Having loved a powerful profession that spans greater than 20 years — with the final 13 years at KBS — Jeff Waldvogel, the agency’s chief monetary officer, has a robust background within the monetary enviornment. His seasoned perspective helps actual property buyers place themselves for favorable outcomes whatever the financial local weather.
We spoke with Jeff candidly about his profession and the way forward for business actual property, together with components that affect the sector’s efficiency.
Query
Jeff, you’ve been within the monetary sector for greater than 20 years. What are the most important modifications you’ve seen throughout that point?
I graduated from faculty in 2002, which was a difficult time for these coming into the sector within the aftermath of the Enron scandal. A lot of my pals had accepted presents from Arthur Andersen, which folded due to its involvement within the scandal, they usually all of a sudden didn’t have jobs. I used to be lucky to have accepted a job at Ernst & Younger on the audit facet.
Quickly after, the federal government handed the Sarbanes-Oxley Act, and there was an enormous onus placed on firms throughout the board surrounding the controls and processes they’d in place. The monetary world turned more and more regulated, and we noticed purchasers spending a considerable period of time evaluating and implementing stronger controls. A few of the smaller personal companies buttoned up their processes to handle danger as properly.
At present, one of many largest considerations and focus areas for CFOs and board members are the problems surrounding cybersecurity. The SEC is concentrated on this and has carried out new steerage by way of analysis and disclosure when a cyber breach happens.
Query
You had been with Ernst & Younger for eight years previous to becoming a member of KBS. What did you’re taking from that as you moved into business actual property, and the way are you making use of it at KBS?
Engaged on the audit facet permits you to get inside firms, observe how they’re run, then take away the perfect attributes from every. After I got here to KBS in 2010, I had the inspiration, expertise and connections to achieve success in my new function outdoors of public accounting. The CFO on the time was considered one of my earlier purchasers, and I used to be in a position to carry my information from numerous actual property purchasers whereas working with Ernst & Younger and apply them at KBS. From my begin with the corporate shortly after the Nice Monetary Disaster, this background helped in critically assessing key danger areas in our enterprise and guaranteeing we had the fitting controls in place.
Our enterprise may be very month-end, quarter-end pushed, and what I all the time attempt to do is step out and perceive the larger image from a company- and industry-wide perspective. Alongside my staff, my function is simpler and gratifying once I think about the place KBS is striving to go, what that future appears like, and the way we are able to develop strategic plans.
Query
How does this information assist KBS stakeholders?
Through the Nice Recession, we discovered learn how to proactively consider our belongings by a monetary lens, a observe that helps at present’s stakeholders when values are in flux. In more difficult financial conditions like we’re going through now, speaking the fitting data with shareholders is crucial no matter whether or not the information is optimistic or unfavorable.
At KBS, we’ve got an especially tenured staff with a number of folks having been with us for 20 years or extra. Our professionals share their mind belief and have a forward-thinking and forthright strategy. After three a long time as a agency, we’ve got nice techniques in place to deal with nearly something that arises, and we’re consistently studying with the objective of optimizing our shareholders’ investments.
Query
Let’s discuss slightly extra about that. What accounting practices does KBS incorporate to guard its companions and shareholders?
We now have an accounting staff comprised of many individuals who beforehand labored at public accounting companies, which is a strong coaching floor. They’ve skillsets which might be laborious to develop or discover elsewhere. A number of have been with us for over 10 years and know each accounting and KBS’ enterprise in and out.
Annually, our inner controls are examined and evaluated, which helps mitigate danger for our stakeholders.
Query
Can we swap gears a bit and discuss your mentors? Who has influenced you essentially the most in your profession, and the way?
After I first began at KBS, I had an amazing mentor right here who was the CFO on the time. His values aligned with mine, and he continues to be among the many folks I most admire. Chuck Schreiber and Marc DeLuca right here have additionally been glorious mentors.
Chuck is likely one of the causes folks have stayed at KBS for therefore lengthy. He’s an sincere man who promotes a reliable surroundings. Chuck’s expertise, route and forthright nature make folks wish to be taught from him. And I’ve a detailed relationship with Marc, whom I work with each single day. Marc is all the time striving to make the perfect choices for our companions and shareholders, particularly within the present tough actual property market surroundings.
