#311 - Susan Gruppi - Co-Founder @ M2G Ventures - Last Mile Industrial, The Stockyards, & Raising Capital

Chris Powers: Susan. Thanks for joining me today. 

Susan Gruppi: Thank you.

Chris Powers: For those listening, Susan and I have known each other for 19 years. We were both freshmen at TCU together. You started the real estate club, but I got some credit for it. So thank you for that. It's typical with how things went, but that's you. You have always just taken the ball and run with it.

Susan Gruppi: And then you, like, got the credit somehow. 

Chris Powers: People give me a lot of credit, but I try and deflect as much. I'm like, they did it all. I was just around the hoop, but being around the ring is good. Now and again, why don't we pick up where we were talking? We're in a weird world of fundraising.

What has been like your experience in trying to raise capital? Just like conversations, like where's the market at? 

Susan Gruppi: Yeah. Okay, I've started thinking about cats, which seems intuitive, but it's not when you're feeling your way through it and learning as you go. And then once you get to the end of it, you're like, Oh, okay.

But yeah, I've been thinking about capital in three different ways. One's our GP capital. Seconds are LP capital. And third is our OpCo capital. For us, OpCo capital is self-funded by Jessica and me. So, we still need to tap that bucket. On the LP side, historically, we've gone from when we first started 19 friends and family investors to family office investment to some institutions and then some mixture in between.

And, I'll say where we've been over the last call it 18 months. And as of recently, on the LP side and then on the GP side, typically, that's been historically self-funded or syndicated GP capital. At the beginning of this year, we decided to raise a GP fund that would allow for one vehicle for our GP investors to invest in to give them access to our deals.

That was my first time and still is, and it's still ongoing right now, my first time raising A fund, and it's been an exciting time to do it. A few themes have popped out of it from a human behavior perspective. 

Chris Powers: Humans are weird. 

Susan Gruppi: I know. God.

Chris Powers: Including us. 

Susan Gruppi: I know. The first one, and since it's we've been raising since February.

So there's been where we were in February. And even when we were preparing to launch quote unquote, the market was way more opaque than it is today. So, we encountered different challenges through the fundraiser. So, call it February through April, and we were more pitching about Whether we will see three caps again. 

I know that type of stuff, which, for the record, I wasn't the one saying we're going to see three caps again, but I know that's not going to happen; maybe whenever Elliot's older, like that, 'd be great whatever.

Chris Powers: She's going to start three-cap capital, right?

Susan Gruppi: Yeah. That'd be badass. Sorry. 

Chris Powers: You can say whatever you want.

Susan Gruppi: All right, cool. So the pitch was different then. And then we had investors interested because for a couple of things: one, it was our first fund, and typically, we've raised on the GP side; it's even GPLP capital on a syndicated basis.

So, our GP investors received the same return and waterfall structure as our majority LP. That's what we had typically done with how we're raising the GP fund. It allowed those typical investors that typically invested in every single one of our deals but had the discretion to say yes or no to each one, like almost 600 basis points of movement between the old deal structure, which was you're a baby LP that gets the same economics as the majority LP. Still, you're on the GP side versus being on a GP Vista and the GP fund, which allows for project-level returns plus a piece of promotion. 

Chris Powers: And technically, the right possibly to be an LP if they want. 

Susan Gruppi: Yes.

And increase the size of their amount. With that being said, in the early days of ferreting through that, many people were very interested. They were getting comfortable changing how they invested with us, which was from discretion and indiscretion. And then there also was a lot of dialogue around, like, where are we?

When is this going to deploy all that type of stuff? So that was, those, it was a different set of challenges. And then, as we've had a ton of just pricing discovery, and it's still ongoing right now from even before then, we've been fundraising where we've had to change like our yield requirements in our fund deck, three or four times.

You're like, crap, shit. Quit going up. I know you're like, dang it. I thought I was conservative on that. And then the most complex piece is now, there was the potential for distress. I call it 12 months when we were in January and February, and now people are starting to see it. It's not prevalent, but we've seen it in one-off cases.

And then, obviously, we all know what math problem depleted 18 months ago that now no longer works that struck many deals. And now, the challenge is more around competing against distress or the perception of pain.

Chris Powers: Yeah. Opportunity cost. 

Susan Gruppi: Yeah, exactly. And as an investor, do I want to invest in a fund where I'm saying yes to, quote-unquote, yes to everything?

The positive of the GP fund is that you're only giving yourself five to 20 percent exposure to any deal. So, in theory, you're diversified more, but you're still thinking, or do I hold all my capital back so I can wait for somebody that has a distress deal and load all my money into that?

And then you have a lot of investors right now that are like, okay, do I even want to put it with a sponsor? I want to keep it. I will do it directly, so Raising the GP fund has been challenging for several reasons. It's been quote-unquote successful, and you know what it needed to do, but it's been a pretty big slugfest.

And I've learned a lot. And then, on the LP side, that's been more challenging. We have some great LP partners, like excellent ones. But one on the more, just taking a step back, the opportunity set they see is very different from the one you and I see.

Chris Powers: What do you mean by that? 

