For real estate veteran Tripp Gantt, humility is an indispensable quality in leadership — it is essentially empathy turned inwards, where the leader is fully aware of his humanity and imperfections. “Don’t be afraid to let your team see the real you,” says the CEO of the manager of Singapore Exchange-listed Manulife US Real Estate Investment Trust (MUST), who describes himself as “calm, friendly, and doesn’t get too ruffled under fire”.
“As a leader, you don’t need to be the best at every aspect of your business, but you must continue learning and growing daily. You can learn something from everyone on your team, regardless of rank or role.”
Likewise, empathy is another core value. “This goes beyond being nice or understanding. It’s about truly recognising the humanness of your team and comprehending their motivations and values so that you can build lasting connections,’ he adds.
Gantt, who graduated with a Bachelor’s degree in geography and urban studies from Georgia State University, has spent more than two decades in the global property industry. His previous roles spanned capital management, investment management, land planning, development, construction and valuation.
This includes 16 years overseeing real estate operating companies on behalf of the Washington State Investment Board (WSIB), a US pension fund with US$29.6 billion ($42.4 billion) in real estate assets under management as at March. He was appointed to his current role in MUST in May.
“What continues to excite me most about real estate is employing creative strategies for a property portfolio to maximise its functionality and value, at different points of the property cycle and in varying macroeconomic and sociological environments,” Gantt says.
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“I think there is no more interesting time to be doing this than now when we’re witnessing a once-in-a-generation change in how and where Americans work and the implications for the US office market.”
Compounding this trend, however, are numerous challenges in the broader landscape. “We’re experiencing one of the most volatile economic periods in recent memory, with inflation at the highest it has been in decades, fear of recession gripping the market, employment plateauing, debt costs rising, bid-ask spreads widening in the transaction market, and office leasing demand slowing as employers figure out their space needs with hybrid work arrangements,” he adds.
“All of this makes for a very exciting time that calls for innovative ideas. In my first 100 days, we’ve already begun formulating creative ways to ensure that our portfolio can keep abreast of the trends and stay relevant to tenants’ demands, so we can continue to deliver sustainable returns to our unit holders.”
Post-pandemic shift
MUST is the first pure-play US office REIT listed in Asia, established with the investment strategy principally to invest — directly or indirectly — in a portfolio of income-producing office real estate in key markets of the US and tangible estate-related assets.
The REIT’s portfolio comprises 12 freehold office properties in Arizona, California, Georgia, New Jersey, Oregon, Virginia and Washington DC. The portfolio has an aggregate net lettable area of 5.4 million square feet and is valued at US$2.2 billion as of Dec 31, 2021.
Manulife is part of a leading Canada-based financial services group with principal operations in Asia, Canada and the US. The sponsor operates as John Hancock in the US and Manulife in other parts of the world, providing a wide range of financial protection, wealth management products, and asset management services. The REIT manager is Manulife US Real Estate Management, the sponsor’s indirect wholly owned subsidiary.
The outlook for the US office market remains fluid as the sector continues to evolve post-pandemic, Gantt says. “Hybrid work has significantly changed America’s work culture and tenants’ space needs.”
“There will be clear winners and losers in this market, and some assets may even be rendered obsolete as tenants relocate to modern and better-quality Trophy and Class A buildings,” he adds. “It is critical to ensure that amid this great shift in the market, we emerge winners with the right formula and optimal mix of traditional, flex and turnkey space to win tenants over.”
Across the US, the return to offices has been slow. “That’s how we came up with our two-pronged approach to provide more flexible office solutions in our portfolio — by partnering with best-in-class operators, and shortlisting some of our Trophy and Class A assets in great live, work, play locations to embark on hotelisation,” Gantt adds.
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In September, MUST announced a management and licensing agreement signed with Flex by JLL to take up 15,407 sq ft of office space at 500 Plaza Drive in Secaucus, New Jersey, with options to lease a further 20,451 sq ft in two phases by 2023.
The space will offer flexible private offices, co-working space, meeting rooms, team suites and virtual offices to organisations and residents in the region. The three phases are expected to achieve a stabilised rent premium of about 30% to the market and allow MUST to enjoy more significant upside potential by sharing most of the operating profits with the operator.
As for hotelisation, Gantt describes how office landlords must adopt new approaches to future-proof their portfolios. “Essentially, we plan to reinvent the office space in some of our Trophy and Class A assets to entice workers back, attract quality tenants, and remain competitive by commanding higher rents.”
