The Sobrato Organization's Matt Sonsini, Rob Hollister Discuss Future Of Company, Trends To Watch
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Bisnow caught up with Sonsini and The Sobrato Organization President, Real Estate Rob Hollister to find out more about the company’s future, CRE trends worth watching and how the leadership team will continue the company’s philanthropic mission.
Philanthropy and social responsibility will be one of the topics of discussion during Bisnow’s West Coast Office Leasing & Development Conference on Sept. 13.
Bisnow: How will your experience as chief investment officer help you transition into your new role as CEO?
Sonsini: Over the 10-plus years I have been at The Sobrato Organization, I have worn many hats in addition to CIO, including chief operating officer and executive vice president. I have also served on the [Sobrato Family] Foundation board for that entire period, as well as the real estate executive committee with John Sr. and John M. for many years. So, I have experience with all aspects of our operations, which has made for a smooth transition into my new role as CEO.
As CIO, I thought a lot about portfolio management, correlations among asset classes, portfolio and macro risks, projected returns, etc. As TSO’s real estate portfolio and overall asset base continue to grow, I believe my experience with the securities portfolios will be helpful.
Also, our securities portfolios now represent a sizable portion of our overall asset base and provide important liquidity and diversification. As such, my strong familiarity with the portfolios will be helpful (and, in fact, probably essential) in thinking through our larger strategic and organizational next steps.
Over time, I expect us to become more active in our securities investment activities, seeking to complement our returns and exposure in the real estate portfolio while providing liquidity and diversification to the organization.
Bisnow: What are some of the development trends you have been watching in the Bay Area?
Hollister: The most interesting trends are the increasing importance of proximity to housing and amenities in how companies make decisions about leasing space. This is leading many of the major employers to consider locations beyond their home market — whether that be Google in San Jose, Facebook in Fremont or any number of companies in Oakland.
There are multiple long-term trends all pushing in this same direction — an increasingly scarce skilled workforce that shifts leverage from employers to employees with multiple opportunities, decades of failing to build enough housing leading to exorbitant housing costs, an overloaded transportation system extending commute times and cloud-based information technology that has severed the tether between the employee and the desk.
Bisnow: How do you anticipate these trends will impact The Sobrato Organization going forward?
Hollister: On the positive side, these trends have increased the value of having the right product in the right location, so making good investments will be more highly rewarded. Real estate becomes a strategic asset, not a commodity, and that is great for an organization like ours that is focused on taking development risk and has a long time horizon in which to realize that value.
Of more concern is whether these trends eventually slow the growth in the Bay Area, if employers need to expand in other locations due to lack of skilled workers here. This is one of the reasons that the Sobrato Family Foundation is focused on those who have benefited less from the prosperity in the Bay Area.
Unless we can house, educate and transport all of our residents, it will be hard for our home to outperform in the future the way it has in the past. We will find our for-profit and not-for-profit activities more and more aligned in their priorities.
Bisnow: What kinds of opportunities will your company consider?
Hollister: Sobrato’s competitive advantage comes through combining the flexibility of being entirely privately financed with a very long-term investment horizon with the creativity of our team. We will consider any opportunities in the Bay Area that play to these strengths.
Traditionally that has meant ground-up development of office and apartment projects and the willingness to take on complexity, whether it be in entitlements, land assembly or cleaning up brownfield sites.
Moving forward we expect to do more mixed-use projects and have more strategic cooperation with organizations that are similarly committed to this region for the long term. Certainly that means technology tenants — that goes all the way back to our original joint venture with Apple on their first headquarters — but increasingly it will also mean like-minded philanthropies and non-real estate investments as all parts of our organization seek to maximize our impact.
Bisnow: What is your vision for the company in the next five to 10 years? How will you continue the Sobratos' legacy?
Sonsini: The Sobrato family has made the decision to build TSO to last, and a large part of my role, working with the founders and team, is to make sure the people, processes and strategy are in place for that to occur. My goal is to do so while remaining true to the core values and foundational business plan that got us to where we are.
To be clear, our objective is not merely to keep the business going, but rather to perpetuate the extraordinary success that TSO has experienced over the years. That will take a thoughtful and focused business plan that is realistic about our strengths and challenges and a strong organization to execute flawlessly.
So, the future, if we are successful, will involve the continued, active development of iconic buildings and multifamily communities of which we can be proud and that people have come to expect from this organization.
At the same time, we have evolved into more than a real estate development firm, with the creation and growth of Sobrato Capital (our securities investment platform) and Sobrato Philanthropies. Our securities investment and philanthropic endeavors have become increasingly important and integral to the overall mission of TSO, which is reflected in our tagline: building a strong and vibrant Silicon Valley community through business and philanthropic leadership.
In fact, you might say the evolution of TSO and our organizational objectives are in tune with larger trends whereby businesses are increasingly cognizant of the broader societal impact that they can and, we think, should have. These, in our case, are grounded in the family’s core value of commitment to the community.
So, we are increasingly thinking of ourselves as impact investors who seek to be the best at what we do in real estate and securities investments while pursuing a broader mission of supporting the communities in which we live and do business. This evolution is also tied to the growing size and breadth of the organization and what we feel is the increased responsibility for community leadership that comes with that.
We will seek to work collaboratively (because real change will take all of us [working] together) while taking the long view. In the end, the success of this organization will depend on the ongoing success of Silicon Valley. As such, we have, in our opinion, both an obligation and an interest in promoting that success, which we see as defined by more than the growth of our business but also by the office space, homes and jobs we create, the capital resources that we direct back into the community and the leadership role we play.
Find out more about the intersection of philanthropy and commercial real estate from The Sobrato Organization chair emeritus John A. Sobrato during Bisnow’s West Coast Office Leasing & Development Conference Sept. 13 in San Francisco.