Mass Timber Group Show: Sustainable Building Experts

Mass Timber Urban Renewal w/Doug Hayden & Mitchell Brooks of Arthroto

• Brady Potts & Nic Wilson

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Are vacant office buildings in New York, Washington DC, Chicago, and San Francisco the future hotspots for innovative hospitality and sustainable living? How can prefab and mass timber technologies breathe new life into these iconic structures, turning them into vibrant hotels and residences with unmatched speed and efficiency? Dive into Arthroado's groundbreaking approach to adaptive reuse, integrating cutting-edge design and smart building systems to transform America's most beautiful cities.

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Timestamps:
0:00 – Introduction: Converting America's Major Office Cities
2:58 – Arthroado’s Adaptive Reuse Strategy
6:15 – Prefab Interiors vs Traditional Drywall
12:26 – Benefits of Prefab in Hospitality and Maintenance
16:54 – Smart Building Systems and Water Detection
23:32 – Overcoming Codes and Financing for Prefab Mass Timber
29:47 – Developers’ Perception of Mass Timber
34:09 – Focusing on Hospitality and Entertainment Districts
37:12 – Creating Unique Hotel Experiences with Mass Timber
44:13 – Future Projects and Market Focus


Looking for your mass timber community? Attend the 2025 Mass Timber Group Summit in Denver Co - Aug 20-22nd!

Speaker 1:

There's four primary cities. I call them the four horsemen of the office apocalypse. Okay, there's New York, Washington DC, Chicago and San Francisco. I think the most beautiful architecture in North America is in those cities, and not only that, but there's a hollowing out. So what are you going to do? Especially when you see Manhattan and San Francisco and downtown Chicago, it's like what is going to happen. How do you revitalize these cities, Especially with all these empty office buildings? There is only one way, and that is, to convert these buildings.

Speaker 2:

What's better than drywall for faster, better interiors? Why are developers chasing hotel projects in entertainment zones? And could mass timber's biggest advantage have nothing to do with carbon? Today's guests, doug Hayden and Mitchell Brooks of Arthroto break down how prefab hospitality and mass timber all fit into a smarter, faster way to build. Doug is the founder and CEO, and Mitchell is the director of design at Arthrata, a development company taking a prefab-first approach to vertical expansions, office conversions and new builds, with a sharp focus on hospitality and senior living.

Speaker 2:

We got into it all prefab finishes that build faster, look sharper and simplify future remodels, how Mass Timber works with vertical additions and why cities pouring money into tourism, entertainment districts and conference centers absolutely need more experience-driven hotel accommodations, which Arthroto is stepping in to deliver. If you're into smarter building systems, development trends or just geeking out on how the future of construction is taking shape, this one's for you and a quick heads up before we get into it. If you're serious about Mass Timber and want to learn from leading experts plus meet future partners in person, the Mass Timber Group Summit is happening this August in Denver. Early bird pricing is ending soon, so now's the time to grab your spot and, as a podcast listener, you can use code PODCAST all caps to save 50 bucks at masstimbergroup. So with that, let's get into it.

Speaker 1:

My name is Doug Hayden. I'm the CEO and founder of Arthrito. Arthrito got started it was coming out of COVID and we're based in Calgary. So what was going on with Calgary was a lot of empty office buildings and the city of Calgary, even before COVID, started a program to do adaptive reuse. In other words, they wanted to take empty office buildings and convert them into residence or hotels, so heads and beds.

Speaker 1:

So they came up with a program where they would give anybody that owned an office building if they wanted to convert it. They would give them $75, basically like a tenant improvement allocation so they would give them, upon completion of that residence and permit, that they would get $75 a square foot. For every square foot they converted into residential or a hotel. That appealed to a lot of groups. They earmarked about $200 million for that. It was basically forwarding tax dollars and the program's now oversubscribed. It's still, we believe, active. They're using a mix of federal dollars and provincial dollars and city dollars to make this happen, but most of it came from the city offsetting taxes. So we saw that and we thought, oh, there's an opportunity to do what.

Speaker 1:

I had as a background, which was I have done real estate, but prior to that I did office interiors, all prefabricated no drywall, by the way, we detest drywall. So it was all materials and there's a reason for that. It's simply about speed and quality and a number of other issues we'll dive into. But anyway, long story short, it looked like a real business opportunity to take these old buildings, convert them, with prefabricated interiors, to residential and hotels. The Calgary market, although good size, just was not big enough to make a business case out of it. We were going through COVID.

Speaker 1:

It was clear coming out of COVID that it was going to be really hard to get people to go back to the office, especially what we call B buildings. And what happened was you hear about A buildings, so we call them marquee office buildings. You hear about those. Folks wanted to go back into those buildings because they were getting great again TI dollars. As a matter of fact, in New York the average TI right now is over $150 a square foot on a five-year lease. If you go to move into an A building, they will design your space for you and it's beautiful space. So B buildings don't do that. They can't do it. They want you to renew a lease. That's not happening. A lot of people don't go back the full five days. If anything, it's probably three at best. So we just saw all these changes going on.

