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Join Wealthion host Eric Chemi and Christine Mastandrea, COO of Whitestone Real Estate Investment Trust, as they discuss the rapidly evolving world of real estate. Discover the future of retail spaces, the importance of local communities, and the power of data analytics in shaping real estate trends. Christine shares her invaluable insights on starting small in real estate, the shift towards more personalized and localized retail experiences, and how technology is transforming the industry. Don’t miss her expert advice on investment strategies, the impact of demographic changes, and much more in this must-watch episode for anyone interested in the future of real estate and investment.


Eric Chemi 0:05
Welcome to Wealthion. I’m your host, Eric Chemi. So much going on right now with stock market at all time highs, uncertainty about the direction of the economy, are we in a recession or not? Will the Fed be cutting rates? How much will they be cutting geopolitical concerns, and of course, this drive for hard assets, right real estate, things like that, that you can sink your teeth into, and it’s priced to help you with inflation. There’s so many factors to figure out right now. So I’m pleased to be joined by Christie Mastandrea. She’s the CEO of the Whitestone REITs, publicly traded on the New York Stock Exchange, a lot of macro discussions to get into right now. So Christine, thank you for coming on the show with me. And I got to ask you, what’s keeping you up at night right now, with all of these nervous factors happening in the marketplace right now.

Christine Mastandrea 0:50
I think it’s always the economy, maybe retail, which we focus on the retail sector, as the economy has everything for us. So as people spend, that has a great impact on our centers. And then of course, the opportunity for growth that keeps me up at night,

Eric Chemi 1:03
keeps you up in a good way or in a bad way. Because you see opportunities for growth. That sounds like a positive thing.

Christine Mastandrea 1:10
True. So the challenge at this point time is in our sector, in particular, retail has been under built. And so at this point, the challenge to grow, especially in this type of environment where interest rates are high, it becomes a little bit challenging. So on the other side, because the economy is growing, and because there’s a new demographic spin that’s coming up with presents opportunities to get ahead with unique ways to merchandise for those markets. You lie to you as soon as you started mentioning, right interest rates, like the first question I wanted to ask you when we started to is,

Eric Chemi 1:45
is the Fed going to kill the economy, right with rates where they are right now, in these fives? We haven’t really seen them in a generation. Is this an economy killer? Well, we get that

Christine Mastandrea 1:55
question a lot. In particular, the analyst asked what our point of view is, and if you really consider what’s happened over the number of years, I, personally, is squeezing out the excess. And there’s been a lot of excess in our business. It’s just too too much product and the wrong kind of product has been built over the years. And so I don’t see this as bad as it could be in the sense of what’s happening because the consumer is still strong, I see it more as just the right sizing in the economic environment. It’s some point in time, it’ll we’d like to see obviously, some drift down in rates because it does improve the profitability of our business.

Eric Chemi 2:34
That’s the thing, right? When you think about real estate in general REITs in particular, obviously the storyline whether it’s myth or fact, but it’s just their rate sensitive, right? When when rates go up, now you’ve got competition, frightened, get yield and other places, and your borrowing costs go up, leverage is harder when rates go down. That’s a real, you know, that’s real fuel for your business. How true is that? And how impacted Are you in terms of rate sensitivity?

Christine Mastandrea 2:59
Well, we’re an asset heavy business. So it has a huge impact. I mean, the tendency towards real estate is when there’s a lot of liquidity in the markets, there’s a lot of capital available, there’s always Anatolian cycle product. So there’s always an overbuilding of the product. And we’ve certainly seen that in the last 20 years in certain types of asset classes. So, you know, at some point that eventually that overbuilding stops everything, you have a little bit of a collapse in pricing. And for us as we look to move forward, there hasn’t been a lot of building and retail. So for us, this provides a really great opportunity for, you know, the potential assets that we have can’t buy a whole lot more. So that’s the challenge on the other side for growth. But for us, it’s our, our assets have actually become more valuable because there’s, there’s just not a lot of occupancy right now. So excuse me a lot of vacancy. So we have a fully occupied market as far as space, but not a lot of vacancy. So again, that’s the upside of the opportunity, but difficulty is to be able to build and grow.

Eric Chemi 4:05
How is that possible? How can you have not a lot of vacancy, because every every newspaper headline I read is everything’s empty, right? Whether it’s office, whether it’s retail, it’s either no one’s going to work, or No one’s buying in person and malls have to be, oh, gonna turn balls into some kind of experience, because no one’s coming here to shop. So I’m curious when you say we don’t have a lot of vacancy. All I see about here about is vacancy. So

Christine Mastandrea 4:27
I think this is where a little bit of the challenge in the business. So it can it’s a long cycle business. So it takes up mostly it’s to get the approvals. When you see a building built, that’s the easy part. Most of the work is getting sourcing the property itself, getting the approval rights, the pre leasing activity, all that takes a long period of time, and particularly if there’s a restricted and very restrictive environment. So if it’s a NIMBY, not in my backyard, it’s even more difficult. So fortunately, we’re in Texas, there’s the zoning laws are a lot looser here in the market. swearin. But that being said, a long cycle product by the time you have the match and supply and demand, it can sometimes take upwards for 10 years for that to meet. And we’ve certainly seen that in retail. So now it becomes about the right size retail. So we’ve had the collapse in the shift and the change of what used to be large format, retail, whether it’s malls and power centers. At this point in time, it’s all about convenience and being closer to home. And that type of retail right now is in high demand. Interesting.