Susan Gruppi: So when they are, when I'm pitching to our LP partner, whatever it is, I can get to a seven-and-a-half field on costs on an untended industrial class. We don't; we all know the same economics or whatever it's moved, was frequency, you get my point, but they're also in the same investment committee.

 That guy is pitching that deal to the rest of his partners. And at the same time, they're getting three distress pitches on the other side. And so They can't help but feel like it's not. It really shouldn't be an and or conversation. But sometimes it is primarily, and I see. So that has been a challenge, competing against the perception of distress or candidly. If we take a very focused approach to real estate investing, we do, which is good. Still, many of our institutional partners are in multiple asset classes and different types of structures.

So they have a larger lens to what other opportunities are out there that they are competing or putting it up against. That one is an excellent way to put it. The second way to put it is we're just naturally who I am. I'm here to build wealth and fine being the first guy.

I don't want to be like the 15th guy. Most of our LP institutional partners wish to wait till everybody's been like, the water's fine. Come on out. It's safe. 

Chris Powers: They come in when prices are high and out when prices are low.

Susan Gruppi: You're like, man, no. There's, it's like finding that balance.

And if you can get a really, we're blessed with perfect partners. If you can get a great partner with whom you can have that dialogue, like, okay, here's where we are, but no one will be a hundred percent correct. It's been good; the issue over the last eight to 10 months is that even with great partners, yield requirements have moved so quickly that even if you're on the same page with an institutional partner, the yield requirements can change mid-deal. And, for structured groups like us, the sponsors, we're the ones on the front line, like negotiating. And it makes it challenging, especially when there's been a bid-ask spread for a while, and that gap is closing.

But then the benchmark keeps moving because rates keep moving, and then you're constantly trying to catch it up. So, on the LP side, it's been a challenge. And then the other piece of it is related to capital raising. The other part is we're lucky that we have many groups that we would like to work with, and they would like to work with us.

The challenge is finding the right deal, given a couple of things. Our business has many smaller deals, calling it 10 million equity, checking down, and forming a new relationship. You need a more extensive check size to do that.

Chris Powers: How much are you hearing?

Because many groups you talk to carry out funds or big institutions that, in theory, have to put out capital at some point, they can't invest for the next ten years. Are you getting any sense that the animal spirits are building? Like we have yet to put money out.

Anybody listening to this, it's not in real estate. This window started drying up. We're now a year and two, three months into this. 

Susan Gruppi: Yeah, they're still keeping it close to the vest, but I'm starting to hear some analytic commentary for the first quarter, the second quarter of 2024.

Chris Powers: Who knows where rates are going, but it feels like we've hit our top.

Susan Gruppi: I think rates will go back down to, like, in the four-and-a-half range, which sounds freaking incredible to me. I'm great with that normalized level at some point. And when that happens, I hope I will have purchased. And that's a ton of real estate. I wish I had already been buying a lot, but it's been challenging.

And as we know, debt is another thing that's been super difficult lately, but through the next, call it 12, 18 months. Cause we will see we won't see what we saw in 2020 to the end of 2021, but we will see value appreciation from rates, not going the other way. Our real estate portfolio depends on the deal, but we could fix pricing by 40 percent off the top. 

Chris Powers: Yeah. Yeah. The flip side is that I don't know exactly your portfolio, but we have some of the same stuff. The fundamental ground game has remained strong. Rents are still going up. Vacancies are still low.

Susan Gruppi: It's just the math equation, which is irritating when we're just real estate people. We're not; we've always been real estate people. So I'm like, this is the same; this is the same asset it was 18 months ago. That part is tricky. And then I had that conversation with our partners; the math will change.

Chris Powers: You have said it. Why did you choose a GP fund? What was the reason?

Susan Gruppi: A couple of reasons why. First, from an efficiency standpoint, I'll speak on both sides, one from our side, why we did it, and why I think it's better for the investor because we're going to be invested tremendously on our side from our perspective, one from an efficiency perspective.

So when you're fundraising GP capital, which again on a 10 million deal where you're 10 percent of the co-investors, that's a million bucks and say, you've got whatever, four or five guys in it. You've got to be thinking, even for those investors, where do those investors want me to spend my time?

Do they want me to talk on the phone to them about their, like how their dentist appointment was? You know what I'm talking about. I'm trying to be rude. So true. Oh, yeah, exactly. 

Chris Powers: Many wealthy older adults don't have much going on. They want to sit and chat. 

Susan Gruppi: I know. And I'm like, my hair's on fire.

I must go. So there's that piece of it from an efficiency standpoint. Then, from a reporting standpoint, I've even noticed in our shop because we do have a lot of majority LP capital, our GP investors are equally as important, but because they're not getting daily updates or weekly updates, like our majority LP, they're getting, quarterly reporting.

In an ideal world, you aggregate that into one report because the magnitude of the information they need to know, significantly if they're investing in multiple deals, is very different. And there's so much, as that goes on at the individual property level, like daily.

For a minority GP investor, like getting them into the minutiae. And once you bring it, it's just like anything else. You want to know more about something if I start telling you about it. And so it's also from a reporting efficiency standpoint, and then just a quality of service in general.