Speaker 1:

That was now after COVID. It's basically nationwide in the United States and to some extent, Canada, which is where we're focused, and we have a wholly owned uh, us subsidiary. So our primary focus for adaptive reuse and almost everything we do is the us market and it's typical. Us is 90% of what we're looking at. Canada is about 10%. So anyway, long story short, it was about taking these old office buildings. So we learned very quickly we'll have to acquire them at distressed prices and then, take that building and convert it into.

Speaker 1:

We do one of three things. We convert to a hotel, which is about 50% of buildings being converted right now. If they're in the core of a major city are being converted to hotel, or a mix of hotel and residence, which is the other thing we focus on Residence being you get all the amenities of a hotel with your residence. And then the other is where we just started looking at seniors housing as well, and we're not talking that traditional kind of what people pop in into their heads, that type of seniors housing. It's really a mix of all the different types of housing we do.

Speaker 1:

So last I'll leave off and then I'm going to hand it over to Mitchell is my background is actually before this was film and television and technology and property development is a lot like getting a film made or a movie made in, just the amount of work and the amount of things that you have to tap into, everything from finance to arranging for, you know, production crews, which would be construction crews, all the rest of it. So they're very similar and so also the budgets are very similar. So it was with my background that's attuned to what we were doing, what we really liked about doing ground up development was the speed at which mass timber could help us. So when you're doing an office interior prefab, the real advantage is you get a better product faster. And then we also looked at what's the technology out there that we could integrate.

Speaker 1:

Because we're doing everything prefab, can we integrate new technologies and absolutely Low voltage wiring sensors? You know, you name it. All of that is available off the shelf. So, long story short, what we really do is we innovate. We can build as much offsite as possible. So if you're buying a building, what's happening typically? If you go through it, you got to get your MEP ready and then you start to build. You know, on site we compress that cycle so you get your MEP ready in the building.

Speaker 1:

Meanwhile you're building everything off site. So as soon as your MEP is ready, you're coming in with a pre-done product if you will, so you can reduce times. If we're converting a building by about 25%, so you're turning keys faster, roi is faster. If you're building ground up once the podium is in place, if you're using mass timber and prefab interiors and exteriors, we're probably honestly we think we'll get it dialed into about 70% faster than conventional construction. That's a big hit on the bottom line. So you can build a superior building, superior products, faster. Your ROI comes in. That's what you're getting. You're getting a better product quicker. So I'll hand it over to Mitchell. You can talk more about kind of what he's doing.

Speaker 3:

Yeah, I'm Mitchell Brooks. I'm the Director of Design at Arthroto Industries. I have been in the construction and design industry for the last 17 years. I'm also a licensed interior designer in Alberta and been working with the Arthrota Group. So, based on our hospitality and hotel and residence approach, working on our branding, our design guidelines, our amenities, facilities, benchmarking to really take the prefabricated interior approach, and evaluating different properties and buildings around North America to look at how we can use adaptive reuse, mass timber construction or a hybrid of the two to expand on existing projects and sites to bring in our construction methods.

Speaker 2:

Got it, got it Well. Thanks for sharing, guys. Before we started recording, we kind of dove into a little bit about what you guys are doing. And you guys are taking an approach across multiple different development opportunities, from new building to retrofits or conversions, if you will. And then also, like Mitchell, you had talked about expanding on top of buildings, right, like adding floor levels to them. You had talked about, you know, expanding on top of buildings, right, like adding floor levels to them. So I guess, like, why did you guys decide to get into this markets, or these markets specifically, like I know you had talked about, doug, like the opportunities from, like a financial incentive, but I guess, where where do you guys see yourselves fitting in? That's different than another office conversion company or a different ground-up developer. That's also looking at prefab, like what's unique about you guys?

Speaker 1:

I think the the biggest one is that we understand how interiors can be all prefabricated and we also understand, um, on the tech side, how you can incorporate technology into the environment. It was really just there's. There's nothing necessarily new about what we do is, if anything, I'll point you to a shop architects out of New York. Yeah, they to build those massive, what I call the pencil buildings. Right, because it? You know you're, you're talking super talls, that you know nobody's ever seen anything like that where you can design and build a building. You know that basically skinny, that tall and that quickly.

Speaker 1:

And what I really liked about what shop architects approach was, and you know, if you know them, then you know that it is sort of half architects, half engineers, and a lot of their engineers come from aerospace. And it was like they early on said you know, we can do a lot of the construction offsite. So yeah, you're still using concrete and you're still pouring and everything else. But when you look at how, um and, by the way, they still haven't used prefab interiors, um, but it was it was sort of like taking what they did was they did assembly offsite. So we just took that way further and said, oh, there's. You know, because of my background working in prefabricated office interiors, it was okay. I'm starting to put two and two together and the real advantages here are the speed and the fact that the materials are of superior quality in the whole, you know, whole nine yards. So that was really how we're looking at it.

Speaker 2:

Tell me about prefab interiors Because, again, before we started recording, you basically said like we don't do drywall, like we detest it for many different reasons, but if I'm looking at 99.5% of the buildings I've ever walked into, they're all drywall. So, like, how are you replacing everything from the ceiling to the wall with prefab interiors? What does that look like? Interiors?

