Justin interviewed the Texas A&M Director of Investments who is responsible for finding general partners to invest in the Texas A&M endowment. They discussed what he looks for in an industrial real estate general partner and their interest and focus on small bay industrial.
Key Takeaways:
- Endowments are increasingly sophisticated when placing capital within the industrial asset class and Rush’s team at Texas A&M, in particular, have found their niche in small bay industrial, also known as multi-tenant industrial parks.
- Being vertically integrated is a key ingredient for endowments being interested in operators. They need to be large and mature enough to have dedicated teams from finance, asset management, property management, and often times leasing.
- Placement agents help with the heavy lifting of matching institutional investors with the right operators
- They have a very long-term, relationship-oriented platform and value their operators and investment partners, and are looking for programmatic investment platforms where they can continue to grow together.
- Growing with operators comes with its own challenges as their focus can change as they scale.
- Bringing an institutional process to the small bay industrial space is what is helping drive value from these assets
- Tenant diversification, “sticky” tenants and low turnover expenses help mitigate risk in this asset class.
Here is a 2-minute clip from Industrial Insights Podcast with guest Rush Harvey
Listen to the full episode below and subscribe to the podcast on Apple, Spotify, or where ever you download your podcasts.
“Talking Industrial Small Bay Property Investment and General Partners with Rush Harvey”
Highlights
- Real estate is part of what he does – 2:37
- The endowment funds – 4:28
- His industrial portfolio – 9:13
- Having quality operators – 12:43
- The nature of being more local – 17:06
- Executing processes at high levels – 22:04
Episode Resources
- https://www.txamfoundation.com
- Rush Harvey LinkedIn
- Grant Labounty glabounty@leeirvine.com
- Connect with Justin Smith
- https://smithcre.com/
- https://www.lee-associates.com/
- JBSmith@leeirvine.com
- https://www.linkedin.com/in/justinbsmith
Justin Smith
Thank you again for taking the time. Maybe you can give Grant and I a little bit about your role there at Texas A&M, and how long you’ve been doing it, and just a general state of affairs of you know that your time there what your experience has been?
Rush Harvey
Sure, absolutely. I’ve been at the Texas A&M Foundation for the last three years. The foundation is the nonprofit fundraising arm for Texas A&M University. So if someone gives a gift to the school to fund a scholarship that comes through us, we have a great mission. Texas A&M is now the largest public institution in America, with 70,000 students. So we have a lot of purposes, how we manage the portfolio and how we do business because we serve those students. For a land grant institution like Texas A&M, it’s a big mission; it’s a big deal. For those students that can get into Texas A&M, they should be able to afford to go, and you know, growing the market value of our endowment, which is just north of $2 billion today, is very important and will become more important going forward. We’re in a period of less and less public funding for higher education. We’re on a mission here, and the portfolio is globally diversified across all asset classes. I’m on a great team here at Texas A&M. It’s a team that’s growing. We’ve got a new Chief Investment Officer, Mike. He’s doing a great job; he just hired Ross Walmen from Memorial Hermann. Ross is going to cover more real assets for us. I cover more private equity from a day-to-day standpoint. We all work on the portfolio. Real estate is also part of what I do. Like McDonald is an associate, and Mason Walker will be an analyst for us with a student worker program. So a great team here and two operations folks to support us in managing the portfolio; It’s a team effort. I’ve been in this businessman to research and due diligence. Most of my career pretty was at Kansas State University Foundation. Another phenomenal organization with great leadership. My mentor, Lois Cox, taught me the way in regards, to an endowment-style portfolio. So very thankful to her and cut my teeth in private real estate at K state and thankful for that experience. It’s an honor to be here. I’m from Texas originally and happy to serve Texas A&M.
Justin Smith
I was looking into the history, I was amazed at how big the campus is. It’s very significant.
