Each quarter, we’re sitting down with Jamestown CEO Matt Bronfman to discuss all things real estate. This quarter, we’re looking at real estate performance and resilience.
Matt Bronfman joined Jamestown in 1998 after being introduced to the company while he was working as a lawyer at Holland & Knight. “I was not somebody running from the law,” Matt jokes, “I worked in real estate law and Jamestown was one of my clients. I had the opportunity to join a great organization and took it. It’s been a great 22-, almost 23-, year run now.” We sat down with Matt to discuss his 25 years of experience in real estate investing and managing: the economic cycles he’s seen, the resilience of real estate, and the long-term view he takes on real estate investments.
What drew you to real estate law?
MB: I was always interested in the built environment. I went to Northwestern Law School in downtown Chicago, which has some of the most interesting buildings in the country. In walking around the city, I became very aware of how certain buildings made you feel good, or certain buildings were depressing, and the impact of sidewalks. When I graduated from law school, I gravitated toward real estate law partially because I was so interested in the built environment. I’ve always been intrigued by how you could make a building more attractive so that it makes people feel good -- how to use park space, green space, and that sort of thing to impact people’s experience.
In your time at Jamestown, you've had a lot of experience creating built environments. What are some lessons you've learned?
MB: One of the things I’m proud of in my time is we have become much more of a real estate operator, in particular over the last 10-12 years. I draw a distinction between a real estate allocator on one hand and a real estate operator on the other. Allocators are the equivalent of someone who coaches a game from the sidelines, but doesn’t actually play in the game. They rely on third parties to do everything. I’m convinced that the real estate business is a roll-up-your-sleeves, hands-on business. The most successful companies through cycles are the ones who can roll up their sleeves and effectuate change. I’m very proud I’ve played a leadership role in turning Jamestown into much more of an operating company.
What are some of the benefits of being a company that engages in the operator side of the business?
MB: It’s really important when you’re going through a difficult point in the economic cycle, like a recession. When things are going well, the rising tide will lift all boats. When the wind is at your back, anyone can believe they’re a real estate investing genius. It’s in down cycles, when the wind is in your face, that you differentiate yourself. I’m convinced that being a real estate operator is how we so successfully weathered the Great Recession and how we will weather what is in front of us right now. There are companies that play from the sidelines, cross their fingers, and hope things go well. And there are companies that roll up their sleeves and find ways to make sure things go well. Jamestown is the latter.
As Jamestown has become an operator, what has changed in the company structure to allow for that?
MB: Coming out of the Great Recession, we became much more vertically-integrated. We’d always done some property management, but coming out of the recession we became more focused on vertical integration around creative, marketing, construction, development, and other functional aspects of running a real estate business. We were never purely an allocator, but we added these in-house services in the Great Recession as part of our response to economic conditions. It was not only our way to address the problems the Great Recession was causing, but it moved us forward to do even greater things, like Ponce City Market*. Ponce City Market was something we bought coming out of the Great Recession because we saw it as an opportunity, and we wanted to have our own people doing most of the work.
How has Jamestown responded to the current challenges of the COVID-19 pandemic?
MB: We saw it coming relatively early, so we took steps as early as early February to have our people set up to work remotely effectively. That allowed us to function successfully when we shut down our offices in mid-March. We’ve been proactive in doing things to help our properties. We created a tenant portal to help our tenants understand different ways to cope: from learning how to access PPP loans to shifting effectively to pickup and delivery models for our restaurant tenants. We also realized words alone weren’t enough, and we needed to contribute money, whether it was to negotiate rent relief, help a tenant make payroll, or reconfigure a space to work in a socially-distanced way. We set up a $50 million relief effort to help our tenants get through the crisis, and we’re still relying on that program to help people. We have the view that we’re all in this together.
What does resilience look like at Jamestown?
MB: For the benefit of all our stakeholders--our employees, our tenants, our investors--we need to be a long-term, sustainable organization. What does it mean today to be a sustainable organization? It means supporting tenants with the relief effort we set up, it means helping tenants figure out how to do pickup and delivery service, and it also means being a sustainable organization in terms of focusing on sustainability - both in terms of environmental impact and business continuity. We’re very focused on what we can do to make sure Jamestown is a thriving organization for the long haul.
What do you see as the benefits of investing in real estate versus other investment vehicles?