Speaker 1:

What does that look like? It looks amazing, it's beautiful, it's stunning, it's a you know, and here's I'll give you an example of of just how screwed up conventional construction is when it comes to interiors. So, if you're using drywall, if you've ever been in a construction site or done it and, by the way, my grandfather owned a drywall company, I used to be the sander Okay, like, if there's, if there's one job that will motivate you to get your ass out of that and into into school, that's probably it. Um, but anyway, you just it's. It's a material that, uh, yeah, it's inexpensive, which is why it's used. It's also traditional in the sense that it you know it's, it's there, everybody understands it, you know the infrastructure is there for it and everything else.

Speaker 1:

But there was a project in Dallas where they were taking the top 10 floors of a building and they were converting it into residential and they thought it was going to take them about 40 weeks. Well, it almost took double that. Where they really ran into problems was when the drywall started showing up on site. And you know it's trades are tripping over. You got drywall. You know inspectors have to get in and have a look at things before they're covered up the whole nine yards, but what happened was when they started putting in the drywall.

Speaker 1:

Then you've got to mud it, tape it and paint it. Well, it was taking really long because the building sealed for the drying process. That added literally weeks and weeks like four weeks to the process. Um damaged the whole nine yards. So just and that's just drywall, not to mention all the other things about that.

Speaker 1:

You get, with prefabricated interiors, the advantages. So, basically, when you do a prefab, all you're really doing is you're dropping in things that will allow you to connect. When you bring in a wall and, by the way, the wall isn't complete, okay, the wall is simply a frame with the wires and everything already in it and the plumbing already in it, and what you've done in that building is prepped for the MEP. So the mechanical, electrical plumbing, they're just done differently. So you've got spider connections, everything will connect on site, versus having to run everything into the walls and do all the rest of it. But drywall's toxic.

Speaker 1:

The biggest issue that we face, though, is you know there's what over 20,000 codes across North America, building codes you know inspectors can interpret. You know prefab has not been part of that process where it's seen as viable. So you run into lots of problems on inspections, and that is why a lot of developers will hesitate to use it Now in office. Very different because we weren't messing, why a lot of developers will hesitate to use it Now in office. Very different because we weren't messing with a lot of stuff, even a prefab in hospitals, by the way. And if you can do prefab in hospitals in that environment, trust me, the complexity in healthcare is far more than residential and that's really where we cut our teeth on. How much you can integrate into an interior with prefab is in healthcare. So you know. Turn it over to Mitchell to help answer that question as well.

Speaker 3:

Yeah, so our prefabricated systems we're looking at. Ideally, the goal is to completely move away from individually stud and framed walls and partitions and barriers and remove as much drywall as we can. Barriers and remove as much drywall as we can. So the biggest thing we run into with interiors why drywall instead is great is for fire rated separations. So we're looking at magnesium board products in a panelized system that can be produced offsite, delivered in an easy modular size that can be handled by an individual person, installed, rated, and then we use those separations and completely remove any of our building systems or services from those. So then we're looking at doing a prefabricated almost furring system where we have steel or aluminum frame go in and then a panelized MDF or finished product on top of that and, similar to what Doug was talking about, we're removing all of those building systems from those structural or non-load-bearing fire-rated safety building code required barriers and separations. And that gives us a huge advantage for our trades on site, future building improvements, the sort of protection of those services as well.

Speaker 3:

As then when we get into hotels we're looking at a different level of furnishings, we're looking at different wall coverings and those kinds of things that then create additional barriers. So in a conventional building when you're putting wall covering type two commercial grade vinyl covering that creates a vapor barrier. We no longer have those kinds of vapor barriers happening in buildings. We don't have that risk of mold or other kind of dusts that happen in construction. We're removing a lot of those environmental issues during construction, so once we're occupying a building we don't have a lot of those concerns that what you said on like the and this kind of touches back on the tech side of things too.

Speaker 2:

But being able to one solve like some vapor maintenance accessibility issues, because, like in mass timber, like one of the big things in the insurance industry is how are we handling moisture in terms of like there's a tiny little leak behind a wall somewhere and a tiny little leak over five years turns into a big mold problem with wood Right and so, like when you guys are talking about I'm imagining you know you have a, a furring system or whatever with with your panels that come in, it's very easy to one install a sensor behind that, but then, two, it's very easy to like pop that panel off and be like, oh, there's a leak there and put the panel back.

Speaker 2:

Like I had to do some repair work on this house, right with some water that got behind the wall and I had to like cut out an entire sheet of drywall, pull the insulation out because it went undetected for a while, take out the framing, replace the framing, put the drywall back up, mud texture, finish, paint, everything Like just for like a small home renovation project. It was huge. But I can't imagine doing that in like a 10-story building where the water link went down three floors or whatever.