Rush Harvey
Yes, it’s a very large campus, lots of students; it’s only growing. It’s really nuts because Texas A&M is a pretty hard school to get into. If you’re in your top 10% of your class here in Texas, you get automatic entry, but it’s hard to be top 10% of your class. A lot of kids don’t get in. It’s actually pretty competitive. I’m involved at the May School of Business and when you get accepted to Texas A&M, you still have to have the grades to get into the May School of Business. It’s not like you just get in. These students will have to continue to work hard once they get here. We have a great mission and it’s only growing. This place is really growing a lot even in the last 10 years, the student body. Texas A&M, from an athletic standpoint, joined the SEC was a big deal; that’s when a lot of the growth here took place.
Justin Smith
When you think of all the things that the endowment funds, what are the main things, the main net food groups, if you will?
Rush Harvey
We are serving Texas A&M University, we want to send them as much support as we can, but we can only take so much risk. Our distribution rate is roughly 5%, throwing on inflation, we need to generate a nominal return of roughly 7.5%. It needs to be a portfolio that can get there over a full market cycle. In regard to the funding, it’s all of the above, all the different schools on campus. We also support projects from a fundraising perspective when our development officers go out and raise money from our former students and friends of the university. We’re not just raising dollars; those are dollars that just go right into our endowment when we put them to work and raise money for projects, expendable gifts that are going to be spent immediately. We have a brand new music hall that just went up a few years ago; that’s state of the art. We raised a bunch of money for that project and going to the endowment. We’re going to support A&M for construction projects, etc. It’s really a big job, a big service we provide A&M. That’s why we’re here.
Justin Smith
When you think of how real estate fits into the investment strategy for the endowment, how do you look at that?
Rush Harvey
We have a strategic asset allocation. We work directly with our investment committee to decide, what is the mix of assets that we need to have to generate that nominal return? We started out with, what’s the number, it’s roughly 7.5%. What is the mix of assets that should get us there over a full market cycle? I’m thinking, a 10 year rolling time period, so real estate is a part of that. Now it’s roughly 8% allocation for us and that’s all private real estate. Our goal within that portfolio is to have balance. We want to generate returns that match our nominal return, and hopefully, a little bit more of that. We are going to be diversified by product type, by the type of general partner we work with, an operator model versus an allocator model. And also the balance between income-producing real estate and capital appreciation, more opportunistic, oriented real estate. I do think that our exposure to real estate will increase over time without a lot of good success in the sector. There are a lot of different markets that are being disrupted, where we can allocate, you know, long-term money to generate that return target. I wouldn’t be surprised if we’re north of, you know, 10% of the portfolio on a continual basis.
Justin Smith
Got it. Then industrial is one of those product types in the real estate asset class. Have you had an interest in exposure to industrial the whole time you’ve been there, or is that recent?
Rush Harvey
It’s a more recent focus for us. Real estate, really every asset class for us is an opportunistic mandate. We’re not going to make macro or sector-oriented calls to go and do business. We do not say, Hey, we don’t have any industrial, let’s go and find a GP that does that. Our sourcing processes is very proactive where we’re trying to hunt for GPs that have a repeatable process with people that are extremely dedicated to that process. They have the non-investment resources to execute that process. If that leads us to someone doing more industrial related deals, so be it. We’ve got exposure to industrial specifically, but also to asset classes that are geographics specific, like Canada, city-specific like Washington, DC, we’ve got senior housing specific, we’ve got other exposures in the portfolio, or found great partners that we think can generate those returns in their specific area. We do like industrial but we didn’t approach it from saying, hey, let’s get more exposure there. We do have some more diversified mandates as well, GPs that have exposure across different real estate sectors where there is industrial exposure. We have roughly 15% of our overall real estate portfolio that is industrial. That’s more focused on, you know, small Bay facilities that are located in more densely populated areas and can benefit from high barriers to entry and replacement costs. So that is what we like about the space.
Justin Smith
When you are saying non-investment resources for operators, is that just a general balance sheet, or that they have a more stable operating platform? Is that what you mean when you say that?
