The Future of Real Estate: Data Centers & Market Trends

Stephen Schmidt (00:04.97)
Welcome to the show where we interview the nation’s leading real estate entrepreneurs I got a surprise in the studio for you guys today, and I’m gonna spoil you a little bit I’ve got an absolute real estate legend in the house who is a second generation Of the Embrycompanies, which is a company that’s been in business since the mid 90s They’re in their 75th year of business

and I got a special treat with MikeEmbry in the house here. We’re gonna be talking about the evolving market trends and development, how they’re playing in the data center space and how they research and analyze their deals to make sure that they’re all making money. So we’re gonna go ahead and get into it, but before we do, just remember at Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs, two to five X their businesses so they can build the businesses they’ve always wanted in order to live the lives they’ve always dreamed of.

With that being said, Mike, welcome to the show today. Pleasure to have you.

Mike Embry (01:01.986)
Thank you, I appreciate it, Stephen, glad to be here, look forward to it.

Stephen Schmidt (01:06.446)
You bet. So you got your second generation, you got into the business when you were 23 back in 85 with a killer mustache and a whole head of hair at that point, as you said in our pre-show call. Was this kind of destined for you or what made you decide to take hold of the horns and work in the family business back then?

Mike Embry (01:27.266)
Growing up in it, I was the youngest of three sons on my dad’s part. There was three brothers that started the business, but I came along. So I’ve always been around it and I’ve always loved it. mean, watching them develop and build and…

and move through the real estate business. It was just a lot of fun to be around as a kid. And the only other thing that I probably love more than real estate’s motorcycles, and you can’t make any money with motorcycles. So, but I do love real estate. It’s a lot of fun and it doesn’t always love you back, but being around it, I just kind of got the bug and always wanted to be like my dad.

Stephen Schmidt (02:12.854)
You bet. So what was your early on role coming into an already established business at that point? mean, you guys had already been in business, I mean, shoot, almost 35 years at that stage. What were you doing at first?

Mike Embry (02:13.73)
you

Mike Embry (02:25.25)
Coming through as a kid, they brought us all along, starting out sweeping houses or landscaping yards if they were building houses or painting. They owned apartments, lot of rental property. So we came along working from the ground up as all three of the brothers grew up on a farm share cropping and they grew up with nothing.

two room farmhouse with no power, no water, and an outhouse. And they really felt that you needed to know what it was like to work. And I never had a problem with that. I always loved working outdoors. And grew up on a farm myself. We had a cattle farm. But they always felt that you should know from the very bottom up to the top how the business works. And so if you didn’t want to do that, then they would pay for you to get a real good education and you could go work.

something else.

Stephen Schmidt (03:25.782)
You bet. So did you see the long-term vision of secession when you were that young? Was that something that excited you about getting into it?

Mike Embry (03:32.106)
you

Yeah, they did real well. But there’s always the things you find out as you get older. didn’t, we always thought it was easy. They were just always on a roll. The real estate business, they seemed to be on top of it. And that’s not the thing once you get older and you get in it. The hard times that they went through where they had run out of capital or the market turned down, they were…

you know scratching to survive it just we never saw when we were really young but as we got older and especially as they got out of the business and we were the only ones left in the business you you start getting those battle scars that you didn’t know that they had got.

Stephen Schmidt (04:21.09)
Right. Yeah, those scars where they’ve been there and bought the t-shirt for it, right?

Mike Embry (04:27.234)
Yeah, there was a lot of knife fights that we didn’t know about that. When you’re young, you don’t see that. your parents do a lot of things you don’t know when you’re a kid that they did to survive and keep the things that they need to do for you.

