Exploring the Future of Urban Development with Michael Van Every: Navigating the Commercial Real Estate Landscape

Embark on an enlightening stroll through the complex world of commercial real estate with Michael Van Every, the mastermind behind Republic Urban Properties. Michael's transformation from a career in local politics to a pivotal role in California's urban development provides an intriguing backdrop to our latest episode. He candidly unpacks the delicate interplay between residential and commercial realms, and shares the strategies his team employs as they navigate the fast-approaching future of 2025, always with an eye on innovative growth and community integration.

Our conversation with Michael takes a deep look at the nuanced challenges within the commercial sector, particularly the symbiosis of small businesses and their commercial landlords. We examine the impact of economic shifts such as the pandemic aftershocks and interest rate hikes, probing into what these mean for the vitality of retail and office spaces. Not shying away from personal stories, Michael illustrates the financial tightrope walked by all parties involved, providing insight into the collaborative efforts required to breathe life and success into commercial developments.

As we peer into the evolving intersection of technology and sustainability, Michael helps us navigate California's green initiatives and their profound effects on the real estate landscape. We discuss the state's electric vehicle mandates, the innovative repurposing of old infrastructures, and Tesla's burgeoning impact on the solar and battery markets. Wrapping up, we explore the promise of Build for Rent townhomes and the seasonal trends that shape the real estate market, offering a glimpse of the dynamic future that lies ahead for developers, consumers, and the environment alike. Join us for a session rich with expertise and forward-thinking dialogue, perfect for anyone with a stake in the urban tapestry of tomorrow.
Website:
https://www.republicfamilyofcompanies.com/companies/republic-urban-properties

Highlights:

(01:29 - 03:42) Building Cities
(08:21 - 09:32) Commercial Real Estate
(18:43 - 19:32) Innovative Multi-Use Real Estate Developments
(25:12 - 27:30) Smart Growth Projects in California
(30:39 - 32:04) Investment in Electric Car Infrastructure
(43:04 - 44:19) Solar Companies as Value Add Partners
(48:23 - 49:44) Build for Rent Townhomes With Amenities
(59:19 - 01:00:52) Dreams of Commercial Real Estate Success

Chapters

(00:03) - Commercial Real Estate Trends and Challenges

(18:43) - Challenges in Commercial Real Estate

(26:24) - Smart and Sustainable Real Estate Development

(33:23) - Commercial Real Estate and Energy Sustainability

(45:37) - Future of Mid-Density Real Estate

(01:00:17) - Navigating Real Estate Opportunities

Commercial Real Estate, California, Urban Development, Retail, Office Spaces, Economic Shifts, Pandemic, Interest Rates, Sustainability, Green Initiatives, Electric Vehicles, Tesla, Solar and Battery Markets, Build for Rent, Mid-Density Real Estate, Capital Markets, Construction Defect Liability Laws, Short-Term Rentals, Land Acquisition, Dreaming Big, San Francisco

Transcript

Marcus: 0:03

Welcome back to MVP Real Estate Podcast, season four, episode three. We have Michael Van Evry from San Jose, california, with Republic Urban Properties, wealth of knowledge in real estate. He is gone. He said he was 55, now 55, yeah, hadn't into his golden years. We talk a lot about, obviously, the differential between locations in California, austin, wisconsin, trends that he's seeing. He's heavy in the commercial real estate market, dabble a little bit in residential before, and we kind of go through, I guess, the cycle of what they focus on within their company and what their horizon looks like going into spring or end of 2024. So before we give away the whole show, we'll bring them in. I will welcome this show, michael, thanks for giving us the time. Thank you very much. Thank you, we are going to jump right into this. You are currently working and you've started a company, republic Urban Properties, which I have a bunch of questions on because I was reading before the show and you have amassed a lot of properties and a lot of projects there. But before you got there, if you could give us like a little brief review or summary of what got you to be in this position you're in today?

Michael Van Every: 1:26

Sure Well, again, thanks for having me. Guys Appreciate it. Yeah, I think it's kind of a local story about a guy that grew up in San Jose. His family was involved in local grocery stores, so always connected to local politics and, as bait would have it, local politics served as my vehicle into the first home building industry, working for some of the great home builders, like Steve Schott, former owner of the Oakland A's company called Citation Homes, but also on the advocacy side of the building industry association here in California, and that eventually that led to my desire to really build. You know, on the infill parcels I was trying to. I was tired of building, you know, on outlier places. You know the old saying pay paradise to put up a parking lot. That's kind of what I was doing and my longing was for to build cities and so when the opportunity, people started looking more infill opportunities. But when the opportunity came about for Republic urban properties, it actually happened through the Santa Clara County Building and Trains Association. They were the one that recommended me to my partner, richard L Kramer, in 2006. And really the rest is history. I've been here since 2006, really as his managing partner, and that's been a privilege.

Marcus: 2:47

That's awesome, and we've had a couple of people on some developers and they talk about subdivisions and subdividing lots. But you're talking bigger than that. You're talking cities, which is super impressive, and obviously you've mentioned it before. Working within politics with that, you are going to have to be in close communication, I would imagine, with city planners and in people in that that department. Do you find that as an easy path because you've been in politics for so long, or was there a learning curve getting into the bigger infrastructure than that?

Michael Van Every: 3:26

Yeah, that's a fantastic question Because I think in California to be a well-rounded developer you really have to have a very background in understanding how each local government works. And what's crazy in California in particular is every local government works differently. There's foundational parts of local government, through municipal codes, that are consistent, but the way they may process a project or, of course, how their general plans are approved are vastly different. The state of California is trying to do a more uniform building process. It's been difficult, but certainly my background in local politics and my involvement in philanthropic matters, both my wife and I we're very fortunate to be able to know not just the city planners, but ultimately we try to work hard to be in community-based organizations that are affiliated with key decision makers.

Marcus: 4:31

That's awesome and it sounds like you've always been in commercial, because along the building side, in knowing your city planners, commercial real estate is a whole different entity than residential. It is so to have some background in commercial real estate, like you did at a young age, and know the city planners, I'm sure kind of helped you into the role you're in, I would imagine.

