Join Matt as he connects with David Thyer, president of Seattle-based R.C. Hedreen Co., a privately held hotel development and investment company where he has worked for the past twenty-six years. The company’s primary focus has been developing, constructing, owning, and managing world-class investment properties since 1963. Principally in the hospitality arena. The company has shifted its focus primarily to luxury hotels over the past 20 years. Yet they maintain a portfolio of successful projects including retail, high-rise office buildings, and single and multi-family homes. The company's Hotel developments include the Seattle Hilton, Crowne Plaza, Renaissance Madison, Grand Hyatt Seattle, Hyatt at Olive 8, and most recently, the Hyatt Regency Seattle.
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Join Matt as he connects with David Thyer, president of Seattle-based R.C. Hedreen Co., a privately held hotel development and investment company where he has worked for the past twenty-six years. The company’s primary focus has been developing, constructing, owning, and managing world-class investment properties since 1963. Principally in the hospitality arena. The company has shifted its focus primarily to luxury hotels over the past 20 years. Yet they maintain a portfolio of successful projects including retail, high-rise office buildings, and single and multi-family homes. The company's Hotel developments include the Seattle Hilton, Crowne Plaza, Renaissance Madison, Grand Hyatt Seattle, Hyatt at Olive 8, and most recently, the Hyatt Regency Seattle.
Connect with us:
www.apexfacility.com
Connect with Matt on LinkedIn
00;00;08;09 - 00;00;40;28
Matt
Today's guest is David Thayer. David grew up on the island state of Tasmania after studying marine biology at James Cook, University of Northern Queensland. He returned to Tasmania where he worked in the abalone and southern rock lobster commercial fisheries. David met his wife, Jane, her dream, a Seattle native on a sailing trip through the Caribbean in 89. After returning briefly to Australia, Lovesick David returned to the U.S. and has resided with his wife and three children in Seattle for the past 32 years.
00;00;40;29 - 00;01;12;29
Matt
David is currently president of the R.C. Adriene Company, a privately held development and investment company where he has worked for the past 26 years since 1963. The company's focus has been on development, construction, ownership and management of world class investment properties, principally in the hospitality area. The company has shifted its focus primarily to luxury hotels over the past 20 years, but its portfolio of successful projects include retail, high rise, office buildings, single and multi-family homes.
00;01;13;22 - 00;01;42;01
Matt
The company's hotel developments include Seattle Hilton, Crowne Plaza, Renaissance, Madison, Grand Hyatt, Hyde It all abate and most recently, the Hyatt Regency, Seattle. Through its affiliates, R.C. Hadrian Company has been an active investor, venture investor as well, focusing on Northwest private companies in all stages. Examples of the past and current investments include F5 networks, Coinstar and TRV, just to name a few.
00;01;42;26 - 00;01;52;01
Matt
David enjoys the Pacific Northwest family life and outdoor activities. He is an avid fly fisherman, sailor, and golfer. Welcome, David.
00;01;53;15 - 00;01;54;27
David
Hi, Matt. Thanks for having me.
00;01;55;23 - 00;02;12;20
Matt
So David is all of our full confession here. David's a good friend. We chase steelhead on the rivers throughout the Northwest and British Columbia together. And he's one of the fishing guys. I know. So that's just a side note on David.
00;02;13;22 - 00;02;17;14
David
That's quite a compliment coming from you. You know, a lot of fishermen.
00;02;18;23 - 00;02;34;07
Matt
So, David, hey, let's talk about a little bit about the last couple of years in hospitality, which has been very rough. And you and I have talked over the last couple of years, but how have your properties been impacted and have you managed through the challenge?
00;02;35;19 - 00;03;28;06
David
Well, I guess we have to go there. We live the pain. Well, obviously, it was a pretty not a pretty it was a very brutal two years for us mentally. So we own and operate with the Hyatt as the flag on three of three of the four and four hotels in downtown Seattle. They're all large hotels ranging from 345 rooms, I think is our smallest, the Hyatt at all of eight, up to 12 under the 60 rooms, the Hyatt Regency, which we completed in December 2018 and all four properties very focused on group business and meetings and the pandemic is not good for that kind of thing.
00;03;29;03 - 00;03;31;29
Matt
And so how many total rooms in Seattle? You're the largest hotel.
