the right direction in terms of where they need to go.

Justin Smith: Thank you, Brian. I appreciate it. Yeah, you doved into a bunch of topics and when at deeper and went into a lot of great nuance. And I think a lot of people either don’t have visibility into or don’t appreciate it as much. I know I came away with a lot of takeaways on that. I appreciate you spending the time.

Brian Malliet: Remember it’s always standardization, transactional volume and don’t blame the operator. Find a good operator to team up with if you want to invest in the space. So that would be my takeaway as well. So thanks Justin. I appreciate it. Let me know if you need anything else and if not we’ll see each other around the airport area. Obviously stop by and say hello.

Justin Smith: Thank you, Brian.

Brian Malliet: Okay. Thanks.