steve-tutt-interviews-andrew-brain

HL Restoration’s Steve Tutt Interviews Andrew Brain from Brain Group

The HL Restoration Impacting Midwest Industries vlog series is where our very own Steve Tutt speaks with our industry partners and others about what they do, their passion, and the great things they are doing in the Midwest all while having a little bit of fun! Check out our videos and subscribe to our YouTube channel!

Steve Tutt Welcome back to HL Restorations Impacting Midwest industries. Today we have Andrew Brain with Brain Group. How are you, Andrew?

Andrew Brain Doing great, Steve. Thanks for having me.

ST I’m glad you came into the studio.

AB Good to be here.

ST Well, I met you a while back, Andrew, and I got to tell you, man, I was impressed from the minute I got to know you. Your knowledge and what you do and your passion and what you do just impressed me all out.

AB I continue to say you think too highly of me, but I appreciate it. Thank you so much.

A Little Bit About Brain Group 

ST Well, why don’t we dive into it. Tell us a little bit about your company, what you do, and how you’re impacting that industry.

AB So Brain Group, we’re a value-add developer, predominantly in an office space. We do a little bit in retail, we focus on underperforming or rather not as good as they should be performing assets and turning them around predominantly in an office space. 

We’ve got a couple of retail deals, we also are a full-service company, so we’ve got a brokerage arm, a management arm, and then we also have development deals, too. Right now, we’re working on developing in partnership with my family, a 16-acre campus at the corner of 39th and Gillum. 

That is a development project that’s focused on a societal change in the form of these formerly blighted buildings in a blighted area of town and creating some changes. We continue to work to bridge the gap between the East and West side, you know. 

It’s that dividing line historically in Kansas City and bridging that divide between 1830, Ninth, and 63rd. We’re also working to do our Purdum part on 39th Street.

ST I’ve been there a few times, and it’s just, it’s awesome. It’s a really neat campus. 

AB We’ve got one phase of five done, and we got the second one, hopefully starting construction this year. We’re very excited about it.

The Origins of the Business 

ST So tell me how was it that you knew that you wanted to do this? I mean, you say you went to college, and this is a conversation that I’ve had with you down in New Orleans. How did all that happen?

AB Total happenstance. All the best things in my life happened to me by accident, and I’m incredibly thankful for that. I wanted to go work in private equity, went down to Miami, I was following an ex-girlfriend of mine, actually, though. Um, and I couldn’t get an interview, and my dad said, “Hey, I play golf with Sky, send me your resume.” 

He was a retail developer and was the only job offer I got, and I took it, and I’ll tell you, I loved every minute of it. He trusted me to do way more than I should have ever been trusted to do as green as I was, but I took onto it and absolutely fell in love with it. 

Then, I started taking a job in North Carolina, and my mom said, “Don’t come home.” I said, “Alright,” and my cousin called me about buying some apartments. I was like, “Oh, I’ll do that. Let’s start buying property.” I bought a shopping center under contract, and that is where I met my business partner, Chad. 

I didn’t know the first thing about raising money, and he had been doing that for ten years, so we worked together, raised the money, did that deal, and then he was saying, “Hey man, let’s go do this again,” and again and again and again, and here we are. We’ve got half a million under management right now and about 500,000 square feet of office that in the past four years we’ve grown this thing. 

ST That’s impressive, man. It’s an awesome story. Tell us a bit about what the positive and negative trends in the leasing space are.

COVID-19’s Effect on the Industry

AB As people talking about COVID and everything going on, you’ve got a couple of different camps. You’ve got one end of the spectrum that assesses it as the apocalypse, no, one’s going back to the office, everyone’s working from home, and then you have this other camp that says everything’s going to be just the same, as soon as there’s a vaccine out, we’re going right back to normal. I don’t think either camp is right. I think we’ll probably lose 5% to 10% of the office environment to a work from home scenario.

ST That’s interesting, you know, the number one asset we’ve been talking about for the past 10 to 15 years in terms of employee attraction and retention has been company culture and a good, nice clean office space. One of the biggest pieces of that. So how can you do that in a rowboat environment?

AB You know, when you take your existing employees, and you go remote, it’s easier to keep the machine running. But as pieces break down and people move on, physical displacement leads to greater disloyalty, or rather it doesn’t increase loyalty. 

So, as you introduce new elements to that, how do you train those new hires in that company culture and get them brought into that new remote environment? It becomes incredibly difficult, which is why I think we’re here. This side of the spectrum, where we’re seeing 80% to 90% of the office coming back, and it is fairly what it used to. 

What’s also happening is we’re moving to this open workspace trend where everyone’s desks were crammed into a wide-open room. With COVID and air transmission, people are talking about, “Well, let’s go back to more private offices.” The Midwest was already a more private office environment, but my office square footage per person is going to go up. 

