Seeking Alpha with Adam Heine, CEO & President, Consolidated Development Corporation and Camden Securities Company

Adam Heine is the CEO and President of both Consolidated Development Corporation and Camden Securities Company. He is also the founder of Great Hill Investments, LLC. 

At Camden Securities, Adam is responsible for overseeing all aspects of investment, development, and property management. Since joining Camden in 2009, he has successfully overseen the acquisition, development, and repositioning of over 2 million square feet of retail property and 8,000 multi-family units throughout the United States.  

His current focus is on further growing the Companies’ national portfolio of mixed-use, multi-family and retail investments in U.S. cities and states with the criteria of growing populations, attractive environments for corporate operations, sound government fiscal policy and where demand clearly outstrips supply.  

Prior to joining Camden, Adam spent 14 years in the capital markets while working for Morgan Stanley and Credit Suisse. Adam is a graduate of Denison University and a member of the Urban Land Institute and International Council of Shopping Centers.

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Transcript

A.Y. Strauss: Hello everybody and welcome to The Dealmakers’ Edge. Today we are really excited to be joined by Adam Heine. Adam is the CEO and president of both Consolidated Development Corporation and Camden Securities Company. He's also the founder of Great Hill Investments LLC. And at Camden, Adam is responsible for overseeing all aspects of investment, development, [and] property management. And since joining in 2009, he's successfully overseen the acquisition, development, and repositioning of over 2 million square feet of retail and 8,000 multifamily units across the United States. And he's got a lot of focuses today, but he is very focused on growing the company's national portfolio of mixed use, multifamily, and retail investments in U.S. cities and states with the criteria of growing populations, attractive environments for corporate operations, sound government fiscal policy, and where demand clearly outstrips supply. And prior to joining Camden, Adam spent 14 years in the capital markets working for Morgan Stanley and Credit Suisse, and he’s also a graduate of Denison University, a member of Urban Land Institute, and International Council of Shopping Centers. Adam, it's really, really awesome. You made the time today. Thank you for being on. 

Adam Heine: Thank you for having me. 

A.Y. Strauss: And anytime I read a bio like that, I'm always nervous that I may have botched something. So hopefully I got that right.

Adam Heine: All good. 

A.Y. Strauss: But in any event, maybe we can start from the beginning—just a short, biographical, personal sketch. How you got into the industry obviously started in the Wall Street environment. And, maybe you could talk about some of the earlier parts of your career?

Adam Heine: Sure. Well, I'm a New York City native, born and raised. [I] attended Denison University, like you said. Graduated in 1995 with a degree in liberal arts and a major in international communications and a minor in modern languages. During my college years, I interned on [] Wall Street, spent some time at Merrill Lynch, as well as Sumitomo Bank Capital Markets. And this was right after Soros had shorted the pound. It was a pretty crazy time, and I spent a bunch of time on the trading floors and really caught a bug for that trading floor environment. So that was why, despite my education, I was drawn towards Wall Street. I started trading NASDAQ in 1995, and a wholesaler in '97 I joined Morgan Stanley. It was trading technology, media, and telecommunications. Everything that went public, it was, you know, Morgan Stanley was involved in. It was a pretty crazy time as everything ramped up in technology. And then I was lucky enough to spend a few years living in London, again, working for Morgan Stanley, trading UK and Pan European equities. And really, at that point, I just loved the risk environment. So when time came to join forces with my family's business that started during the Great Depression by my grandfather, I was really well suited to come in and just understand the risk from a number of different perspectives in order to naturally take over the business. Very crazy time [be]cause that was during the Great Financial Crisis. And here we are today. 

A.Y. Strauss: You're still a man who likes action. You know, you like moving markets, you like complexity. But hopefully the transition in, you know, the formal transition around the GFC time wasn't too crazy in retrospect. 

Adam Heine: It was pretty nutty. [] You know, there's the balance of investing and managing existing assets, potentially new investments at a very dicey time. Well, at the same time, when you're in a quasi-family business, there's a lot of mouths to feed, a lot of concern for just the people who live day-in and day-out on the distributions and the compensation for the people in the organization who had been with us for very long period of time. 

A.Y. Strauss: Absolutely, and also different generations have different appetites for risk. I imagine you're coming in as a young gun blazing to take over the world, leaving Wall Street, and people may be more cautious than somebody just ramping up their acquisition career. 

