[00:00:00] Justin: All right, welcome Marty Shiff of Rooflifters.
[00:00:03] Justin: It's been since 2019 since we talked last and
[00:00:08] Justin: it's funny what has changed in
[00:00:11] Justin: roof lifting and then what's changed in the
[00:00:14] Justin: industry and now in the economic cycle.
[00:00:18] Justin: So much has changed, I know in brokerage, even though the
[00:00:22] Justin: business stays the same to some extent. So I'm excited to reconnect with
[00:00:26] Justin: you and kind of see what you've been up to and what the state of
[00:00:30] Justin: the market is.
[00:00:31] Marty: Excellent. Thanks for the opportunity.
[00:00:34] Justin: Yeah, so tell us, rooflifting in
[00:00:37] Justin: general, what is the size of it and what would you say
[00:00:41] Justin: is the state of it? Like for us I know we have a lot of like trying
[00:00:45] Justin: to recover from the market, being at a trough for lease rates.
[00:00:49] Justin: And then interest rates is on everybody's mind. I'm sure you're
[00:00:52] Justin: going through a lot of that too, because that's all part of the same
[00:00:55] Justin: decision making process.
[00:00:57] Marty: Yeah, absolutely. Um I'd say, listen if it's since
[00:01:01] Marty: 2019, so a lot has changed uh, you know
[00:01:05] Marty: COVID hit 2020 um e -commerce really
[00:01:09] Marty: took off after that. So, um, that really had an
[00:01:12] Marty: impact on our business, uh
[00:01:15] Marty: because we boomed uh, just in terms of inquiries, cause
[00:01:19] Marty: everyone wanted last mile. So last mile is in the cities.
[00:01:24] Marty: So, especially the older cities whether it's LA whether it's, you
[00:01:28] Marty: know, Northern California Jersey, Chicago Boston, and those
[00:01:32] Marty: older established cities and areas that had a
[00:01:36] Marty: lot of product you know, at that last mile. And we're all
[00:01:40] Marty: built many years ago and obviously at the obsolete heights.
[00:01:45] Marty: So it really took off, you know, for us through COVID. it.
[00:01:49] Marty: That being said taking off for us really means
[00:01:52] Marty: a huge amount of additional inquiries, okay?
[00:01:56] Marty: Cost, timing everything like that. A lot of
[00:01:59] Marty: things really need to fall in place for them to become
[00:02:03] Marty: projects, right? So first and foremost, we'll get a call on something and
[00:02:07] Marty: it's a very quick discussion. This is how
[00:02:11] Marty: much it's going to cost. This is the range. This is how long it's going
[00:02:14] Marty: to take. This is how what, how it's going to impact the existing building
[00:02:18] Marty: operations, et cetera. Is that even close to penciling
[00:02:22] Marty: or making sense? And at that point it'll be oh yeah, you know, that that'll
[00:02:26] Marty: work or just no. So it's a pretty, at the end of the day, this
[00:02:30] Marty: conversation gets pretty quick. Um, but I mean, there's been a big Delta
[00:02:35] Marty: in rents and values of buildings since
[00:02:38] Marty: 2019 as well okay, as a reflection of how
[00:02:42] Marty: inexpensive money was, price of buildings going
[00:02:45] Marty: up, cap rates know, things like that. So, you know
[00:02:49] Marty: everybody was flying, you know from, you know
[00:02:53] Marty: probably till 2022, 23. I'm not sure
[00:02:57] Marty: exactly when, you know, you'll probably have a better handle on that as to
[00:03:00] Marty: when things really started slowing down a little bit.
[00:03:02] Justin: In a good and bad way.
[00:03:04] Marty: For us, it really hasn't stopped, you know and the inquiries
[00:03:08] Marty: have probably stayed, you know as many as there were, if
[00:03:12] Marty: not more, because we've also branched out, um
[00:03:16] Marty: just again, based of, based on cost of
[00:03:20] Marty: construction of building new versus lifting. So it's not
[00:03:24] Marty: only industrial, a lot of retail old retail conversions
[00:03:28] Marty: especially in California, we've done a lot of, um conversions to rock climbing
[00:03:33] Marty: facilities and and kids' play centers and
[00:03:37] Marty: all sorts of stuff like that up and down the coast. And then a
[00:03:41] Marty: lot of self-storage too. So, you know we've gone from industrial to kind
[00:03:45] Marty: of retail and self-storage. So that's helped with different
[00:03:48] Marty: types of projects.
[00:03:48] Justin: I could see that totally.
[00:03:51] Marty: But again, now we're at a point where money is more expensive.
[00:03:55] Marty: Some of those initial cap rates that were established a few years ago were
[00:03:59] Marty: based on a certain value of the purchase and everything else. And some of
[00:04:03] Marty: those are not making as much sense as they used to.
[00:04:07] Marty: So, um, so it's, it's for sure challenging time for a
[00:04:10] Marty: lot of developers and, and, and owners. Um
[00:04:15] Marty: and, and now especially, so our cost is pretty much stayed the same, know
[00:04:19] Marty: steel's gone up considerably, you know, just the purchase of it over the last
[00:04:23] Marty: little while. Uh, but the overall costs, you know, between
[00:04:27] Marty: lifting the steel work, you know in filling in
[00:04:31] Marty: the gaps and all that hasn't really changed
[00:04:34] Marty: that much. What has gone up is the cost of construction.
[00:04:38] Marty: So the spread between building new, what we
[00:04:42] Marty: do continues to get farther. The spread
[00:04:46] Marty: continues to be bigger, which is making lifting
[00:04:49] Marty: more sets.
