December 15, 2020
Episode #104 – Chad Griffiths – Championing Exceptional Value
- Selected Links & People Mentioned in this Episode
- NAI Commercial
- Edmontoncommercial.com
- Melcor REIT
- Canada Emergency Commercial Rent Assistance (CECRA)
- Red Notice by Bill Browder
- Glengarry Glen Ross film
- Connect with REIN Canada
- REIN Canada
- [email protected]
- SHOW NOTES
- [02:08] Patrick introduces his next TEDM guest: Chad Griffiths.
- [03:55] Chad and Patrick kick it off with where Chad comes from, a bit about what he’s up to in the commercial/industrial real estate space and his views of the Alberta economy both pre-March 2020 and what is potentially ahead.
- [09:22] Chad feels the best approach for investors anywhere is micro-perspective. Broken down by asset class he speaks to commercial real estate – mainly industrial and retail office. In the past five years retail has been hit the hardest but from the North American economy perspective, Edmonton has not seen catastrophic vacancies. Chad does not feel this situation will cause an office apocalypse. Although the immediate risk may be real, he feels, in time, companies may actually want increased square footage to allow for physical distancing in a more traditional office setting. He is most optimistic about industrial real estate for the fact of continued manufacturing, continued need for warehouse space and logistics.
- [15:53] Chad and Patrick discuss the trend that was hip downtown centres with open office space and where that may head into more suburban locations. Chad looks at the trade-offs of both. Again, re-imagining internal space may be of more consequence than the where the building is located.
- [20:59] Transit, urban, suburban, and rural. These are all areas where trends in larger centres are being impacted. The data and evaluation from all of this, a year from now, will be very interesting.
- [23:40] Chad talks about the potential for a Canada-first approach to manufacturing and supply chain, and what he sees as growth in the industrial landscape; it’s a steady driver regardless of where the bulk of our manufacturing resides.
- [28:50] Chad speaks to the pivots he has made during this unique time but more significantly where he has not. His current mindset is to stay constant, consciously avoid fundamental change and double down on intentional, and historically successful action.
- [33:41] What are some of those intentional actions and habits that have proven successful for Chad? The greatest substance is derived from distinct action and value-add.
- [37:51] Chad provides an overview of the climate around Edmonton commercial space and opportunities within it. It’s not the fire sale situation he anticipated back in the early spring. Broad uncertainty makes it difficult to identify where specifically the opportunities will be but feels investing in long-term plays bears far less risk than banking on short-term gains in the Edmonton market.
- [44:24] Fake economy, unemployment, light industrial and manufacturing: does Chad see something different for Edmonton’s future than he has seen before?
- [52:26] Chad and Patrick each contribute their view of upsides and downsides of owning commercial real estate. It can be a profitable and beneficial asset class to invest in but it is incumbent on investors to evaluate the risks. To help mitigate risk keep your sights on the long-term. Work with a broker who has experience and knowledge in this arena, as well as vision to support you and your tenants to be successful. Establish a strong client base, and an adaptable lease space for the inevitable tenant turnover. Price risk into any acquisition and consider a building that would attract a diverse pool of tenants vs. a customized space.
- [60:41] Cap rates. Chad gives a summary of how the Edmonton market is performing.
- [61:55] Chad’s entrepreneurial road is certainly a diversion from his family’s path. Chad talks about his experiences, and the benefits of going back to finish his diploma, undergrad, graduate diploma in business administration, and then his MBA. While the timing may have been unconventional, the blend of his real-life experience with a career and a family together with his academic studies proved to be both enriching and empowering for him and to bring deeper value to his clients.
- [67:22] Chad talks about the Canada Emergency Commercial Rent Assistance (CECRA) and the overall arduous undertaking it proved to be.
- [71:45] Patrick gives kudos to the immediate action taken by the government in the spring, and discusses his frustration with the lack of support for small and medium-size enterprises (SMEs) which predominantly drive employment in Canada.
- [74:32] Chad describes his bird’s eye view of the situation for property owners/landlords and companies/tenants. As a landlord himself he is situationally utilizing a long-term outlook but a short-term focus. He sees landlords primarily focused on the immediate – supporting tenants to stay solvent both now and in the future. A decline in operating SMEs will have a significant impact on employment and commercial real estate. Companies/tenants have concerns over what comes next after subsidies, assistance and deferrals come to an end. Companies who were already on the cusp of significant struggles are expressing real concern, but companies who have retained earnings and planned for downtime are more reflective of the overall landscape.
- [83:07] Alright, it’s time to roll into some rapid fire! Best book Chad has read lately; favourite inspirational quote; room-desk-car; favourite swear word; favourite movie; favourite tune is just about anything; favourite streaming series; message at the pearly gates.
- [86:33] Chad’s gratitude.
