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Meet the Masters – Sam DiFranco from Trinity Partners, Discusses Commercial Real Estate, his love of the Raleigh area, Buffalo, NY roots and the family business.


Trevor Chambers:

Everybody, this is Trevor Chambers from the Old Raleigh Financial Group’s Meet the Masters blog and podcast. Today I have Sam DiFranco and I’m so happy to have him. Sam is a Raleigh and RDU-based guy, and he heads up Trinity Partners which is a commercial real estate services firm here locally. I want to welcome Sam for being here. Welcome, Sam.

Sam DiFranco:

Thank you, Trevor. Thanks for having me.

Trevor Chambers:

Excellent. So I want to jump right in to it with you. I had a nice conversation with you a couple of weeks ago and it was very interesting to get some perspectives on what’s going on here, and maybe even on a larger scale around the country in your space. But before we get into that, tell me about Trinity Partners real quick, and where you’re from, and your background and all that.

Sam DiFranco:

Sure. Well actually, I’ve been in the Raleigh market for 23 years now. I came down here in 1995 to check out the marketplace. Born and raised in the Niagara Falls, Buffalo area of Western New York. I came down here because a… For the number one reason of the weather, and the fact that the economy was faltering in Western New York. We had a continuation of loss of jobs and exodus of people. And quite frankly, in the real estate business all we were doing up north was buying signs and planting signs all over. So people would say, “I see your signs all over.” And I’d say, “Yeah, you see my signs, but you don’t see sold or leased. You see available.”

So I came down here in 1995 in Super Bowl Week of January when it’s pretty dismal for those people in old Western New York. It’s a pretty ugly place to be. And I hung out for a week. I spent a couple of days in Raleigh, a couple of days in Charlotte, and a couple of days at the coast, just to determine if I liked the state. Actually, one of the reasons I came here was Forbes Magazine in 1995 had a front page cover, Best Place to Live in America, or Best Place to Raise a Family, it might have been. And Raleigh-Durham was number one. So I told my wife, I said, “Hey, what do you think about moving?”

At the time, up north we were… Things were going relatively well for us. We had just built our dream house and the kids were very small. They were seven and nine years old, our boys. And my wife said to me, she said, “I would entertain it. But we have to do it before the kids get to high school age, because I’m not moving once they’re in high school.” So I said, “Okay, I’ll check it out.”

So, I came down here, checked it out. Fortunately, I was connected via some [inaudible 00:04:44] old time friends, I don’t even… I think through my souvenir business in Western New York which I had while I was doing real estate. They knew a gentleman named Tommy Drake who was well-connected, well-heeled Raleigh guy, or Cary guy, I should say.

At that time it was the Carolantic’s 10th annual conference which is a local real estate firm that has been here forever and there was… Their conferences bring investors and developers and not brokers and just talk about the marketplace. I shadowed Tommy for the day and got to see Carolantic’s event, and through that event I was just dumbfounded because we had never seen a… Mayor Tom Fetzer was mayor at the time. He had been… He was a guest speaker, talked about lowering property taxes by 30%. I asked Tommy, “How come I don’t see any signs for sale?” He said, “By the time you put it out there it gets sold.”

But the…. was gracious, and it just became a, for me, became a situation that I couldn’t miss. I didn’t think I could miss if I did that. So, by doing that… I went here, I went to Wilmington, checked it out, I went to Charlotte. My business partner prior to moving was as a developer in Western New York, and he wanted to go to Charlotte. And he to this day is still there. But I decided Raleigh was the place.

So two weeks later I flew my wife down in a plane and it was the middle of February, which is even uglier in Western New York. When we landed at RDU it was a day that kind of looked like today outside, nice Carolina blue skies. Probably about 55 degrees. She looked out the plane window and she said, “I’m convinced.” So it didn’t take much to take it from there, to move into… To move to Raleigh.

Subsequently we bought a little two-family-

Trevor Chambers:

So the boss… I didn’t mean to interrupt. So the boss signed off.

Sam DiFranco:

Yes, she signed off right away.

Trevor Chambers:

I love it.

Sam DiFranco:

So that was an easy object to overcome. So from that point we bought a little two-family duplex at Hedingham Golf Course Community. We furnished half and kept the other half for a rental. Came back and forth for a couple of years while I unwound my business to make sure we were going to like it here. Then, in April seventh of 1997, I moved permanently and then Carol and the boys moved August when the kids got out of school and we sold the house that same year.

So that’s how I got here. Commercial real estate-wise, I started out as a small firm with Russell Gay & Associates. Russell Gay is a local North Raleigh gentleman that had Century 21 and associates and also had Southpoint Builders. Russell was developing some office condominiums at the time, which I had been doing up in Western New York, on a small scale, but I had experience with it. Went to work for Russell for two reasons, number one, he had the commercial division which I needed, but he also had a residential division because I needed to find my family a house and knew nothing about the area. So I figured if I went to work for him, I can get two birds with one stone.

So, worked for Russell or a year, from there went right to CB Richard Ellis was hired by CBRE. It was CB the day before I started. The day I signed on it became CB Richard Ellis, which is the European conglomerate that they merged with. So we worked at CBRE for about three and a half years and then CB was… I don’t want to say messing around. It was going back and forth between public and private and ownership and non-ownership.

