“ We need to lean into the future: when the world changes around you and changes against you – what used to be a tail wind is now a head wind – you have to lean into that and figure out what to do because complaining isn’t a strategy,” Jeff Bezos.
….. and so APAM entered ‘lockdown,’ several weeks before the government decided it would be a good idea with both trepidation, anticipation of the challenge, and excitement for the opportunity that disruption brings.
It was not long before even the most technically incompetent (me!) got used to ‘Microsoft teams’, ‘Zoom’, Google hangouts’ and ‘Webex’ meetings with the new customary introduction of ‘can you hear me?!’ By day three the machine was well oiled, there was a sense of renewed energy, ‘communications’ might have even improved, and the sense of camaraderie was palpable. Team ‘Friday fridge’ drinks were replaced with ‘Friday quiz night’ (with beer and cocktails to refuel tired brains!). Our ‘Workwell’ team newsletters took an even more impactful dimension with team ‘shoutouts’ (praise for a colleague for exceptional effort) increasing by over 50%. Concern for colleague’s well-being has always been high on the list at APAM but now it became the number one priority.
APAM Workwell Newsletter week 2 of lockdown
The team went into overdrive on tips for keeping active, positive personal stories of achievements and four ‘APAM’ babies were born! We cycled, we ran, we swam, we even entered the ‘big lift’ organised by Barnes RFC for our NHS heroes. We have been lucky as none of the team succumbed to the virus, probably because we locked down early.
Simon Cooke lifting daughter, Olive, for the ‘Big Lift’ for the NHS
Once the bird watching, yoga, biscuit making, home schooling, knitting, and gardening were embedded into everyone’s schedules it was down to work. With £1.7B of assets under management and over 1,100 tenants in the portfolio the initial challenge was ensuring buildings were safe and tenants were ‘happy’ with initiatives taken to ensure safety at work where possible. Then came the challenge of the March and June quarter day rent collections. Through ‘day one’ engagement, APAM’s policy was to listen to tenants who had genuine difficulty paying rent and grant concessions to ease cashflow. Over 100 positive lease and rent negotiations took place across the portfolio and we are very proud of overall collection rates of 79% in March and 69% in June. In the main, tenant discussions have been courteous and our asset and property managers have shown empathy coming up with creative solutions born out by the fact that fundamentally, and with few exceptions, our tenants have ‘honoured’ their lease agreements and compensated landlords for this flexible approach.
Of course, some ‘majors’ have exploited the situation and will of course regret this short-term stance over the longer term. Complainers, particularly those without cause, will not survive the rapidly changing environment and the need for change. This is not because landlords are demanding payment of rent under a contract but more because the underlying business could not withstand a loss of cashflow for 6/8 weeks. Businesses need to retain sufficient profit to weather these ‘shocks’ and perhaps this will be a lesson learned as we reach some form of stability in the future.
When businesses fail, opportunities arise. APAM has managed to accumulate over 5 million sq ft of shopping centre and retail asset management mandates since the start of the year, and during lockdown this ‘onboarding’ accelerated as banks, mezzanine lenders and debenture holders began to take back control of assets.
Consequently, we have strengthened the team with four senior recruits joining the business (interviewed via ‘teams’ meetings)! and the appointment of Professor Andrew Baum as a member of our investment committee and a consultant for our Investment Research and Strategy. One thing ‘lockdown’ has taught us is that data ‘talks’ and we aim to be a leading player in the analysis of data in real estate to further inform our investment decision making.
There is no doubt that remote working is hard on the brain and the soul. The intensity of screen-based meetings takes its toll and people crave human interaction to relieve the intensity of the job. Are we more efficient and productive without the distraction of face to face meetings and the time dilution of commuting? I think so, and I genuinely believe that business can be more productive as it adapts to some of the time savings of home working. That having been said, we are not expecting to close down our office! The importance of human interaction and human empathy in business is undervalued. Great military leaders walk amongst their soldiers the day before the battle and great sports captains put their arms around their team mates to create the bond of teamwork. No matter how hard you try, ‘empathy,’ is lost over ‘Zoom’.
What lockdown has proven though is a flexible approach to work is here to stay and nobody in the future will be expected to commit to 9-5pm in an office. Tasks will be set, and deadlines met but how those tasks are delivered will be very different.
Jess Bezos also said that everything in the future will change save three things:
- Consumers will continue to demand greater choice of goods;
- Consumers will continue to demand cheaper prices;
- Consumers will want faster delivery.
The same applies to services beyond retailing. Investment and Asset management businesses will need to adapt to the increasing demands of global investment capital. New services will be added, efficiencies will cut costs, and speed of execution will need to accelerate if the industry is to keep up.
During ‘lockdown’ APAM has added development management services through our Bankfoot APAM partnership, bought a data centre operator through our JV with Trinity Data Centres in Singapore, and are advising clients on debt restructuring and capital partners on public to private strategies in the REIT sector. We have learned, through lockdown, to adapt to the changing demands of our clients and the need to intensify service levels as uncertainty destabilises markets we are working out ways of getting the head wind to turn in our favour , of course it isn’t over yet, there are more challenges ahead and as the team grows to meet the challenges we are constantly reminded that despite the lack of human contact we are only humans who cannot predict the future no matter how clever our financial modelling or statistical analysis becomes. The great strength of humanity, however, is that we adapt and are yet to be defeated by any disease or virus and we are highly unlikely to succumb to Covid-19. Business must learn to adapt or die.
Keep fit and well for whilst you have your health the world is full of opportunity and optimism.
Simon Cooke is a co-founder of Catella APAM.
APAM back to work at both London and Manchester offices