Michael Van Every: 5:00

In a little bit of reversal. I was actually in the whole building side first.

Marcus: 5:04

Oh really.

Michael Van Every: 5:05

Yeah, and that was doing those classic 6, 8,000 square foot lots, building roads and sewer and infrastructure For large baking. Smaller cities, bigger, pretty large cities like the city of Salinas here in our agricultural belt, in Monterey County, california. And then again that background, though translated to commercial, but it was a rethinking of how the financial side of the projects were vastly different selling single family homes, obviously, than, say, building and renting commercial real estate of all types. Vastly different and more intense, I would say, on the commercial side. But it's nice to have a touch point for both disciplines, whether you know home building or commercial real estate. But now, as a 55 year old male, I'm probably more in tune with commercial real estate and how that that functions financially.

Marcus: 6:11

Yeah, and that's what I've heard. It is vastly different from your perspective. Because I couldn't excuse me, I couldn't weigh in on this one because I have no experience on the commercial side. Yeah, what do you think in your history or your background has been the biggest difference between the residential and the commercial side? Second, question.

Michael Van Every: 6:32

First, I think it's just how it's approved and so obviously you have a lot or multiple lots where you either buy the land or you buy the airspace, and so how the state of California treats the mapping and ownership process is vastly different from commercial, where you'll only have one building, one lot. So it's really that simple. It comes down to subdivision of the land and then of course, how how finance works. You know, obviously you own a building, but you probably hope 65% of that building to commercial real estate, to a bank, I guess not that much different than when you own a home, but it's just, I think, an ownership difference more than anything in a mapping difference in California. But the business models are totally different, much different. In particular, after the financial crisis of 2008, home-golding shifted vastly for home builders the way they accept deposits and the way they sell, you know, and develop land to where commercial real estate is probably staying pretty consistent in its model, although those models are changing every day now with new financial hurdles like interest rates. But they're very similar but very different, as you noted.

Marcus: 7:54

Yeah, and I always note when I'm trying to bring up examples of how commercial and residential are different, like I always bring up the Walgreens system that they've got, where Walgreens doesn't own any of the buildings I believe their parent company owns it but Walgreens brand leases to themself. So there's a lot more, I don't know flexibility. I call commercial real estate the Wild West Because I feel like you can honestly do what you want as long as your paperwork is good, but it's not as regulated as, let's just say, the residential market.

Michael Van Every: 8:35

Yeah, the model you mentioned also is how the wealth was built in McDonald's same situation. Oh, really, yeah, if you've ever watched the movie the Founder, michael Keaton's character, of course, ray Kroc. That's how he became a billionaire by owning all of his land and leasing back that land and building to his operators. But it's a great model because it enriches both the landowner, the building owner and, in most cases, the operator of the business. And, to your point, that's how commercial real estate really touches so many different people, whereas home building is really affecting the homeowner, maybe their neighbors, and then, of course, the developer exits and that's the end of it, whereas commercial real estate we're in it for the long haul, sometimes for the best case, sometimes for the worst case. But yeah, I love the way you characterize the Wild West, in particular today. It is truly the Wild West.

Marcus: 9:33

Yeah, there's ups and there's downs right now in the market, at least here in Wisconsin, with commercial real estate. Sure, rick and Mortar, at least this area is hurting.

Dan: 9:45

Yes.

Marcus: 9:45

Is that what you're seeing out in San Jose as well?

Michael Van Every: 9:48

Oh yes, post pandemic and low interest rates, there has been a tectonic shift in commercial real estate of all types, whether it's a cost factor, a use factor or even just kind of a what is this building going to be for the long term factor, it's just, there's so much has changed, but in particular the cost side, and it's interesting to hear you say that for a place like Wisconsin or Chicago where construction costs are typically lower than, say, here in California. But now here in California the replacement costs for a new building, really, say, for an office building in particular, but even apartments, round up hotels, and it's just long story short, you just cannot construct a new commercial real estate building today and expect it to reach those financial matrix hurdles that capital markets expect. So in short, there's just not a lot of new ground up market rate projects that are underway right now here in the Bay Area and the greater part of California. That's not to say it's everywhere, but it's very difficult with the cost side now with interest rates being what they're at. And then we've seen a tremendous amount of cooling off for apartment rents. That's a national average in fact, unless you're in the Southeast or maybe Arizona, but they have that hyperinflation. So it's difficult, it's a very difficult market and it probably will stay this way for at least another year, in my opinion.

Dan: 11:30

Yeah, that's what? Sorry, it sounds a lot like how the residential market is Like. You're getting priced out of being able to buy the fix and flips or the fixer uppers to rent them out, and then you're trying to figure out the numbers aligned, like you said, with the matrix of what you expect on return and how quickly.

Michael Van Every: 11:50

Yeah, true, you bring up a good point that that's been another, actually to some extent a commercial business, where you are fixing properties and either renting them or selling them, but you have a little bit more chance on something that's existing and doing a value add. I think that's where most of the capital markets are on the equity side, but also tremendous programs on the debt side would say, hey, you have a structure of building or what have you that you want to reinvent or you want to advance, or maybe you want to create an affordable situation. That part of the capital markets is still moving pretty well. But again you see an obsolete piece of property that has a great piece of land and you want to blade that and go vertical. I don't care what commercial asset it is. It's almost impossible right now, at least in March of 2024.

Marcus: 12:47

And it's so timely that you bring that up, because down the street we have a company that's here in Wisconsin. They bought up a couple of commercial unit buildings that were not historic to our town, but on the older side they tore them down. I believe it was July, august of last year. They were supposed to, over the winter, get prepped for build and they've since called the project off for at least a year because they can't get funding to work. All the build costs have escalated to the point where they can't even build them.

Michael Van Every: 13:26

Yeah, it's a virus right now that the industry has and I'm not sure what is going to break loose. In terms of what will it be? A lower interest rate because right now, just from a financial perspective, if your return on cost on a commercial project, say, is 5%, that's too low because the cap rate or the value that the building's actually worth, you can't have a 5% cap rate and a 5% return on cost that the capital markets on the equity side will not accept that. So they want to see about a 0.5% above that cap rate or a 6.5% return on cost and a 5% cap.

