AmeriServ Presents: Bank Chats

Financing with Purpose: The ERECT Funds

• AmeriServ Financial, Inc. • Episode 26

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A true example of win-win. The Employee Real Estate Construction Trust (ERECT) Funds have been helping finance commercial real estate projects for over 3 decades.

On this episode of Bank Chats, Drew and Jeff sit down with Senior Vice President and Director of Specialty Real Estate, Justin Maser, to talk about this pool of funds, as well as how the development of even one commercial real estate building can have a ripple effect on the surrounding area.

Resources:
The ERECT Funds

Credits:
An AmeriServ Financial, Inc. Production 
Music by SchneckMind
Hosted by Drew Thomas and Jeffrey Matevish

Thanks for listening! You can find out more about AmeriServ by visiting ameriserv.com. You can also find us on Facebook, Instagram, and Twitter.

DISCLAIMER
This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts, with the goal of helping to take some of the mystery out of financial and related topics; as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast, and any resources available for download from our website or other resources relating to Bank Chats is not intended, and should not be understood or interpreted to be, financial advice. The hosts, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The hosts of Bank Chats are not attorneys, accountants, or financial advisors, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation. AmeriServ Presents: Bank Chats is produced and distributed by AmeriServ Financial, Incorporated.

Drew Thomas:

Fast fact, the total dollar volume of commercial real estate transactions in 2024 reached$757 billion, an increase of over 12% or $85 billion since 2023. I'm Drew Thomas, and you're listening to Bank Chats. We are talking today about, we have an interesting guest with us today, and I'll let him introduce himself in just a minute. But the, this started because we were starting to think about some of the, you drive past these buildings and stuff that you come to work and you see the skyscrapers, so you see cranes and stuff like that.

Jeff Matevish:

New development, yeah.

Drew Thomas:

Yeah. And you start thinking about how in the world, does that get built, right? Because JD Rockefeller is dead. He's not building his own buildings anymore, right? 30 Rock is, is not the way that this stuff is done these days. And you got to wonder, you know, how much money is invested in these buildings, and are they really, you know, making money.

Jeff Matevish:

What the process is, yeah.

Drew Thomas:

Yeah. And then also, you know, who's involved in making that happen? Is it, is, does every tenant that ends up in that building, do they end up paying part of it through rent to pay the building off? Or, how does this, so, so we have somebody that works for the, for the, for the bank, you work for the bank now, right? And, who can talk about some of this stuff. So, I'm going to let him, this is, this is Justin Maser. I'm going to let him introduce himself, tell a little bit about what do you, what do you do for, what is your job? What do you do?

Justin Maser:

So, I, I am the Senior Vice President and the Director of Specialty Real Estate, which is basically something that we have within the Trust division of the bank, and what we do is we run what is called the ERECT Funds, which are the Employee Real Estate Construction Trust Funds. And they're kind of a special alternative investment type, where we accept union pension money into the fund, and then we invest that pension money into real estate projects within the local geographical area of the pensions. And at the same time, while we're investing to get a return for those projects, we are also requiring 100% union labor on all construction projects that we invest in, which then basically creates jobs for the unions along with performance returns from our investments in these real estate projects.

Drew Thomas:

Okay, so, so we're going to talk about that, and we're going to, we're going to talk about it in a way that most of us will understand.

Unknown:

Yeah, because, you told me that twice, and I still don't get it. So, let's break it down a little bit more.

Drew Thomas:

So, from what, from what I'm hearing, basically, when, when companies, and I'm guessing it's companies, when companies want to invest in a new building or want, of new construction, obviously they need funding, correct, right? And, like I said, there's not a lot of independently wealthy people out there just building their own stuff these days. So, is it usually a group of, of you said that this is with, with union labor, right? So, is this a group of unions that usually put these buildings together? Or how does that work?

Justin Maser:

No. So, what we do is we actually reach out to they know, you're building $100 developers that are active in the area. So, we, we're mainly in the Pittsburgh and Cleveland markets, so we have a lot of active clients in those markets, and they're developers, they're development companies, and this is all they do, is develop real estate. They have specialties. Some of them specialize in million building. I'm not giving you $100 million you know the office buildings. Some of them specialize in apartment buildings. Some of them specialize in industrial buildings. But they have their niche. They know what they do well, and we work with them. Basically, they come up with the idea, hey, this is where we want to put the project. This is what bank is saying, and today, you know, back in the day, they we want to do. This is our game plan, and then they come to us and ask us for money. How can we help them? Okay, I could go on here a little bit. So, when they start this process, they have a banking relationship already. Majority of development companies, they're going to have relationships with a lot larger banks, regional size banks, because they're asking for

Drew Thomas:

So, they're, so are they going and saying, hey, I significant amounts of money, you know. might have said, we'll give you$80 million to start this $100 need a $200 million loan to build a building, or is it?

