172. Jonathan O'Byrne on Doing a JV on a Coworking Space With a Major REIT in Singapore

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172. Jonathan O'Byrne on Doing a JV on a Coworking Space With a Major REIT in Singapore

00:00:01 Welcome to the everything co-working podcast, where you learn what you need to know about how the world wants to work. And now your host coworking space owner and trend expert. Jamie Russo. Well, welcome to the everything coworking podcast. This is your host. Jamie Russo. Thank you for joining me today. Today, my guest is Jonathan O'Byrne. He was an ex Patriot in Singapore,

00:00:40 desperate for workspace and community, not finding an offering that combined both. He started his own brand collective works and quickly became one of the fastest growing brands in Singapore. He entered a joint venture with one of the largest REITs in Singapore, hoping to support his growth and provide easier access to his preferred class, a real estate. Jonathan shares that story and his lessons learned and what he's up to now and his perspective on the coworking market today.

00:01:14 He now lives in Brisbane, Australia and is finishing his second book. You can grab his first book, which we talk about a little bit on the podcast today. Coworking inc. The Bohemian movement that adopted capitalism on Amazon or wherever you buy your books. Before we dive into Jonathan, I have two opportunities to share with you today. If you are working on opening a co-working space,

00:01:39 I want to invite you to join me for my free masterclass. The three behind the scenes secrets to opening a coworking space. If you're working on starting a coworking space, I want to share the three decisions that I've seen successful operators make when they're creating their coworking business. The masterclass is totally free. It's about an hour, which includes Q and a time.

00:02:00 If you'd like to join me, you can register@everythingcoworking.com forward slash masterclass. If you already have a coworking space and you're starting to look ahead to 2021, can you believe we are just about 60 days until the end of this current Raisy year? And I don't like to count December because December gets crazy even without gatherings and whatnot. People are distracted by holidays and wrapping things up for the year.

00:02:29 So we are almost there. We've got about a month left. So you're probably wondering how the heck to plan for such an unknown. We're going to tackle that together. We will not have the same planning focus coming out of a global pandemic as we would in a more typical year, but we're going to take a nine-step approach to getting ready to thrive in 2021.

00:02:55 So survive means to continue to live or exist, especially in spite of danger or hardship, which is what we saw in 2020 thrive means to prosper, to be fortunate or successful, to grow or develop vigorously to flourish. So we can't predict what 2021 will mean for our businesses, but by planning in advance, how we will approach the year, we can be intentional and more in control and we can find opportunities to grow and to thrive.

00:03:29 So I want to help you to prepare for 2021 confidently so that you have both the mindset and the business that is ready to compete for incoming post COVID demand. And I know that many operators today are feeling uncertain, maybe burned out unsure of what to do next, and some not sure that you can survive. So you feel a little not in control,

00:03:52 maybe unfocused and stuck. And if you feel that way, you're not alone, but those feelings are not healthy for you or for your business. And I think that with an intentional plan for how you and your team will approach 2021, you will feel happier, more positive, less stressed at work and at home you'll be prepared to focus on the right things and to be able to see the new opportunities that are coming.

00:04:19 And let me tell you and part of the workshop. So I'm hosting a workshop called designed to thrive in 2021. I would love to have you join me and get the details at everything co-working dot com forward slash thrive. 2021 on my email list. Do you have a couple of emails with the links in it already? So take a look at all of the details.

00:04:42 There are two options. There's a free option, which gets you access to the first session, which will be super meaty. We're going to dive into the planning approach and get some actual planning done. And then we're doing two additional sessions that go deeper into the process. And the third session is actually kind of an accountability hot seat Q and a session in January.

00:05:06 So take a look at the options. The first session is totally free. You can do the all in option, which is a paid option, but includes the additional two sessions. And I have some guest speakers that are going to join us. And some of them are going to share some of the opportunities that they've already taken advantage of that are out of the box and do not depend on people coming into their space for revenue.

00:05:30 And we're going to do some mindset coaching. We have some exciting components to the workshop, so it's not webinar style per se. There'll be some content, but we're going to workshop. We're going to interact. We're gonna work on our business and we're going to get a plan on paper for 2021. So you can check that out at everything co-working desk com forward slash thrive 2021.

00:05:54 And now please enjoy my conversation. Jonathan, I'm here with Jonathan O'Byrne founder of Singapore coworking space collective works, and the author of recently released book coworking, inc. The B the Bohemian movement that adopted capitalism. Although this is only a first in a series he's already on book number two, which maybe we'll get to talk about, but I have read the book and we're going to talk about Jonathan's coworking journey and some of the topics that he addresses in the book,

00:06:29 and Jonathan is sitting in his new home in Brisbane, waiting for all of his lifelong belongings to arrive on a shipping container from Singapore, which someone else packed. So fingers for all of those, for your life's history, that it will survive its journey. But thank you for making time to chat today. I'm looking forward to it. Likewise, Jeremy,

00:06:56 thank you for having me and thank you for being one of the 10 people. Well, we're going to link to it in the show notes. If you have Kindle unlimited, it is temporarily free in the U S I don't know if that's the case everywhere, so Snagit while you can. I did. I got to read it for free and it's a good read.

00:07:15 I told Jonathan there were things that I wish that I had said, because I thought he, he described them really well, but Jonathan, I'm really interested in your story. We were just talking about the second book and how there are things that you've lived through and seen that, you know, has really shaped your perspective and that you feel like you need to share,

00:07:35 tell us your coworking story. How did it, how, how it initially happened and then some highlights of your journey. And then we'll get into some specific questions. Sure. Where to start. I know. So I am, I guess the first piece is that I'm a lifelong expatriate. So I grew up internationally. My parents took me overseas when I was a month old and I never went home.

00:08:03 So I've been, I've been living overseas, but in, for long stretches in each, each country. So my, I guess my individual skillset that I developed with that was building communities as I went, because you have to reinvent every time you move. And that's the process that you've alluded to right now. So I'm in Brisbane. I've had to get into some new,

00:08:23 some new networks, thankfully I'm a member of EO. So I got into EO, Brisbane and all that kind of stuff. But when I moved to Singapore, 10 years ago, I was 24. Difficult to get into a network. Didn't really have any money, kind of was just starting out in business. People don't really want to talk to you when you're that age.