Marcus: 14:11

And that would be bare minimum.

Michael Van Every: 14:13

Bare minimum and we have projects that are 6%, 6.5% above a cap rate and just zero interest. It's interesting, without naming names, I spoke to a very prominent family who owns a lot of hotels in Chicago and they're not hurting for money, but they are just sitting on the sidelines and they're not interested and they have real estate in every single part of the United States. They have a very large presence in San Francisco, as they do in Chicago, and they just kind of hang in tight. I spoke to this great guy yesterday who runs their San Francisco office and he's like I don't know why we're not investing because there's good projects to invest in. I just know that we're not and it's frustrating, and so it's just like who's going to fire that starter spistle to bring back wealth and commercial real estate? Because there's billions sitting on the sidelines, guys, and the question is when will that re-enter the market so we can get going back on our city building, which has been interrupted entirely by the pandemic and has created a whole new kind of pattern of migration and growth throughout this country?

Marcus: 15:30

Yeah, and I'm interested to see which companies or what industries go back to brick and mortar, because before the COVID shutdown those mixed-use office buildings where you could have a common space but then each company would kind of have their own little office, I felt like those were growing and now everybody's working at home. And then obviously everybody boosted up their delivery wing of their company. So those storage, those industrial buildings have now kind of shrunk because everything's delivery truck now. That's my worry for commercial is everything is just going to kind of fade, and I'm hoping it doesn't, because those are important industries. That's what brings cities together, is the companies.

Michael Van Every: 16:21

Yeah, I think for a long time me personally I was angry about the policies that was just basically dictated to us by the health officials in most of our counties, which really shut down everything that you just mentioned. And then, as we reopened, technology as we're witnessing here in this podcast has emerged as a more effective deliverable of how people work and communicate, and so we have a complete paradigm shift from going to the office. So I don't think the dye has yet finalized or cast on what does this look like, but I think we all intuitively know how we're feeling that and the evidence appears that the hybrid will be standard for the large companies and here in the Bay Area. The easy ones are the Googles, the Apples, the Intuites and the Navideas. Those companies have adopted, effectively, models that allow their employees to have flexibility, but that's great for them. But it hurts people in our industry who have been landlords and who have essentially built these cities, because we had such a renaissance post-2008 of city building and transit-oriented development and now we're finding that the daytime population in San Francisco, san Jose, oakland, los Angeles depending on where you're at is vastly different. So a reinvention of those spaces, especially on the office hotel side, is underway and I would say, with the capital markets and the things we just previously discussed on cost, it is a barrier of entry to reconfiguring, reimagining our city. So I'm sure you guys have heard the saying and I try to, since it's a Friday, let's be a little humorous. There is a model in our industry, which is what you've heard survive in 25, to see if we can start a new process of city building and a reinvention of the spaces now that have been abandoned as a result of a remote work.

Marcus: 18:43

Yeah, and I was going to ask you. I don't want you to spill the beans of your secret sauce of how you guys at Republic Urban Properties are reinventing or integrating.

Michael Van Every: 18:55

Yeah Well, there's no secrets in commercial real estate there isn't.

Marcus: 19:00

So I guess I will straight out ask what are some things that you guys are doing with some of your buildings, because from what I read and I might be off on my information you guys do a lot of multi-use. So, it's not just straight storefront, it might be a storefront on the lower and rental units above. Are those some of the things that you guys are adopting in your builds or in your renovations to help kind of like lessen the burden? Or in the residential space. I'll say if you have a single family home and you have a vacancy, you are 100% vacant. If you have a multifamily and you have a vacancy, you may be 25% vacant. So that's a big liability on the single family side and I would say that as a commercial space, if you have a storefront and there is vacancy, you are 100% vacant.

Michael Van Every: 19:56

Yeah, and you bring up a good point in particular with these storefronts. So storefronts between, say, 1500 feet and 5000 feet. These are small businesses and so what we are. It's very difficult for small business owners to get loans, and so we do have one couple of large retail mixed use properties and mixed use whatever reason. An apartment above, say, in the case of Milbury, california. It's really dependent on location and you tend to get more of the corporations that come into some of these good locations. So that part of the mixed use for whatever reasons, easier On a standalone basis, say a strip retail. If you don't have an anchor tenant like a Safeway or a Crowders or something that's anchoring that shopping center, it is very difficult to attract a number of users, especially between, say, 1500 feet and 5000 feet. It's extraordinarily difficult, especially if you're doing a new build, because that means you better bring that new build to a warm shell, which means you have their bathrooms, all the drywall and all the HVAC system ready to go. If you don't, it's a struggle and I can say that firsthand that we've struggled, going from getting saying all right, here's a cold shell space, just the walls, no bathrooms, none of the things I mentioned, none of the HVAC, none of the drywall. It's a big deal for a small business to go from zero to a warm shell and building that out. My life's just turned off here, so it's probably no.

Marcus: 21:39

But the lighting looks like you're in a movie scene. Oh, good, good it looks great.

Michael Van Every: 21:46

Will we call it Godfather, or will we call it one of my favorite Dumb and Dumber? We'll have to figure out what movie Up to Time Machine.

Dan: 21:55

Wow.

Michael Van Every: 21:57

But anyway you told him you had one right. Yeah, exactly. In short, retail is a very difficult commercial real estate asset and it requires a ton of capital by the owner Landlord. They have a ton of investment by the tenant, and boy, you better make sure you pick the right tenant. I can tell you from experience I picked the tenants really good tenants, and I picked so not so good tenants and ones you would think would have succeeded. That just great business plans would have been amazing if they would have just had this place open. But they couldn't go from zero to open because they couldn't get the financial wherewithal in the loans that they need small business-wise to make it happen. So it's a tough retail's a tough commercial industry right now.

