For finance and real estate veteran David Snyder, the best piece of advice — one that resonated with him throughout his career — was given by his father when he was a teenager living in Singapore.
“A principle my dad had learnt and thought worked best in building a team was to give away all the credit and to take all of the blame,” recalls Snyder, CEO and CIO of the manager of SGX-listed Keppel Pacific Oak US REIT (KORE). “While I don’t do this perfectly, I have tried to make this my guiding principle and found it invaluable.”
“For the success that KORE has achieved, while I may have made some contributions, more often than not, it’s because our finance team, our asset management team, our leasing team and our property management team have all done a great job. If we make mistakes, more often than not, it will be because of poor communication or an oversight on my part,” he notes.
“So, this principle doesn’t just work, it’s a true reflection of reality — even if it’s not necessarily what people may expect to see.”
Such a leadership style builds respect and loyalty in the team. “It spurs my colleagues to do their best as they know their work will be recognised and they won’t be scapegoated or blamed for the mistakes of others. Even if they do make mistakes, they will be motivated to improve in the future,” he adds.
Other core values of Snyder’s management philosophy include honesty, transparency, trust and teamwork. “Real estate is largely a people business, even though many view it as simply buildings,” he points out. “We strive to be transparent and honest with everyone — from our board, employees and investors, to our asset managers, property managers and leasing teams — basically, all whom we work with,” he adds.
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“It takes time and effort to build trust, and it’s an easy thing to lose, so we work hard to ensure all parties have not just accurate, but all of the relevant information — both positive and negative — so they can make the best decisions for themselves, or on our behalf.”
Listed on the Mainboard of SGX in November 2017, KORE is an office REIT with a portfolio that comprises a balanced mix of 15 freehold office buildings and business campuses across nine key growth markets in the US. As at Dec 31, 2021, these assets have a combined asset value of US$1.46 billion ($2.19 billion) and an aggregate net lettable area of about 5.1 million sq ft.
Leveraging strengths
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Leveraging its focus on the fast-growing segments of technology, advertising, media and information (TAMI), as well as medical and healthcare, KORE invests in income-producing commercial assets in key growth markets characterised by positive economic and office fundamentals that generally outpace the US national average and the average of the gateway cities.
These markets include the Sun Belt and 18-Hour Cities, which have and continue to see an accelerated influx of talent as part of The Great American Move. The Sun Belt has a sunny, warm climate and extends from the Southeast US across to the Southwest, while 18-hour cities are those with downtowns that flourish outside the nine-to-five workday.
KORE is managed by Keppel Pacific Oak US REIT Management, which is jointly owned by two sponsors, Keppel Capital and KORE Pacific Advisors (KPA).
Looking ahead, the REIT will continue to seek high-quality and value-accretive acquisitions across the US, largely focusing on the 18-Hour and Sun Belt Cities, including Phoenix in Arizona, Raleigh and Durham in North Carolina, Salt Lake City in Utah, San Antonio in Texas, Tampa and Miami in Florida.
“These markets will continue to benefit from strong population growth and employment opportunities, good supply-demand dynamics, as well as high occupancies and rental growth in the mid to long term,” Snyder says.
In particular, the Covid-19 pandemic has accelerated migration to key cities such as Seattle, Denver, Dallas, Austin and Nashville, and put a spotlight on the healthcare and life sciences industry. There are also opportunities in the fast-growing tech sector because of the acceleration of digital transformation by businesses, he notes.
KORE has established an early mover’s advantage and strong presence in these selected growth cities, where it has also built a good rapport with the expanding pool of tenants in the technology and healthcare sectors.
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Additionally, demand for lab spaces has been on the rise, driven by the expansion of biotech companies. KORE’s low-rise business campuses can provide or be converted into lab spaces and testing facilities on the spacious ground floors which have been, and continue to be, popular with its tech, healthcare and life sciences tenants.
“These strategic attributes and strengths, together with our high-quality assets, put us in a strong position to capitalise on opportunities that arise,” Snyder adds.
KORE’s portfolio also boasts a diverse tenant base and low tenant concentration risk, with its top 10 tenants contributing only 23% of cash rental income as at March 31.
“The growth in our markets, coupled with our astute management strategies, have enabled KORE to see rent increases that have kept pace with, and in some cases exceeded, our cost increases in the current inflationary period,” he says.
Navigating challenges
Nonetheless, industry headwinds persist. “With some of our peers announcing plans to expand into similar markets we invest in, we expect to see more competition,” Snyder admits.
“However, the portfolios of our peers still have significant investments in gateway cities and gateway adjacent markets. Their tenancies are also more heavily concentrated, especially in professional services, with a much lower tech/TAMI and healthcare tenancy.”
Other challenges include downsizing by professional service tenants whose employees can work remotely. However, such tenants make up a small percentage of KORE’s tenant base, he adds.
“Our strong tech focus and significant tech tenancy in our portfolio, along with our locations in key growth markets and other strengths, should help bolster our occupancy rates, even as we expect to see some additional downsizing as leases mature in the future.”
In particular, office landlords have been grappling with issues on whether employees will return to the office and at what frequency, as related to the rise of “work from home” and “work from anywhere” concepts.
“We’re now seeing big tech companies like Microsoft leading the way, and many others following, by bringing back employees to the office on a flexible basis,” he says.
“In fact, the number of workers working exclusively from home is trending down, to just about 11% of the total employed — at around 17.4 million, compared with 50 million working from home in April 2020.”
Apart from its day-to-day operational priorities, KORE is equally committed to upholding its Environmental, Social and Governance (ESG) targets. “We have a strategy of balancing improvements on the energy front over time, whilst maintaining strong returns to our unitholders,” Snyder notes.
“There are, however, a few challenges, including the fact that some of our older assets were not built with energy efficiency in mind, and would be costly to retrofit, as well as high costs involved in implementing certain energy efficiency and energy usage infrastructure,” he adds.
“We’re navigating these obstacles by first, focusing on retrofitting items that are less expensive but create significant energy or water savings. We’ve also been working on the replacement of bigger ticket items with more efficient versions over time.”
On growth opportunities, the 51-year-old notes, “One concern I have now is our ability to find accretive acquisitions and grow, as a result of the pandemic and our unwarranted high yield, despite our strong performance.”
Fortunately, in 2021, the REIT was able to find, and close on, two very strong acquisitions in two of its target markets that were entirely occupied by tech tenants — this is key to its strategy, he adds.
“Moving forward, as we look for opportunities to acquire, the impact of the pandemic, rising inflation, and limited supply of ready assets will remain key challenges that we will continue to navigate. We have strong teams on the ground who will help us find value-creating investments.”
When out of the office, this father of four is spending time with his family or helping others — in particular, building houses for desperately poor families in Mexico.
“My kids have learned they can start helping others at any age or any stage in life. My youngest helped build her first house when she was five and since then, she has helped to build another 15 more.”
Keppel Pacific Oak US REIT
A distinctive office REIT, KORE listed on SGX Mainboard on Nov 9, 2017. KORE aims to be the first-choice US office S-REIT focused on the fast-growing technology sector across key growth markets in the US. The REIT invests in a diversified portfolio of income-producing commercial assets and real estate-related assets in key growth markets characterised by positive economic and office fundamentals that generally outpace the US national average and the average of the gateway cities. These markets include the Super Sun Belts and 18-Hour Cities. Its portfolio comprises a balanced mix of freehold office buildings and business campuses across key growth markets significantly driven by innovation and technology in the US. KORE is managed by Keppel Pacific Oak US REIT Management, which is jointly owned by two sponsors. The company website is: www.koreusreit.com
About kopi-C: The Company Brew
kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations
