178. Coworking & Coffee Company Pivots to Hospitality as a Service for Multi-Family Lobbies

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178. Coworking & Coffee Company Pivots to Hospitality as a Service for Multi-Family Lobbies

00:00:01 Welcome to the everything co-working podcast, where you learn what you need to know about how the world wants to work. And now your host coworking space owner and trend expert, Jamie Russo, Welcome to the everything coworking podcast. This is your host, Jamie Rousseau. Thank you for being with me once again, if you are a listener and not subscribed to the podcast,

00:00:40 hit that subscribe button on your player so that you don't miss an episode. I release a new episode every single Wednesday. This is episode number 178, and I have a special story to share with you today. Trevor Hightower is my guest, and here's why I think you're going to enjoy his story. So 2020 has been a really challenging year in so many ways and also for some,

00:01:10 with kind of the right mindset and the right opportunity, a time to see what's possible and to force some changes in a business model. Trevor has been on an evolution of his business model for quite a while. So I met Trevor a few years ago and I think he had, at the time we were introduced, had just shifted from running his own co-working space in a multifamily apartment building and had just joined forces with the founder of craftwork,

00:01:42 which is a coffee in coworking model in the, I think Austin Dallas area. So Trevor has a real estate background, became passionate about sort of place-making and community building started his own coworking space shifted out of that model. He talks about sort of the pros and cons of his in what he learned from doing his first coworking space into the coffee and coworking model.

00:02:09 But now they've evolved into a hospitality as a service model for multifamily owners. What I think is really interesting about his story is some of the lessons they've learned, but just also the opportunities they saw in the model and what has been in the trends that have accelerated due to COVID and all the other forces that are happening in our world. So I think we can learn a lot from his journey and his perspective.

00:02:36 So I will dive into my conversation with Trevor momentarily really quickly. If you already have a coworking space and are thinking about your team planning for 2021, your community manager. And we talk about this in my episode with Trevor, that community managers are really the heart and soul, the coworking space. So I started a series that's really focused and focused in,

00:03:05 on hiring and managing community managers. It's a private podcast and this is super cool. It's like a new toy for me because I love audio content. And I know many of my listeners love audio content. So it's a private feed that is not public, but it'll show up in your podcast player, not every podcast player, but Apple podcasts and many of the others.

00:03:29 So if you want to check that out again, it's very focused on the community manager, the profile of a successful community manager, that hats that your community manager wears. And I have some new episodes coming up. A couple of my early listeners submitted some topics that they requested that we cover. So this will not be a weekly series, but it will be a private series that we do for a little bit.

00:03:54 You can register for that@everythingcoworking.com forward slash C M podcast. So now onto, Oh, really quickly. Before I jump into my conversation with Trevor, I have a favor to ask it is the season of giving. If you enjoy the podcast and get value out of it, please give this gift to other operators or soon to be operators. Everyone needs resources when they're starting a business.

00:04:25 So I do this podcast to support new operators, existing operators that are listening. Please leave a review. I will be honest. My 2020 reviews are a little bit light because we have been focused on many other things this year, helping everyone get through this challenging time and iTunes, the algorithm is just like Google my business. They like new reviews. So please do me a favor to help meet,

00:04:54 reach additional operators and seem to be operators just like you pop over to Apple podcasts or wherever you listen to your podcasts and leave a review for the show stars. And a couple of quick notes would be helpful. Okay, now we're going to dive into my conversation with Trevor welcome. I am. So looking forward to my conversation today with Trevor Hightower, who is president and chief development officer for Kraftwerk hospitality and Trevor is with me today from a Fort worth Texas.

00:05:30 He was in Houston. I think the last time we talked, so he's moved and has had a significant evolution of what he's doing in the sort of coworking hospitality space. So I want to share Trevor story with you because I think it's just a great example of the evolution and the opportunity that's in our sort of broader space. So Trevor, I will,

00:05:55 we'll dive into your story, you for joining me today. Well, thank you Jamie. So good to be here. So Trevor, I'm trying to think of how we originally met I'm blanking Parkway, Mike Fransen. Yeah, yeah. I think you need to have Mike on. I totally need to have Mike on. I haven't cut. He's another one.

00:06:18 I just need to be like Mike, let's catch up and I'll hit record. Totally. I know. I think I talked to Mike maybe right before the pandemic. He had just gotten his second dog. I think they got a Bernie doodle. Oh yeah. I don't know if he's staying in touch with Mike, but I have, and I bet his daughters love that burning doodle.

00:06:39 Yeah. Mike's just a, a world-class leader and I think this'll be interesting, but I think he just started a kind of a consulting company in a shared workspace space. So he's going to catch up Big thinker about what's happening in flex and also a little, you know, adjacent to what we're going to talk about today. So Trevor, we're going to share your story.

00:07:00 Tell us a little bit about you let's start with the personal family Fort worth. Give us the, in a little bit about your background That yeah, we'd love to, but let me just say like, as a, I think it's probably like a four year listener of the everything co-working podcast. Like I literally the first proforma that I did for my first coworking space was the everything coworking template that you had sent out that I downloaded.