Marcus: 22:43

Yeah, and from what the little I know from commercial, those staple tenants that you said early on are important to that whole shopping center. Oh yeah, because I mean that's a heavy chunk of you. It may not be 100% of your fillable space, but that's a large chunk of your profit. Oh yeah, and if they leave the sale cycle to get a new person in is so much longer, like we think. On the residential side, like I'm gonna list my house, someone will talk within 60 days we'll get a new owner title will change. But even a rental unit, you put it up on the market for a couple of months maybe and you get a tenant. The commercial side it is a long sale cycle, so there's a lot of holding costs and a lot of nerves that go in. So that is a very stressful point to be in. Thanks, for reminding me.

Michael Van Every: 23:37

It is. It is you're, so I think you just captured it beautifully. You know, I just sent a note to my this 5,000 square foot free-in restaurant. He's got a permit ready to pick up. He's supposed to start paying rent in July and he's been in contract with me now almost a year. He hasn't started construction and it's yeah. So there's a lot of sleepless nights, you know, worrying about those type of tenants, and we do everything to help them. You give them large tenant improvement allowances I'm talking several hundred thousand dollars and yet sometimes that's still not enough to get that business from. You know, again, what we explained from cold show the warm show, the open, and so it is. It's a I would tell you that the Republic. You know a business plan. You know that was a business plan that we started in 2016, 17, where everything looked great, and again, once the pandemic changed, and once it changed it forever, and then interest rates now have really been our bugaboo. You know, for small business, I don't again I'm going back to our original kind of discussion on what's going to start, what's not going to start. Within cities, I don't see a lot of new retail and certainly office across the country. I can't even see a day right now where there would be demand for a new office building For exactly those reasons that you mentioned.

Marcus: 25:02

Yeah, and the supply is up. So to build a new one, you're, yeah, kind of just go take what is available, correct? You had mentioned, or I read on the background of the company and you guys were doing smart growth projects. Can you explain what you mean by smart growth projects? I don't know if that fills in with things that you've got going on or if that is a completely entirely thing, entirely different thing, but I feel like it kind of alludes to what you're trying to do to ease the tension of what's going on in the commercial market.

Michael Van Every: 25:43

Yeah, smart. Smart's an open-ended kind of definition, maybe subjective to what you're applying it to. I guess in California and I think we should probably change the narrative from smart, sustainable and sociologically kind of in fit there's a real movement. As you probably know, california, we do have a tremendous amount of wealth, and in Silicon Valley there's a right, wrong or indifferent because there is costs associated with smart or sustainable and green, whatever narrative you want to paint it with. But there clearly is an effort to work climate control into new development, and that's the thing about new development. It's always the test case for providing smart, sustainable, green, whatever you want to apply, and so real examples of that are now here in California. Again, these come with costs. So I'm just reporting the news in that we're forced in most cases to do smart growth, which I think long-term is best for the environment. But, for example, now in California, in most cities everything is electric. So if I want to build a mixed-use project, my water heaters or my boiler it has to be electric. My ground floor retail with my chef has to be electric. That's not necessarily something chefs want to hear when they're not going to attract a marquee restaurant to a destination. So that's one example. They call it the Greenpoint Energy Standards here that we have. But I think then there's the when you get back to what I would define as smart it's. Most people would agree because they probably thought the same thing. You walk by that corner gas station that was shuttered. They pulled the tanks out. What should be on that corner? And it gets back to. Okay, maybe there's a bus stop there or there's a rail stop or there's something that we need to put in there as an infill project commercial, hotel, office building not likely anymore, but certainly for somewhere so people to live, to be in that community. So again, I think smart may be overused, but I would say that it's a blue sky thing to make sure that you're putting in the right type of development for that neighborhood, for that city, but also going a step further and you probably are making sure that it hits all of those environmentally sustainable items that you can hit without it overburning the project to be unfinanceable. And so solar, now charging stations. I think these are all things that people want and expect and need if we are going to somehow combat climate change on some level. That's again whether you fall down in your political narrative, whether you agree with that or not. I think that's in our community now as developers. That's considered smart, those types, okay okay, if that's where I wasn't sure of it.

Marcus: 29:00

What's that?

Dan: 29:01

I just have a random idea, like you know how charging stations, right, like they're normally tied to, like shopping malls or like dealerships, or sometimes municipal buildings or city buildings, right, why not convert old gas stations, like you said, where they pull the tanks but in charging stations? I don't know how much that costs, I'm sure it's a pretty big amount. But then add, like activity centers Once they start charging their car, they get a code they can enter a gated like basketball court, tennis courts, pickleball courts, like something to pass the time, instead of them just sitting in their car waiting for the car to charge, cause sometimes it could take 45 minutes an hour. Right, like again. I've been loosely following like electric vehicles and what they require, and some have gotten better with their quick charge to 80%, but it's still you're just sitting around. So why not do something while you're doing nothing? I don't know like.

Michael Van Every: 29:57

I love your idea and I think a little known fact a Shell Oil Company just purchased some of the larger charging stations, so I think they have to start putting charging stations on gas stations, that's just. They have to do it. There's a little concern and there's engineering related to gas versus electricity. That makes sense, but they'll figure that out. But I like where you're going with your idea on. That has to be integrated into commercial projects, in particular, maybe retail themed projects like you're talking about, and it's funny you mentioned that because there are a number of great pickleball concepts. Tesla is making massive investments in the infrastructure, so I think what you just stated, I think that's happening and I think that's something that investors should look towards, and there's some great startup businesses that are going to do exactly what you just mentioned. So it's not an idea, it is a business plan and I think it's going to be. You're going to see that country wide because to I still don't own an electric car, why? Well, I'm an anxious guy. I have fear of anxiety and of range anxiety. And then also the depreciating values of electric cars. On the minute you talk about driving a car up a lot, you know you lose value On an electric car. You better understand that there's not much of a resell market if you're putting 50K mile on it and what's that going to be? That being said, you know we need the infrastructure and I love your idea and, frankly, it's probably an idea that's going to be implemented in some of our projects going forward.

Dan: 31:37

Yeah.

Marcus: 31:39

Pretty cool and of course Dan brings pickleball into the show Big pickleball.