00;03;32;15 - 00;03;58;06
David
3625 planes. And those four hotels, the three Hyatt and the Renaissance. Madison, which is 562 rooms. Right. And so, yeah, we had a lot. And we moved pretty quickly during the pandemic to actually close two of the hotels, including the biggest one, the Hyatt Regency, which had only been open for about a year and a half at the point we closed it.
00;03;58;14 - 00;03;58;27
Matt
Wow.
00;04;00;04 - 00;04;18;03
David
And we closed the Hyatt at all of eight across the street from the Regency. And we kept the Madison Renaissance Hotel on Sixth Avenue and the Grand Hyatt Open. And frankly, in hindsight, we probably would have lost less money if we closed all four of the hotels.
00;04;18;05 - 00;04;18;18
Matt
Wow.
00;04;19;01 - 00;04;19;09
David
I mean.
00;04;20;17 - 00;04;27;08
Matt
There's a tremendous operating costs, right? I mean, just physically people have to run these buildings. I mean, you have to keep everything functional.
00;04;27;23 - 00;04;52;16
David
Yeah. Well, one of the reasons we kept the Grand Hyatt open was to sort of consolidate some of our key management people and employees that we didn't want to layoff. Right. And, you know, as we all know, that everybody kept expecting the pandemic to end and it kept going and getting worse. And so, you know, in the beginning, we were people were taking vacation and then they were working part time.
00;04;52;16 - 00;05;29;29
David
And obviously, when we actually physically close to the properties, we had to lay off a significant portion of the 700 service level employees that we have with the four hotels. Right. But we consolidated our Hyatt management team into the Grand Hyatt operation. We kept the Renaissance open and obviously reduced staff significantly, but we limped along with those two hotels open and, you know, having a big hotel like the Hyatt Regency closed so soon after it was opened was pretty traumatic financially.
00;05;30;00 - 00;05;40;20
Matt
Yeah, very traumatic. I mean, you were just getting rolling with that. Yeah. That development and that hotel. And it was, you know, then it's the crown jewel really in Seattle.
00;05;41;21 - 00;06;05;16
David
Well, certainly from a meetings perspective, it's the biggest hotel in the city. Obviously, it's we like it with the elm and the architect the architect of the fabulous job on the design of it. And, and yeah, it was, it was ramping far quicker than we had expected in 2019 and early 20 before the pandemic hit.
00;06;06;19 - 00;06;53;18
David
But you know, the banks still wanted their money and we were able to basically defer a lot of debt service between the properties. But the banks, big banks, they wanted interest on the interest and they we're still in the process now paying back a lot of that deferred debt service. Wow. And so it was a rough and rough couple of years and we got through it thanks to some of the other resources that the company has and were able to survive, basically and bring back a lot of our employees, although it's I would say it's been challenging since those hotels opened and this last year or so of finding employees, a lot
00;06;53;18 - 00;07;16;07
David
of the people that we laid off went on or had gone on to other things, it would appear. And that seems to be a pretty general problem. And service level industries, including hospitality and response, these people have not come back and we struggled mightily through this summer in particular, and the hotels were quite busy again to find service people.
00;07;17;06 - 00;07;17;13
David
Right.
00;07;17;14 - 00;07;27;22
Matt
So this year you mentioned this summer you saw a bit of a resurgence. What were your occupancy rates like this summer and how's the market looking and coming back for you?
00;07;29;11 - 00;07;58;19
David
We were pretty much back to pre-COVID levels during the summer. And obviously, you know, there's a lot of tourist travel, a lot of pent up demand for transient transients, what we call tourist. A lot of transient travel came back. The group business was slow, too slow to recover. A lot of that, particularly larger groups and convention type groups, that business is often years in advance.
00;07;59;17 - 00;08;35;25
David
So as people have sort of recovered from the pandemic blues and started thinking about rescheduling meetings and group gatherings that part of the business has been slower. But during the summer, the spring, summer, early fall this year we were supported by really a lot of transient travel. The cruise business was good in Seattle, small corporate business, you know, the companies that were having gatherings that maybe didn't have their offices open yet or whatever were doing things in hotels that we benefited from a bit of that.
00;08;36;25 - 00;08;48;07
David
But yeah, I would say overall we were in that high eighties, 80% occupancy during the summer. We were, you know, busier than we could handle, frankly, at times.
00;08;48;21 - 00;08;49;18
Matt
Because of labor.
00;08;50;00 - 00;09;19;09
David
Because of the staff problems we had. You know, one of the concerns that I felt and, you know, I live and work downtown like I live on the west side of Capitol Hill and spend a lot of time through the pandemic walking to and from work. And our offices are downtown. And I spent a lot of time in our hotels, and I got to see and sort of feel the experience that our guests were having through the summer and during this recovery.