Speaker 3:

And then if you're in a hotel building your room or number of rooms is closed, can't be rented out, you've got loss of sales. You've got to manage that work so you're not disrupting other guests. Where, with a prefabricated interior, if someone has a really good time in their room and maybe doesn't leave it as pristine as it was, to repair a room, patch room, anything like that is such a quick, relatively easy fix. Maintenance could go in, your room could be down for maybe minutes, maybe a couple hours, and you can turn it around so quickly.

Speaker 1:

I just want to add to that as well. So you touched on sensors. So, like our basic baseline, having been in real estate for 20 years around multifamily, the biggest damage occurs from flooding, and that's flooding from above and you know gravity right. So we do water detection, water arrest in everything we do. That's our baseline. There's not a project that will go up without water detection and water arrest.

Speaker 2:

Tell me about water arrest, because I'm not familiar with that.

Speaker 1:

Water arrest is simply if you detect water with a sensor. A couple of things. One is we do smart building, right? So smart unit, smart building. So immediately a sensor goes off, the occupant is going to know about it, right, I mean alarm, and also the building management building system will know about it. You know, same alarm. Now that sensor can give you things like, maybe, flow rate, because you're doing multiple sensors. One sensor goes off.

Speaker 1:

Now you can immediately shut the water off in that unit if you have a valve right. So basically there's valves that are connected that you just shut off. They just electronically turn off. You can shut water off to an entire unit, a room like those that it's at that level. So in a hotel we're going to obviously be shutting off. If we get one or two hits, we'll shut off in that that particular room. But that's really how it works. It's simply a valve that's connected to a you know, basically, smart management system. But that technology here's the thing. That technology has been around for 30 years and the damage done by flooded condos is is crazy. Now we've talked to the insurance industry and they will actually offset your insurance if you have that in your buildings. Again, that's why it's like. It's just a logical thing. So we're just, we don't see a lot of the tech as necessarily expensive. We see it as necessary, like, why aren't you using these technologies that can save you time, money, all the rest.

Speaker 1:

Also, I wanted to quickly point out that what we're focused on is prefabricated, not modular. So when we go in, let's say, a bathroom that's more a cassette, so it will go in, the inspectors can see the plumbing before the walls go on, if you will, and, as Mitchell pointed out, it's really easy. Basically they clip on. Obviously, you couldn't get it off with a butter knife. You need a special tool because you don't want some kid messing with it. But you know, if you've got, if you got a bunch of rock stars staying in a in a unit and they're doing some damage which, by the way, it's really hard to put a hole into a solid piece of fire rated MDF Okay, it is really hard. So you know you've got that going for you. You've got sound. The sound attenuation is far higher with what we're we're using. So you got better sound, you got all of that. But the big thing is that each piece that we do has a barcode on it. Literally everything is assembled. It has barcodes on it. So if you pull that off and you want to know the color that was used, the size of it, all the rest of it, you could literally take that barcode and get that information, build it on site for yourself or just order it and it will basically show up, you know, within about a week. We think that we can do it all off site. So, long story short, there's full documentation on everything that goes in it. You're just using tech that already exists right Now.

Speaker 1:

Here's the other thing.

Speaker 1:

I'll just tap on mass timber. When we looked at mass timber what we loved about it, and it's kind of you know when you look at it, it's not kind of the process you would think. If we use mass timber, we like it for the primary building structure, right? So the floors, cross-laminated timbers, the big timbers as soon as we go in, as Mitchell pointed out, we're using different materials. We're using cement boards like magnesium oxide, we're using fire rated MDF, we're not using dry wall, but we're also not necessarily using wood and on the exteriors you'll see there's a lot of use of metal and glass as opposed to wood.

Speaker 1:

So again and by the way, there's a company that we really like in Canada that builds photovoltaic exteriors that we would like to use and incorporate. So we've already been working with them to come up with solutions. That and it creates a lot of electricity. So there's all these things that we just looked at and said we can integrate all of this, still get the speed, still get the quality and, you know, you've got a beautiful environment. I don't know if you've seen any of our proposals and our renderings that are out there, but you sent me one yeah.

Speaker 1:

Mitchell and the team have done a great job of of utilizing timber and that biofeel messaging throughout the units. Even if you have to encapsulate, like in San Francisco or in other places, we know how to do that properly.

Speaker 2:

So so let me just talk about. So we've talked about why everything is so wonderful and the things that we're talking about, yet people are not doing it. Is it primarily cost? Is it lack of familiarity? I mean, obviously, like the more tech and sensors and things that you're putting in, there's added material, added labor, so there's obviously some added costs. But I guess, like you know, if you're drywalling 10,000 square foot of a floor versus doing a prefab thing, like is it? Does it purely come down to cost, about why they're not being used, or what's the factors there?

Speaker 1:

So I'll, I'll go and then I'm going to let Mitchell go on the actual kind of design side from that's why we had to become a developer. Nobody was willing to bite off on the whole enchilada. So you know, they're doing prefab office, they're doing mass timber, they're doing all these different things, prefab healthcare Nobody's come together. And you're exactly right, there's two primary things that interrupt it. One is codes, and you're dealing with traditional construction methodologies, comfort level, so, and it's even getting financing around doing a prefab, because if it's around housing Fannie Freddie, now in Canada, cmhc does and has come up with a program that they will finance or guarantee financing on fully prefabricated buildings In the States, not so much right. So your financing structure is different. There's a lot of different aspects to what you're doing, but at the end of it, that's why we just said you know what, we'll do it ourselves. Okay, we're here to prove it out. We believe in it, we'll make it happen and we'll also show why getting people in faster, why turning the key faster, gets you not only a better building but it's a better business case. Your insurance is less right. The risk of capital is far less. You know, and you do this once with the right capital partners, they're in for life, because at that point they see it.