Eric Chemi 5:31
So how does somebody who has a lot of viewers are thinking I need to make money and I’m only going to make money in real estate, I’m not going to make money in stocks because I don’t want to buy at the all time highs here if I think the Feds going to cut real estate is going to get supercharged I want to be involved in that. But we know a lot of people lose their shirt in real estate. Right? So So what do you tell people who maybe they don’t have the the massive billions of dollars are they I’m going to I’m going to do a big massive portfolio, but I’m going to start small. And I think a lot of real estate moguls, they started small, right? They started with one shopping center, one apartment in the next you know they’ve got 1000. So what do you tell somebody who wants to go down that path? Where do they begin?

Christine Mastandrea 6:07
I think the best part about is always starting small, there is a lot of product that small that you can start with. So I remember for me, my first experience in real estate is my dad bought duplexes. So I got to experience he would take me around, we collect rents together, and you know, start there and you start building upon that, that asset base. And from there you can continue to grow. We see that a lot with people that do house flipping, I mean, they start small and they they start getting into because the ability to take you take that asset, and then redeploy that capital without him to pay a capital gain, you can redeploy and you can get bigger as you continue to grow. So, you

Eric Chemi 6:47
know, one of the things that Whitestone is known for, at least according to my research, you’ll know better than I have is obviously the you know folks service retail, in particular food and grocery restaurant things that you got to do in person, right, or it’s been less disrupted. It’s not just you’re buying things normal typical store retail, what differences in trends are you seeing there in terms of people who want to still get together, they want to be in person, they want to do something that requires them putting on real pants, you know, doing their hair and get into a car? Yeah,

Christine Mastandrea 7:18
this is, especially with work from home, our centers have done very, very well, we have a tendency to be more in the suburbs, and more anchored to communities living versus being in urban centers. I think that we’re seeing what’s really important, I think this is becoming more and more important, just having to do with the age of just the cell phones, people are actually becoming more disconnected. And the need to be connected is more important than ever. So especially in restaurants, we are heavily focused on restaurants as far as restaurants that are we consider your local watering holes, or where do you go to visit to see your neighbors? Where do you spend time with others? Where do you connect with others were their places of collision. And that’s the most important thing is how you bring people together. Sometimes we think about in the sense of accidentally, right? So walking paths are very, very important to us not just focusing on the automobile and parking, but how can we bring people together and outdoor space, patio space, how that interacts with the community, all those things, we focus very, very, very much in a detailed type of fashion with who, who we bring into our centers, and then how we design our centers?

Eric Chemi 8:31
How does it typically work? Do you find you’re reaching out to companies and businesses and say, Hey, we’ve got vacancy waiting to come in? Or is it the opposite where a business says, Hey, we’re looking for space? Would you please let us in? What’s the typical who’s calling who first?

Christine Mastandrea 8:44
It’s a little bit of both. I like to say that, I think for us, the most important thing is we focus on local. So we do we’re a little bit different than most REITs, where we are about 70% local and regional businesses versus your typical large anchor tenants. And the larger companies are the reverse. They’re about 70% of the larger anchors. So usually, in our space, we’re trying to find the best operators in our neighborhoods, our people are direct boots on the ground, you know, researching, and by the way, we use data analytics to help us with this as well. We’re reaching directly to business owners to come into our spaces, and then at times as well, because we’re very well located we have you know, it’s we have, I would consider some of the larger operators seek us out. And we also work with the brokerage community as well.

Eric Chemi 9:40
What is your data analytics saying about? Oh, stay away from these areas, either either of these sectors or these geographies? What’s sort of a red flag right now that your data is telling you?

Christine Mastandrea 9:51
So I think it’s most important is to understand the traffic drivers of your center yawns, especially with the data analytics if you have an O been, you know, your fonts are open source of how you where you go, how much time you spend there, all the way we

Eric Chemi 10:07
mean my phone is like giving away too much information, information.

Christine Mastandrea 10:12
It’s a little scary, right? Because now you take you actually, companies like as we take the social media scrapes. So it’s not just what you give away from your phone in which you open the world to, it’s what you do with your phone, how you use it, how you communicate. And that all comes into a use of psychographics, which we, you know, we do employ that use to understand more about you wish he liked you who you’d like to be with, would you like to do with your off time where you’d like to spend your money, how you’d like to spend time with your family. So that’s, that’s been a very, very important indicator for us as to new tenants that we bring in and also, you know, areas that we may want to avoid. So we stay towards growing markets. And if we look for places that that growth is actually starting to constrict, or it’s difficult to grow in those markets, and and you’re finding that the skilled labor force is moving away, those are the places that we avoid.

Eric Chemi 11:12
So say that again, to the skilled labor force is moving away. And then what was the other factor you just said,

Christine Mastandrea 11:16
skilled labor force is moving away. So again, real estate’s all about location, right. So if you have a shift and a skilled labor force moving away, that’s, that’s always a concern. But also, sometimes you can see that. So again, this is a little bit of data analytics, but it’s also boots on the ground when you can see a neighborhood transitioning, and you start losing population. Because

Eric Chemi 11:39
I, you know, I live in New Jersey, right? So I see a lot of stories about oh, New Jersey, keep losing people because they all go to the Carolinas and Florida and Texas and they they keep going south, is that the kind of trend that you’re looking for to make sure that you stay away from places like that?