Rush Harvey
What I mean is, there is a CFO that is dedicated to the business, there’s Investor Relations folks dedicated to the business. We want our investment teams focused on acquiring assets and not focused on non-investment-related tasks. So for us, we need to make sure that the firm is of institutional quality. They have the people dedicated to serve us as limited partners, but also to help them with administration, HR, all the things that need to be done by someone with professional experience. A lot of times we will make educated bets on firms that are earlier in their lifecycle in regard to their business. If it’s a fund one, or fund two, because we’re investing in funds, we’re not doing direct deals. It could be a fund one, but we want them to be set up operationally, like a fund five or six. So that the investment team can go out and work that market invest our capital, and get quality assets for us. I’ve seen it time and time again in our business, whereas as an allocator, you get excited about an opportunity. If someone spends out, if it’s a venture capital they spend out from a top tier firm, whether it’s Sequoia Greylock, Excel, etc., to launch a fund and they fail because they don’t have the non-investment side of the house up and running. The same could be said for someone that comes out of the Siebel CRE or any other type of real estate entity that launches a business. That’s what I mean by non-investment.
Justin Smith
Got it, that’s helpful. They know deals and how to source them and underwrite and acquire, that has nothing to do with all the stability of the operation, right? Those are two totally different facets that all have to be stable to be a gun.
Rush Harvey
That is why a lot of institutional investors don’t invest at the lower end of the market or smaller firms because of that business risk; they’re not comfortable with it. They would rather write a check to a larger, say more core fund, that’s very diversified. Maybe real estate is asleep on that firm’s business. There’s nothing wrong with that. We look at those deals as well. You will probably lose a little less sleep at night, knowing that business has the backstop of a much larger entity. We will take that risk with more niche, more boutique-type firms, but we have to get the non-investment diligence side of our work done and get a lot of comfort room.
Justin Smith
Finding operators in industrial that fit that profile, you touched on a small bay, or some will call it shallow bay. Some will call it multi-tenant, but that smaller multi-tenant projects. I feel like it’s in its infancy of having quality operators where they do exist, but there’s a lot of growth in that market right now. I feel like that is a place you can go in search of yield, but still like a conservative yield or risk-adjusted. It seems like an interesting space to be in right now. It’s at first surprising, but then maybe exciting to see the group like yours has come across it, and believes in the investment thesis, and is playing in that space. So how did you guys come across that, or that’s just as I suppose if you’re searching for GP’s, maybe the GP’s, finding quality people kind of help gets you up to speed on that investment thesis?
Rush Harvey
Absolutely, sourcing opportunities is really an important part of our process. We want to be reactive and get flow from our networks and from our colleagues in the industry. We also focus a lot on the placement agent community, so those firms that are helping investor management companies raise capital. Those placement agents know what a Texas A&M deal looks like. From a reactive side of things, we get a lot of love. When we got introduced to our industrial partner, that was an agent that said, “Hey, this could be a potential Texas A&M deal. I don’t know if he had exposure to this asset class, but you should take the call.” We did and we ended up doing business. We also try to be extremely proactive and go hunt for deals to find opportunities that might not be covered by the market or by firms that aren’t hiring an agent. We can’t sit around and wait for the phone to ring. It’s really important that we have a balance from a sourcing perspective, that’s both proactive and reactive. That’s how we got associated with industrial and particularly small bay industrial. We like the space and ownership tends to be pretty fragmented in this area. There are opportunities to acquire assets at respectable cap rates for those that are looking to sell and for an operator that can come in and put a lot of smaller assets together and bring an institutional process to that. We really like that there are more opportunistic beds to acquiring real estate here, what I mean by that is, it’s an industrial complex that may be mismanaged, maybe the ownership hasn’t given the property a lot of love, it’s going to have cutbacks to make it attractive to the market, but still could be 100% leased. Now you can come in to acquire that property, provide liquidity for the owner, and put some CapEx into it. What I mean by that is, stripe the parking lot, clean up the landscaping, paint the building, do things that are a lot of blocking and tackling. So not a ton of CapEx going into the deal and making it a much nicer, cleaner asset, not only for the current tenants, but to attract new tenants. Small bay industrial, what’s great about it is the flexibility. You can have a company generating significant revenue and need a ton of space but be next to a Mom and Pop type of shop that just needs a little bit of space for a really small business. Another thing we like about it is the potential for vertical integration across a plant. You have the opportunity to own all aspects of the process, knowing the tenants managing the tenants, and we found that to be critical during the COVID time period. Having a vertically integrated operator that not only focused on acquiring leasing, owning these assets, but also managing them at the property level. I think for something like light industrial, where it is a little less institutional at the tenant level, that vertical integration really helps because then you have that customer service model that can add a lot of value and keep those clients sticky and also make them a little more open to rent increases should they need to happen.
