An Interview With: Bob Pinkard

Pinkard, who grew up in Baltimore, co-founded Cassidy & Pinkard, one of the largest independent real estate companies in the Washington area. His firm has handled leasing and sales all over the region, including most recent sales of Tysons International Plaza and the Watergate office building. The company also has leasing assignments at the Portals in Southwest Washington and the Westory downtown. Cassidy & Pinkard recently celebrated its 25th anniversary.

Editor's Note: With this issue, Tim Mazzucca debuts as interviewer for Bisnow on Business’ Washington Real Estate Weekly. He is the former real estate reporter for the Washington Business Journal and now a business reporter for a national newspaper in Washington.

Tim Mazzuca for Bisnow on Business: Can you talk a little about the anniversary?
Cassidy & Pinkard opened its doors the first day of February in 1981. It’s really exciting to have been in the commercial real estate industry that long. 25 years is an epoch in the real estate business, or in any business. So, we decided that we would celebrate this landmark anniversary by hosting a number of special events, including a speaker series featuring the top professionals in our industry. In November, we had Don Miller, chief real estate officer of Wells Real Estate Fund, come in and talk about the Wells model, and his thoughts on the future of real estate. That was really interesting to people because Wells has been one of the most dramatic success stories over the last several years in real estate. Then in January, we held our Capital Markets program where Dr. Peter Linneman from Penn’s Wharton School spoke on the economy and its effect on our industry. We’re planning another program later this year as well. We’re doing a fair amount of business with alumni from Cassidy & Pinkard and will host an alumni reception in April as part of our 25th anniversary. Internally, we had celebrations in our offices located in DC, Virginia and Maryland on Feb. 1, and we’re hosting an all-company event in March as well. It’s a very busy time in the real estate business now, and everyone here is busy, but we felt it was important to take time and celebrate our success and our client relationships.

In reflecting on the 25 years, do you remember the first couple of weeks? Were you worried about the business at all ever when you first started?
Worried? Only every day for the past 25 years. It was extraordinarily exciting during those first few weeks because we had no idea how successful we were going to be, but we were gung-ho. It was an adventure. I think in many ways we were fortunate because the real estate business was not a particularly mature business back then. Essentially, we were able to grow up with the business. We started with a couple of people and now we have more than 150 employees. It would be a lot harder to start up today because for one thing the technology requirements you need to compete are so expensive. It’s much harder for someone to do today what we did back then.

I’m not trying to insinuate anything, but it has been 25 years, and you’ve done pretty well. Have you thought about succession planning?
Yes, we’ve talked about it. For me personally, I’ve had a great time, especially the last couple of years. As we grow, the real challenge is that we’re bringing people into leadership positions at Cassidy & Pinkard. That’s hard because there’s a little bit of a letting-go process on my part. It’s working out well, though. There are other people within the company who are doing a great job of taking more initiative.

Was there one time when you knew the business would be O.K.? A moment when you said, “All right, I can sleep tonight”?
Well, there was one day that I’ll never forget when I signed two deals the same day – the sale of the land under 1225 Eye St, NW to Akridge, and then a sale of a piece of land at the King Street Metro Station to CarrAmerica. I remember driving back from Alexandria after the second deal signed. I was on the GW Parkway with the windows down, you know, the classic movie scene and thinking, “This is great!” All that kind of youthful exuberance rose up. As you may remember, the early ‘90s were terrible. We almost went out of business then. So you know, success is not a destination, it’s a journey.

What’s different with the real estate market as it is today? Are there any indicators that worry you?
That’s a great question. There’s always a general sense of worry about that one thing that is unforeseen like a terrorist incident or the whole RTC period [Resolution Trust Corp.], where you had a banking crisis that precipitated a real estate crisis. The thing that I worry about the most is that event or series of events that you can’t see in front of you. But based on what I can see now, I think the indicators are all solid for our business in this particular market. Yes, there could be some bumps along the road in terms of what happens if interest rates go up or there’s a housing bubble. But the reality in this market is that we are creating a lot of jobs here. I think that that will continue.

Any unique regional concerns?
One local factor that is of concern to me is that the pace of development over the last several years has been very strong and the transportation infrastructure has not kept pace. How long can we go on without the appropriate infrastructure improvements? You read about what Gov. Tim Kaine is talking about doing in Virginia, getting more money for transportation. Our political leaders need to be forward thinking in terms of allocating funds to improve the transportation system. We really need regional leadership. We’ve got good leaders in various jurisdictions, but we don’t have good regional leadership. Someone or some group need to provide regional leadership on these growth and transportation issues. I’d say that’s one Achilles heel in our region.

Are there any clear candidates for whom that might be, whether it be a person or position?
I think the simple answer to that is no, because of the way we are structured as a region. Maryland has its issues, Virginia has its issues, and D.C. has its issues. Having said that, I think [Maryland Gov. Bob] Ehrlich and [Virginia Gov. Mark] Warner and their administrations were probably the most collaborative since I’ve been in the business. Whether Kaine and Ehrlich or whoever Ehrlich’s successor is can continue to come together will be important going forward. Then, of course, D.C. is really all about baseball. When you think about it, that seems to be a driving economic development issue. D.C. is somewhat different. It has its own issues. It’s kind of locked into its own transportation system.

What’s driving the vacancies down in the suburbs?
We’ve had increasing job growth in Northern Virginia driven by government contractors and post-9/11 spending from a variety of agencies. On the Maryland side, demand has grown. Maryland is a steady market, but there’s very little new supply being delivered in 2006. I think it’s more lack of supply in Maryland and tremendous demand drivers in Virginia.

