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Commercial Investment Real Estate Podcast

Jamestown CEO Matt Bronfman, joined Larry Guthrie, award-winning communication executive and industry speaker, on the Commercial Investment Real Estate podcast. Through the conversation, Larry and Matt discuss trends emerging from the pandemic within office and retail real estate, geographic regions Jamestown is targeting for future acquisitions, the decision to broaden its capital structure to include retail investors through Jamestown Invest, ESG investing, and more.

Read the conversation between Matt and Larry below.

Nicholas: Welcome to another episode of Commercial Investment Real Estate podcasts. I'm Nicholas Leider, senior content editor of the magazine. In this episode, Larry Guthrie, CCIM Institute Director of Communications is joined by Matt Bronfman, Principal and CEO of Jamestown, a global real estate investment and management company that has completed massive downtown projects, including Chelsea Market in New York, Ponce City Market in Atlanta, and San Francisco's Ghirardelli Square.

The two discussed the secret to the firm's enduring success through its 37-year history, supporting tenants during COVID-19 and strategies for approaching the retail space from a unique perspective. Bronfman also details Jamestown's direct-to-consumer investment platform to encourage participation from new sources.

Larry Guthrie: Hi, I'm Larry Guthrie, Director of Communications for CCIM Institute and I'm here with Matt Bronfman, CEO of Jamestown, a global real estate investment and management company. Jamestown's ongoing mission has been transforming spaces into innovation hubs and community centers. And I think their track record speaks for itself with projects like Chelsea Market in New York City, Ponce City Market in Atlanta, Ghirardelli Square in San Francisco, just to name a few.

Before we jump in, we do have a quick disclaimer for compliance purposes. Securities are offered through North Capital Private Securities corporate member FINRA/SIPC. Jamestown's portfolio of projects is not representative of Jamestown Invest One’s investment strategy and the scale of investments the fund intends to make. An investment in Jamestown Invest is illiquid, involves substantial risk, and there's a potential for loss of part or all invested capital. Visit jamestowninvest.com/oc for more information on the full offering statement. And we'll get more into that when we chat with Matt, but now that we have that out of the way, thank you for joining me, Matt.

Matt Bronfman: Pleasure to be here, Larry. Nice to be speaking with you, and to be a part of this dialogue.

chelsea_market
Jamestown sold Chelsea Market to Google in 2018

Jamestown’s 37 - year Experience

Larry: Absolutely. When I looked at the projects that you had done, I had to say- we so often see these really high-profile projects but don't know the names of the people and the companies behind them, so it was exciting to have a chance to talk with you about your 37-year history. You've been around for quite some time, some incredible accomplishments. You mentioned that the firm braved the Great Recession relatively unscathed, what do you think was the secret behind that?

Matt: Well, I'd say a few things. Number one, we were one of the largest sellers in the United States, a little over $5 billion in the 18-month period leading up to the Great Recession. We just had a company view that the markets were overvalued and we're one of, if not, the largest sellers in America in advance of the Great Recession. But of course, relatively is a relative term. To be clear, we took our lumps as well. We were fortunate to sell a lot, but we own plenty of assets, but I would say a few things about what we continued to own going into the Great Recession.

Number one, we had a diversity of assets across markets, across product types and that helped us a lot. We also have a really strong internal value-add team. We have people who do leasing, who are in marketing, who are in development construction. I'm a believer that there's a difference between what I call 'allocators of capital' in the real estate space who more sit on the sidelines and sort of cross their fingers and hope things go well and there are 'operators of real estate' who roll up their sleeves and really dig into the dirt, so to speak.

And we're that latter category. We're 'roll up our sleeves' guys. We're in the real estate business. We're not 'money managers'. We're not 'tech guys' by nature. We are a real real estate company. And all of our internal skills and vertically integrated teams really helped us a lot in the Great Recession and it also made us better coming out of the Great Recession. In other words, it's easy when the wind is at your back and things are going well, but when you've had to basically tilt against the wind and fight against it and create your momentum, I actually think the Great Recession made us a much, much better team today than we ever were in the past. It made us more resilient, it made us more creative and just a better operating real estate company. So it really set us up for the future very, very well.

Larry: I guess there were some great lessons from great tragedy if you will. It was a proving ground for so many and it sounds like you did amazingly well with the way your business strategy was set up, to begin with. Did you find that that was different in this past year? Or you were just set up for success because of that? And so this past year didn't necessarily- you didn't see those speed bumps.