00:08:44 And so I had had my own business for two years. I ran it from home. It was in PR and branding. And I basically hated my life is the short version of that. And I had, I was financially successful, but emotionally fulfilled and started looking for somewhere to work or somebody to go to every day to get out of the house,

00:09:05 to meet people and realize that the space I wanted didn't exist. I looked at, I'd say about 45 spaces in Singapore. And they were all various degrees of nicely appointed beige boxes and no community, no connection. And then I, I thought, what if I created a space that actually foster connection and got people speaking to each other, because I remember walking out of a one particular service office,

00:09:31 which was on it's on the Marina in Singapore. So it was really pretty low rise building, but like right on the water, great French way. And they had this notice board at the front and literally it was this list of, of, of names. And it was everything from this incredible female VC who'd just been featured in. I just read about her in the business times.

00:09:52 And she was there and Skype was there and there was just, it was like this veritable who's who of like PR branding, legal tech. And I was like, if these people actually spoke to each other, this would be really, really fortuitous, Kind of like run down the hallway and open all the doors. And Yeah, but I remember asking when you on the tour,

00:10:16 I was like, well, do they do any events? And they were like, we have a Christmas party once a year. And I'm not, I don't even believe that they do the Christmas party every year. I think they just said it to me. Yeah. And they had this tiny little Scuddy pantry, like in the back, which had this like super skinny little,

00:10:33 it was a, it was a, like a little bar that you could like put your coffee on, but it was wasn't more than a foot wide. And it was like, it was red Korean. And it was like, there's a zigzag. And I'm like, well, that's really helpful. Cause no one's gonna spend any time here. So there was just,

00:10:47 there was no, no circulation space anyway. So the faster version of that is I got so mad leaving that meeting and I was like, fine, I'm starting my own. And, and I have a, I have a background in interior design. My uncle's an architect. I interned with him when I was a teenager. My parents have dabbled in buy-to-let properties since I was five.

00:11:14 So I've been like doing it properties and stuff since I was little with my family. So I was like, I can design this. I have a PR degree. I should be able to market this and a little bit social. I should be able to socialize it. Yeah. So then entered into the process, just dive headfirst into doing leases, working with contractors that don't speak English.

00:11:34 And that whole fun thing in Singapore opened my first space. The short version from that was the first six months were a little tense. Then we ended up being full. Then eight months in, I was building two additional floors in that building 10 months in another floor. Then another floor that I joint ventured with a company called CapitaLand, which is one of the largest real estate companies in Asia.

00:12:00 So if you don't know them, if you're from the U S capital land has an 118 billion in assets under management, I was dealing with the Singapore subsidiary, not the whole, not the whole HoldCo, but yeah, they've they own, I think 11, 11 of the top ultra grade, a buildings in the Singapore CBD. So that whole portfolio, I think is just under 9 billion.

00:12:25 So what was it that you, that drove that explosive growth? Was it generic pent up demand or pent up demand for your specific offering? I think it was pens up demand from my specific offering. I'm biased. I would, I would like to think that, But let's let, let's examine that a little bit more. I think I was the first coworking operator to open in the CBD.

00:12:53 I pitched myself at a price point that was about 75%, the price of the service offices at the time. So it was a good value proposition good-bye proposition. We were making fair profits and we had this whole other piece, which was community events, engagement. And I think as I shared to you in the past, Jamie part of my product very quickly became about market entry because when you're an ex-pat,

00:13:15 you get very good about understanding how to get into market. So joining within our first year, we did a deal with the British chamber of commerce in Singapore, that our members became defacto members of that chamber of commerce. So they were then into a professional network of like three and a half, 4,000 people that role that the heads of banks, heads of the,

00:13:35 a rolls Royce and all that kind of stuff. So that then got them into, so they had my event network and the British chamber of commerce event network, which runs, gosh, I think they run something like 200 events a year. And, and I was also at the time I was chairing the entrepreneur and small business committee at the it's called Brit champ.

00:13:54 So Brit channel I was running. So I was running that, that event calendar and my calendar and yeah, so it just, it became, for me, it was a magnification proposition of it. Wasn't just get a desk and an office. It was get a desk, get connected to all these people, get into these events In your product mix.

00:14:14 When you say coworking versus service office for offices And the, the first version one, no Virgin one was entirely open space. The first expansion was, so the first floor was just open space. Second floor was a mix. It was actually more offices with some of in space. Cause I did it too to counteract the first one. Cause I was just,

00:14:37 I B I realized quite early, there was this juggling action of, of enough, of the different quantities of space. And then the floor that went with that was a 50, 50 split of office and open. And then the one that went after that was a seventy-five percent office. And then the one that went after that was probably also 75% office.

00:15:02 Yeah. You mentioned at the time of your joint venture, you had 30% share of the market in Singapore, so it was fine, but you, you had found something, you had struck a chord. And so we were talking about kind of the soul of coworking and talk about your joint venture. What was the why behind that for the asset owner and for you,

00:15:31 and kind of what did that process, why? Sure. I think the so expanding and coworking as, as you well know very expensive proposition. So even if you're doing well, we wouldn't have, there's no way we could have recovered the capital in the first kind of no eight, nine months of operation. So I was putting in more money. I was putting in good money after good money yeah.

00:15:56 To expand, right. What are the, what do you lease lengths look like in Singapore, They vary, but they actually tend to be quite short. So you're also the, that's the other challenge in st. Paul is that your, your capital and your fit-out is at risk. So actually the very first floor I did, I put most of the money into furniture and I designed everything kind of on wheels.

00:16:18 So if we got kicked out, I could literally clear it and move it. And then as I got, you know, I just got a bit further and I developed a bit more confidence in the landlords that we were working with. We did more of a kind of fixed fit, but yeah, the, the Y for the deal, I think it was multifaceted.

