The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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36 REALASSETS ADVISER | D E C E M B E R 2 0 1 8 Recently, Geoffrey Dohrmann, founder and CEO of Institutional Real Estate, Inc., spoke with Charles Schreiber of KBS. The following is an excerpt of that conversation. How would you describe KBS to someone who doesn't know what you do? In short, we are an investor in high-quality, multi-tenanted, mid-rise and high-rise CBD offi ce assets located in markets with a limited amount of development. Why is that your focus? Our goal is to mitigate risk whenever we can. We avoid markets where there's a risk of overdevelopment because we don't want new buildings competing with our existing properties. We know tenants will often leave a perfectly good existing building for the shiny new one down the street. And that actually plays into why we avoid single- tenant properties. A few years ago, funds would focus on single-tenant buildings because it doesn't take much to manage one tenant. But the hidden risk comes into play when it comes time to sell the building. If you have a single tenant with an eight-year lease, that building is going to lose value the closer you get to the end of the lease. For example, if you want to sell the building six years into that lease, the buyer will be looking for a discount because they know they might have an empty building in just two years if the tenant leaves for newer space. KBS has been around for about 26 years. How has the industry changed in that time? The major change has been the amount and sources of information available to the investor. In the past, investors would receive a rosy report from the seller, and that would be it. Today, there are several very talented and sophisticated real estate research companies that are generating reports and information on the markets. This third-party information has reduced the overall risk in the market because unbiased data provides a foundation for more accurate return projections, which in turn allows more accurate asset valuation. What else has changed? Companies are valuing their employees more. It used to be that a company leased space in a building convenient to its C-suite executives. Now, it is more likely to look for a building closer to its employee pool. They are also more likely to want amenities for those employees, rather than something like an executive dining room. For example, when we acquired a building in Portland, Ore., we put in 200 bike racks. The tenants absolutely love it. What are some other amenities that tenants appreciate? We put a variety of spaces in the buildings that can be used by the tenants, so they don't need their own dedicated conference or meeting rooms. We'll have some sort of food service in the lobby. We have buildings where we have exercise facilities, with men's and women's locker rooms. These are the types of amenities that allow a 30-year-old building to compete with a brand-new building. Has your operating model changed over time? In the beginning, we had a rather standard set up, where the portfolio manager would be responsible for both investing in the markets and connecting with the investors. We have changed that model so that Peter Bren and I are the primary investor contacts. Investors can call our chief accounting offi cer or asset manager if they have questions, but if there's bad news, Peter or I will talk to them. If there's something that we need to change, Peter or I will talk to them. If we need to go to their offi ce, Peter or I will go. We don't send somebody else. This model allows us to focus on the investors — and lets our investors know that we consider them worth the founders' time — while our portfolio managers focus on investing and what's going on in the markets. SPONSOR INTERVIEW KBS: Bringing institutional real estate to RIAs and individual investors Charles J. Schreiber Jr. Chief Executive Offi cer Throughout their 40-year careers, Mr. Schreiber and Mr. Bren have been involved exclusively in real estate. They founded KBS in 1992 and continue to oversee all of its operations, including the acquisition, management and disposition of individual investments and portfolios of income-producing real estate assets. Peter Bren Chairman and President