And then the last piece is just where we're going and back to what I was talking about, like on opco capital, GP capital, LP capital. My time now, which again is more trial by trial and error, just like every other job I've had at this company, is around how can we be, I say to the team, climb the next stair tread and just be more efficient and optimize more of our capital base.

And so the GP side was a self-explanatory next step for us. In addition, you never know where that takes you, and we'll only actually do an entire LP fund or something like that, but you will do it if you've done a fun one. And we report our returns the same way I'll inform you all's returns.

Yes, it's on a deal-by-deal basis, but our track record is everything. And so I report our track record on a portfolio basis. That's the same. It's the same concept. 

Chris Powers: Okay. Yeah. And I have something written here. That was an interesting fact. I didn't even have to read this to know about you, but it said I have a vital skill in seeing data and identifying outliers.

I want to ask you a couple of things out of that thing. Are there any trends that you saw that there's this, there's the quote, if you've met one family office, you've met one family office, but a lot of your investors, especially coming into the GP fund or family offices. Are there any trends you picked up on and what matters to them versus other investors you've had in the past?

Susan Gruppi: Oh man.

Chris Powers: Or is it all across the board? 

Susan Gruppi: It's probably all across the board, but I would say, in general, I think you deal with personalities with every investor group you work with, whether it's an institution or it's a family office, I think the family office dynamic is a little more personal.

And so the things that they care about and raising a GP fund, for example, is different than what, if I'm on the phone with an institution talking about investing in the GP fund, which, to be clear, we don't have any institutions that are investing in the GP fund. And so it's more about, it's more of that, like much more about personality fit, who else is supported, which the institutions are the same way. But I wouldn't say that one trend popped out to me.

Chris Powers: You guys have entered a similar market over the last few years. We're buying different stuff, but it's under the class B category. But you have taken an approach we have not accepted, which is you are making industrial A little more. We are not doing that stuff. Yeah. Where did that come from? Why are you all doing that? How's what is the data saying there? 

Susan Gruppi: There's a couple of things related to specific whys behind why we started doing something when we did them. So it's momentarily off the relaxed class B and thinking about class A development before pre covid.

We talked about this. Remember, I brought you; we brought you all a deal. And I was like, Hey, we've got this hybrid asset class, which, you know what else is difficult—making an asset class makes it very hard. I found that out later. But we were discussing industrial sites with retail attributes, i.

1. access, proximity to rooftops, some level of showroom, and consumer component. And so we called it hybrid at the time we did an S tunnel research and then started trying to, we got a site, which was our North quarter 35 site, which was land at the time, there's some buildings on it and started trying to pitch doing that, which would have been more, not as far as it went, but, basically some retail component with huge industrial component on the back, but still like shallow bay, but a little bit cool, if you will.

Chris Powers: Refresh on that quick, just so I, and I remember this like it was yesterday, it was like, Hey, Pottery Barn might have seven locations around DFW, why not centralize this into one thing to where you can still show up shop.

But you can get it right out the back.

Susan Gruppi: Right? Or, well, and from the retailer's perspective, you would have wanted to do it, so take a typical big city, say there are eight pottery barns or whatever. There are three that are badass; make them a ton of money. The rest are exposure for them.

And this is, again, pre-us being online shoppers. And so the concept was, okay, have your brand, your flagships. You've got to have those, whether two or three, but you only keep a little extra stuff there. And then have your centralized location where your warehouse is; you can also have a consumer component.

And you can cut your real estate costs for all the retail that is just unoptimized and move it there. That was the pitch to the retailers. But again, we were still. That was when we were like, what's Omni channel? Like we were still trying to figure it out. And then COVID happened, and it accelerated it.

We ended up doing North quarter 35, basically, a very dumbed down version of that, which what we did on that asset was it we're lucky enough. It's a fantastic site. I wish I could have 15 more of those sites, but it was such a good site; it had excellent frontage and was very close to rooftops.

It was one exit North of Lyons town center. And then, from a design perspective, we were more forward with the design, landscaping, et cetera, signage, and then, in our branding, the other thing that we're known for is our branding. If you look like our branding materials for our industrial stuff, it's pretty sexy.

And so that does stand out, too. But all that only costs as much as it would to pick. Okay. Instead of choosing a blue stripe, which I can't, how many industry buildings have a blue line, and whatever you prefer, black? It's the exact cost, but it has made a difference in differentiating our products.

And so that was one on the class B side. We do very urban class B. So we don't do suburban class B and in an urban setting in class B, especially sub-markets that I know we all love like G. S. W. and Brooke Hollow and Bow would. Those are sub-markets where you have Smaller tenants that they appreciate more.

Some of those types of excellent components, whatever you want to call it. Or we call it mojo, like mojo components that cost the same amount of money, especially in a rising rate environment, not interest rate, but rental rate. You're already catching people on the up.

And so your product is just, they're already moving. They're already having to move. They're already having to, okay. My rent's already going from four to eight or whatever it is. All right. If it goes from four to nine, I get this. It has been super successful in markets where you see bleed from other sub-markets pushing tenants out, i.e., Brooke Hollow design district. 

