Lance Glinn:

Welcome into another episode of the Inside the Ice House Podcast. Today's guest is Luke Petherbridge. He is the CEO of Link Logistics. Luke, thanks so much for joining us Inside the Ice House. Happy to have you here.

Luke Petherbridge:

Thank you for having me. I'm really excited to be here.

Lance Glinn:

So I want to kick things off at a high level. When you just step back and look across the industrial real estate landscape today, how would you describe the overall health of the sector, and I guess some of the key trends that are either driving improvement or potentially stagnation?

Luke Petherbridge:

Yeah, I think let's start with Link. Link, we are one of the largest landlords or owners of industrial real estate in the United States. We have over 400 million feet. We're part of the Blackstone ecosystem. We have about 8,000 customers. We're in nearly every city. And a good way to think of it is about a little over 4% of US GDPs flowing through our customers' buildings are our customers who are in our building. So I think we have a pretty good purview on that.

But what we're seeing today, I think it's balanced optimism or strong resilience actually. And where we're seeing that, if you really think about the US economy, we're seeing this e-commerce penetration accelerate. We're going to talk about AI, but AI, agentic commerce is sort of pushing that. But you see Amazon or Walmart, there's speed to last-mile to delivery. So we're seeing that as a pretty big buoy. The economy continues to grow, which is another big source of demand for us.

And then you're seeing advanced manufacturing defense and also just this infrastructure build out, whether it's data centers, whether it's power and infrastructure, all of that that's happening, this huge amount of capital deployed throughout the country, is driving significant amount of a demand pickup. And you're seeing that throughout the Sunbelt for sure, the Midwest areas that have probably been a little bit slower post-COVID. So you have these really good, diversified, multifaceted demand building up. And on the flip side, we've got record low new supplies, like a decade low. So we're not building new warehouses at the speed we were in COVID, which is probably prudent. So right now, it feels like it's pretty strong at the moment actually.

Lance Glinn:

And in your answer, you mentioned a couple words, you mentioned last-mile. And now Link is one of the largest owners and operators of last-mile industrial real estate in North America. So for the listeners who don't know what that term means, just explain last-mile real estate for us.

Luke Petherbridge:

Yeah, so I think of it as proximate to the end-user. So when you think of buying something on Amazon or getting a part to a Boeing facility, people aren't waiting four or five days to get it anymore, Lance. It's like, "I want it that day or the next day." I watched my teenage kids act that way.

Lance Glinn:

Hey, I'm the same way. Look, if I'm ordering something, I want it now.

Luke Petherbridge:

Exactly. So last-mile is to be able to fulfill that customer promise. If I think of Chicago, you're not sitting in a warehouse two hours away or three hours away. You're trying to be within an hour of the population or the end-user. And so, when we really think of last-mile, it's really owning those last touch facilities that gets it to the consumer or to the factory or to the end-user.

And then what that also does is they're the hardest ones to develop. We are a large developer, but it's really hard to develop infill industrial warehouses. So not only do you have surging demand for that, you actually have more limited supply than even the rest of the country. And we think that's a pretty good setup as a landlord. And then also our customers continue to grow in that space.

Lance Glinn:

And how do you approach that segment differently than a traditional warehouse or traditional distribution assets? How does that differ from last-mile to, like you were saying before, a warehouse that might sit four or five hours away that might take four or five days to get to you?

Luke Petherbridge:

Yeah, I think it's probably the ones that sit further out are going to be newer generation, larger buildings. Last-mile, you're probably stuck a little bit more with what was built. We still own a lot of Class A and Class B product in that market. But the location matters a lot more. So the location probably outranks some of the building quality features. And our customer's path of travel really is focused in and around that.

But you're trying to end up with a very similar building, but be like infill Dallas and infill Atlanta, or infill Chicago. And we've just built a great building just here on the Jersey Turnpike that's right outside the city. It's really trying to deliver that product, because that's what we think our customers want today, tomorrow, and in the next decade. So it's really fulfilling a customer promise of ours.

Lance Glinn:

No, look, I'm a Jersey guy, Jersey born and raised, lived there. So I'm sure I've passed the building.

Luke Petherbridge:

You passed the building?

