We all reasonably expected some form of reprieve after an action packed 2020 and 2021. We instead waded headfirst into new headline challenges in 2022 that will certainly carry into 2023. Despite the obvious headwinds we remain optimistic that opportunities for meaningful investment will be present in the year to come. Deals will still get done, both from the perspective of buyer and seller, albeit with ever greater skill and discipline employed to properly measure risk and reward. We share below a few areas of focus and inspiration as we close out the year.
We sold an office building…
Last month we closed on the sale of our reimagined creative office project, Mosaic. The sale was the culmination of a thoughtfully constructed business plan executed by our team over a 36 month period. Mosaic came into our portfolio as West Bernardo Corporate Center in October 2019 only a few months before the pandemic. The early months of ownership were tough – we lost our largest tenant due to bankruptcy and faced a slower leasing environment. Despite the headwinds we maintained conviction for our vision and moved forward with a complete reposition of the property re-branded as Mosaic. We created a “workplace built for the new world”, leaned into an indoor outdoor office vibe, commissioned an art mural and built a one of a kind spec suite. We were rewarded with not one but three new leases taking us from almost 50% to 100% leased with an average lease term of over 6 years. A big win for office in an otherwise challenging environment. The execution is our team at its very best – steadfast stewardship, creative entrepreneurial spirit, an unwavering positive outlook and an all hands on deck effort. Proud of our team for realizing the vision that is Mosaic, but also a reminder that reimagined office lives on in this new world.
All in all we realized an $8M+ net gain, 29.23% IRR and 2.06 MOIC over a 36 month hold. Additional detail available via our formal Mosaic Closing Announcement.
A Workplace Reimagined.
Commodity office is certainly dead. But Mosaic proves that differentiated office experiences live on. Given we’re in the real estate business we have invested much time in determining how best to engage with our own office space in light of the evolving public view of how we should work. We subscribe to an open office model - an ecosystem that fosters complete transparency and organic collaboration and that we believe allows for personal and professional growth. We view the best office experience as an inspiring physical environment powered by the authentic culture that exists within our four walls. We were fortunate to have not directly experienced the pain of the much discussed “great resignation” nor difficulty in recruiting new team members – we strongly believe this a testament to the reputation that we’ve cultivated as a company. Recently we internally published a more thoughtful look at our “Workplace Reimagined”. Yes, we still work from work, but how we work is more nuanced and curated than ever before. We constructed a company calendar whereby we recognize 15 separate holiday days (no work), 4 holiday weeks (work from wherever ideally with family & friends during the holidays), SENTRE Summer (half days every Friday, Memorial Day through Labor Day) and quarterly social events. Forcing our team exclusively into “work from work” or “work from home” seemed overly binary and lacked creativity in approach. The debate for us is less centered around team productivity – we trust the work product, the ability to meet deadlines and to do the blocking and tackling inherent in every business. Instead we aimed to create a workplace as a conduit for continual creativity and inspiration coupled with greater flexibility.
For additional details on how we messaged our commitment to a differentiated workplace to our team please visit our Workplace Reimagined Announcement.
Our Brand Promise.
When we initiated a comprehensive rebrand of our company earlier this year a core component was the introduction of a brand promise. A brand promise is “an authentic truth that is simple, inspiring and infused into the core beliefs of your company. It’s the promise made by SENTRE to every person who experiences your brand.” We invested countless hours as a team in evaluation of what motivated us to bring our best to real estate every day. We landed with conviction on the following promise: “To reimagine real estate for good. For our partners. For our team. For our global communities.” This promise as an absolute truth that by translating our passion for real estate into meaningful outcomes, financial and otherwise, we can most positively impact our team and those within our community. This promise led to a formalized annual giving plan that dictates we donate a minimum of 1.00% of our top line operating revenue to deserving causes within the communities in which we invest. The giving plan is a lasting commitment that lives in both good and in more challenging economic times. We develop strategic partnerships with charitable organizations that allow for focus on engagement as a team. Like with our real estate we want to roll up our sleeves and get to work. This is not a marketing opportunity. We are proud that our brand represents more than a logo and a website.
Please view our Real Estate Reimagined Announcement for visibility into what inspires us.
Another year is now closer to the end than the beginning. The holidays provide us added appreciation for our friends and family that we’re fortunate to call partners. We count investment partners from five separate continents in many different time zones and with varied plans for celebrating the holidays through the end of year and beyond. We wish you all the very best for a happy end to 2022 and a positive start to 2023!