00:07:29 I am a big proponent of everything that you do, Jamie, and thank you for how well you, you serve the broader coworking community and yeah. Really appreciate being here. Yeah. I live in Fort worth, Texas. I have an awesome family. My wife, Tyler, I think the appropriate Texas term is I out kicked my coverage with her.

00:07:56 Amazing. And then I have three wonderful kids. So I have a nine year old son and an eight year old daughter and a four year old daughter. So I think most recently my biggest accomplishment was as a assistant coach of my son's football team, where in Texas, there's the same number of assistant coaches as there is like an NFL team. So I'm one of like eight or nine assistant coaches.

00:08:24 But my biggest accomplishment is helping actually coach the coaches, not to take the third grade football team as serious as they would like an NFL team, which is also a problem in Texas. But yeah, we, we live and work and, and play and kind of worship men, a very kind of all concentrated area, which as a lover of place,

00:08:50 we've been intentional as part of our move to Fort worth is how could we kind of move those, those spaces closer together as we could. And so we left Fort worth and this is where Kraftwerk's headquarters is. And our, our roasting facility where we make our coffee. And so, yeah, we are grateful to be in, in such a great city.

00:09:17 So I've been to Fort worth and I don't think, I I'm sure I didn't, we have not met in person. I met some of the craftwork team at the time and visited maybe the, is the Magnolia location. Yeah, I was thinking about that the other day. I was like, when was that back in the day when I could just go see people because I wanted To,

00:09:39 I think I went to Dallas just because I was like, there's so much happening in the Dallas area. And so I was like, I'm going to go visit spaces and see people. And I went to the common desk, which I think had just opened in Fort worth and did the Dallas tours. So I can't wait to get back to doing that again.

00:09:57 Okay. So one day and you're so yeah. Tell us, walk us through your professional background and take us through like real estate coworking and kind of where you are today. I think it's a really interesting evolution. Yeah. I'll also, I went to the air force Academy for school, which I needed the discipline in my life as a, as an 18 year old.

00:10:27 And so, but I th th the neat thing about the Academy is you have a service commitment when you graduate. So my air force career, and a lot of ways really set up kind of what I'm doing now, professionally in that I got to coach as a, a football coach for the prep school at the Academy as a second Lieutenant. And really,

00:10:57 I love coaching. I love developing people. And then I love, I think the best coach has put the mission and then put their people first before themselves and then build structure and discipline to, to win. And so that was a great experience. And then I got stationed in Los Angeles and I worked on the space side of the air force. So I worked on the Atlas five launch vehicle,

00:11:24 which is a rocket. And so I, I got used to being the dumbest guy in the room because literally rocket scientists, another skillset that's come in handy all throughout my life. But while I was in the air force, I got to go to grad school. And there was one class of all of the different asset classes that you would study that seemed to make more intuitive sense to me than the others.

00:11:53 And that was real estate. And I think it's the tangible nature. And just, I think it, it made a lot more intuitive sense to me than stocks or bonds. And so when I got out of the air force, I went to work for a private REIT that was doing industrial development in California. And I got really good at spending hours and hours behind financial models.

00:12:24 I was a total nerd and, and then kind of, you know, luck is what happens when preparedness meets opportunity. And that opportunity for me was the great recession when we, our company's shrunk significantly. And I basically was telling the CEO that I would sweep the floor as I was playing to Be patient. So I got Moved to more of an asset manager,

00:12:55 was really a leasing role for these assets that we had developed that no one thought we had any chance to lease up. And we had underwritten to leases that, you know, probably weren't going to happen. And then by no skill and a lot of really the market just turning quicker than anyone had thought in that particular asset class, in that particular area,

00:13:21 we're able to lease up those properties and stabilize them. So I got credit for something I shouldn't have got credit for, but I got to learn a lot in the process. And I did learn that I, I love much more than financial modeling and I love the, the deal-making and interaction of that whole process in real estate. And so that's what led me to work with Mike and Houston.

00:13:46 Mike was the managing director of Parkway properties, and they, Mike and I had formed a relationship. And then I got to go work with Mike in Houston and Parkway for those who don't know is office reads. So I got to learn that asset class. And then I went to work for CVRE and had a chance to lead the tenant rep group in Houston.

00:14:14 So that was the journey. And it was while I was at CVRE that I really started to develop a passion and an interest. And the trend that I was seeing, a lot of our enterprise clients making decisions to go into shared office space. And that was really intriguing to me. So I have to share, I've been waiting for an opportunity to share this.

00:14:43 I was listening to a podcast with Matthew McConaughey. He just wrote a book, which I have not read yet. He was on the StoryBrand podcast, which my listeners know I'm obsessed with StoryBrand. So Donald Miller was interviewing him. I love that podcast. I love, I love McConaughey is this book. His book is called green light. It is. Yeah.

00:15:03 Did you have you read it yet? No, it's, it's on my list though. So he, I can't remember what they're talking about, but Matthew says at some point he's like, yeah, it's kind of life. It's like a combination of, you know, nature and giddy up. He says, it is like, you know, The way that he can say it.