Lance Glinn:

I'm constantly going up and down the turnpike, so I get it. I get it. What separates, I guess, a high performing last-mile property from one that just happens to be close to a population center? Because it's great to be close to the population center, but I'm sure there are intangibles or maybe even tangible things that need to be there to make it a high performing one. What separates the two?

Luke Petherbridge:

Yeah, I think it's the functionality of the building. So more clear height, dock doors, truck court depth and parking. You really want to have things that have great ability to have high throughput. That's for distribution. But just remember, there's a lot of small businesses, whether you're a HVAC operator, you're a small builder, they use warehouses close to populations because that's where their workers are.

Lance Glinn:

Yeah.

Luke Petherbridge:

That's where the work they're doing, the customers they're serving. It sort of varies by market, but I think it's quite similar to what you'd think of as a good building anywhere and that's really what we focus on. I think the thing you probably yield getting closer in is size. You don't end up with million foot buildings-

Lance Glinn:

Sure, just because of space.

Luke Petherbridge:

... in the boroughs, you end up with 100,000 foot buildings. So customers need multiples of those, and they run a network-like style there. But I think size is probably the one thing you yield when you get closer in.

Lance Glinn:

And that makes sense. The closer you are to population, the less space there's just going to be to have a building of a million square foot size. So that all makes sense.

Link Logistics has built, speaking of size as we're talking about it, has built a massive and I think unique portfolio of I think over 3000 properties, greater than 40 markets. When you think about what truly differentiates the company today in a competitive space, what would you point to as core advantages that allow for Link Logistics to have such great success?

Luke Petherbridge:

Yeah, I think one of the things we've really sort of... The two areas we've really focused on, one, because of our scale, we've really been able to double click on the data and insights that we're able to draw from our portfolio. So as you mentioned, we have 3000 buildings, we have 8,000 customers, we know how 8,000 customers are doing by constant conversations. We can get great insights from that to know path of travel, what they need, how can we serve them well, where can we invest more capital? What is the growing trends? So I think access to that information data and with our owner Blackstone, really has allowed us to have what I think is a competitive advantage around that.

And the second thing being so large, we can offer a superior customer service, whether that's with internalizing property management, we built our own app for our customers to be able to access energy and utility management. We can offer, as opposed to just being a simple landlord, we can offer them procurement benefits. I think really they're the two things that at scale we can do, and we can do it more efficiently and cheaper for our customers. And it provides a service for them both accessing insights and information and owning great buildings, but then also offering complimentary service there, which I think is a unique opportunity, which we've really double clicked on.

Lance Glinn:

And I want to look at the positives or I guess the benefits and the challenges of said portfolio, because it's diverse in property size from smaller [inaudible 00:08:08] assets to obviously large distribution centers. What are the biggest advantages of having that kind of range, especially when you're obviously serving different tenant profiles? Because not all tenants are going to be same, all tenants are going to have different needs. And I would think to have buildings of such range would really help fill what each tenant wants.

Luke Petherbridge:

Yeah, it's a great example. Our smallest suite is probably less than 1000 feet. Our largest is over a 1.4 million feet, single user. So we range in customers from, you think, the largest e-commerce manufacturing firms in the world down to small mom-and-pops. And to running that, there is huge challenge to that, and being able to build an organization to accommodate that. And the benefit is we built the business to do that. So we've only been around six or seven years, which we allowed ourselves to build a business that's scaled and flexed.

So the biggest benefit is when we talk to a customer, big or small, we can offer many different solutions in many different markets. So if you are a small or middle-sized enterprise in Dallas and you want to move to Austin, and you think we're a great landlord, you call us and we have space in Austin, or we have space in Houston, or we have space in El Paso if you're moving through Texas. If you're a very, very large provider or user of space, we can help you all across the country. We provide portfolio access. We build you buildings, build to suit is something we can do for the largest customers.

And on the very smallest end, our Link Parks business, we offer services that are unique, whether it's gross leases that makes it easy and easy to budget for them, or we manage everyone's utilities. We make it much more of a plug and play for small businesses and entrepreneurial growth. And what you find, those small businesses start to grow and they move. They morph through different phases of what they need and some of them are shrinking and growing. And I think we can offer such a huge opportunity there. But connecting all of that portfolio is incredibly challenging and technology's needed and great people. We have 1,100 people all around the country that offer these services. But that scale is very challenging to operate. But we've been fortunate we've been able to build our firm around it.