Justin Maser:

So, what I will say is the buildings like, just to give you an example, the buildings that we typically get involved in are between the $50 and $100 million buildings. Okay, so when they want to go, they're looking to get basically...

Drew Thomas:

So, not that expensive is what you're saying.

Justin Maser:

Well, we built buildings that have been worth, you know, $200 million, $250 million so, but we try to keep in the niche of 50 to 100 and, yeah, that's probably a lot for most people. But for us... million dollar building. But today that's down. It's not $80

Drew Thomas:

It's a lot for, it's a lot for me. I can tell you that right now.

Justin Maser:

It's a normal thing for us. We consider that million, it's $60 million. So, now you're building a $100 more of a mid-tier market like small...

Jeff Matevish:

A little easier million building, you're getting$60 million from the bank. So, you got to come, the developer has to come up with an additional $40 million. And that's where we come in.

Drew Thomas:

Okay, so, so to put this in the perspective of an average person, like, like, you know, if you're buying a house, right? Chances are your, your bank is probably not, the bank wants to have a little bit of probably equity in that house. So, so they're giving you a loan value that is not necessarily 100% of the value of the house. They're saying like, well, we'll loan you, you know, what we feel is probably 90% of the value of

Jeff Matevish:

You gotta take care of the down payment. the house or something like that.

Drew Thomas:

Yeah, well, you got to do the down payment whatever. How you do that, you know, is, there's different ways to do that, but it's essentially the same thing, like, I, you know, the bank is, is, is taking a risk in, in terms of, you know, fronting all that money. So, they're, what you're saying is, they're, they're less and less willing to take large risks on the event that these buildings don't, don't make money, correct? Absolutely, okay, so, and then, so, so continue. So, you said that's where, that's where the ERECT Funds comes in, right?

Justin Maser:

Absolutely, yeah. And that was a good analogy, because when you, so when you're buying a house, you do have to put that equity, that down payment down. You know, whether you know you're buying a$100,000 house, should have$20,000 down, right? Well,$20,000 not much. You could raise it. Maybe talk to friends and family. Maybe you could save for that. $40 million you're not saving for that. That you're, you need to come up with other people to help you kind of lift that. And so, kind of why we gain traction in our markets where we're at today is, you know, if you're raising $40 million and you're going to friends and family to talk about this, and, you know, trying to get them to buy into this project. You know, even if you have very wealthy friends and family, you know, they're only going to give you $200,000, maybe $500,000, maybe a million dollars. So, you're going to need 40, 80, 120 discussions with 120 people. I mean, it's a long haul, and that's, that is why we've kind of come in as we are, we are basically one person, not person, but an entity, and we can do a much larger portion of that $40 million. So, we may not do the whole $40 million, but maybe we do half. So, we'll give them $20 million, but we underwrite a project. The big thing, the difference here too, is we're experts in real estate, whereas if you're going to friends and family, you have to explain the project. You have to talk about it. You have to explain how they're going to make their money back, how things you know, how you're going to get paid back whenever you with this$100,000 investment. How long is that going to take? Because you're not when buildings get built, you're not getting a return on that money. So, you're going to, you know that it's going to take years until you see that return, we know.

Drew Thomas:

Which makes her for some very awkward Thanksgivings.

Jeff Matevish:

Nice turkey, where's my million? Yeah.

Drew Thomas:

Exactly. This is great. How'd you afford THAT,

Justin Maser:

Especially if you have 40 of those people out

Drew Thomas:

So, oh, go ahead. Mildred? there or 80 of them to deal with, yeah, so. But so, since we have this background and we understand these things, we do, basically, we underwrite these like a bank would underwrite them, but we underwrite them based on what position that we get into the project, so that$40 million we could be in many different types of products, because there's not just a one size fits all product for that, but at the same time, we have a better idea of that, because this is what we do for a living. Yeah, you know, it makes it easier. It's, it's really trying to make it easier for the developer to get this deal done. But the other side of that is, you know, your friends and families aren't going to question you about, you know, does this number make sense? Or is this a little off? Or, you know, this, are these numbers accurate? Whereas, since we do

Jeff Matevish:

No, I was going to ask so these investors that this for a living, and we're kind of experts, we know what to look at. We know what to check when they're checking, you know when they're saying we're going to make this money back on X number of days, or whatever, we actually have as much, if not more, information than the development team does. So, we because this is what we do. This is all we do. We only do construction loans. So, we only do these things. We have, you know, developers might build three or four projects a year if they even, maybe one two, if they're not super big. You know, we're doing eight to ten deals a year. So, we're looking at eight to ten different things. So, we have a better understanding of the markets that we're investing in, we have a better understanding of the tenants and what's going on. So, we're, we are harder on the developers, too. So, there's a tradeoff there both ways, you know. are investing into these, these funds, do we have long-term investors, or do you have to find new investors for each project?