[00:04:52] Marty: That being said the one main
[00:04:56] Marty: driver of our projects these days is when you lift a
[00:05:00] Marty: building, um and in California there's different
[00:05:04] Marty: parameters. Um most of it if once you
[00:05:08] Marty: if you're within allowable zoning heights, right. And you're not at any, any
[00:05:12] Marty: gross floor area it usually qual you know, will qualify as a
[00:05:16] Marty: renovation, which avoids a lot of, you know
[00:05:19] Marty: site plan, water retention, energy issues, um
[00:05:24] Marty: setbacks have changed so that you know development
[00:05:27] Marty: charges so that's really made the lifting you know
[00:05:31] Marty: that much more uh interesting of an option but
[00:05:34] Marty: again a lot of things need to fall in place for them to become to
[00:05:38] Marty: become projects for sure
[00:05:40] Justin: Yeah, it does remind me of
[00:05:43] Justin: not only last time we talked but there was
[00:05:46] Justin: a project you helped coach me through that was
[00:05:49] Justin: on Randolph Street in commerce. And it was a building that
[00:05:53] Justin: had half low clear, half high clear, a bunch
[00:05:57] Justin: of sawtooth docks. And it was a owner user.
[00:06:01] Justin: And we were just trying to find more value for the space he didn't need.
[00:06:04] Justin: for him to lease it out and it's amazing the different things that need
[00:06:08] Justin: to be taken into account so I think it goes way past
[00:06:12] Justin: what the majority of people think on just like the very surface
[00:06:17] Justin: level and you talking about height and
[00:06:20] Justin: renovations in the city like that's a great point of like something
[00:06:24] Justin: that people don't know and don't recognize so I'm
[00:06:29] Justin: not sure if you can do a quick refresher on the general process. I certainly
[00:06:33] Justin: remember from the slab to the
[00:06:37] Justin: ceiling to the sprinklers and then all the intangibles like the city.
[00:06:41] Justin: That'd probably be helpful for people that are listening that have a
[00:06:44] Justin: project in mind.
[00:06:45] Marty: yeah i guess in what respect from the actual
[00:06:49] Marty: process of how we do it or just the sequence of of
[00:06:53] Marty: um you know from initial call to uh determine
[00:06:57] Justin: yeah I think feasibility is probably more
[00:07:00] Justin: important than for people to understand than like the process
[00:07:04] Justin: of the lift itself that's pretty cool
[00:07:07] Marty: So I'd say yeah, one, one big difference is you know, since we last spoke
[00:07:11] Marty: is we're pricing a lot of stuff and let's say Inland Empire where buildings
[00:07:15] Marty: are already 32 feet. We're pricing some large buildings
[00:07:19] Marty: that are competing with the newer product that are 40 and 42.
[00:07:23] Marty: So we're pricing some 32 to
[00:07:27] Marty: 40 and 42. 42, some big 700,000 square footers, million square footers.
[00:07:31] Justin: Yeah, okay, so we're going 32 to 40 or 32 to 42 yeah.
[00:07:33] Marty: So that's something that never really happened, you know, many years ago.
[00:07:37] Marty: But in terms of the process so really, well let's take it
[00:07:41] Marty: from an initial call, right? You have a client that you want to tee
[00:07:44] Marty: up, you know to Marty someone's inquiring, you know, what would
[00:07:48] Marty: be the process. So again, we jump on a call, we'd go through, let's call it a
[00:07:52] Marty: hundred thousand square foot building going from, you know
[00:07:55] Marty: 14 to, you know, 28 or 32. So on something like that, I'd
[00:08:00] Marty: go through my list of previous projects in that area and I'd
[00:08:04] Marty: say, okay, on that size, roof lift
[00:08:08] Marty: steel, know, to actually lift the roof infill all the
[00:08:11] Marty: new steel, install a new insulated metal panel or you know, any
[00:08:15] Marty: kind of infill would probably be around the, you know, let's call it a $20
[00:08:19] Marty: a square foot range. Okay. Then we'd factor
[00:08:23] Marty: in, okay, is the building sprinklered? Okay. Okay can we take
[00:08:27] Marty: up the existing sprinkler system or should we budget ESFR
[00:08:31] Marty: sprinkler system? Okay, another four or five bucks a square foot.
[00:08:35] Marty: Lighting, HVAC roofing. So on that quick call between me, you, and
[00:08:39] Marty: a potential client, we can come up with a high level number.
[00:08:43] Marty: Okay, let's say at 35 bucks whatever that turns out to
[00:08:46] Marty: be.
[00:08:48] Marty: Then we, you know, from that point, kind of delve into a
[00:08:52] Marty: little more into some preliminary engineering making sure there's no
[00:08:55] Marty: surprises checking slab thickness, because again, you know
[00:09:00] Marty: you've got to make sure the capacity of the slab works if you're going to
[00:09:04] Marty: rack at 32 feet versus where it is right now. So these are some things that
[00:09:08] Marty: we kind of cross off the list. Yeah, right off the bat, make
[00:09:13] Marty: sure there's no surprises in any of those budget numbers. Then it's the
[00:09:17] Marty: permit process you know drawings, permit you know construction.
[00:09:20] Marty: So, you know you'd probably be between drawings and permits
[00:09:24] Marty: probably five, six months, um depending on the you know, some
[00:09:29] Marty: cities will get a permanent a week. Sometimes we've been four to
[00:09:32] Marty: six months, right? So, um, to be safe, I'll
[00:09:36] Marty: tell a client you know, five six months on the front end and on that
[00:09:40] Marty: size project about probably five months for the work.
[00:09:44] Marty: So it's not only the, the the cost that needs to make sense.
[00:09:48] Marty: It's that, that timing as well.