Those rents are getting too high. So then those tenants are coming to Brook Hollow. They're seeing our industrial product and saying, Oh, this is an excellent brand expression for me, but it's industrial. But I'm still saving money somehow, but we're achieving a top above-market rent for the submarket where it hasn't been successful, and thank God we haven't done it in any commodity industrial or significant box type industrial. We have yet to do any of that. 

Chris Powers: Do you think the world is headed more in that direction, or are you probably paying attention to this more? Do you see other people designing kind of urban class be minor-based stuff like you all? Are you guys still at the tip of the spear? 

Susan Gruppi: That's hard. I think for us, there's the question, it's even internally for us, it's like a gut check, we'll get costs back, we're going to buy a building, we get prices back, and, our construction team's it's 60 afoot to do what you want to do, and you're like no, we can't do it, and you have to, the way we do it is challenging. Most groups don't do it because if they say, look at our building and say, Oh, I want to do that storefront, lighting, landscaping, do that.

It's generally going to come out more expensive. So nine times out of 10, every group will say, no, I'm not doing it. And it's not just that you have to layer that with a very hands-on approach to leasing, branding, and marketing. Otherwise, you've got a lovely building, but nobody's talking about it.

So it's super layered. So no, many groups are not doing it because an industrial, as we know, it's been easy to make money. 

Chris Powers: And are you all getting higher rents because of it?

Susan Gruppi: Oh, yeah. We still need to update the stat, but it's at least 25%. 

Chris Powers: That's awesome. Shit. I might have to start. 

Susan Gruppi: Yeah. It's hard, though. 

Chris Powers: I know it's hard. You all make it look easy, though. 

Susan Gruppi: Super hard. 

Chris Powers: Yeah. We were talking about that going back to opportunity costs and everything. 

Susan Gruppi: On that note, though, one thing that's become difficult for us. Recently, because the market has done what the market has, we've been beaten up more on market rent assumptions in our underwriting than we have.

And when we entered the last cycle, the way we were able to get aggressive very quickly was to be aggressive on our market rent assumptions. But we backed it up with, okay, we've got the mojo to make them there, but you have to bet you can do it now. We're in a. A market where we see, especially on the institutional side, they're seeing deals across the country.

They're seeing inland empire rents plummet. And so what's happening is not only are we getting, I want. Whenever they're fact-checking a deal, I want untrended yield on cost. Not only that, but I want to ensure that nine comps support whatever rent you're including. Unlike before, here's where the market is, but we feel comfortable.

We can hit two bucks higher, making getting aggressive in the market challenging. And which, that's the other question. When's the time to be bold? 

Chris Powers: But do you hire a typical industrial broker? Do you hire a retail broker to lease this stuff? 

Susan Gruppi: Hire a typical industrial broker.

Chris Powers: Okay. And then you give them like, here's how you'll talk about this space. It is a plan. It is a pitch. 

Susan Gruppi: Archetype would have been interesting for us to discuss. 

Chris Powers: Let's talk about it. We're right here right now. 

Susan Gruppi: Our type was, or it is, a six-building park in Brook Hollow, a flex product, which there's no flex product in Brook Hollow and, average suite size ranges from five to 15 000.

It was smaller than that. And then we deflexed it a little bit, which again, alternate strategies there. 

Chris Powers: What do you mean by that? 

Susan Gruppi: We tried to make suite sizes more prominent to make it feel more like a light industrial with an attitude type instead of leaning flexy, keeping suite sizes at 2,500 and pushing rent that way.

We could round robin on that anyway; that deal is one where we could push rents. When we bought it, it was. The average rent was like eight or nine bucks, and we're signing deals today, and we've only owned it for 18 months or less. And we just signed a 15,000 square footer at 1650.

Yeah, that's, but it's urban, and we've added some murals, painted it, and did landscaping, but I know what I was bringing up for is that our industrial brokers were like, what? And so it took a second for us to get on the same cadence because it's Like you're asking them to, like, all right, sell don't just show this to every industrial tenant that wants to look at it.

I want you to go target like the electric car companies, and they're like, why would I do that? That's way harder. But again, We're both in the repositioning business for sure. We have to be careful. Sometimes, the brand of the reposition can be some; you've got to be cautious that it doesn't become non-accretive, right?

Like it's, you get my point. 

Chris Powers: That's awesome. We're looking at we've seen a few things lately where I think piercing the 20-a-foot number is not too far away, Which is freaking nuts.

Susan Gruppi: Yeah, It's so nuts. And retail was, like, 20 to 24. Now, we're just seeing this blend, which goes back to what we discussed earlier, like this blend between industrial.

Chris Powers: But it's like what you just said, there are no other flex buildings or whatever in Brook Hollow, and guess what, there's never going to be another one.

Yeah, exactly. This asset class. It's like you're okay with the next one popping up. 

Susan Gruppi: And there's a deal you all bought that we looked at similar thought processes up in the farmer's branch, Addison area, the same concept. And now, it's different because there's a lot of flex, other than Brooke Hallow.