Dan: 31:44

I don't really have a pickleball head, but today I chose the branding, the company branding.

Michael Van Every: 31:48

So that's fine.

Dan: 31:49

Okay.

Michael Van Every: 31:50

Okay, well, pickleball, I'm sure as it is, there is just a rage across the country. So, and it's so consistent with commercial real estate, it's fantastic.

Dan: 32:02

That's funny.

Marcus: 32:04

That's cool. Yeah, I was going to ask about the charging stations because, as California has been pushing more and more for regulations for electric vehicles and I don't I'm not from California. Electric vehicles here in the Midwest Don't do well in the cold, so you see very few of them out here. But in California, like I'm seeing videos on social media and news coverage about how people aren't getting their cars charged in, the charging stations aren't working because it's too cold and there's a lot of issues with that, and I figure, like if there's a big push to go to electric vehicles, they're going to have to get more charging stations. That's inevitable, and where are they going to put these things? So I'm glad that it seems like the feel of the climate in California is to push to get more of those in, because obviously if you're going that direction, it's going to need to happen.

Michael Van Every: 32:58

Yeah, tesla is going to emerge as the what they call the type three charging station. You know the rapid charging station, they they appear to be the safest choice in terms of providing that infrastructure. And you know, by way of example, that same Livermore project that I've mentioned, they're going to be putting those type three stations in the shopping center, so it's along the freeway and then you'll have that. But I like where Dan was going and that you know how do you capitalize that as a revenue generator? Also, and I do think you know whether it's a brewery or a tap house that you don't want to mix drink.

Marcus: 33:38

But we're not condoning them, mixing them, we're just offering another service.

Michael Van Every: 33:43

But in California and retail, my good friend Don and Wally here, wally Stanger, he always says that retail really has a bandwidth, which is how many forms of food or how much can the stomach, you know, really be the generator to retail? In other words, most of our retail uses are food oriented and so there's a bandwidth of how many things that you can provide that are food driven. And then what can you provide? Such a dance point, you know, a pickleball, or even a spot where you're maybe you're traveling with your children, maybe there's a jump house or something or you know kind of non food entertainment. You know, we still think movie theaters and I want to go to movie tonight, and there's, there's things that, like you said, if the future is plug weight. How do you take advantage that commercial real estate, dan, I think you've done a great job identifying as one way to do it and that could help reinvigorate some of these commercial places that are not doing well.

Marcus: 34:41

Yeah interesting and I'm all about electric vehicles. I wish we could do more in the Midwest. But that your range anxiety that you're talking about is what I have, because I was looking at that Ford lightning oh, that'd be so cool, like the towing capacity is pretty much the same as what I have, but I couldn't get to Milwaukee and back pulling the trailer Like that. I can't do that.

Dan: 35:06

There's no way to do that with your guest, because you leave it, you leave it on, you leave it on the all the time. This guy is notorious for riding into the station on fumes man.

Michael Van Every: 35:15

He gives other people anxiety of the gas car.

Marcus: 35:19

Yesterday I rolled into the gas station zero miles to empty and I pulled into the pump.

Michael Van Every: 35:25

It took you only five minutes, to you know, to basically fill it up, 10 minutes to fill it up, whereas it might take 30 minutes. On the chart, again, that's where the manufacturers are now looking at. Well, maybe the all electric needs to be blended in a hybrid sense, and I think we're going to trap trap towards that. But, as you know, in California, by 2035, our government right on our own or indifferent, has mandated that there will be no more gas sales. Of that, the legislator and the next governor may need to rethink that strategy. If we don't have this infrastructure in place, yeah, that would be a devastating part to an already expensive economy that we have here. And so again in California, we we want to do the right thing, we want to do it in the right time, you know for climate control, but you know you got to push the envelope to where you're not. You know you don't become non competitive and I think there's some concerns right now that California could be non competitive if it doesn't start to kind of tack back towards a little bit more middle ground. And we have electric, electric cars on the future and we have some of the best ones here in the world and it is an opportunity for commercial real estate, as we touched on. To take advantage of that and to reinvent space is that would also benefit. You know, charging stations and electric cars.

Marcus: 36:50

Yeah, and on the electric theme, even the I know the vehicles are one side, but the commercial, the residential houses with solar you'd mentioned that as well, and I came to a company actually based out of California to get solar panels on my house, and the topic of the battery storage came up. Yeah, you're like, do you want one? Now's, like, what's your recommendation? I'm not knowledgeable in this. You tell me, and they're like, to be honest, tesla is going to create a battery that's much better than what we have today. So, don't go with it. Take your dollar for dollar buyback from the city. Just wait until the next battery comes out, or two versions from now, because it's going to hold more. It's just going to be better. That's where technology is going, so that was their recommendation, and they're in the solar electric world.

Michael Van Every: 37:38

Yeah, in California now you used to be able to have solar. You know, invert that power and it would go back into the grid and PG would pay it, you know, for you and there was a you know and there's obviously heavy, heavy federal and state incentives. A lot of those have gone away, in particular the utility commission companies here and the utility commission has redirected that that you can really no longer as a as a homeowner, business owner, sell power back into the grid. You can only really. Yeah, that power goes free to the utility. Now you have the ability to store it to your point about a battery and then you can program your battery and your system that when, when PG in this case here in California starts charging you for the highest per kilowatt hour, say at 5pm when you get home you want to start cooking, you want to do laundry you can actually have that battery supplement that time. Therefore, that will lower your rate because you're not on the grid PG. So to your point. I agree that you know you better make sure that you have your best performing battery and it might make sense to wait. But a lot of people here in California are not waiting. They're still federal and state incentives for those batteries. But it's a, it's a commitment and you're going to have to put some upfront dollars into it. Meanwhile the PG and here in California, continues to raise rates and it's very expensive. It's affecting all of our commercial real estate. That, plus insurance costs, are really affecting the expense side of commercial real estate but also hitting the pocketbook of, you know, john and Joe and Q public. Again, that's part of the issue here in California that we're still facing post pandemic.

Marcus: 39:27

Yeah, how long ago did they change that regulation to where you can't sell back the power to the utility company?

Michael Van Every: 39:34

I believe around. I think it's the loss changed from 2022 to 2023.

Marcus: 39:39

That's my man, that's a big hit. That was a big selling feature for me, where I could sell it back because the batteries are so expensive they are, and that's why, oh man, that stinks.

Michael Van Every: 39:50

You might check your local jurisdiction. Obviously, each power company works differently. Yeah, wonderful to set specific gas and electric they. That's how they operate.

Marcus: 40:01

The wonderful Um are you starting to, because you were talking about, with your commercial spaces, letting it pretty much build the suit so you give them the outside structure they can go in. Are you now putting electric, like solar, for those commercial properties that you're building now? Are you, are you already putting those in, knowing where it's headed, or is that something that your, your new tenant, would come in and put that in?

Michael Van Every: 40:33

No, if it's a, you know, a retail office, that's our responsibility and then the tenant shares the benefit of the power and as a case of this building that we're sitting in here I have pretty much mitigates all my power. But again, under that model I mentioned, it sells it, it goes back into the grid and PG me gives me a slight credit as a business owner, but it also mitigates the power of needs of my large restaurant. I have an 8,000 square foot restaurant on a multi story and so it helps that tenant with his electricity bills, so they're not as much fluctuation and their costs, which allows for a higher rent they can pay.

Marcus: 41:12

So yes, and then?

Michael Van Every: 41:14

for the, for the residential apartments and or town loans, and in particular, we are required to provide solar plus charging stations. Moving forward, that is a standard now of all projects. But from a bill for rent, which are town homes, now that we're building, imagine two car garage, five unit town homes, commercial property, and we read we're giving, where you drive in your garage, your charging station is already retrofitted and ready to go. You probably said provide the cord and then you have solar also, that's power in your house. That is the new standard now. It actually it is a cost benefit when you're doing more lower density, whether single family homes, town homes, why? Well, I'm not having to provide those gas lines you know in, so I'm saving a little bit on the. You know the heavy infrastructure. When I build road, street sewer, at least I can leave out that gas option and I'm supplementing that with, you know, solar and those things that go with solar. So that's that part of it is actually heavily incentivized and there's a lot of solar companies that want to be involved, that are giving the developer benefits moving forward, and there's real income that you can actually achieve if you design and build your apartment, your town homes, that way.

Marcus: 42:32

I got you, yeah, and you kind of hit on my next question of cost when you put those things in. I wouldn't imagine it'd be like a break even where you save on the gas line but the electric that you need to upgrade would pretty much break even and cost. Have you guys gone through like what it does cost to add a charging station? Like what would installing one charging station be at this point? And I'm guessing those costs will go lower as more and more people are in the game and we get more competition with it.

Michael Van Every: 43:03

Yeah, good question. The solar companies A lot of times will become your partner and they'll be your third party vendor. So in many cases they'll give you maybe the charging station for a very discounted rate, or the or the battery pack would have you in return. So you're you're leasing those from them which they make money from and you make money from as well, depending on your arrangement with that solar provider. So it is, it is, it's become a more of a value add in your revenue side to work with these solar companies at the beginning of your project. Same thing with Tesla. They'll come into your shopping center without a cost, they will provide all the infrastructure charging stations, canopies for solar and you rent on top of that based upon you know what they generate and they'll revenue share in some cases to put those stations in. So you, I think, I think the balance is shifted now that it is an incentive for developers on the commercial real estate side to put charging stations, solar, into the projects, because there is very entrepreneurial time for these solar companies.

Marcus: 44:21

Awesome. Yeah, I feel like we're looking into the future because we haven't gotten there really in Wisconsin, so it's, I don't know, I'll show you how it works, but we can't do anything about your weather.

Michael Van Every: 44:33

That's the problem.

Dan: 44:34

In a couple of years we won't have winter. I mean it snowed five times since December. Maybe a significant amount to be affecting stuff. I luckily dodged it. I'm not in Wisconsin today. I'm actually in Phoenix area for the next couple of weeks.

Marcus: 44:52

Spring training.

Dan: 44:52

Yeah, I get to enjoy this out here it's 85 degrees at six o'clock PM and at the Brewers watching Brewers play San Francisco.

Michael Van Every: 45:03

Oh, my San Francisco giants, I think we won yesterday.

Dan: 45:06

Yeah, you did. You guys put it on in the middle, middle innings there.

Michael Van Every: 45:11

I love the brew, brew.

Dan: 45:14

I think, with all of this talk, we should get into discussing how much we should be investing in Tesla, especially with how low it is right now.

Marcus: 45:24

Oh, what's the?

Michael Van Every: 45:24

stock at no stock chips from this guy. I can only get some of those.

Marcus: 45:30

We should throw the disclaimer that this is entertainment. We're not giving stock advice.

Michael Van Every: 45:34

There you go, because you don't want to hear my stock advice. Yeah, tesla, I would imagine, has a bright future in the solar business and battery business. Obviously we still think of it as a California company because we know Elon Musk if you're listening, we know you live in here in the Bay Area more than you said.

Dan: 45:57

Right now it's at 169. It was 407 in November of 21. With all of the charging stations and that stuff coming and the batteries that Marcus said he had experienced with that solar energy company, it might not be a bad gig. But you could create competitions to get the people to come to those stations specifically to let their kids run wild and then compete against other people charging their cars. They throw out the paddles and let's go.

Michael Van Every: 46:35

I love your pickleball. You have no idea how close of a reality that's going to be. I think you're seeing the future, Dan. I think you're there.

Dan: 46:46

I only had some money from the property.

Michael Van Every: 46:48

I think you've got the other stuff down cold.

Dan: 46:51

Yeah, yeah, that's funny Cool.

Marcus: 46:56

We only have a few minutes left, but we didn't get to talk into what you're on to next In the beginning of the show. I think we're off air. Actually, you were talking about how seasonal commercial real estate is, and right now we're in the spring, so we are hitting the busiest portion of both residential and commercial. So for you guys over at Republic, what is on the horizon for your spring summer, or what are you looking forward to out of the dark ages?