00:16:36 I think I was the we by that stage, the point at which I did my joint venture coworking my business in particular, because we were CBD operator had, had attracted a lot of interest from service office operators. We had been approached for an acquisition by one, one Asian service office operator. I'd been asked to franchise into Hong Kong at that point. And then I was in discussions with three different real estate trusts.

00:17:05 So in Asia real estate is kind of the family hobby. So it is just sort of, first of all, I was a foreigner in corporate real estate, which was very unusual and we were growing very rapidly. And obviously we were making a bit of a noise that process and some of the existing operators we're losing, we're losing clients to us. So the,

00:17:32 I think from the perspective of the real estate trust that we worked with, they were looking for one that could see this as an emerging trend. They wanted to kind of dip their toe into it in a, in a way that let them understand it more, without it being too risky for them to do, they knew they didn't have the expertise in house.

00:17:52 They were very upfront with me when they said they didn't have the expertise in house. And yeah, so they essentially saw it. They were like, this is an emerging trend. We'd like to be at the front at the forefront of this, but we don't, we can't do with this as a whole, as an organization. So let's ring fence.

00:18:08 This and our joint venture was described as an experiment from the beginning. So from my perspective, they granted access to a portfolio of real estate. I couldn't get access to otherwise. So their buildings are very difficult to get into. Interestingly, I learned, I mean, I think from the outside of you think, Oh, you'll get mates rates, you'll get cheaper leases.

00:18:33 You do not. When they are publicly listed you, cause your leases have to be externally benchmarked and audited. So now I got a rack rate list and, and, but I also, I suppose at that stage, I saw them as potentially a source of expansion capital, which they didn't, they didn't turn out to be. But the I, at the time I was looking for,

00:18:54 I was considering a bunch of different options, options being taken over by a service office operator felt like it would take the soul out of the business. Some of the other real estate trusts didn't seem as progressive. And I, I didn't feel like they would get it. And the one I partnered with I thought seemed to be more modern. Yeah. So that was,

00:19:14 that was the rationale at the time it was expansion. It was securing a market. What turned out to be the benefit of the joint? That's a, that's a difficult one because I think the, the, yeah, that is a difficult one because I've done a lot of reflection since. And actually if you put me back in time and I could do the time over again,

00:19:39 I would, I wouldn't do the joint venture. I would just keep expanding by myself. You mentioned that maybe it was in an email that you said, and I know we think differently about know management agreements and joint ventures. So there tell me what you meant by that. So I think the it's, it's some touristy difficult too. So when I did this deal with this billion dollar corporate,

00:20:03 I had three employees and then we did the deal and then I had 16 employees and my business went through, what was it? 300% growth in a quarter. It was literally, we put, we literally, we put something like 2 million in revenue on the business in the first quarter. And it was just that process broke everything. So it broke my team.

00:20:29 It broke some of our systems. We ended up, we were then doing that, growing rapidly, doing a system migration because our old system couldn't handle what we were doing. I was onboarding 11 new staff. It was just, the whole thing became really, really challenging. And I think from the, the, the other challenge from the other side is when people work in large institutional organizations,

00:20:53 they don't think about revenue because it's always there. So there wasn't the empathy or the understanding of what an operating business looks like from a trust because real estate trust build buildings, they rent them. So they're always generating some kind of income. You know, it's like, are we at 90% or are we at 85%? You know, it's their, their world doesn't revolve around billing and income,

00:21:15 the way that small businesses do. So, so there was a really big learning curve to take them on as a operator. So essentially at one point before I sold my business, I asked my team how much of a productivity tax, the ones who've been there the whole time, how much were productivity tax they felt, or how much of their day they were,

00:21:38 they were spending servicing the joint venture. And the average answer was 30%. So the team had lost 30% of their product productive capacity just by entering into the joint venture. And I think one of the very early discussions I had, we were doing, because we had to do this monthly reporting into this joint venture because they were publicly listed and they were constantly preparing filings.

00:22:01 I got some queries back and one of the CEOs asked me about them. And I said to her, I said, do you realize that you actually, I said, how many people are in that department? And she was like, 19. I said, do you realize you have more people checking my numbers than I actually have naked? Yeah. And she was like,

00:22:20 that's a little embarrassing. And I'm like, I thought so too. And cause I'm pretty sure you guys are probably also more highly paid than mine are. Right. So, so I was like the, the, the, the economics here of the checking and the revenue are completely off of kilter. And the thing is their organization could do that and not even notice that.

00:22:39 And I'm like, I would love 19 highly trained accountants in my business. We could do amazing things with that, you know, would you like to subcon some of them? And I think there was that there was just this David and Goliath element of it from the beginning. So that was one also I was already growing at like, like an, a normalized 40% per annum.

00:23:00 Yeah. So I mean, what, what happened with the, with the joint ventures? I did one huge expansion, which broke everything. If I hadn't done that, I would have done another little 50%, 50%. And I would've got actually, yeah, I would've got bigger the process of breaking systems as other, that would have been more progressive.

00:23:19 It would've been easier to handle through that more organic because there would have been a pacing to it where you could sort of see it coming and catch up to it and manage it. Yeah. And then I think the other aspect was just the, the autonomy of doing, of doing business. So I entered into a 50, 50 joint venture that, so th it was only a joint venture for that location,

00:23:44 but that was the location we famous for because it was the one which I've been running this old location for five years. We had all the learnings, we could throw all those learnings into one new center. It was the first grade a building. It was in a, it was in the, the fourth tallest building in Singapore. It was, it was really beautiful at Herman Miller furniture.

00:24:04 Beautiful. We had 9,000 square foot of herringbone floor. It was just lovely, really lovely space to spend time in. And so that was essentially when we wanted, when people want us to do to do more. That was, that was that the other piece was that it actually became an obstacle for me getting further leases because I partnered with a real estate operator.