But they're still not making any more of it. It's still highly urban. Anyways.

Chris Powers: We talked to equity a little bit. We don't have to talk much about this. Most people know what's happening, but like debt, any opinions besides rates are up; banks aren't lending as much as anything that comes to mind.

Susan Gruppi: I have some exciting nuggets on it in general; leverage is down substantially, whatever, 55 percent is the old 70%, maybe 65%. We had a deal recently where it appraised wildly good and was like a 50 percent LTV, but we needed help to get near the loan. We wanted to be more relaxed about the DSCR debt service coverage.

Chris Powers: We're living in a DSCR world. 

Susan Gruppi: It's annoying. And so that's another thing that is a challenge.

We're used to not underwriting refers in our hold analysis, but we will have to because you can't. It would help if you didn't live with 50 percent leverage and, through it, a five-year hold at any point. But anyways, on the debt side, so seeing that, seeing you're seeing the same thing, a lot more conversation around recourse.

And then I joined a bank board; it's been interesting to see from the other side how those decisions are made slash, as a borrower, we're even in a rising rate environment. And so of the banks and I remember having discussions, and we're talking about, on the borrower side, when rates started moving, we were all conversing.

Spreads will change. Feeds will come back in. The rate won't be quite so alarming. And then, I'm in the meeting with a couple of my colleagues, and they're like, Spreads stays the same on the banking side. And I'm like, no guys, I'm telling you as a representative, all borrowers, we think you all are going to move spreads, and it's just been interesting to watch it and how they've adjusted to it.

Also, it is interesting that many banks have wanted great borrowers who have yet to be able to get it in this very competitive market in DFW. And because there are so many lenders that are like, just no. There's a tremendous opportunity for many good banks to grow their business.

But, on the borrower side, if you're not like at this point, if you're not focused on relationship lending and playing that up like you're doing yourself a disservice, that's how you're getting that right now.

Chris Powers: It's a lender's market. The whole market right now is it, and I'm not saying I don't get good deals. You got to get good deals. The name of the game right now is can you earn money? There's going to be a lot of people that get great deals. That can't get a dime. 

Susan Gruppi: It's so annoying. 

Chris Powers: Yes. It's a, can you get money?

Susan Gruppi: Yeah. And this is where we talk about more and more.

Chris Powers: But this is where the better companies grow and take market share. Because everything I'm hearing from the banks is If they had five borrowers, and maybe they will, two of them were great, three of them might've been new. They're thinking, how do we give more to those two, and how do we get these three?

It's not off our balance sheet, but We're not leaning in. And so, like the money in downturns, whether it's equity or debt, it will accrue to the people who can prove that they can put it to work. 

Susan Gruppi: And you have to talk yourself. 

Chris Powers: Yeah. You gotta good, you have to have good deals for them to give you money.

But there will be many people out there who find good deals that won't be able to fund it. Yeah. It is an expensive endeavor. 

Susan Gruppi: It is super expensive on that note. And you have to have a tremendous amount of resiliency factor. I've watched over the past 18 months the amount of resiliency.

Not just for like me personally or in the company, but just from a real estate perspective overall, with so many people dealing with so many different things and a lot more knowledge than they were used to receiving, for the 18 months prior, you see how much resiliency is a competitive advantage, and how much you won't like to sit on that. Somebody says no, and then you sit there.

Chris Powers: All right. We've talked about industrial, but I have yet to have had as much of a talk with you on this, even offline. And this will be fun to talk about. I want to talk about the stockyards. Cool. So, anybody listening to this, if you have yet to figure out anything but respect, Susan didn't start in industrial.

You started in adaptive reuse, like really complex shit. When I heard about the Stockyards Project many moons ago, I was like, no fucking way this thing will work. And it has turned out to be one of the most incredible freaking projects in Fort Worth when I have guests come into town, and they stay down there like it was kick ass.

So, I want to go deep into how this all came about. Can you set the stage for what things? We're like before the project kicked off and before you all got involved just in general.

Susan Gruppi: So, if you've been down to the stockyards, it is technically a district, a historic district. And we work in partnership with Ed Roski, who owns a majestic company.

And then a tiny little company. Yeah, exactly. And then the Hickman family, and they own 77 acres. It has seen revitalization and ups and downs over the last 30, 40 years. When we got involved, which was in 2015, Majestic Hickman Holt Hickman had been buying property there for years, and then they ended up partnering with Majestic.

They had been there for a while. When we got involved, they had all of the holdings, but it was in what they had purchased and, or. Yeah, I contributed, so the 1st project we called Phase 1 was Mule Alley, and Mule Alley, when we started, was 150,000 square feet and 2 barns.

That had horses and mules in them a year before we broke ground. So up until, literally a couple of years ago, that's where the horses and mules stayed. And then if you get on mule alley today, like the drive you go down, that was a parking lot. So it was just a place of like yesteryear and many excellent memories for people.

But other people, especially in the local community, were like, I never go there. 

Chris Powers: I was one of them.