We tried to do a management buyout of the group back between a few of us to buy it back from CB as a private entity, and they were basically jerking us around. So, one of my other good friends in the shop and myself, we broke away and we formed Triangle Commercial in 2001. Late 2001. So from there, we formed Triangle Commercial which was going to be a primarily tenant-repped by our rep services, along with managing and leasing of any projects that we word have equity in. From there we built a small shop up to about a dozen or 13 people.

Then, in 2008, prior to the market tanking, we had merged with Cresa, Corporate Real Estate Service Advisors which was a national platform for, basically, tenant rep advisors. Well, needless to say what happened from 2009 and 10, when the corporate real estate world shut down, we had to fend for ourselves. So, by 2012 we were struggling to keep everything going, but things were okay.

Then by 2013, the beginning of 2013 I left and joined Trinity Partners with my youngest son, Sam Jr, and another gentleman, Mark Alviano, investment advisor. So the three of us as a team went out looking for a new location to work for. We figured out when we would find the right place we would land there, we would know where we were going. So Trinity Partners was the place. We’ve been there eight years now. Life is very good.

A little bit about Trinity Partners, it’s based out of Charlotte. The company is 23 years old currently with the Raleigh office getting ready to celebrate its 11th birthday in September. We have overall just under 200 people, with offices in Charlotte, Raleigh, Greenville, South Carolina, and Columbia, South Carolina. Collectively, we’re the largest boutique firm in North and South Carolina with management of just over 20 million square feet collectively, management and/or leasing.

With that in mind, we’ve got… I think there’s a couple hundred employees all in at this point in time. Raleigh office is comprised of about 53 people currently, all of which, by the way, we have kept working during this pandemic.

Trevor Chambers:

Good for you.

Sam DiFranco:

We haven’t laid anybody off. We’re considered an essential business, and we’re still working. So our firm, we’re a full-service commercial real estate firm. The only things we don’t deal in, we don’t deal in multi-family, and we don’t deal in mini storage. But we deal in every other product line. We’ve got a full-service construction team, we’ve got a full project management team. Property management team, and then asset management, leasing, and then investment sales. Then there’s just a general brokerage shop which is my team. So, just of my background and what Trinity Partners is.

Trevor Chambers:

Awesome. I love hearing these stories. So you and I have a connection because we’re both Upstate New York kids. My wife’s family’s, her mother’s side, the matriarch side’s from the Greater Buffalo area, so go Buffalo, and I’m from, actually, the vacation capital of the world, Binghamton, New York. So everything you said, my friend, I completely relate to. But we do love our Upstate. Especially in the summer, and of course the people.

You work with your son. Tell me about that. How’s that dynamic? And what have you learned? And that’s Sam, Jr.

Sam DiFranco:

Yeah, okay. So, I work with both my sons.

Trevor Chambers:

Oh, that’s right! Yeah, yeah! Sorry about that. Right, okay, yeah.

Sam DiFranco:

Okay. So our oldest son, Ryan, is 34 and we owned together a small Italian cafe.

Trevor Chambers:

Oh, that’s right! Of course, yeah! Right, right, right, right. Okay, cool. Yeah. How’s he doing? What’s going on? Tell me about that.

He’s doing excellent right now, actually, interesting enough, when you retool based on when your surroundings, and he’s smart enough to do that, and capitalize on social media. He has been extensive take out and delivery. And the interesting thing, as you know based on your background also, is that Italian food travels well when you’re ordering takeout. It’s not like selling a cheeseburger and you’ve go to hope that the medium stays medium.

So, with that being said, they’ve had all kinds of promotional specials and deliveries and their business is up 25%, from what I’ve heard, in April. It was only down 5% in March while they were retooling. And, they’re… With a lot less staff, he’s unfortunately had to lay off people. But he’s only got 34 seats interior anyways, plus the outside patio. So it wasn’t a big shop. Plus remember his entrees aren’t, they’re not $30 entrees. Everything’s 15 bucks. So it’s an easy price point and it’s a comfort food. So business has been going well with him there, and we’re constantly in communication almost every day about what’s going on.

Trevor Chambers:

Awesome.

Sam DiFranco:

So that’s that side of it. Just the guidance, advice….

Trevor Chambers:

Yeah, you’re not washing dishes.

Sam DiFranco:

I’m not washing dishes. When I’m there I am, I tell you.

Trevor Chambers:

Yeah, and you and I can go off on a whole world and into that. Perhaps a little bit later. But, local you work with Sam Jr. Tell us about that.

Sam DiFranco:

Yeah. So my son Sam Jr since he went through college he’s always known that… We’ve discussed about him coming, working with me in my industry. Our commercial real estate industry is very unique because a lot of the brokers in our business, they are… You’d be amazed at the backgrounds. From Attorneys to, we always joke, there’s a lot of political science majors that are commercial real estate brokers. Or medieval history majors that are commercial brokers.

It’s an interesting business, it’s a tough skin business, no different than what you’re in every day in the financial world-

Trevor Chambers:

Yeah, very similar.

