Conversation with Frank Buckley, Marlin Equity Partners

 Matt sits down with Frank Buckley, Director of Real Estate at Marlin Equity Partners, a global investment firm managing more than $9 billion in capital. He leads real estate strategy and operations for the firm's portfolio companies worldwide. 

Connect with us:
www.apexfacility.com

Connect with Matt on LinkedIn

Transcript

00;00;00;00 - 00;00;39;11

Matt Watson

Welcome to Transcending Workspace, where we talk with leaders of organizations managing the greatest rate of change in human history. I'm Matt Watson, VP of development with Apex Facility Resources, an integrated services company that delivers and manages workspace change for clients of all sizes. We hope you enjoyed this conversation. While we're super excited today, we have Frank Buckley, who is, a seasoned real estate professional with over 30 years of experience as director of the real estate at Marlin Equity Partners, a global investment firm managing over 9 billion in capital.

00;00;39;12 - 00;01;08;07

Matt Watson

He oversees all real estate matters for the firm's portfolio companies worldwide. Previously, Frank founded Urban Development Partners, specializing in acquiring and repositioning distressed properties, and served as a partner at the Apollo Realty Advisors, where he led a business development and acquisitions. Earlier in his career, he was managing director at Ramsey Schilling Commercial Real Estate, overseeing 1 billion in transactions, a UCLA economics graduate and a former Division one athlete.

00;01;08;08 - 00;01;28;26

Matt Watson

Frank is a member of the Urban Land Institute and remains active in civic and political initiatives. He resides in Redondo Beach, California with his wife and son. Welcome, Frank. Thanks, Matt. Yeah, we're really, we were just talking before we kicked this thing off on, me waking up to four degrees and you waking up to, what, 75?

00;01;28;28 - 00;01;35;07

Frank Buckley

Almost. Almost. Not quite about 60, but, clear skies and, and and the waves are pumping.

00;01;35;10 - 00;01;47;11

Matt Watson

So, I've had I've had the opportunity to come down and visit you in, your headquarters there in Hermosa Beach. Tell tell us how that happened. How did, Marlin Equity Partners wind up in Hermosa?

00;01;47;13 - 00;02;11;10

Frank Buckley

The founder, who was previously with the course group, lived in Manhattan Beach when he decided to start Marlin some 15 years ago or so. He decided to do it in Manhattan Beach, where the first office was domiciled, and then he migrated to Hermosa Beach shortly thereafter. And we're right here on Pier Avenue and downtown Hermosa, which is great for recruiting and certainly great for those that work here.

00;02;11;12 - 00;02;29;26

Matt Watson

Yeah. I tell you, when I came down to visit, I was just amazed and, you know, love just walking around. I mean, right out in front of, a $9 billion equity partner group. You got guys walking by in beach surf shorts and sandals and.

00;02;29;27 - 00;02;32;02

Frank Buckley

Yeah, I, I. Dressed up for you today.

00;02;32;04 - 00;02;36;23

Matt Watson

Yeah. Well, tell us a little bit about Marlin Equity Partners and kind of the investments you made.

00;02;36;23 - 00;03;06;25

Frank Buckley

So Marlin is primarily a technology and software investor. Didn't start out that way, but but evolved into that over the years. We have an office in London and one here in Hermosa Beach. We buy businesses that, either with a growth strategy, a merger strategy, or just a cost cutting strategy. The footprint that these portfolio companies occupy, whether it's a leasehold interest or a fee interest or a manufacturing plant or what have you, and is what I oversee.

00;03;06;26 - 00;03;33;25

Frank Buckley

So I'm the one real estate spoke in the wheel, the asset managers, all the real estate globally for the firm. And it's a little unique. Not every private equity firm has a real estate professional that oversees their portfolio companies, but but many do. And those that don't rely on the portfolio companies themselves either have a facilities director depending on the size of the company, or they just reach out to the consulting world, whether that's the brokerage community or whomever.

00;03;33;27 - 00;03;45;15

Matt Watson

Yeah. I mean, I call you guys kind of a sleeping giant. I mean, at one point you had as many as 10,000,000ft under lease. And I think today you're around 3,000,000ft with all the portcos.

00;03;45;18 - 00;03;46;13

Frank Buckley

Yeah, that's about right.

00;03;46;18 - 00;03;48;29

Matt Watson

And that's I mean, that's big. That's a lot

00;03;48;29 - 00;03;52;05

Frank Buckley

It's a lot. It's a lot of moving parts. It's a lot of moving parts. Yeah.