Susan Gruppi: Yeah. Jessica and I weren't that way, but that's not a surprise because Jessica and I are like, we can do it, 

Chris Powers: What were you hired to do? 

Susan Gruppi: We originally started, and me, I'm always like, yes, yes to business type person.

Initially, there were one or two pads they wanted us to help them with, like a broker, and this is again at the beginning of our company, starting in 2014, so this is our second year. And it was like me and Jessica, like we had an intern, and they wanted us to help list some pads for some retail users.

And, of course, my better half was like, I want a more extensive assignment than that anyways, so we started talking. Then, we got engaged for the retail leasing of Mule Alley over time, which morphed into obviously leasing for all of the mule alleys. Still overseeing many branding, marketing, and tenant build-outs, just Like anything, your role expands. We can be successful if my business partner can get super obsessive and throw herself into stuff, And so we made. I need to find out the count of unique deals that we made. We had a wonder wall of tenants, Stetson. You get the point that's in Wrangler, like particular tenants, and then a lot on the food and beverage side that didn't exist.

They've none of them existed. And so most of the deals were cut, not with a, Oh, I'm, head of retail for whatever. And I'm opening 40 stores this year. It was like going to like—the founder of Lou Casey. You get my point. And so we struck each deal super uniquely.

It also points to ownership, which we must include on the majestic Hickman side in the request. I wanted to make sure. Phase one was a success, and then phase one was flanked by Hotel Drover, the world's number one autograph hotel.

Chris Powers: It's so awesome.

Susan Gruppi: It's so awesome. And that was who Jessica and I work for the most: Craig Cavalier and Kayla Wilkie, who are at Majestic, and they design that piece by piece, piece by furniture, piece, just everything. And it shows. 

Chris Powers: You already said it, but I'll say it from my perspective.

These old mule barns that nobody had walked inside or lived in for decades. Like we used to park there, that was like a parking lot. 

Susan Gruppi: Like you said, yeah, no, there's literally like shit inside, like actual shit. Like the year before. 

Chris Powers: Yeah, Was it hard to sell people? Because again, Even me, it's the Stockyards.

Nobody from Fort Worth goes to the Stockyards. That's a tourist destination. Was it hard to how do you do that? It's not even Stockyard-related. How does somebody go from taking something desolate to then turning this into a momentum machine where tenants start signing up left and right? 

Susan Gruppi: We had some early believers. Tim Love's been down there for a long time. And so once you get a couple of tenants that are, they believe in the message of it, then you can build off of it.

And many of those tenants, especially on the food and beverage side, are natural creators. So they see the vision instead of most people seeing it once it's there. If we led with that, we had enough concepts to signal that things would be unique, engaging, and different.

And so it. The cell sounds, which sounds terrible, but the cell was not that hard. It's sometimes easier to sell the dream than to sell reality. Once reality kicks in, you've got, let me see your historical data, and you're like, shoot, the difference with the stockyards is, again, back what we're talking about, industrial and e-commerce when COVID happened.

The Stockyards Phase One opened in the middle of COVID-19. The demographic of person that goes to the Stockyards does not give a fuck about COVID. And there was nowhere else to go, and it was all outdoors. So it was a scary time to grand open, but once we did it, this was the only place to go.

So then. It snowballed, so the timing was perfect for when it opened, and then, at the same time, Fort Worth has been changing and growing. Many locals go there for drinks, but because of many of the food and beverages we have in Mule Alley, many locals hang out.

And so now you have, it is the place to go out, quote-unquote, if you're going to go out, 

Chris Powers: Which it isn't West Seventh anymore, right? 

Susan Gruppi: Yeah, exactly. Exactly. That is, it's not downtown. It's not West Seventh. That's where it is. 

Chris Powers: Will you please get hired to redo downtown so it can come back to life?

Downtown is a freaking zombie land.

Susan Gruppi: God, it's brutal.

Chris Powers: Is the stock you guys still involved in it? And it's not over. You all have a lot more work to do. Is it a multi-decade project, or where does it stand today? Yeah.

Susan Gruppi: So yes, we're still involved. We are working with Majestic Hickman on their plans for phase two.

At some point, we'll be able to announce what those look like, but it will be awesome. And the challenge with. When and if phase 2 ever happens, It's a unique historic district with so many people who love it. And then, there was a very successful execution of phase one.

You want to make sure everything runs smoothly. So you can only do better than that, which is a tall order given how successful phase one was, but we're excited about it. It's one of those projects you can work on for the rest of your life. And I hope I do.

Chris Powers: it's been fantastic.

And I was not, and I didn't see it. On that, and I'm not trying to ask this like giving up private information, it's something you'll see in many. You're hearing it is you have this wonderful Fort Worth family, the Hickman's that have just been, they've been great for the city in many ways, have this tremendous asset, and then they partner with somebody to develop it.

How do those partnerships come together? And is this a trend that we'll see? I have another friend, John Marsh, who helps these wealthy, billionaire families that want to restore their cities. They own this part of the city and come in and help them.

