This week on the Be Epic Podcast Matt sits down with Dan Andrews, Managing Partner and CEO at Tempus Realty Partners, a real estate investment firm specializing in commercial property in the Southeast and Midwest. Dan shares how he finds good opportunities to invest in and the variables that are considered in that equation. He also touches on the benefits of working in the Southeast and Midwest for the real estate market in the long term. Matt and he then discuss how remote work and e-commerce is effecting the commercial and industrial real estate market as well as the move to more suburban vs. urban offices. They end the episode with Dan sharing advice for students who want to be entrepreneurs.

There's a lot of markets where people want to be that there's just no land to put it on currently. And so there will be more land developed and made ready for that. But those will all take time.

Excellence, professionalism, innovation and collegiality. These are the values the Sam M. Walton College of Business explorers and education, business and the lives of people we meet every day, I'm Matt Waller, Dean of the Walton College and welcome to the be epic podcast. I have with me today, Dan Andrews, who is the managing partner and CEO at Tempus Realty partners. Dan, thank you so much for for joining me today.

Thank you Matt, it's a pleasure to be here.

Dan, let's start out by just hearing a little bit about what what you do. What is Tempus Realty partners do?

Tempus is a real estate investment firm, we put together opportunities for uh investors to invest in commercial real estate properties. We do that here in Arkansas, and really across the southeast, and Midwest primarily. Um built relationships all across the country. And we look for compelling investment opportunities that we want to put our capital in and have other investors join us in.

You know, real estate investing can be complicated. What specific kinds of commercial real estate properties are you most interested in? I know, obviously, you said in the southeast and Midwest. But beyond that, are there any restrictions?

We typically focus on office properties and industrial properties. And there, those are obviously very unique and have their own characteristics as well. But those are areas that we seem to have pretty good expertise in. And so that's our focus.

You know I- Because when you talk about commercial realty, there's so many possibilities. And so I can understand why you would want to narrow it down. But, you know, within those with, for example, with an office space, for example, how do you find good opportunities? Because there's, there's like, again, I'm, I'm not an expert on real estate at all. But I would think, right, there's properties that are in bad shape. There's properties that are in good shape, there's properties that are old, that are properties that are new, the location of the property is important, too, I would think. So how do you think through those kinds of of variables?

That's the real art of it is, you know, translating an infinite number of variables down into basic capital asset pricing model, right? You take all these variables from all these different things, and you really want to translate it back to a series of cash flows. But then all of those things become an art and, you know, okay, how long is it going to take to find somebody to lease this? What rate are they going to pay? How much incentive? Am I gonna have to pay for them to do that? What's that gonna look like, over time when I have to find the next tenant in 10 years? What's that gonna look like? And so you're making a lot of assumptions. And you do that based on experience. And we do that with a lot of feedback and help from partners that we've developed over the years in various markets. You know, real estate, like politics, it's all local, right? Everything is very unique to a specific market, and even a sub market or even, you know, just a set of blocks can make a tremendous difference in how a piece of real estate is valued and how it's going to perform. And so it's really helpful to have trusted people on the ground locally that can guide you through the nuances of the specific property tell you what to expect. And and so that's the real key for us has been developing relationships with people in these markets, building a level of trust, because ultimately, we do have to rely on the things that they're telling us to translate those data points back into that pricing model.

So cause when you're investing in a piece of real estate, say office space, for example. Your investment can get cash flows from it. But the property itself can appreciate. And both can happen. And there are also cases where you might not have great cash flow, but the appreciation is great. And and vice versa. Where do you all fall in terms of what your sweet spot is?

Well that's one of the things that we've historically prided ourselves on is being willing to do anywhere along the continuum. So you can have deals that are purely cash flow and not likely to go up in value at all. You can have deals that have no cash flow, and you think you're going to make a lot of long term gain and then you have a number of deals that have some kind of blend in there. And so we have a mandate that allows us to do all of those. And, you know, we'll have certain partners that join us in one style or another depending on their personal preference. But we are really looking for something that we feel is has relative value in it for the position that it's in.

Is there a reason you're focusing on the Midwest and the Southeast is that because there's you think there's more opportunities there or is it because of your connections in that area?

A little bit of both. We like the Southeast and Midwest, and particularly secondary markets in those areas. Because, you know, it has an ideal blend of being large enough to have assets of scale that are interesting, and the ability to do some things and has good velocity for tenants that want to be there and for ultimate buyers that we want to sell to. But you know where we really make our money is the fact that you know, real estate is an inefficient market in a lot of ways. And the larger markets, you go to, whether it's the west coast or the Northeast, that inefficiency becomes a lot smaller. And so, we really liked uh the ability to play in the Southeast and Midwest because of that factor. And then also, just historically, the Southeast and Midwest had not had these massive swings in value. You know, in the economic downturn, they don't drop as far, and then they don't run up as high, you know, when the economy is really hot. And we think that makes for a better long term investment over time. People have certainly made a lot of money that play in the market, right in some of these other markets. But that's just that's not a style that we're particularly comfortable with. And so it fits, fits with our values.