Michael Van Every: 47:23

Yes, yes, and this has been a fun time spending time with you guys Really appreciate it and I'd say, going forward. We still have the same business plans to try and start some projects, both for multi family hotels, but I think where we're immediately trending towards a start, although we still have some you know some concerns about the capital markets assuming the capital markets, maybe you know kind of heal a little bit more. While we're still in the building season, we have a large project in Fairfield, california. That's kind of halfway between Sacramento, california and the Bay Area, and there you have a tremendous amount of growth from life science Large companies like Genentech and Roche and these large life science companies that are in this Solano County region. And then you have military bases there as well in Fairfield. So we're looking at, as I touched on briefly called Build for Rent. It's that five unit town home, because here in the Bay Area we're starting to see, you know, people that live in cities who are, say, now in their you know early 30s. You know they're we talked about home ownership how difficult it is and so. But people don't necessarily want to spend their entire life in a two bedroom flat, especially when these two bedroom flats and I built them are really not designed for kids. They may be designed for dogs but they don't have a lot of features for kids and, frankly, most people need three bedrooms and they need cars and they're going to drive. So we're looking at this Build for Rent project. It's catching fire and has all throughout the Southeast and places like Charlotte, atlanta Also. We're Dan's at not too far from there, dan. You can probably see some of those examples in the greater Phoenix Metro. But again, imagine five unit town homes side by side, garage for two car garage I mentioned, you know, having charging stations, solar, but also a little backyard for their dog or for their child and then an amenity space just like an apartment pool, community room, gym, but detached, not in a multi level but within more of a subdivision, but operates as commercial real estate, meaning everyone pays rent and there's one landlord. So that's what we're trying to start here. It's capital markets have been a little quirky, as you know, but we still think long term that business plan, because if things are going to be so expensive to build on a multi level, you know kind of basis it only makes sense that maybe a lower density when I say lower density. I mean 25 to say 30 units of the acre versus, say, 55 to 100 units in the acre, more spread out. And so we're excited to start that business plan. Hopefully this year we've had a lot of a lot of interest in and I think the business fans have been proven in those areas I mentioned. But that's pretty much what we're involved with, that and just kind of asset management, making sure that we have, you know, working a lot in the capital markets on on longer term loans for our assets that's. I spent a lot of time doing that and then and so again survived in 25 and hopefully we'll be in a position in 25 and beyond with a more stabilized interest rate where that's the new norm and we could once again kind of heat this thing up. But that again will depend on jobs and a lot of other factors that I don't think the three of us can control. But hey, it's great and there's challenges, but we work hard and we still try to do what we can to make every city we work in a better place to be.

Dan: 51:05

Yeah, I could got one question regarding those five, five unit, five townhomes you're talking about. Would there ever be a situation where, after you guys build it, you could sell each individual unit back to the homeowner and then basically say, hey, you five are now this community with these amenities, obviously the price then you would reflect because they have access to that gym or that pool or whatever else you that could be get a higher ask for the single.

Marcus: 51:35

More of a condo feel kind of yeah.

Michael Van Every: 51:38

Yeah, in California we have a 10 year liability on construction defect, and so it's, it would be a safe assumption to make that after a 10 year period. In particular and I'm only speaking about California that would be an option to do that. And again, maybe the next kind of turbo charge to this business, to where we could increase home ownership. And you know which, I think at the end of the day, even though I'm a commercial builder, you know, really you need people to own their homes, to invest in communities, so yeah, and that would be an incredible way to boost home ownership, specifically in high barrier entry markets like California.

Marcus: 52:19

Yeah, I really like that plan. That mid density is always a sweet spot For me. Personally, I feel like that's like the safe area to be in. Not everybody wants the a class, the 6000, 10,000 square foot house. Well, I'll call it a mansion at that point. Yeah.

Dan: 52:37

In Wisconsin.

Marcus: 52:38

What's that? I said in Wisconsin, yeah definitely In California we got to get a little bit more square footage, called a mansion, maybe on a mountainside somewhere, but that mid density, that, the smaller footprint house with a little bit of a yard, is something sought after because you're seeing people push away from the apartment complexes of 100 and, unless they need to, with either price or location, a lot of people would like a little backyard but not a huge yard where they're outside mowing it for two hours in an afternoon and not a lot of house where they have to clean all the time, because a lot of people now, the younger generation and I'm not that old, but the younger generation is more after like experiences and they'd rather spend their money traveling. So those smaller price point homes, which is just enough space for them, I think, is where where the future is going. So to get on that now, I think is a brilliant idea.

Michael Van Every: 53:39

Absolutely. And I think it would be on 55, heading to, hopefully to my golden years and I would say the empty nester with with echo and everything, and you believe we'll see a lower density product bill as, again, capital markets will never stay dormant forever and be a prominent business plan moving forward. So yeah, I appreciate what you're saying because it really is your generation that we're targeting.

Marcus: 54:05

Knowing that you have younger children, you probably don't, maybe don't want to own, and there's a lot of younger people now that don't want to hide.

Michael Van Every: 54:14

That's your point. So I completely agree, and it really is dependent on you, know that kind of mindset that will drive this business point.

Marcus: 54:24

That's exciting. I'm excited to see what you guys do with it.

Dan: 54:26

So you just want to send us that business plan.

Michael Van Every: 54:29

It's a science brewer series. Let's hang out, let's have a hot dog, and then I'll take you around and show you all these communities and share this plan with us to certainly send us the start replicating that here and then maybe give you a kickback or something. Hey, listen, there's no secrets in commercial real estate. Gentlemen, take every idea and run with it. That's what makes our industry fun.

Marcus: 54:51

Yeah, and I would take you up on a giant scheme. Hunter Pence is no longer playing for you, so I can do it.

Michael Van Every: 54:58

No, but I think you are hunter pets. You look just like him.

Marcus: 55:01

Oh, don't say that he's my most. I don't know why, but I could not get on board with him. I hope I didn't look like Hunter Pence when I was batting. That's what bugged me. That was awkward, but he was an all star and I'll never take away his accomplishments. But man, that was gangly.