Justin Maser:

Yeah, so we basically, the way it works is, the pool of the money for, in the ERECT Funds comes from the Union Building Trades and, and from other pension money from counties and the state and stuff like that. And what, what that like, that money is sitting there for us to use for these projects on a regular basis. And what happens is, the way the pool kind of works, the ERECT Funds, the way the pool is, we try to invest 100% into the construction projects. But as you know, loans pay off, investments pay off. So, we constantly have this churn where we're putting out money for new projects. But at the same time, we're getting money back from existing projects, and so the money continues to churn back and forth, back and forth, back and forth, and we try to keep the cash balances as low as possible. But at same time, you know, the goal is to keep it fully invested, but we still need that churn so that we have more money for more projects on a constant basis.

Drew Thomas:

Yeah, you said something interesting there. I didn't, that, I didn't realize happens, loans pay off. I might, for some people, yeah, that's a different subject. Yeah, it's a different thing. No, I think that's, I think that's really, really cool, because those buildings and this kind of goes, I think, to what, what Jeff and I were thinking about is, you know, these buildings, they, it's not just the building that makes a difference in those communities either, you know, but we can get into that. But what kinds of project, you said you usually deal with 50 to $100 million projects, whatever. But what kinds of projects are there? Like, what kind of are these, are these, like, manufacturing places? Are these retail places like, who builds buildings like this, and what do they usually put in them when you, when you, when you fund them?

Justin Maser:

Absolutely. So, so we so we're broad spectrum. We basically are, will invest in any type of property type. We stick with the core stuff, and not anymore, but up until 2020, one of our major property types was office properties. They're always, well, they were always in demand. They were always good at attracting tenants and stuff like that. Today, that's a different topic. Everybody knows what's happened with the pandemic. Office properties are in struggling. I mean, actually, I actually just read an article, I can't remember who wrote the article, but they actually said that there are more office closures, office buildings closing, than opening for the first time in like decades, which is not surprising. We also are, one of our big investments right now are apartment buildings. They're very hot right now, as everybody knows, the real estate market, even for homes, for single family homes, prices are up a lot, in a lot of places, rents are more affordable than having a mortgage right now, and so there is the sense that we would think of. Industrial buildings now are mainly warehouses for shipping products. That is really what things have changed in the industrial market, and it's more tied to, you know, warehousing and distribution facilities. So, that's one of that's another type. But honestly, we've done all kinds of things. We've done retail. Retail is very hard to do, as everybody knows.

Drew Thomas:

It's probably like office buildings. Retail is not as popular as it once was, either. There's a lot of malls around the country that'll tell you that, yeah, it's, you know.

Justin Maser:

Absolutely. And the other thing with retail is, you know, as everything is, retail has totally changed. I think retail is more, it's not so much retail as the clothing stores and the big box stores and things like that. More of it is local and smaller scale retail things. And those types of things are probably outside of our expertise because they're just not big enough for us to do. So, we have a hard time in that. But we've done self-storage centers as well. That's a different type of property.

Drew Thomas:

Yeah. So, I mean, so basically any type of property, but theoretically that property has to then turn around and make money then, right? You know? But those properties also, and this is what I was maybe getting to a little bit ago, those properties also help the communities that they're in grow, I would have to think. Because anytime something new comes up, you usually find that there are things that sort of pop up around it, right? So, what you guys are doing is not only funding that particular project, but theoretically, you're helping to fund the growth of a community.

Justin Maser:

Yeah, absolutely. And that, honestly, that is what I like to call it, like the ripple effect of what the funds do. So, yeah, we build the building, which is nice and makes us a return and everything like that. But you know, when we built the office building, you bring tenants in. Those tenants then are creating jobs in the neighborhood. Well, when people are in a neighborhood and they have jobs, they like to eat lunch, usually. So, typically, what happens is restaurants start popping up so that people can eat. You'll get more retail development, and then as you get more retail development from that, then eventually people need to live there. So, then the apartments come. It's like it's, it's a cycle.

Drew Thomas:

It's a snow, it's a sort of a snowballing effect, you see. But you got to start with something small, and then it grows.

Justin Maser:

Absolutely and to be honest with you, like the ERECT Funds have seen this happen in a number of our projects, because we are in, we're in the business of doing things that most other places aren't going to do. Other banks aren't going to do these types of loans. They, they're, they don't want to, they don't want to be involved. So, we, we have to be, we're willing to do things that most people can't.

Drew Thomas:

So, why, so why is that? Oh, sorry.

Jeff Matevish:

I was gonna say so this is kind of an us thing.

Justin Maser:

Absolutely. Yes, it's very unique to us, and it's I mean, other banks don't do this because it's risky. And the thing is, is the risk pays off because it's risk and reward. But you have to have people that know what they're doing, and that's, and the thing is, is the ERECT Funds have been around for 38 years, so they have a track record that can be trusted, because we've done this for 38 years.