Stephen Schmidt (04:38.945)
for

Stephen Schmidt (04:43.778)
Right. Yeah, you know, that’s something I’m even trying to instill in my own kids now. You know, I have this this fear of, you know, where where our world’s heading for our our next generations. And I’ve got a 10 year old son who I’m trying to teach the values of hard work and and not complaining about the things that you have to go through. And it’s like, you know, I’m hoping this isn’t all for nothing, that he’s going to be one of the people leading the world someday. But it’s also just scary thing to think that there’s a

Potential reality he’s gonna be selling fake moccasins in a virtual reality world to somebody else’s kid You know what I mean? But at least at least I can do my best to instill some of those principles of the hard work and hopefully I’ve built something at that point To be able to have him also start working in and that’s gonna be the same thing He’ll be cleaning the toilets and sweeping the floors and doing the landscaping. That’s for sure

Mike Embry (05:17.378)
you

Mike Embry (05:35.5)
Well, I don’t think you can start them young enough doing that. My daughter did research for me coming up through middle and high school before she went to college. My son worked when we had a construction company with my brother in the summers, sweeping houses and carrying lumber and doing whatever needed to be done. And you don’t always like it when you’re younger, but when you look back on it.

you realize there’s a reason there for it. And it’s that work ethic that I’ve always felt, I wasn’t the smartest guy, but no one was ever gonna outwork me. I always told people that, I will outwork anybody there is, and hopefully that pays off.

Stephen Schmidt (06:06.69)
Hmm.

Stephen Schmidt (06:21.742)
You bet. Love that. So let me ask you this because this is something I have, one of my favorite questions to ask, but I don’t always get to ask it to everyone just because not everybody has been in the business for a very, very, very long time. But what’s something that you believed about the real estate space when you started that you no longer believe 40 years post?

Mike Embry (06:45.922)
that I believe or that I think is drastically different. I just want to make sure I answer it correctly.

Stephen Schmidt (06:52.108)
Let’s go with that. I like that better.

Mike Embry (06:55.17)
Well, when I started out, I could take a project, I could put a piece of property under contract and do a design, take it through zoning, get it permitted in less than a year. And I’ve got projects now where I’m in year four or five and I don’t have my permits. So the drastic amount of red tape

that it takes and what goes along. The municipalities are not like businesses, so they don’t gear up. They don’t hire more people like a private company does. But also out here, the shortage of engineers, there’s not a lot of kids that go to engineering school and come out. So you’ve got private equities buying up engineering firms so they can buy the talent.

Silicon Valley where they’ll buy a tech company to get the talent. It’s the same thing going on with engineering and it’s creating this huge void where if you’re not a bigger company or you don’t know an engineer, it just takes weeks or months to get your work done and it just puts you behind. But that’s probably the biggest thing is the timeline now and the dealing with the municipalities, the time to get zoned, to get permitted.

the zoning’s become a disaster. mean, we had one about five or six weeks ago, a couple of hundred people there, know, flipping out. Most of them didn’t even know why they were mad at us for what we were doing.

That’s the one thing, difference, I’d say the biggest is the internet because I can Google that Stephen Schmidt, does he hate data centers? And there’s probably something with AI that’ll say Stephen Schmidt said that he hated the data center 11 months ago. mean, that’s one of the problems that we run into with projects is that people Google stuff or…

Mike Embry (08:56.962)
They’re just not informed in this time where you can find out a lot of things and have platforms like this. And we try really hard to either meet in person, have teams meetings, whatever it is, talk with people on the phone to keep them informed. And that’s probably been one of our better things as far as entitlement is zoning and design where we can get projects done that a lot of times other companies can’t.

Stephen Schmidt (08:57.272)
Hmm.

Stephen Schmidt (09:23.096)
Sure. Now, so like with the data centers, I’m glad you mentioned that because I was going to pivot towards that here shortly anyway. So with the data centers, I know you guys did your first project, realized there was, you know, something to be had in that specific niche. But how did you exactly land on that specific strategy of going after those builds and development? And maybe for those of us that might not know what that is, what exactly is a data center? How does a deal like that even get put into place?

Mike Embry (09:53.218)
Well, they’ve been around for probably 20 years and just haven’t been at the forefront of real estate because there wasn’t that much data to store. Most of it was government data or health industry, that type of thing.

But now everything is stored on a data in a data center. You what we’re here right now and you put it out there for it to go to YouTube or on your website, it’ll be stored in a data center. Everything on your phone, your app TV, everywhere you shop or you’re getting your points, everything is stored at a data center. with AI has made the jump dramatic and it started a couple of years ago and

You’ve only got areas in the country that have enough power or water or fiber to handle it. And Georgia is one of those areas right now. They’re just about ready to lead the nation. The Southern Company provides a lot of power here, but Virginia was the epicenter and then it was Arizona. Texas has jumped in there, but how we ended up getting involved directly in it, as you asked.