Adam Heine: Absolutely, absolutely. My father at the time was 80 years old. And he certainly was not interested in being on the higher end of the risk spectrum and coming from Wall Street and being pretty well capitalized at that point in time to take advantage of the environment, we definitely didn't see eye to eye in the beginning. It was a couple of years it took to really know how much development we wanted to be invested in, how much new acquisition of existing assets as well as just maintaining what we had in hand. 

A.Y. Strauss: And I guess– and we can talk about this maybe a little bit later—but I think it'd be really interesting to do a compare and contrast. That couple years slice a little bit now. I mean, obviously there's a lot of different nuances. But you've seen markets and a ton of deal flow. So what do they say? “Calm seas don't make for good sailors.” So it's good to hear from people who've navigated through the GFC, for sure. 

Adam Heine: Yeah, it was a wild time. 

A.Y. Strauss: And then after those storm clouds started to lift a little bit, maybe you could talk about how you went to market and looked at new deals. And I know you grew the portfolio and you've been aggressive at times, and with thoughtfulness, but maybe you could talk about how you decided that the air was clear enough to start transacting and sort of the ride up through a more normal, healthier market. 

Adam Heine: So, the first thing is we stayed true to our fundamentals the entire time. We knew what we knew, and we knew what we didn't know. And we had fantastic people around us from both lawyers and brokers and investors, where need be that if you really listen to everybody and you waited until you saw the seams on the ball, then you knew it was time to go. [] We really didn't want to get too far ahead of our skis. We never really want to get too far ahead of our skis. And that's both during times of, you know turbulence like the GFC, or even when we were in easy money environment as well as where we stand today, which is a pretty amazing period of time where we stand today. So it's really just staying true to the core fundamentals. 

A.Y. Strauss:  Yeah. I mean, maybe we can talk about, I hate to jump out of order chronologically and such, but it's such a natural entry into sort of what you're seeing today. I know you're super involved with the intel part of the business too, 'cause real estate is relationship-driven, it's information-driven, and you really have your ear to the ground of what's happening. I know with your extensive involvement with ULI and being on the council. Maybe if you would mind sharing with listeners sort of what's the snapshot of what you're seeing today because I know every month, honestly, people are shifting their views a little bit.

Adam Heine:  We're definitely at another inflection point and potentially a very momentous moment. The rise in rates has certainly been difficult from a transaction standpoint, and it's certainly been very difficult on those that have had big exposure to the floating rate product. But at the same time, you have this “Fedspeak” that everybody in the capital markets in the world of risk are very focused on and obviously the real estate trade is very much focused on when rates are going to go lower, [and] if they're going to go lower. The numbers that we got on Friday on the non-farm payrolls are potentially, you know, the first, the first source of information that might lead the Fed if we get a few more towards a reduction in the rates. Obviously, we got some comfort that they're not gonna be increasing, but who really knows where this is going? You see guys like Blackstone that acquired a $10 billion multifamily portfolio a few weeks back. And that's a Warren Buffett-type of moment. Those are, you know, the biggest and baddest in the industry—I don't mean baddest for the negative connotation—but those are the type of folks that, when nobody knows how to put a residual value on a portfolio or an individual asset, and they make that sort of a move, that has very big implications. And then you parlay that with the Fed potentially raising rates. Who knows how fast or how slow, who knows if the economy is going to be a soft landing or a hard landing. But those are the sort of things that will bring people back into the market. And then the question is, what markets are they going to come into and what subsectors are they going to come into? Is it going to be like the last 10, 12 years, or is it going to be something new and different? 

A.Y. Strauss:  Yeah, and I think that's an amazing analysis. And I appreciate that. I know people listening will really appreciate it because it's a real feel temperature too as well. And I think when we spoke last, you need the market maker like a Blackstone. But there's also that bid-ask and there's still this gap, there's still the gap between what owner investor operator types such as yourself want to pay today and what sellers are willing to part [with]. So, are you seeing it narrow today versus even a month or two before or do you just think until we really know which way the rates are headed and when everyone sort of frozen?

Adam Heine:   It's a little bit too soon. There's been volatility of recent. I think it's a little bit too soon to really put your finger on and say, “I'm comfortable with this exit valuation or stabilized valuation”. For the long-term holder, you might be willing to take some additional risk by paying the wrong price for an asset that's really well located that you can understand and manage for a long period of time. But that's going to be a much different type of valuation analysis or exercise than if you're going to be geared towards an IRR. So guys like myself care more about the cash-on-cash and the equity multiple because we've held assets, 30, 40, 50 years, right? And we'll manage through different cycles, whereas the guys that have a closed-end-type of vehicle are going to really be looking at what that IRR is and can they put their finger on it.