Jeff Matevish:

It's hard to build something like this, yeah, overnight.

Justin Maser:

Exactly. It's hard to do something like this from scratch today, it would be almost impossible, really.

Drew Thomas:

So, I with, I don't know if you're allowed to drop like, you know, names or anything like, but what are some projects that people obviously, if you're listening to this in California, you're probably not gonna know this. But if you, if you happen to be in western Pennsylvania or Ohio, what are some of the projects that you guys have helped to make happen?

Justin Maser:

Yeah, so we've done, one of the big projects that was kind of this catalyst for a major neighborhood in Pittsburgh, we helped finance Bakery Square, which was a big, it's a big development in the East Liberty section of Pittsburgh, and it started as one little thing, and it's kind of just expanded. I mean, that entire neighborhood has changed over the last 16 years that I've been involved with the funds. We also have done a similar thing down in the Strip District of Pittsburgh. You know, we were, we did what was called the Cork Factory apartments in Pittsburgh, and everybody told us we were crazy to even invest in this. It was a major renovation in a city, in a section of the city where there weren't too many residents to begin with. Well, that first one led to two more types, and then from that point, it's kind of the Strip District has totally changed over the last 20 years. Anybody that's been to Pittsburgh will tell you it's a totally different place. But honestly, we went down there and did the deal with the Cork Factory when we didn't really know that, that was a good spot or not. We took the chance. We had a good developer. We had a developer that knew what they were doing. They had a good idea. But the reality is, is it's a risk. It's an unproven market. It's an unproven product in an unproven market, and you have to have people that know what they're doing in order to feel comfortable with taking that type of risk.

Drew Thomas:

I kind of get where you're coming from when it comes to the growth of the communities in that that you're in. I know that we were talking a little bit that you guys didn't have anything directly to do with the area around the Waterfront, but I can, I remember when I was a teenager, I remember going with a friend of mine, we were going to a Pirates game back when the Pirates were worth going to see, and, and I guess they won't be sending me any merch, but, we were going to, and we decided on the way, we're like, wow, the, you know, the ball field is going to be, you know, super expensive, why don't we just stop someplace and get something to eat, you know, on the way. So, we, we get off in Homestead, right? And this is, you know, if you're not familiar with the Pittsburgh area, Homestead was, it was bad. I mean, it was a, it was a, it was a rough neighborhood. And we, we went to an Eat'n Park, which is a Pittsburgh staple. And we went to this Eat'n Park, and we go in and they say, you know, it says, like, the whole like, please wait to be seated thing or whatever. We stood there for 10 minutes. Nobody, like, there were people there, but nobody approached us. So, then the one waitress finally said, well, just grab a seat anywhere. So, we did, and we sat at the table for another 10 minutes, and nobody came around. So, we left there, and then we ended up going to a to, to another fast-food joint or whatever down the street. There was nobody in it. It was, it was a KFC. We walked in. There were no employees. There were no, there was nobody there. It was the craziest thing. And so now when I go back, and we left, I mean, we just because it was like, there were, there were restaurants and that were obviously previously fast-food joints and stuff that just had, like the, they were falling apart. There was graffiti all over the place, whatever. 20 years later, it was a completely different place, because somebody put some investment in there, and they put some retail in, they put some shopping in, and now there's, there's a comedy club there, there's hotels, there's a huge movie theater, all this kind of stuff. So, I get what you're saying about some of these places, just these investments, they're not just for that building. They invest in a whole community.

Justin Maser:

that chance, you're going to take that risk in an area that is not hot right now, that it's maybe this is an area that you know, you think has potential. I mean, it's hard to get people on board with that, because, you know, if you go to, you know, just if you go to an area like that is run down a little bit, most people are gonna look in and say, I don't want to invest in that area, because how do you know that somebody's going to come? How are you going to, and honestly, that's why it takes a real, a team. And honestly, the ERECT Funds is part of that team. Because you know, when you go to a bank, you know your banker tries to help you and tries to tell you, like, this is the way it works, and this, that, and the other. But banks, most banks don't have, well, smaller banks, community banks, don't have dedicated construction lenders. You know, that's all they do, is development lending. That's not usual. Even in larger banks, it's hard. You might have a guy that specializes in development lending, but he's probably not doing, you know, 10 deals a year because it's a hard, it's a hard business to get into. That's all we do. So, we help, because that's all we do, we're helping the developers. We can actually pick and say, like, okay, we can see what their thoughts are for the future. How does this community actually grow? Because we've watched it in other times, and if you haven't done that, it's hard to do, I mean, it's hard.