Sam DiFranco:

… grinding it out and digging for every dollar. Killing what you eat. So I brought Junior in, and he has been with me, let’s see. He started at 21, he’ll be 33 next week. 33, I think? Yeah, 33 next week. So he’s going on his 12th year.

Trevor Chambers:

Wow.

Sam DiFranco:

11th or 12th year, I believe. Actually, yeah. I think it’s his 11th or 12th year. Regardless, one of the first things I had him do was, in our business we’ve got some professional designations that are needed. He got his CCIN professional designation, I believe he was one of the youngest in the state to acquire it. Obviously with the help of me, because you have to have the transaction volume. And by me involving him in the deals that I was working on helped bring him to those quotas. Not that he didn’t earn… I didn’t give it to him. He had to make sure he earned it because the way the system works, they just won’t let you put something down that you did not actively work on.

So he’s been with us this long. We together have a team, Sam Jr, Dylan Heafner and myself are collectively, we’re the medical team. Our promo is that we primarily work in healthcare and medical fields. That’s probably about 70% of our business. The balance of the… The other percentage is a mix for me, but between those guys it’s primarily investment sale or tenant representation for select clients. So we don’t do typically any third-party leasing. If you had a building, “Hey I need you to lease these three suites and they’re 2,000 feet each.” We wouldn’t do that unless we were potentially going to sell that building. So we will help people buy or sell anything, but we just don’t do third-party leasing. Unless it’s like Emerge Orthopedics is our biggest client with 42 locations. They say, “We need you to lease our 3,000 foot space,” we say yes.

But him and Dylan work on a lot of deals on their own, and then we work as a threesome on some deals which is a little bit unique in the marketplace because it’s very hard to put three brokers in a deal when it comes to getting paid. Putting up the pie, because remember, everybody still has a house split on top of that. But we all have our own roles, depending on if we’re going to pitch or to do the process, or to do the closing. Mine is usually to make sure stuff closes. But they’re getting a good heaping of experience, and everybody’s doing really well at this point in time.

Trevor Chambers:

Yeah. And he’s seen some battles, you know what I mean? Which is great. And it’s just-

Sam DiFranco:

I’m sorry. Go ahead.

Trevor Chambers:

No, no, go ahead. Yeah.

Sam DiFranco:

So he started in 2010 when the market was totally upside-down, which was much better than starting in 2005 when the market was on fire. So he got it, he was crawling a long time, a few years, without making any money, trying to figure out how to hustle. So now he still, as I tell him all the time, “Don’t ride the rollercoaster,” he’s still riding the rollercoaster occasionally on stuff about… Our business, some deals fall apart, some deals go together. But you’ve got to be… You just can’t… You cannot always focus on what’s going to work and what’s not going to work.

Trevor Chambers:

Yeah, it’s a long game. You’re going to work long time, he’s got a long way to go-  …and we tell clients, unfortunately every about six, seven years, certainly within the decade, you’re going to have some sort of depth charge go off and that’s just how it goes. But, you learn. Well, that’s great. I appreciate all that background. As I said, I love hearing about people’s history and also the dynamic working with your family is interesting and fun and challenging.

Sam DiFranco:

You got it. Fun and challenging.

Trevor Chambers:

Yeah, fun and challenging. Yeah. Let’s get right to the nuts and bolts. What… Just for the record, it is April 29th, 2020. What are we seeing out there, my friend, in your world? How’s deal flow? I mean, I can… Where were… That type of thing. Is RDU in better shape than most areas? What’s your pulses situation? What are your instincts telling you?

Sam DiFranco:

We’re constantly talking to clients and trying to figure out what’s next and what’s the next move, especially deals that were transitional deals in the works. Certain deals where we know we have to renew… That we’re up for renewal for clients that we’re working through.

A question came up with one of my larger restaurant clients and he said, “Hey, is this… I know the landlord wants us to do this, this and this, but aren’t we going to be in a situation where there’s going to be just a boatload of vacant restaurants out there?” And I said, “Well, I’d like to believe that, based on what’s going on that perhaps there may be. But I don’t think you could take the risk of saying I’m going to leave the location which I know has done well prior to the pandemic, and wait, hopefully, for a matching location of…” and this is a substantial restaurant size. It’s 5 to 6,000 feet with 4,000 feet of patio space location. Didn’t know if I told you, but regardless, they’ve been doing well, been in business for a long time and while the landlord is pushing on certain aspects, we know how to push back because the landlord’s thinking the same thing.

The last thing the landlord wants is a 6,000 foot vacant restaurant that they’ve got to find the right tenant for, re-tenant, and have downtime versus just give us a little bit of help right now and we’re all on our way. And even put my landlord’s had on, I know that’s what you want to do because if you do a landlord revenue analysis of what’s lost and what it would take to recapture that, it’s pretty obvious that you don’t want dark space. Especially not in these times, going into it.

So, we’re seeing, for some of the bigger deals, like the medical deals I’m working on a 10 year renewal that comes up the end of… It comes up, actually, mid next year. We’ve been working on it for the last year because it’s a substantial size. That’s moving forward. My guys will sign off as soon as we get the final terms, which should be today or tomorrow, because that’s going to continue. The healthcare world is continuing, some of the bigger projects have been just put on pause, that we’ve seen.