“We’re by no means transforming our office buildings into hotels, but adding hospitality elements to our buildings to create an environment and experience in which employees would like to return to work.”
Remaining relevant
The REIT needs to adopt a defensive and offensive strategy amidst changing office landscape dynamics. “On the defensive front, to ride out the cyclical office downturn, we’re working on capital recycling and allocation to strengthen our balance sheet and contain gearing while staying agile in leasing to protect the occupancy and weighted average lease expiry (WALE) of our portfolio. We want to continue leveraging our assets’ location and quality to attract stable and creditworthy tenants,” Gantt explains.
“On the offensive, to embrace the secular shift towards hybrid work, we’ll partner flex operators and embark on utilisation for some of our assets to provide greater workspace options in our buildings.”
At the same time, MUST’s strategy to pivot into growth markets and asset types remains, as it has already built a high-quality portfolio of Trophy and Class A properties since listing. “We’re always seeking joint ventures (JV) and M&A and capital partners to work with,” he adds.
In November 2021, MUST announced its entry into high-growth markets with three acquisitions — Diablo and Park Place in Phoenix, Arizona, and Tanasbourne in Portland, Oregon.
“This objective hasn’t changed, and we plan to continue to increase our exposure to growth markets — sunbelt and magnet cities that benefit from population and corporate in-migration, growth sectors such as healthcare, life science, knowledge economy, as well as property types, for example, buildings with limited capital expenditure needs. We believe such assets will offer more resilience to ride through the structural shift towards hybrid work that the office sector is going through,” he explains.
“Therefore, we’re evaluating capital recycling opportunities, but our focus in this uncertain leasing environment is on intensifying leasing momentum to maintain our portfolio occupancy and WALE. We believe that managing our spending prudently will help us improve our properties’ valuation and keep them relevant and in demand amidst the cyclical downturn.”
Future-proofing
Apart from its growth objectives, the REIT also focuses on its Environment, Social and Governance (ESG) initiatives. “At MUST, sustainability is about future-proofing our business to create long-term value for our stakeholders,” Gantt says.
“Perhaps one of our greatest challenges when it comes to ESG — beyond operations — is really in terms of helping investors and stakeholders understand that sustainability has tangible returns and can even offer competitive advantages,” he notes.
“Many people are under the impression that ESG comes at a high cost and negatively affects distributions per unit. But not embracing ESG will incur greater losses in the long run for unit holders, with stranded assets, regulatory penalties, loss of competitiveness, and loss of market demand - all leading up to decreased returns.”
MUST has seen increasing regulation and penalties imposed on non-green buildings and buildings with high carbon emissions in the US. Conversely, demand is on the rise for green buildings. “For us, 70% of our properties are already green-certified, versus the US average of about 14%. Hence, there’s no need for us to spend huge amounts of capex to green our properties,” he adds.
There is much to keep Gantt busy regarding the REIT’s day-to-day operations, but when this 52-year-old is out of the office, he turns into a handyman. “I like to build, repair and maintain things,” he admits.
“In the past year, I’ve replaced a gas-fired furnace — a necessity in the US — and rewired a kitchen electrical system in my house. I’ve also done a complete 60,000-mile maintenance service and rebuilt the suspension and drivetrain of an off-road SUV. I’m convinced you can learn how to do almost anything just by watching YouTube!”
Manulife US REIT
Manulife US Real Estate Investment Trust (MUST) is the first pure-play US office REIT listed in Asia. It is a Singapore Exchange-listed REIT established with the investment strategy to invest directly or indirectly in a portfolio of income-producing office real estate in key markets in the US and real estate-related assets. MUST’s portfolio comprises 12 freehold office properties in Arizona, California, Georgia, New Jersey, Oregon, Virginia and Washington DC. The current portfolio has an aggregate net lettable area of 5.4 million sq ft and is valued at US$2.2 billion as of Dec 31 2021. Manulife is part of a leading Canada-based financial services group with principal operations in Asia, Canada and the US. The sponsor operates as John Hancock in the US and Manulife in other parts of the world, providing a wide range of financial protection and wealth management products. The manager is Manulife US Real Estate Management, an indirect wholly owned subsidiary of the sponsor. The company website is: www.manulifeusreit.sg
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