When you look at this phenomenon that's going on of remote work, right, there's more and more people working remotely. And there's more and more companies that are allowing people to work from anywhere. And so there's there's a lot of people moving from expensive areas. I know, in particular, just from my experience with Northwest Arkansas, you know, we have people moving here from San Francisco, Silicon Valley, New York, Chicago, and other places like that. I've actually been surprised how many people just in my neighborhood, my own neighborhood, people that have moved from those cities. And, you know, they're working remotely now. In fact, I met about a year ago, the co founder of Evernote software company, he lives in San Francisco for a long time and grew up in New York City. And he moved to Bentonville. But I've met other people, many, many other people that have had this happen. I'm thinking now still, you know, housing prices have gone up here for sure. But nothing like they've gone up in a lot of other places in the country, from what I can tell. But I'm wondering, you know, even though people do work from anywhere, they're also sometimes using office space in these new places that they've they've moved to, because in some cases, well, in a lot of cases, if you're customer facing, you've got to be in person, but even when you're not, there's a lot of times that people do want to meet face to face about business. How is all that factoring into this market?

Oh, wow. There's a lot there. It's been the topic of conversation every day in our industry, and something that we spend a lot of time thinking about. First of all, right, these secondary markets, places like Northwest Arkansas, places like Columbus, Ohio, Charlotte, North Carolina, and those places benefited tremendously over the past couple of years, as people are migrating to places where they have more of a drive to work culture a lot closer to the kind of lifestyle that they want. They don't want to ride public transit to work. They don't want to pay, you know, enormous costs for housing. You know, they they like a little bit smaller town, but these have become kind of a nexus for people to come to outside of Chicago and New York and San Francisco. And so that's been a major shift. The second major shift we've seen is, you know, for probably 10 to 15 years prior to COVID, there was a large trend toward the urban core, where offices were really coming out of suburban office and everybody wanted to be back downtown and you saw these regenerations of downtown and you're seeing that trend reverse in a lot of areas so a lot more activity in suburban office as um people don't want to commute into the the urban core anymore. They don't want to get on an elevator ride to the 25th floor. You know, they want to go into their suburban office pull into the parking lot and walk in. And, and even then they may only go to the office for half a day, three days a week or things like that. So that's another changing trend. It's not a total reversal, we still see some very healthy urban core assets. But on the whole, it's definitely changed that trend, at least stopped the trend and probably reversed it a little bit. The third thing that we've seen is the companies that have typically a call center or a lot of homogenous employees in one location, typically, they would have have uh looked for assets that had a very high amount of parking and ability to have a lot of density within a building. And so prior to COVID, those assets were in high demand in a lot of areas, places like Omaha, places like Boise. Those are the companies that seem to have the most trouble actually, with returning to work companies that have executive offices that have, you know, 10 to 25 to 50 employees less than 10,000 square feet, they're actually largely back in full force. And the activity in that space is almost the same as it was in 2019. But the very large users are really finding it difficult to come back to work. It's been a very interesting dichotomy between those two types of tenants.

Tell me a little bit. So we've talked a little bit about the market, which is so interesting. Where do you get the funds to invest in these real estate opportunities?

Yes, we have a lot of great partners. And that's been built up over a number of years and careers of myself and my partners. So it's it's family offices, it's just successful individuals, it's a handful of institutional insurance company and those types of investors. And and it's, it's developing those relationships over a period of time, and they've seen our return history and say, you know, we'd like to continue to invest with you. So that's who we go to, for each of these deals. And, and we have, you know, several 100 of those unique investors that join us that when we do a deal.

Do you have different funds that you open over time, or is it just a ongoing rolling type of a fund?

We- we do real estate in two ways we have uh when we are investing in a property where we have a specific game plan for that property, we're buying an empty building, and we want to do the things we need to do to lease it up or, you know, we're going to develop a property or we're going to do certain things and then sell the building. Most of the time there, we would go and have that specific asset and take that specific asset to our investors and say, "Hey, here's what we plan to do on this, would you like to invest with us on that?" Then separate from that, we have a fund it's a private REIT, where we have a collection of assets that we say, "Hey, these are not necessarily being held to complete a specific investment, these are being held, because they're a collection of assets that we have high conviction about and want to own for a long time". So those are the two ways that we invest.

And you're managing both of those?

That's right.

So Dan, we've talked a lot about office space and and the fund, but why are you interested in industrial as well, not just office space?