I additionally admire the late businessman and writer Stephen Covey. His message focuses on being an environment friendly supervisor and caring about folks — qualities that are what matter most. Work remains to be simply work; workers have lives outdoors of their jobs, and also you need to have the ability to relate to them on a private degree. Folks ought to really feel appreciated for what they do day by day.
Query
Let’s focus on CRE as an entire. From the pandemic to inflation and rate of interest hikes, the {industry} has just lately confronted a whole lot of adversity. In your estimation, how has CRE weathered these challenges?
The enterprise surroundings has definitely been challenged with excessive rates of interest, substantial mortgage maturities and an absence of liquidity from the banks. From KBS’ perspective, it’s a matter of constructing certain banks are snug with our plans for our belongings, particularly in markets the place they’d wish to shrink their publicity to reduce danger.
Whereas there’s presently loads of uncertainty and stress within the business actual property debt markets, KBS has long-standing, trusted relationships with lenders on whom it depends. It goes again to your trusted relationships — KBS has endured many actual property and financial cycles, and we’ve been by related issues like this earlier than.
Query
Along with your deep experience and wealth of data, how do you view business actual property financials at present, and the place do you see it heading over the following few years?
ESG could have a major influence on the monetary sector. Stakeholders are selecting to speculate with firms whose requirements, methods and ethics are aligned with their very own.
There’s growing demand for sustainability and extra reporting on how our footprint impacts the surroundings. We’re getting that data to our shareholders and companions, and we’ve outlined ESG objectives that may be audited.
These issues increase the bar for everyone. At KBS, we’re wanting extra at changes we are able to make on the property degree. We purpose to realize the certifications we would like whereas making enhancements that make sense and yield the right advantages. The truth is, we just lately obtained GRESB certification throughout our REIT III belongings, and we anticipate that course of to be ongoing. Annually, GRESB assesses the ESG efficiency of belongings worldwide, offering readability and insights to monetary markets on complicated sustainability subjects.
After all, the elephant within the room is business workplace in a work-from-home period. What does that appear to be as we transfer ahead? Again and again we’ve seen that high-quality workplace buildings in good areas and submarkets have achieved properly.
Outdoors of sure gateway markets, leasing exercise has elevated as workers have continued to return to the workplace. Increasingly, firms are asking folks to come back again as they acknowledge the advantages of groups being collectively, which makes it tougher for firms to downsize their footprints. Companies wish to be in Class A buildings, and we consider demand for such belongings will proceed.
The fitting facilities at every of our belongings are crucial. Figuring out these requires listening to tenants. Whether or not it’s a pickleball courtroom, health heart or bike cupboard space, the significance of matching facilities to tenants’ wants in every market and every constructing can’t be overemphasized.
For instance, at Accenture Tower in Chicago, we just lately carried out a complete capital enchancment marketing campaign and had been in a position to push occupancy share from the low 70s to properly into the 90s during the last 24 months. Strikes like this are giving tenants the inducement to return to the workplace.
Query
Lastly, let’s focus on your views on expertise. How have technological advances impacted the monetary enviornment, and what do you anticipate transferring ahead?
From the monetary and accounting facet, tech has helped enhance efficiencies. There have been extra frequent occasions previously at KBS the place groups would keep late to fulfill deadlines as our processes had been rather more handbook.
Tech has alleviated that by streamlining processes like functions that interface with our accounting techniques, which helps us extra simply mannequin our forecasts and full required disclosures for SEC filings. Due to efficient, correct expertise, our stories permit our groups and shareholders to concentrate on wanting forward to allow them to make higher choices for the long run.
KBS’ methods are designed to optimize the efficiency of all belongings with the objective of maximizing returns to buyers. My staff and I are dedicated to transparency and integrity in all of our funding choices. By means of ongoing tenant surveys, compliance applications and property audits, we’ve ensured a constant KBS expertise for tenants throughout our portfolios in addition to certifying that our property managers are held to the very best requirements of efficiency.
Study extra in regards to the newest in business actual property, go to KBS.com/Insights.