Some of the companies, some things are on pause. We’re working on a deal… I don’t know a lot of the bigger deals that transact in the office till after they happen, because it’s not my division. I know them when I see them in my paycheck, but… Which is… but it’s my understanding there was a large transaction in the works somewhere throughout. We have a sister company called Trinity Capital, that’s the investment/development arm, and they’re with Starwood and they had a large project for sale. I think it got stalled because everybody’s kind of on hold. We’ve got a smaller deal in the $3 million range where, it was supposed to close April 6th, Wells Fargo told the client, “If you don’t close April 6th, we’re pulling the loan,” which is kind of raw. And they did.

The client subsequently had to go get another loan with 50 point spaces higher in rate, and now that loan is waffling because the client asked the seller for a, basically a $290,000 reduction. The seller was… If I was the seller I would have said I’m not doing it. But the seller was genuine enough to say, “I’ll give you 180,” and the client’s still pushing for another 55. So I think you’re seeing some greed enter the marketplace. The seller seems to believe that the market is going to be flooded with an abundance, and this is a flexible space property. It’s a 3,000 foot building on, I think it’s nine acres. So it’s got expansion. It’s got everything they need.

It’s perfect for them. If they drop it, I think they’re really going to kick themselves six months down the road when they realize that this product is not… If they were looking for a retail restaurant and they were dropping down now, I wouldn’t have a problem with it. But they’re looking at a retail center or retail store, because nobody knows where that’s going. But at this point in time a flex building in a good location with all the things you need and just so you can borrow money at 3.6%, is owner-occupied, you’re crazy not to do it.

So I think hogs get slaughtered and pigs get eaten, as they say. At the end of the day, if it does fall, it’s a shame because we’ve been working on it for six months, like we always have. But if it goes through, they’re going to find that they made the right decision.

So we’re seeing stuff like that all over the board. In the meantime, we’ve got two offers on small investment deals, some of the lease transaction deals are still going through, there are still closings happening. So, in general… And more importantly, construction. Our construction team, the facility folks, everybody’s full-bore. Everything’s strong.

Trevor Chambers:

Yeah, that’s what I’ve been hearing across the board. Everybody in construction is just rolling.

Sam DiFranco:

Yeah. We’ve had a little less pricing activity this week, for some reason. I mean, it’s only Wednesday, but this week just seems I’m pricing projects a little slower. But there’s still… We’ve got clients flying in… Or, I’m sorry. Potential clients flying in Thursday and Friday to look at a couple of redevelopment projects we have in downtown Durham that are available that Sam and Dylan have for sale, and with that, it’s… Activity is okay and we’re still working on deals. The part where you can physically go show stuff and do things like that, it’s slowing down. But I think it’s going to start to be opened up a little bit better.

Trevor Chambers:

Good. Yeah, I think as we… And like anything, I think as we get more visibility on this thing and understanding then it’s going to build confidence. Do you mind if I ask, did you apply for PPP and did you get it?

Sam DiFranco:

Yes. I applied in two different fronts because I have… My investment company, DiFranco Investments, which holds all the real estate, which my wife and I work under, we are obviously stymied there because there’s no work to be done. Not that there’s no work to be done, we’re working on everything. We applied, we got it. That was through Town Bank. Then we applied for Trinity through South Bank, and we got them, too. Yes.

Trevor Chambers:

Great to hear. I’m sure that helps you sleep at night. A little bit.

Sam DiFranco:

Well the problem is, for both of our businesses, is that while we are going to continue to pay because we were sufficient to be able to do this, we work off a trailing six to 12 months. So right now while things are still okay because we’re literally collecting from things that happened six, eight, nine months ago, a year ago. What we’re afraid of is this, if you fast forward nine months and we don’t have any reserve like that or any kind of cushion to help us cover this, or the availability of low interest money. We’ve got credit lines, but credit lines are 5 1/2%. So at this point in time, why wouldn’t you take a 1% loan versus a 5 1/2% loan with a two year buffer to pay it. So we’re more comfortable now. It just gives you some breathing space and the ability to keep everybody working, which we’ve done.

Trevor Chambers:

Yeah, you know what I do. We’re long-term personal wealth managers and we love… we invest a few different styles, but we love to invest in companies that have great balance sheets, ethical leaders who know how to allocate capital, and who have good cash flows. That’s… When you told me, when we first talked a couple weeks ago after the plague hit, that’s one thing that… Another kind of check point. I was like, “Sam is astute enough and has gone through enough battles that you’ve got to go into these things with cash and have good balance sheets.” So that kind of leads me to this. One of the things you said to me before was, you were surprised at how vulnerable, if I could use that word, certain sectors of the economy both on a local and national basis are in terms of being able to weather storms. Can you expound on that a little bit?

Sam DiFranco:

Sure. Like I said, when the mandatory stay-at-home orders or whatever it was called started in the middle of March, it wasn’t probably 10, 12 days later that the phone started ringing and, “We can’t pay April’s rent.” My initial thought to myself, because especially after going through the recession in 2008 and 9, as bad as that was, and we were funded but we weren’t overfunded by any means and then learned right after that that the best thing you could do is overfund all your projects so you don’t have to ask people for cash calls. Which, since then, we have been for most of the stuff we have.