Lance Glinn:

And how do you remain consistent? Because when you have such a diverse portfolio, obviously the small or the SMBs, let's call them, and the large distributors, every client is important. So how do you make sure that it's not just they focus on those large contracts, those large distributors, but you also give that same recognition and that same sense of care to those potential mom-and-pops?

Luke Petherbridge:

Yeah. Well, I think that's a real challenge. I'd bring that back to the people you hire care deeply about every single customer that we have. Whether you are a huge user or a small user, you're very important to us, and in every market. So I think we do a good job of being quite consistent. But every customer is unique, every customer needs something a little different from us. But what we try to do is raise the bar on everything. And when we're dealing with small customers, making sure they feel they've got what they need. We make sure the building is providing the service they need. If they need a bigger building, we can help them move early. If they need a smaller building, we can help downsize them. But it really is the people that interact with our customers all across the business.

And I think what we've actually tried to do, the service we offer to those largest customers, we've actually tried to use that same mantra and offer it across our whole business range. So yes, it's different, but we really do try to take the best of our customer experience and offer it all across the country. And technology allows us to do that today, but probably five years ago we couldn't have done it quite as seamlessly.

Lance Glinn:

Describe to me, in your opinion, the ideal landlord/tenant relationship. What does that look like?

Luke Petherbridge:

It's one that actually is a great partnership and that word gets thrown around. But I think what it means is we are willing to flex things to help them grow their business. In theory, we're aligned. Their business grows, they need more space. We have more space, we lease more space. So we are actually joining-

Lance Glinn:

Your business grows as their business grows.

Luke Petherbridge:

Exactly. So we have a common goal. And I think what it really is, is one, both of us understand the common goal, being overly transparent with one another and providing clarity and flexibility when needed. So how that would work is we provide information and insights that we're gathering across our portfolio. So if you're a small business, we're like, "Wow, we're hearing small businesses are struggling with inflation at the moment. How do you feel about that? This is what we've heard. Here are some ideas other customers are doing to offset that. That helps your business grow."

And the quid pro quo would be, you tell us how you're doing. And we're like, "Wow, you need more space. Let us help you before you get into trouble. Or let us help you implement automation." That's the way the partnership works. And the goal is ultimately both businesses do better as your business grows, our business grows.

Lance Glinn:

And when you think about portfolio growth from here, how much of the opportunity is about doing more within your existing portfolio versus just pursuing entirely new, say, acquisitions or markets? How do you balance that internal investment on what you already have versus that external investment on what you can go out and buy?

Luke Petherbridge:

Yeah, I think it's probably both. I think I'd start with the internal. We have a huge canvas, over 400 million feet. There's just so much we can do both inside existing great buildings. We can redevelop buildings. We've got land we can develop, build-to-suit buildings. So we have a huge opportunity to be constantly serving our current customers. We lease 60 to 70 million feet a year on our existing portfolio.

But because we have Blackstone and we have the funds that Blackstone manage, we have an opportunity to really deploy capital at scale in opportunities that we think are additive to our customers' benefits, our returns, and then ultimately, our investors through Blackstone. So I think it's probably both. We don't need the external component, the internal's enough.

Lance Glinn:

Sure.

Luke Petherbridge:

But I think you find every year we are one of the most transacted buying and selling real estate owners in the country.

Lance Glinn:

And so, we had John Gray on our podcast earlier this year. And we talked a lot about obviously Blackstone's portfolio and what they do and their investment in real estate and so on and so forth. To have a company like Blackstone behind you and backing you and there to support, what does that do? How does that benefit you, Link Logistics as a whole, and everything that you guys are trying to do, and all the goals you're trying to hit year in and year out?