Speaker 1:

So it's like getting, you know, a new airplane off the ground, right? Not everybody's going to trust. You know I don't want to speak for Boeing, but you know you're dealing with a lot of that. You know I don't want to speak for Boeing, but you know you know you're dealing with a lot of that. You know uncertainty. You know you're going from aluminum to using, you know, new materials, right, like carbon fiber in the airplane industry, right, that? Imagine carbon fiber that's. They're using it in these skyscrapers, right? So there's just a lot of that. And and if you're a guy that's been a, you know you're a code guy, you're an inspector and this shows up on site. You know you're going to scratch your head. Additionally, there's a bit of union stuff going on in there. So we have to also accommodate unions, because in places like Chicago there's still things where they won't allow a quick connection for electrical, you know. So there's all kinds of aspects you still have to work around. Mitchell, you can sort of add to that if you like.

Speaker 3:

Yeah, I think we're. We're finding all the advantages that we really love for it. There's a lot of the reasons why it hasn't been taken off and used a lot. So in terms of costs like we've got, you know, maybe a little bit if your cost is balanced, a little bit higher at the beginning we're looking at a longer-term approach. So we're looking at because of the speed we can open a turnover and get a project and a site up and running quicker Doug's catchphrase of heads in beds where you get that whole process starting sooner, you're seeing your ROI come through quicker. And we're also looking at the long-term benefit. So maybe a panelized system with this additional fire rating and then a furring system with the panelized system is a little bit more upfront and premium, but we're able to get that premium base level to get that up to then a really high-end luxury finish is a much lower increase in investment.

Speaker 3:

As well as then the long-term benefits of the maintenance, the durability, the serviceability as well as then we're trying to move away from a seven-year cycle that a lot of hospitality sees, where brands are completely redoing rooms. We can do that less frequently. Lower timeline to turnover. And we've done some analysis like we're looking at turning over fitting of the interiors of hotel floors in a matter of weeks instead of months as well as then, like lead time, we're turning over floors and groups of floors so much quicker. And then we're also looking at trying to balance out a shortage or a decline in trades and labor, so we're finding that this is a great way to balance that out. You need less bodies on site, which is always ideal in a lot of these large scale projects. It's safer. A lot of the work that's being done is then being done by highly trained people in indoor, safe climate control facilities, so you have better worker health, safety and all of those other aspects that we're really bringing into our projects, just beyond the cost and sustainability of things.

Speaker 2:

Yeah, so it's. I'm glad we're having this conversation and we'll move on from this interior topic, cause I could spend hours talking about it, cause it's actually something I've been thinking a lot about just in the last week. Um, but we'll, we'll put a pin in interiors, cause I think we've kind of talked about the high points there. Uh, tell me about, uh, some I forget the technical term, but when you're adding levels to buildings with mass timber, cause, like, not only are you converting buildings but you can actually increase the building size and use, so tell me about what you guys are doing in that world.

Speaker 1:

Yeah, I'm going to let Mitchell take this one. There's a building that we looked at. It's in Calgary and the original building owner, which was an engineering company, had actually built the building that they could if they had to add floors on. But, mitchell, you take it from there.

Speaker 3:

Yeah, so we're also looking at doing vertical, vertical extensions or vertical expansions on existing buildings, whether that be an existing parkade, an existing building. There's a building in Calgary we're currently evaluating. It's a two-story concrete structure. It has a historical sort of half to it but it was added on to about 10 to 15 years ago and was two-story structure, originally designed to take an additional two stories of conventional steel concrete deck expansion.

Speaker 3:

But we're looking at it as sort of well, what do we bring to it with mass timber? Mass timber is a lighter structure, so we're currently evaluating it and think that we could just base, without reinforcing any of the existing structure, put on three stories of mass timber, take a office design building, reconvert it to a hotel hospitality program, but then also looking at what's involved in reinforcing that structure to take it up to maybe 12 stories, maybe 18 stories, and what sort of is involved in that whole system of things too. So looking at a lot of different uses for it and mass timber just where we like the idea of it for a lighter structure, less foundation requirements and just a lot of those things that go along with that less foundation requirements, um, and just a lot of those things that go along with that.

Speaker 2:

Yeah, uh, that makes a ton of sense to me. And uh, doug, you had said something earlier that kind of piqued my, my interest and we've kind of been talking about it's like we've been talking about mass timber in terms of efficiency, speed, prefab, offsite, et cetera. We haven't even said the word sustainability, carbon, any of that. So can you guys tell me, like, how you guys came into mass timber and what was like the value attachment to that Cause? I know it wasn't initially the the greener side of things, it was all on that kind of nature and, like you, you touched on a little bit Mitchell, about hey, it's lighter, less reinforcement or no reinforcement, lighter foundational engineering or less. Excuse me, um, what do you think as developers? Um, is the mass timber industry messaging in the wrong direction to reach more developer minded people by only hammering on this point and not this one?