00:15:21 Yeah, totally. And he says it much better, but I was like, that's perfect. I love that. It's kind of what you said about, you know, preparedness meets opportunity. Yeah. Yeah, no, I, I resonate with that. I, I absolutely do. It's. I think that's being ready for the opportunities when they come and we had this brief conversation before the podcast,

00:15:45 but the pandemic is a great example of just being ready for even really hard circumstances and what opportunities there might be that are created from, you know, big changes. There's always always a path to take, you know, different opportunities will, will come from any circumstance. So I'm curious the trend you were seeing when you were at CVRE in Houston, because Houston has been slower to adopt flex,

00:16:17 was that a local trend that you saw or was that kind of a broader, were you serving clients that weren't necessarily in Houston? Well, it was definitely broader. I mean, I would talk to my counterparts in other cities and it was a shared story of at that time, it was a new phenomenon in 2016, but it was large fortune 500 companies making decisions to say,

00:16:47 you know, at least a portion of our workplace strategy, we're going to allocate towards more flexible options. And so that intuitively the enterprise clients pushing towards more flexibility and wanting a better experience for their employees, that made a lot of sense to me. And then the, the kind of secular trend of the growing gig economy was something that was very interesting to me as well.

00:17:19 So I thought, you know, then that a large portion of the office market would, would be flexible. It was kind of the studying of the operators at the time that I got really excited about coworking in particular, because it was, I think yeah, as an advocate, a high cast listener of everyone co-working I know that you are a CrossFitter and the analogy that made sense to me at the time is,

00:17:52 you know, CrossFit is a great practical solution to a workout, but the reason why it's the phenomenon that it is, is that CrossFit creates community and creates connection. And so I, I noticed that, you know, the best operators were absolutely creating a great practical solution to, to work for many of its members, but the ones that were really capturing market share were doing a really good job of creating connection and community.

00:18:23 Yes, this CrossFitter misses her people. I CrossFit in my gym. I have all the, or in my garage, I should say, I have all the things at home. And I, especially, we just went back to purple, which is the worst stage. And so, yeah, I just it's, I realized that every so often I'm like,

00:18:44 Oh my gosh, it's not about the workout. It's about the people I miss the people. Totally. But yes, we won't get sidelined into CrossFit. So you decided to leave the glamour and stability of CVRE. And Yeah, this is, this is where I, I, again, reference my amazing wife who I've out, kicked my coverage with,

00:19:07 but it was a, I think we had just had our third child when we decided to start a work flourish. And so I think like many things in my life, I wouldn't go back and do it again. It's like basic training. I feel that way and all the best things in my life, but it, the, the real, you know,

00:19:38 passion for starting a coworking spaces was derived from what we were talking about earlier. I, I I've always loved real estate, but, you know, I've loved most of all the places that create connection and community. And so that was the desire behind starting a coworking space. We accidentally happened to start that coworking space and a apartment building. And that was because I had a friend who was developing a,

00:20:12 a pretty significant mid-rise multi-family project in Houston. And in talking with him, we both had a kind of shared aha and shared conviction that amenity space and multifamily oftentimes is beautiful. There's a lot of money spent on it, but it goes way under utilized if utilized at all by the residents. And so in sharing kind of the passion for coworking, and then his,

00:20:43 the problem that he was trying to solve in creating a differentiated in his mini space, we decided, well, what if, you know, we put a co-working space in the already designed amenities space and then converted the first floor units into office suites, and essentially tried to bring the best components of a coworking operation to the operation of the multifamily building. And so that is what we did at work flourish.

00:21:13 And the neat thing about it was we had some hunches that there'd be some synergies between the two uses, but those really came to fruition when we started to lease, you know, units and then start to start to operate the coworking space. And that there were, I think it was just over 20 leases that occurred in the multifamily building that were either members moving in or member employees,

00:21:42 or there was a, you know, a conference meeting in the coworking space that led to an individual, at least in this space. But even more than that, it was a philosophy of how we would manage the property in the same way that you would think about a community manager managing a coworking space. So how do you create, you know, shared experiences?

00:22:09 How do you create, you know, groups that had similar interests and those types of things weren't necessarily being done in multifamily. And we tried that At all right, to your point. I know, I remember when we moved to the Bay area, we were in temporary corporate housing in an apartment building and it had this, I was the one person who would go co-work in like the super nice amenities space to your point.

00:22:38 It was this gorgeous space, right by the pool, all these windows, a fireplace like the kitchen bar area, but I'd be sitting in there all by myself. And it was huge. It took up a ton of real estate. And then right, the staff for the property was very much focused on like maintenance and giving people their packages, which was also before all of the Amazon lockers and the tech that can manage packages.

00:23:03 And, you know, I knew no one, I can't even imagine being a part of someplace that was more intentional about that role. Yeah. Yeah. I mean, it's, it's very intuitive for, I think the audience of this podcast to say, well, of course, like you would want to create, you know, the, I mean,

00:23:22 that's, that's the philosophy and mentality of how you create, you know, a really sticky and really, and really great coworking space. But the multi-family, I think industry has a different arc that, you know, it, the beginning of it treated the property more as a product than maybe a service or an, and so it was really neat to see residents respond to that and it,

00:23:50 and it leads to asset value so that the coworking operation actually increase value for the asset itself, which I was, it was really neat to see. And there you were going from spreadsheets to leasing to operating, which was a totally new skill set to learn. Absolutely. I wish I wish I had the coworking startup school back then would have helped me a lot.