00:24:28 I was then seemed to be on an opposing team. So other, other buildings were then other buildings and other landlords either assumed the capital land owned more of my business than they did, or that they're kind of the, the response I would get would be, why would you come to us for property? They have that portfolio. So the, the,

00:24:47 it became, I guess I was, I was, I was no longer seen as an independent. So that also impacted my own ability to expand and run my own business outside of that partnership, which when you get into a relationship. So then what that does is it forces codependency. And when you get into a business as in life, if you end up in a relationship where there is a codependency,

00:25:09 it becomes really a bit icky because then it's just sort of, there's this internal thing of, well, we now need each other to expand. They couldn't do co-working. I couldn't access it the real estate. And yeah, so essentially that it's, and then we got to a point where we, as we, as a team, couldn't agree on an expansion pathway.

00:25:29 So I sold, I sold the business. So that was, that was kind of the path to the end. Yeah. Well, actually I tried, I tried to buy the business back first and then they said, no, no, we'll have it. So that was the way to the end Anti joint venture for everyone. Or can you see cases in which it makes sense?

00:25:57 I, I'm not anti joint venture for everyone, but I think the, there is a, the first factor would be the address, the David and Goliath issue. So if you're going into a joint venture with a real estate operator, you want to be dealing with someone, which is, they can be bigger, but you don't want them, you know,

00:26:17 10 to the nine bigger than you. Right. Right. No, I think that's an important point. And the reporting requirements, I mean, it's, it's the trade-off people talk about with public companies, right. As you grow, you've more responsibility and you go public, there's all this reporting requirement. And do you want that? Yeah. Yeah.

00:26:38 I think, I think there's a lot of different ways. So for example, so the way we structured this joint venture, we created a new company. We both co-funded that we could have the money in, you know, on both sides. And we built this new center. The other way we could have done this. I could have just taken that money from them,

00:26:51 put it into my business and given them a shareholding. And that would have been far more efficient. Yeah, that's interesting. Cause it's I, so even just, you can, so, so the one, the first is the David and Goliath issue. The second is a structuring issue. And just going, how much, you know, what is the quantum of money that you're getting?

00:27:11 What is the most efficient way of dealing with that? That doesn't create huge amounts of regulatory complication. And then the cause the other complexity with this is because of the way we did the joint venture, I was in licensing and a whole bunch of stuff from other areas of the business. And it created this whole intercompany billing situation that we never had before.

00:27:31 So we, you know, made our, we made the operating the say operating business, eight times more complex. Then we have that 30% additional reporting requirements. It became so heavy. You can see how the energy came out of the growth because it just, it was all going into other areas. And your team was used to focusing on community building and connecting people and the reasons why people came to you and now they're being pulled into spreadsheets and real estate.

00:27:58 And I managed to keep a really big split between my team. So we had, I split the team into operations who were kind of my front desk team, my community and events team, which were the kind of we'll have coffee with you. And then we had the kind of backend finance executives. So, but even still the other challenge, and this is actually a community management challenge.

00:28:21 When you throw that many new members into a community, you don't have an existing, you, you don't have community policing because essentially when you build a coworking space, you know this, but I'll say it for the, for the purpose of the room. When you build a coworking space, you enroll people into the group culture of a space. And then that group culture becomes self policing.

00:28:43 So if you put your cup in their own place, people say, actually in this coworking space, we put them in the dishwasher or we leave them here in this basket. If you're, if you have fun site, maybe five front desk team managing 300 plus new members, no one knew what the rules were. Even though they'd all been given, like rule on boarding packs,

00:29:02 there weren't enough people there to police them. The words on paper mean nothing until the culture. Right? And you, you, you, you can't be intentional in front with the culture and, and right. ESP again, the organic piece, it's just like, that's super interesting. It makes a lot of sense. Yeah. So just basically that it made every aspect of running the business harder than it had ever been before the stakes were higher.

00:29:25 It was, we were a lot more hype. We were very, very public. And then the economics of the, of the spaces we were running were very different because we were in this now in the super gray environment. And even, I mean, we are early on, I lost one customer because the building had a dress code and we had this one very hot,

00:29:44 very famous tech startup out of Northern Europe and their CEO notorious, he likes wearing Bermuda shorts. And he was like, ex I think he's ex Bain or ex Goldman or something. And he was like, I'm never going to wear a suit again. Yeah. And then the issue of the shorts came up and then we lost this huge tech company because it didn't because the LA the joint venture partner who was also the landlord of the building was conflicted.

00:30:10 And I think that's the other piece there is when you do a, as a coworking operator, when you do a joint venture with a landlord, they are intrinsically conflicted because they have two competing interests. One is their, their stake in your joint venture, which is a small component of their duties to a building. Right. So I like another example I can give you is we ended up opening the joint venture space far faster than I initially wanted to,

00:30:38 because they didn't want to have sitting vacancy in the building. So I, that was something I agreed to. I take responsibility for it. I felt pressured into doing it, and I did it. And it was very, very big expensive to do it. But again, that's, th that's not a thing that you'd have from somebody who was just a,

00:30:58 I mean, even if I, so if I look at the quantum of money that we did in the joint venture, I got, I could have got a bank loan. I could have got an angel investor or an outside investor they've have taken VC money. There were plenty of ways to get that money with far fewer strings. And I could have found a different building.

00:31:16 You know, I already had the point at which we were expanding. I was looking at the, so there's a building in st. Paul called the SGX, the Singapore stock exchange. And they have some lovely towers about them. They're a little older, but they're still quite nice. And they're in really good location. We could have taken a boat,

00:31:30 a floor there by ourselves, and it would have been a different product. It would've been a different progression, but none of these crazy hurdles, I mean, on the flip side, if you want a big growing experience, go do a joint venture, Which is what you experienced and why you feel, I feel like you, you, this book is inside of you that needs to come out.

00:31:50 Right. And that's part of what you're working on now, which is the, sort of the evolution of the real estate cycle and how coworking has impacted that. So now I'm really curious to read second book since you're kind of talking about, so if it, so if, if a landlord, because I says, you know, you're talking about in the second book about the disruption of coworking,

00:32:14 what, what does an asset owner do when they see or start to get it and want to integrate, if not a joint venture, what do you, how do they, What is my advice to an asset owner? Yes. I mean, what do you, yeah. How, how is it if you feel like the joint venture is fraught with many trade-offs,

00:32:36 but we worry about them doing it on their own, and you want more integration. What do you have a theory on the best structure? The it's, it's very difficult to do. What is the best structure without having the particulars of each of the two parties involved? I mean, in structure. So compared to what I did structures, it would be neater.