But I couldn’t fathom the idea… I can understand the employee that’s the waiter or the waitress or the cook or the chef or whatever that gets laid off that day, they can’t pay their rent. That’s different. But if you’ve been in business for any term whatsoever, and you literally, because you don’t have cashflow this week, you can’t pay your rent at the end of the week? That’s very sad. It’s a sad state of affairs. And there’s not only the small Mom and Pops, there’s some pretty significant players in this market from what I’ve been gathering around the horn, if you will.

Trevor Chambers:

And this is all, this is not just this market. Let’s not… It’s everywhere. I mean-

Sam DiFranco:

It’s everywhere. It’s everywhere.

Trevor Chambers:

Yeah, for sure. And-

Sam DiFranco:

… I was dumbfounded, I mean no more dumbfounded than I was that the average American doesn’t have $1,000 in the bank for savings in case of an emergency. But the point is that if you’re supposed to be running a business. At some point in time, I don’t care if it’s a line of credit or… You need something that it can help carry you through a… Whatever you want to call it. A horrific experience like today. Like I’ve said. Like what we’re going through right now.

Then we’ve had… So you have customers like that. Most of the people that have asked for rent forgiveness for us are retail. We did have one warehouse, industrial user that is in the home building supply call and they immediately said, “We’re not paying the rent for four months.” And we said, “Wait a minute, before you go to this, number one, the building industry hasn’t shut down. Okay? As a matter of fact, you guys are essential, and all our guys are working, so I don’t know what you’re talking about.”

So, after requesting financials and digging deeper, we find that they’re totally upside-down. It didn’t matter if this pandemic hit or not. They were going to be in bad shape regardless. So that’s a different anomaly that this thing just happened to shake out right now.

Trevor Chambers:

Right, so that leads… Yes. I didn’t mean to interrupt, but that leads me to this, and from your point of view in your business and what you do, are you now going to say, “Hey listen, before I get involved with these guys, I got to know a little bit more here.” I mean, does that change how you look at your business model?

Sam DiFranco:

Well, we don’t want to be underwriting

Trevor Chambers:

And the type of people you want to work with?

Sam DiFranco:

Yes, of course it does. But we always underwrite… I’ve always said this, too. When we’re reviewing a tenant, or taking an application for lack of a better term, for a tenancy for a building that, let’s say we own, or I’m a partner in, we’re going to run the credit background and we’re going to see the financials. There’s a certain point in time where, as long as they’re substantial, or enough to know that they’ve been in business for a while, they’ve shown profitability for the last three or four years, I mean, there’s… I’ve used this saying for years. In 2000, if I would have brought you Enron as a tenant and you’re Highwoods. You would have been buying me houses and cars and whatever it takes to get that tenant in your building. Then, in 2002 you’d be looking for me with your gun because they imploded and there’s no longer a business there.

So, there’s hundreds of thousands of companies like that. So we don’t even… At this point in time, there’s a lot of gut-check, especially after 42 years in this industry of what risk you want to take. How do you mitigate that risk based on what you’re going to have to outlay as a landlord versus what they’re going to pay back in return. What’s your payback period? I mean, in 2009 and 10, we saw deals where… We were doing deals for tenants where the landlord’s recovery was going to take five years. But you know what? The landlord didn’t mind. The landlord didn’t mind because he was getting cashflow for that five year period. It was some money coming in versus none.

So, as I said, there was crazy stuff being done, which leads to this situation where in bad times there’s opportunities in our world, and in good times there’s opportunities. It’s just how you approach it and what we go after right now. So, we don’t know what tomorrow’s going to bring. When people are asking us… Like earlier I said… hundreds of restaurants out there available. Don’t know. I really don’t know. I really don’t want to guess yes or no to skew you one way or another. This is a business decision that you have to make based on intelligence and I don’t know how your business operates. You have to take the gut-check and say, “Does this work or doesn’t it work?”

Trevor Chambers:

Yeah. And thank God we’re in the United States, right?

Sam DiFranco:

Oh, yeah.

Trevor Chambers:

I mean, this is a great place… The best place in the world to really do that. But anyway, that’s a whole other subject. Let’s switch little bit gears here. Do you have any… Do you have any thoughts on maybe how this might impact commercial design space? This whole experience with the plague here? Do you have any thoughts on that? And I know, by the way, I saw… I went to your website in my deep research prior to this talk talk that you like to design house designs. You like to house design. It’s a big thing for you.

I’m not surprised because I know you like beautiful things. And so, anyway allowing to put your design hat on, tell me. I mean, how do you… Do you think the moon might be a little bit different in 10 years because of this?

Sam DiFranco:

You know, that’s another one that, it’s so hard to pick out. Because if you think about that, there’s even some discussion we had last week because we’re just getting ready to remodel our office.

Trevor Chambers:

Yeah, I remember that.

Sam DiFranco:

And we were going to bring them down by two feet in each so we can get four more cubes into the area, add more touchdown space, and collaboration-type space. But if you think about it, does this mean that we go back to big, hard-wall offices like we used to have? I don’t know. Is there more people working remotely?