Now, is that going to make up for that 5% to 10% of employees that are now working from home? Are we going to see a net absorption? Possibly, as people take down more square footage per employee than they’re used to. So, there’s a lot of interesting things going on. I will tell you, though, office leasing is coming back. I mean, the last two months have been very busy in our office.

ST There’s a lot of talk saying people are going to remain working from home. With office trends, do those change depending on where you’re developing these campuses?

AB Totally. What we see right now is it’s back to 80% of what it was prior to COVID. We’re getting leasing calls all the time, we’re doing tours all the time, there’s a lot going on. Now, people aren’t committing as much as they are previously, let’s say it’s about 30% to 40% of what it was, so it’s interesting.

ST Why is it always everybody pulls to Overland Park?

AB Because that’s where they grew up, and that’s what they’re familiar with. So yes, there was this huge push of Millennials diving into cities, but the reality is now that millennials are starting to have kids, they’re defaulting back to what their parents did. 

They may not be going as far South, but they’re still moving in those suburban environments. Luckily, you’ve got Gen Z coming right behind Millennials and back filling that vacuum in the multi-family space.

What’s New?

ST Can you talk a little bit about the growth prospects for coworking?

AB So, over the past 30 years, we’ve seen office leasing terms continue to shrink. It’s been getting more rapid in the last decade, but you’re having a lot of people say, “I don’t know where my business is going to be in three to five years, and I don’t know if I want to be in this office building in three to five years. 

I like moving around the city and doing different things because that change is fun and exciting for the employees.” So, enter coworking. Coworking is the merger of hospitality and office and what we’re seeing is a lot of landlords taking the floor and dedicating 20% of it to coworking, so I could still have 80% of my building doing traditional office leasing environments, but I still want to have a product offering that could fill that short-term gap for me to take that risk on the term. 

Enter the coworking operator who handles the programming and everything so that I can then lease to them half term, and then they take the risk and fill that space and let them handle all the resource sharing, all the software, all the programming, and therein lies their profit and how we can live symbiotically with landlords and coworking.

ST Let’s talk about the investor’s appetite right now.

AB Man, there is so much capital sitting on the sidelines still waiting to get in deals. Debt is cheap, and there’s a boatload of equity out there, and that’s what kept the acquisitions. I talked to a couple of broker friends of mine that focused on office leasing, and I said, “How are you guys been making up the gap with COVID?” Ringing acquisitions have been busy off the chain.

There’s lots of capitals looking for deals. They’re seeing Kansas City and where it’s at, and it has potential. So you’ve got capital here looking for deals, you’ve got outside capital that’s now looking for deals with cheap debt. There’s a lot going on right now.

ST So with downtown, you’ve got all kinds of different districts and everything that’s growing. What’s the rumor now, or where do you see or hear things moving? Where are you moving in the next big crossroads?

AB You’ve seen a lot of activity in East crossroads building off of the amount of building on West crossroads because they really can’t go West because you end up against the Hill and you got West side up there, so it’s geographically detached. 

So you see a lot moving East, and you also see the city saying, “We want things to happen, and we want to help bridge the gap with the East side.” So, again, like what we talked about, bridging that East and West divide. It’s 18th, it’s 39th, it’s 63rd. 

You’ve seen a lot of stuff happen on 18th Street with the crossroads going East. So, I think that will continue to happen. Again, cheap land city incentives are where you’re going to see development happen, and that’s where the East Side is headed, in my opinion.

ST Anything new that you’re working on?

AB Yeah, there are a couple of things I’m actually really excited about. In January, I’m going to be president of the board of the Midwest Innocence Project, something that’s very near and dear to my heart and a fantastic organization, fantastic staff, fantastic mission. 

I’m really excited about it. One of my good friends is a guy named Ricky, who was a client of MIP. He was in prison for 23 years for a crime he didn’t commit. It’s an incredible story. I highly recommend you look it up. Fantastic guy, fantastic organization. 

ST Well, congratulations on that.

AB Thank you very much.

ST If life had a theme song, what would it be?

AB Interesting question. I’ve got to go with something AC/DC or Aerosmith. My wife’s probably going to hate me for this, but I’m going to say “Highway to Hell.” It’s one of my favorite songs. I absolutely love it.

ST What is something that I wouldn’t believe about you?

AB I was a C plus B minus student. I hated school, and I was terrible at it. In fact, I got Ds in English.

ST I would have never guessed that at all, especially considering the passion and the knowledge you have in this industry.

AB When money became involved, I suddenly became interested.

ST Well, I appreciate you coming on this show, Andrew. I have one last question for you, though. If you were to pick a restoration company, what company would it be here in the Kansas City area?

AB It would have to be HL Restoration. You guys have saved my butt more times than I can count.

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