He does that for a living. He does over 2 billion. He stewards over 2 billion across eight cities where it's becoming a thing where, like, these billionaires as a way to give back, they're going back to their hometowns and just like buying the whole thing, and they're like, Hey, let's do a 40-year project and bring this thing back to life.

Awesome. Is this the stockyards? One and done. They can't do it anywhere else in the country. Or are you seeing these types of multi-decade legacy projects becoming a thing that it's like nostalgia? We're at that point. We're like, and we miss the old days. 

Susan Gruppi: Yeah, it's incredibly unique. However, I do believe. We will see more of these multi-decade type projects from the standpoint of the type of real estate that is, I look at it like, okay, you've got bronze. You've got silver, and you've got gold. You've got diamonds, that type of real estate, and you're thinking about as a family investment and a legacy if you're going to invest in whatever, some different things, they're not, they're never building that again. 

And the specialness you can make of that place, all the memories, and all that makes it even more valuable and rare. From an investment standpoint, if you can Freaking, do a multi-generational project like that.

It's an excellent investment as long as you're not worried about turning capital and debt, like the rest of us who have to figure things out the old-fashioned way. 

Chris Powers: There needs to be a five-year performance. 

Susan Gruppi: There is not, so yes, I think. There is going to be more of a trend that it is rare because you have to have that money, which is hard for the Hickmans and Majestic; the Hickmans were very comfortable with Majestic.

And so the partnership was super easy because it was like, if they were going to do it, this is who they would do it with; Holt Brad's dad was good friends with Ed, who owned. 

Chris Powers: So, that relationship had been building for a long time before it wasn't like they went out to market and picked you.

Susan Gruppi: Exactly. So there was a comfort level, though, which goes back to our earlier conversation about themes on investors. Many decisions are made based on comfort, ability, and personality, especially in a family office-type setting. 

Chris Powers: Every dollar is a dollar until it's attached to a person. And then it's a dollar with a personality attached to it. 

Susan Gruppi: Yeah, exactly. 

Chris Powers: Money magnifies your heart. 

Susan Gruppi: Yeah, for sure. 

Chris Powers: Okay. So then they partnered. Is this something like, again, the stockyards? Is this something that you all are seeking more of these big legacy projects? Or is it like, look, we're in Fort Worth.

This one's good enough. And we're going to spend the majority of our time buying industrial. 

Susan Gruppi: The way our company begins, we've got investments and advisory work. Advisory work is on the stockyard side, and then development, asset management, and property management serve both functions on the investment side.

It's 85 percent industrial given to me. It's natural; we have a small bucket for unique but highly profitable mixed-use projects. But again, that's a tiny subset. It's not a volume game. And then, on the advisory side, we'd love to do more projects like this.

This one is so rare, and it's rare for many reasons. And then it's also in Fort Worth, and Jessica and I, our whole team, have so much pride in it. So I'd love, we would love to do more of those projects. They are super rare. We don't do advisory work. Is pitching it suitable?

Chris Powers: Yeah. Okay. But I should have tied this in more upfront. You probably answered it, but I will ask it again. What was your all's role in the project? Was it designing buildings, just tenting buildings? What was your all's role?

Susan Gruppi: it was tenting the tinnitus mule alley. And then we helped a ton on setting up like the vision branding, et cetera, for what it became and is and then ended up helping on tenant build-outs and stuff like that, but Majestic did the actual development. Then, they have an in-house construction company called Commerce Construction in the house. So they, self GCd it. 

Chris Powers: Yeah, I remember it's Jason Bosso.

With a truck yard, he was going to go to Crystal Springs, and then, like years were going by, it wasn't happening. And he's I think I'm going to the stockyards project. And I was like, no, do not go. I was there the other night. We had an event in Fort Worth in May. And it brought 300 people there, and it was kick ass.

Susan Gruppi: There's, that's the place like where the TCU kids go. It's highly popular.

Chris Powers: Okay. Now, it's you who started that project. You said 2015 is 2023, like looking back on it. What are the one or two most significant lessons you learned? It was a success. There might be a phase two.

You've said it could be exciting. What do you go into that project with that you didn't have yet? That you had to learn throughout the first eight years of this one. 

Susan Gruppi: I'd say, this is, yeah, speaking for us, which, if Jessica, she's not afraid of anything, but thinking about what the future could look like for the stockyards and like a phase two setting versus phase one, there was a lot of can we do it, can we dream up what we want, X concept to be and then go.

Thank you. Execute it, find it, and convince somebody who doesn't even want to open a store that they should open a store. These were many of the questions asked in Phase 1 on Phase 2. We know we can do it, and we have a track record behind it to do it. So there's a lot more freedom d. It's fun when you think about when you're in planning sessions. What can it be?

And literally, I've never been in meetings outside of whenever it's just me and Jessica really that we can like it's what if we invented aliens? You want, there's so much.

Chris Powers: Politicians are trying to do it as we speak. 

Susan Gruppi: Yeah, exactly. I got a text on it yesterday.

But. But you get my point, like once you've seen, oh, you can do it, you, it allows like the planning process or the dreaming phase for the next step, directly be limitless, which is excellent on a project like that when it has, it's 9 million visitors a year. It's unbelievable. It's more than that.