00;09;20;14 - 00;09;37;29
David
And it made me a little nervous, honestly, because the hurricanes were busy, but a lot of our guests were not really getting the kind of service that we were accustomed to delivering. Right. And Seattle was not really delivering the type of experience that I think we're used to having in downtown Seattle.
00;09;38;09 - 00;10;08;01
Matt
Well, let's just jump into it then, because that's getting ahead of it. But I, I do want to talk a little bit about the effects of, I think generally the effects of lack of office occupancy in Seattle, current office market in Seattle is at or below 40%. Occupancy buildings are largely empty, which means street life from the standpoint of office workers is largely empty, meaning the streets are empty.
00;10;08;01 - 00;10;35;19
Matt
Many of the shops and retail downtown Seattle, including hospitality restaurants, have closed and have not reopened. I mean, to get a lunch in Seattle, it's either go to one of David's rest hotels or maybe one or two, I think maybe five or six restaurants. Other than that, it's fairly dramatic in Seattle. What I mean, I know we have a tremendous kickoff here for the Alaska Cruises.
00;10;35;28 - 00;11;04;09
Matt
And then you also have your hotels perfectly positioned around the Seattle Convention Center, which has been recently improved and expanded. What what's your impact in your impression of Seattle? I know it by all by all means of measurement is starting to improve based on a new mayor and a new administration in Seattle. Not going too deep into politics.
00;11;04;23 - 00;11;15;07
Matt
What you talked a little bit about the experience factor that you're and you have concerns about that for your hotel guests to talk a little bit more about that and what your impressions are.
00;11;16;13 - 00;11;50;09
David
Yeah, well, just a little background. And I said I live downtown and have done for the last 30 years, we've offered our company as office downtown. I started with the company in 96. We were in the Rainier Tower at that point, and we moved into Union Square not long after. I started the company and then spent 14 years up until September of last year in the Olympic Tower at the corner of 30 Pine.
00;11;50;26 - 00;12;27;09
David
And for those of you that know downtown, you know, that's in Pine is an interesting district, shall we say. But I think that office experience over those years has given me a good flavor of sort of the rise and fall of Seattle. If you will, and spending those 14 years at City Pine, and particularly during the time that period office thing occurred in Portland and walking from my residence on Capitol Hill down to certain points to my office during COVID was a pretty scary time.
00;12;27;16 - 00;12;53;03
David
And when I look at sort of the consequences of that, I think, you know, COVID came and the pandemic came at a very bad time for Seattle in terms of where we were politically, how we were handling our homeless and mental illness and growing problems in downtown and the pandemic really just compounded all of those problems for us.
00;12;53;13 - 00;13;23;25
David
And I got to see that in spades. Strolling down Pine Street to my office every day and literally dodging the bullets on a few occasions. I was witness to the shooting on January in January of 2020 at the McDonald's at Third and Pine, where a couple of people were killed. And it's been tough. And I think when you look around now and walk the streets now, we really have got a long way to go.
00;13;23;25 - 00;13;49;09
David
And the recovery that we've seen in other parts of the country and some of the revitalized revitalization that's happening in some of the some of the other cities around the country right now has been slow to appear in Seattle. And I think retail wise, restaurant wise, those are really feeling the effects of the lack of office occupancy.
00;13;49;11 - 00;14;14;10
David
I mean, if I were to spend my screen around at about 34th, the 25th floor window here at seventh and Olive, and look to the west, basically on a gloomy day like this, you see the buildings, the high rises are not lit up. No. And that while I hear talk and I hear statistics about the fact that we're 40% or we bumped around the high thirties, late forties.
00;14;14;12 - 00;14;22;08
David
Right. Reportedly office occupancies. I think the reality when I look out my window is not is not there.
00;14;22;17 - 00;14;23;10
Matt
And I agree.
00;14;23;16 - 00;14;26;12
David
I go to another county. I'm not sure how they're counting these.
00;14;26;21 - 00;15;02;24
Matt
Well tend to nerd out a little deeper. Mondays and Fridays is almost zero occupancy. Yeah. And they say the highest occupancy days are I think Tuesdays and Wednesdays, Wednesday probably peaking and that's where you peak out in the high thirties. So you're right relative to a consistent occupancy not happening. And nationally in the national figures, the ten state there's ten municipals that I watch through of which is a FOB and access code company throughout the country.