Christine Mastandrea 11:53
Yes. So actually, we built the company on the trend of what was happening in business friendly markets. So in 2006, we started looking and seeing that there was a very big shift in the demography of the United States. And Texas was the first market that we looked at. And then we also looked at Arizona as well. And you know, part of the move part of the move is just a more desirable place to live as far as the climate. But the second thing that we saw that was very important is where we saw the growth of Secondary Education and also the workforce. So in particular, Texas has a very broad and skilled workforce. And in addition to that, it’s a very economically desirable place to live. It’s a low cost of living. So we sought out the largest, fastest growing markets in the country at that point in time, and it was clearly Dallas, Houston, even San Antonio, which was in the top 10. Austin was growing very quickly. And then we started looking as well at Phoenix, which was actually, if you looked at Scottsdale in some of the East Valley was growing younger. So that’s where we actively sought out this market. So we looked, as well for the type of labor force that was supporting it.

Eric Chemi 13:03
Yeah. So you’re staying as far away as possible from from my area.

Christine Mastandrea 13:06
You know, I grew up in Michigan, it was really hard to see what was happening in Michigan, in particular, in some of the Midwest states, because I’m a Midwest girl I’ve heard and my family I come from a family of entrepreneurs, and it just got more and more difficult to conduct business.

Eric Chemi 13:24
And do you see that? Really having that the following. If I like, for example, a company like yours, Hey, you are in Michigan, now you’re in Texas, because you’re following, you’re following the money, but you’re following good business practices, good regulatory environments that people will come. But it sort of feels like it’s creating the spiral, right? You came after you saw the growth, but your presence will help encourage more growth. It’s like it’s an avalanche that builds on top of itself.

Christine Mastandrea 13:50
It does. And because, again, our focus is so much of having grown up in an entrepreneurial family saw an opportunity there to serve entrepreneurs, and growing businesses. So at that point time, we moved the company, it was around 22 people, move them down to Texas, started supporting that group and start seeing that this is this is not just a Texas thing. But you know, it was the growth in immigration into the community. It was younger people starting businesses, we just saw that there was a real differing change in how people approach risk, and it’s just a much more entrepreneurial economy.

Eric Chemi 14:30
What do you mean by like, how we approach risk in terms of like, there’s more of a risk taking culture is like,

Christine Mastandrea 14:36
I think it most definitely, I think you have to not just the culture, but people appreciate it. People appreciate the difficulty and taking on the risk. And if you’re

Eric Chemi 14:46
punishing the risk, or not realizing how difficult the list gets. Yeah, and

Christine Mastandrea 14:50
unfortunately, I saw quite a bit of that coming, you know, from certain environments that people didn’t didn’t really understand how important it is to support the entrepreneur. Rule environment, the more you punish it, the more regulation the most of the more restriction, restrictive nature that you place on businesses just all of harder to start up. And it’s not for the faint of heart to begin with. So watching just the mindset around risk taking the support for those type of businesses are there and much greater in the locations that we’re in?

Eric Chemi 15:21
Do you do you concern yourself with a general national level risk taking that when when you can find better states, right, you can go down south, you can find these better environments, but at some point, federal rules tend to overwhelm all of it right? It’s okay. Well, these are federal income tax rules or capital gains tax rules or real estate tax rules or regulatory rules. Are you going to hit this, you know, climate emissions thing or this health? Like? Is there a concern for you that at some point, the US is going to dry up in terms of opportunities relative to other countries?

Christine Mastandrea 15:51
Well, you know, that is always a challenge. But I, I’m just a big believer in the American dream. I, you know, just look at the growth that we’ve had in the last 1020 years. And I still see it again, we’re in we’re in economies where we are, there are large people just keep coming here for opportunity. And they come with ideas, and I just don’t see it stopping at this point. I keep thinking that something will interrupted and it hasn’t. It’s quite the engine. What

Eric Chemi 16:22
have you What have you thought and obviously, you guys aren’t stock pickers, right. You have the stock, but you’re focused on real estate. But when you see the stock market at all time highs, obviously that all relates, right. There’s money being put into the markets, in all places, right? People want to invest, they want to take risk. And there’s been a lot of that the headwinds in terms of media headwinds, right, like, is there a soft landing? Is there this pullback economically? How strong is the labor force? What’s your perspective on it? Because you’re seeing a lot of growth, with boots on the ground, you’re seeing a lot of growth in your data, you’re seeing the growth in the markets, you’re you’re saying you don’t have any vacancies? Right. So you’re seeing a pretty bullish environment? What do you say to the bears out there who say, Hey, I think this economy is due for a massive collapse here this year.

Christine Mastandrea 17:05
The difficulty is I just, I think, if you pay attention to the news, you’re always going to have fear. And you’re just not going to get out there and do it in, you know, I just him being around entrepreneurs working with entrepreneurs, they just don’t effectively have time to pay attention to it.

Eric Chemi 17:21
They’re busy, they don’t have time to read the news. The time

Christine Mastandrea 17:24
to focus on that, if they do they’re, you know, why would you want to take the risk if you believed in any of that? Yeah. And again, this is where you say that you’re the people that we see forming businesses and starting businesses and expanding their businesses. They’re just rolling. And I thought that there might be a little bit of a slowdown in leasing activity, because in particular, the cost of capital being higher. But here’s the thing that I think that’s happened with the entrepreneur over the last and again, since the crisis in 2008, is that they’ve worked in capital constrained markets for a long time. Ever since what happened in 2008, it hasn’t been very easy for them to get banked. And so many of them grow organically, they grow out of their own cash flow. And at the same time in the service economy, you’re not platforming inventory cost into your business.