00:32:57 Would one have been a straight acquisition that just bought us because then they would have won. They would have, there wouldn't have been the reporting. We would have just been part of them. We would have had access to their resources. So there's 19 accountants that were monitoring. They would have been, they would have been her accountants. So I think it also,

00:33:18 it, then it does away with the them and us mentality, because that was something I was really managing with with across both teams, actually, because we'd have this, that we were sort of, the interesting thing about it was the joint venture made me feel like an employee, even though I owned the business because I was then I was an answerable to somebody else and there was no back reporting to me.

00:33:39 So it was sort of am so straight, acquiring would have been, would have been easier. And actually at that stage, they probably could have gobbled us up for the peanuts. You know, we were, we weren't a big company, the, and then they would've acquired the brand, the whole shebang. So straight acquisition is one I would say,

00:34:00 fund them and leave them alone. So like, go, go more of the venture capital route of put money into them and then leave. And then step back, act like an investor, which actually, so the, the interesting thing about the company I worked with is they actually decided to spread that across coworking operators. So they joint ventured with me.

00:34:20 They funded another one. They VC funded some in Vietnam. And then when they bought my business, they actually then bought into their, then their final decision they ended up, ended up with was they bought one. And then they acquired me through that vehicle. So because again, even at the point of acquisition, three years in, they didn't have the skill set within the organization to run a co-working business.

00:34:45 So they still needed the management skill. So from one of the things that we were talking about before we hit record was what I, what I call the problem of asset mindset. And so many people in real estate are used to assets, buildings, and they look at buildings. They look at numbers like yield occupancy, and it's incredibly impersonal. And coworking is actually all about connection community.

00:35:11 The individual personal needs, user experience, humanizing the relationship with real estate coworking came out of people being very annoyed, that there was no relationship around their physical environment. They're like I'm spending so much money so much time in the space and I'm getting nothing from it. It's just, it's a take relationship. So co-working ma made it a, a give and take it.

00:35:31 It was a, you know, a back and forth and the difference it's really critical for an asset manager to move that mindset of assets to community. But those are actually the same as you have accountants and salespeople. They're different people. So that's why, in my opinion, if you're a large asset owner looking to get into coworking, you should acquire an asset,

00:35:51 an asset owner, or acquire the management team because you need that skill set and you don't have it. And it is a, when I did a, I did a talk at retest, the real estate conference in Singapore, and I did this pitch called a coworking reeds. And basically normally with a traditional rate, you've got a REIT structure which holds a building and a REIT manager,

00:36:13 which is responsible for getting the yield. And I was like, you have, there's an argument for a coworking rate manager as a sub article of that, because a coworker, you know, a REIT manager will get you 3%, 4% yield. The coworking manager will get you 35% yield. It's not going to take over the whole building yet, but for now,

00:36:31 it's going to, it's going to bump the yield of the whole building. And actually w what we're looking at now, particularly, and again, we were saying this in the, in the pre-chat COVID has bumped up the evolution of coworking and flexible working by four or five years, because it, it it's, it's killed a bunch of leases. I was,

00:36:51 I was just telling you, I was, I'm doing my annual filings at the moment. I was on a zoom call with my accounts is in Singapore. They don't have an office. They gave up their office, they gave up their lease because Singapore has been in work from home since March. So the coworking industry in Singapore is decimated right now, because literally people are bailing out of their leases.

00:37:10 Why would, why would you pay for an apartment? But even if it has the best community on the planet, no, one's there. Yeah. So, so we're at this inflection point of a lot of the number of operators, unless they're, well-funded will turn over the, a lot of the traditional real estate. They're, they're going to, they're going to have issues with people downsizing,

00:37:29 and they're going to have this influx of space. So we're at this point right now, where yes, landlord should be looking at creating co-working like products, but they still don't have the skillset and the skillset, it takes two years to develop. And then you need to have the You're going to end up with a mindset, right? This is the challenge to your point.

00:37:46 There you're like, they're two different people. So they have to acquire that competency and that mindset. And then, then they have to respect it because they have to respect that maybe they don't quite get it. They just sort of broadly get it and then let the operator go at it and do what they do. Even if they, you know, you,

00:38:09 you were telling the story about sitting in a meeting and talking about soul as sort of a metric, I guess. I'm sorry. Say that again. What, So, yeah. I mean, it's, I exactly, I was sitting at the, I mean, but on that point, so when I used to recruit people in my business, we used a psychometric profiling tool called a Berkman profile.

00:38:32 And a Berglund profile is essentially a four window pane. And this, the North South axis is high extroversion to high introversion. The east-west axis is people oriented, object oriented. So asset management is high introversion object oriented. I see where you're going here. Yes. Coworking management is high extroversion people oriented with, with some systems support you, you, you,

00:39:00 but you still need to be high extroversion systems management. So when you, when you're trying to build an optimum team using using something like a Berkman profile, you need people in every quadrant and you have to respect their differences, because these are like, these are your best accountants. These are your best assistants. These are your best sales and marketing. These are your best engineers.

00:39:20 So what traditional real estate don't understand is that they all sit on one side of a, of a Birkman grid and they're all hired in their own image. So they're all basically object focused systems, focused systems, or a numbers focused. And this is why co-working feels like these sparkly aliens to them. They're like, why are you guys, you know,

00:39:40 why are you all extroverts? Why have you all got funny hair? Why are you, why do you all look like you work as an Apple store? And I think I told you on another call that we had, when I, when I first did my joint venture, the real estate company, succonded in a group of people initially, because they wanted to experience coworking.

00:40:00 And the team were in the space for five minutes. And one of the venture capitalists in my space come out to me and were like, who are the dudes in chinos with? IBM ThinkPads they don't belong here, literally verbatim quotes. And I was like, ah, they're from capsule ed. And he just threw his head back and started laughing. He was like,

00:40:17 that makes sense. He's like, they are not your clients. They are not your people they're messing with your community. So, yeah. It's so, yeah, I think the, the answer, Jamie is individual circumstances, as far as a landlord from a coworking operator, I think right now have some humility. You know, the, I think what what's required here is mutual respect.