Jeff Matevish:

You have something to compare it to,

Justin Maser:

Exactly. And it's like, if you don't, it's, it's a yeah. nice thing for us, because we have that expertise, and we can kind of play off of that, but honestly, we actually help the banks. Because the banks, typically, I will just be honest, a lot of the banks that work, the senior lenders on these deals, that we get involved with, a lot of them are like, are the ERECT, if the ERECT Funds are involved in this deal, you know, can we talk to them? Can they give us some insights as well? You know, a number of banks, they get more comfortable with deals whenever developers go and say, well, just so, you know, the ERECT, this is an ERECT Fund project. And then the banks are like, oh, well, we really, we know the ERECT Funds know what they're doing, so we can support this as well. So, we, and we work directly with banks. You know, it's we think of us as competition, but realistically, we work with the banks to kind of help them along too. They don't have that dedicated development lending staff. We do. That's what we are, so.

Jeff Matevish:

So, these developers, they go to the ERECT Fund first before they go to the banks.

Justin Maser:

So, most of them, what they'll do is they'll know, they know that they can get a first mortgage loan. Most people know that you can get a first mortgage. Banks are willing to give money out pretty much for anything, but you don't know what the terms are on those. So, they know that they're going to be able to get that, they, their, their biggest concern is coming up with that gap money, that $40 million. And so, they start coming to us first, and they do come to us, and they tend to help us. They tend to bring us in early, because if they get buy in from us, that helps them with their thing, but it also helps them when they go to select their lender, okay, and to get terms with their lender.

Unknown:

And this is not the first thing they've built, so they kind of know what they're going to get, yeah, from the bank.

Justin Maser:

Absolutely, yep.

Drew Thomas:

I just, I think that's it's not something that I think a lot of people think about. You know, they don't, that's why we didn't. I don't know what made us think about the fact that, you know, but really it's just, you see these things go up, and you're like, oh, somebody, you know, building a new building. But nobody ever thinks about somebody's paying for it. That's, yeah, that's how it started.

Justin Maser:

Yeah. And I don't think people understand how long it takes to build a building. Like, I think people say, oh, well, they're building that building, and it'll be built in two years, but it took five years to get that money lined up. It takes long, long stretches of time. And you know, in an, in a world that we live in now, things change quickly. So, if you're, you know, planning on building an office building, if you were planning on building an office building in 2019, you know, that was the beginning of it. And, and, you know, it takes three years lead time, more than likely, you lost that building. You just scrapped the plan, but you spent three years on it, but, yeah, you scrapped it. So, yeah, like, it takes a long time to build a large building. I mean, I don't think people realize the scope of it, between the lead up time and then the construction time, the all told you're probably looking at six to eight years for any type of development.

Drew Thomas:

Wow. Now when, whenever one of these buildings comes up for you guys to consider one of these projects, yep, right. Do you then say, well, who's going to occupy the building? Like, do you have to, like, if it's an apartment building, do you, do you, do they have to try to rent those apartments ahead of time? There was, there was a place in State College that I used to drive past when I used to deliver blood, and it was the Frazier Complex, I think it was called. And it looked like it had, it had just it had, they started, they broke ground, and then nothing ever happened for like, two years because, and then what I later found out was that they were having a hard time renting the apartments, so they weren't accelerating the progress on the building, because they were like, well, we're going to build it and it's going to be empty, right?

Justin Maser:

So, so again, this goes back to like this, since we do this all the time, we have a very good idea of where to put an apartment building, because with apartments, the biggest thing is location. It's all about location. Because if you build one, if you build that, yeah, housing location, location, location. Yeah, it's the same thing with apartment buildings. Like, if you think about it, it's really the same thing with any property type. The location is literally the key to anything. Because you're not going to build an industrial building, you're not going to build a warehouse and distribution center in a residential neighborhood like, let's just say, Oakland in Pittsburgh. It is where Pitt, the University of Pittsburgh, is. You're not putting a distribution center in the middle of Pittsburgh, right. But that's a very good place for an apartment building. You're also not building an apartment building at an, an interchange, an inter, an interstate interchange, because nobody wants to live at an interchange. So, it's all, it's, the big thing with that is, like the apartment building, it's not going to be leased until it gets built. But you can have a good idea of, how is that neighborhood leasing? How are the, you know, the apartments that exist there now? Is there demand? Are they leased up? Are they, is their occupancy in the 80%, 90% range, or are they in the 50% and 60% range? You know, you take the data from the market and kind of analyze it and see, and then you make, basically, we make the, our estimate or our best educated guess based on the data that we have at that point in time. But again, data changes constantly, so we have to stay on top of this daily.

Drew Thomas:

Yeah, yeah. I just can't imagine, that doing this, like doing, doing marketing, the way we do doing podcasts, and stuff, I mean, things change quickly, but it doesn't, there's not lives hanging in the balance if we don't, you know, put I mean, our lives are hanging in the balance if we don't do, but nobody else's are. But I just, you, I want to circle back, just because I don't think we touched on a lot of it, but you had said something about the unions that are involved in, in the ERECT Funds, reinvesting in in their own retirement, is that what it is?