Eric Chemi 18:15
So what does it mean in a platforming inventory cost of your business? What do you mean by that?

Christine Mastandrea 18:20
Because they’re mostly asset like businesses. So it’s, it has more to do with the cost of labor than it does with building an inventory?

Eric Chemi 18:29
Rather than a factory? That’s correct. Right? It’s

Christine Mastandrea 18:32
It’s the difference between picking up what I would consider, you know, clothing, soft goods, hard goods, all of that that’s an inventory that you have to move quickly into the market. service based businesses are more about people. It’s so that’s where labor costs do impact service based businesses much at a much greater degree. Oh,

Eric Chemi 18:53
I see. So the service based business, you care more about the labor cost, then maybe you care about interest rates, like you care more what what the wage level is than what you’re borrowing level is? Because maybe you’re not borrowing that much. That’s correct. Okay, so do you see that a lot of what either tailwinds, right, the positive or do you see a lot of positive wins? If that is going to be cutting, you know, multiple times this year? Do you think that’s going to matter a lot, or maybe not as big as people are hoping I

Christine Mastandrea 19:19
think will matter a lot in our industry, in particular, so what we are seeing is that the shift in this new demographic span that’s coming on, so millennials, which have had a very consider a much longer delay in their spend in the market, compared to their, you know, their previous cohorts, and a lot of that has to do with just the cost of their education. You know, the cost of buying a home any of them still haven’t really had an opportunity to buy homes, like, you know, I am Gen X and I was able to buy a home much earlier in my life. They’re waiting with, you know, household formation, so on and so forth. Showing up more around age 30 You did, the first group is just earned by the Congress. So this is there’s a lot of money coming into this group. And part of it, part of it has to do just with the wage growth that they had. And the other also has to do with some of the wealth transfer that’s happening at their age too. So that’s all starting to come. I think there’s big tailwinds that are coming from this group and the group behind them. It’s

Eric Chemi 20:18
funny because I do wonder nowadays, I look at how expensive a home is relative to how much money people make. And we know right, the home price has gone way up, and the incomes gone up, but not as much, right. So the the number of years I think of it, like how many years of income does it cost you in terms of the home price, and that ratio has gone way up. And I fear that maybe I’m reading the news too much, that no one’s gonna be able to buy a home anymore, you’ll have to make, you know, so much money to be able to buy a home that I live in a normal suburb, a typical home sounds like a million dollars, that was unfathomable. Back in the days, like how many hundreds of 1000s of dollars do you have to make to buy a regular home? Right? And so that’s why I feel like, are we getting to this point, if we’re being stuck, right, and there’s not enough new supply in places that people want to live? Unless you keep moving out? miles and miles away? How do you? How do you see that all solving itself?

Christine Mastandrea 21:12
So I think that is one of the most troubling things about the opportunity, again, for younger people, beyond especially if you think about, well, the millennials are just starting to hit 40. So they’re really not young anymore. They’re not they’re still viewed as kids. Sometimes I think that’s really unfortunate. And maybe that’s because not many of them have kids. So that’s it. This is something that’s probably troubles me quite a bit for that generation is the lack of opportunity for homeownership. And what we are starting to see is that local that we consider local municipalities are starting to recognize this and that they’re going to have to shift and change their point of view on density on density as to, you know, where they’re going to provide better, a better opportunity for living and a financially feasible living environment. Because that’s again, that’s your That’s your new workforce. Right. So if you don’t provide that opportunity, you’re not going to get that talent.

Eric Chemi 22:09
Yeah, I think it’s something you said earlier around the data. And every company, every industry keeps saying, Oh, we’re going to be disrupted by AI. And whenever you say data, and you talk about the phone spying on you and say, I just think there’s a big AI play there, right, there’s okay, what can we figure out based on all these patterns? Have you, your company? Have you made different investments all of a sudden, in the last couple of years? Because the AI is better? The data analytics are better all of a sudden, you think, oh, you know, I didn’t know that we never would have been able to figure that out with just spreadsheets or just boots on the ground? Is there an actual investment change that’s happening now?

Christine Mastandrea 22:44
Yes. So during COVID, a group came out with pacer AI, and there are other data analytics or location software type of products that are coming out to better understand traffic patterns and what drives traffic. So in the past, you’d always have to rely on sales reporting. Now you can see directly the traffic patterns that are coming into your centers, where they’re going to. And I think that so an example of this that I can provide that I’ve used a lot is, you know, who’s actually providing the repeat traffic. So we look for centers where we give a certain amount of customer stickiness, we want to see you coming back, not just once or twice a week, but several times a week, and going to different stores. So what does that mean? Who drives that traffic? Well, one of my favorite traffic drivers are schools, we love having our Centers near schools, because it’s the most convenient, then where the most convenient location, what I was gonna say,

Eric Chemi 23:38
when you said multiple times a week, and then where do I go multiple times a week. And then as soon as you say school, that’s five days a week right there.