[00:09:49] Justin: Taller buildings more product, more weight. Yeah.
[00:09:51] Marty: Um, and, uh and again, once all those, that's why a lot of things need
[00:09:55] Marty: to fall in place because it's the cost of timing, all that stuff. And then if
[00:09:58] Marty: that's still working, then we start, you know kind of really getting into it.
[00:10:02] Justin: yeah i could totally see how the the difference between 20 and
[00:10:06] Justin: 35 when you get into the oh yeah by virtue of having
[00:10:10] Justin: a taller roof you now need new lighting or you need to
[00:10:14] Justin: do your ESFR upgrades and all that kind of stuff that people like uh perhaps
[00:10:18] Justin: like and maybe ignorantly don't know, but that's
[00:10:21] Justin: not what the problem is that you're trying to solve, but that's something that
[00:10:25] Justin: comes along with the solution.
[00:10:28] Marty: yeah i've become kind of the guy who points out all the negatives
[00:10:33] Marty: they're going to come into play and if we can tick off the boxes they
[00:10:36] Marty: they just keep moving
[00:10:38] Justin: Yeah.
[00:10:40] Justin: Let's dig into the Inland Empire example you gave because I love that one.
[00:10:44] Justin: It's a great one that's topical. and for us
[00:10:46] Justin: here, people are making those types of decisions. It's interesting
[00:10:51] Justin: to see 40 and 42 foot clear. And then I don't know, maybe
[00:10:55] Justin: I haven't done a whole lot of million square
[00:10:59] Justin: footers to know that we got 50 or any taller ceilings.
[00:11:03] Justin: I think there's probably zoning requirements or limitations that
[00:11:07] Justin: 40 and 42 seems to be the top for the time being and material handling
[00:11:11] Justin: considerations. But I could definitely see
[00:11:14] Justin: once you have that new height
[00:11:18] Justin: then having legacy product is now more a liability or it makes
[00:11:22] Justin: your valuation like you have to adjust for that.
[00:11:26] Justin: I certainly know going from like the 32 to 36 like that was
[00:11:30] Justin: interesting to now look at all new buildings and see taller.
[00:11:33] Justin: So, yeah, that's wild to imagine people doing that because that seems
[00:11:37] Justin: like the spread has to be big enough.
[00:11:41] Marty: Yeah, it's all about that delta between the value
[00:11:45] Marty: of where it is now at 32
[00:11:49] Marty: and what a similar new building would be at 40 or 42 and Delta
[00:11:53] Marty: in the rents. I mean, so our number on a million square feet, you know
[00:11:57] Marty: is going to be, could be as low as 15 bucks, you know, a square foot.
[00:12:01] Marty: But are you going to get another, you know in California terms, another 10
[00:12:05] Marty: 15 cents a square foot to justify that. So it really
[00:12:09] Marty: just, yeah. So, I mean so really just it is a
[00:12:13] Marty: quick exercise in you know, the numbers at the end of the
[00:12:17] Marty: day. But some interesting projects that we've done recently is where
[00:12:21] Marty: you know, it's pretty straightforward to look at a building that's
[00:12:25] Marty: got the proper you know, size
[00:12:27] Marty: loading, you know and things like that.
[00:12:31] Marty: But what's really interesting is when people come to us where
[00:12:35] Marty: the building works location -wise everything else
[00:12:39] Marty: but there's not enough of, let's
[00:12:42] Marty: call it, not enough loading or not enough of
[00:12:46] Marty: a truck court. So we did one not too long ago up in San Leandro
[00:12:50] Marty: where location was great. The height was low.
[00:12:55] Justin: For 15 years or something like that.
[00:12:56] Marty: And we've been doing this a lot is really cutting off a section of the
[00:13:00] Marty: building. uh, create new loading, create new loading, uh
[00:13:04] Marty: you know, that uh, that truck court. Um, so it's
[00:13:08] Marty: it's really that's really repositioning a building where
[00:13:11] Marty: so, you know it's, it's really people that are getting creative
[00:13:15] Marty: uh, that, that this is, this has been really working for.
[00:13:19] Justin: I love that because that's the developer hat of like, OK, there's
[00:13:23] Justin: value here we just have to figure out how to unlock it and what does
[00:13:26] Justin: this one site need to get maximum value
[00:13:29] Marty: you're also chopping off part of the building so all of a sudden you've
[00:13:32] Marty: you've owned something that's 200 000 square feet in order for this to
[00:13:36] Marty: work you got to cut off 20 000 square feet let's say right so you're
[00:13:39] Marty: so again it it really just comes down to the math
[00:13:43] Justin: it better be worth it people don't like making their buildings smaller if they
[00:13:47] Justin: can help it
[00:13:47] Marty: it better be worth it yeah yeah and again over the across the country people
[00:13:51] Marty: have overpaid And you know, there's a lot of people that really
[00:13:54] Marty: overpaid for, not overpaid, but that was the rate in that market
[00:13:58] Marty: at that time based on cap rates and things like that. Interest rates
[00:14:03] Marty: have gone up. Demand maybe in some areas has come down. So all those
[00:14:07] Marty: buildings are not worth, you know as much as they were at
[00:14:11] Marty: some point. To your point about the manufacturing were some
[00:14:15] Marty: buildings high some buildings low? So we've been doing a lot of work where
[00:14:20] Marty: you know, they're they're bringing their manufacturing back into their
[00:14:24] Marty: specific cities and buildings. So instead of
[00:14:27] Marty: lifting the whole building is where you know, they're keeping the
[00:14:30] Marty: manufacturing portion of it low and now we're just lifting a portion of
[00:14:35] Marty: it for storage. So we're seeing seeing a lot more of that
[00:14:38] Marty: lately as well.
