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Foreign.
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I'm Kathryn Hamilton and welcome to Inside CRE conversations with the people developing the future of commercial real estate. On this podcast, we talk with developers, investors, owners and industry leaders about the ideas, strategies and trends shaping the built environment. The Commercial Real Estate Development association provides the education, advocacy and connections that help commercial real estate professionals succeed. Inside CRE is proudly sponsored by Majestic Realty. Today we're joined by a developer who has built a really interesting platform by combining deep industrial expertise with a broader development strategy across residential and mixed use. Our guest is Jordan Lott, President and CEO of Lake Washington Partners, a real estate development and investment firm active across multiple markets with projects spanning industrial, residential and mixed use communities. Jordan, it's great to have you on the show.
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Thank you so much for having me here today. You know, I'm a longtime NEOP member and really nice for you guys to feature us and excited to be here.
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Welcome. Let's start with the big picture. For listeners who may not know Lake Washington Partners, give us an overview. Tell us about the markets you're focused on today, what product types are core to the platform, and how you would describe your investment strategy.
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You know, first and foremost, Lake Washington Partners is a family owned real estate company. We are very much a family business and we're really long term owners of real estate kind of across the country. My brother and I founded the business 20 years ago. It was a vehicle to carry on our grandfather's legacy in real estate and at the same time it was intended to serve other family businesses that we were involved in. So our DNA goes back a very long way. Our investment focus is a little bit multifaceted. We work on a national platform, so we operate in 10 states across the country. We operate in four distinct product types. So we have a lot of diversification around what we do and we typically have an incredibly long hold expectation. We rarely sell properties. We make long term commitments to our buildings, our tenants, and the communities we work in.
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So good to hear that history and your longtime involvement with neop. And like many of our other NEOP members, you have strong industrial roots, but over time you've expanded into residential and mixed use development. Talk to us about how that evolution happened and what the strategic thinking was behind broadening your platform.
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Yes, absolutely. Our roots are in industrial real estate, but it's also worth mentioning that we're still very active in that market. Today we brought three speculative buildings to market in 2024 and we'll be breaking ground on a 500,000 square foot industrial project next month that the entire team is really excited about. So we're still very much a part of the industrial marketplace nationwide. But yes, to your point, we've certainly evolved over the years. However, it's also worth saying we don't view each building individually. We're trying to build one of the US's great real estate portfolios. That's our mission statement. And, and so we think each building needs to be a building block in a larger portfolio. So whether we're chasing diversification in geography, tenant type, product type, we're always looking at how the new opportunity affects the whole portfolio. It's not chasing one deal, it's building a better portfolio. In that vein, we had built a large industrial portfolio from the early 2000s up through about 2010 or 12, and wanted a different product type that was harmonious with what we were doing, but also diversified our product. I was born in the Seattle area. My family's lived here for quite some time. And we felt like suburban real estate really had a good opportunity. Right. Kind of at that time and place in the market. And so we spent a long time, about 10 years, building out a suburban office portfolio kind of of throughout the Northwest. And that was really meant to be a counterweight to industrial. Obviously Covid happens and our business has to pivot again. And so you see us getting into multifamily and other product types kind of as we're growing the business. But yeah, those industrial roots are still very much with us today. And yes, we've also expanded into a lot of other things.
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Fantastic. The development landscape is more and more competitive with capital being constrained more so than it was even just a few years ago. Talk to us about what you believe truly differentiates Lake Washington partners from those in your market and also nationwide.