And you mentioned baseball. What do you think about the whole situation?
I think the baseball deal has to get done. Baseball is the canary in the mineshaft for how healthy our governance is in D.C. If the mayor and the City Council fumble this one, that does not bode well for D.C. I’d say that’s a big deal. We’ve come through in the last 20 years where we had some periods of governance issues in the District. We’ve been through the Control Board and all of the problems of the Barry administration. We’ve emerged over the past six to eight years to where the city is considered a healthy place, where people are moving back, and where it’s considered a good place to do business. But if we can‘t, as a city, make a deal with Major League Baseball, what will that say about us and how we operate, and whether the mayor and the City Council can function as a government? It’s a big economic development piece. I worry about it saying a lot more about who we are than just having baseball here or not having baseball here.

And not to get too technical, but let’s discuss the hypothetical if the stadium comes and is built, how far is the economic impact felt?
I think the economic impact will be more far reaching than people think. We’re seeing companies buying real estate five or six blocks from the stadium, banking that the stadium will create value in their locations. So it’s impacting everything from close in to the potential stadium site to the Navy Yard, and then north to the Capitol. This is also a real stepping stone for economic development into Anacostia. There are going to be people who are attracted to this area of the city that would never go down there otherwise. So this becomes a stepping stone to the other side of the river and pulls together people from Wards 7 and 8 into the more affluent areas of the city. I think that’s going to be a positive thing for the city.

The condo boom. I was sitting on the couch last night, and I was wondering if anyone’s crunching numbers and figured out how much condo development has displaced office space. Do you think all the condo development has hurt commercial leasing at all?
No, actually not. We’ve seen some conversions of office buildings to condos, but that helps to control the supply of office space. It makes it harder to build an office, particularly inside the Beltway. It will lower the vacancy rate a bit because it’s taking some chronically underperforming or vacant office buildings that are really C grade out of the market and converting them to residential. It’s not a huge trend, though.

Federal government. Do you guys have an outlook on that this year?
I’m sure you’ve heard about the pull back of GSA -- the Veterans Administration and the Justice Department. That’s going to have an impact on leasing activity in ‘06 and ‘07. That’s unfortunate. It impacts about 1.5 million square feet. We’re all trying to get our arms around exactly what’s going on with the federal government. I think we’re going to witness more moving around of GSA over the next two to 10 years than we’ve seen in a long time because of BRAC [Base Realignment and Closure]. So we need to evaluate what this means to Arlington and to Fairfax around Fort Belvoir, and to the corridor in between Fort Belvoir and the Pentagon. It could create some real estate opportunities. Will you see GSA agencies moving out of D.C. to backfill some of those Virginia locations? Could that have a negative impact on D.C. leasing? Those are some of the questions that people are asking. Right now there are more questions than answers. Cassidy & Pinkard is constantly evaluating these issues so we can keep our clients ahead of the curve. There also is the thought that the impetus behind BRAC in this region and moving from leased space into owned space came from the Secretary of Defense. Congress wasn’t really wild about it; the agencies weren’t really wild about it. So to the extent that he’s out of office in two years, we’re wondering where the political impetus will come from to follow through on all these proposed relocations.

How is 2006 looking for the real estate market?
I think 2006 is going to be a very good year. We’re going to see vacancy rates fall in Virginia and in Maryland, which is good. Those markets are going to continue to tighten. D.C. has a lot of supply coming, but demand has been growing every year. I think the vacancy rate will go up slightly in D.C. The big question is, will demand pick by year end?

What effect will rising interest rates have on the local real estate market? What’s the worst case scenario, the best case scenario?
The worst case scenario is that rates go up a lot. I think we can absorb a bit of an increase. I don’t worry much about interest rates because they’re unpredictable. People who are a lot smarter than I who follow them on a regular basis are often wrong about them. So I don’t subscribe to the notion that interest rates have to go up this year. People have been saying that for three years and they haven’t.

Bold predictions for this year?
I think 2006 is going to be much like 2005. As soon as you say that, though something happens. However, we’ve been evaluating all the market indicators, and 2006 looks a lot like 2005.

In less than a month, you have one of your biggest events of the year. Can you talk about the Race for Hope?
Cassidy & Pinkard became the title sponsor of the Race for Hope in 2000 when my partner Pat Cassidy was diagnosed with a brain tumor. He lost his struggle in 2001 and our company has been the title sponsor ever since. This event has grown to become the largest single fundraising event in the US for brain cancer research. Proceeds benefit the Brain Tumor Society. Last year, the Cassidy & Pinkard Race for Hope raised more than $1.1 million. This year’s race will be held on Sunday, May 7, at 8:30 in the morning at Freedom Plaza. The race is a very moving event because you have people there who are survivors and are past the five-year remission point, and others who are suffering with the disease. Their families and friends turn out. It’s just incredibly inspiring how brave they are. It’s really amazing how the local commercial real estate community steps up for this event, too. It’s one of the most moving things I do during the course of the year because of the love and support you see for these folks and for those loved ones who did not survive. Recently, I was at an ordination for a friend who is a priest, and there was a woman there who knew my wife. The woman’s daughter, who has a brain tumor, was there with a patch over her eye. My wife introduced us to the woman who was probably in her 60s, and her daughter who was in her late 20s. The daughter said, “I can’t believe I’m actually meeting the person who heads the company that’s sponsoring this event.” I replied, “Well, it’s not only me. There are a lot of people who help.” It was great to see how much she appreciated this.