[00:14:40] Justin: Yeah, I was going to, I remember you
[00:14:44] Justin: talking about that, that kind of blew my mind a little bit of
[00:14:47] Marty: Because you don't have to lift the whole building.
[00:14:49] Justin: not only like the phasing aspect of like I'm going left to
[00:14:53] Justin: right or front to back, but also that you can only do a portion and
[00:14:56] Justin: what that would look like. But I assume for you, it's
[00:15:00] Justin: that's not that big of a leap of the imagination.
[00:15:03] Justin: But for manufacturing they don't need it to be
[00:15:06] Justin: tall everywhere right? If they don't have a mezzanine. Yeah.
[00:15:11] Justin: I would think with this advanced manufacturing like making a comeback, that's
[00:15:15] Justin: all sorts of new opportunities. for legacy assets that have a
[00:15:19] Justin: ton of power and they don't have the ceiling. And now that power is this
[00:15:23] Justin: big constraint or limiting factor
[00:15:28] Justin: that people are chasing power around, and now that we have
[00:15:32] Justin: all these new Class A buildings but a lot of them are absorbing, and cost of
[00:15:36] Justin: construction is high enough that there is not a whole lot of new
[00:15:39] Justin: construction right now, that would tell you that in like a
[00:15:42] Justin: year, two years we've worked through a lot of that supply
[00:15:46] Justin: before new supply comes online Marty's going to be getting more
[00:15:50] Justin: phone calls of people chasing buildings with power that don't have the ceiling
[00:15:54] Justin: height.
[00:15:54] Marty: we'll take them we'll take them
[00:15:56] Justin: Yeah.
[00:16:00] Justin: That is interesting for manufacturing. would think of your book of
[00:16:03] Justin: business, would you say it's a half users and tenants and
[00:16:08] Justin: half developers and landlords? Or what would you say the
[00:16:11] Justin: mix is?
[00:16:13] Marty: hmm i mean a lot more developers now than they're you
[00:16:17] Marty: know when the business started you know the business is almost 40 years old
[00:16:21] Marty: so it was originally owner users because they could justify the
[00:16:25] Marty: cost and everything else. Now that spread between now
[00:16:29] Marty: obviously the developers and the big, you know I mean, the
[00:16:32] Marty: industrial, a lot of, you know your dad, you know, might've had a company
[00:16:37] Marty: manufactured, you know, sponges or something, you know, it's got out of that
[00:16:41] Marty: business and still had a 50,000 square foot building somewhere that he just
[00:16:45] Marty: kept in the family and kept leasing out. So it was a lot, a lot of
[00:16:48] Marty: opportunities back then for one -off owners. Now, I mean some of the
[00:16:51] Marty: institutions have really been buying up, you know a lot of
[00:16:55] Marty: that stuff. So still a lot of owner
[00:16:58] Marty: users, but a lot more like I mean, now
[00:17:02] Marty: we're dealing with some of the largest industrial landlords pretty much in the
[00:17:07] Marty: country, in the world that are really looking at you know, at some of these
[00:17:11] Marty: buildings because they've also acquired a lot of older
[00:17:14] Marty: portfolios. so they you know they might have gone after
[00:17:18] Marty: a few of the key buildings in that portfolio but okay if you're taking
[00:17:22] Marty: these you know 20 buildings you're gonna have to take a couple of these
[00:17:25] Marty: other ones you know so uh so they're looking at you know
[00:17:29] Marty: whereas at one point they were just set on building brand new
[00:17:32] Marty: big bombers you know now you know it's
[00:17:36] Marty: something that a lot of the the bigger developers are looking at uh
[00:17:40] Marty: you know as well um and then a lot of again a lot of the
[00:17:44] Marty: industrial uh so the the retail clients so a lot of the
[00:17:48] Marty: big um mall owners and power center owners are
[00:17:52] Marty: looking at these two for these new kid you
[00:17:55] Marty: know kid concepts and and things like that to bring people back
[00:17:58] Marty: into the malls
[00:18:00] Justin: Yeah, that's not my bailiwick, but I sure have seen him. Tell me more
[00:18:04] Justin: about him. Like A, retail and then B self-storage is just like
[00:18:07] Justin: additional levels.
[00:18:08] Marty: yeah yeah so every every 11 feet or so gets you a
[00:18:13] Marty: a level of self-storage so they're taking you know so i
[00:18:17] Marty: know about 100,000 square feet is a sweet spot for self-storage seems to
[00:18:21] Marty: be so they'll take a 50,000 square foot building and raise it to 22
[00:18:25] Marty: or 30, you know, 30,000 or so and raise it to
[00:18:29] Marty: 33 to generate that three floors. Um, and then
[00:18:33] Marty: you know, we just did one uh on, on the entertainment
[00:18:36] Marty: side, Aliso Viejo. Uh, you know we did a 10,000 square
[00:18:40] Marty: foot, uh, they raised it for a rock climbing facility. Uh, you know one up in
[00:18:44] Marty: Santa Barbara, we got one coming up down in and I think
[00:18:48] Marty: Thousand Oaks. So those are yeah, a lot of that, a lot of those
[00:18:52] Marty: conversions also. So smaller areas for sure. We've been doing
[00:18:57] Marty: these 4,000 square foot lifts for some of
[00:19:00] Marty: the other smaller kids places as well.
[00:19:03] Justin: Rock climbing's gotten pretty popular. Yeah.
[00:19:05] Justin: Yeah. I would imagine they all have different constraints too of
[00:19:08] Justin: like for self storage, you're not so worried about parking, for
[00:19:12] Justin: example of like employee counts and stuff.
