Capitalizing On Market Cycles And Office Distress With Jeff Gronning (Podcast)

Aaron Strauss: You're listening to The Dealmakers' Edge with A.Y. Strauss, diving deep into stories behind commercial real estate leaders. Hello everyone. Welcome to The Dealmakers' Edge. Today we're going to be joined by Jeff Gronning, who is currently the CEO of Cannon Hill Capital Partners. Cannon Hill was formed through a management-led buyout of the investment management business of Columbia Property Trust. Prior to founding Cannon Hill, Jeff was Executive VP and Chief Investment Officer at Columbia. Prior to that, he spent 15 years at Normandy, where he co-led the growth of a vertically integrated real estate private equity firm. Before that, he was CFO of Morgan Stanley's real estate investing division.

This is a great conversation. We're going to learn what Jeff's excited about in this market, how he's navigated through the early days of the RTC to the GFC, through COVID, through today, what's compelling about what he's seeing in the market, how he's navigated the ups and downs, and how he's making deals pencil today. So it'll be a lot of fun to talk to him. I hope you enjoy the conversation. Without further ado, here we go.

Hello, everybody, and welcome to The Dealmakers' Edge. Today, we are joined by a very illustrious guest, Jeff Gronning, who has taken time out to share some wisdom, share his background, and share his career stories. He's done some amazing work over his career, and he's had a fantastic, successful journey in commercial real estate. We're excited to learn from him and hear from him. Thank you for being on today, Jeff.

Jeff Gronning: Thank you, Aaron. It's a pleasure to be here.

Aaron Strauss: We usually like to go on the wayback machine a little bit, not too heavy, not too deep, but where you grew up, how you grew up, first job in real estate, where you went to school, and the like.

Jeff Gronning: I grew up in Northern Virginia, just outside of Washington, D.C. I grew up in a bit of a real estate family, so I think I've got real estate in my DNA somewhere. Although I went to school at Virginia Commonwealth University and graduated with a degree in accounting, and spent the first couple of years of my career at Coopers & Lybrand, which is now part of PwC, in Washington, D.C.

When I went there, I went in with the intention of working on audits of real estate companies. But this was 1990, and it was the RTC days, if you will. The clients were evaporating at a pretty rapid clip in those days. I had the good fortune of getting assigned to a consulting engagement on a D.C. developer that had gone bankrupt. That was really my first entree into real estate, real estate investing, and the capital markets side of the business.

I did that for a year or so and then had the opportunity, through that engagement, to transfer up to New York City, where a short time later I took a job working at Morgan Stanley. I didn't know it at the time, but the job was in the accounting area, working on Morgan Stanley Real Estate Fund Number One, really at the beginning of real estate private equity as we know it.

That turned into a tremendous opportunity, learning opportunity, and growth opportunity. I was able to migrate from an accounting background into asset management and acquisitions and wore a bunch of hats at Morgan Stanley over roughly a 13-year period. That firmly launched me into the real estate private equity career track that I've been on ever since. Interesting roundabout way of getting to where we are today. But in total, I've been in the business for 35 years. It's been a great run.

Aaron Strauss: Awesome. It's incredible. At Morgan Stanley, you were the CFO of the real estate investing division, which is a serious role. Twelve years there, it's like a $13 billion asset portfolio, if I'm getting my numbers right. But it was major responsibility at an early stage. You weren't far out of school, so you really grew up there very fast, it seems like, in the business.

Jeff Gronning: Yes, it was great. I don't think I can express enough appreciation for what working at a firm and a platform like that did for me in terms of my professional development, career, relationships, and network, and the like. So it's a real highlight in my history.

Aaron Strauss: Yeah, it's a great touching point for people who are in their career. Everyone wants to be an entrepreneur, but there's nothing wrong with going to work at a real institution to start. You understand training and polish, and honestly, just the people you meet in your orbit go on to become partners, clients, friends, what have you. So that's terrific. Then from there, I know you transitioned over to Normandy, correct?

Jeff Gronning: That's correct. I left Morgan Stanley in 2005 to team up with two partners, Finn Wentworth and David Welsh. Together, the three of us grew Normandy Real Estate Partners into a vertically integrated platform that went on to raise four value-add funds, an opportunity zone fund, and a couple of separate accounts.