“This crisis also presented unique challenges, and I think having a vertically integrated, hands-on real estate team helped us a lot heading into this crisis, […] we learned to be very creative and think outside the box.” – Matt Bronfman

Covid Safety Jamestown

Matt: Well I'd say a few things, I think from a crisis, it's a cliche but from a crisis can come opportunity, and the crisis of ‘08 led to opportunities for us. Again, to be a better real estate opportunity and to find some great buying opportunities. This crisis also presented unique challenges, and I think having a vertically integrated hands-on real estate team helped us a lot heading into this crisis, but of course, this was unlike anything we've seen in the past. But I think we learned to be very creative and think outside the box.

For example, we ended up coming up with a $50 million fund to help our small business, tenants our local retailers, restaurants, etcetera. Help them survive this most recent pandemic. And so, things like that, that took a lot of creativity. It took a lot of capital but we were just committed to keeping our tenants in business, keeping them going. And so, yeah, I think we learned a lot of creativity from '08, but I think every crisis of course is unique and so we had to respond in new ways this time around.

Jamestown’s Commitment to ESG

Larry: And I was really heartened to hear about the $50 million fund. It's not something that everyone did during the crisis and certainly, you're in a position where you might be able to raise those funds more readily than another firm. But clearly that commitment to being that strong corporate citizen above and beyond the fact that it's a great business as well. But why is that important to you outside of the business sense and what are the benefits that you've seen from doing an initiative like that, that other firms could scale at their level?

Matt: Well, I would say a few things on our $50 million fund to help keep our tenants going. It really helped a lot of them to survive. I used the term tenants but they're really one of our partners. We have investors who are partners, we have different people who I see as our partners, and one of our partners are our tenants. And we were just committed that we were going to do what we could to help them keep going. And so we provided loans for such things as let's say you were a small business that couldn't access the PPP loan quickly enough, we provided a loan until they could get PPP loans. Or if they were a restaurant that needed to redo their kitchen or create outdoor seating, we provided loans for that sort of thing.

The other thing we did was we set up a tenant portal. So all our tenants could go there and find out best practices. Whether that was best practices on how to fill out a PPP for a PPP loan or whether it was how to redo your seating, how to improve your app to get more food- to do better with the Uber Eats, and things like that. We were really committed early on. And for us, it's really about being part of the community. One of the things that's always distinguished Jamestown, I think, is that we've always been about improving the quality of life, economic development, advancing the community, those sort of things, you know.

At our Ponce City Market project in Atlanta, we were early with a job training program, and job hiring program for people in the community. We really think one of the things that good retail does today is it becomes part of the community. One of my go-to stories is we have a bookstore, a handful of our projects. Bookstores are often not the highest paying tenant but if you're going to see your project as sort of a main and main, I think one of the things you need to do is have some type of a bookstore.

"It's all wrapped up in one, whether it's having a lot of local tenants versus purely nationals, whether it's having a bookstore, whether it’s having a tenant portal to learn best practices, or setting up this loan program for our tenants, it's all about really being part of the community and really helping to foster that." - Matt Bronfman

Ponce City Market
Originally constructed in 1926, the 2.1 million square foot former Sears, Roebuck and Co. warehouse and distribution facility in Atlanta sat largely vacant for almost two decades until Jamestown purchased the building in 2011.

Larry: I love the tenant portal. Communication was a theme throughout the pandemic, as far as best practice, “How can you help get through the past year?”. And that tenant-landlord communication was so key and to have something like a portal to share all of those best practices, and really, like you said, be a partner to them and help them. Their expertise is in running their particular business and they're faced with these kinds of unprecedented challenges and to be able to go in and help them and share those best practices, I'm sure made all the difference with them. And meant a lot to them as a business relationship or even a personal relationship that they, I'm sure at some level, they feel with working with you so closely throughout this past year.

And on that related note, we've talked about the strong corporate citizen, but also Jamestown has a very strong commitment to ESG, as well. Because in April of this year, Jamestown announced that its committing to NetZero carbon at Levi's Plaza in San Francisco by 2025. And Levi's Plaza will be Jamestown’s first carbon-neutral asset across its global portfolio. So what does ESG investing mean to Jamestown? What was the story behind finally having this commitment now with this particular property?

Matt: Well, I would say, first, we were pretty early on the sustainability path. In 2006 roughly, we bought a small sustainability company and onboarded them into all aspects of our business. We set up a proprietary program called Jamestown Green and every time we did an acquisition starting in about '06/'07 part of the investment thesis included how were we going to make this building more sustainable, more green? It's been part of our business plan every year that are asset managers and developers focus on. So, in other words, it's part of the acquisition plan. But then we actually buy an asset and it becomes part of how the asset managers and developers are graded on their job; whether they're making the right decisions from a sustainability perspective. So, pretty early on we've been engaged in this space.