Christine Mastandrea 23:46
I don’t think anybody takes the bus anymore to school, they’re usually dropped off by the parent. And then there’s always activities after school. So we that’s one of our one I’ve always seen as a is a very impactful traffic driver. And we’ve seen that that’s clearly the case. And in particular, we also look at our centers and say, We’re, where are we seeing a dynamic and traffic that it’ll we have to maybe match according to the business hours of the use for that center, because you don’t want everybody coming in at the same time, then there, there’s a lack of convenience, and there’s a parking issue. So we’ve carefully matched up or users by place or analytics, and in using that information also to seek out growing tenants and other places that we can bring in as well. So that’s been very helpful for the last couple of years. You

Eric Chemi 24:33
and I think about this a lot when you when you see a restaurant or you see a place you think, Oh, the peak optimization isn’t there and everyone tries to come at once. And then it’s not good service or not enough parking, and then it’s empty the rest of the day, whether it’s a restaurant or store, a barber shop, whatever it is, it’s like if they could have smoothed it out, they’d have a lot more money and it’s interesting that your that your AI your data analytics is is really actually starting to fine tune that kind of perspective to help you make a better investment. visually,

Christine Mastandrea 25:00
it’s very, very helpful for us to mix centers and what we look for as we look at peak optimization about 18 hours. So utilizing the entire timeframe.

Eric Chemi 25:10
Now, how do I, how do I tell my phone to stop spying on me? So you don’t get this information?

Christine Mastandrea 25:17
I wish I had an answer to Fortunately, I’m in real estate. So our industry is a little bit behind the times a lot of times approaching tech. But the difficulty I think, and again, you know, how the right to privacy has always been an issue and that that’s a whole nother, that’s a whole nother animal to talk about, right? It’s, but people seem to be more open to sharing information, just sort of accept that that’s part of life now. Yeah. And whether that’s good or bad, it remains to be seen.

Eric Chemi 25:47
Does it spook you a little bit like when you go through all the reports that you get on an aggregated level? Are you like, how did they figure all this out?

Christine Mastandrea 25:54
It does, and it spooks me a little bit when we use it, because it is a little bit evasive. And there is one of the centers that we have, that I don’t live that far from and go, Well, I can kind of tell it’s me. Comfortable. It’s so and you know, going forward into the future, it’s very valuable information, because I do want to make sure that we successfully serve the neighborhoods. And so that means making sure that making the right decision about what, you know who, you know, who would businesses serve those communities. So it helps to match that up appropriately. It’s

Eric Chemi 26:31
a reminder, though, that the companies behind the scenes are a lot smarter than we may realize, right? Like, you may not even realize how much data this thing is giving off. Because you gave some examples, I, I think, Oh, I didn’t even realize it was sharing that kind of data. So it’s not even so much what our privacy choices are, but not even being aware of what the phone is giving back to company. So I think even more from a bullish investor point of view, we may think companies have these headwinds added up. But they have a lot more data than we realize. And they’re making decisions based on that very accurate data. And

Christine Mastandrea 27:01
I think that’s always the challenging part of really, how do you use that data effectively to understand all right, how do you how do you slice it? How do you work? So the company I’m most impressed with? And it’s actually it’s a company that’s been around since the 60s is EZRI. So it’s environmental? Yeah. EZRI. Environmental software and Research Institute. Yes.

Eric Chemi 27:24
Ri. Right. I thought they were called ESRI, but maybe we just call it. We

Christine Mastandrea 27:28
call it ESRI. And it’s something we’ve used for 20 years. And it’s been it’s, it’s been a huge impact for us to understand our communities. And I think I think they handle it in a more sensitive way. But I you know, it’s again, it’s these are black boxes that are interesting to see how the information comes out. And then how do we use it as an end user?

Eric Chemi 27:49
When you talk about millennials, you talked about phones, I think about a couple of things as it relates to real estate is all the social media, the tiktoks, the YouTube channels about, oh, here’s how you can flip here’s how you can make money in real estate, right? There’s all this media about this kind of stuff that people think they can be you right? People think they can be you because they started on a YouTube channel, or a 62nd tip today. I know I know. You’ve got decades of experience but I saw one minute tick tock so I’m going to compete against you or, or the way people are presenting their image, right their social media image and, and how they how they live in what’s called the real world but it’s it’s this digital world. Are you seeing this this weird impact on both of those things? Just how they spend money, and how they think they’re going to try to compete in real estate. Yes,

Christine Mastandrea 28:35
so I’ll separate those two. So one of the the most engaged areas that we’re finding in our communities now are all about health, wellness beauty, is that’s a growing that has been growing, probably doubling in size in our centers over the last 10 years. And much of that has to focus that’s all about being on Instagram Tik Tok. Yet, in fact, one of the interesting areas that we’ve seen a huge amount of Spam is actually men in beauty. It’s almost as much as women then

Eric Chemi 29:06
what do they buy?

Christine Mastandrea 29:07
Yeah. I should ask you that question. A lot of it is about what I would consider you know, looking like well manicured ma’am. And promoting themselves and looking well, it’s so that’s been a very, very active active space for us that we’ve seen that has not shown up before. I always remember my dad, he would just you know, buy toothpaste and aftershave that’s about

Eric Chemi 29:32
Yeah, brush your hair with your hands and you’re done. That’s what we mean by active space in terms of you have locations like like you mean salons, barber shops, flakes, places selling them and what do you mean by your active that even physical?