We grew that business from just a handful of people in 2005 to over 100 people over about a 15-year period before we sold the company in early 2020 to a company called Columbia Property Trust.

That was the next leg in my real estate journey, shifting from a much more institutional Morgan Stanley, big global platform into a smaller, privately held, vertically integrated operator, fund sponsor, and developer. So it was a pretty significant shift. But what I was able to do was leverage a lot of the relationships, knowledge, and institutional upbringing I had at Morgan Stanley and use that experience as an asset to help grow a smaller, much more entrepreneurial and nimble operator, or sharpshooter, as I think the term we were using at the time when we started. That worked out well for all of us.

Aaron Strauss: Definitely. I remember the first time I heard of Normandy was probably '07 or '08. What a different world those were. I remember some of the deals. I remember reading, in the darkest days of the GFC, where you couldn't pay a client to buy a property. Zero liquidity, market froze.

I remember reading about the acquisition of—was it the Hancock Tower? The huge office building in Boston—and almost being alarmed. "How did these guys do that?" So clearly it was your brains and your partners' brains to pull off deals like that in a market that had no movement whatsoever. Nothing. To take down big deals like that is illustrative of the capacity you guys had, the brainpower, and the capital at a time where it was all frozen up. That was really cool to watch.

Jeff Gronning: Yeah, it's interesting because a lot of things have to go right to pull something like that off. Fortunately for Normandy Real Estate Partners, we had raised a fund that had some dry powder right as things were going to hell in a handbasket. So we were able to use that dry powder to be somewhat active during the worst part of the market, maybe in a way that others weren't, when you look back on it with hindsight.

But I would also say what was a real advantage for Normandy was the capital markets expertise that we had. Not only could we operate real estate, value real estate, manage, and develop real estate, but coming from Morgan Stanley, where I was the chief financial officer and responsible for a lot of our capital markets activities for a number of years, the ability to understand the capital stack in a way that probably other similarly situated firms weren't, just because of that different background.

Then tapping into the capital markets relationships with decision makers at some of the big institutions that were, at that time, looking to shed assets at any cost. It's a different market today, but at that point in time, you could go direct principal-to-principal, buyer-to-seller, and negotiate a deal to buy defaulted loans or debt at a discount.

We had the ability to not only access those opportunities but underwrite those situations and ultimately navigate our way through the capital stack on John Hancock Tower and others as well, and control that real estate. Really, the name of the game for a vertically integrated operating company like Normandy, is to get your hands on the real estate and then create value at the operating level. That's what we did in that situation and others, and something hopefully we can do more of today, given that the markets are down and you'd like to think there's a similar opportunity out there.

Aaron Strauss: Definitely. When you apply that experience to those relationships and the dry powder, anything's possible. But even having the courage to pull the trigger, that alone is part of it. That's incredible conviction.

Fun fact about one of your partners—you probably didn't know this—but I was permitted to try on Finn Wentworth's Yankees World Series ring one time at the office, at a closing that I was handling with him when I had a private firm. So fun fact.

But from there, after the purchase, after it was bought, came into Columbia Property Trust, and then from there, Cannon Hill Capital Partners, or your partner now, spun out of that natural trajectory. Maybe you could talk about the current platform, some of the deals you've looked at or done, what you're looking to do, how you're formed, and what's interesting to you today.

Jeff Gronning: Yeah. So I think it's probably helpful to understand a little bit of the history. The way the Columbia transaction came about, we had built up this successful private firm over a number of years. A lot of what we did was joint ventures with other sources of capital, one of which was Columbia Property Trust at the time. We had finally done three joint ventures between Columbia and Normandy.

I think I realized now Columbia is a public company, gateway office focused. There was a lot of overlap between Columbia's markets and Normandy's markets. What Columbia had was a permanent balance sheet, a publicly traded balance sheet. They had core assets, very high-quality, stabilized core assets. What Normandy brought to the table was the ability to raise capital in the private markets, which, if you follow the REIT industry, chronically, I think, for office REITs traded at a discount to NAV. So it's very difficult to raise public equity when you're trading below your asset value.