[00:19:15] Justin: So it's where the more people you can have
[00:19:19] Justin: rock climbing maybe like the more cars you have parked. So I'm sure
[00:19:22] Justin: they all have their own nuance to them.
[00:19:26] Justin: Has there been much change in
[00:19:28] Justin: the technology? If you just think of like
[00:19:32] Justin: I haven't seen any robots lifting buildings yet with
[00:19:36] Justin: AI plumbed into them but I'm sure things have changed a little
[00:19:40] Justin: bit or not so much you tell me
[00:19:43] Marty: um art yeah our process is pretty much the
[00:19:46] Marty: same, you know and the guys are doing this.
[00:19:50] Marty: It's only my crews that travel the country and doing the lifting.
[00:19:54] Marty: So some of the other trade work will work
[00:19:57] Marty: with local GCs or, you know
[00:20:00] Marty: help owners wrap you know, and help them. So basically we'll help.
[00:20:05] Marty: We're involved from start to finish, whether we're just doing the lifting or
[00:20:09] Marty: helping some of the sub trade work as well. And some of
[00:20:13] Marty: those kind of technologies have gotten better just, you know in terms of
[00:20:17] Marty: let's say insulated metal panels and things like that have come down in price.
[00:20:20] Marty: So the technologies have helped with the pricing. But in terms
[00:20:24] Marty: of our system this is our
[00:20:28] Marty: second iteration. We used to sleeve our columns and now we have a separate
[00:20:31] Marty: independent lifting system. Our synchronization
[00:20:35] Marty: has gotten quicker just with the technology and some laser
[00:20:39] Marty: monitoring of our lifts. But for the most part, the setup, the
[00:20:44] Marty: bracing, things like that, I don't really think we can get
[00:20:47] Marty: much, much better with that.
[00:20:50] Marty: We're in possession of, you know, we'll do 150,000 square feet, let's say
[00:20:54] Marty: in one phase. So, you know you've got a building that's
[00:20:59] Marty: gone from 12 to 40 feet up in the air.
[00:21:04] Marty: and so the system that we have is very
[00:21:08] Marty: proven and so we're pretty happy
[00:21:11] Marty: with that. Again synchronization the monitoring things like that
[00:21:15] Marty: that technology has but the actual lifting system has pretty much
[00:21:19] Marty: stayed the same
[00:21:21] Marty: and it's by far the most cost -effective way to do it.
[00:21:25] Marty: So we haven't seen a need to really change much.
[00:21:29] Justin: Yeah, let's hear a war story. What's some of your favorite ones?
[00:21:33] Justin: I'm sure you've had ones that are a roller coaster where the
[00:21:37] Justin: hurricane came by or everybody's trying to lift
[00:21:41] Justin: roofs with their masks on or some version of one like the
[00:21:45] Justin: challenges you've had or interesting projects you've had. Any stand out?
[00:21:49] Marty: Yeah, we had one that a hurricane came through, but 80 mile an hour
[00:21:53] Marty: winds.
[00:21:55] Marty: So, I mean as part of our roof lift design, we're designing for that
[00:21:59] Marty: in those areas anyway. You've got to design for hurricanes and
[00:22:02] Marty: things like that. So, but again very, very challenging and
[00:22:06] Marty: sleepless night when you know that's happening. But I mean
[00:22:10] Marty: the lift itself that's the quickest process.
[00:22:15] Marty: You know, we're lifting, you know five feet a day or so. So if we're
[00:22:18] Marty: monitoring the weather with some pretty sophisticated like a weather
[00:22:22] Marty: company that we subscribe to. So we're not going to lift it if we
[00:22:26] Marty: think that there's any bad weather coming. but we've had some where we've
[00:22:29] Marty: had 80 kilometer an hour winds coming through.
[00:22:33] Marty: The good thing about it is is once we lifted, the walls are open.
[00:22:38] Marty: So the, you know, everything's coming, coming through. So that hasn't
[00:22:42] Marty: been a huge issue. We had one where it was
[00:22:45] Marty: a major, they had like three or four feet of snow
[00:22:49] Marty: dump on the roof, right? Which, and that
[00:22:53] Marty: was a 700,000 square foot lift we were doing in phases.
[00:22:57] Justin: Snow's pretty heavy, I would imagine.
[00:22:59] Marty: so snow is pretty heavy right so i guess we're concerned about you know
[00:23:03] Marty: all that extra weight so okay and so we're figuring out how
[00:23:07] Marty: do we shovel off you know all this size and then uh
[00:23:11] Marty: what landed up happening is someone came up with the idea to bring a
[00:23:14] Marty: helicopter in so they rented a helicopter for i don't even know
[00:23:19] Marty: what it was three four grand for and this thing hovered over
[00:23:23] Marty: the building and you see the snow flying, you know, all around.
[00:23:27] Marty: So, um
[00:23:29] Marty: yeah, some, some we've had some pretty crazy crazy stories, uh
[00:23:34] Marty: you know, over the years. I got my own guys that are standing under
[00:23:37] Marty: these roofs. So we're, we're pretty cautious and try to avoid any, any
[00:23:41] Marty: any war stories like that.
[00:23:43] Justin: Yeah. And in doing feasibility and due diligence, I'm
[00:23:47] Justin: sure there's surprises, maybe not surprises like things you
[00:23:52] Justin: haven't, like aren't prepared for, but surprises like different
[00:23:56] Justin: site characteristics or things that you don't know until you dig in
[00:24:00] Justin: enough or until you go there in person? Are there other
[00:24:04] Justin: things that come to mind that you don't really know until you get there?
