• People make the difference. We have always believed that a vertically integrated operating platform provides a key advantage in real estate investment. We believe stewardship comes most easily to those that are most aligned with the real estate, our values, our colleagues, our brand and our vision. What’s good for the real estate is good for us and vice versa. There is no asset greater than our team and the culture our team reinforces. This is especially true when times are unpredictable, challenging and require discomfort and constant change. Our team rose to the challenge, stayed positive, embraced our values, supported each other and found passion in their work. We’ve long embraced a ONE SENTRE mantra; we’re stronger, smarter and better together than we are apart. This was never more key than in 2020. 

• San Diego is on the cusp of greatness. Yes, we’re biased – born and raised as a company in San Diego since 1989. We’ve always had the weather, the beaches and an incredible quality of life, but never the diversity of industry, the quality of academic institutions and the sponsorship of business leaders and philanthropists that we have today. Multiple major universities are growing. The Airport Authority re-committed to a long overdue $3B redevelopment of Terminal 1.  The connection to Mexico and the broader mega region grew stronger via the investment in the cross border terminal and a newly remodeled Tijuana airport.  The life science cluster expanded meaningfully from Torrey Pines to Sorrento Mesa, the Interstate 15 corridor and, in the very near future, Downtown San Diego. Apple planted a flag and then expanded their office footprint further supporting the viability of the San Diego marketplace as ripe with a highly educated and talented labor force. Biotech has grown alongside big tech – further inspiration for other larger corporate and technology companies to make a similar commitment. The future is bright for our hometown. 

• Office is not dead. But it’s forever changed. Human beings are inherently social and crave interaction and collaboration. Work is not simply a place to work. Talent still needs a home and not all homes are conducive to work long term. We exist in a moment of transition where office user demand is quickly evolving and some form of hybrid is here to stay. Most large technology companies continue to expand their footprint despite being remote in some cases through the end of this year. There exists an opportunity to meet this new demand and we are on the precipice of a new era of space planning and design in the revitalization of a compelling work environment. Disruption often leads to a flight to quality. The most engaging and thoughtfully curated office experiences will lease in time and commodity will continue to struggle.  

• With change comes opportunity. With our office closed since March, we found new ways to collaborate and to socialize, albeit virtually. We didn’t fight the change, we embraced it. We invested heavily in our platform enhancing almost every aspect of our operations - better data, visibility and transparency. We worked smarter, not harder.  We added to and enhanced our team. We expanded our geographic footprint - pursuing investment opportunities throughout the Western Unites States including Los Angeles, San Francisco, Seattle, Phoenix and Houston. We built new partnerships and forged new relationships. The year was undoubtedly challenging in most every way, but it also inspired us to materially re-invent and re-invest in our people, platform and portfolio. A silver lining in a tumultuous 2020.  

• Grocery, drug and discount anchored retail survived. Necessity based retail redefined itself in many cases as essential business. Traffic, albeit far slower, continued. Our shop tenants survived. Many quick service restaurants, especially those with drive-thrus, thrived. Not surprisingly our best performing centers featured a combination of grocery, drug and discount retailers with 98.1% contractual revenue collected in 2020. New leasing across our portfolio was minimal, but the year provided the opportunity to re-engage with our existing tenants forging better relationships and a better understanding of the businesses that represent our portfolio. The United States has long been over-retailed and there will undoubtedly be a continued consolidation and re-imagining of malls, power centers and unanchored shopping centers - an opportunity to breathe new life into tired and obsolete retail product, to redefine neighborhoods via mixed use repositioning and to create new, modern experiences adapted to this new world. 

• Return of capital is the priority. Return on capital makes the headlines, but protecting principal is fundamental. Stewardship of capital is the cornerstone of investment management. We devote equal time to risk mitigation as we do a value-added business plan. Create upside, but protect the downside. Understand and underwrite the risks. Structure, governance, leverage, capital in reserve and sponsorship matter. In April we sold a multi-family asset and elected to return all capital to investors rather than locate an exchange. The market was choppy and uncertain and we believed a return of capital on a successful investment took greater priority than pursuing tax benefits associated with finding a follow on acquisition. We realized a gain and returned principal in the midst of a pandemic.   

• Not all leverage is created equal.  As interest rates hit all-time lows we were in a position, across much of our portfolio, to refinance into more attractive rates and terms. At the heart of this financing execution was moderate in-place leverage, prepayment flexibility and lender and banking relationships built over decades. There are few levers an investor can pull once a deal is fully capitalized, but accretive and relationship-oriented debt provides a continual opportunity to rebalance and re-invest in a more thoughtful and flexible business plan. Where we have strayed from this commitment in the past, we have been quickly reminded how much debt partnerships matter, in both good and challenging times, in creating value, mitigating risk and ensuring optionality during the life of an investment.  

• Industrial, life science and tech-oriented markets ruled the day. Clearly not all real estate asset classes have fared the same. There were definitive winners and losers. Industrial remains on a tear with Amazon creating a marketplace within a marketplace and the fundamental strength of logistics and e-commerce, and the growth it brings, in full effect across 2020. We expect this trend to continue to accelerate in the years ahead. Infill industrial in naturally high barrier markets will continue to price up.  Life science demand, spurred by the pandemic, has in part offset the lull in traditional office requirements. You can’t set up a lab in your home – highly specialized, physical real estate is critical to productivity. Life science in San Diego, San Francisco, Boston and Seattle is strengthening and diversifying office demand. Traditional office is being converted to life science in many markets. The major tech players are still leasing creative and differentiated office space.  

• Experience matters. Not just in that you have it, but that you can innovate and “do different” in a rapidly evolving environment. A slower and more challenging market means the difference between commodity and differentiated execution has never been more important. We continually reevaluate our portfolio against the litmus test: would our project be memorable in lineup of 10? We re-imagined creative office at our Mosaic project which features 24’ ceilings and a true indoor outdoor work environment.  We pursued a health and wellness initiative at our 900,000 SF office project Lakeshore via Fitwell certification which promotes healthy buildings. We invested in a better solution in our partnership with OpenPath, a touchless access control solution, which we installed at each and every unit at a recently completed multi-family development which we leased up successfully on a mostly remote basis. Curating a positive and memorable experience, across our team and portfolio, is at the heart of our corporate ethos.  

• Alignment is the standard. Relationships matter. We’re fortunate to have invested in meaningful relationships across 30+ years in business. At the heart of our partnership is alignment. We invest our own capital alongside our investors. We share values. We give back to our community. We strive to be incredibly open, transparent and clear in our communication. We seek to avoid conflict and to evolve in ways to reinforce alignment. Our partners collaborated, shared best practices and ideas, maintained trust, inspired us and helped us to improve. We are better individually and as a team as a result of our many partnerships.