00:24:21 The thing about coworking is so many varied, smart, intelligent, successful people get into it, and they've just never, you know, had to flex those muscles before it's a really operational business, but you were seeing these strategic opportunities that were kind of keeping you going. Okay. So tell us about what the evolution of, of work flourish and how it sort of flowed into what was next for you.

00:24:45 Yeah, well, as, as successful as the operation was to the asset, the actual unit economics of workforce itself, we, it was profitable, but very slim margins 'cause we were essentially doing a lease arbitrage model. We were paying a lease on the space that we were in. And so very similar to I'm sure many of the operators listening, then everyone on this particularly audience to understand smaller footprint,

00:25:19 coworking space is hard to drive the type of economics that you need. And it's why, you know, inherently coworking spaces tend to be larger footprints. And so that was a challenge as we thought about how could we scale work flourish? And, and so it's just, again, kind of the luck and opportunity dynamic is I was introduced to Riley kilts by a mutual friend who he worked with while he was at Blackstone.

00:25:56 And he saw what I was doing at work flourish. And he, he knew what Riley was doing at craft. And he, he just said, you guys need to meet. And so I drove up to the Magnolia location that you went to and, and met Riley. And I think like at that stage, in my entrepreneurial journey, I, I might've even said this out loud to Riley,

00:26:21 but I, I said, you know, I'm probably just going to go back to my day job and I'm going to go get a real job. And somehow out of, you know, that type of, you know, disposition, confidence, overwhelming confidence, we had one of those meetings where we were finishing each other's sentences. You know, we,

00:26:50 the, the missional, why of why he started crap work and why I started work flourish, where very much like eerily aligned and all the way to the, the strategy of both of us seeing this opportunity and under utilized space and multifamily, this was something that Riley was already thinking about in his expansion of craft work. And so I left that meeting and I called my wife and Who already thought you were going back to your day job?

00:27:24 Exactly, exactly. She needs to be interviewed on this podcast, but the, the kind of a strength and weakness of mine is I tend to think everybody is awesome. Like, I, it's hard for me to see the downside and, and, and my wife on the other hand, she's like 99.9% on, like, she could say, I could tell you that guy was shady six months ago,

00:27:51 if you just thought. Yeah. So the plan was, we had some meetings set up with multi-family owners and for our old, you know, for the workforce model, just coworking going into a mini space. So the plan was, what if like Riley just joined those meetings and he stayed at our house. So how do we pitch together? And then as my,

00:28:21 you know, my highly intuitive wife, so two things happen. We, we met with large owners and I had never been in a meeting when it was just me where the owner said, okay, we have a project for you. I heard a lot of, Oh, this is a very interesting idea. We should, we'll get back to you.

00:28:42 So I, you know, I'm not, again, not the smartest guy in the room, but I, I realized there was something when Riley and I were in the room together when we pitched coffee and co-working together that worked a lot better. And then we had dinner, my wife and, and Riley that night, and my kids met Riley and,

00:29:06 you know, going to bed that night and Tyler just turns over and says, you have to partner with him. And so both of those things were very affirming and we could have a whole podcast on the partnership relationship. I'm super fascinated because it almost, it was so rarely actually works. Right. I think the Riley or the, the Tyler test is,

00:29:30 is critical. So I loved it. She got involved because, and people really, I wonder if you were probably in this boat a little bit too, it's lonely to be a solo, really lonely. And I talked to people a lot of times I'll do like one-on-ones with people and they'll ask me about a partnership and I'll be like, just, maybe,

00:29:48 could you hire someone to talk to you? Don't don't want to partner because you're lonely, but I love like you had this chemistry and this really unique, shared vision. So, but yes, we can do a long podcast about partnerships. Yeah. Bet. The irony is both of us, we're not looking for a partner. And the other thing that I I'd mentioned for anyone out there who's,

00:30:17 you know, thinking about partnering or bringing on a partner is with all of those, you know, really good aligning factors. We still Riley. And I went through a, we went through an accelerator and they, they essentially forced us to do what, what, I would only describe it as like premarital counseling. We answered a set of questions that were like the most uncomfortable questions that you could ever possibly ask an answer.

00:30:48 And it was one of the most helpful things that we've ever used. We is like all the worst case scenarios. Okay. Right. Like what is, how would you handle? Right. Interesting. Yeah. It was very helpful. And, and so now we're, I guess it's, you know, two, over two years into our partnership and it's,

00:31:09 it's wonderful. And, and there's, there is a good balance of strengths and weaknesses and, and how we dividing, which lanes that we're in. And, and so it's been a very rewarding partnership. I'm very grateful for, for Riley. So T so real quick on Riley, did you say his background was Blackstone? So investment side, like what was his,

00:31:38 what was his background? He was an analyst on their investment team and worked in South America. And so there was a portfolio of assets that I think all different asset types. And he was part of the team doing this large analysis across multiple markets and multiple asset classes. So while I spent, you know, my first part of my real estate career modeling a lot,

00:32:18 like, right, that's, Riley's love language. So he, he is, he is 10 times the, you know, financial model or as I am just kind of a Nate gift at it. But yeah, he, he, he then left Blackstone to start craft work. And, and so when I had met Riley, they had opened their second craftwork location and kind of the uniqueness of the craft work model rooted in the same missional Y of seeing this needs to create a connection and community.