Luke Petherbridge:

Yeah, I think there's so many ways. The list is long. But I think that in simple form, you have a great partner that's completely aligned. They provide incredible insight and advice and guidance and they see so much. They have incredible access to capital, which is obviously a huge part of a real estate business, like it's capital intensive. So I think that's another big opportunity. And in a world that's changing very quickly, they see a lot. They can connect dots and say, "Here's something you should be thinking about. Here's a market we're seeing that's changed from another." It could be one of their private equity investments or they connect us with other clients.

So I think it's so much. And then you can go down the whole data... I could talk about how Blackstone and their data science team has been helping us. So I think they're wonderful partners both from capital advice and access. I think it really has allowed us to grow a business in six years that I think if we didn't have Blackstone would probably take a decade if we'd even get there.

Lance Glinn:

Sure, sure. So you mentioned that we're obviously in a changing world, a transforming world, one that is constantly evolving. And with that constant evolution, there also comes changing tenant demands and changing client needs and client expectations. And look, different tenants have different demands, and different accommodations across the portfolio are needed to make sure that you can work with every client that you have. How have you noticed client expectations evolve really in recent years, particularly around things like speed, flexibility, and then ultimately, and I think maybe the most important one, this technology integration?

Luke Petherbridge:

Yeah, I think on speed, I think what we've seen over the last five years has been the constant pressure of just being closer. Speed is a time, not a distance. So in New York, speed is very close to the island. Speed in Chicago's a little further out, although Chicago's traffic's not ideal. So speed is something that we've seen probably evolve over the last decade. And it's not just Amazon. You're seeing retailers start to do it, you're seeing 3PLs start to do it. You're seeing everybody sort of chasing this speed component, because the customers' expectations have just changed. And no one is going to say in 10 years, "I want things slower."

Lance Glinn:

Yeah, they're not going to change back. In fact, it's only going to get faster.

Luke Petherbridge:

Exactly. You're hearing Amazon now going into one to two hour deliveries, it's just getting... So to do that, you need to proliferate and get closer in. And a stat that's interesting is 90% of Americans live within an hour of an Amazon facility, and that was like 60% five years ago. So they've got closer and closer. Walmart, 95% of Americans live within three miles of a Walmart. So that has happened. So I think speed is something that's happened.

I think the other thing we're seeing more of is the need for power, whether it's EV trucks, you see Rivian vans running around, whether it's automation in the warehouse. We're seeing our customers really look for us as landlords and us as a good partner, how can we have a little more power in the building? We're going to put automation in there. We're going to start using EV trucks to deliver things. So we're seeing that a little bit more.

And then, there's always the normal things like we need trailer parks and dock door depths and all that sort of stuff. We're seeing a lot of that. But the two big ones are speed closer in, and we are starting to see this emergence of... Which by the way, everybody's asking for as we try to transform the overall economy and electrify the economy, I think need for power is something we're starting to see crop up more and more.

Lance Glinn:

And in that conversation that I had earlier this year with John, we talked a lot about Blackstone's focus on data centers and the investments they're putting behind that specific infrastructure when it comes to AI and technology as a whole. How does Link think about data centers within its general portfolio?

Luke Petherbridge:

I think we have some land that maybe could be transitioned into a data center. I think Blackstone is the owner of QTS and a lot of other data center companies. So that's where the data center business really lives. I think what we're seeing though is what we'd call spillover demand. You used the word land's infrastructure. So think of all the infrastructure that goes into that. There's generation that needs to be made, and there's transmission that needs to be done, and generation that needs to be created, and generators, and cooling towers. We're seeing a proliferate demand of the people that are building the component parts that go into data centers. Just like any sort of industrial revolution or any sort of huge infrastructure build out, there's all these component parts and we're seeing that really pick up throughout the traditional industrial complex. And we've been a big recipient of that so far. So we may not go and build a huge data center business, but that proliferates through the industrial complex, and that is a huge benefit for warehouse owners and landlords.

Lance Glinn:

And so going from the infrastructure to the technology itself, AI has shown the ability to provide a lot of benefits, still has cautions that come with it, but provide a lot of benefits for a number of different things-

Luke Petherbridge:

Absolutely.

Lance Glinn:

... not just with work, but sort of how we live our everyday lives. I know I have plenty of AI apps on my phone that I use on a relatively regular basis. I'm sure a lot of other people do, too. How is Link Logistics implementing, integrating, using AI within its general business then?