Speaker 1:

That's really kind of up to, to the developers, I think.

Speaker 1:

I think you've you're, you're hitting on a vein there of of kind of you know, you do see, it wasn't really let me get to this point. When I ran across, oh, wow, and what they were doing in California, when I saw that you could build a 30 story mass timber building and the speed in and everything else, we come in with our prefab interiors and then we close up with, basically, sip panels that we've been working on designing as well. I mean, there's the holy grail of prefab building, right Like it's, and it's not modular, because if you get into modular, you're dealing with accuracies that that cause issues as you move up, you're off by one centimeter on the bottom. That amplifies itself as you go to the top, whereas prefab you adjust and correct along the way. It really, mass timber was the magic kind of bullet for okay, now we can do everything prefab ground up and so, yeah, go ahead and I think, too, we really like the idea of mass timber because it can be an entire site mass timber.

Speaker 3:

It can be a hybrid solution with an existing building or other new construction materials and trying to take a look at sustainability just beyond renewable resources source within a certain kilometer radius. It has all these other beneficial elements to it that kind of expand the idea of sustainability that we're trying to really take an approach and a focus on as well. So I think, definitely I think you've got a great point, Brie there's so many aspects to it that we need to focus on kind of the bigger picture.

Speaker 1:

And what we really wanted to do at the end of the day was to deliver a superior product right Faster, so that the and it came down to ROI, that you know what developers want not only a superior ROI, but just such a much better product at the end of the day. And part of that is just incorporating what we talked about. Our tech, just to you know, make it, you know, a more comfortable environment as well as, like we said, the sensors when you get into multi-story buildings. You pointed it out earlier, water's not your friend, right, so you know, and especially around timber, right? So how do we offset a lot of that? But it was speed and accuracy, so, and accuracy not just in the measurements and what shows up, but accuracy in the costing, because that's the other thing as a developer if we can get our, if we don't have to, oh yeah we'll need an extra 10 or 20% on top of all this, just for all the you know inefficiencies of the whole process.

Speaker 2:

You don't see that as much if you're doing fully prefab your pricing's more dialed in, as is your time, yeah yeah, and that that all makes a ton of sense. Um, another thing that I wanted to make sure that we talked about is you guys have, uh, what I think is a is a really good system and focus and like what? What types of markets and where you guys are going, like the, the physical locales, if you will. Um, obviously, hospitality kind of, and senior housing kind of being like a focus point of that. But can you tell me about why you guys are investing in hospitality specifically right now?

Speaker 1:

I'm going to let Mitchell talk to the zones, what we call the entertainment zones. Where we saw was you've got these beautiful cities and we, I call them. There's four primary cities. I call them the four horsemen of the office apocalypse. Okay, there's New York, washington DC, chicago and San Francisco. I think the most beautiful architecture in North America is in those cities, and not only that, but there's a hollowing out. So what are you going to do? Especially when you see Manhattan and San Francisco and downtown Chicago, it's like what is going to happen. How do you revitalize these cities, and especially with all these empty office buildings? There is only one way, and that is to convert these buildings. They're not going to be used as office buildings. Again, you got a couple of uses. Either you convert them into something where and heads and beds is where we saw it, or you convert them into a warehouse or some something else, or you tear them down right, which would be a real tragedy and not easy to do in a lot of these cities.

Speaker 1:

So, and, by the way, we only focus on cities that are open to doing this, and those are the cities that are. They have programs or at least they're open to doing it. So the permitting process is sped up. Take a city like Toronto. Same thing's going on there, but it could take you four years to get a permit to go from office to residential. So we can't obviously touch Toronto at this point. So that that's really kind of when we looked at it, you know just what we saw as those those cores.

Speaker 1:

Now why we focused on seniors and hospitality and residents. They all are open to having high levels of in in in site, on-site service, and as well, they're in locations that are very walkable, truly walkable. Okay, so you don't necessarily need a car, by the way. Old office buildings, not a lot of parking. And then you look at all the things that are going on, trends like automated car services, all the rest of it. There's just enough there that it made sense to focus on that. And so we work with a company called Arch Humanities, top amenities provider and operator in North America, and we connected with a hospitality group.

Speaker 1:

So we really saw having onsite services as being crucial, and then that's what we sort of stumbled into. The other thing which I'm going to hand over to Mitchell, which is these, what they're calling entertainment districts, and all of a sudden we just lit up on entertainment, anyway, mitchell, which is what they're calling entertainment districts, and all of a sudden we just lit up on entertainment, anyway, mitchell, you might want to talk about that.

Speaker 3:

Yeah, we're finding that people still want to travel.

Speaker 3:

People are still wanting to get out and see the world and we're seeing a really big increase in that business and leisure mix travel.