00:32:53 And I think he even had a, I think a more clear definition of the problem of loneliness that I know you've talked before on Jamie is. And, and so he experienced loneliness as he was, I think, working from a workspace in South America. And he's a, he's an introvert, but he's like, if I'm feeling this, and I know,

00:33:18 I know that this is a totally. And so he, he, his missional incentive, starting Kraftwerk was the most community oriented spaces that he had been in were coffee shops. And so what if you could create the environment of workplace by having kind of the specialty coffee shop as the front door that really fueled the, the energy and vibrancy of the coworking space.

00:33:43 And, and so that's, he started the two locations and was opening his third. When we first met, I'm always just interested in people's right? Like their why and how, especially to men spreadsheet, you know, brains like have this passion for community and addressing the loneliness problem and, and get into this, you know, very community oriented real estate aspects,

00:34:08 100% and operational businesses. And we could do another podcast on that. I'm have you read rocket fuel. Oh, so is that, do we have rockets? Yeah. And you highlighted every page. Thank you. You never Macy. This is All right. So I'm holding kill right here. It's I mean, I just think it's a, it's a super interesting for visionaries,

00:34:41 you know, you and Riley probably both fall into the visionary hat, right? Like you have these big ideas, you sell your ideas. You're, you're, you're going after. Like you probably have to stop yourselves from too many ideas. And to bring that into an operational model is, is hard. And I think, I think I just, I,

00:35:02 it's interesting to watch when people are successful doing that, because I think coworking is the business is very operational and it's hard, I think for visionary people to center, bring it down and actually make it happen and then execute on that vision to have the discipline, to see that through. So. Okay. So you met Riley. Yeah. Can you share a little bit about what a craft work,

00:35:24 the sort of that original model looks like? Yes. Well, so when, after the fateful meeting where Tyler gave the, okay, we built our model around an idea of meeting with multi-family developers when the asset was in pre-development and communicating the thesis that we saw that amenity space is way under utilized. And that multifamily owners are all in this similar amenities,

00:36:04 arms, race to try to compete for the same demographic Rooftop deck, the right, all the thing, the golf, yeah. That totally. Yeah. Mara Hauser. You probably heard her, they have one in their building too, that the golf simulator next to the roof deck, Arms race. And, and again, it's not a bad strategy because on some level,

00:36:30 like if you are competing specifically at real estate as a product and one set of amenities differentiating as, than another, I think had, there was some success in how to, you know, I think particularly attract residents on the front end, our thesis was that you don't want to win the minis arms race you want, we want to win an experience,

00:36:55 you know, race, and, and you can do that through a really vibrant, you know, coffee and coworking space. And so, and even if a kind of stodgy New York, you know, financially minded equity person would not really buy into, Hey, we want to create a better experience through coffee and coworking in our multifamily, our model at the time made sense,

00:37:23 because we were converting that space into income producing space. I had a lease attached to it. So we were asking the owner to allocate what they were going to spend on the lobby and amenity space on our build-out and pay for our build out. But now they have an income stream that had capitalized value. And so it made a lot of sense to them.

00:37:45 And so that is what we Rose capital around and then started to go to market with. And we opened our first location in that model in Austin, at a project called flat iron and the domain. And, and it was, it was really neat to see it coming to life and to the, the, the ne the best part about it was hearing from residents that they were having a,

00:38:18 a overall better experience living there because they had this touch point that they had consistency on every morning. And then there was kind of a uniqueness in the offering of the coworking that, you know, the, the co-rec had some unique benefits of being attached to the multifamily property. And so that was, that was great. And what we were running on the field with,

00:38:46 and until recently the pandemic hit. Hmm. So the original model was built out to paid for, but you're signing a lease and you're essentially running coworking and coffee. So members would pay or residents, sorry. If they lived in the building where anybody outside of the building would still pay to use the coworking space and buy coffee, They would. Yeah.

00:39:12 And, and this was kind of a key part of the model that was missing at work flourish in that if you're gonna operate smaller footprint co-working space, I think it's wise to think about multiple streams of revenue. And so how the, the unit economics at work for craft work is at a certain occupancy of the coworking space, call it 75%, you're effectively covering your fixed costs.

00:39:44 And then you, your upside, your margins coming from the copy sales, but you're, you have an advantage to maybe a, a typical coffee shop that's only selling coffee, and then an advantage to a smaller footprint coworking space. That was the financial benefit. The operational benefit was you had this synergy of the energy coming from a coffee shop into the coworking space.

00:40:11 And then the benefit of going into a multi-family building was that the build-out was paid for residents would get discounts to coffee and, and discounts to the coworking space. But they, if the residents so opted into having the co-work space, they would self pay for it. And, and then there was a neat activation of the lobby that was occurring because of the coffee shop was adjacent to the lobby area that was driving vibrancy and additional leads to the asset.