Right now all of our employees work remote. We’ve probably got three or four at any given time during the day that will pop in and out of the office for different reasons, along with their… Some of the admin staff for mailing bills, paying and things like that. So, when you think about just working from home, that’s… Everybody thought that that was supposed to be the latest and greatest trend 15 years ago. But guess what? People are getting cabin fever. This is… You got to have socialization. People have to be around people.

Trevor Chambers:

Agreed. I agree.

Sam DiFranco:

Yeah. I love my wife dearly, but it’s time to… For each of us to have some space here. So, at the end of the day I’m not sure how this design changes. It’s the same thing with restaurants. Do you have to… The talk is when they open they’re going to tell them, “You got to take half the tables out.” Well, let’s just fast forward and say okay, if they figure out a vaccine, or I’m watching on CNBC this morning, even if they just figure out something that stops people from dying because of this, that’s a game changer. It’s an overall game changer, and all of a sudden everybody’s hugging and shaking hands again.

So I think this will pass, as much as everybody else knows it will, it’s… If you really would have taken New York State out of this equation, it’s not that bad. And this is coming from somebody, I’ll tell you right now, who took a COVID test two mornings ago, and I’m waiting for results, because I’ve been under the weather for five or six days and not feeling well and unfortunately, I mean, I’m okay but I’m just nervous about, do I have it or not?

Trevor Chambers:

Yeah, totally. Totally, well said. I understand. Hey, and by the way, and that’s not to say that… I mean, there’s just some tremendous suffering going on out there, and we’re certainly not mitigating that because-

… we all know vulnerable people.

Sam DiFranco:

… one day. And one-

Trevor Chambers:

Yeah, it’s terrible.

Sam DiFranco:

That’s correct. No matter what it is, this is… And because of how fast this thing has ramped up and we’ve seen it, it’s a horrible disease. There’s no doubt. But, again, how it leads us forward and with all the talk you really… I’m not intelligent enough to say, “This is good,” or, “This is bad,” like, “Let’s open everything up and here we go back to normal.” I don’t know what the new normal’s going to be. I think everybody’s going to be waiting to see.

Now, for us in the space industry, if it goes back to… Well, let’s put it this way. It’s kind of a… I don’t know if dichotomy is the right word or not. When you look at what happened in 2008 to 2010, what we had was companies downsizing their space, not necessarily as much as downsizing their people. When you look at a companies books and you say, “Okay, what are your expensive pts?” Number one is your human capital typically and in most businesses. Number two has typically been your facility costs, although that’s been hampered by healthcare in the last few years, which could be bumping that line. But regardless, your facility costs are usually a very expensive item.

So what has started happening to us in eight, nine, and 10 is that if you had 10,000 feet, and you had 40 employees in there, you now said… And maybe you had two locations. Now you said, “Well, I’m going to reconfigure all my space, keep the 10,000 feet, but I’m going to put 80 employees in here now. So I’m only paying for 10,000 feet of space. Instead of you guys, everybody having eight by 10 offices, they’re going to have five by five cubes.” And that’s where some of this stuff came about. So, they started condensing. So now, what may happen is the reverse, saying, “Well, we can’t really keep people…” I mean, we’ve got call centers where people are literally sitting in a phone booth, if you will. Right?

Trevor Chambers:

Yep, terrible.

Sam DiFranco:

They’ve got a two foot by four foot space. One of my first cousins works at Merrill Lynch out in Arizona in a call center. He said, “We are stacked like sardines.” And not only that, they kept them working till the end of March based on what they were doing. But he said, “We are… And this stuff has been passed around our office.” He goes, “I believe we’ve already had it.”

So now, to answer your question, for the office user… For the flex-industrial user, nothing changes. For the office user, not sure how that really changes until they figure out the solution, the cure, the vaccine for this dilemma. Then, for retail, the biggest question is, again, when you go to these… Let’s just say the nail salons where they’ve got 30 people sitting in a row, and when you go to the restaurants where you’ve got as many tables packed in… Or, nightclubs, or you’ve got dance clubs, stuff like that. How is all that going to be affected?

Trevor Chambers:

Yeah, I mean you could affect ventilation, it could affect, obviously, just core design, is everyone basically wearing masks, required here for who knows how long? I don’t know. It’s going to be interesting to see how it all plays out.

Sam DiFranco:

What are the other services that may be in business? One of my friends is now involved in a business where they come in and spray a disinfectant… Where most people come in and spray your… All these people [inaudible 00:39:01] will come in and disinfect your place. Well, if they disinfect what happens is, that’s perfect. They disinfect it, but 20 seconds later it’s still susceptible to be infected. Now the product they had… This one company is touting is, “Well, we’ve got a product now that, if we spray the disinfectant, guess what’s going to happen? You’ve got 30 days to 60 days of time before this can be infected again.” So now it’s got a protectant on it.

So now, you start adding that at 50 cents a square foot, I mean, it becomes big numbers then, even for our case. We got 20 million square feet at 50 cents a square foot. That’s $10 million that somebody’s going to have to pay for. So…. going to be the trend or the norm going forward.