We bought a pretty large mixed use project about two and a years ago out of bankruptcy. was 300 multifamily units, 320 senior living units, 100,000 feet of commercial retail, 250 single family, and it was already permitted. So we had planned on just going through and doing our mixed use project like we had bought.

Mike Embry (11:37.42)
data center and end user and we started walking through it and just the dynamics of it and the pricing of course.

swayed us that we needed to take a really hard look. And from that point, once we started that one, we’re now involved in six data centers. So within a matter of 18 months, we’ve gone from doing zero to six.

Stephen Schmidt (15:10.253)
Alright, I’m back. Can hear me?

Stephen Schmidt (15:25.595)
Can hear me?

Mike Embry (15:27.276)
Yeah, I’m here.

Stephen Schmidt (15:28.879)
Okay, perfect, I’m back. Man, what we’ll do is, I think it’s probably because we still have weather going on, but yeah, my office Wi-Fi, I’m surprised I even still have power to be honest with you. We were hit last night, my wife and I woke up, we had almost an entire maple tree fall on our house, 90 mile per hour winds, so it’s raging here this morning still.

Mike Embry (15:34.262)
Hot spots don’t always do the trick.

Stephen Schmidt (15:58.031)
We’ll just start right back where you were starting to talk about how data centers, there wasn’t really a big need for it really until the last like 20 years. Now everything is data. That’s where I cut and my team can edit the clips together. So if we wanna start back with that same question, you just start where you picked up, we’ll go from there and I’ve closed all my other tabs. So hopefully this is the only bandwidth that the hotspots taken so we shouldn’t drop off again, hopefully.

Mike Embry (16:11.938)
Okay.

Mike Embry (16:21.078)
Ha!

Okay, yeah I mean after, you know, there was about a 20 year span where data centers, there wasn’t a lot that was being stored. It was government info, know, health records, that type of thing. And then as everything became your phones, computer, everything, I mean, everything exploded, app TVs, the storage had to increase dramatically. And then AI has just pushed it to another level.

Stephen Schmidt (16:52.379)
Mm.

Mike Embry (16:52.674)
In fact, you’re talking about where in a regular data center they would have servers they could swap out in five years. Now it’s two to three years because AI, the demand is just crazy. what happened with us about a year and a half ago, we had bought a project out of bankruptcy that was 300 apartment units, 320 senior living, 250 single family houses and 100,000 feet of commercial retail that

It was permitted and we were ready to go through seven or eight year deal. We were gonna stay in it. We were approached by an end user about a data center campus there. And once we looked at the dynamics and the numbers and everything else, it was just like, you know, this is a, I mean it was.

very eye opening for someone who’d never been in that space, not that we were ignoring it, but the numbers and our timeline of being able to get out in a couple of years as compared to eight years and make a lot more money at it, you very inviting. So we looked through our portfolio of we’ve got about a hundred million in assets either that we own or under contract. And we went and analyzed every one of them. Okay.

Stephen Schmidt (17:55.642)
Hmm.

Mike Embry (18:11.02)
Will this meet the criteria? And we had five at the time that met the criteria where we could either do a small center to send a cell to someone private or larger ones like we were doing that involved Meta or Oracle or there’s a number of end users, hyperscalers, that type of thing that actually developed these campuses for a number of companies.

That’s what kind of drove us there as we analyze, we had one we’re looking at right now, 355 single family units. It was a defunct golf course in South Carolina.

it turns out we can do a data center on it and possibly a regeneration site, which is where the power company will upgrade the power lines and then they’ll dump a bunch of power in this building overnight and store it for the peak hours during the day. you know, they’re very lucrative.

Stephen Schmidt (19:06.735)
Mm.

Mike Embry (19:13.826)
You don’t have the hypersensitivity of let’s say putting in a multifamily site or something. You’re not putting kids in the schools. You’re not putting a bunch of traffic on the roads. The tax base, I mean, we’ve got one now that’s a 300 lot residential deal and over a seven year period, it would put $16 million worth of property taxes into that county. With a data center with

Stephen Schmidt (19:40.196)
Wow.