Justin Maser:

Yeah. So, yeah. So, what this is, is basically, this is the funds are set up to basically hold pension money and health and welfare money, which is basically specific money that unions have as benefits for their employees. And one of the things is they take their pension money through their trustees and their investment consultants and whatnot, and they decide, hey, we're going to invest in the ERECT Funds, and then we go and start investing it within the projects. Well, when those projects come on, when those projects begin construction work, the one stipulation of the ERECT Funds is that it has to be built using 100% union labor, and that's very important to the funds. It's very important to us, and it's very important to the unions. The reality is, my personal opinion, I can't tell you off the top of my head, but I would say I've been involved with between 40 and 50 projects, and almost every project that we get involved with is done on time and on budget, and I believe that, that is because we use the union labor and the union workforce, and they do the job right the first time, and that's very important. But at the same time, as each individual worker is out there on that job site, when union members get paid, they pay into their health and welfare fund. They pay into their pension fund. So, every man hour that gets worked, not only are they getting the return through the investment of the ERECT Fund investing into the project, but they're also getting basically a secondary investment because their employees are working on the site and paying into that same pension fund that we are using to make their returns for them. So, it's kind of like a dual, it's a dual win for them. They're getting something else.

Drew Thomas:

Well, and not only are they, not only they getting their pensions and their potential retirement funded, but they're getting paid to do the work, right? So, these are, these are union laborers and people that, now, I don't know how many of them are journeymen, and how many of them are, you know, local, but at least while they're working on the project, they're local and chance, you know, theoretically, they're bringing their families, and then maybe they, you know, they buy a house or they, so again, there's beyond the building itself, making the community improving the community that surrounds it, right, even further out you, you have communities that are benefiting from additional people coming in. The schools benefit because the kids got to go to school. The restaurants benefit because, you know, after, you know, mom or dad get off work, they take the family out, they have dinner, right? So, there's, there's a lot of benefit to not only the building itself and the tenants that occupy it and or whatever, but also just constructing the building requires people, and those people require a community to sort of support them and so forth too, so.

Jeff Matevish:

The, if you build it, they will come. You know.

Drew Thomas:

Yes, there are, there are cornfields around here, but there's. Yeah. But I just think that that's, that's an important thing to think about too, is that it's not just, well, so and so's making a bunch of money on a building. It's, it's that building not only grows the community, but, but provides for the community in a lot of ways that aren't

Justin Maser:

Absolutely, yeah, yeah. I agreed on that. And I directly attributed to that particular project. will just say, I mean, one of the big things is, you know, put people to work too. I mean, that's the one thing like, I get a tangible, I can see tangibly. That's one thing I like about what I do. Because when we build a building, I can tangibly go there and see the building. I can go and talk to the guys that are working on the building, which actually, we actually did something a couple of years ago, we haven't done it recently, but we really probably should. We went to a building that was getting built, and we actually catered lunch for the guys that were working on the building. And when we did that, we actually told them, do you guys know that like you're technically owners of this building? Because your pension money is invested in this building and is basically yours, and you know what? And what they realized was they, they actually were like, well, that's really cool. And I wish we would do that more, but we basically tell them, anytime you see an ERECT Fund sign, that means you guys are not just the builders of the building, but you're owners of the building. Because your pension fund is a, has an ownership interest in this

Jeff and Justin:

It's a cool way to think of it. Yeah, it's very cool. And they like that. Oh, yeah. And work harder and do better, probably, yeah. And that's why we're on budget and

Drew Thomas:

Yeah, well, I mean, you're right. I mean, the idea on time. that, hey, you know, if I, I don't care what it is, if I feel like I have some stake in the, in the whatever it is I'm doing, I'm probably putting in just a little bit more extra effort, even if I'm, you know, even if I'm very dedicated to my job and I really enjoy what I do and I have a good work ethic, there's still something about, hey, I own this, so there's a point of pride that I want to make sure that it's really done very, very well.

Justin Maser:

Absolutely, yeah, and that's what we see with the guys, and honestly, it's nice. It's nice that they get to see that too, because when you start talking about pension money and stuff like that, it started to get higher up, and you're not, the guys that are doing the work don't get in the weeds of that stuff. So, it's nice that they get to hear that too, and they get to see that, because it's different. It's not anything, this is not a normal thing. This is not something that's done

Drew Thomas:

Yeah. And you would almost wonder, you almost everywhere in the country. wonder, I mean, I know you said there's a, there's a high skill set involved in making something like this work. But you would, you would like to think that maybe somebody might parrot this, or use, there might be other programs out there around the country that could use, use a program like this.

