In his talk, Alex explained the industrial asset class’ significance driving value in the investment space. Raising funds for industrial projects was particularly difficult. However, the capital markets are well aware of the returns and reduced volatility due to the proverbial gorilla in the market place. The organization providing legitimacy to the industry from Alex’s perspective “is AMAZON…. The transformation of traditional retail into e-Commerce, is the best thing that’s ever happened to our business. A lot of the business that was taking place in retail stores, now is taking place in our warehouses.” The e-Commerce operators are moving closer to their consumers in the hope of providing faster service. Forsgate having all of their properties 50-60 miles outside of Manhattan provides a perfect solution for the most influential national customer base.
Forsgate’s investment philosophy involves positioning themselves within close proximity to the consumer with high discretionary income. In choosing the location of investment and operation, Alex is drawn to New York and New Jersey because of the quality of life and family. It allows him to be home every night with his wife. The combination of family values and the Tri-State areas significant market to support additional industrial space prevents him from investing in high value cities like Los Angeles, Washington, South Florida and Seattle, despite their deep consumer bases, strong population growth, and locations as transportation hubs.
Forsgate has seen inflation taking effect in the replacement of warehouses. The private company capital expenditures incorporate state of the art facilities in brownfield projects; 4 of these projects are currently underway. Recently completing their last greenfield site, Forsgate now only works on previously developed sites (brownfield projects), due Alex’s particular interests, and focus on difficult projects. He noted during his extended time on campus that “there are many more moving pieces, whether it would be neighbors, environmental issues, geotechnical issues but at the end of the day, they are closer to the consumer.” Forsgate is converting landfills, suburban office buildings and an antiquated industrial building to newer industrial warehouses. The creativity in this space which Alex developed as an architect allows Forsgate to take advantage of the high barriers to entry these projects involve.
Alex also spoke to Baker students about supply chain management and the environment. Of particular mention was the destruction caused by Hurricane Sandy, reeking havoc on the New Jersey and New York shorelines and transit systems. Alex views the global supply chain being linked to the environment, transportation, water and waste management systems. It is his belief that “we need a certain amount of resiliency, depending on what is in the warehouse. If we have hospital supplies, we can’t wait a week to resume supplies. That building has to work the minute the rain stops. Now we are trying to address resiliency in all the projects we undertake, because not only does corporate America require it but the communities that we serve require it.” Alex believes that the commitments made to better the land and transit planning should include a buffering zone to protect not only real estate property, but the transit enabling the shipping of goods to those possibly in need.
Alex’s advice to Baker Program students suggested that they envision the location and lifestyle for their lives 15 years post graduation. Those two particular factors will lead the Baker students to their first 20 friends outside of school. It is these relationships that will grow, mold, and develop Baker students lives moving forward.