Speaker 3:

So we're finding across Canada and the US a lot of cities and municipalities are working on developing their conference, cultural, entertainment, events districts.

Speaker 3:

So in Calgary, nashville we're seeing it in Memphis and a lot of those facilities they're focusing on the event space, the conference centers, the sites and then, as soon as those open, we realize that we need places for people to stay, we need to house them and we, as soon as those open, we realize that we need places for people to stay, we need to house them and we want to make sure that that's a quality, world-class, iconic, recognizable building and experience that ties into these state-of-the-art conference and event and cultural districts. So we're definitely seeing a push up in that kind of realm and with everything we're seeing these districts and the connection to the local community and the local environment. But then that sustainability aspect so being able to bring in a sustainable, pre-fabricated construction system like mass timber is a great opportunity to bring that. It brings the involvement of the community and the local makers and history into that kind of a space, that really those spaces are needed on short term quick notice.

Speaker 2:

So just that speed and sustainability of mass timber is a great approach for that yeah, I agree and I we had talked before we hit record about like where we do our conference. In denver, you know, got the the Denver Art Museum one. It's kind of an out of the box venue, if you will, but it's got right in the Civic Park Center. And then the hotel that we're talking about, which is exactly the niche that you guys are moving into. It's like we wanted a world class, sustainable, beautiful, comforting, warm, inviting stay experience for our conference attendees. And like this hotel just opened. We went down, we toured it. They're absolutely wonderful.

Speaker 2:

But literally like from the moment you walk in to getting your key card to open, to going into your room, like everything is a world-class experience, from the aesthetics to the service, but also like all the little details and I'm a details guy, right. Like my card is a wood, is a wood card with an RFID chip. Like I hate seeing all these little plastic hotel cards. You see them all over the ground. They're like they never work. They always you always have to go down to the desk and get locked out of your room.

Speaker 2:

But it's like the the stay experience for me is one of like the primary things that has the most impact on me when I go to conferences, when I go see a concert out of town, it's like the, the program that I'm going to see is great, right, I'd love for that to be a beautiful welcoming environment too.

Speaker 2:

But like, let's say, I'm going to a concert, right, that's got its whole thing. Most of my time is going to be spent, like, in the hotel room, whether that's overnight or pre event or post event, like whatever, like. That part of it has a big impact on me and as a as a, as an event organizer and host, I look specifically for exactly what you guys are talking about to bring three to 400 people to come stay at that event, right At that location. Like we, we tried other hotels, we toured other ones and we were willing to pay a premium to go to this one, right? Or we could bring our negotiating power and like power and even level the playing field, but then the experience is so so much better that I think you guys are really moving in the right direction there, because if or when we ever decide to move out of Denver, that's literally what we start with. It's like where's the venue, what are the accommodations?

Speaker 1:

Well, I think you should think of Calgary as your next one, but I can add to that too.

Speaker 1:

It's interesting because we connected with a hospitality partner and they're actually out of Switzerland and this group came out of Marriott and they formulated their own company I don't know it's like 20 years ago Did a lot of luxury. They have a ton of luxury hotels, mostly in Europe. They were looking for a hospitality partner in North America. We connected with them because of the adapted reuse. So you go into sustainability. It's pretty sustainable if you can save an older building from being torn down. That's part of it.

Speaker 1:

They thought that was brilliant and then when they saw that we were going into mass timber as well, the writing was on the wall and so exactly what you're touching on right and we do think that there's a whole demographic out there that we'll call it a psychographic more than the demographic that are looking for, you know, does my, you know, you know where's my eco footprint here. I want to stay and we've actually, mitchell and the team have done a great design effort in terms of exactly what you're talking about. So how do we make sure that it's not just about, you know, sustainability and your footprint and all the rest of it? It's like walk the walk right, like you'll know if you're exactly, as you pointed out, you know it if you're in it, so that it experiences everything. And so, really, what we're doing, and go back to the movie business, we're setting the stage for the actors, which are the people that are coming right.

Speaker 1:

It's like what's the experience? Or the audience, right, what's your experience? So, anyway, that you know I don't want to kind of get off on that dovetail, but doing what we're doing, being a developer, especially if you're in hospitality or service, you have to view it as you know who's your audience and and exactly that how not only how are they being entertained, but how are they being served.

Speaker 2:

And you know, speaking to developers, I'm like we've done some small scale developments, nothing like what you guys are doing, right. But like when you're going, when you're talking about, like market differentiation, like how, like, why should people come to, like your building? I can't remember where I heard it, but a friend of mine told me he's like, look, there's, there's three stages of something coming to market. There's, there's one product who has it Right. So, like when hotels first became a thing, it was like it's a hotel, we're going to go there and then it's okay, there's a bunch of hotels who's got the best service right. Then everybody catches up. Now all the service is excellent.

Speaker 2:

The next fork of different differentiation is who's got the best or the unique experience that I want to be at right. So, product service experience. And when you get to experience, there's no level higher than that, because if you have a great product, you have great service. You can put your experience factor to whoever you're trying to reach right. Because, like, if I'm, if I'm building a hotel and I'm targeting the event organizers for this conference center, right, this conference is two blocks away. This conference center, this is, this is our primary audience, etc. Like you can tailor that experience to attract those kind of people and like that's that's something that's always stuck in my mind, specifically in mass timber Cause it's like everybody got some multifamily building, everybody's got the, the, the building managers they all do you know if they're good on the same level.