There's been a major change in industrial over the past several years. And it it really began in earnest, I think under the Trump administration, and some of the trade wars and tariffs and those types of things that really, companies started to look to bring manufacturing and things back to the United States, combined with some of the e-commerce trends that we've seen over a long period of time. And then, of course, now with COVID, and the supply chain disruptions that came from that has just been a continued driver. But the demand for industrial has been just off the charts the last few years. If you look at the statistics on the growth and rental rates and the vacancy, it's just the amount of supply is vastly outstripped by the demand. And there are probably still a number of years worth of development that need to happen in order to meet the existing demand in that space. And so there's a lot of capital go into that and seeing that as an opportunity. It's just it's gonna take some time to meet that demand because it takes time to build buildings. And honestly what we're seeing in a lot of places is you know, there's only so many good places that you can put an industrial building, it's got to be zoned properly, it's got to have the right services to it, it's got to be located within proximity to other services. And you can't just put a giant industrial building anywhere. And so there's a lot of markets where people want to be that there's just no land to put it on currently. And so there will be more land develop, made ready for that. But those will all take time. So we're very bullish on the future for industrial property over the next several years. As we continue to see, you know, companies bring production and distribution capacity back into the US. And then the e-commerce piece, it takes several square feet of industrial space for every square foot that you pull out of a store and start selling with e-commerce. It takes more square footage on an industrial building, than it does to do that in retail. And so as we continue to buy more from Amazon and buy more things online, you're gonna see continued increased demand there as well.

Yeah, I know. For example, Walmart recently built DC in the Northeast, that's kind of like the DC for DC's, where product will flow in and then be re-directed to DCs. And I know that, you know, as walmart.com has grown, and also pickup and delivery, you know, where people pick up at the store, or have it delivered from the store, those create changes in the distribution process at the distribution center that also, you know, require more- a different kind of space. But your point about the re-shoring, you know, what they're calling it, of course, there is a lot of that going on, of course the United's it's funny, a lot of times people think not a lot is produced in the United States. But something like 20% of the world's supply of product is created in the United States manufactured in the United States, the growth in employment in manufacturing has not been very high, because we're so productive. But I think, you know, you're right, companies are starting to think more carefully about having all their eggs in one basket internationally. There's political disruptions that occur, and there's natural disasters and so forth. So yeah, there's clearly there's a lot of talk out there about reshoring and nearshoring. Right now. So moving on, why would someone want to invest in your funds?

Well, it goes back to something I've touched on earlier, but back to relationships, in a lot of ways. These are our people that, you know, we've known and one of our partners will have a relationship with. And then over time, you know, it's grown by the referrals and new relationships that we've been able to make because of that, but people generally look to us because, you know, number one, they know we have our own capital in it, and a large way we started this business and continue to run this business as primarily a place to deploy the capital that that we're charged with, for our families. And so ultimately, there are people that say, hey, these guys have done well managing their own capital, and they're offering me a chance to invest alongside them. And that really resonates with people. And then we really try to make it a priority just to, you know, invest in real estate relationally. So we want to, we want to create our partners fairly we treat our partners in the field fairly. And, you know, we just look at it all as very much a relationship based business. And so that's ultimately how we source our deals. That's how we source our capital. And, you know, so it's relationship first. And the other pieces have a tendency to fall in place when you're taking care of the relationships.

Dan, you're a CPA, I know. But you're really an entrepreneur, more than anything, you've started this business that is doing quite well and you've got some great partners. And really running a business like that create, you know, creates the need for an entrepreneurial mindset con- constantly. We have a certain percentage of our students want to- want to be entrepreneurs, you know, and some of them aren't thinking about it, but they're gonna be entrepreneurs. They just don't know it yet. And I would imagine you probably fell into that category since you majored in accounting and then got a CPA, you probably weren't thinking, oh, I want to be an entrepreneur. So given your experience as a successful entrepreneur, what advice do you have for our students who are interested in entrepreneurship?

Well, you're exactly right. I didn't set off to be an entrepreneur I was going to be a CPA and maybe a partner in an accounting firm or a CFO somewhere and, and that was kind of the the ultimate goal I had for myself. But over time as opportunities presented. And, you know, there were challenges out there to tackle, I just sort of found my way into this role. But, you know, the things I would say is, number one, do chase your passion, you know, find the area that really makes you excited and go after it, you have these skills and talents for a reason, go make the most of them. The second is associate with people who are doing big things. There are lots of people out there, and you're going to wind up performing to the level of the people that you surround yourself with. So make sure that you surround yourself with people who are doing big things, and you'll wind up doing big things as well. And the third thing is, you know, don't be afraid to step out there and try something, you know, I- I'm a CPA, I came from, you know, financial accounting, and GAAP and all those kinds of backgrounds. And yet, I found my way into, you know, real estate and and real estate's a field full of extroverts and full of people out shaking hands and, and brokers and those kinds of things. And that is not me, it's outside of my comfort zone. But you know, where I found my role is they are full of extroverts. But there's a lot of people in the field that that are not so great at, you know, the numbers and the the capital asset pricing and all the kinds of financial things that you need to consider. And so I found a way to be a complement to some other very successful people in the field. And as a team, we worked really well together. And that's how we came together in this business. So that would be the advice I would give to those is um do those things go make the most of it. And don't be afraid to fail. probably hear that from a lot of people, but it's okay. much better to chase the big dream than it is to never try.

That is so true. It's it seems we're um quite risk averse people in general, and a lot of opportunity is missed because of that. Well, Dan, thank you so much for taking time to visit with us and educate us on real estate, real estate investments, especially in office space and industrial. And congratulations on your amazing success. And I wish you the best of the future.

Thanks, Matt. It's been a real pleasure.