00;03;52;05 - 00;04;17;06

Matt Watson

And I think the other way I find and just looking at other equity partner groups, I think you guys provide a lot of resources. It seems like you guys provide more resources to the investor in invested portfolio companies than most. A very deep bench in all categories. Human resources, finance, leadership. You are on the operations team. That's one of your key differentiators, isn't it?

00;04;17;06 - 00;04;19;11

Matt Watson

In terms of Marlin.

00;04;19;11 - 00;04;36;13

Frank Buckley

I think it is. We do have an operations group which is independent but obviously affiliated with Marlin. That is a resource to all of our portfolio companies, everything from asset management on the real estate to procurement, best practices, etc.. So yeah, it's nice for our portfolio company to be able to lean on those resources.

00;04;36;13 - 00;04;49;21

Matt Watson

It gives you, I think, hopefully a an advantage when you're competing, because I know you refer to yourself as a middle market firm, you know, amongst all the portfolio companies. But I mean, it seems like a middle market firm with a lot of depth and offering.

00;04;49;27 - 00;05;09;12

Frank Buckley

You know, it's the middle market is challenging because you're not Blackstone, but you're not startup either. And so you're paid to put money to work, but you're competing with big boys in every deals. Yeah. To to have a robust ops group definitely is helpful. Not just once you acquire the company, but also for underwriting the prospective acquisitions.

00;05;09;15 - 00;05;41;00

Matt Watson

So with the heavy lean into technology companies and with coming out of the pandemic and work from home, how has that affected the resources the group of portfolio companies you work with tell us about what your strategy is about today and how it's changed, perhaps over the last 3 or 4 years. I know you and I have worked together for almost ten years and you know, we've had pre pandemic activity level right before the pandemic, we did a couple of big projects and then during the pandemic we did some projects.

00;05;41;00 - 00;06;14;13

Frank Buckley

So most of the activity as you probably know, Matt has been, you know, liquidating space. Yeah. Because the executive teams of the portcos, you know, to the extent that there hasn't been an obvious productivity falloff with work from home, are now recognizing that that's a pretty easy line item to scratch and recapture in the form of EBITDA. I would say that our footprint has reduced from plus -10 million to about three as a function of us evolving into a very strict software technology investor.

00;06;14;13 - 00;06;18;23

Frank Buckley

In addition to the pandemic, but primarily due to the pandemic.

00;06;18;29 - 00;06;43;05

Matt Watson

You know, and you pay attention to. And I kind of noted this in our last conversation, the efficiency and occupancy of spend. And that's clearly dramatically changed that efficiency and occupancy spend. I know occupancy and office is the second highest spend to people and you had probably benchmarks tracking that. Have those benchmarks changed dramatically since you've kind of seen this work from home?

00;06;43;07 - 00;07;20;24

Frank Buckley

It's such a subjective metric to try to quantify. I would say that I, I'm surprised as to how many of our leadership teams have decided to go with executive suites. You know, the yeah, the we works of the world and they're competitors. Just what I thought that the industry was kind of dying and on its heels. I think it got a new breath of life when, you know, the HR departments, not just in our companies, but I think across the landscape have convinced leadership that if they don't provide a very provocative work environment, that you're going to lose the workforce.

00;07;20;28 - 00;07;40;17

Frank Buckley

Rightly or wrongly, they've been pretty persuasive in that argument. And you couple that with an ability to reduce costs, and it's pretty compelling. What baffles me is the idea of working in a, you know, a we works kind of environment versus an exclusive environment. It has obviously its pros and cons, obviously much more difficult to kind of control your culture.

00;07;40;17 - 00;07;52;23

Frank Buckley

And, yeah, keep an eye on folks. And I don't know how you measure that, but they seem to be successful in doing it. They seem to enjoy that, that direction. And we're seeing a lot of shift to, you know, a more flexible office lease environment.

00;07;52;24 - 00;07;57;23

Matt Watson

Which you love. I mean, you've always kind of pursued, you know.

00;07;57;23 - 00;07;58;19

Matt Watson

Sublease strategy.

00;07;58;19 - 00;08;21;11

Matt Watson

In a lot of cases when you're looking for space for growth or change. And I know your philosophy was not trying to encumber the businesses with long term leases that, you know, financially can be a real hindrance to not just saying that you're going to flip a company, but just having the flexibility to. Absolutely. Yeah. So the flexibility perhaps is even better now.

00;08;21;15 - 00;08;41;24

Matt Watson

And I know having worked on so many projects with your portfolio companies, you have an unbelievable diversity of different cultures that you have to kind of tap into and figure out. I mean, you have companies in the southeast, you have companies in the southwest, you have companies in Canada. You have, you know, all over the world.