Christine Mastandrea 29:46
Barber shops have been at that’s been a fun one to watch and girls specifically tailored towards men in the med space, so Med Spa space therapy, that kind of stuff about private therapy has been big and we’re starting to see also I wouldn’t you know, we call sweat and sauna is becoming really big right now. So that’s your perspire, we’re fitness across the board has been a huge get very, very large growing population for us and something that we’ve really leaned into over the years. Boy, I just I think that the more I’ve always learned, and this is a great part about our business is that we get to see new businesses and the beginning stages and growing. And so but yeah, it’s been a big scandal. And

Eric Chemi 30:30
how does a typical lease agreement work? So let’s say I’m a business owner, and I’m going to do my Men’s spa, right? And I’m now you’re my landlord and the tenant, is it percentage based of income? Or is it typically flat rate, like, Hey, you get 5000 a month, and then wherever I can make I can make or you get 10% of what I sell? Because you check the credit cards? How does that typically work?

Christine Mastandrea 30:54
So retails a little bit different than most products. So most people are experienced from paying their mortgage, or having spent time in a multifamily residential community? A fixed rent, yes, a fixed rent, and the value of the real estate that you own is based on the contracts, right? So it’s not just so I’m gonna break this down. So first, the values in the land first, and then the restrictions that you have around that land as to what you can build up, right? So do you have the best would you have the best use for that location. So you start there, start with the land, the value of the land, the restrictions, and now the building that’s on the land is that the best use for that location, then you move to the next step is that is who who’s leasing from you for that. So that’s the value of the contract. In that battle, that comes into the value of the overall property. So we start there, a lease, typically in retail has what’s called pastures, so you’re paying, you’re paying a base rent, in addition to that, you most likely do have annual increases. And then in addition to that, you actually pay the pastures. So it’s common area, maintenance, taxes, and insurance. So those those get passed through. And then you may have anywhere from a three to five to a 10 year, and then there’s some 20 year leases. But most leases now really go out to about 10 years, and you have the right to that space, but you have certain restrictions as to what you’re able to do in that space, or the uses for that space. And then complicated or retail is actually the most complicated product out there. And

Eric Chemi 32:39
then I guess maybe you said maybe I missed it. But then when they do their their sales, let’s say I’m selling shoes, or I’m selling razor blades, whatever, do you get a percentage on that? Because of the cash registers that you sync up? Or is it just No, like, if they sell nothing, or they sell a million dollars a month? They’re paying based on those other factors that you already said, cuz I don’t think you had a sales percentage factor.

Christine Mastandrea 33:01
So you’re right on this. So at the same time, you’ll have a percentage rent clause. So after a certain break point, then there’s a percent percentage rent that’s based on the revenue for that space. Okay, so

Eric Chemi 33:12
it needs in there. Yep.

Christine Mastandrea 33:13
So there’s an upside to that as well. And we consider that it’s almost like an equity kicker

Eric Chemi 33:18
for you, right? Like, that’s your upside in all of these businesses? Yeah, you’re almost, you’re kind of like, half bond, half equity investors, and all of these businesses, you want all of them to sell as much as possible.

Christine Mastandrea 33:29
We do. And I think that’s, that’s, again, we talked about successfully serving the neighborhood, it doesn’t do us a good service to the neighborhood, if you have a business that’s existing in the space, but not really maximizing their sales are not serving the neighborhood well, and just existing. It doesn’t drive traffic for the other tenants, it creates, sometimes a disincentive, I think, to even keep a business like that in there for us and for them as well. So business, you know, businesses do have a lifecycle and an age to them. Typically, you wouldn’t invest in being an entrepreneur, if you didn’t have 10 to 20 years of life, right towards, you know, a business. And, you know, we always look and we make sure that we’re cultivating the right businesses in our centers. What’s

Eric Chemi 34:15
a type of business that you all have bailed on in the last, let’s say, postcode, what’s the major just like, we’re done? We’re not doing this again.

Christine Mastandrea 34:23
Think that so it’s always hard again, I’m an entrepreneur, so I don’t like to think about the death of a business that’s always worth

Eric Chemi 34:31
it, I’ll rephrase it. So it’s not as it’s not as deadly but but what’s, what’s a type of business that you’re that you’re transitioning away from that feels like maybe it’s, it’s kind of past its its peak in terms of serving the community. So

Christine Mastandrea 34:45
I can start with COVID. So when COVID happened, that was a true time and especially for us. I think, one of the things that I really liked about our portfolio is that it performed very, very well during COVID We had the the art In our collections were the top in the industry, people were paying their rents. And part of the reason why is that we had local and regional tenants and they were able to flex very, very quickly to meet the market needs, they got open right away, or the National tenants didn’t matter where you were you closed. So you had a lot of customers switching. And that was really interesting. If you were a local coffee shop and Starbucks was close, you were able, that was the first time you could get a foot in the door with a customer that had a stickiness towards Starbucks. And so we saw a lot of the local and regional businesses growing during that point. And so we decided to take that opportunity and see who is performing and who is struggling. And we found that there were a number of restaurants at that point that just weren’t performing as well. So we took that moment to rework those leases. And at that point, I would say in 2021, the first quarter, our restaurants all or second generation, restaurant space, was almost completely leased up. It was that fast, people wanted to get back into the market, seeing people being with people again. So that happened very, very quickly. I’d say then what we’ve seen over the last two years is a transition away from the financial institutions. They aren’t traffic drivers, like they used to be the bank branches or

Eric Chemi 36:18
credit union branches, branch branches,

Christine Mastandrea 36:21
you know, your your typical local, State Farm Farmers Insurance, so forth, really go into those.