As to "Why?", I would say a few things. Number one, and this was true fifteen years ago when we started doing this stuff, is it's simply the right thing to do. But beyond it being the right thing to do, I will tell you that I think it's the right thing economically and financially to do as well. It's the right thing to do for prospective tenants because we think prospective tenants really embrace and support these initiatives. This is especially true when you're a company like Jamestown that caters to a lot of creative and tech companies. They want to see that they are in a building that's sustainability-focused. The other thing is it's important to your investors, to your current investors in your funds, things like that, that they're part of a company, that they're investing in a company that actually cares about these values. And then finally, I think it's important from the capital markets perspective. So in other words seven, ten years from now, you go and sell a building, I think you're buying pool of people who are interested in actually buying that building are going to be broader. You're going to engage more potential buyers when you have a sustainability story to tell.

Levis Plaza 2

So for all those reasons, I think sustainability is the right thing to do. For us it's also about- we've been talking about sustainability, but another big initiative for us is around health, having healthy food options in our building. It's about the quality of the air and it's also about having tenants, whether it's medical facilities or things like that. We want our buildings to not just be sustainable from a green initiative but also to be truly healthy buildings for the people officing in them.

Larry: So it sounds like you really have incorporated this whole concept into the bones of Jamestown, if you will. It permeates, sounds like, every piece of what you do. Do you find even now that ESG is an important factor for investors?

Matt: Absolutely. It gets bigger all the time. When we started doing it fifteen years ago, we had investors say, "Why are you prioritizing that? Why do you have a section in your investment committee memo on sustainability efforts?" And now, I think investors, we don't get the question "why", we more get "we appreciate the thoughtful analysis around the subject". But fifteen years ago, you really would get, "Why are you doing this sort of thing?"

Larry: Absolutely, it was more of a European desirable, right? They were kind of ahead of the curve on ESG and it seems like we're adopting it more and more. So I'm excited to see how that affects investing going forward and what that trend is, how it progresses, and see it progressing.

Trends in Commercial Real Estate

Larry: Speaking of trends, what are some of the other trends that you're seeing emerging from the pandemic? Especially since Jamestown is within these two sectors, within office and retail, in particular, what does the future of these asset classes look like in your opinion?

Matt: Well, that's a great question and everyone's focused on that right now. I would say a few things. Number one, we still believe in the office environment. I believe that collaboration, mentorship, spontaneous encounters in the lunchroom, these are important things. I think work from home worked particularly well at the beginning of the pandemic when candidly everybody was super scared and worried about it. You know worried about losing their job, worried about really everything. I think as we've gotten farther along, I think it's become more and more apparent to more and more companies that getting people back in the office is necessary. Again, collaboration, mentorship, growing the business, spontaneous encounters in the lunchroom, these things are really, really important. So we still believe in the office environment.

The other thing I'll say is, the more you see people in the office, once you hit, call it an inflection point or call it fifty, sixty percent of the people in the office, the more people unfortunately who are not in the office are going to be unintentionally marginalized. I see that at Jamestown. We have a meeting, 2 or 3 people are in the office, 1 or 2 people are not. The 2, we have a Zoom call, we make a decision, then the 2 or 3 people in the office go downstairs, get lunch or keep the discussion going in the hallway and they end up changing their decision and engaging in a whole other dialogue sort of spontaneously about how, “Well, we actually didn't think through this issue enough,” etc. And so they change their decision, send around an email that says, "Hey, we've changed our opinion. We're now going to do X", and very quickly unfortunately or not, it's unintentional, the people who are not in the office end up to some degree marginalized and feel the need to come into the office the next day.

So we still believe in the office environment. We think there's a growing need for office space. I also think densities will decrease. We basically went from a period about twenty years ago where we were giving about 250sqft per person in an office, the tech companies got super dense, and they took an old school-like lunchroom table and declared that was in office for ten people. All of whom were going to be on the phone all day and got their densities down saying to the 80-90sqft per person range.

And my point in sharing that is I don't think we're going back to 250sqft, but the 80sqft to 90sqft doesn't work when you're going to be worried about germs and things like that, more worried than before. But it also doesn't work because it was never really effective to have 8 people at a lunchroom and calling that an office for eight. So, I think you'll see reverse densification coming out of the pandemic as people think about their future office needs.

“We still believe in the office environment; we think you've got to do it with health and safety in mind which again I think we're very good at.” - Matt Bronfman

The end result of this is, yes, there are some office spaces that are obsolete, but I think there remains a need for good office space. And this is true as retail as well. Here's the way I would put it, whether you're talking office or retail, you have to create a space that's dynamic enough and engaging enough to get somebody out of their pajamas. It's easy in the 21st century in 2021 for someone to stay in their pajamas, do their shopping and to some degree, do a fair amount of their work too.