Justin Maser:

And you know, the one big I will say, we, we've, we've looked at that, and we've talked to others. And one of the big things, and to be honest, Western Pennsylvania is a pretty strong union, union, sure, area, sure and, and the big thing with them is the unions get along really well. The building trades unions are, they work together very well. And it you, you don't just need the buy in from the development teams and the general unions. You need the unions to actually be able to work together, because you don't want to have to deal with disputes and things like that. And what we found is some other people that have tried this in other locations, you know, if you don't have that, the unions working together, if you don't have a good team with you, it's very difficult to make this work. So, we're almost in kind of a special area where the stars aligned, is what I like to say.

Drew Thomas:

There's a nonprofit in New Jersey. Chip Paillex is the guy that runs the place. And they, they basically started out because he worked for a company that, he worked for Unilever, and he moved to a different part of the state, his, he wanted to show his daughter what it was like to sort of grow a garden. So, they grew a little home garden, and they had some extra food left over, so they took it to the local food bank, right? And so, they were like, oh, this is great, you know. So, then that happened for two or three years, and the daughter started getting really like, well, we're gonna give this to the food bank, right dad? You know, it was like, anyway, they now have this organization where they ship to like 37 states. They have farms, they, they partner with farmers in New Jersey to grow food and send it out to people that are in need. And they do it all as a nonprofit. They don't, they don't, they don't get any money directly from the growth of the, of the, the farms, or anything like that. They tried to do something similar, and the reason I bring this up is because they tried to sort of port that program out into other parts of the country, and it just didn't work. And it didn't work because...

Jeff Matevish:

Location, location, location.

Drew Thomas:

Yeah, it was, it was the location, and it was the partnerships that he had, that he had built with the local farmers. And, you know, these farmers, it's called Grow-A-Row. That's what it's called, okay. And the idea was, because every, they asked the farmers to just set aside a row of their crops to be donated, right, right? So, the so to the individual farmer, it really wasn't all that much extra work to grow an extra row or two of corn when you're already growing 30 acres worth, right? Yeah, but it was, it was those partnerships that made it work. And when you try to put it into a different part of the country, even though it's a fantastic idea, it just didn't take off the same way.

Justin Maser:

And honestly, that's kind of the same thing that we've kind of experienced as well is, like I, and I do think that it could work in certain places, but you got to find the right city with the right people, the right, and the right real estate mix, basically. So, it's like, not only do you have to get the unions on board and make sure that you know the unions are excited about it, they want to do it. They can work together. But on top of the unions, you also need, basically, the development teams. They have to be willing to use union labor. They have to be willing to take this kind of investment. And the other side of this, does the real estate market support it? Can it support it? I mean, you need a pretty substantial real estate market to kind of make this work. It doesn't have to be the biggest, because Pittsburgh is by no stretch of the imagination the largest. They are one of the smallest, actually.

Drew Thomas:

But Pittsburgh is growing. It is. I mean, I think that they have, they have done a really good job in Pittsburgh of sort of transplanting the idea of this, the blue-collar steel worker being 80% of the population, to now tech companies and more modernized stuff that they're doing.

Justin Maser:

To be honest, like, the thing with Pittsburgh Yeah. I mean, and then, and then, of course, you have a lot is, like, if you look at it, like, Pittsburgh had a struggle. We all know that, you know for years that we had a lot of blue-collar, collar work, and that went away, and they didn't really know how, but they did a good job of reinventing themselves. But the big thing is, they didn't just go all in on, like, the tech work. One of the big things in Pittsburgh that's working really well is the building trades. The building trades are very big. They're very supportive, and they're huge employers down there in, in the area. And it's that mix. It's that mix of blue-collar work with the white-collar tech jobs. It's a much more diversified employment base down there now, which I think is what makes it a good place for this type of, yeah, type of, I want to say project, but type of investment opportunity. of the medical in Pittsburgh too. So, you have that, you know. Absolutely. And the medical really is a big push for the unions. It actually builds the unions a lot down there, because if you go down to Pittsburgh, they're always building a hospital somewhere. If it isn't a hospital, it's a, it's if it's not a hospital, it's a, it's a university, something at the university, you got Carnegie Mellon down there, you have University of Pittsburgh. Those places constantly built too, and they use union labor for that. So, that builds a nice, strong building trades. And I feel like Pittsburgh has one of the strongest building trades councils I've ever seen, although I haven't been around much, but it's definitely one of

Drew Thomas:

Well, and I'm, I'm sure that that has at least the best in America. something to do with the history in Pittsburgh being a Yeah. They, I mean, they did. They built their own blue-collar town, yeah, 100% I think there's still a lot of pride in working with your hands and doing the building trades and coming from that lineage out of, you know, grandfathers and fathers. town, you know, yeah.