00;15;03;29 - 00;15;37;08
Matt
The overall occupancy, including places like Texas, where occupancy is well over 50 and something as high as 60% in Austin especially is 47%. So it's it's a bit of a scary time specifically for those who are invested deeply in office buildings. And that's a whole nother subject in rabbit hole we could go down, but I think hospitality has also an interesting opportunity.
00;15;37;08 - 00;16;28;19
Matt
You and I have talked a little over the years about how office design is trying to adopt many of the hospitality approaches in the workspace. And this approach has largely been captured by coworking environments. But I would say that in some ways, hospitality specifically lobbies have are natural workplaces for people who travel and the position of your properties in downtown Seattle and the number of residential towers that are all around and that have been built in the recent years in downtown Seattle, perhaps position you uniquely to capture some of that office for a day workspace on demand office day week, month, flexible.
00;16;29;24 - 00;16;49;12
David
That's what I like. I like the theory, I like the way you see. Yeah, we had a lot of discussions and strategy around this with our open hotels during the pandemic in terms of, you know, was that an opportunity to attract remote workers or people that just wanted to get out of their lockdown homes? And we did see a little bit of that.
00;16;49;12 - 00;17;10;22
David
People would come and stay at the hotel and work from their hotel rooms or from the public spaces of hotels. And it does get you thinking about sort of the future and this hybrid work model. And people are going to be making more use of both meeting opportunities within hotels. If their offices have shrunk, that might reduce their office footprints.
00;17;10;22 - 00;17;41;07
David
And now when they do want to get groups together, they don't have the facilities. I think that's one aspect that that is real. And we are seeing that effect for sure that some ofthose groups are meeting in hotels because they either they've relinquished their office space or dock and it's easier for them to go have a meeting catered at a hotel in a meeting room than it is to to fire up their office space and get people back again.
00;17;41;20 - 00;18;06;29
David
Right. So I think that's one aspect that is real. I think this idea that people, you know, extended stays in hotels as a live-work environment is interesting. It's something we're talking to Hyatt, our partners in the three hotels that they manage for us and Marriott, there is a lot of conjecture and speculation about how you how to make that work.
00;18;07;25 - 00;18;32;13
David
I will say at the end of the day, you know, the hospitality business is really you know, it's right in occupancy is our business the rate how you how do you structure rate to attract long term medium term stays for somebody that might want to spend a week or even a month in a hotel is tricky from a rate standpoint, right?
00;18;33;00 - 00;18;43;14
David
A person that's looking to do that can obviously find cheaper options in an Airbnb or other types of hospitality and.
00;18;43;27 - 00;18;46;10
Matt
You've seen a lot of disruption in hospitality, obviously.
00;18;46;28 - 00;19;16;02
David
Yeah. You know, I think the we've we've got to a point where I think we're coexisting a little better with the Airbnb and that concept. It's interesting, you know, we've we've started we started design on another hotel. We have a lot next to the Hyatt Regency, which we have a 400 room luxury hotel design that's getting into construction documents, document fires right now.
00;19;16;19 - 00;19;56;08
David
And and, you know, just thinking about what that future might look like. And then hybrid model for hospitality. We do have three, three or four floors, I think four floors of residential units on top of that hotel interaction. You know, I think a lot about well, is is it conceivable to think that the Hyatt or the Hilton or Marriott or whoever we end up with as a brand on that hotel could operate those apartments as extended, stay in a live work environments for people and sort of bridge that gap to A, B and C, so to speak.
00;19;56;24 - 00;20;23;06
David
Problem again though as you come back to rate. Yeah. And can you if you just go out and rent those apartments as long term rentals, you look at the return on that versus trying to do it in a in a shorter term medium term stay is when you have vacancy built in. As you're turning over people that are spending a week or a couple of weeks, can you get the same kind of rate as you get for an apartment?
00;20;23;20 - 00;20;35;05
David
Right. And can you charge hospitality type rates on a nightly basis without becoming too expensive for people who then have other alternatives? It's a tricky one.
00;20;35;15 - 00;20;42;07
Matt
Yeah, it's very tricky to the business model, both traditional and how you might look at that model moving forward for sure.
00;20;42;07 - 00;20;42;16
David
Yeah.
00;20;43;00 - 00;20;43;09
Matt
For sure.
00;20;43;11 - 00;21;11;28
David
I think getting back to the earlier part of the conversation now about downtown, you know, I think we have to bear in mind the other problems that we have in Seattle. One thing to talk about this, these kind of concepts in a void, but you have to look out and go out on the streets of Seattle and think about, well, right now, what are the reasons for a person to choose to come down and stay in a hotel, whether it's short term or live there?
00;21;11;28 - 00;21;12;07
Matt
Right.
00;21;12;10 - 00;21;36;27
David
Well, live there, yeah. And in a live work scenario, assuming you can make those numbers work, if the experience outside the door of the hotel is what we see today. And that's the problem I alluded to earlier with the kind of experience a lot of our tourists and visitors have this year in downtown Seattle. You know, I expect a lot of them may not come back based on that experience.
00;21;37;05 - 00;22;02;17
David
And there's a big pool out there in the world. So I'm sure we'll have a lot of tourists next summer. But it does get to the root of, you know, what are we going to do about our downtown and how are we going to reactivate all of these empty retail and restaurant spaces and make it a more desirable place to come to spend your time, whether it's shopping or potentially live working or just being a tourist.
00;22;03;03 - 00;22;25;09
Matt
Yeah, the yeah, I was just reading this morning that nationally they're looking at a good 30% of office buildings, perhaps never coming back into use. And those are primarily the B and C level properties are less attractive amenity, not amenity rich environments. And you know.
00;22;25;24 - 00;22;47;16
David
I actually think that not to cut you off, but while I have this book that, you know, I look at this window and I think about sort of the logical trends in office space is going to be. And I think we're already seeing to some degree it's a little bit of a move movement or a flight to quality so that the high quality office buildings are going to be the ones that repopulate released.
00;22;48;20 - 00;23;24;19
David
And I think particularly in Seattle, where we're a little bit dependent on some very big users, not to mention names, but that I think, you know, in the tech world, there's some shrinkage happening in terms of that staffing. There is also, I think, some very outsized ideas about their future office needs going into the pandemic. So as this condensation happens, concentration happens back in the Class A and the better class properties.
00;23;24;29 - 00;23;43;17
David
What's going to happen to the BS and the CS? And there may be a more logical opportunity to look at converting office into some of these hybrid models or even pure residential models. When you see, yeah, that's the value of these buildings when they're, when they're unoccupied, not least.
00;23;43;25 - 00;23;57;04
Matt
That's the problem because it's cost prohibitive to try to adapt. What I'm hearing is trying to adapt these office structures into residential structures, the infrastructure alone, you might as well tear it down and build a new one.
00;23;57;04 - 00;24;16;07
David
Today is construction cause you start putting a pencil to the idea of taking out an empty office building and yeah, putting in the plumbing and the infrastructure. They're trying to partition that into a residential unit. It doesn't add up now put it out up in some scenarios and maybe.
00;24;16;24 - 00;24;45;27
Matt
Yeah, in our world of office and environment and move and change and furnishing and installing, we're seeing next to no activity level on new office, new office tenant improvement. You know, starting tenant improvement costs just starting is probably 100, 150 bucks a foot. And most of the tenants we have over 50% of the occupancy in downtown Seattle is Tech and creative.
00;24;45;27 - 00;25;16;20
Matt
And those folks are not looking for long term leases, which is ten years, which would have to cover a tie allowance that would have to be high enough for you to build out in space. So they're as the big users are vacating and pushing space to the sublet market, we're seeing a lot of activity level going from users to take in those sublets at two and three year lease arrangements and do a short term thing until they figure it out.
00;25;16;20 - 00;25;40;13
Matt
And I think the other aspect of everything that we're talking about here is the shocking work from home before the pandemic, the trend was doubling every 15 years. So we had a chance to adapt and adjust. And old fogies like me could say, Oh, yeah, you know, maybe my marketing person works better from that coffee shop up the street with all that energy.
00;25;40;13 - 00;25;58;01
Matt
You know, I'm not in our office. Well, guess what? When? As the whole thing exploded on us two and a half, three years ago, now we're starting to recover and try to figure out really who is best working in office and who would best thrive out of the office. And so those things have not been resolved.
00;25;58;23 - 00;26;20;24
David
No, it's it's been a serious shakeup in everybody's thinking. I think about what what is working. Yeah. And I think depending on your trade or your skill or your industry, there's different arguments about what you want to a future may look like or what the realities of the future might look like in different industries. I think I think hybrid work is here to stay.
00;26;20;24 - 00;26;47;18
David
Obviously. The question is, when you look at a particular job or particular business, what is what is hybrid mean? Is it is it four days in the office and one day at home, or is it one day in the office and four days? And I think there's no clear answer to that yet. I don't think just like I don't think there's a clear answer to how these tech companies are going to deal with remote work and are they going to demand that people return?
00;26;47;18 - 00;27;10;01
David
Is Amazon is Amazon going to demand that people return to these empty buildings that I look out on the north side of my office here? Yeah, I don't know the answer to that. I don't think anybody does. I think we're all in this pandemic hangover. Seattle is certainly in the variable. It's got a serious pandemic hangover by comparison to some of the other parts of the country in the world.
00;27;10;16 - 00;27;33;29
David
But yeah, I mean, I try to be optimistic about the future. I think we have a long way to go and I think it's going to honestly be a slow road for Seattle. I think the I don't see the the reality of converting office space into something else because it will be one thing if you had this sort of highly desirable residential location.
00;27;34;24 - 00;28;00;25
David
But that's not what Seattle is right now. And as you turn it back into a desirable place to spend your time in the core of the city and to dine and to go to attractions and to shop, which is all going to take quite a bit of time. You could you can make an argument, I think, that the office demand will creep back in some form and we'll start to fill these these empty offices over the years.
00;28;01;11 - 00;28;29;28
David
They may not be much new construction. In fact, I would bet there will be very little new construction of office for a while here and in general terms. But that's a slow road. And right now I'd say, like I said, spending my time in downtown Seattle and walking around these streets and I'm not seeing the action. In fact, I've actually had a couple of tenants in recent weeks advise me that they will not be renewing their leases.
00;28;30;14 - 00;28;43;19
David
And we have a bit of retail and restaurant around the perimeters in the hotel developments and it's disappointing that one of them is a big national retailer, a big national restaurant chain that's basically had enough with Seattle.
00;28;43;26 - 00;28;46;21
Matt
In your hotel. They design your hotel.
00;28;46;27 - 00;29;14;05
David
Yeah. Wow. Far as you know, attached to the developer speak to you know, here we are trying to be optimistic about downtown and you've got big national retailers basically saying, hey, you know what, we've been here in one case almost 20 years now and they're saying enough's enough. Oh, my goodness. Pulling the plug on Seattle and that particular retailer was told me they're also doing the same thing in San Francisco, too.
00;29;14;05 - 00;29;23;10
David
So right now, a little bit of our dilemma obviously is reflected in places like Portland and San Francisco and L.A. as well. It's a it's.
00;29;23;21 - 00;29;44;05
Matt
Mild climates have always been attractive to homelessness and, well, just survivability on the street, I guess I hate to say it's so much attractive to homelessness, but rather than that, it's people can survive and then resources in more liberal communities are available. So and we have a very liberal campaign.
00;29;44;08 - 00;30;07;10
David
I think I think the liberal community has a lot more to do with the trend. Yeah. Than the climate, although I can certainly understand the climate element of it. Yeah, I was I was pleased with downtown Seattle Association members and I listen often sit in on some of their calls talking about the various states and things that are happening downtown.
00;30;07;27 - 00;30;45;27
David
And there has been, you know, going back to my old neighborhood down at City Pine, which I think is a pretty classic example of our problems in the city and is in some ways the hub the hub of the problems Seattle PD has put. They had a program, they called it the emphasis program, something of that nature over the last year or so between second and fourth and Stewart and University, I think it was, which, you know, is an area obviously in the bull's eye and that is in pine and it has a significant effect.
00;30;45;27 - 00;31;15;05
David
And I will say walking my old neighborhood it's turn on yeah there that there are less homeless people there's less drug problems happening on the street than than I was used to saying in those 14 years I was down there and that police emphasis has made a significant difference. I think problem is Seattle police I think I think in the last call I said on the day they talked about needing 360 more officers and great plans, they're putting in an emphasis on that.
00;31;15;05 - 00;31;18;05
David
That chunk of real estate, which we know to be problematic and.
00;31;18;29 - 00;31;21;17
Matt
Resources are an issue just like everything else.
00;31;21;22 - 00;31;44;10
David
Resources are an issue. And I think the King County, the regional homeless authority, which I would say Mark Dunn's, the new head of that, I've been impressed with him. I think they're doing some good work on the homelessness and the drug and mental illness problems we have out there. And I have seen significant improvement in all of those areas on the streets there.
00;31;44;20 - 00;32;08;23
David
But we've got such a long way to go. Right. The problem is you've got to you've got to, you know, continue to work on that that social problem. And at the same time, we're trying to get retailers and restaurants interested in coming back and repopulating all of these boarded up storefronts we have. And there really just isn't the energy there yet to do it.
00;32;08;28 - 00;32;25;13
David
And it got to that critical mass and I think improving the environment on that emphasis area, if you will, is a great first step. It's an important step because all of our tourists that are staying in hotels are walking through that area to.
00;32;25;13 - 00;32;26;13
Matt
Get to the market, to.
00;32;26;13 - 00;32;38;05
David
Get to Pike Place Market. And I do think if you look, you know, whether it's Pioneer Square or the Market or, you know, what's happening with that, you know, the fantastic development that's happening on the waterfront.
00;32;38;24 - 00;32;40;10
Matt
That unbelievable development.
00;32;40;15 - 00;32;55;15
David
Yeah, I could jump forward a couple of years and certainly envision a revitalization of Pioneer Square, great traffic on the waterfront, a lot of a lot of great things happening down on the waterfront, great cruise ship business. Our hotels are going to be busy.
00;32;55;23 - 00;32;56;24
Matt
Everything accessible.
00;32;56;24 - 00;33;17;05
David
Convention center, all the new expansion, I think will deliver a lot of business. It's a very attractive development. And problem is you've still got this chunk of real estate in the middle there between us, the sixth, seventh, eighth, ninth Avenue areas down to the waterfront. You've got to run that gantlet between 4/2 and two to.
00;33;17;05 - 00;33;20;08
Matt
Block the two block gantlet between the two areas.
00;33;20;23 - 00;33;34;16
David
And until we address that, because the effects of that, you know, spill out into the rest of the city does. And I'm pleased that they had this emphasis program. I'm pleased with the effects of it. But we still have a long way to go.
00;33;34;21 - 00;34;01;04
Matt
And okay, so let's get off the doom and gloom for a minute and say it does sound like things are inching along, getting better, but what's next? I mean, you spoke briefly about your potentially next potential next project going to CDs with the city, but what's next for Adrina and are you looking further at diversity? I didn't realize you guys did as much venture in that community as you do and have done for you.
00;34;01;04 - 00;34;01;23
David
Don't do as much.
00;34;01;23 - 00;34;07;00
Matt
Either. Big companies aspire huge. I mean, some of these companies are unicorns, man. They're big.
00;34;07;25 - 00;34;33;07
David
Now. We did when I first started this company as CFO who's no longer with us, was was far more aggressive and interested in the venture capital side of things, how the founder of the company, Mr. Green, he loves a good speculation and venture capital suited him. And we had a you know, we had a few successes early on, things like five.
00;34;33;20 - 00;34;35;03
David
Yeah, and some others.
00;34;35;12 - 00;34;39;07
Matt
Coinstar, we did their offices over in Bellevue. It's a fantastic company.
00;34;40;02 - 00;35;01;10
David
And it was a good diversification. I think we did. We did less than now, partly because we got we ended up with so many eggs in the large hotel business right. And over the last three years, obviously, we've been very focused on just keeping our heads above water in the hospitality front. And although we have made a few investments here and there.
00;35;01;25 - 00;35;07;14
David
All right. And some venture good companies, but it's less of our business than it used to be.
00;35;08;11 - 00;35;24;19
Matt
And I know biotech and Seattle's emerged as a big opportunity within development community. I don't know if you guys are looking at I know you were kind of playing around with that idea a little bit, but I don't know. You're really going to focus that next building on a little bit on hospitality and residential blend.
00;35;24;21 - 00;35;35;12
David
I mean, that in the short version is, you know, we're a small family company. We've got six or seven people working in this family office right now, one hotel at a time.
00;35;35;22 - 00;35;40;25
Matt
I see your occupancy is pretty low. I guess either one of the one of you in the office right now.
00;35;41;01 - 00;35;47;07
David
But when we when we when we move from certain pine, we downsized from 11,000 feet to 6000 feet. Yeah.
00;35;47;19 - 00;35;51;08
Matt
And we have to have room for the artwork. That's true.
00;35;52;09 - 00;36;12;29
David
And have a nice collection of art. Beautiful. And so I'd say, you know. Right now our focus is on this next hotel. And frankly, it still feels a little crazy to be be jumping into another hotel right now. But I think, you know, we are optimistic about this convention center expansion. We have obviously very strategic product with the three high.
00;36;12;29 - 00;36;39;23
David
It's sort of flanking that new facility well, as well as the existing convention center. And so we're very well well positioned for a rebound in the convention and hospitality business. And we think that, you know, if things go the way people project them to and that's always a gamble that that there is room for actually there will be a need for more hotel rooms to support these two convention center facilities.
00;36;40;01 - 00;36;57;07
David
Right. I mean, that business comes back. But, you know, there's a part of me that's still a little nervous. I wouldn't say skeptical, but a little nervous about, you know, how significant and how quick this rebound and group and convention business will be like how quick we're going to see a recovery in the office market.
00;36;57;17 - 00;37;02;05
Matt
Yeah. Do we see do we see bookings for the convention center and do you project.
00;37;02;14 - 00;37;03;04
David
We see.
00;37;03;04 - 00;37;03;28
Matt
Next year already.
00;37;04;06 - 00;37;07;23
David
We see a lot of that for the next three or four years.
00;37;07;23 - 00;37;09;25
Matt
We work closely with the convention center.
00;37;09;25 - 00;37;33;10
David
Obviously with that the 2100 or so just Hyatt rooms that we have across the street from the new facility. We're an important partner to them. We're a critical partner to them as they are to us because of the nature of these hotels. They need us. We need them. We we look at a lot of that business is booked two, three, four years in advance.
00;37;34;03 - 00;38;05;09
David
And it's you can imagine trying to fix rates and speculate on rates and balance what we're committing to group and convention business versus holding back room inventory to do that a transient tourist business during the summers. It's a tricky it's a tricky load balancing exercise and yield management exercise. But we're optimistic. And obviously, that's why we're jumping into this next hotel.
00;38;05;09 - 00;38;11;16
David
But there's there's always a little bit of this that, God forbid, what's.
00;38;11;16 - 00;38;14;08
Matt
Another quarter billion dollar investment?
00;38;15;03 - 00;38;54;17
David
Well, I'm nervous bonuses. And I told you this before, but I think the big opening of the Hyatt Regency, I got up in front of a crowd and talked about how when we opened the Grand Hyatt in 2001, in July of 2001, we probably had September 11th. Right, which sent the hospitality and hospitality industry on its heels when we opened the Hyatt at all of eight oh 9008, eight, nine, seven and eight, we went right into that great little depression and then I made a joke at that opening about, Well, I can't wait to see what happens when we open the biggest new hotel on the West Coast.
00;38;55;09 - 00;38;56;22
David
Well, a pandemic is what happened.
00;38;57;14 - 00;39;00;16
Matt
So we're not going to let you get up and speak at the next one. Okay.
00;39;00;16 - 00;39;13;04
David
Well, I should maybe we should set a date to air the announcement of the next hotel, just so everybody knows that to sort of batten down the hatches, what's coming.
00;39;13;04 - 00;39;13;06
Matt
It.
00;39;13;14 - 00;39;14;05
David
Could be bad.
00;39;15;05 - 00;39;38;08
Matt
Well, I really. Hey, David, thank you for I don't want to take up all your day. And I do appreciate your insights on both Seattle and the retail hospitality market. I'd love to go deeper and another time with you on just the chat we've had around the diversification of hospitality. And I know that it's a big it's a big ship that doesn't turn on a dime.
00;39;38;08 - 00;39;39;24
Matt
So with all the.
00;39;40;08 - 00;40;09;15
David
Incubator think the reviews maybe in about a year. Yeah, I think the next year is going to be very interesting. I think both the hospitality standpoint and an office occupancy standpoint, I mean, we've got to break out of this 40% rate, if you will, or not. I mean, is this the reality that we're going to be grinding back a few percentage points at a time in office occupancies, in which case this is going to be a very long road back to fill up all these buildings in downtown or is it going to happen quicker?
00;40;09;25 - 00;40;29;13
David
And you know, we'll have obviously some good visibility into the convention business when the new facility opens in January. And we'll see, as I said, because that business book so far in advance will by this by this time next year, we'll have a much clearer picture, I think, about what that industry is going to look like in the next couple of years.
00;40;29;27 - 00;40;38;29
Matt
Fantastic. Well, we'll have you back for an update on the temperature of hospitality, convention, business and occupancy in Seattle. Thanks again for joining us.
00;40;39;17 - 00;40;42;28
David
Thanks for having me, Matt. See you on the river. All right.