A.Y. Strauss:  For sure. And it's great to see, you know, that Wall Street background, you know how to hedge and manage risk for a lot of different assets, partners, markets. Maybe we'll talk about the investor community. Obviously, your family's been in the business a long time. But you've also attracted really wonderful partners as well to deals. And maybe you could talk about how those conversations are going today without naming any parties, et cetera, but you're always talking to different investors, institutions, and the like. They have that IRR work-driven calculus, you're more of a cash-on-cash return on multiple guy.  How are those conversations going? Is the appetite there? People want to sort of break out, get in front of it. These institutions have to put out capital, ultimately. They can't just sit around and do nothing for years. But how are those conversations going when you're having them? 

Adam Heine: Yeah, there's not a tremendous amount of risk appetite that I can sense right now. That's both talking to the institutional world as well as the brokers that represent them or raise equity capital. Money's moved to different parts of the cap stack, right? There is a lot of money that wants to get out on the first lien debt side of the equation. There's a lot of potential talk about investment on the pref side, but the common equity isn't really there yet. 

A.Y. Strauss: And the pref is where it's at, and the mezz perhaps, people more aggressive want to put out mezz loans or restructure as the white knight, sort of the bridge over troubled waters, I think that's the common refrain you hear, right?  And let me ask you this. You've seen ups and downs. You've seen a lot of different deal flow. You've built a fantastic reputation to manage through different markets. How do you, sort of talk to yourself during a very stressful period? I think a lot of sponsors, operators, maybe who are newer to the game than you are, frankly, have really seen some rocky roads the last couple of years. But maybe from a long-term perspective, you could talk about how you sort of manage, you know, the mental aspect of riding markets and waves. I know you're pretty cerebral, you're very thoughtful. But, you know, at times people start getting very anxious. So how do you manage that side of the business?

Adam Heine:  So, I enjoy this stressful aspect of the business and that probably dates back to just being on a trading floor for 14, 15 years. years. It's almost like being in the huddle, right? You want the ball, you want to run with it, and there's those that can manage stress and thrive through stress, and there are those that, you know, just crumble. And one needs to ask themselves, “which person am I?” Everybody wants to be the guy with the ball, but when you get the ball, it doesn't necessarily [] mean you're advancing it. So, you know, the way I personally deal with it is, you know, you have to take care of yourself. You have to exercise. You have to have good nutrition. You have to have a change of scenery. The good thing about our business is we're not slaves to the screen. We can get out and we can do it from anywhere in the world. in the world. Connectivity, you know, is, you can get, you can get connectivity anywhere, which is a great aspect, versus those that are really slaves to the screen. You can meet people, you can talk about things. You know, at the same time, what I do is 24 /7, but I also try to keep a perspective as well. You know, you got to, to a degree, you know, the live-work-balance. Life is too short. A lot of people who know me well know that I lost my closest and best friend, essentially my brother, when I was 40 years old. He was 40 as well. He passed away in the hospital, [with a] wife, two kids, young kids. And I often reflect on that and it brings me back to not sweating the little things. And well, as much as I enjoy the stress and I enjoy the work and it's 24 /7, it's like, what are the important things in life? 

A.Y. Strauss: Well said. And it's hard to remember that in the thick of the moment. And there is, there is that sort of bifurcated personality in the dealmaking. And I think Wall Street is an incredible preparatory laboratory for dealmaking. So it's like, it just gets in your blood. And to that end, while we're in the more of the advice-category-side of the conversation. I mean, a lot of times I try to gear this conversation towards maybe that next generation up-and-coming, young sponsor, young developer owner, investor type. And, you know, you're probably hit up a lot. A lot of people want to meet up and get together for coffee. And they're just looking to you for advice and guidance. And no one's a fortune teller to tell you where things are going. But you have a great career arc where if you're sitting with that person for coffee, what are some of those things you're telling them today as far as managing through, but also thinking big picture? What are the themes you've seen that they need to be thoughtful about?