Justin Smith
Without a doubt, the nature of being more local is that once you’ve found your spots, you want to stay within that spot.
Rush Harvey
The small bay is a really small part of the overall industrial market. You have to be pretty tactical with how you want to acquire properties. We’re not a big fan of taking on development risk. We’d rather have a partner that goes out and buys something at a respectable cap rate. It’s hard to find industrial at a respectable cap rate right now because the asset class has gotten a lot more attention over the last few years, and maybe it’s ever happened. We’re going to see a lot more competitive processes around acquiring those assets. You got to be careful that if something is trading at a pretty good cap rate, that you’re not buying a falling knife, something that needs too much cutbacks, where there’s no return for you, we don’t want our managers putting leverage at the fund level to increase risk.
Justin Smith
It’s just at that point where that product type is starting to become more institutional, or there is a path for the institution’s to take what is traditionally like a mom and pop industry or like a cottage industry and really, like take those best practices, and take being vertically integrated and, and make the most of that.
Rush Harvey
Absolutely, small mid-cap industrial assets have not received much attention from private equity firms. If a firm can be vertically integrated and have the resources they can focus on that segment, buying assets that very few firms are targeting. A lot of the larger real estate, private equity firms are raising lots and lots of money, so they need to buy larger assets. Which makes small bay a lot more attractive. You’ve got to have operational expertise, property management, the marketing resources available to really transform a small or mid-Bay asset. A lot of boxes have to be checked but that opportunity is out there and there’s a yield component. Now, in a world where rates are so low and going to stay low into the seeable future, how can you get some income without taking too much risk. We think that this is an opportunity to get a pretty consistent sustainable yield without going out and taking on too much risk. There’s also an upside from potentially selling, if you don’t want to hold the asset forever, you can collect a coupon for eight to 10 years, roll up some of these small assets, small-mid-bay assets, to an institutional player. So, if you have a long-term time horizon, this is a pretty interesting asset class right now.
Justin Smith
It’s almost hard to imagine how it can go wrong. It’s almost one of those that it’s not that boring, per se, but it’s very predictable. And it seems like the risk is pretty mitigated.
Rush Harvey
The focus for us is that these are shorter-term leases. There can be higher vacancy rates, which could lead to issues collecting rent, especially if it’s a mismanaged property. If those tenants have options and don’t feel the respect from management, so it’s really important that they get that with our assets. Risks are inherent when improving a property so your engineering and your underwriting is really important to buy because when you reengage the marketplace, once those renovations are final, they need to be done right. If you want to get multiple invested capital, known as respectable, so you have to have a good reputation. Real estate is an interesting asset class, you meet a lot of interesting people. I think ego is one of those things that you have to try to judge. In real estate, there’s a lot of it and we really want to work with folks that are humble, and respectful, and do business the right way. So, maintaining a respected reputation with the leasing and marketing community is important in this asset class. Also risk for geographic focus too, you want to have some diversification, don’t want to be in one market, as well. If you’re going to be in multi-state type of portfolios within a team that can manage those assets. So to your point, there aren’t a ton of risks, but you still have to execute a process at a high level.
Justin Smith
I was just going to ask, how you think about geography, because if you’re managing a lot of tenants, and each one requires its own manager, but you don’t have a presence big enough in any given market. You could imagine how you can be too thin in your management so I could see that be something that you’re cognizant of and sensitive to?