And so I think what Jamestown has done really well with our vertically integrated teams is going to be even more rewarded into the future. And that is creating an engaging environment. Whether you're talking, Chelsea Market in New York, Industry City in New York, the Innovation and Design Building in Boston, Georgetown in DC, Ponce City Market in Atlanta, Ghirardelli Square in San Francisco. I think what Jamestown does well is creating engaging environments where people will want to linger longer.

industry_city_community
Community yoga hosted at Industry City, New York

I look at it as a good office retail environment creates almost that second space for you. You have your home space, that is your home, but you have that second or third space, where you're also very comfortable, where you feel engaged, where you're around interesting people, looking at interesting stores in an interesting engaging office environment. We still believe in the office environment; we think you've got to do it with health and safety in mind which again I think we're very good at.

The other thing I think is really important are, what I would call some horizontal campuses, whether that's Levi's Plaza in San Francisco or Southern Dairies in Atlanta. I think these sorts of horizontal campuses where you can get outside relatively easy are also incredibly important.

Larry: So as a follow-up question for the retail side of that answer, with those big, beautiful properties, as you mentioned with Ghirardelli and those types of things, that's something that perhaps the local retail firm might not be able to take full advantage of. Do you have any type of tips or anything for, what do you do if you're not a store in one of those kinds of community experiential properties like a Ponce City Market?

Matt: One of the phrases, we like to use at Jamestown is, "How do you surprise and delight people?" Again, to get somebody out of their pajamas to go shopping, I think, “surprise and delight” are key. You got to do things where somebody will walk into the store and think to themselves, "Wow, that was a surprise. I didn't expect to find that here." Or, "Wow, that's really interesting architecture. That's really interesting." You got to bring a smile to their faces, you've got to be able to surprise them.

Again, I think our projects do that really well. If you're not at a project that's super engaging, I think it's simply on you to try to do that on your own, which is hard. And I will say, I'm very proud that if you look at our foot traffic numbers at our properties, they're really - from a retail basis, in particular, on the weekend - they’re at pre-pandemic levels now so it's really exciting for us.

Larry: That's fantastic. Yeah, it's one of those with retail, in particular, you really can't compete on price, not with E-commerce over the past year. So you really do have to delight and surprise them, have some kind of experience for them. It's got to be something above if you're trying to compete on price alone, that doesn't seem like the recipe you need for success these days in retail.
Matt: That's right.

Jamestown’s Target Markets

Larry: So you happen to have properties across the country and certainly are very familiar with all of the changes and where the movement of people, especially over the past year, with migration of where people are going and have moved, especially given that they can do remote work. Are there any MSAs of particular interest when you're looking at future acquisitions that you guys are keeping an eye on? And if so, what is it about those areas? What are you looking for?

Matt: I would say a few things. Number one, for me. It all starts with strong demographics. I never invest in markets without really good demographics where I think young people or young educated people are moving. The second thing I really like in the market is good job growth and that goes hand in hand with the demographics. I'm looking for job growth in industries that are tech, that are creative, and things like that. Atlanta has a lot of that. So do a lot of the other Sun Belt cities, they have great demographics and really great job growth.

Something else I look at, that isn't always easy to find is, I do have a preference for what I call supply-constrained markets, markets where it's not easy to just put up a new office building, new retail project. I like markets that are a little bit more predictable where the zoning makes it difficult. There are some markets in the country where you can put up anything on any street corner and that makes it harder to drive rent.

So, for example, New York is a great example of, generally speaking, a supply-constrained market, zoning is very difficult. The neighborhoods are primarily built out. There aren't a lot of just parking lots that are sitting fallow waiting for development. So we like supply-constrained markets as well. But for us, it really starts out with strong demographics and good job growth. Atlanta has those, which is why here at Jamestown we've been successful in recruiting and attracting a number of innovative companies from the Airbnbs and others to the market.

But for us again, we think, if you can create that engaging environment if you're in markets like Atlanta Raleigh-Durham, etc., you can create that innovation hub. And we love to be a part of and help facilitate innovation hubs.

Southern Dairies Ponce City Market 2

Innovation at Jamestown

Larry: And not only just facilitate innovation, you actually kind of do your own innovation as well, which I'm excited to chat with you about. Recently, you launched a direct-to-consumer platform through Jamestown Invest. What was behind that decision to broaden your capital source to include retail investors? There's been plenty of talk about crowdfunding in commercial real estate in recent years. Why do you think your crowdfunding model is working so well?