Mike Embry (19:42.178)
million 200 square feet on it of buildings it’ll put 93 million dollars in property taxes into it in seven years.

Stephen Schmidt (19:50.842)
Wow.

Mike Embry (19:52.962)
It’s crazy when you start looking at the numbers and compare them to other types of real estate.

Stephen Schmidt (19:59.301)
Sure. Now, were you guys approached for your first development or when did you decide like, this is something we should pursue and then see how the first one went? How did that kind of come about?

Mike Embry (20:15.522)
We were approached. We were moving forward with our project the way that it had been designed and permitted. And they were knocking on the door. didn’t, we weren’t real interested at first. It’s like, look, we’ve got a game plan. We’re there. We’re ready to break ground. And they kept on talking to us. And as we peeled back the layers and looked at it, and it’s like,

Stephen Schmidt (20:23.035)
Hmm.

Mike Embry (20:40.194)
time and make four times as much money. I I don’t have to be hitting the head with a hammer to figure that one out. So, much as I’d like to think I’m smart sometimes, a lot of times it just kind of goes your way. I mean, you know, this business, it can go both ways. It can kick your butt and make you feel like you never want to do it again.

Stephen Schmidt (20:47.739)
Yeah, no kidding.

Mike Embry (21:04.002)
feel like you’ve done everything right, and a lot of times it’s just right place at the right time.

Stephen Schmidt (21:08.923)
Sure. Now, so I know research and analyzing the deals is a big thing that you focused on, something that you cut your teeth on very early and finding some challenges and possibly even making some mistakes. But how do you decide which opportunities are actually worth pursuing at the end of the day now?

Mike Embry (21:29.378)
Well, a good example is like when this came with data centers and then we started looking at other projects and saying, OK, what? We were never involved in this space. Now we have to go back from the beginning and look at it like it’s a blank piece of paper and do our research and see is there something there. But each project, if we decide an area that we want to be in,

if it’s a residential deal, usually starts with public schools. That’s usually the number one driver for, from years ago when I was young is that if you’re gonna do a residential deal, the first thing you’re gonna look at is the public school system and then you’re gonna be looking at jobs and you know, it’s not.

It’s not that difficult. It’s just a matter of peeling back the layers. And it’s a little easier now because you’ve got people that collect data and you can subscribe. 100 years ago when I got started, we had plat books that you had to go down to the county and look for a parcel. And we thought we were high tech when we started buying our own plat books and not having to go down to the deed room.

Stephen Schmidt (22:41.648)
Yeah.

Mike Embry (22:41.89)
But you know, then you have every year in the school system put out scores and you’d go buy those and you’d have that. You’ve got a lot more information now, but you still have to filter it. Some of it’s just a gut call. mean, we’ve made a lot of calls where we went back into redeveloping in Atlanta 30 plus years ago and lot of people didn’t want to in there.

Stephen Schmidt (23:06.298)
Hmm.

Mike Embry (23:10.498)
told pioneers end up with arrows in their back. we were in some pretty sketchy areas, but as low tech as I can put it, I’d sit there and drink a cup of coffee and watch what kind of cars were coming by and who was going in and stopping in stores and getting something and where did they come from? mean, it wasn’t, to me, wasn’t that difficult to read it.

It was hard to get a lot of people to do a project with you or get financing for it honestly. But we spent a lot of time using private money for a number of.

Stephen Schmidt (23:38.864)
Hmm.

Stephen Schmidt (23:45.125)
Yeah.

Stephen Schmidt (23:51.771)
So, I mean, on that note, that brings up a good point that for your side of real estate, it’s obviously, and I think most portions of real estate are the same, where it’s really relationship driven. But to be in business as long as you guys have been in business and to be able to still continue to operate, you have to have built some really long-term relationships. What’s your approach to building long-term relationships in the business?