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You know, being a family business really gives us a different ethos and that drives our tenure of ownership. And we think long term ownership of commercial real estate really changes the equation for development. I like to say we're long term thinkers and long term owners, but at the same time, we're not merchant builders. We're. We're not building something only to sell it. We want to own these buildings for the very long term. Often we trade short term wins for long term successes, and we think that's core to our business strategy. If you're building a building with the mindset that your kids are going to own it 30 years from day, or that your nieces and nephews are going to be part of a business, you make very different decisions. And that's how I come to Every deal that we work on is that we're going to own these things in the very long term. In line with that, we spend a tremendous amount of time and energy investing in our people. We empower them to be long term thinkers as well. We have an incredible leadership team and I think if you asked them, they would tell you they appreciate getting to do what is right as opposed to chasing quarterly returns. It's really part of our ethos and so I think that long term thinking is really what changes the landscape for
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us like that culture. And we're going to come back to that in a little bit. But let's zoom out just a bit and talk about the broader moment that we're in. The last few years have been pretty dramatic with shifts in real estate that have gone from extremely cheap capital and rapid growth to a much more disciplined and selective environment. If we fast forward 12 to 18 months from now, what do you think will separate developers who win in this environment from those who will be struggling?
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It's a great question and NAHOP has some fabulous members who are really run high functioning businesses and I would never be so arrogant is to tell them what to do and how their strategies are going to play out. But our strategy and speaking for Lake Washington Partners, we think is really compelling. We focus on the physical real estate. We're not trying to financially engineer an outcome and I believe that works for the next cycle. As the general real estate market evolves, we think fluctuation in interest rates are going to affect companies. And obviously companies with the most amount of debt are going to have the most amount of fluctuations. We've chosen to be ultra conservative. At this point in the cycle. We candidly see significant risks to the global economy. I believe inflation to be above target and going up, oil and energy costs being expensive in today's world and potentially either going up or staying expensive. We think the stock market is expensive with price to earning ratios that are incredibly high. And so we boil that down to some real macroeconomic risk points. So that leads Lake Washington Partners to be, you know, ultra conservative in the way that we manage our business. And so that's the approach that I take kind of every day.
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That approach is one that's probably shared by a lot of our listeners given the high interest rates and tight capital that we're experiencing right now. Where are you most confident in deploying capital at this point in time or are you strictly holding back?
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No, we're very active in the market. As I mentioned to you earlier, diversification really is important to Us, we're always looking at a multitude of deals in a multitude of geographies. And so trying to operate nationwide and in a diverse way is really important. We still like industrial. Again, it's our roots, we still like it. We think AI is absolutely going to change the way that people work. But at the same time we think physical boxes are probably stay about the same size as they are today, that it's going to be hard to make a physical product significantly smaller or that businesses will need to hold significantly fewer of them. So we're bullish on industrial real estate in the long run. Similarly, you know, we like multifamily people are always going to need a place to live in a world with increasing unaffordability. We think there's upward pressure on apartment rents. You know, I just read 65% of people in America cannot afford the median priced home. I think that's going to mean that a lot of people rent for a long time. I don't in fairness think that you're going to see rent growth in either of those categories in 2026, but I do think in the long term both are going to be successful for us.
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Another topic we're hearing developers bring up is entitlement risk. And in many markets the approval process feels much more complicated and more unpredictable than ever. How do you approach municipal relationships and community alignment so that projects make across the finish line?
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Yeah, it's a great question. And entitlements are challenging. They're challenging across the country. And something that people may not really appreciate, they ultimately add to the cost of a building which tends to affect the cost that consumers pay for the goods and services that come out of that. So there is a real effect between developers ability to build efficiently and the unaffordability that we have in America. When you look at things like zoning approvals, environmental reviews, community opposition, multi agency sign offs, redesign triggers. Development is hard, it takes a long time and it's certainly expensive. We think Lake Washington Partners works with a great set of consultants who help us navigate that in the different geographies we work in. But it's certainly a time consuming process. I will call out Hanover county, who's pretty close to where you are, where we've done several projects over the last few years as being, you know, incredible to work with and really forward thinking about wanting developers to come into their market and to get projects done. And so we've really enjoyed that experience. But we think navigating municipalities is part of what makes kind of a great real estate company. But it's certainly hard and time consuming. And think AddStar conservatism around development that you're not going to get those permits as quickly as you might think.