Matt: Well, first of all, it's really exciting to be pursuing it. To best answer that, just to give you some history, Jamestown has two primary capital sources. We got our start raising capital in Germany from retail investors, what I call 'the dentist in Dusseldorf'. We then secondly diversified and added what I would call more 'traditional institutional capital', including some large US state pension funds, etcetera. What was missing is what I might call the 'third leg' of this stool which was retail investors in the US, sort of the 'dentist in Detroit or Decatur' comparable to the 'dentist in Dusseldorf'.

And again, we have a long history with these retail investors in Europe. Coming to the US was new to us and what changed was some of the recent changes in regulations that really are fostering with the Sox Act and other things that have really fostered what I would call 'democratization of investing'. Increasingly, Americans are interested in going direct and having a say in who they invest with and that sort of thing.

We also had friends through the years asking us here in the US, "How do I invest in a Jamestown product?" And the answer until recently was, "Sorry, you really can't." We have an institutional caliber company that has raised a lot of institutional funds through the years. We have roughly ballpark over $12 billion in assets under management today. And when I looked at the crowdfunding space, again, I saw that this is a growing space, that Americans want to invest directly. And some of the recent legal changes in DC had made it easier to do so but I didn't see a lot of what I would call, 'institutional caliber' real estate companies operating in the space.
And we are not a tech company dabbling in real estate, we're a real real estate company. But the idea of engaging with tech and doing it direct-to-consumer experience on the internet, we thought was really unique. And the opportunity to also create an alignment where Jamestown, myself, and others are some of the biggest investors in this fund, basically paying the same structure as our investors.

We just thought this was an interesting place to be, we see it as a long-term business for us. In other words, we got into this business, not expecting to be hugely successful in year one, though, we are successful, but with the idea that you plant seeds so that over the next seven, ten years, it reaps rewards. And so we're really excited to be in this direct-to-consumer business right now.

Larry: Yeah. And it actually has already yielded results for you, right? With Southern Dairies at Ponce City Market.

Matt: Yes, Southern Dairies was our first project we put into this direct to US consumer product. We've had great success at Southern Dairies, adjacent to Ponce. It's been able to have some synergies with Ponce and it's been really exciting. It's a really fun project. As I said, I'm an investor in it, so are a lot of my friends and family. It's really an exciting place to be playing right now.

southern_dairies_office
Southern Dairies is a five-building office campus located in Atlanta's Old Fourth Ward Submarket, near Ponce City Market, the BeltLine Eastside Trail, and Inman Park. The project is a creative office conversion of an early 20th-century dairy distribution plant, listed on the National Register of Historic Places


Larry: But as I said, it's one of those things that everybody's talked about, but it's the first story I've heard of somebody doing it successfully at this level. When you're looking at your next Jamestown Invest property, are there any particular unique factors that you're looking at to say this will be a direct-to-consumer platform property versus this is just going to be our regular Jamestown property?

Matt:
I think, what we look for is pretty uniform in that we're always looking for non-commodity assets. Assets, again, that justify people getting out of their pajamas. Whether it's retail office or even an apartment, we want to do things that are a little bit unique, where we think we can really create value over time. At this point, some of these direct-to-consumer products will be on the smaller side compared to our other projects, simply a function of capital raising.

Larry:
I can't thank you enough for this conversation. I think it's fascinating to kind of peel back the curtain and hear the stories behind some of these iconic properties and the history of Jamestown. I certainly was aware of plenty of nuggets in there for our listeners to pick up and hopefully take back to their own firm. Thanks so much for chatting with me today, Matt.

Matt:
Larry, it's really a pleasure to speak to you. Thank you for your time.

Jamestown Author Thumb

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The NPI is a quarterly, composite total return for private commercial real estate properties located in the United States. The NPI includes operating office, retail, industrial, apartment, or hotel properties accounted for on a market value basis and includes the impact of leverage employed on the properties in the index. The NPI Levered Index is illustrative of historical average annualized commercial real estate returns on a gross property level leveraged basis, and these historical returns may not be indicative of future results. Leverage adds additional risks because leverage providers generally get paid first and may have a full or partial recourse claim against a portfolio. Such real estate return data should not be used to estimate returns of Jamestown Invest investments. While Jamestown Invest 1, LLC may acquire properties that meet some of the NPI criteria, it may acquire properties that do not meet such criteria. Further, Jamestown Invest property returns may have a better or worse average annualized return performance compared to the index as each real estate investment is unique in nature, which is inherently problematic for benchmarking to the composite returns of a highly diversified index.