So what Columbia was looking to do, and other public office REITs were looking to do, was access private capital. We had a private capital machine at Normandy that was capitalizing deals, including with Columbia, because they were leveraging their public balance sheet to do business with us.

What I also realized is public companies shouldn't be allocating capital to private operators and paying promotes. They should be doing that themselves, right? And so it made sense for Columbia to want to combine with Normandy to augment the capabilities of the combined firm to be able to expand beyond core public assets, publicly traded assets, into private capital value-add business plans that could drive growth for the combined company.

So that was the original intent of the transaction that we negotiated between Normandy and Columbia. What ended up happening was we negotiated the transaction during the second half of 2019, and we closed it in January of 2020, which was right before COVID hit.

We brought over 85 Normandy employees to join, call it 85 or 90 Columbia employees, so it doubled the size of the company. But because of COVID, we were doing Zoom calls like we're doing right now. We were never really able to integrate the company, the cultures, the business plan, the strategy. It is very challenging, right? So for months and months and months, we were on our back foot, on defense, if you will, not able to move business forward.

Then being an undersized gateway office player attracted the attention of activist investors. One thing led to another. The board had to run a strategic alternatives process, which culminated near the end of 2021. So a little less than two years after we merged with Columbia, it culminated in a take-private transaction that was sponsored by PIMCO and a bunch of the funds that they manage.

So the whole time we were just on defense, right? Whether it's a company for sale, dealing with activists, or dealing with COVID and the impacts of COVID on office real estate in particular, clawing out of that at a very slow trajectory. The whole business plan, the whole concept, the whole strategy behind bringing the two organizations together just never really gelled for reasons that, frankly, were beyond anyone's control.

So when the company announced that they were selling the company to PIMCO in a go-private transaction, what became very clear to me at that time was that if you're sitting in PIMCO's seat and you're looking at Columbia Property Trust, what you see is a big portfolio of core assets that have low corporate-level debt, investment-grade debt, and 120 million shareholders making up the equity base.

That got financed with CMBS debt and other loans, and then levered up. About $1.4 billion of equity went into that transaction. That was coming from PIMCO, the acquirer. Then there was no equity required to step in and assume what we were running on the other half of the business, which was the old Normandy legacy book of business, because it was all commingled funds with small GP investment, but obviously revenue streams and a lot of people and resource allocation going into managing what was an equal-sized portfolio at the time.

So for me, that created an opportunity to go back to the folks that were running the deal at PIMCO, Nelson Mills, who was the CEO of Columbia at the time, and negotiate for myself and 55 other people to spin out, effectively unwind the transaction that we closed in 2020, and create this new company, which we rebranded as Cannon Hill, which for all intents and purposes is what Normandy became after we merged it into Columbia.

It's a little bit smaller. There had been some runoff in some asset. There were some folks we used to work with at Normandy who stayed with Columbia to help run that portfolio for PIMCO, and they continue to do that today.

But we had the opportunity to set up Cannon Hill Capital Partners. What we are today is a value-add, vertically integrated, 60-employee, privately held company that has a lot of the same look and feel of what Normandy had prior to the sale in 2020, but under a different brand and with different leadership too. A lot of the former partners of Normandy are doing great things on their own or in different capacities. But the successor company to Normandy is Cannon Hill Capital Partners.

Aaron Strauss: Got it. Great overview. I'm sure a lot of your survival instinct kicked in when COVID kicked in from the GFC. Totally different story, but probably a similar reaction, "Oh, my God. What's going on?" But you heard that story.

Jeff Gronning: You have to adapt and evolve. Yeah, for sure.

Aaron Strauss: One hundred percent. It just makes you stronger. Maybe you can describe the current capitalization, what deals you're pursuing, what assets you've acquired, you're doing a lot of GP-LP deals these days or more straight GP.

Jeff Gronning: I think the most recent news on Cannon Hill Capital Partners is that late in the fourth quarter of 2025, we announced the formation of a strategic partnership with TriPost Capital Partners. TriPost is a great firm. They platform investments. They provide growth capital to firms like Cannon Hill.

So for Cannon Hill, we are the vehicle through which TriPost and their fund investors can gain exposure to the office sector. The opportunity there is if you look across the office sector, there's been a lot of distress, right? When interest rates shot up, cap rates shot up, and values were already depressed in office because of the work-from-home hybrid.

