The FORT Podcast: Rob Gandy
In this episode, Chris sits down with Rob Gandy—the Founding Principal of Cielo Property Group in Austin, TX. Rob is responsible for capital market engagement, financing, and acquisitions for Cielo. Prior to founding Cielo, Rob built a $60 million commercial real estate loan portfolio as a banker and previously served as a Vice President for Sandler O’Neill and Partners in New York where he traded municipal debt, agency debentures and collateralized mortgage obligations. They discuss Cielo’s massive development in downtown Austin, entitlement risk in real estate deals, the effect of COVID-19 on Austin, and much more.
01:44 — Founding Cielo Property Group and Rob’s Background
05:31 — A Single Tenant Focus
06:07 — Chapter 380 Development: Was Sam’s Club a distress deal?
09:02 — What should an owner think if the borrower knows there is an issue with the bank?
11:56 — Were you living in Austin during this deal?
13:59 — What was your source of capital?
16:23 — What was the original intent of the Austin Music Hall development and how did it become this ‘creative office’?
22:38 — What data gave you the confidence to build a spec office building?
26:22 — Are there any indicators that Austin is being over-built?
30:55 — When you buy a deal like this, is it fully-entitled or are you taking on the risk?
33:15 — Is single-tenant NNN something you’ve always done?
34:20 — What is the status of leasing / transacting in Austin right now? Is it paused due to COVID-19?
36:49 — How are retail tenants responding to the current climate?
38:54 — Are office tenants responding any differently?
40:12 — What are your best practices for providing rent relief to tenants?
42:04 — What is your outlook for the remainder of 2020? Is Cielo going to be actively seeking opportunities?
43:48 — When do you see normal activity resuming?
With a background in investment banking and a hands-on approach to real estate development, Gandy’s transition from the financial world of New York to the bustling real estate scene of Austin paints a picture of adaptability and strategic foresight.
During the podcast, Gandy delves into the intricacies of Austin’s real estate market, highlighting the city’s magnetic appeal to tech giants and startups alike. He underscores the high demand for office spaces, albeit acknowledging the speculative nature of such developments. The city’s growth, fueled by its burgeoning tech scene, necessitates a level of speculation, as companies often expand at an unpredictable pace. This situation, while challenging, also presents opportunities for developers willing to navigate the complexities of speculative development.
Gandy shares valuable insights into the impacts of the COVID-19 pandemic on the real estate market, particularly on tenant behavior and space utilization. He anticipates a shift towards flexibility, both in lease terms and the physical layout of office spaces. Retail spaces are not exempt from these changes, as the pandemic accelerates the evolution of consumer behavior and necessitates adaptability on the part of landlords and tenants alike.
At the core of Cielo Property Group’s strategy is a focus on urban infill projects and adaptive reuse, a reflection of Gandy’s belief in the importance of being nimble and responsive to market dynamics. He emphasizes the necessity of embracing change, highlighting the potential for innovation and efficiency gains, particularly in the realms of construction and property management. This approach not only ensures the relevance and competitiveness of their projects but also aligns with broader trends in sustainable development and resource optimization.
Gandy also touches upon the intricacies of development in urban settings, shedding light on the challenges posed by zoning and entitlement processes. He advocates for a proactive and community-engaged approach, ensuring that development projects are not only financially viable but also beneficial to the communities they serve. This philosophy extends to navigating the current market uncertainties, as Gandy draws upon lessons learned from previous economic downturns to emphasize the importance of financial prudence, strong relationships, and a long-term perspective.
The integration of technology into various facets of the real estate industry is a recurring theme throughout the conversation. Gandy discusses the transformative potential of tech, particularly in terms of driving efficiency, enhancing property management practices, and enabling data-driven decision-making. He underscores the need for the real estate sector to remain open to technological advancements, ensuring its continued evolution and relevance in a rapidly changing world.