Speaker 2:

Well, what's unique about the experience of living in that building? Is it the biophilia? Is it the onsite amenities, right? Is it the structure? Is it the story? Like all of that is like where you get that experience from. I think you guys are onto something big and especially with you guys are doing mass timber on the new builds.

Speaker 1:

Well, and I'll just add to that it's you touched on it yourself it's the details, it is details, it's you know, it is everything, like every little thing is kind of critical to that and is kind of critical to that. And the other is that we very much, from day one, have said we're only going to build when it comes to hospitality, we're only going to build iconic buildings or develop iconic buildings. We want people to take a picture of the building. There's a really good example in Denver that everybody can see and it's that new apartment building that was done by Mad Architects, where they literally have cut in like- oh, the canyon Yep.

Speaker 1:

Yeah, so that is a type of building we aim to be building. Is that like? And obviously they're. You know that's not a mass timber building. Could be, though, um, but the point is that it didn't cost a whole lot extra to do that. But, what's interesting, not only did they get premium rents and I mean premium but it filled up before it was finished. Yeah, so there's your ROI again. It's like what's the cost of not being unique, what's the cost of not having a great place? Right, and everything's changed. Covid really changed everything. Your demographic people, when you know Mitchell's touched on it. When you travel, you want an experience. You've touched on it, and that's. You know Mitchell's touched on it. When you travel, you want an experience. You've touched on it, and that's. You know everything. All of it has to be baked in, and I think that's what's different about us. We're willing to say we'll take it on ourselves. The extra cost, the whole nine yards. We're going to take it on ourselves. We'll prove it ourselves. So you know, that's where we're at.

Speaker 2:

I love it, and so you know that's where we're at. Yeah, I love it. So what do you guys focus on next? Like what's on the immediate horizon for you guys Right now.

Speaker 1:

we just put an offering on a building in Calgary that we'd like to get and convert. We have several proposals out Nashville, memphis. We've been asked to come and work with a hotel group out of Memphis. They really like our approach. So co-development Seniors is really critical. We've got an eye there.

Speaker 1:

We did some proposals for the city of Edmonton. We're just going to even if we don't get that, we'll simply just keep playing off that. We wanted to use that as an example to what we could do quick build in places like everywhere, right, but obviously places where they really need it and just securing sites. That's. That's really where we're. We're at at this point and, like I said, we have four main focuses for adaptive reuse and then Calgary, and then new build, new construction. We're, we're kind of very focused on that hospitality end. So and, by the way, we're looking at almost every market uh, that we think is, you know, well served by that and that we think there's a real shortage of quality experiential places to stay. Just as an example, Calgary's short, I think they say they're short 5,500 rooms. We think it's probably closer to 10,000.

Speaker 2:

And that's just rooms. That's not. I want to stay somewhere cool.

Speaker 1:

There's even an approach to when you're doing hotels now, which is to build a residence tower and a hospitality tower and yeah, so that's where we're getting at. Seniors aren't seniors anymore. Seniors want to live in the hotel experience right, and have all those things. That's what they want. That's retirement for them. And you look at who's buying residence, like these luxury residence and even the ones that aren't so much right, but aren't residents served by a hotel?

Speaker 2:

it's 55 plus that makes a lot of sense. Well, if somebody wanted to learn more about what you guys are doing and connect with you, where can they find you online?

Speaker 1:

Arthurtocom. And by the way, arthurto is Greek for modular. Now we did Greek for prefabricated, but it was this long, so Arthrito was available, the com, so that's where the name of the company came from. So, yeah, Arthritocom.

Speaker 2:

Got it and are either of you guys on LinkedIn? Yeah, absolutely Okay, I'll link.

Speaker 1:

Please connect. Yeah, I love LinkedIn man, I just love it. That, okay, I'll link. He's connected.

Speaker 2:

Yeah, I love LinkedIn man, I just love it. That's where I found you. It just goes to show like that's that's where this industry kind of lives online. But I'll link the website, your guys' LinkedIn's down there. Last question, Like, if you guys I'll let, I'll let Mitchell go first this time.

Speaker 3:

Mitchell if you had somebody in an elevator for 30 seconds and you had to tell them about why prefab, why mass timber, why this different approach, what would you tell them? I would say like it's. It's the way going forward. It's the sustainable, socially responsible, durable, future-proof way to start building our spaces and our projects. That's the way that we're going.

Speaker 2:

Love it and for you, Doug.

Speaker 1:

I'll just put an exclamation mark.

Speaker 2:

That's the quickest 30 second pitch I've ever heard. No, but thanks for hopping on with you guys. I learned a ton and I'm excited to see you guys out in Denver this summer.

Speaker 1:

Yeah, same. I can't thank you and Nick, enough Thanks.

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Brady Potts

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Nic Wilson

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