Michael Van Every: 55:21

That's awkward if you remember that World Series where he hit the ball like three times when he was swinging through. But but he is beloved and he has a San Francisco very a resident now and one of our color commentator. So, like I said, you can be his doppelganger.

Marcus: 55:39

I've gotten a bum gardener. That's what I got.

Michael Van Every: 55:43

Another stalwart, but yeah, little, little, little different personality.

Marcus: 55:48

Yeah, no, that's cool. Well, I'm hope. Wait, we're on an even year, so San Francisco is their odds to win the World Series.

Michael Van Every: 55:57

I don't think we'll win the World Series. You guys have a team that could lost your manager, but you should be in the mix this year. I'd love for you to beat that Chicago top Cubs team.

Dan: 56:06

Thank you for not mentioning his name. That's a, that's a trader move of. I've ever seen one man that was treacherous, oh man, and he's. He's got kids that go to high school in in like Whitefish Bay, so like it's for them. I know they got a lot of flak because he was he was deep rooted in that community and then for him to just say, hey, let's. But I understand it because he had pressure from other managers across the MLB saying if you don't take this money, you're affecting our pockets down the road.

Michael Van Every: 56:36

So is that your rival, the Cubs are the brewers rival, right.

Dan: 56:40

Yeah, them and St Louis, I think they they, they frustrate me so much. Yadir Molina, albert Pujols, back in the day who else was with them? And just they, they, cubs and Cubs. And St Louis frustrated me so much.

Michael Van Every: 56:54

Yes, yes, for us it's the Dodgers.

Dan: 56:57

Yeah, yeah them too when we get to the NLCS or LDS.

Michael Van Every: 57:00

Yeah, we don't like the Dodgers.

Marcus: 57:01

Now you'll have fun with Otani this year. Yeah, at least he won't be pitching against you.

Michael Van Every: 57:05

Yeah Well, he better be careful too about his little friend, and that, and I heard, handling situation is not a good look. That's not a good look.

Marcus: 57:14

So I didn't get to read much on it and I know this has nothing to do with real estate. So if the visitors came for real estate, they can, they can click out.

Dan: 57:21

If you stayed to the end, you get some nuggets.

Michael Van Every: 57:23

Yeah, yeah, well, we it sounds like we're all baseball fans, which is what we're living for here coming up.

Marcus: 57:29

Yeah, this big baseball. I still have all of the wood bats in college that I had. I'd broken not me personally, but I was a pitcher. Yeah, yeah, that I have. We had hung up in our college apartment Okay. Nice, the bats have broken dreams.

Michael Van Every: 57:45

Love souvenirs.

Marcus: 57:47

It was a great souvenir, yeah, so Otani's translator.

Michael Van Every: 57:54

Yes.

Marcus: 57:55

Was was betting for Otani?

Michael Van Every: 57:58

No, he was betting on an MBA, soccer and other things, allegedly through a bookie, but to the tune of hundreds of thousands of dollars, which he then stole from Otani to pay back.

Marcus: 58:09

Okay, that's where it was. There was something where it crossed over to Otani's bank account.

Dan: 58:13

Yeah, Stole from Otani. Hey, I'm taking this money. Yeah, yeah, yeah, okay, that's what the story?

Marcus: 58:20

I didn't get to read much on it so I was kind of curious on what was going on with that one yeah.

Dan: 58:26

He's spurned the.

Michael Van Every: 58:27

Giants. You know the Giants really wanted him to come to San Francisco. So have fun in LA.

Marcus: 58:36

Well, good luck to the Giants this year.

Dan: 58:39

It's hard to cheer.

Michael Van Every: 58:40

It's hard to cheer against the Giants.

Marcus: 58:43

It is.

Michael Van Every: 58:43

I'm telling you boys, if you guys come out to San Francisco, we'll go to a game. Talk some more commercial real estate, and it's been a pleasure being on your show.

Dan: 58:53

Hold on one second. Who was the manager for San Francisco at Miller Park? When it was Miller Park, they would be yelling out was it Bochi, Bochi, Boat? They would. They would rass him the whole time when I would go to those games.

Michael Van Every: 59:06

Man Bochi Four times Bochi yeah, three with the Giants, one with the Texas Rangers.

Dan: 59:12

Wow.

Michael Van Every: 59:13

We miss him. It was a dumb move. Let him go.

Dan: 59:16

Yup, I agree.

Michael Van Every: 59:18

Well, cool.

Marcus: 59:19

It was a very enjoyable conversation.

Dan: 59:21

Love the dialogue here and the information Tidbits.

Michael Van Every: 59:24

Yeah.

Dan: 59:24

That's great.

Michael Van Every: 59:27

I really appreciate it and feel free to stay in touch and, like I said, let's get to ghetto soon.

Marcus: 59:32

Yeah, absolutely. I'll definitely keep in touch because commercial real estate is something that I've wanted to do. We've got this ski hill that's in in the town that I live in been vacant for maybe a decade, 15 years. There was three owners to the land and one of them died and there was a big probate battle of who owns what. So it just sits there vacant every year. The ski lift is still on there and I've got this like pipe dream of putting like little modular, like Airbnb's on this hill, Because again in the summer it's a big lake draw, so people coming up from Illinois or down from Minnesota have a place to stay. Our city doesn't really like short term rentals, which is a hiccup there. Yeah, and then to find out who and how to obtain the land, but stuff like that would be a nice, exciting second step in a real estate or to get into commercial.

Michael Van Every: 1:00:32

But I'm going to stream, because you'll be surprised at how often dreams come reality commercial real estate. So dream your best dream and, and you know, always hook up with people that are smarter than you and just like I knew, and you'll be surprised how fast those become reality.

Marcus: 1:00:50

We'll have to make a way up to San Francisco.

Michael Van Every: 1:00:52

Yes, all right, gentlemen, thank you so much for being on your show. I appreciate it. Yeah, thanks for coming on.

Marcus: 1:00:57

Thanks for giving us the time. Enjoy your weekend you too, my friends, take care Bye, bye, see ya.