00;08;41;25 - 00;09;07;17

Frank Buckley

Yeah. Yeah. I think what Marlin does well is introducing best practices to all these portcos. But as it relates specifically to real estate partnerships like we have with your firm, obviously is a great resource for portfolio companies. They can choose to lean on us to assist them with space planning, relocating facility, renewing a lease, subleasing, whatever it is.

00;09;07;17 - 00;09;35;07

Frank Buckley

We're here as a resource, but no obligation to to use us to great benefit to the portcos. And it gives us an opportunity to just provide oversight to the management company as to how we're doing on lease utilization, how efficient are we utilizing office space? We set up our lease administrative software so that we get flagged every time we're under utilized, or we have certain metrics that we have plugged in that, you know, to the extent that they're violated.

00;09;35;10 - 00;09;41;10

Frank Buckley

Yeah. Or exceeded or what have you, we get flagged and then we reach out to leadership and, you know, get active.

00;09;41;11 - 00;10;01;21

Matt Watson

Yeah. I think occupancy is a really challenging benchmark to set today. Before I was always told by those who purchase in or invest in buildings, office buildings and or lease office buildings is that, you know, you're not going to want anything less than 85% occupancy. You know, that's on the low end. It's sort of like a manufacturing company.

00;10;01;21 - 00;10;15;05

Matt Watson

You're not going to buy a manufactured home to have 30% production, right? Right, right. Today in Seattle, we have 30% vacancy in downtown Seattle. I've been at this over 40 years. I've never seen that.

00;10;15;11 - 00;10;17;08

Frank Buckley

That's Class-A office. Downtown Seattle.

00;10;17;09 - 00;10;44;16

Matt Watson

Probably Class-A is doing a little better because they don't have a sub category for Class-A. But overall the vacancy in Seattle is over 30%. And like I say, you know, I've never having run around in this market forever, I've never seen that. And I know San Francisco's fairly similar. I don't know about Southern California, but I know that throughout the country overall, it's close to 22 or 24% vacancy.

00;10;44;16 - 00;11;04;18

Matt Watson

So there is a real reset going on. And I think what keeps me very interested in this industry is how people pursue the right fit for their organization. Like I say, you and I have had a chance to work together on a whole lot of different companies that either rely on occupancy to get the job done and then some.

00;11;04;18 - 00;11;26;15

Matt Watson

It's just a culture touch. And yeah, perhaps a way to occasionally get a meeting together and reconnect with one another and they can really do everything they want to do to get it done remotely. And I think that's really interesting thing that came out of this pandemic is how we got vaulted forward, you know, with technology supporting remote work.

00;11;26;17 - 00;11;53;27

Frank Buckley

I mean, I don't know I don't know what the percentage of companies are working five days a week, for example. Yeah, I have no idea. Until that returns to normal, it's hard to know whether there is a real sea change. And this is the new norm. 20% vacancy in the existing office supply, or whether that starts to retreat back to a recessed back to mid to high teens, which, you know, back in the day was was a high occupancy right now.

00;11;53;27 - 00;11;55;23

Frank Buckley

Now we would welcome that.

00;11;55;26 - 00;12;23;03

Matt Watson

Well, and I was just reading this morning about how they're tracking downtown utilization and office occupancy. It's not so much from Keycards. It's from cell phone tower hits. Oh, interesting. Yeah. Which I've always looked at a couple different key card company data shares that they put out around utilization and occupancy. And it's all concentrated Tuesday through Thursday. So Mondays and Fridays are the best day to commute in because nobody's coming to work.

00;12;23;06 - 00;12;30;00

Matt Watson

Right? That's probably true for portcos, given most of them are tech companies, and a lot of them probably can work from home full time.

00;12;30;03 - 00;12;53;20

Frank Buckley

Yeah, yeah. You know, I think, you know, during Covid, obviously people justified the vacation home in the desert or in the mountains or wherever because they could work there for the first time ever. And now to give that up, particularly when prices have yeah, appreciated almost everywhere across the country, people are making money on second and third homes that before they probably were pretty speculative.

00;12;53;20 - 00;13;00;10

Frank Buckley

It's a pretty compelling argument just to continue that pattern again, if there's no obvious productivity fall off, which we're not seeing.

00;13;00;15 - 00;13;19;08

Matt Watson

Yeah. I think what's also interesting is two things not to get political, but I'm going to get political for a minute. How the government is calling back so many workers to be full time in the office, while at the same time they're trying to reduce cost. Isn't that going to increase cost of occupancy? So there's a little irony there.