Trevor Chambers:

Yeah, I… There’s a couple of things you said. If you take a restaurant and you have to… An office space, a restaurant, and you have to reduce the number of people that can go into those places, you’re going to drive up cost. And then if you’ve got to spread… It’s all these things that are going to be incremental. Which could lead to some inflation down the road here. So we’ll see how that goes. But, all right. I’ve got just a few more minutes with you. What are you-

… most optimistic about, what are you most worried about? Let’s start with the worried.

Sam DiFranco:

Okay, well I’m not worried now, because my test was negative. I just got the results

Trevor Chambers:

Congratulations! Perfect!

Sam DiFranco:

Yeah.

Trevor Chambers:

Okay, so that was the thing you were most… Yeah. Oh, good for you!

Sam DiFranco:

Right.

Trevor Chambers:

Awesome, man.

Sam DiFranco:

Doctor said okay.

Trevor Chambers:

Yeah.

Sam DiFranco:

Anyways, sorry. So what am I most worried about? I’m worried about the political outfall. I’m worried about the political outfall, the political disruption of this world. I’ve been worried about it because there’s such a… There’s just such an uproar of hatred in politics that’s just… It’s ugly. If you or I ran our business like they run the government, we’d be in big trouble. Where whatever one side does, the other side doesn’t want, if that makes sense. Just because the other side’s doing it. Not that it’s best for the country. I’m… That’s what bothers me the most, not knowing where this is going. I think everybody’s got their rights to have their candidates that they want and things like that, and not to get political about it. But it is just… There’s something going on here that is just ugly in the background that’s brewing, and I don’t care what you call it or how you call it, but I think there’s an issue here, and I don’t…

I think there’s a bigger underlying issue that six or nine months from now, perhaps after the election, we’re going to say, “Gosh, this is really ugly.” There’s a lot of finger pointing. That’s what bothers me the most, is the political unrest based around this thing and in the news. It’s just, there was a comment online the other day that said, “If you shut off the news for 90 days, let’s see what happens. The world will be a better place for sure.”

Trevor Chambers:

Yeah. It’s… Yeah. But conversely, what are you most optimistic about?

Sam DiFranco:

Opportunities. Yeah, opportunities for sure.

And, you’ve got to plan, to go back to what we said, and you know this because you’ve been in business for many years now. But you have to plan for these types of things. The way we look at the world is there’s always political upheaval. There’s always going to be one of these things that’s going to happen.

Sam DiFranco:

Correct.

Trevor Chambers:

Are you ready for it? You have to build ultimately, and I think only experience lets you do this. You have to build for these times knowing that they’ll happen. And they’re awful. I’m not mitigating that. Because it takes a huge toll on humans. Then again, this is how we move forward. You have to tear things down to renew, that’s just how it goes. Well, thanks for sharing that side, and I’m so happy that you got… The COVID test is negative. That’s wonderful.

Sam DiFranco:

Me, too.

Trevor Chambers:

A couple just last questions. These are more just kind of… What are you reading or streaming these days? What’s going on there?

Sam DiFranco:

Okay, interesting enough, I don’t do a lot of reading but I stream different things, different articles and headlines. I am up to my ears with how COVID is going to be changing things and everybody’s opinions about it. So I stopped that about 10 days ago, looking at any of that. I’m more focused on a product that’s coming to the market, more looking at CNBS defaults or what they’re talking about for the bigger loaned projects that are out there, and how some of these big centers are handling it. More concerned with creative opportunities, trying to dig through the mounds of miscellaneous stuff that don’t make any sense to figure out where this market is going. Because if you look at construction of, let’s just say flexible space or warehouse space, we don’t have… There… We’re in a 5% vacancy for that market… that problem.

Sam DiFranco:

So, we’re looking at, is there going to be opportunities for this? Like I said earlier, when the guys think a bunch of it’s going to come flood the market. They really think it hurts, and we’re going to get stung by it. So I don’t think there is an opportunity coming for that. But it’ll be really… It’ll be really interesting to see what we’re really just… And again, it’s just going to be searching for opportunities in my world. Because again, this should bring some opportunities for us to help clients, to help reposition clients. But I don’t think… It’s not the same where we can go into a lot of landlords now and go, “Hey!”

Because let’s face it. This is a 60 to 90 day hiccup. This is not an economic crisis that was started by an economic crisis.

Trevor Chambers:

Yeah, it’s [inaudible 00:45:17], totally, yes.

Sam DiFranco:

Exactly. So it should be self-curing. Now, of course it may take two years to recover from the big hit that you’ve taken immediately, from actions that have been taken. But, I don’t know.

Trevor Chambers:

Yeah. And I think… What do you think about the government’s role so far in the fed and treasury and all that? I mean, what those guys do plays a huge role in what you do, I mean, obviously.

Sam DiFranco:

Well, there’s no doubt. And that… What scares me the most is that while I’m glad we’ve got DPP assistance in the rest of the world, and these people that are… Here’s a perfect example. One of my big clients, and he was a partner of mine. He owns a couple of… A few restaurants, and he said, “I can’t even open May 15th if I wanted to, because my employees won’t come back to work. They’re making more money on unemployment than they would by coming back to work, and they’re mad at me if I were to apply for this PPP loan, they would be mad.”