00:40:42 I don't know how to build a real estate trust. That's a whole other area of expertise and a degree that I didn't do, but what I can do is generate more money per square foot than a, than renting CAD. And I can do it sustainably for many years. And that that's a, that's a skillset that has value. So yeah, there's,

00:41:04 there's an ecosystem which hasn't quite gone together yet. And it requires the shift, I guess it requires accepting that set up and forget it, real estates over. And I think real estate for so long has been signed the lease, ignore them for two to four years and come back and be like you staying, if not rip out all your fit and give it back to me,

00:41:24 like it's saying it now, knowing that there is a world where there's co-working, it sounds like madness, you know, and environmentally reckless actually, but Right, exactly. Now that we've seen what's on the other side, you think, right? Why have we been doing that? And how could that possibly go on? I'm curious about a couple of practical things that you talk about in the book.

00:41:50 So taking a little bit of it, a turn from the joint venture talk, but I'm curious about terms, because you talk about in the book, sort of this balance of managing a space that has some people in their, on flexible terms and some people in there on longer terms, and now COVID hits and everyone's uncertain and no one wants longer terms.

00:42:17 What do you think that will look like as we start to kind of return? I think, well, first of all, the thing that page you're talking about is this one. Yes, yes. I've got this sort of bell curve of length of membership term and then income costs, or then recurring cost per person. That's how I think coworking spaces work,

00:42:40 but it's, I know it isn't for all of them. How do I think this is going to work? I think, I think length of term is actually sometimes a misnomer for how long it it's. Okay. When you're selling a co-working space, lens, length of term is how you evidence future revenue. When you're running a co-working space. I had a,

00:43:06 I had one, they were a recruitment from really awesome recruitment firm out of Sydney. And they were on rolling monthly for five years, Right? Yes. The w what that meant to that, that founder was when she was like, when I hire one person, I can bump it up. When I lose a person, I can bump it down.

00:43:28 And actually what I found early in my co-working experience was actually flexibility with sticky. Cause you couldn't get flexibility. The stickiness of flexibility is, is, is a factor. And I think now postcode, that that flexibility is going to be a deciding factor because no one knows what they want to do. So everyone wants to hedge. So if you allow them to hedge,

00:43:51 it might give you some butterflies in your stomach, but they'll probably stay with you if they can't have somewhere else. The other move, I think Jamie is, I've been talking for a couple of years now about big institutional lessors of space. So corporates moving to per head re leasing models. I really see that coming quite quickly now. So I think they're in a,

00:44:15 they're in a bargaining position where they can get it. So the, there hasn't been the impetus. So there may have been the client demand before, but I think there are so many companies around the world looking at their real estate portfolio with 90% of their teams working at home, going we're spending how much money, you know, and we don't need it and it's not enriching people's lives.

00:44:36 And some of them are actually happier at home. It's, you know, they, they know they need to get them together. They know there's a core of space that they need events based town halls, you know this, but I think we're actually really pushing that up to. So you're saying you've a power shift so that the occupier can say to the landlord,

00:44:56 we're not playing by your rules anymore. Here's, here's what we want to buy. Do you think that it'll be a direct to landlord relationship or do you think that there will be a flex space operator in the middle, Large institutional, less as a space? So something like 90, what does that? I think it's 90% of CBD space goes to multinational companies.

00:45:21 It doesn't go to small businesses. I don't think there's ever been. So those businesses are very reactive with their real estate. They, they try and do this like five-year forecast. They always get it wrong and they just constantly are reacting to circumstances. There has never been a point in recent history where they have been so misaligned from a real estate perspective than they have in the past.

00:45:43 So I feel like every fortune 500 company right now is going, what is our flex real estate option? So that, that I think is, is just what's happening. They then go to JLL or to CVRE and go give us an option. So they do, They go to their broker and JLL Seabury have varying degrees of quality of offering. I know JLL has been working on their own and Seabury was doing to do some co-working thing.

00:46:14 And then they'll try and kit fit something together. But actually the, when we talk about, when we look at companies that are I've actually survived, COVID really well. The example of McDonald's versus some of the other fast food chains McDonald's has this massive distribution network. They're everywhere. You need them to be a landlord that has a large distributed portfolio has a better coworking proposition than a co-working space because the landlord could put in a coworking fit.

00:46:41 They're just missing the management skill. So it is a, the, the barrier to entry for what really hit this home for me. When I moved into my migrate a office, when we built that we spent, we spent many, we spent several million on the fed. And I remember I remember signing a $250,000 check for office chairs. Like we spent a lot of money on the fed.

00:47:09 Yeah. The year, the year before we moved in, the building spent $40 million refurbishing the lobbies. I mean, it's a, it's a four 52 story building, but basically it was built in the late, it was built early two thousands and it had this very Asian kind of orange peachy marble. And they were like, okay, we need, we need the building to maintain its grade status for its leasing.

00:47:36 So they flipped all of it to this sort of blond travertine. So they did like, I don't even want to think of the environmental footprint of stripping out that much stone or how many square meters of stone that was. But they did all the lobbies, all 52 floors. They replaced all the lists and they bought a bunch of corporate art and they were like,

00:47:54 great spend 50 million. It keeps our rents up by 20 cents, you know? And I went yep. Really, really, really easy for an institutional real estate trust to go and build coworking spaces. It's not hard. And there are there. Now we're getting enough. Internationally sophisticated design firms, Gensler are doing an awful lot of, of coworking fits. They,

00:48:18 they do half of the operators in Singapore. Arguably I think you shouldn't use a interior design firm to do a coworking fit, but that's that's me because they don't live with the outcome of what they design. And actually one of the things I talk about in book two is this new movement of performance-based design, which has never existed before performance-based design used to be.