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Certainly. You said you were operating in 10 markets, I believe so. You've got 10 different sets of state guidelines or regulations that you're dealing with as a company, which must be an undertaking beyond comparison. Much to consider there. I want to shift gears a bit and talk about how you're running the business internally during a cycle like this. When markets tighten, strategy really matters, but leadership and culture matter just as much. Tell us how your investment decision making today is driven by data and technology versus experience and instinct.
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It's a great question. You know, data is very important and certainly AI over the last 12 to 18 months has changed that significantly. We have better access to information, it's easier to find, it's easier to work with. And yes, data is incredibly important at the same time. Right. I also like to use a good judgment standard. Right. I always ask myself, is this a great real estate or are we just trying to get a deal done? Sometimes I think you just need to check yourself and make sure you're building or buying for the right reasons and not because you want to get money out the door. And so yes, we absolutely use data. We buy all the commercially available data that we can get. We have an incredible team that is working internally here. But I think there's also a piece where you just have to ask yourself, is this the kind of real estate that tenants are going to want to be in for the long term?
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Great consideration as you're making your decisions. You said you've had your company around 20 years, I believe, and certainly have experiences beyond that. So you've been through multiple real estate cycles at this point. What has this one required from you as a leader that previous cycles didn't?
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You know, we really don't have a good economy strategy and a bad economy strategy. We think our thesis of being long term owners of well located commercial real estate that tenants want to be in works well over time, both good times and bad times. This is certainly a cyclical business and it always has been. I go into every deal knowing that we are going to own this building through some sort of a downturn. It's just the way it is. In fact, we always model a recession in every pro forma that we do. We think that if you're going to be successful over the generations, you really have to plan for recessions.
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Certainly do. Looking ahead three to five years, what structural shifts in commercial real estate. Do you think developers and investors should be preparing for now?
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I would tell you from a Lake Washington partners perspective, I think interest rates are at or near current levels for the long time. I am planning for them to stay where they are for years and that certainly changes the game. Returns, capital, deal structure, a lot of other things all are going to have to be really different over the next five years if you think that interest rates stay where they are today. And frankly, I think with what's going on in the world, they might go up. But in my opinion that might be best for our industry. I think having a high level of conservatism, projects that have a lot of equity in them really brings stability to the commercial real estate sector. And that's just kind of the way we think about the world. We're looking for people to have well capitalized projects that they own in the long term. We think that's what's best.
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Jordan, as we start to wrap up, we're going to do a quick lightning round. So I am going to pose a question and I want you just to share the first thing that comes to mind. Are you ready?
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Ready.
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All right. One market you're watching closely right now, Austin multifamily.
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They're working through their oversupply of product. We think they're going to do well in the long run.
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All right, one development trend you might think is getting a little overhyped.
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Small data centers, anything in the 2 to 5 megawatt category. I think you're going to have a really tough fight on your hands when the boom cycle ends and big data centers are picking up a lot of the business.
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Okay. A book, habit or resource that has sharpened your thinking. Thinking recently.
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I just read Leadership in Self Deception. It's a must read. I recommend it to everybody.
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Last one. If you weren't in real estate, what would you be doing?
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If I wasn't in real estate, I'm not sure I'd be all that successful. Probably something in philanthropy. I'd love to work in land conservation. I think that'd be really interesting.
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Ties in closely with what you're doing. Somewhat, I'd say. So you're following your passions. We'll close with this. If you could give one piece of advice to developers who are positioning themselves for the next upcycle, what would it be?
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You know, I think it's really simple. Take the long term approach to everything you do. Make sure you operate with integrity always and be patient. We're building the infrastructure where other businesses do their business. That's an incredible honor.
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Take it seriously, Jordan. This has been a really great conversation. I really appreciate you sharing your perspective on development, strategy and leadership, especially those related to your business, and giving us a little insight to where the market may be heading.
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Thank you so much for having me.
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Thanks for listening to inside Conversations with the people developing the future of commercial real estate, and thanks to our podcast sponsor, Majestic Realty, for supporting the show. If you enjoyed today's conversation, please share it with a colleague and subscribe so you never miss an episode. To learn more about NAOP and connect with more than 22,000 commercial real estate professionals, visit NAOP.org.