00:40:45 So that was part of the value proposition to the multifamily owner. I'm surprised after the value you saw to the value of the building where work flourish was initially, did it occur to you to like it's? So I guess it's hard to sort of take a cut of that, right? Like, how do you quantify that and how does it come back to you?

00:41:10 Yeah, I mean, that's, it was always, we were thinking about that. And I think that it's really what led to us beginning to think about this iteration of our model that we're doing now at Cropper hospitality, and that we were measurably increasing the RET prospective resident leads. We were integrated with the leasing team and that we were providing, you know,

00:41:41 drinks of a prospective residents choice, and they were ending their, their tour, their tour there. And we were seeing higher retention and the building. And so we were, we were begging the question, you know, is there an opportunity for us to become a service provider or, or to think about our model since we are creating so much value and,

00:42:07 and as kind of real estate background minded people, we were thinking, is there a way that we could, you know, potentially, you know, become part of the development in the future. And that's still something that we think about, but that's, that's definitely down the road. So next iteration pandemic happens, then what, March, 2020 happens April, 2020. Yeah.

00:42:35 And thankfully in November of 2019, we were meeting with a very large multi-family owner and we kind of gave our best presentation of the model that I just described. And he said, you know, this is great. And we are already kind of thinking about the hotel vacation of our next set of developments. So we have a project in Austin and one in San Francisco,

00:43:05 but he's like, guys, this, these properties don't deliver until 2024. And I have all these existing properties, what can you do? And my existing properties. And it was not necessarily a good moment as Riley and I didn't have a good answer for him. It just doesn't work in existing properties. And so it did force us to go to the drawing board and ask the question,

00:43:33 what would have to be true for Crawford to go into an existing asset. And some of the first principles that we arrived at was, okay, we have to be low risk for the owner. We can't make any major structural changes. We probably can't increase asset expense, even though we're, you know, we w we are going to be asking for a fee.

00:43:57 And so we started to ask owners what pain points were. And beginning of 2020, this is, this is literally in January and February. And we had a consistent reply from owners that concierge existing concierge services. A lot of times there, the best part of the asset, and that you have individuals who are amazing and resonance love them, but the consistency of management and the consistency of training and the integration of the concierge with the third party property manager or the,

00:44:35 the property manager, that's part of the company left a lot to be desired. And so we were thinking, okay, what if we replaced the concierge expense, the line item expense in the asset. And then we were able to somehow put a, a bar in the existing lobby and just convert the existing lobby, which a lot of times is beautiful space into this activated community hub.

00:45:01 And that was a thought that we had, and that's when the pandemic happened. We had a, a mentor say that there's going to be a blizzard. There's going to be a winter. And there was going to be a mini ice age. And he gave us this wise counsel in March, and basically said during the blizzard, which is when everything is going to shut down,

00:45:28 you as a, essentially a consumer facing retailer need to keep your why your why's good, but your how and your, what needs to completely change. It was very Wise counsel. And so We ended up having to Shut down our four existing locations and furlough our team and many on this call knows how difficult that is or is going through that right now.

00:45:58 So those were hard days, but you know, some of the most rewarding days, and there's one in particular where we gathered around as a very small team, and we had a whiteboard and we said, okay, we're, we're no longer going to be paying rent. We're not gonna pay paying lease. We're going to get paid for, for being in buildings.

00:46:21 And, and so, and at that point, it was really just an idea, but we use the blizzard to rally all of our team, all of our focus and all of our resources into developing this agile model that became Crawford hospitality. And, and so crapper hospitality is what I described. It's a, a bar that is placed in a lobby or an,

00:46:53 a mini space in multi-family building. The, the use case that seems to be our beachhead is in high rise or mid rise multifamily assets that either have a conscientious expense line item, or have kind of the, the budget to invest in a Crawford hospitality to really differentiate the experience for residents. And so we take a lot of the principles that we've learned through operating our coffee shops in our coworking spaces and apply them in this new function where we are.

00:47:38 We essentially created a new role called the bar host, which is this combination of a concierge as a barista and a community manager. And they are placed in the building to really be focused on one thing. And one thing only, and that's delighting the end user of the resident, do that through really great F and B really great coffee. We expanded our menu to focus on the needs of the residents.

00:48:07 So we added a really healthy grab and go food items, and then an alcohol option and evening convenient grab and go items, or the residents like bottles of wine. And, and so we were not sure how the, our partner owners would respond to the new model when winter came or even the, the mini ice age. And we can talk more about this,

00:48:36 but it's been really gratifying to have such a good response from owners. And it, we think it's because the pandemic really accelerated some trends that were already occurring within multifamily industry to think about how they could bring a hospitality experience to their assets, to differentiate their asset through really in user experience. And so that's where we're really hitting on and why we've had the kind of initial adoption that we've had.

00:49:14 So what did the concierge in the building do before? So you're replacing a role that existed. What was their role? It's it's it's varied, but primarily they would be the grieving party for resonance guest, third parties, a huge part of their role. It would center around package receipt. Okay. So kind of what I would see. Yeah. The term concierge sounds a little more elevated than maybe what we're actually doing.