Rush Harvey
Absolutely, something we tried to understand in our diligence was trade wars. How that could impact industrial space. Companies may look for less expensive alternatives moving production from China to Mexico and how could that impact industrial and those tenants. We got comfortable around it though and for us it’s about balancing diversification. The positive of light industrial is you have lots of different tenants doing lots of different things. Also having management at the property level, that you’re not just letting anybody in, there can be a, a low-quality aspect to light industrial, letting these tenants do whatever they want in these spaces, which can lead to those reputational risks that I mentioned. That’s why we think that property management or vertical integration is so important because you want a tenant base that is high quality, that isn’t going give us reputational risk. We care about A&M’s core values and our mission to serve. We don’t want any investment we make in any asset class to know to give us any exposure to something that we wouldn’t want to talk to one of our donors about. That is just important. So, we have to also take some risks to generate the returns to support Texas A&M, and this is very similar, whether you’re here at A&M or Harvard or anywhere else. We don’t support the same percentage of the operating budget that say, a Harvard does, or Rice University does, or Dartmouth does because we’re not private institutions like they are. So, they need larger endowments to support them but for our public school like A&M all that really matters. It’s part of our diligence process, we try to be extremely thorough, we try to reference call with everyone that we can, have exposure to potential partners because at the end of the day, it’s a relationship. We want to know who we’re doing business with and we want to know them and know their kid’s names. For them to understand who we serve, and that’s our student body and for that to be important to them. I tell everyone, respectfully, at Texas A&M or when I was at Kansas State, Kansas State is just another name on your high list where the business has to matter. So it’s just really important for us to have them to understand that, and then that goes into just having a thorough process room due diligence.
Justin Smith
Then once you have known that you have the right people in place that are taking care of your investments, I could imagine that then you can develop great relationships with them. You can even learn that much more about absolutely various different segments because I feel like you guys have such a wide variety.
Rush Harvey
Our goal is to be in funds one through nineteen. Now, once we find a great partner in a specific asset class, we want it to be a long-term relationship. That doesn’t always happen. We’re constantly sourcing the market for new ideas and this is my way of putting it, but basketball, we want a great starting five on the court that’s hustling that’s playing defense that’s boxing out, that’s going to lose balls, that is sweating, or press. If my point guard now isn’t going 100%, I need to look to the bench and know who to put into the game, or a center breaks his leg, I’ve got to have a backup. If one of our managers isn’t doing what we’re paying them to do, now we need to know who else could be out there to replace them. We’re constantly evolving, working the market to ensure that the A-team is in the game at all times. When one of our managers comes back with our next one, we have to re-underwrite it. We tell everyone that’s that, yes, we want to be in all your future funds as long as you continue to execute and don’t change the mandate from which we originally hired you to do. Those are tough conversations to have sometimes because a lot of these folks are very entrepreneurial, they raise larger funds, they do want to do larger deals and have more success, etc. But for us, it is all about having a repeatable process and within real estate, we have the ability to do that with a lot of our partners, but at the same time, it’s not guaranteed that they will react. It’s part of the job, and we have to be able to gracefully, say no and we want to be as respectful as we can to everyone if we pass on.
Justin Smith
I imagine for some operators part of growth right it does lead you down different avenues. As I’ve seen in industrial, there’s a bunch of different models out there and they do change over time. So yeah, I could see that.
Rush Harvey
I do like industrial, and I think what’s really good about it tenant diversification is. I spoke a little bit about it but just thinking out loud here, and you’re going to have manufacturing and contracting services, and maybe retail or apparel type of stuff within industrial, but you’re also going to have tack and logistics, food and beverage, engineering, or no tenants. It’s a really interesting aspect of the asset class that we like. Now if you invest in office, which is a very challenged space right now, well, it’s the office. The underlying diversification here, I think it does give you a little more risk management as well, to feel good about the exposure.
Justin Smith
To give you an example of the 14 tenants I have in one project I own in Irving, Texas. It’s a medical device repair company that does maintenance and repair, an electrician, a general contractor, a company that replaces windshields in your automobile, a person that takes care of batteries and switching out batteries for warehouses and other automotive companies, and a pest control company. That’s just off the top of my head, and one of them has been there since 1993 and we renew one year at a time since I’ve owned the asset but clearly since 93. That’s how he does it. He lives in the neighborhood and he’ll be there in 2023 and 33, for that matter, assuming everything continues on the same path.