00:48:39 We design it, you go into it, it looks nice success or working as you design it, you put a bunch of sensors into it to see if Will actually use it. Yes. How many people sit in the booth for? How long does somebody camp out in a booth Booths? Do you use the booth? Why aren't using the booth and then they go because the air-con sects and you fix the air-con,

00:49:00 then they use it the, yeah. So I think the I've lost this question. So where did we start? Oh, wait, where were we starting? We started, we were talking about least tenure and then W U S w we were still under advice for, for kind of corporates or for, Yeah, I guess I was right. Cause you're you were talking about right.

00:49:24 Corporate sort of giving up lease and having sort of paying on a per person use case. And so, right. I was curious, do you think they're going direct to landlord or will there be an, okay. I think they'll go through their brokerage and then they'll go to JLL and they'll go to CVRE and Seabury will try to sell them Hannah. And right.

00:49:46 The first corporate inquiry I had for per head space was a, an Asian bank. And they were like, could you get me two and a half thousand desks or two and a half thousand memberships? And I was like, there aren't that many in the Singapore coworking market now. Right? Like there there's, there isn't that available capacity. And they were like,

00:50:07 that's our problem. They're like, if we're going to make this shift, I need. So like my core and flex, I need a flex of two and a half thousand. Wow. And the, the way that you address, I think the key for the coworking industry to respond to that, like, absolutely. If you're a coworking operator, that's a great operator.

00:50:23 You're approached by like a landlord right now. It's like, we need to build out a coding, let them buy you, you know, be that, then convert them into having, you know, 20,000 desks across the country and then do it that way. Essentially. I always thought one of the big plays we work was going for was to get that corporate life Lessing market.

00:50:42 The problem is, is that the we work fit. Isn't pitched at a corporate client. So their acoustics aren't good enough, their data security isn't good enough. They don't have enterprise phone systems through their spaces. So they were like, we just build it big enough, then it will be fine. And I was like, yeah, you got to build it to a corporate spec.

00:50:58 So you don't meet their chairs and desking, don't meet workplace health and safety standards. The ergonomics aren't good enough. They're lighting. And the fortune 500 companies will get lawsuits for bad lighting and RSI. It's super interesting because this came up on one of our, on the GWA conference, which is that in California, for example, the employer is still liable for employees in a co-working space,

00:51:25 which to your point is messy on many levels, certainly messy during the global pandemic, but then there, right. So you sort of dig into like, well then what are their requirements for the space? And, you know, ergonomics and all the air quality, et cetera, the bar goes higher. Yeah. And I think the, and in,

00:51:44 in Australia, they're liable for people working from home. So yeah, so the, the people I know that got sent home by large organizations in Australia were sent home with a checklist going, do you have an ergonomic chair? Do you have a table? If you don't, you can take them from the office or we can get them sent to you.

00:52:05 And it's saying, yeah, I mean, so essentially there, the gap right now is a specification gap, not necessarily a realistic quantum gap. And I think the challenge, the challenge that we work has in terms of meeting that need. Cause they're the only operator that I know of, that's actually of the scale that could do this is they have a multi-billion dollar refit because their acoustic part,

00:52:29 their glass glazing doesn't mean optical privacy or acoustic privacy needs a lot of their, their partitioning doesn't go to slab. They don't they're desking and, and seating furniture is not to ergonomic standards. They're built to scale, not quality. Right? Exactly. And it's it's, but it's just, but the problem is it's end to end. And then there's also the issues with the data security and we work networks and stuff too.

00:52:56 So like in our space and Capitol tower, I think I said this to you in a, on a previous call, we had 150 or 160 V lands. So that should, we had we'd segmented all of our clients. So when a company came in, if they had an office, the office was already going to be land. And then we had,

00:53:14 so my own system took up an entire rack, 72 U rack. And then we had three available client racks for firewalls, Nass DPSS, et cetera. And the, that was what we needed to deal with. You know, big Institute, the kind of companies that would put themselves in the fourth tallest building in Singapore require that kind of specification, that kind of space.

00:53:38 We had a Cisco, a full Cisco enterprise telephone system to be<inaudible> 6,000 servers, all that kind of stuff, really, really heavy phone systems and all that. Connect other bits and pieces, but if you need it, so, So what do you think about the hub and spoke theory? And is it practical that operators on the spokes can fit,

00:54:03 meet those standards? Oh, okay. Yes. Cause we have, we have been talking mainly about CBD operators in this discussion. So the hub-and-spoke theory is much more the, I, I think it works. I think it is. But again, it depends on the industry because you're certain industries, their office is more of a, of a, of a node than it is for others.

00:54:37 So certain ones just require you to be there. So for regulatory requirements, financial services companies just need you to be in the office and on their network. That's just the thing they need in, in certain roles. In other roles, you TAC is a great example. You can be far more diffused. And I think so there's an industry there, industry relevant responses.

00:54:58 And I think also if you're, I think this, my answer to this goes back to coworking for me, has always been this Venn diagram of location specification. I think I have a Venn diagram in the book. Wonderful. For anybody listening. He had some wonderful illustration of concepts in the book. That's a, yes, it's beautiful. Thank you.

00:55:24 I do all my own illustrations market positioning. Some of those charts. I mean, there's some very good visuals. So one of the key things, there is one of the key areas is location and basically going, are you solving a high barrier to entry? Are you solving diffuse population? I think specification is the right tools for the right problem. So hub and spoke is the right tool.

00:55:47 If you are an industry that supports that you're very cloud oriented, you can do a lot of things over video conferencing. Also your work does not require a specific equipment that needs people in the office. So like you're not a car design firm and you require these big walls and digital drawing tables and stuff. The so, but I think the, we talked a bit about this at your GWA conference,

00:56:13 but we used to be core flex. We've now got core flex and work from home. The work from home piece really nicely fits into hub and spoke operators because after a certain amount of at home, I mean, even I'm a coworking operator, but my work at home workstation is not as good as the workstation I have at Hubbard. Totally. I'm the same one day I don't have Herman Miller chairs at home,

00:56:36 you know, maybe I should, but there is still the operator and there is still the need for socialization. And so yes, I think there is, I think actually your out of town, coworking operators are probably in a great spot right now, because if you, as a small operator, I'd rather be an out of town one. Yep. Small downtown court,

00:56:54 tricky Looking at my list of questions for you to make sure we don't, I there's a big one that we might have to make just a separate, separate discussion. I am happy to chat with you every, whenever you want me to, I'm going to save the digital community layer for another time. Cause we, I think we can go long on that one.