[00:24:08] Marty: yeah a lot of things so as these things progress uh
[00:24:13] Marty: there's a whole initial analysis that we'll do on the buildings
[00:24:16] Marty: to eliminate you know any surprises so it's uh
[00:24:20] Marty: you know So soil underneath a you know, under a building
[00:24:24] Marty: contamination again, sprinklers
[00:24:28] Marty: a big one. You know, once we install this sure, it's great
[00:24:32] Marty: to, you know we'll need to install an ESFR sprinkler system but is there
[00:24:36] Marty: enough pressure from the street? Are we budgeting another 100 grand
[00:24:40] Marty: for a pump? You know, things like that. So really what people are
[00:24:44] Marty: committing to is a stage, you know, let's say if we, if we say a lift is going
[00:24:48] Marty: to be $20 on a hundred thousand square feet, no one's
[00:24:52] Marty: committing to $2 million to start. It's like, okay let's, let's come
[00:24:56] Marty: out there. Let's do some core samples. Let's expose a footing, some
[00:25:00] Marty: foundations. Let's get some contractors involved. So, you know
[00:25:04] Marty: it's a step process just by the time we've this, you know by the time
[00:25:09] Marty: everyone's committing, we've really eliminated any of the
[00:25:12] Marty: surprises. There's only five or six different trades and things
[00:25:16] Marty: that can come into play with these things. So we eliminate
[00:25:20] Marty: those surprises as quick as possible.
[00:25:23] Justin: And would you say slab thickness is the ultimate limiting factor
[00:25:27] Justin: that keeps like a lid on how high you
[00:25:30] Justin: generally go?
[00:25:32] Marty: no because that just would be a line item to to pull out that slab
[00:25:36] Marty: and replace it
[00:25:38] Marty: so you can replace them you can top them up like in California we've
[00:25:41] Marty: done projects where we've just added to the
[00:25:44] Marty: slab um it's going to affect you know the
[00:25:47] Marty: the you know the man doors in some areas and the dock doors.
[00:25:51] Marty: So sometimes we'll pull it back one bay to
[00:25:55] Marty: create that slope. But yeah, each. So once we
[00:25:59] Marty: evaluate that that slab is not sufficient for a
[00:26:03] Marty: 40 foot load or level then we'll
[00:26:07] Marty: evaluate, okay can we just top it up? Is that going to make sense?
[00:26:10] Marty: Or we've got to factor in X amount of dollars extra in
[00:26:14] Marty: cost to pull that out and pour a new slab.
[00:26:18] Marty: But they're just really line items. All of these things are just
[00:26:22] Marty: line items to see if, you know, and at the bottom, if
[00:26:26] Marty: the circle, if it all adds up, then they keep moving.
[00:26:30] Justin: For every problem there is a solution. I love it.
[00:26:34] Justin: I didn't know you could top up slabs.
[00:26:35] Marty: Where's the solution? It's just a cost. It's just a number. It's just a
[00:26:38] Marty: number. That's it, you know? But yeah, the biggest thing that's, that's
[00:26:40] Marty: happened over the last few years is that real Delta, you know in the rents
[00:26:45] Marty: like there's some markets where an existing building
[00:26:49] Marty: was getting you know, $6 a square foot you know, it's
[00:26:53] Marty: a 14, 16 foot high building. They're putting you know
[00:26:57] Marty: repositioning this whole building you know, call it, you know
[00:27:01] Marty: again, call it 30, 40 bucks a square foot. And now the
[00:27:05] Marty: rents are 15 $16 right?
[00:27:10] Marty: So you're talking a $10 difference in rents with
[00:27:13] Marty: a $40 investment right?
[00:27:16] Marty: So the projects either are no
[00:27:19] Marty: brainers, right? In terms of the ROI questionable, or they just don't
[00:27:24] Marty: make sense.
[00:27:25] Justin: That's funny. Our math right now on like the C plus B minus buildings
[00:27:29] Justin: that are low clear is like 12 on the annual.
[00:27:33] Justin: And then this is like parts of L .A.
[00:27:37] Justin: And then, yeah maybe 22 bucks a foot on
[00:27:40] Justin: the class A somewhere around there. So that $10
[00:27:43] Justin: spread is, it's funny because it doesn't make a
[00:27:47] Justin: B or a C turn immediately into an A. There's other like
[00:27:52] Justin: site constraints but that's class
[00:27:55] Justin: A popped so hard. Rents went so high and peaked so much until
[00:27:59] Justin: that 23 period that even though they've come down a bit, they
[00:28:03] Justin: haven't come down as much as the Bs have. So I feel like that's
[00:28:06] Justin: starting to widen a little bit. And now that we're getting a lot of this
[00:28:10] Justin: Labor Day activity, that's caused A to
[00:28:14] Justin: maybe hold the line a little bit more with a little more hope that like
[00:28:19] Justin: the recovery is coming soon enough that you can you can be patient rather
[00:28:23] Justin: than have to capitulate.
[00:28:24] Marty: yeah one thing also that's that's changed is the column spacing on
[00:28:29] Marty: the older buildings versus a newer one So you know, ideal
[00:28:32] Marty: column spacing is 50 by 50 52 by 50 you know, whatever that number is
[00:28:37] Marty: right now. So, and a lot of these older buildings have 30 by
[00:28:40] Marty: 30 grids.
[00:28:42] Justin: Yes.
[00:28:42] Marty: And we've looked at some Northern California and you know
[00:28:47] Marty: basically across the country. So we're pricing out now, basically
[00:28:51] Marty: taking out every second column. So we can convert a building
[00:28:55] Marty: that's 25 by 25 grid or 30 by 30
[00:28:58] Marty: to 30 by 60 or even 60 by 60.