Eric Chemi 36:27
It’s all remote all online. Yeah,

Christine Mastandrea 36:29
it’s remote online, there’s consolidation, those interested industries, the cost of a bank branch doesn’t make sense anymore. That and quite frankly, I mean, those are your best corners. So I love getting those spaces back. They’re great buildings, you know, they’re easy to reposition. The only thing that gets costly is if they have a bank vault. But by and large, they’ve been my favorites.

Eric Chemi 36:51
The Bank Vault is really that big of an expense to deal with.

Christine Mastandrea 36:54
It is because you think about it’s, it’s all reinforced that this big, heavy door, it’s always like, does it that’s the first question I ask is does it have a bank vault. But in most cases that went out of style, even in the 80s. So not that many banks have them anymore. There’s not a bank vault,

Eric Chemi 37:13
it’s pretty good to have some, you know, oh, this is an old town that I’m in. And then there are some bank vaults. And some of them are like, the bank is still there. But it’s a modern bank. And the vault is just like, I don’t know, the closet or something. And then there’s others were Oh, now it’s a restaurant in the bank vault is some kind of cool thing that people can do with it, or a wine cellar, but there’s stuff

Christine Mastandrea 37:34
that’s about the only thing you can transition them over for is like a wine cellar, or even a cooler, but still, you got to remove the door. It’s very difficult to manage.

Eric Chemi 37:42
But that’s a good point. That’s a good example of the banks, let’s say or, you know, an insurance office, will you go to them and knock knock and say, Hey, if you guys want to get out of your lease, I’ve got somebody else that wants to take it for a higher rate? Or will you wait for them to either finish their contract, or come to you and say, Hey, we want to get out of here.

Christine Mastandrea 37:58
And generally we do wait for them, you know, because it’s it, that’s, that’s now more corporate in nature. And you can get an indication when you see sort of shifting environment, the banks are either if there’s some sort of consolidation of branches, and you can again, this is where we use pacer and, you know, other forms of analytics to see what kind of traffic so we can expect it at a time. And, you know, get ready to start looking in the market for other opportunities for those spaces.

Eric Chemi 38:24
That’s where you know, you know, in advance based on this, oh, no one’s going to that bank. So you can see, it’s almost like it’s a leading indicator of we know they’re not going so we can predict when the contracts up, we’re probably going to get this back. So now we can start planning on who might be in there at that point? That’s correct. That’s super fascinating. So then, then I’m wondering, my last question is for people who want to invest in real estate, is it better to and I mean, people that say that, I want to take my myself as example, don’t have real estate experience, right? But let’s say people got savings, they want to invest, and it’s I could put in the market, or I can buy something in real estate, should they buy actual real estate? Should they buy a REIT? Basket? I think there’s two functionally very different things. Right. One of them is effectively a stock. And the other one is you own the hard asset. And you’re the one doing the boots on the ground work. Well, what would you recommend for someone trying to figure it out? Since

Christine Mastandrea 39:13
a passenger your timeframe and your need for liquidity, I mean, I think that all it always comes down to those two things with real estate. If you’re going to be an owner of real estate, and you’re going to you’re going to have to be prepared. That’s not just buying it and collecting checks. It’s much more actively managed than most people expect. And so I think that’s why a lot of people maybe look at it as an interest to them, but a little bit concerning as far as what what does it take to manage something like that? So, so I’m always careful that you have to think about your timeframe. And do you have the time to actively manage it or the resources to manage it? I would not recommend going directly into retail because it’s very complicated product and there’s a lot more involved in it. However, you know, a small group of apartments is something that’s manageable, add a, you know, again, home rentals, which I think now you’re competing with the big guys buying those as well. So it gets a little bit more difficult. But if you know your neighborhood, I would consider buying, I would definitely because now with Airbnb and and, you know, again, the challenge with being able to afford a home, I think single family rentals are gonna continue to become big and more and more important into the economy. That being said, the other option is the REIT space, which we’re in, I prefer the liquidity of a Public Read versus a non traded read. Just because you know, you need to get out or you need to shift your investment policy you’re able to do so that being said, you know, a lot of people aren’t necessarily comfortable with the volatility, especially at this point in time with REITs when interest rates kept going up, you know, it started, obviously, in fact, it, you know, impacted our stock price. So I think it’s a mix of both.

Eric Chemi 41:03
That’s a good point. I think it’s that the timeframe, the timeframe and liquidity meet, I think that’s good for people to remember. And this idea that it’s passive income is definitely not passive income, everyone I know that owns apartments, this sounds horrible. This sounds like so much work, I’d rather just have my job and deal with that deal with that can ask because it’s, it’s, as you know, boots when it’s hand to hand combat, right, if you’ve got a tenant, who’s difficult, whether it’s a corporate, you know, small business owner, or are just a person living in an apartment or house, if they can make your life miserable, right, and you got to figure out a way to deal with it. It’s a lot of diplomacy and combat there.