Rush Harvey
Listening to those tenants, that’s very I don’t want to say like non-tech. The thing about industrial that’s interesting is that the benefit, and the massive tailwind from e-commerce. I think really helped the asset class, and then you have tenants like that, that are repairing stuff or have a pest control business that are pretty sticky. If they are comfortable, there’s no reason for them to leave and if they live down the road, even better. That doesn’t surprise me at all.
Justin Smith
You must have had to get up to speed on e-commerce and last-mile delivery and get pretty educated on that. That’s an exciting component of the industrial business right now. I feel like the small bay just fits right in there with it. Where Amazon won’t be your tenant, but will there be a bunch of companies that are all joining the e-commerce evolution, and possibly be tenants or be service based on those tenants or follow on. So, I feel it’s exciting to see that help kind of buoy that asset class.
Rush Harvey
I think there’s better prospects for small bay relative to the big bay for just written appreciation. Also higher yields than distribution warehouses, where you have a FedEx, UPS, and the Amazon that want that space, that’s when it gets way more competitive yields to get compressed. You can’t make the return like you can small bay, and there’s a lot more development risk with the big base stuff, where Amazon could go down the road, and still serve their client base, and then you lose that tenant. They’re hard to replace at that level, which makes small bay much more attractive. I mean, you’ve got lower operating costs, capital expenses, which are going to generate more cash efficiency. It’s a really interesting space right now and I think allocators, folks in my seat, are trying to figure out how they can get more exposure to these types of mandates that provide yield but also a tailwind to have a return on capital that’s higher than 1.4X. There is going to be more demand but there aren’t a lot of players that are institutional, that are attacking this market too. So, for folks like me, it’s tough and that’s why the diligence has to be very thorough and you got to attack the market to make sure you know, who’s doing this.
Justin Smith
Do you find ones that include metal buildings instead of concrete tilt-up or tilt-wall construction? Does that make any difference to you on how you view that or is that all the same?
Rush Harvey
We leave that up to our operator. Most of our exposure is concrete to facilities. I wouldn’t be opposed if they acquired assets that were no more metal-focused, but we leave it up to them in regards to managing risk and having diversified portfolio of assets.
Justin Smith
Are there any markets that are up and coming or markets that still comes back to the operator first?
Rush Harvey
Absolutely I think the West Coast is really interesting. We do want to have exposure there. I think California, Nevada, Arizona, Washington State, and Colorado are pretty interesting. Texas is a tougher market for light industrial but that’s our backyards so I wouldn’t mind doing something here. If I had to pick and choose, I would say more of West Coast central focused for geographic standpoint.
Justin Smith
We’re all scratching our heads here trying to figure out the yield part and how that all makes sense because we have the rent growth has been off the charts, 5 to 10%, annualized from 2014 till last year. Then it seems like we’ll have a 3% – 3.5% for 2020 to 2021. Then anybody’s guess is the future but if you look at the forecast and the trends, it looks like it goes back to 5, 6, 7 percent annual rent growth rates again. The returns are you getting on the cash flow basis, are you getting on your exit. It’s an interesting challenge out here, but because there’s so much rent growth, it seems like there are still opportunities in that space because it still has a lot of the qualities that we already discussed.
Rush Harvey
Market rents for smaller spaces should grow at higher rates with less risk than larger spaces going forward. Occupancy rates, historically, have been higher as well. There’s limited construction of smaller bay, so if you can find a good asset and get leased up, just cash flow and keep it simple. If you can be extremely competitive with your rents, and you’re making a good yield, after all your expenses, then maybe you don’t have to raise rents as much as the market. Which is only going to help you have secure tenants over the long term and make it more competitive for them to never leave. Because if you have higher quality assets and do not raise the rent like to place across the street, they feel more tenant love and support forever. I think that’s putting property owners at pretty advantageous spot right now. So, it’ll be interesting to see who sells who holds and how turnover is affected. You can only raise rents so much before people leave and given where rents are at now, given where yields are out now, if you want to maintain sticky revenue via the return, I just don’t see a massive reason to raise rents. These tenants just given where yields are currently at and that expenses are not increasing.
Justin Smith
Out of the 100 buildings under construction in So Cal, I can’t think of one that’s multi-tenant. I may have like two but not like these business parks. It’s amazing to see that that’s just there was a point in time when they built them and that window has closed and that’s not in the foreseeable future that it will come back.