Luke Petherbridge:

Yeah, I think it's sort of early, I would say, and it's proliferate. As you said, everyone's testing it and trialing it. And I think we're using it in three core areas. I think there's cognitive engagement, which is a little bit about whether it's our chatbot, the way we're dealing with customers, customer interaction is an opportunity there, which is really interesting. There's obviously automation like process automation. How can we automate things like a lot of the functions we do in treasury and CAM reconciliations. I think that makes our business faster and more efficient. And then, it's cognitive insights. How can we draw better insights and information that we can make better decisions for real estate, for our owner, for our customers based on this vast data set that we've been curating for six years and use Blackstone's data to overlay that?

So there's a number of different ways we're sort of levering that. I think a lot of people are going to talk about automation over the next 12 to 18 months. It just makes businesses faster and leaner and quicker. But I think this engagement opportunity, how you can engage people to your business and manage your customers, and then how can you draw incredible insights and information at scale I think is the one I'm most excited about. Because I think it just makes us smarter. It makes us a smarter and more intelligent business. If you're smarter and more intelligent, you can offer better services, your customers do better, we do better, and hopefully the virtual cycle takes off from there.

Lance Glinn:

You say it's still early and I agree. And I think AI is only going to get better and new use cases are going to come out. New platforms are seeming to pop up every single day. I feel like there's thousands of now AI companies and obviously some rising to the top while others still stay in the middle or down below. But do you view AI as something that... Do you need to be at the forefront of it? Do you need to be first with it or are you comfortable seeing how it plays out and then adjusting what Link Logistics does based on what you potentially are seeing others do?

Luke Petherbridge:

I think it varies. I think some of the things you can be sort of an early adopter, other things you can just wait for application. Just think about the number of applications that you would use across your current organization. AI is being infused in those, whether it's in the accounting complex world for us, AI's being infused by the technology providers. Or you're seeing it in human capital management with Workday, what they're doing there, or Salesforce for our CRM. So they sort of come to you.

I think there's other things we want to lean in on. And I think the area of offering better service to our customers, we can do a little bit more there because we're so big. And I think the data and insights component, intelligence for us, I think we have a right to win there. I think we've done a great job of building quite a good data mode and understanding of our customers. I think we can do more there.

So I think each area, one, is different. And two, they change so rapidly. I would say in the last 90 days, the number of new tools or analysis that we are able to do at speed at Link, it's almost like you're on this logarithmic scale at the moment. I think the thing I would caution is the human in the loop is still very much required, like this emotional intelligence component and I guess deciphering the insights that you get, and what is the actionable intelligence from that? I think that's all new and it's just what you can overdo is get so much information flowing that you're like-

Lance Glinn:

No, you need to have a human at the end, or I think at least, you need to have a human at the end of the, for lack of a better term, the phone. At the end of the process, I still think there needs to be a human overlooking. And I would think, and correct me if I'm wrong, but I would think Link follows that same tenant, that there has to be a human dictating things, not just the computer?

Luke Petherbridge:

Absolutely. But I'd say this is a people enhancer. This allows you to be the best and smartest, the most intelligent version of yourself versus spending hours or days or weeks grinding in a spreadsheet, it'll do a lot of that work. And then, do the critical thinking component. The critical thinking component is the most valued component. So it actually will allow you to be more... It'll enhance you as an individual inside Link or inside any firm using AI. And I think that is the exciting part our employees are seeing.

Lance Glinn:

So obviously, Luke, industrial real estate as a whole is very cyclical. As soon as you go up, it can have downturns. That of course is all uncertainty in the field that you are in. So how do you lead with certainty through this uncertainty? Because I would think that's a pretty hard thing to do.

Luke Petherbridge:

Yeah, I think, look, I think understanding the business is a good start. Yes, it is cyclical. You have moments of COVID. We had incredible demand, limited supply, a very, very good time to be an industrial real estate. Post COVID, rates go up, demand softens, we've overbuilt, we've been working through it. I think what we really try to do is focus on what we can control. I can't control where the 10 year is, not yet anyway. I haven't been able to work that one out. I can't control that. I can't control where customers are growing in their businesses every single day.