Even before that, for a lot of years, there's been a lot of capital allocation away from office into more niche asset classes. So the office space has been facing headwinds for years, even before COVID, quite frankly. So you had headwinds, then more headwinds, then interest rates, which were more headwinds. The next thing you know, you've got values office buildings down 40%, 50%, 60%, 70% in some cases.

So at some level, that breeds an opportunity, right? And what we were seeing, and I think what TriPost is seeing as well, is an opportunity to come back in and take advantage of a 30-year price adjustment in the value of commercial office real estate. Frankly, if you go back 18 months ago and were looking at an office deal in any of the Northeast markets, finding a joint venture partner to capitalize that transaction was impossible.

Now you fast forward to 2025, now early 2026, and it's a bit of a different story. I wouldn't say it's easy, but there are definitely more institutional investors, opportunity funds, value-add funds, and the like that are ready, willing, and able to take a look at an office deal. The bar is still very high. Returns need to be high, and it's got to check all the boxes. But there is receptivity and increasing conviction around deploying at least a portion of XYZ funds, available capital into the office space.

So that's really what we're trying to take advantage of with this TriPost GP fund and this strategic partnership that we have. Hopefully, we can grow it from here. With the capital available to us, our goal over the next two to three years is to acquire upwards of $1.5 billion of distressed office, if you will, that we will be looking to earn opportunistic returns on.

We'll do it in three different ways. One would be distressed debt or forced sales, reset basis into office that wants to be office. It needs a new capital stack. It needs the ability to go out and compete for tenants. Maybe you have to reposition the building, the amenities, and the like. But it's good bones, good real estate, good office real estate that can take market share. That's one aspect of our strategy.

I also think there will be opportunities to provide gap equity, whether it's in the form of mezzanine or preferred equity. There's already been a lot of that. Frankly, it's getting compressed, so I'm not sure how deep that opportunity will be for us. But selectively, I think there will be opportunities to come in and work side by side with existing owners to fill gaps on a selective basis. And then thirdly would be conversions, which is an area we've spent a bunch of time on.

There's a lot of it going on, particularly in New York City and Washington, D.C. It's hard to get those deals to pencil. But as prices have come down for real estate, the opportunity for assets to potentially underwrite for conversion has increased, I think. So we're doing one now in Tribeca. 101 Franklin is a vacant office to high-end residential conversion that we closed on 18 months or so ago, and will be under construction here probably the middle of this year, beginning sales on that.

So that's a good example. Another example of what we've been up to is down in Northern Virginia, we are taking a two-building, Class C obsolete, suburban office park, and we are going to demolish two of the buildings and repurpose that space into a quasi-industrial use, or that site into a quasi-industrial use. Our opportunities returns that way. Those are the three areas where we think we can play.

Then I think we also just want to continue our development activities. Development's a big part of our history and our DNA. So we've got a forward pipeline of residential multifamily development opportunities in the northern New Jersey market that we're pursuing, actively pursuing as well. So that's what we're up to these days.

Aaron Strauss: That's a lot. So congrats. On the markets, are you looking, I mean, New York, obviously Northeast, are you looking in other markets besides the other one you mentioned, I think Virginia for office?

Jeff Gronning: I wouldn't say we're proactively looking outside of the Northeast. I mean, we believe in our vertically integrated model, and we think having boots on the ground where we can execute and at the operating level have a very strong relationship network is really important, a really important ingredient to our past and future success.

So for Cannon Hill, that's always been, and even Normandy before that, it was kind of the Northeast U.S. So that's where we spend the vast majority of our time. That's not to say that if we're working on some larger portfolio transaction that includes assets and it could be across the country or just outside of the Northeast region, we would certainly look at opportunities like that as well. But I'd say to go outside the region, a little bit more portfolio-driven, I think, than to say we're going to San Francisco or LA or Dallas or someplace like that. We probably should have gone to Miami, but we didn't do that.

Aaron Strauss: Listen, hindsight's 20-20. I want to ask you too, I mean, you've really seen the cycles, right? I mean, from the early days at Morgan Stanley to obviously GFC to COVID to what's happening now. You've really ridden roller coasters up and down. The one thing constant is you have to keep showing up, doing the work, having the conversations, sourcing deals, maneuvering through opportunities and over obstacles.