We looked it up. It's more than the Eiffel Tower. 

Chris Powers: That's so awesome. You got to start your career under Terry. Who's one of the best playmakers with a trademark? You got to work on this. You travel a lot. You enjoy, and you get your inspiration as you go. How do projects like that, even when money's not the constraint, totally blow it?

Like what you, cause you to walk around and see a lot of stuff these days that people like, man, you spent a lot of money, and this is garbage. How can groups that have so much money create such wrong places? Where does what happens in the process that screws it all up? 

Susan Gruppi: There are a couple of things. There's a ton of them.

The biggest one is when the non-calm person tries to be excellent—and big, massive, mixed-use type projects like that. If you're not, that's not like what you live and breathe in the detail and the glitter and the layering and then, how it makes you feel and what it smells like, you try to fake it, and you're not naturally.

That's how it is. You can feel it like we've, for example, Crockett row. Sorry. I just bought it, but I wouldn't have bought it. But you can feel it. There's just, there's nothing there. 

Chris Powers: Could there ever be something there? Is there the right person?

Have you all bought it at the right price, or is it that once things settle, you settle down?

Susan Gruppi: No, I always believe you can revitalize. It's challenging to take something from something with a stigma and turn it into something else versus taking something from something and turning it into something.

That's easier. That asset could do it, but the pricing is such the multifamily anchors that deal so that you can never get to a price that makes sense for the other piece of it is complex mixed-use. If you think about the stockyards or any of Terry's projects, for example, there's so much programming, layering, and things happening there.

And you have to have your game face on that. That's what you want to do. It is not like operating an industrial, Single-tenant deal. You're, I need to find out how many employees dockyard heritage has that literally from gunfighters to marketing people. Just stuff that you wouldn't even think about the amount of layering you have to do on a programming basis is If you don't do that, then it doesn't feel alive. So that's number two. And then number three is keeping all that stuff up is extremely expensive if you need more money. 

Chris Powers: Yep. So you're running a property. It's not managing tenants. And then you have a hospitality company that's precisely at all.

Do the tenants pay in as an HOA budget marketing? 

Susan Gruppi: Yeah. A marketing fee. And then I get to the last thing cause Jessica and I have done some makes-use projects where there's been a substantial. For example, the placemaking component, i.e., foundry, is one of those things.

If you're not Billy's benefactor, you must get in there, redo it, and put the energy into it. And then you have to sell it because it's expensive to maintain it. And then the last piece is that it's dangerous. A lot of those districts stay alive because of the personalities that are in them.

And if you start losing those personalities or somebody sells. Then it's bought by an institution, the institutions, they don't think about it because I'm not going to tell them. Still, they're making a big bet that they can manufacture what somebody has made their life to have been, their baby, and when those things start going away, it just stops feeling special. Then it's like just a regular old, expensive, mixed-use steel that nobody can afford. Nobody wants to go to the tenants because it feels dead.

Chris Powers: What happens when you probably run into this before you have this tenant that's been there 20, 30 years? It's like what you just said. They're the life of the party. Like they're the soul, the heart. They've been there forever. Maybe they have low rents, or perhaps they're in an old lease, but the truth is like, they're never going to be able to pay the top, like what you could bring somebody else in for do great developers know, leave that tenant in at a lower basis and make it up elsewhere. Or do you punt that person out, or group out and backfill it and hope it works, even though you might've doubled rents? 

Susan Gruppi: I think they do now, again, even in our little span of the last six or seven years, when we started, when I cut my teeth in mixed-use, retail was while multifamily was highly profitable, you had a ton of capital that was interested in just the retail component of it because you could get, all right, 30, 40 rents, super successful tenants. And then, it shifted to where retail has become the amenity base for other uses.

And so what that means is that many developers have picked up on now. It doesn't matter whether or not so and so is going to produce, and I don't Transcribe my retail friends like earmuffs. Sorry, when I asked for an actual rent, it didn't matter.

They're there for the amenities and what they provide, everything else. Now, the challenge becomes when you like to buy street retail as we've expanded into Austin. So we've been more willing to look at street retail, which is something we did. A long time ago, like South Congress stuff, those, that's a little bit of a different animal because you're buying like little standalone buildings at whatever crazy price for square feet.

Even if you love the guy and he's been there for 20 or 30 years, be paying five bucks. You're like, man, you can't. It depends on the project's size and the tenant's size. 

Chris Powers: You saw it happen with the original and camp booty.

Susan Gruppi: Yeah, exactly. Oh, man. I want to, I want to. Know that story a little bit more.

Chris Powers: Do you know what the Hudson house comp was across the street? You kick out a nursery and then bring in one of the top restaurants in Dallas. 

Susan Gruppi: I'm sure I made it up. 

Chris Powers: It's not in my head. My building owner is, there's no way that the nursery was paying anywhere close to what a restaurant.

Susan Gruppi: That's going to open soon.

Chris Powers: Alright, Susan, thank you so much for today. It was great, as always. 

Susan Gruppi: You're welcome. Thank you.

Chris Powers: I appreciate it