Trevor Chambers:

Yep, yeah. We’re hearing a lot of that.

Sam DiFranco:

Yeah, and that’s a traction that you don’t want to hear on that side of it.

Trevor Chambers:

Yeah, I think a lot of people in the customer service world are worried about that. Okay, well I appreciate that. So, you do a lot of podcast streaming and stuff like that? You listen to a lot of stuff?

Sam DiFranco:

I don’t listen to a lot of things, I’m just more reading articles that come through-

Trevor Chambers:

Reading articles, okay. Cool. What are you watching on Netflix? Anything?

Sam DiFranco:

Just got through Outer Banks. Watched [crosstalk 00:46:51] all of shameless, which is a very…. Shameless, it shows you how nice your life is, really. There’s a lot of dysfunction out in this world, and it’s real. That’s for sure. What else did we watch? Bloodline, we’ve been watching, miscellaneous movies. But, little bit of everything.

Trevor Chambers:

I restarted Ozark, I went back to the beginning.

Sam DiFranco:

I didn’t get to this season. I watched the first two.

Trevor Chambers:

Oh, you’re going to love it. Bateman is ridiculous. And Laura Linney. They’re so good.

All right. Couple more questions, then I’ll let you go. How’s your plague hair? How’s your style looking these days?

Sam DiFranco:

Okay, so you’ll love this story. So…. was getting bored without a haircut, and one day I took my, whatever you call that thing, the razor… Not the razor. The electric thing, electric razor.

Trevor Chambers:

Trimmer.

Sam DiFranco:

I don’t know what… The trimmer, yes, thank you. I took the trimmer and I trimmed the edges and I said, “Well, that looks pretty good.” And then a couple of days later I went in and did it again and totally messed it up. So I’ve got somebody that I’ll leave nameless that I had to engage to come to the house to clean it up. So my hair is as short as it’s ever been because I really buzzed the front.

Trevor Chambers:

There’s a lot of clandestine haircuts going around. It’s hilarious. I talked to Jesse Lipson, Jess Lipson from ShareFile/Levitate fame, local entrepreneur and he and I had similar hair. You and I, we’re… I got… My head is as… I said to him, “My head is as wide as it is tall.” So it’s not pretty. All right now, the other thing that you and I… I’m an Irish kid, and I married into this Italian family. And you know that my family owns Bella Monica and then Stellino’s on Cary as well, sister restaurant. So I have a deep-rooted understanding of Italian food. But you go to an Italian meal and also, in your house, is it sauce or gravy or what?

Sam DiFranco:

It’s definitely sauce.

Trevor Chambers:

Okay, Western New York.

Sam DiFranco:

Our go-to is pasta with meatballs and sausage.

Trevor Chambers:

That’s it.

Sam DiFranco:

My favorite is veal parm. And one of which, Bella Monica used to have a wonderful veal parm -that was to die for.

Trevor Chambers:

You know what we need to do? Stress politics. We need to run, like Dick Corbett, we have to get a campaign to get that veal chop back. I mean, I think everybody needs a veal chop. Or meat eaters. Actually, I told Gonza from Gonza Tacos y Tequila the other day, I was like… That’s… The Mexican flag is my go-to there. Any comfort food, right? There’s some places… Your son’s got the same thing, he’s got the… Anyway, so I said, “All the North Raleigh needs a Mexican flag.” And I actually saw, yesterday or the day before, he’s going to get fired up for to go pretty soon here.

Sam DiFranco:

For us, as a matter of fact, we’re having veal Marsala tonight for dinner.

Trevor Chambers:

Nice. Nice. Now do you cook a little bit in the house? Or what’s up?

Sam DiFranco:

Primarily my job is simply to make the pasta and Carol does everything else. The sauces and everything.

Trevor Chambers:

Is Carrie, Carol Italiano?

Sam DiFranco:

Yeah, yeah. She… So her mother was born right in Sicily. So she’s first generation [crosstalk 00:50:16]-

Trevor Chambers:

What was her maiden name?

Sam DiFranco:

Ooh, actually it was….. and C-E-R-T-O was her mother’s maiden name. Her father’s side-

Trevor Chambers:

And her dad? Her patriarch side was what?

Sam DiFranco:

Dad was Polish.

Trevor Chambers:

Polish, okay, yeah, yeah, yeah. Yep, that’s a very classic mix up there. Up in the… Actually, my wife has Polish blood and Italian blood. So that’s interesting. Yeah. Get the blue eyes coming through in these… Yeah, it’s great. Anyway.

Well, listen, I know you’ve got to roll. I so appreciate you calling and talking to us on Meet the Masters.

Sam DiFranco:

Trevor Chambers:

Hey, let’s do this again in six months. We’ll review the tape and then we’ll come back and we’ll do this in like six months and see, and we’ll kind of review where we’re at and where we were.

Sam DiFranco:

Yeah, sounds great. Perfect.

Trevor Chambers:

Awesome brother. Hey, I’ll see you soon, and thank you for the time, and give my best to your family.

Sam DiFranco:

Thanks, Trevor, you do the same.

Trevor Chambers:

Yeah, man. Talk to you soon. Thank you.

Sam DiFranco:

Bye-bye.