Maybe we can talk about the mental edge that has to get developed. I mean, I think very successful people in my experience who ride these waves, they are great at compartmentalizing, or they have a way of thinking through things that they can maintain that analytical part of their brain without becoming emotional about any one piece of real estate or opportunity. Maybe you can describe how you self-regulate. I think a lot of this business is just checking your emotion at the door and learning to keep all the variables at play no matter what's happening. I think that's something that you're obviously very skilled at doing. I think people listening to this would love to hear that.

Jeff Gronning: Yeah, it's a really good question. You're right. I mean, I can't even count how many cycles I've been through in 35 years, but it's been a lot. They're all painful and a little bit different.

But yeah, look, I think you just got to keep your perspective. You've got to, in some ways, be unflappable and, as you said, not emotional about it. You got to take it as it comes. I mean, in some ways, it's beyond your control, right? I can't control the capital markets or cap rates or office demand and things like that, but I can control what happens at the property I own. And you got to focus on the things that you can control and not on the things you can't control, right?

So I think that's really important. I think for me, riding the ups and downs and coming out of it and being able to say you were successful at the end of the day, I think it's, for me personally, a lot about hard work and perseverance and persistence. You just have to grind through it and come out the other side.

It's all about navigating and pivoting and working hard and just being persistent about deals and assets and commitment and integrity and being a good partner and things like that, that are all the ingredients that help you get through and deal with the ups and downs.

Aaron Strauss: Well said. I think that really dovetails into the advice section we always try to peel out of our guests too. People always want to get in your calendar and say, "How do I make it? What am I doing?" I think those lessons you just imparted are just absolutely standard, and they're consistent, and they're necessary for success.

Anything else I could have asked you that you would have loved to have been asked that I just totally missed in the interview process? Or if you don't have anything specific along those lines, anything that's very exciting to you over the next 12 to 18 months?

Jeff Gronning: I feel like I'm excited about the vintage that we're in. We're just talking about markets being cyclical. I think we're off the bottom. Markets are moving up. I'm optimistic about the economy here going into 2026. I feel like capital is flowing into the sector where we can provide a service and a value to larger investors looking to allocate into the types of deals that we can execute and source. So I'm really optimistic about that.

I'd say there's no excuse, right? I think the wind's at our back. Vacancies are reclining. Cap rates are coming down. Values are going up. Tenants are back in the office. New York City had the most leasing volume since 2019. I'm not diminishing how hard it is to make deals and capitalize deals by any stretch, but I hope that this is our year or our next couple of years.

So when I look back at the best performance that we ever delivered to our investors, it was just coming out of the Hancock Tower, the other deals that we were involved in in that vintage. We haven't had an opportunity like that in whatever it's been, 15-plus years now. So I'm glad to be in the business in 2026 based on everything that I see and what we hope to accomplish going forward.

I'm grateful for the support from TriPost and the investors that we've invested with and the relationships that have helped us along the way over the years. Hopefully, we can do more together.

Aaron Strauss: I'm sure you will. I'm sure with your background there's plenty more deals in the hopper, plenty more deals to execute on. It's been great hanging with you on this podcast conversation. I appreciate you. I'm sure a lot of people have learned a lot. I learned a lot, and it's really great to hear the inside stories.

So I guess with that, we'll wrap, and we'll all watch your deals in '26 and beyond. I'm sure you'll make it a fabulous year based off a long lineage of high-level performance. This is a great time to be riding up a new wave of deals. It's going to be exciting to watch you and your whole firm behind you really do some cool stuff this year and beyond. So thanks for being on, and to be continued. A lot of continued success to you.

Jeff Gronning: Thank you, Aaron. Appreciate it.

Aaron Strauss: Thank you for joining The Dealmakers' Edge. Don't forget to follow us on your favorite podcast platform. Please, give us a five-star rating so more people can follow the conversation.

The Dealmakers' Edge with A.Y. Strauss highlights the stories, successes, and struggles behind major commercial real estate investors. Each episode offers a behind-the-scenes look at commercial real estate leaders and their unique edge.

Hosted by Aaron Y. Strauss, Managing Partner at A.Y. Strauss