Christine Mastandrea 41:39
It is, it is. And, you know, again, it’s contract. So that involves the legal system. And unfortunately, from time to time, we have to work within the legal system, based on the issues with a contract, whether it’s, you know, making a change to the space or other types of optionality that we have to bring into our centers. There. You know, unfortunately, we have a legal team that has to deal with those things. But you put in a bunch of it’s, it’s harder, it’s part of what we have to do.

Eric Chemi 42:09
And then it lastly, because you mentioned in the last few years, we had that sort of 0% interest rate environment. That was a real golden age for REITs. Right, borrowing is easy, there’s no yield, do you think and in REITs, sort of came of age in that time? Do you think that that age is over now? Because maybe we’re never getting back to 0%? Again, it’s just a new generation of of how REITs will trade and how they’ll perform? Because it’s, that was a once in a lifetime gift at those 0%?

Christine Mastandrea 42:36
Yes, I think it’s a really good point. And I think what, whatever we’ve seen with this is this is where the operators that good operators, that separates you from if you’re if you’re good operator, and I believe we’re really good operators in the space that separates you from just the financial engineers and the aggregators, right? And so that’s the big difference. So REITs were able to grow. So I started in the space and the 90s, were sort of the golden age of the startup REITs. In point, you had a number of firms who got into trouble. You know, a lot of it having to do with, again, the lending environment and the challenges with whatever we consider, you know, probably product that shouldn’t have been built or overbuilt at that point in time. And then you have the 90s. And again, that was the ladies. And then you had the 90s, where all of a sudden that public markets discovered REITs. And you ended up with a number of these portfolios going public, and being able to grow tremendously to a very large size over the years. But if you think about who the largest REITs are, it’s actually in the industrial space, it’s the tower REITs it’s not your it’s not Simon anymore. They’re not the largest. So it’s really shifted as far as an asset class as well. And so what I find very interesting about it is, you know, at this point in time, I think the good are just going to get better. Yeah. And they think those that aren’t as good are going to be merged in with the others.

Eric Chemi 43:59
Yeah, that’s a good point. It reminds me the analogies not great well, but it reminds us that they got NASCAR fan when they had restrictor plates on the cars, all the cars went the same speed. So bad drivers could often win races at Daytona Talladega, right because no one had to brake. And they could just floor it the whole time. And the cars weren’t going as fast as they could be. And that and then once you get to a regular track where the tracks diagram and without restricted plates, the better drivers would win because as soon as you had to brake and accelerate, you saw who actually was more talented at that and, and maneuvering their car. So this, this reminds you that like the better companies will stand out because 5% interest rates is kind of like well, you’re gonna have to brake and accelerate, who’s going to do it better? Yes,

Christine Mastandrea 44:41
I think that’s a great analogy. And I think we’re already starting to start to see a little bit of shift and unexpected places as well, where that’s happening. Even the multifamily space in some cases is challenged right now, which is really surprising, because the demand is there. You’re right there’s there’s more and more population growth that continues but even Multis getting a little bit challenged unexpectedly, and that, again has to do with, you know, cheap money.

Eric Chemi 45:05
Just finish that thought I was gonna end I was gonna end but you just just finished that thought. Tell me Tell me one more about that. Just wrap that up.

Christine Mastandrea 45:12
So again, when you have such cheap money, you’re focused more on just building product and flipping up. Yeah, and especially in the multifamily space, there was just so much money coming into so many operators continue to build and then what’s changed a lot is the ability to raise rents his it’s you don’t have the same transparency in the market to raise rents right now, right. And so there’s been a little bit of slowdown, too much product in all this product was built into with very, very large run increases over the next couple years, because your leases turn every year. But all of a sudden, this changes, your borrowing costs went up. And at the same time, you don’t have the same rent increases, and you’re not also able to fill them as quickly. So what’s happening is some of these projects are turning upside down, which is again, common or industry and then office, that’s a whole other category.

Eric Chemi 46:04
Then they’ll be here for another hour talking about that. I want to keep talking to you the whole day. But I’m looking at the clock and I’m like okay, I think we’ve done a lot here. But this is so fascinating. Christine, thank you so much. And before that tell us where people can can find you whether it’s you on social media, the company, how can they get more of Christine?

Christine Mastandrea 46:20
Yes. So you can find me through LinkedIn, that’s probably the best place to find me. I do have a tick tock account, but that’s a private account. Thank you. But I also am a professor at Rice University too. So you’re interested in taking my class in the MBA school at Rice? Feel free to join.

Eric Chemi 46:38
Very cool Christine thank you so much. fascinating conversation you’ve given me a lot to think about with with what’s going on behind the scenes with the real estate investing space, enjoyed it. Thanks again to my guest Christine Mastandrea from Whitestone REIT so interesting, so fascinating. If you want to get more information, go to the Wealthion website. We got all the episodes up there a lot more you can check out of course the YouTube channels got everything as well. Please like it, share it forward it comment, engage. The more interaction we get, the more people can watch this, the more the algorithms serve it up for others to enjoy and learn as well. And of course, wealthy Got a couple of things there. There’s a short form if you’re looking for financial advice, investment professionals that we endorse that we vetted, we can connect you with them. It’s free, there’s no obligation, you can just have a conversation see if you like them, you can check out Anthony Scarramucci show you can submit questions for because he takes questions live and you can fill out the form at So a lot of resources there appreciate you watching appreciate you listening. I’m Eric Chemi, we’ll see you next time.


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