00:49:48 Okay. It's a package receipt and tasks like giving resonant fobs and yeah. Like sorta onboarding. Yeah. The feedback that that residents loved the most about existing concierge is really the human connection. That there's a person who knows their name now. And so, and then there's, there's different variants of in super high rise assets. The concierge maybe acts more like a hotel concierge where they are making reservations and doing those types of tasks.

00:50:27 And so we saw an opportunity to have a bar host fulfill kind of the most important parts of those roles, and then add an additional layer of services that are geared towards resident experience. So residents have a unique billing app that they don't have to pay at the point of sale. We're doing poolside service. So if residents that want to order food or drink from their pool,

00:50:53 then we bring that out to them. But the most important thing that we could possibly do is know our residents name. No, there's no their stories and, and be that consistent connection point, which going back to the loneliness epidemic was extremely important before the pandemic. And I think becomes all the more important, you know, in the, in the mini ice age of how we can create those consistent touchpoints of human interaction for,

00:51:24 for residents who, who really need that. Yep. I love that. It's, I mean, it feels like on the surface, it's a slight shift, but, but it's a major shift it's like taking that role from being really sort of operational, right. Like packaged focused and yeah. Greet the members and, you know, get a bottle of water for people coming for tours to this like totally different like community focused.

00:51:50 And I'm here to like greet you with a smile and get you a coffee and all of these amenities. I mean, it's, it makes complete sense. You sort of wonder, right. How did we start with this layer? That was not all that exciting because it could be so much better, which what you're doing and to have somebody bring me my,

00:52:10 my almond milk cappuccino poolside sign me up. Right. Yeah. I mean, I think that what's neat about it is you do see parts of the story that we were just talking about this come out and this Crawford hospitality, I mean, it's the path that we had to take to learn, okay, this is ultimately, you know, how, and,

00:52:39 and what residents need and how we can deliver that. And so the, the multifamily industry is an amazing industry. And property managers are, do a phenomenal job. They're not structured in a way that they can focus on delighting the end user that they're, they're so inundated with, you know, maintenance requests and leasing the building that I think there are amazing property managers who can straddle both of those,

00:53:11 but it's really helpful to have a group who we are integrated with the property manager in that we're doing some of the same things that we did in the previous model where providing drinks to prospective residents, and we're really trading a really warm greeting, but we're also like we get this neat ability of like, we can focus on the part of the value chain.

00:53:35 That's all centered around. How do we delight the, Yeah. So I'm curious about your brand, so Kraftwerk coffee, and co-working sort of like hip boutique local, and you can build that from scratch in sort of the previous model. And now you're integrating into an existing situation. How do you manage the brand alignment and sort of consistent experience, or do you not,

00:54:03 is that not kind of, No, it's, it's a great question. We, it, as you, as you can imagine in this new model, we are very much a B to B to C company. So we have two clients. I mean, we have a owner client, and we have the, the end user, the consumer client,

00:54:26 which, you know, is the resonant. If we're delighting the resonant, then we're, we're best serving our B2B client. But the branding is very important for us, for our B2B client that like the asset is getting credit for craft work, but in order for the asset to get credit for the craft work, Crawford's brand does need to be distinct from the asset because,

00:54:54 you know, it's like we told Heinz, you know, no one would think like a Heinz coffee shop is cool. Right. But they would think that, you know, craft work at Heinz, like it is like Heinz gets the credit for that. So yeah, we, we want, we want the asset to get the credit. And then from a design standpoint,

00:55:17 all of the, the building, the bar has to fit the building and the operation and the offering has to fit the building. So there's a contextual visitation of the materials use that fit. So it feels like it always belongs. And then all the way down to the types of wine that we're offering, matching the demographic. So you go through a process to kind of figure out,

00:55:47 okay, existing space, existing sort of demographic of resident, how do we bring our brand? But you use word contextualize it for, for the fit. Yeah, absolutely. I mean, the, the, the neat thing is it's a very simple hundred, 120 square foot are as the only change that we're making that, that bar has some, you know,

00:56:14 design principles that transcend, you know, our, our logo and the design and the equipment. But then beyond that, we want to make sure that the bar cause we're going into existing assets. A lot of times it feels like it always belonged there. And so that's why we adopt the materials that are already being used in the lobby or the mini space.

00:56:40 And, and then all of our hospitality locations are preffered at the building's name. So that that building gets the credit for having craft work there. So do you sort of poke your nose into other offerings? Like if they have the rooftop deck that's getting not getting used or the, the golf simulator or, you know, I don't know what it is or the,

00:57:08 you know, or even as simple as the seating area, because you're not running coworking, this is simply a hospitality offering with the very human connection to it. What if the lobby is sitting there and it's an otherwise not activated, or does it get activated by nature of, of what you're doing with the bar? That's a, it's a great question.

00:57:29 One of the trends that we obviously see accelerated from COVID is the mass adoption of remote work overnight. And that, of course, it's gonna have lingering impact on decision decisions that we've made around the, the amount of remote work that employers allocate to their, their teams. So a general trend, however, it shakes out is going to be an increase in the number of days that residents are going to need a space for remote work.