Mike Embry (24:21.922)
you

I always tell people to be real careful when you’re talking to the new planner at the county or the young engineer or whoever it may be because, you know, time moves on. know, like we talked about earlier, I had a lot of hair and a mustache and a real good tan and you know, a lot of the people as time goes on, the people move up and they become the person that’s making the decisions and you have to be really careful and check.

how you treat people that aren’t necessarily making decisions today but in 10, 20 years they’ll be the shot-caller. So you just got to be respectful to people even if they’re learning the business, whatever sector that is they’re in, whether it’s private or public, just be nice to people. It’s pretty simple to me, know, if you’re nice to people…

people want to work with you. If you’re going to yell at them and act like a jerk, they don’t want to work with you. To me, it’s that easy. You’ve to think long term that people, the guy I’m talking to today is going to be 10 years from now he’s going to be running that department down at the city of Atlanta.

If I’ve been treating them bad, well, you can bet they remember the people that treat them bad as well as the ones that treat them good.

Stephen Schmidt (25:52.827)
Sure, 100%. What’s maybe the best piece of advice you’ve ever received about leadership?

Mike Embry (26:01.472)
leadership. Don’t ask anyone to do a job that you wouldn’t do yourself or a

Stephen Schmidt (26:10.019)
Mm-hmm. Who’d you get that from?

Mike Embry (26:18.454)
Worked in the rain, putting up silt fence. I’ve put pipe in the ground. I’ve put ductile iron pipe in the ground. Water lines, you name it, I have worked in the field. I didn’t just come up and, as he used to say, you can’t build houses from behind a desk. I didn’t sit behind a desk and do things. I’ve worked in the field for many years.

Enjoyed it, know, at times it got old when it’s almost 100 degrees here in Georgia and you’re putting pipe in the ground. You kind of want to go put the suit on and sit inside for a while. But I think that’s the thing is don’t tell people to go do something that you either don’t know how to do or you haven’t researched. You know, trying to be a leader and not know the job you’re asking someone to do is tough.

Stephen Schmidt (27:09.167)
Yeah, yeah, I totally agree with that for sure. You know, even even more so than just in business, you know, I know I mentioned earlier on the show about how I’m teaching my son now the value of hard work and that you’re always going to have to do things that you don’t want to do. And life might get easier the more you get educated and the better relationships you build and the higher net worth people you get around. But at the end of the day, you know, right out of high school, I cut my teeth putting in working on a

Mike Embry (27:34.082)
Thank you.

Stephen Schmidt (27:39.631)
board drilling crew and putting in pipeline myself and working 100 hours a week. And it’s one of those things that it’s nice now because I get to sit in a fancy office and talk to real estate investors all day and have a great time. But at the same time, I would never be preaching about the value of hard work had I not been through it myself and realized that some of those lessons when it was 100 degrees out and I was sunburnt from head to toe for weeks at a time that

Mike Embry (27:42.526)
and I will be back.

Stephen Schmidt (28:08.815)
those were some of the most important lessons that I’ve actually ever received in my adult life too.

Mike Embry (28:14.622)
It, you know, the cliche makes you appreciate it, but I think it instills a work ethic and it’s one of those things that, like I said, when 08 hit, we were getting hammered like everybody else. you know, I told people my dad grew up, like I said, two room farmhouse, no water, no power, had an outhouse, worked in the fields. And I said, I don’t have it that bad. You know, I can.

I’m sitting at home, I’m eating dinner and I’m watching TV and got my phone and I’m working on stuff and you you just gotta keep things in perspective. And at that time my daughter told me, my daughter also told me, she said, guys like you always come back dad, don’t worry about it.

Stephen Schmidt (28:54.383)
Right.

Stephen Schmidt (29:01.722)
Mmm.

Mike Embry (29:03.692)
the advice from my…

Stephen Schmidt (29:10.989)
What a profound thing for a 12 year old to say.

Mike Embry (29:15.222)
And now she works in the business. she’s 29 years old and worked in the business and her and my son and my nephew. They’ve seen how hard it can be. You can work on stuff for a long time and then a deal just go away in matter of hours.

Stephen Schmidt (29:18.181)
There you go.