00;13;19;08 - 00;13;38;04

Matt Watson

I find that, yeah. Yeah. Because they could leverage work from home to lower costs and get out of leases. GSA is just enormous on leases. And then the other aspect around Seattle is Amazon's got a mandate to be in the office. I think now five days a week. You guys haven't had among your companies any mandates?

00;13;38;04 - 00;13;46;08

Frank Buckley

Not every Portco handles that differently. There's no, mandate coming from us. They assess it on a one off basis.

00;13;46;10 - 00;13;47;22

Matt Watson

Yeah. What's the future?

00;13;47;22 - 00;14;13;26

Frank Buckley

It's really hard to know. I think there's definitely, a shift. The percentage of workforce that's working from home effectively now is obviously greater than it's ever been. Yeah. And I think that's going to settle to some number and it's going to be greater than what it has been in the past. But I also think there's going to be a return to the office in a legitimate way, probably the nicer office space.

00;14;13;26 - 00;14;34;10

Frank Buckley

I think most companies are recognizing that if we're going to have an office, let's reduce the footprint, let's get in the building that we really want to be in, on the best street, in the best neighborhood, with the best public transport, etc.. And that's why you're seeing the premier office product in key markets going through the roof right now.

00;14;34;15 - 00;14;53;22

Frank Buckley

Right. Which is completely odd given where we're at in the aggregate. Right? Right. We're doing deals all over the country and Class-A office. And the landlords are quite cavalier. I mean, yeah, they're really pretty bullish. Yeah. But you don't have to go far before you get into the A minus B, B plus product and they're sitting at 40 or 50% vacancy.

00;14;53;28 - 00;14;55;19

Matt Watson

And then they'll do a deal.

00;14;55;22 - 00;15;13;03

Frank Buckley

And they'll do with you, they'll do a deal. But they can't they can't get people to show up because, you know, for all the reasons we just discussed, they rather go from 40,000ft to 20,000 in an amazing building, then spread out 40,000 in a less interesting environment.

00;15;13;07 - 00;15;18;11

Matt Wastson

Speaking of class A space, you just finished a big project at the old world headquarters.

00;15;18;11 - 00;15;20;02

Frank Buckley

There. Yeah, we did, we did.

00;15;20;03 - 00;15;31;12

Matt Watson

I mean, I just described your office as just a paradise because you've got these upper decks with garage doors that roll up and you can look at the beach. Yeah, have a barbecue.

00;15;31;17 - 00;15;50;24

Frank Buckley

I think we have one of the larger patios in the, in the South Bay, for sure. Yeah, pretty sure of that. It's a great set up. It's. Yeah. For a PR firm. Very casual but obviously professional. Fantastic for recruiting real estate. It's very expensive around here. So that's the downside. You know we're a block off the beach and can imagine the residential pricing.

00;15;50;24 - 00;15;51;23

Frank Buckley

That's the only downside.

00;15;51;26 - 00;15;53;26

Matt Watson

Well you go paddle boarding for lunch right.

00;15;53;26 - 00;15;55;07

Frank Buckley

Yeah we do.

00;15;55;09 - 00;15;55;11

Matt Watson

I mean

00;15;55;11 - 00;15;56;29

Frank Buckley

We can.

00;15;57;02 - 00;15;58;28

Matt Watson

They're big paddle board right. I mean you can.

00;15;59;01 - 00;16;01;14

Frank Buckley

You know we go every Wednesday every Wednesday.

00;16;01;17 - 00;16;15;22

Matt Watson

And so what is occupancy like? I mean you have a very selective process. Super, super difficult to get on board at Marlin Equity Partners. As a young employee, what's your occupancy like now? Do most of the kids show up.

00;16;15;25 - 00;16;35;04

Frank Buckley

Oh yeah. Yeah absolutely. Yeah. We're we're we're chockablock full throughout the week. We're trying to set the example for the portfolio companies. Yeah. We consolidated into a single bill and we were in 3 or 4 buildings at one point. So kind of amortized up and down the main drag. And now we're in a single building, which is great.

00;16;35;10 - 00;16;54;29

Matt Watson

Fantastic. I appreciate the time you've spent with us today. Fascinating world that you have in being in an equity partner ops person overseeing three plus million feet of occupancy requirements for the portfolio company. So thanks for coming aboard and thanks for sharing with us.

00;16;54;29 - 00;16;56;23

Frank Buckley

My pleasure. Thanks for having me.

00;16;56;25 - 00;17;09;28

Matt Watson

Thank you for tuning in to Transcending Workspace. If you'd like to hear more, please subscribe to our channel. Visit Apex facility.com for more information about how we can help you build an adaptive workspace.