Rush Harvey
We look for places to put mine to work right now. Industrial is really interesting, multifamily housing is pretty interesting. If you look at workforce housing, that’s interesting. Manufactured housing is also interesting, but hotel, retail, and office is less interesting. There’s plenty of places to look. I think grocery-anchored real estate really interesting as well.
Justin Smith
What part of grocery-anchored piques our interest?
Rush Harvey
What we like about grocer anchor is the stickiness of the rent. You can come in and buy a property with the grocer anchor tenant, that has a low a walt, say one to three years. We like this outside of the US more than here in the States. For us, this is more of an international play, that’s a different property management thesis over there. If you can come in and say, hey, Aldi, we want you to sign up for a 15-year lease and we’ll come in and strike the parking lot, we will fix the electrical, we’ll install new doors, and we’ll add value to the property management. Wow, now you turn maybe a C plus asset into a B plus, A-minus asset in three or four months, you go from having an asset that’s on the brink of the tenant looking for somewhere else to store to being pretty happy. You’re getting a great yield while you wait. For us, we get some currency diversification as well and we’ve got a lot of exposure to that. We’re okay if a partner will buy a piece of property that has the grocery-anchored real estate, along with some other properties that they can sell on a lot basis. A lot of the local or even regional investors in Europe don’t want to own all the add-on assets. They love the grocery anchor, but they don’t want to own the bakery, or the gym, or the other assets that are part of that property that’s for sale. So, we can come in value all of that at zero, pay a respectable cap rate for the grocery anchor, resign that lease, and then sell off the secondary assets and anything we get for them is just essentially gravy for us because we valued them at zero when we purchased the property. So, we do have exposure to GP’s that do that.
Justin Smith
Got it. That’s another nuance, that I think speaks to what’s probably one of the more energizing parts of your role in your business is getting to learn each asset class and learn all of the great people that are partners in general partners in those asset classes and really get to learn and grow within each one of them. I imagine that’s pretty fulfilling,
Rush Harvey
It’s a real blessing because I have a ton of fun doing this. The reason why we moved from Denver, Colorado to Manhattan, Kansas, when I got the job in Kansas State was the purpose behind this job, what we do supports an institution. K state, also a land grant school, like Oklahoma State, sorry, I went to Oklahoma State, but also like Texas A&M, and I love the purpose aspect of it. It’s really important to me. In real estate, we’re having a ton of fun. For land industrial mandate, we have to spend time. One trip touring assets over in Phoenix, learning about the property. For our grocery-anchored, you got to see the assets, got to see the folks that are managing the properties because when I’m doing due diligence at the asset level, I’m not going to pretend to do what you do. You do have that skill set to have that expertise. That’s why I try to find folks that do but when I’m at the asset level, I want to talk to the folks managing the property and understanding how they do business and what’s important to them, and how they get the support they need to be their best to serve the tenants. We do have a lot of fun across all asset classes, venture capitals are a fun one for us, early-stage technology, we believe in that sector and have great partners there, and it’s a lot of fun.
Justin Smith
Those are experiences that are so unique. Once you’ve learned about a different segment then that’s something you can build on.
Rush Harvey
Just putting it all together in a very diversified portfolio, a service-oriented to go back, generate a return to Texas A&M. Our role is only going to increase over time. We wouldn’t have it any other way and it makes our job that much more meaningful.
Justin Smith
Rush, I’m sensitive to your time, but I sure appreciate you carving out a couple of minutes for us and going deep on industrial and sharing some other parts of it.
Rush Harvey
I really appreciate it, guys. Thank you for having me today. Great conversation, it’s a wonderful asset class. I really enjoyed the conversation and look forward to staying in touch.
Justin Smith
If we meet any operators that are Rush where they will be sure to let you know.
Rush Harvey
I appreciate it, guys. Justin, Grant. Great to see you today. All the best to you and your families. We’ll talk soon.
Justin Smith
You as well. Take care.
Rush Harvey
See you guys, bye.
Justin Smith
Bye.
