I reached out recently to Lee Roberts, former director of the N.C. Office of State Budget and Management. After leaving public service, Lee became Managing Director at the investment management firm SharpVue Capital.
He had spoken with the Triangle Business Journal about N.C. real estate investors’ attitudes, and I wanted to get his thoughts on a few issues to help a client. He’s a great friend of mine and I value his insight into real estate finance. Five years ago, we raced our bikes across the State, traveling from Murphy to Manteo in four painful days. Our friendship stayed intact after the long ride, and the conversation was insightful and witty.
We covered a lot of ground during our recent talk, and I’ll share the highlights with you at the end of this article. However, Lee and I talked about one aspect of the office environment that has really stayed with me – the idea that high-performing teams don’t do their best work from home.
Creatives have long been the poster child of the remote workplace. The theory was all one needed was a laptop or a smart pad and they could design or write from a
mountaintop or the comfort of their couch. But Lee and I discussed the idea that these workers could actually perform better if they weren’t working remotely. Or at least not all of the time.
The coronavirus made most of us remote workers. But as companies start opening back up and deciding where and how employees will work together, Lee believes that onsite coworking, even in an era of COVID-19, will still play a major role.
And that’s because collaboration breeds creativity.
He pointed to the Triangle’s National Humanities Center. Pre-coronavirus, everyone was expected to meet and eat in the cafeteria. Lunching together was required. The thinking was it was important to get researchers out of their laboratories and into a communal space where they’d mingle and collaborate.
Lee thinks the Triangle’s coolest office space is the Epic Games campus in Cary, where Marvel Studios shot scenes for Iron Man 3. Lee said that Epic Games values
collaboration so much that they purposely decreased the number of locations where employees could get coffee to increase the chance of more serendipitous communication. (Check out this aerial footage of the campus, or tour Epic Games’ office with this 2012 YouTube video by Game Informer.)
There’s a lot of value in the unplanned back-and-forth banter that co-workers can have.
Lee commented how he is teaching a class at Duke University about government budgeting. He said the material itself is perfect for an online course because it is
straightforward. But he was surprised when, halfway through the class, it was moved online and the quality of the students’ work dropped substantially. Same students. But no class interaction.
Remember Marissa Mayer, former CEO of Yahoo! She made headlines in 2013 when she banned employees from working remotely, saying, “Speed and quality are often sacrificed when we work from home.”
Some types of work lend themselves better to working remotely. The Social Security Administration has found that claims have been handled more efficiently when
employees are working from their houses. NPR wrote an interesting story about how productivity went up when claims workers worked remotely.
We know that coworking will look different going forward. The WeWork formula isn’t feasible, given it was based on using computer modeling to get as many people as possible into a floor plan. Lee believes coworking will remain popular among remote workers who want a break from their home-based office. He and I both agreed that getting into the office has never looked so good!
Other items Lee and I talked about:
- Lee likes Charlotte a lot. He’s bullish on SharpVue’s investments in QC. He points to the success of their multifamily and adaptive reuse investments in
- Remember seller and buyer attitudes in 2009? Sellers wanted prices that were possible six months prior while buyers expected to pay for values that might
be true six months later? That’s what Lee is seeing now.
- Expect a rush to borrower quality. Going forward, lenders will be able to be selective when choosing deals, and the sponsor’s track record will matter more
than it ever has. As a result, lower-quality deals and less experienced sponsors will have a harder time getting financing.
When Lee left the state budget director position, the state was very well funded, thanks a lot to his efforts, and that of many others. North Carolina’s reserves were on shaky footing when he arrived and he made it one of his priorities to get reserves fully funded. In hindsight, with every state being hit by lower tax revenues and higher unemployment insurance claims, Lee’s actions look very smart.
He and I agree that the modern real estate industry is exceptional at creating value in downtimes. Lee reminded me that the modern opportunity fund structure was created as a result of the savings & loan crisis in the 1980s and 1990s. Challenging times are when savvy real estate investors can make some brilliant moves. It’s the time when fortunes are made.
More about SharpVue Capital: SharpVue operates private real estate and private credit and equity funds on behalf of institutional investors and qualified individuals. Its real estate strategy spans all real estate product types in the growth markets of the Southeast and the firm has the ability to deploy capital as equity, debt, mezzanine, or a hybrid. On the private credit and equity side, SharpVue provides flexible debt and equity capital solutions to middle-market companies. They invest unitranche, second lien, subordinated debt, and equity capital in financial sponsor-backed and independently operated businesses. SharpVue seeks to invest in growth-oriented businesses with EBITDA of $2 million or greater and typically invests $3-$15 million per transaction, although the firm can arrange larger investment facilities through relationships with our limited partners.
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