[00:29:02] Marty: So you want to stay in the parameters of that bay, but you can take
[00:29:06] Marty: out every second column. And again, just you know, however
[00:29:10] Marty: many columns, it's going to be X amount of dollars per column. Right.
[00:29:14] Marty: So, uh, and then in a lot of those
[00:29:17] Marty: cases, um, to take out every second column in a building gets
[00:29:21] Marty: expensive. What the real push is for at the speed
[00:29:25] Marty: bays, they want to create a 50 or 60 foot speed bay.
[00:29:29] Marty: So a lot of those that we're looking at to take out a number of
[00:29:32] Marty: interior columns ultimately result in just taking them out near
[00:29:36] Marty: the docks and creating that 50 or 60 foot speed bay.
[00:29:40] Marty: They worked the racking around the existing columns but at the
[00:29:44] Marty: ends, we're taking out a lot of those columns to create those speed bays.
[00:29:48] Justin: and whether they go very narrow aisle or not maybe is a
[00:29:52] Justin: part of that determination I would imagine
[00:29:54] Marty: right right so then we'll get their racking guys involved or anyone
[00:29:57] Marty: that we work with and say okay here's the layout they're looking for trying
[00:30:00] Marty: to generate this many pallet positions so we'll
[00:30:04] Marty: take as much work on the front end to you know try and make these
[00:30:08] Marty: things happen um because again if it's a one
[00:30:12] Marty: -off owner they're they're in their business they're locked in their
[00:30:15] Marty: business they don't know you know they don't have their own construction
[00:30:18] Marty: people that so we we really in order for a lot of these projects to
[00:30:21] Marty: happen, we really need to take the reins on these things and point out
[00:30:25] Marty: everything that's going to happen put a number to it, put a timeframe to
[00:30:29] Marty: it and really just present it. These days we're putting out
[00:30:33] Marty: proposals with AI renderings of what the building's going to look like.
[00:30:37] Marty: You know, we spit those out in 20 seconds. Like, you know I used to
[00:30:40] Marty: pay an architect to do a rendering. Now I can you know, we
[00:30:43] Marty: can doctor that up and show them what the buildings And those have been
[00:30:47] Marty: pretty impactful.
[00:30:50] Marty: So that's, yeah. So that's, we
[00:30:54] Marty: found we've been doing a lot more of that really a lot of handholding and
[00:30:58] Marty: walking people through the whole process.
[00:31:01] Marty: Because it's a daunting thing to think about right?
[00:31:06] Marty: If you're not you know, not in the business.
[00:31:08] Justin: So if I thought some...
[00:31:09] Justin: Yeah, people sometimes that we work with have only gone through
[00:31:13] Justin: doing a deal two to five times.
[00:31:17] Justin: So I'm sure roof lifting they've done zero times.
[00:31:20] Marty: right yeah correct correct yeah yeah
[00:31:24] Marty: yeah and a major investment
[00:31:29] Marty: this is a major investment that they've made you know uh
[00:31:32] Marty: so so they they just want to to get that comfort level
[00:31:36] Marty: um you know take some time for sure so you're a lot of a lot of hand -holding
[00:31:40] Justin: and it's a whole new ball of wax that there just is a foreign to them.
[00:31:42] Justin: If we go back to the taking columns out, so you've got to reinforce
[00:31:45] Justin: the roof then I would imagine for where those columns were or
[00:31:49] Justin: what else goes into the that you consider other than actually just
[00:31:53] Justin: like not not replacing it
[00:31:55] Marty: Yeah. So you're reinforcing the the two existing columns, the
[00:32:00] Marty: outside ones because now you're adding that, that half a load
[00:32:04] Marty: that was, and then, and you're installing either a 50 or 60 foot long
[00:32:08] Marty: uh, beam or a truss under the existing ones to take that
[00:32:12] Marty: full span.
[00:32:15] Justin: Yes. Yes. So in a home remodel, you dread the beam the dreaded beam
[00:32:19] Justin: that is the cost increase. Here you could have all sorts
[00:32:23] Justin: of trusses and beams. Yeah, depending on how big the building is.
[00:32:26] Marty: yeah and now i mean steel's gone up considerably uh
[00:32:29] Marty: availability of steel has has uh been challenged
[00:32:33] Marty: although a lot of the big data centers have tied up a lot of the
[00:32:37] Marty: uh the new steel right so and they're not running some sizes
[00:32:41] Marty: for, for, for months. So again, if
[00:32:44] Marty: you can reuse you know, it's it's, I compare it to a few years back
[00:32:48] Marty: when, uh, all the big e -commerce buildings were being put up and you couldn't
[00:32:53] Marty: buy joists, right? You couldn't find joists across the country. So that really
[00:32:57] Marty: helped with the uh, the lifting or the renovating and the same
[00:33:01] Marty: now with these these uh shortage of all these all the steel
[00:33:06] Marty: because really all we're all really replacing is mostly just
[00:33:10] Marty: existing columns or stubbing columns so not
[00:33:14] Marty: so most of that steel has been much more
[00:33:17] Marty: available than for some of the new builds
[00:33:21] Justin: And then you're not in the data center game. That's primarily
[00:33:26] Justin: new construction and the height doesn't work the same way, I
[00:33:30] Justin: would imagine.