Justin Maser:

I mean, you think about any area. I mean, even,

Jeff Matevish:

Knowing you built that town, yeah. like, we were a little off of Pittsburgh, but, you know, I know of tons of union people in my family. Like, it's a very strong thing around here, and that's, and to be honest with it, that's a good thing, because it's diversification. We're not just, hey, we're not just going to try to turn into a tech hub, even though, you know, when we build these buildings, we want to attract the Googles and the Facebooks and the Metas and whatnot to be tenants in these buildings, to bring those jobs in. But we still want to build those with good, strong union building trades.

Drew Thomas:

Yeah. And I think that's, that's something too. I mean, you kind of dropped a few names there, but I think that's the, you know, we're, you know, you work for, for AmeriServ. We're, AmeriServ is a community bank. We're not, we're not a mega bank, we're not a regional bank. But yet, at the same time, we, you know, your community bank can sometimes be doing things that you don't quite realize that they're doing to better your community. And working with some, rubbing some pretty significant elbows with, you know, companies like what you just named. These are, these are international companies that, that are, you know, benefiting from something that a community bank is helping to provide, you know.

Justin Maser:

We've actually, so, you know, I name dropped a couple of them. And honestly, those are tenants that are in our buildings today. You know, we, we have other tenants as well, but it's like those, you know, it takes a lot to bring those kinds of tenants here. You know, they want the newest thing possible. They want top quality. It's not just, hey, you build a building and they're, you're going to bring a tech company. That's not the way it works. They want something that benefits them, that benefits their employees. And again, I go back, I keep saying it, but it's the truth is, like the building trades, they know what they're doing, and they do an excellent job of not just building the building to the developer specifications, but they really know how to do it the right way the first time.

Drew Thomas:

Yeah, well, I mean, I gotta, I think it's pretty impressive.

Jeff Matevish:

I learned a lot, yeah.

Drew Thomas:

Yeah. I, I always learn a lot, I think, when it comes to this stuff, and you're very good at explaining what it is that you do to, to, to somebody like me, that maybe, maybe, you know, I didn't, I didn't go to school for finance, I didn't go to school for that kind of stuff, you know, but just understanding that this is something that it seems, it seems like it's a win, win, win. And there are very few things like that in this world anymore.

Justin Maser:

Absolutely, and that's the way I look at It's a win for the building trades, it's a win for the community, it's a win for our bank, it's a win, it's a win for everybody. Everybody comes ahead, and that to me, that makes my job easier, because, sure, it's easy to tell everybody, hey, let's do this, because everybody's winning. You know, it's like the developer gets what they want. The unions are getting jobs and returns. Everybody's happy. It's very, the communities are growing. Yeah. I mean, it's good stuff. There's very few things that can kind of do what we do, and that's why I find it to be extremely cool, and that's why I like what I do. And I've been here for so long, so.

Drew Thomas:

Yeah, well, you can, after you build a few more buildings, you can come back and talk to us about those too. That'd be awesome. No, Justin, thank you very much for coming

Justin Maser:

Hey, thanks for having us on. I love to talk down and talking to us about this stuff. I think it's, it's, it's fascinating stuff, and it's stuff that, again, you know, I about this. I hope everybody enjoyed it. think a lot of people when, when we talk about, even on this podcast, when we talk about a lot of the stuff we talk about, it's really at the individual level we talk and that's the Yeah. point is to try to educate about, you know, finances and banking and so forth, but at the same time, your bank is probably doing things you don't even realize, and sometimes those things can be pretty

Drew Thomas:

No, no. Thanks very much. I appreciate it.

Jeff Matevish:

This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts with the goal of helping to take some of the mystery out of financial and related topics as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast and any resources available for download from our website or other resources relating to Bank Chats is not intended and should not be understood or interpreted to be financial advice. The hosts, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The hosts of Bank Chats are not attorneys, accountants, or financial advisors, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation.

Drew Thomas:

When we see a new restaurant, technology, or manufacturing company arrive in our communities, the local television station or newspapers typically make a fuss over the food or the products being produced. Unless the story is about Apple building a $5 billion facility for themselves in Cupertino, time is rarely spent talking about the buildings that house those businesses. Yet the business wouldn't exist if it didn't have a place to call home. Most small to medium sized businesses and organizations simply don't have Apple's capital to invest in the construction of their own facilities. So, finding investors willing to take on that risk is a vital step towards bringing successful companies and job opportunities into our cities and towns. I'm glad we had a chance to talk with Justin Maser today and go behind the scenes a bit to see how businesses like AmeriServ and PenTrust help to make construction and real estate projects like that happen. AmeriServ Presents Bank Chats is produced and distributed by AmeriServ Financial, Inc. Music by SchneckMind. Our executive producer is Jeffrey Matevish. If you're not yet a subscriber to the podcast, well, what are you waiting for? You can listen and follow us on any of your preferred podcast platforms, or you can watch the vodcast on YouTube. For now, I'm Drew Thomas, so long.

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