MB: The benefits of real estate investing are several-fold. One: it’s real. It isn’t in the ether; you can point to it. Yes, times may become difficult, but you own a share in something real and tangible.
The other thing that’s great about real estate investing, especially if you do a good job with it, is real estate can appreciate in value with time. So many things get less valuable over time. Let’s say you buy a new car. You make a right turn out of the car dealership, and you’ve already lost a couple percentage points in value. Within a year, you may have lost 15% of the value of the car.
One of the things I have always appreciated about real estate is that if you do something of quality, it becomes more like an antique car that can actually appreciate in value. You take a building like Ponce City Market, or Southern Dairies across the street: these are old buildings that have gone through different uses, whether it was a showroom, warehouse, office, residential, or retail. These are great buildings with great bones. In my experience, assets that are well curated and cared for can appreciate in value, whereas so much of what you buy in this world, like a new car, is worth less so quickly after the purchase. There aren’t many things you do where you clip a coupon that can produce a 6% return today and then 10 years from now, if you do a good job, can potentially produce a higher return.
Speaking of Ponce City Market and Southern Dairies, Jamestown has worked on quite a few adaptive reuse projects. How did that strategy develop over the course of Jamestown's history?
MB: The first major adaptive reuse we got engaged in was Chelsea Market*. We invested in Chelsea Market in 2003, and that was one of our first experiences buying that type of building. When you buy a building like Chelsea Market, you develop a specialty, and you want to amortize the brain damage. You invest all this time in understanding how a building like Chelsea Market functions: how to maintain and enhance old buildings. You get good at understanding the equation and develop skills in this space. That’s where Ponce City Market originated. We took our knowledge from Chelsea Market and realized we could apply what we’d learned to other buildings. Adaptive reuse buildings are tough. They come with their own unique challenges, but when executed well, they can achieve great things.
Last question: you mentioned how Jamestown shifted to a remote work model in response to the ongoing global pandemic. What's your perspective on current discussions in the news about the future of office space as many companies have had to make this adaptation?
MB: I am a believer long-term in the office space. I think in this crisis, people have found out that their teams were more effective than expected remotely, however, I’d emphasize a few points.
First, it has worked well in emergencies--to get out reports, put out fires, that sort of thing--but what’s missing is collaboration. In a business like real estate, getting different people sitting around a table sharing ideas is very important.
Second, if you don’t go back to the office, there’s no opportunity for mentoring, which is even more important for young people. How do you get mentoring if you’re simply working remotely? The other thing that happens is, if some people come back and others don’t, the people who are back are much more of a team and, to use a line from Hamilton, are “in the room where it happens.” This pandemic is unique because everyone was working remotely in the early days, so we were all on equal footing. As people start to come back, the people who are in the office have a huge advantage over people who are remote. You may do a video conference call with two people in the room and two on video and make a decision in the meeting, but walking out of the meeting to lunch with the other people in the room, you may change your minds. Remote working worked better when everyone was doing it, but when some people are and some people aren’t, the remote workers are much more likely to be marginalized.
I think we will get to a place where there is more flexibility. People have found their teams are trustworthy and maybe they don’t need to come in every day for very strict hours. I think you’ll see more people say they want to work from home a day or two a week, and I think that’s great and a totally workable model. But even with someone working from home a few days a week, they still need a desk at the office, so it’s not that impactful to the need for office space and the office environment.
*Information on and photography featuring Jamestown’s current and previous portfolio of projects and properties are not representative of Jamestown Invest 1, LLC’s investment strategy and are not representative of the scale of investments that Jamestown Invest 1, LLC intends to make. Further, there is no assurance that Jamestown Invest, 1 LLC will be able to achieve its investment objectives or to access investments like those identified. Prior performance is not indicative of future results.
Investing in Jamestown Invest 1, LLC’s common shares is speculative and involves substantial risks. The “Risk Factors” section of the offering circular contains a detailed discussion of risks that should be considered before you invest. These risks include, but are not limited to, illiquidity, complete loss of invested capital, limited operating history, conflicts of interest, blind pool risk, and any public health emergency. In addition to the foregoing risks, the adverse economic effects of the COVID-19 pandemic are unknown and could materially impact this investment. Further, there is no assurance that Jamestown Invest 1, LLC will be able to achieve its investment objectives or to access targeted investments like those identified.