[00:33:31] Marty: yeah no we haven't we've looked at some over the years just because they
[00:33:35] Marty: bought buildings that are that are too low for even just as a data
[00:33:38] Marty: center kind of office but for the most part i think those are
[00:33:42] Marty: new those are mostly new
[00:33:44] Marty: buildings yeah
[00:33:48] Justin: Cool. I would say that's a good amount of time we spend to
[00:33:52] Justin: get a good understanding. I don't know if you could leave us with any rules of
[00:33:56] Justin: thumb or things that stand out to you that
[00:34:00] Justin: I think of in our business for brokerage. We have a couple mantras
[00:34:04] Justin: that always hold true. So one mantra might be like
[00:34:08] Justin: a tenant in 100,000 feet
[00:34:12] Justin: will never move to another 100,000 footer to
[00:34:16] Justin: save money on rent. Like people will say that all the time, but
[00:34:20] Justin: it just holds true that they never do because the cost of moving and the
[00:34:24] Justin: time, the hassle. Like if you hear that, you already know it's false.
[00:34:28] Justin: Like the second you hear it or like when
[00:34:30] Justin: people say my landlords, my I'm
[00:34:35] Justin: friends with my landlords. If I want to get out of my lease I'll just call
[00:34:38] Justin: him. He'll let me out. Don't worry about it. And you're like yeah, yeah, I
[00:34:42] Justin: hear you. But it doesn't actually prove out that way. Do you have
[00:34:46] Justin: any in your business, I would imagine?
[00:34:47] Marty: Right. Yeah, okay. Yeah, sure. I mean, we basically state that we're
[00:34:52] Marty: probably anywhere from quarter to
[00:34:55] Marty: half the cost and time lifting
[00:34:59] Marty: a roof versus building new. um and also you can if
[00:35:03] Marty: you've got two facilities to call it hundred thousand square foot facilities
[00:35:08] Marty: that are both 16 feet or you know uh tall you can
[00:35:12] Marty: combine that into one hundred thousand square foot facility that's now 36
[00:35:16] Marty: or 40 so you're eliminating that um and you can also
[00:35:20] Marty: um buy a smaller building and double or
[00:35:25] Marty: triple the cubic so that you're paying less on a per square footage basis
[00:35:29] Marty: rental basis, but yet, because until now, and I've
[00:35:33] Marty: been promoting this from day one, I'd like to see lease rates based on
[00:35:37] Marty: cubic footage not square footage right?
[00:35:41] Justin: Yes, I remember this. Yes, Marty's axe to bear.
[00:35:42] Marty: So that's, you know, it's not it's, it's going that way a
[00:35:47] Marty: little bit, you know, with the uh, the, the difference between
[00:35:50] Marty: the heights, but not, not exactly per, per cubic
[00:35:53] Marty: foot, but that does give the opportunity to someone to scale
[00:35:57] Marty: back by your smaller building um, and raise that and create
[00:36:01] Marty: the same amount of pallet positions, if not more.
[00:36:04] Justin: Yeah. Yeah. Why do you think we don't do that? It's just how
[00:36:08] Justin: it's always been done and changes stuff.
[00:36:10] Marty: Yeah, it just uh, you know the real estate industry is a big ship to
[00:36:14] Marty: turn. So, you know and the lifting part is only
[00:36:18] Marty: a small portion of the square footage costs and everything else. So, um, and
[00:36:23] Marty: it's only been the last, I don't know, I don't know how many years where
[00:36:27] Marty: the cubic footage has really started being a, been
[00:36:31] Marty: a big talking point.
[00:36:33] Justin: I would say it's never been more important than now.
[00:36:36] Marty: Yeah. And, and more so it seems.
[00:36:39] Justin: Yeah, and with e -commerce now they'll put in
[00:36:43] Justin: mezzanines more oftentimes. I've gone to a couple of sites that are
[00:36:47] Justin: way over 40 feet that have had three or four levels of mezzanines and all
[00:36:51] Justin: the conveyance systems.
[00:36:55] Justin: I've seen those primarily in the Midwest, but it's pretty cool to see some of
[00:36:58] Justin: those, like what people do to take advantage of that.
[00:37:01] Marty: it's the automation and that's become pretty pretty
[00:37:05] Marty: sophisticated it's uh it's pretty impressive to watch we've been
[00:37:09] Marty: in some warehouses where there's actually they're dark so everything's kind
[00:37:13] Marty: of robotic and you know there's
[00:37:15] Justin: You've seen one. You've seen more than one.
[00:37:17] Marty: yeah well we saw one that was a hundred footer right and this was like
[00:37:21] Marty: you know there was no one working in the warehouse it's all robots are
[00:37:25] Marty: programming and it's pulling a box from up here and it's pretty fascinating
[00:37:29] Marty: the technology that's out there now
[00:37:31] Justin: What kind of industry was that for?
[00:37:33] Marty: it's for a coffee company
[00:37:36] Justin: Okay. Yeah.
[00:37:37] Marty: yeah like a big chain of a car so they're pulling out a you know i need
[00:37:41] Marty: a box of this size cups and this size lids and and
[00:37:45] Marty: you know the trays and things like that so um but pretty
[00:37:49] Marty: pretty
[00:37:49] Justin: That are probably knowable, super consistent, only so many that are in
[00:37:53] Justin: high volume.
[00:37:54] Marty: exactly exactly yeah but again you're talking uh you know it's
[00:37:58] Marty: pretty impressive to walk into building that's 80 or 100 feet.
[00:38:02] Justin: That's insane and look up with a headlamp.
[00:38:07] Marty: Yeah.
[00:38:09] Justin: Nice. It's great spending time with you. I love hanging
[00:38:13] Justin: out and learning more about it and I appreciate your candor and
[00:38:17] Justin: being open and honest about it. I love that you're in the fight and you
[00:38:20] Justin: got all these projects going and you know how to be practical
[00:38:23] Justin: about how to underwrite things and sharing knowledge. Thank you, Marty.
[00:38:27] Justin: Have a good one.