Mike Embry (29:37.694)
It can be tough, I mean, you know, I think that people in real estate business, you got to be thick skinned. There’s just a lot of facets to it, whether, you know, whatever sector you like to work in or whether you’re dealing in the financial part of it whatever it is, it’s, it can be, I’ve always enjoyed it. But yeah, it’ll,

Stephen Schmidt (29:57.957)
There’s a…

There’s an entrepreneur that I really respect who had a clip that I saw of him. He’s in the, he’s in the building, Steel Buildings has a pretty sizable company that he’s built. And he talked about when he was earlier on and he was about to go through bankruptcy, he went to one of his mentors who is a pretty big deal on that space. And he told him, he’s like, man, I’ve got a million bucks out that I’m owed. I’ve already had to take out a second mortgage on my home just to make payroll.

and I really think I’m gonna go bankrupt. And his mentor slapped him on the shoulder and kind of smiled and just said, son, if you don’t feel like you’re gonna be doing that every four years, then you probably ain’t doing anything anyways. And you kind of strike me as the type of person that would say that to somebody going through that.

Mike Embry (30:49.41)
Well, I had a guy who I knew for years, older developer, he looked at me one time and he said, know, I’ve gone through the booms and the busts. Real estate is kind of like the oil business. You make it and then if you just mistime it, then you can lose it all. And he had done it three times and he ended up on top. But he’s like, you know, just…

Go back to work. know, once everything went bad, you know, they’d clear the deck and I’d go back to work. But he also used to joke, he’d say a real estate developer is worth what he can borrow.

Stephen Schmidt (31:31.535)
Mmm.

Stephen Schmidt (31:35.717)
I love that. Let me ask you one last.

Mike Embry (31:36.386)
course, when 08 hit, he owned about $250 million when 08 hit. So he was worth a lot.

Stephen Schmidt (31:44.429)
No kidding, man. So let me ask you one last question. If you were able to go back to when you got started, but you were able to take all of the knowledge you’ve gained over the last 40 years back with you and do everything over again, what would you do differently and what would you do the same?

Mike Embry (32:04.556)
differently, think I would probably.

Mike Embry (32:12.886)
knowing where things are now, would have learned more about the capital end of it. It’s always, it starts out, you you go to a bank, you have a deal and you put it together, this is the profit I’m gonna make. I mean, that’s kind of old school-ish. And now, you know, the way capital is and where you’ve got a return on the capital and it’s just…

stacked up differently and I think the guys that you see that come out of private equity and stuff become good developers. They understand how the money works, I think, a little different. Instead of looking at how the project works, okay, I need $10 million, I’m gonna go get $10 million and this is how my project works. Instead of saying, I’ve got $10 million in capital, how am I going to put this into one, two, or three?

I think that’s one of the things I would have liked to have known differently. What I would have kept doing was, like I said, working hard. I I like to work, always have. like I said, I’ve always told people, if I have to, I’ll outwork them. I’ve worked on Christmas Day. I’ve worked all night long. I mean, I don’t mind doing it. And I think that’s the thing that, you know,

You also have to in this business. I’ve been called on Thanksgiving Day when someone’s hot water heater’s exploded and the ceiling fell in while they were eating Thanksgiving in one of my apartments. And you’re down there cleaning it up instead of sitting with your family. So you gotta be ready to do that type of stuff. You can call your maintenance guy on Thanksgiving, but if he’s been working two weeks straight and hadn’t had a day off, then you want him to keep working for you, then you just go down there and handle it.

Stephen Schmidt (34:03.577)
You got, mm, love that. Well Mike, this has been an absolute pleasure and a privilege. How can these people connect with you for more if they want to learn more about you or what you’re working on?

Mike Embry (34:16.322)
They can go to EmbreeDevelopmentCorp.com, that’s our new updated website, and it’s got a history on us, projects we’re working on, and they can…

They can give me a call or email if they want to talk to me about projects. Either they got some for sale, want to buy something, best, whatever it is. Anything real estate, we’re always game to talk to people.

Stephen Schmidt (34:45.957)
Well, thanks so much for being here. I know everybody got a ton of value out of this as much as I did and we appreciate you coming on and sharing your story and some nuggets of wisdom with us. We’ll see everybody in the next episode.

Mike Embry (34:52.898)
Thank you.

Mike Embry (34:57.954)
Thank you, I appreciate it very much.