00:58:05 And so we think that, and believe that there there's already a really beautiful existing mini space designed for work in apartment buildings, and that space can only be enhanced and brought to life with an F and D operation in a hospitality, focused, a bar host. Who's essentially stewarding that space. There's not really any programming, consistent programming going on in the existing space,

00:58:38 and there's not the food and beverage component. So we want to bring to life that space and, and be that steward of the amenity space that can make that space more valuable. It won't be service in a way that, you know, some of the best coworking spaces are, but there is going to be a component that's brought to life from having our F and B our hosts.

00:59:03 They're providing a really great food. And also when there's not transactions going at the bar that individual can check in on residents who are utilizing the space and see how they're doing, if they need anything. So we're excited about that. So I'm curious with this sort of new opportunity that's been accelerated, what does the future look like, sort of your mix,

00:59:30 will you do more coffee and coworking, or is the new model? The focus? Well, you know, we are a small company and we are too visionary. So we need a healthy dose of discipline to stay focused on, you know, this, I think we all believe that the hospitality service model is the future of our company. We have wonderful spaces that we call our legacy spaces that we're continuing to operate in,

01:00:04 that we love. And so we have, you know, two different essential business lines or within our company, but the future is our hostile service model. And that's primarily because the model is inherently more scalable. It's less capital-intensive for, for us, there's no capital allocation, and it's a lot less capital intensive for our owner partners, but it's, it's also the most exciting in helping a whole industry rethink the way that they operate their building in a way that,

01:00:43 you know, really focuses on delighting the end user. And so we have six deals that are approved that will launch, and he won in Q2. We opened our first hospitality location here in Fort worth just a few weeks ago. And our, our goal is to really in Texas, initially growth are our locations. And I think with the right partners try to then grow outside of Texas.

01:01:15 And, and I think in a disciplined way, try to really gain as much market share as we can with this model. Cause we don't think we'll be the only ones thinking about this for, you know, in the future. So we're, we're excited to kind of have a headstart. How do you, I'm curious about sort of your overall view of,

01:01:45 of 2020. Do you feel like hard decisions in March and April? Is there a small part that feels sort of grateful that you were forced to say no more lease, then we're build outs, like we're going for, you know, capital, light service approach. I mean, it have taken longer to, to get there, do you think, Well,

01:02:08 there's no question we may not have made the decision. And so I think in that same way that I wouldn't when I go back and have to go through it again, cause there was really hard days. I think that, you know, there, there are there instances like this and many of the people I talked to our employees and friends and, and,

01:02:37 and other business leaders that there are several linings that ha that are occurring from this very, very difficult time personally and professionally, because you're forced to ask questions that you wouldn't normally ask and necessity does become the mother of invention. And so we would not have pivoted to a model that really is a better, I think, a better opportunity for craft work,

01:03:09 but for the pandemic. And I wouldn't have spent as much time with my, my kids and my wife as I have, but for the pandemic and that's not discounting how unbelievably difficult this time has been. It's just, there has been really good silver linings and created decisions that we wouldn't have otherwise made. So I'm curious, what phase are we in?

01:03:36 Are we in the ice age or yeah. Yeah. That's a good question. You know, I think it's so regional, right? I mean, there's now I think there are regions that are, are definitely in winter and you know, and then I think that the way that we thought about them, the mini ice age, or just, you know,

01:03:56 what are the, the changes that occur for a longer period of time and, and how do we adjust our offering to meet those changes? And, and so, and I think that now it seems so obvious, but that this, this is the reality that what the pandemic has done is accelerated a lot of trends that were already occurring. And so I think that's kind of the exciting thing is wherever the puck was going to punches has gone a lot faster and you have to skate faster to get there.

01:04:38 Well, I, I think it's serving you well to accept sort of the hard times of this year, but to say, okay, what right? What can, what can we do? What are the opportunities here? So, and D to skate after the puck, not everybody's doing that. I think it's, it's not easy, right? It takes,

01:04:56 it takes a certain personality and a certain sort of like discipline to keep like seeing the optimism, you know, that there's gotta be something positive coming out of this. So, Trevor, I love your story. I appreciate the time we've been talking for quite a while. So I'm going to respect your time and I could keep going and ask you many more questions,

01:05:20 but we might have to do this again. Once you've gotten this model underway and I suspect given your history, there will be evolutions of this one. Well, I do want To tell us, I'm going to put links in the show notes to the, your coffee and coworking locations. Cause they're always people interested in that. And then the hospitality program,

01:05:41 if someone here's, what you're offering is an interested, what's the best way to contact you. Yeah. Our website has a link for real estate partners. If you're an owner of a multi-family asset and you want to look at the offering and that's probably the best way to, to get in contact with us. And we'd love to talk to you if you are interested in that.

01:06:07 And, and then yeah, we, at our core, I think that the, the heart of the, our coworking operation will always drive, drive a lot of our in our operational decisions and the hospitality company, meaning that the most important part of a coworking operation, the most important part of, you know, this hospitality service operation is our people.

01:06:33 And so the, the hiring and training and equipping a lot of what you do in your community manager program is the most important part. And with anything for us is that transcends. So if anyone is interested in ever checking out one of our coworking space, we'd love to love to see you in Fort worth or Austin. Awesome. Thank you, Trevor.

01:06:54 I appreciate your, your time and willingness to share your story. Yeah. Thank you, Jamie.

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