What I can control is making sure we're delivering services the right way, making sure we're understanding what buildings we want to own or sell, understanding what markets we should be growing in or developing in and what markets we may want to pull back on. And then also understanding the macro backdrop. The macro backdrop for industrial is we have growth in e-commerce, we have general GDP growth, and we also have growth in this sort of re-industrialization, which I'll put data centers in there, of the United States. They're great tailwinds and understanding that these things will take time. Re-industrializing the country is going to be a decade-long tailwind, and then watching supply, supply remains at a low.

It's sort of dealing with what we can control. And there's lots of noise. There's lots of noise in our business, and this is not a quarter by quarter business. It's nice to be private. This is a decade long business. You're building for years and decades and understanding that... And our business has been very fruitful even as things slowed post-COVID, and now we're seeing the early signs of reacceleration in our business. Really focusing on what we can control has really been the focus.

Lance Glinn:

Is it hard to tune out that noise?

Luke Petherbridge:

Of course it is. You're not seeing [inaudible 00:26:32]

Lance Glinn:

No, for sure. I know it's-

Luke Petherbridge:

It's nice being private, because you don't get your value of your firm priced every day. I think having an owner, and I think you said you had John on here, he's like, "You've got to get through... Look through the noise."

Lance Glinn:

No, I asked him that same question. I said, "For a company like Blackstone, they deal with noise all the time. How do you break through or ignore... Or what do you determine as noise that you should look at and noise that you should just ignore?" So yeah, I'm curious how you do that.

Luke Petherbridge:

Yeah. And I think having an owner that thinks like that is very helpful. They are looking at longer term macro trends or longer term even real estate trends on how we want to deploy capital around that. I think that's really helpful. And then also, when things were slow, we're like, "We're going to double down on our customer experience."

Our owner is like, "Absolutely, this is going to be important, not for right now, but for the next decade, and we're going to build out a whole data science franchise. This is going to be great for the next decade."

So having these long-term views in a cyclical industry I think is incredibly important, and having an owner that's aligned to that, I think has been wildly powerful for us. That doesn't mean I don't get caught in the noise at times.

Lance Glinn:

Of course, it's hard not to. Like you said, it's all over the place.

Luke Petherbridge:

You go down rabbit holes on things, but we've been fortunate that we can be very much steadfast in we look multiple years out and we're building a business for not today and not next year, but for five years.

Lance Glinn:

Sure. Speaking of five years and looking ahead, what are some of the big, structural shifts or emerging trends that you think will define the next era of growth, not just for Link, but for industrial real estate as a whole?

Luke Petherbridge:

Yeah, I think if I go five years out, I think it's where's population going, because that's where consumption is moving. I think we're seeing a very clear migration pattern that seems to be appearing and has been appearing. So I think continuing to invest around that. I think South Florida continues to win. I think Texas continues to win. Not just Dallas, Houston actually had more people moving to it last year than Dallas, which is an interesting fact. So I think investing around that.

And then, I think you've got to look at what autonomous vehicles, e-commerce fundamentals changing or just accelerating over time and how automation and robotics play into the overall supply chain over the next five years. I think it takes time, but all of this will need more power. It needs to be newer facilities. There are things that these newer concepts are going to need. And making sure we're ahead of that is something we're very focused on.

Lance Glinn:

And then finally, as we end our conversation, when you specifically think now about Link Logistics, what's your vision for the next chapter of the company, whether that's 5 years out, 10 years out, 15, what is the next chapter for Link Logistics look like?

Luke Petherbridge:

Yeah, I think it's probably doing much of the same. I think we've built a great firm. Can we be smarter and more intelligent? Can we offer better buildings and better service for our customers, and then really be a great partner? You want to be the number one choice in industrial real estate for our customers as they grow. And we believe in our business, we believe in our customers' businesses, and we're excited about the future growth here.

Lance Glinn:

Well, Luke, I really enjoyed the conversation. Thank you so much for joining us Inside the ICE House.

Luke Petherbridge:

Thanks so much. Thank you so much, Lance.

Speaker 3:

That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X @ICEHousePodcast. From the New York Stock Exchange, we'll talk to you again next week Inside the Ice House.

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