The ex-presidential candidate getting into sustainable real estate

From: POLITICO's The Long Game - Wednesday Apr 19,2023 04:01 pm

Apr 19, 2023

VERBATIM

Tom Steyer, co-executive chair of Galvanize Climate Solutions

Tom Steyer, co-executive chair of Galvanize Climate Solutions, is investing in real estate. | Courtesy Galvanize Climate Solutions

Tom Steyer is again putting his money where his mouth is.

The 2020 presidential candidate, climate evangelist and California political bankroller launched a new real estate "investment strategy" this month under the umbrella of his investment firm, Galvanize Climate Solutions.

He's planning to buy and retrofit multifamily housing, industrial buildings, student housing and self storage units, and has hired Goldman Sachs real estate veteran Joe Sumberg to oversee the strategy.

This interview has been edited for length and clarity.

You're in San Francisco, where the downtown is not doing great. Is this a good time to get into commercial real estate?

We're going to be doing real estate, but that doesn't mean we're going to be doing office buildings. That could include multifamily. That can include student housing, that can include industrial.

Obviously, if you live in San Francisco, because I think we're sort of the eye of the storm, there's a real question about not whether there's a need for commercial real estate, but how much of a need is there for commercial real estate in terms of square feet.

And obviously in markets where there is as much demand as there is supply, then a whole bunch of things happen, including when vacancies go up, and that means rents go down and all kinds of valuation issues come into play. It's not trivial to take a big office building and, okay, if it's not going to be an office building, what the heck is it going to be?

How are you going to make money at this? What are the risks and what are the returns that you're expecting?

Real estate is a huge investment area. And within that we believe that this strategy of actually doing sustainable real estate is something which is going to have higher returns that has a huge tailwind to it. We believe that the climate response is a gigantic investable area. We're dedicated to climate response, but we also believe that it will lead to higher returns because it has to happen and there's a huge demand for it.

You're planning to focus on the Pacific Northwest, Colorado, California, Arizona and Texas. What's driving that: policy, high real-estate values, exposure to climate vulnerabilities?

Econ 101: Location, location, location. You want to be in places that have the characteristics of a positive market to be in. Part of that is just regular old real estate. And part of it is we want to be in places where we're going to be able to put this through in a way so that we make sure that it adds the returns.

When Joe's talking about it, he's looking at places where we can make good real estate investments and dramatically reduce carbon footprints and have better returns as a result.

Are you counting on the Inflation Reduction Act for anything?

We have people who are policy experts looking specifically at the IRA and all the other things, but our basic attitude is we need to invest in terms of the framework that exists today. The investable proposition is here is the world we're in. This is how we're going to get returns.

Were there any political wins from Prop. 39, your 2012 California ballot initiative to raise money for school retrofits? Do you think that the IRA will benefit Democrats?

Let me put it to you this way. Do you think that doing the right thing for the citizens of California, or the citizens of the United States, is a good thing to do politically or not? Clean up our air, specifically work to try and help the people who've been most disadvantaged in terms of environmental harm, and basically help solve a gigantic global crisis. Is that good politics?

Prop. 39 specifically was supposed to help people. The IRA is specifically supposed to help people. If you succeed in specifically helping people and they recognize it, is that good politics? I guess so. Isn't that what democracy is supposed to be?

You're close to [President Joe] Biden, you're close to [California Gov. Gavin] Newsom, you ran for president yourself. How are you seeing 2024 shaping up?

I am totally focused on building this company. That is what I do with 100 percent of my time. For a long time, I was not investing my own money because I was trying to be a climate advocate for eight or nine years, full time, and investing is a full-time job. But basically, I'm going to put all of my time and all my money into building this because I believe this is a gigantic problem and also a massive opportunity.

I think we're at the execution phase of climate. The conversation is over. If you read what the CEO of Exxon says, or the CEO of Chevron, you can't decide if they're running a summer camp, or they're just full-time environmentalists. This conversation is over. There's no one who's really a climate denier. There's a lot of talk and there's the question, are you sincere enough? But the conversation is over. The question is how are we going to get this done?

You say no one's a denier anymore, but, like, they still kind of are. What do you think when you hear people railing against woke capitalism?

I don't know exactly how to define ESG. What I do know how to define is an investor looks to the future. We're talking about climate. We're talking about making business decisions for the future, which includes an awareness that, “Oh, by the way, we have this huge crisis that we're going to have to solve.” So this is just dollars and cents.

If you tell me as an investor, 'You can't think about the future and anticipate it," I say, "Okay, so you're telling me I can't be an investor," because that's what investing is. That's all of it. You're telling me, "You should go do what happened in the past"? That's a recipe to go broke.

I wanted to ask you about Prop. 30, the Lyft-sponsored wealth-tax initiative last year in California to raise money for EVs and firefighting. What do you make of its defeat? Newsom was against it. You never said.

I am always interested in us having a progressive, front-foot approach to climate solutions. I've participated in a serious way in a bunch of propositions, including 39. And my attitude is, if the people get a chance to make their choice, they get a chance to make their choice.

I do happen to like [Lyft co-founder and CEO] Logan Green a lot. If the people of California get a chance to vote on something and get to hear both sides, that's what they call democracy and that's what I believe in.

Do you think [Sen. Dianne] Feinstein should step down now?

I don't know. I would say this: There are three people, at least, who are running for that seat. And they're all pretty darn good. I think California should recognize, wow, that is a cornucopia of talented people who can represent us. All of them would be fantastic and I'm really looking forward to it.

What are you driving these days? Did you get your Mustang?

I did. I was torn between getting a Bolt and an electric Mustang. And my personal predilection, because I'm cheap, was to buy the Bolt, because it's cheaper. And I've driven a Volt for seven years.

For me, driving to work or driving myself somewhere, I'd like a smaller car, but the Mustang has a much bigger backseat. I feel like I spend enough of my time ferrying around other people, and it's very uncomfortable for them, if they're very tall, to be in the backseat, if it's a particularly small car, so I got the Mustang. It also is, as they would say, it is a Mustang. It is a sporty car.

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