Adam Heine: Well, if it's a young person, first and foremost, like you said, they need to figure out whether they enjoy the stress of risk or not. When you talk about real estate, there's so many different job roles that one can take. You can be a developer, you can be an owner, you can be a broker, you can be on the asset management side. What wakes you up in the morning that you get excited about? And what can you truly, from a longevity standpoint, manage through? So that's first and foremost, is just look in the mirror and being honest with yourself. If you're young, you can try different things and see, you know, you may or may not like, but at some point you're picking that path, right? In terms of coaching, it's difficult to tell somebody who they are. I just like to lead by example, always maintaining high standards for both execution, but also maintaining the highest ethical standards possible. We're not a regulated industry so much. And there's a lot of news out there about bad players and I just never want anybody to ever say anything bad about our ethical standards.

A.Y. Strauss:  Well said, and I think that that carries through in your personal brand, the company's brand, and you get a reputation as somebody who knows how to do the right thing even when there's no one looking. And I think they call that “integrity”, which you have in space. So that's something that should be celebrated and always, always doubled down on, like you suggested. Maybe we could talk a little bit about, you know, deal flow. Maybe someone's listening to this thing and say, “wow, you know, Adam be a great investor for such and such. I really want to show him this type of deal.” Obviously pricing aside because we're talking about a very fluid environment, but asset classes. I know you're focusing on a lot of different geographies and property types of that matter, but is there anywhere in the country you're trying to focus more versus less, any asset class you're leaning into more versus less so that maybe there's a broker listening and they're on the fence about whether to show you something. What would be those themes that they're trying to get in front of you with?

Adam Heine: Sure. Well, first and foremost, we have the luxury of not having a charter or anything like that, so we can invest in a lot of different capacities. We can invest as GPs. We can invest as LPs. Generally, as an LP, it's with partners and folks that we've known for a long, long period of time. We're very serious about those relationships. We want to sit down at the table, and we want to see eye to eye with the folks that we're doing business with, right? Because especially with real estate, it's long term. In terms of holding, you gotta make sure that you see eye to eye with the folks that you're investing with. We're, again, just especially during this time period, we're staying true to what we know. We know multifamily, we know retail, we know mixed use of the two, and that's really what we're focused on. We've been invested in California, Texas to a large extent, and the general Southeast. We're in 12 states today. We've got an investment as well in Puerto Rico. Our biggest focus right now is definitely Texas to the Southeast.

A.Y. Strauss: Perfect. And anything else I should have asked you as long as we're talking that maybe slipped or would have been a good question that you'd love to address?

Adam Heine: Not that I can think of.

A.Y. Strauss: All right, no pressure there. As far as just where we are today and where we're going, it seems like that's the crystal ball no one has. But looking back over the last 10 years, without mentioning specific deals, what's been a good partner for you? Who's the type of partner that would really fit your philosophy and your integrity and your way of doing business? You have a lot of partners, but what are some of those themes you're looking for, given that others may be IRR and you're more cash-on-cash or multiple driven?

Adam Heine: You know the last 10, 12 years, it seems like there's a crisis every couple of years, right? And so you need to make sure that you have good lines of communication with the folks that you're investing with, or that you're relying on or they're relying on you. If you don't have those lines of communications when times turn tough, then it's really difficult to engage in those conversations, get up to speed quickly…so it's paramount to have good partners and advisors where you're constantly communicating. You fast forward to today. You know, what we're looking for in the future is really a lot of opportunity that we know we already have in hand, and that might be stuff that we control, that might be stuff that we're invested in with other folks that are leading it. But because it's such a potentially pivotal [] period right now, you know, we don't want to run too fast. We don't want to have any partners or make any decisions ourselves that are going to put us at too much risk. And so, we continue to work on our potential development pipeline, which is quite significant. We continue to work on managing our existing assets so that they are as core as core can be for the next 10 to 20 years and make sure that we're set up that when that switch gets flipped, whichever way it might be, we're ready to go and we're with those partners or we're ready to go ourselves.

A.Y. Strauss: Really well stated. And Adam, I just, it's great to know you personally and professionally. It's great you took the time to share your thoughts here today. And speaking on behalf of people listening, I'm sure people are going to learn a ton because sometimes it's not about the spreadsheet. You know, you can't predict markets. But you reflect on the character of a person with integrity who knows how to make it happen in good times and bad and everything in between. So I think people just to learn and listen to you will take away a lot. And with that, I guess we'll wrap it. But again, just thanks for taking the time. It's been a wonderful conversation. Really appreciate it. 

Adam Heine: Pleasure. Yep. Pleasure anytime. 

A.Y. Strauss: So I guess we'll wrap it right here. Thanks again. 

Adam Heine:  Thank you.