00:57:26 The other thing I'm curious about, and I wonder if the position shifting or not is you talk a lot about in the book about the consolidating, the share of spend and sort of, you know, once you acquire a customer, getting them to spend more with you, does that still hold post COVID that look like? So that belief for me came from,

00:57:53 so let me think this would have been 2016. So I had a coworking space. I spent up an accounts and corporate services firm as a like support services. It's very natural support services. One that kind of took off very quickly. So that was one example. The classic one in coworking is cafes or food and beverage proposition, but you need scale to justify that.

00:58:25 I think there are arguments both ways. I mean, you can, you can say, is it better to put an independent cafe operator in the space and have it all done really well? Or is it better to capture that Sheriff's spend, you know what, it depends by whose metrics? I mean, if you look at a, compared to a,

00:58:41 an online business, coworking is low margin compared to a leasing business, coworking is high margin. It really depends on your perspective, but compared to like a leasing or CA or a REIT business, coworking is capital light and high yield. So I think if you're a landlord you don't need to, because if you're a landlord, you'll just be like, let's get the best coffee place.

00:59:05 Let's get the best counseling corporate services firm. Again, really important to do scale with that one. We, we, we tried a partnership with a big four accounting firm, but they had an innovation side and we put that into the space. Didn't really have a huge uptake, literally having a, a bookkeeper that would go and speak to far more powerful.

00:59:28 We also did a, we did a revenue share with an it services firm. We had our it services firm, which was not owned by me. And we got them, we got, we got them a desk in the space, which was like a help desk and people could walk up and be like my laptops broken. And then we just took an inch.

00:59:45 We had a little introduction fee for the time that they build. And then that, that worked really well. What else did we do? We did a, I put my whole membership on a group insurance plan. So we did a membership insurance and we saved the average member, several thousand on their insurance by putting them all together as insurable cohorts. That was,

01:00:12 so it was the first individual individual health insurance policy in Asia, which was quite fun. I know someone experimenting with that here and it's, I think it's super compelling. It's necessary the way our system works. I don't know how Singapore healthcare works, but I think that alone, if solvable could be extremely compelling. Yeah. Well, I mean, we do,

01:00:36 they even on my own, even by transferring my own company into this insurance plan, we saved, I think two or 3000 a year on our corporate insurance for our medical transfer, our team. And so the way the same system works is if you're Singaporean, there's, there's like a Medicare type thing where it it's at least partially paid or your part of your salary goes into a medical fund.

01:01:01 And then that covers some of your care. You can be still out of pocket for some expenses, if you're foreign, you're on your own and you're on your, at full price and you're at full price, medical care. So my, I mean my own insurance thing, my personal insurance in Singapore was, or is, cause I still have it,

01:01:21 I think it's 12 or 14,000 a year. So it's, which is not scary to Americans. Americans are like, yeah, that's about right. That's right, exactly. Yeah. Not ideal, but yeah, we get it manageable. Yeah. So it's, it's a bit, so actually, so the reason we were so interesting to the ensure that we did that with was because I had a 70,

01:01:42 75% ex-pat community the mean age was 31. They were 55% women. Yeah. And they were like, we want to ensure these people, these guys are low risk. So that was the, the fact that we had a really good age cohort really helped tell me how to good gender makeup too. Yeah. I think some of these services may play a role as we see sort of the shifting user segments.

01:02:14 I mean, we think about the, the corporate work from home folks that your, your it example they're used to having support and now they don't have it. Right. So who fixes the computer when you're an entrepreneur and you know, like you fix the computer, right. You deal with it or go to the Apple store. But you know, if,

01:02:32 if you're used to having an it department and they're remote, and then that may be a service that even the company buys it to, depending on scale and, and whatnot. But I think it's smart to be thinking about what else I have a captive audience. I think, yeah. I think the persons of getting someone in as a coworking member is you spend all this time building up trust and then potentially modifying space,

01:02:58 getting things to work for that person. And then if they leave or when they leave all that revenue falls off a cliff, if you're still providing other services, things like accounting support, then actually you don't lose the client in its entirety. You, you, you get a long tail. So it is essentially it it's long tail economics, but also going,

01:03:16 if you've got them here, you might as well provide that service or get someone in and get a commission for the introduction. Right. And it is, it's essentially when, cause the co-working relationship is all about trust. So if you've built trust in that area, if you can be a, I'm trying, think of the word I want to use,

01:03:34 if you can be, if you can be an arbitrator of taste and be like, this is the best it from, we found this is the best accounting firm we've found. This is, I mean, there are businesses have generic requirements. Everyone has to do annual filings. Everyone needs to keep books, almost everyone drinks, coffee, or tea. There's some things that you can hit.

01:03:54 You know, most people need health insurance, you know, childcare is a whole nother complexity, but you know, there, there is yeah. Lots of things that people can do. And then also even things like monetizing access to networks. So like things that we did with the, with the chambers of commerce, we didn't monetize that, but you could.

01:04:18 So we did, we did look at going, we just have one, but we looked at going, if we got a bunch of chambers of commerce and put them together as a product, would that be something we could get people to subscribe to? But again, you need the buy-in of the people that are being Right. Exactly. Jonathan, I feel like I've taken up half of your day here when you're probably anxious to hear about your belongings and whether they've arrived deal with all of your taxes and whatnot.

01:04:47 So your current book can be found wherever you, wherever you buy books on Amazon. Yeah. It's on Amazon. It's in a lot of major bookstores. It's in kind of Waterstones in the UK, which is kind of exciting. I felt like a grownup when that happened. Totally. Like you like see the actual book and it's bright yellow for anyone who hasn't seen the cover yet.

01:05:11 Yeah. It's beautiful. So we'll link to the show notes so that folks can find that. And what's the timeline on the, on the new book. It will be published before the end of the year. I'm trying to get it into layout by the end of October. Okay. You're in hustle mode. I definitely feel like you need to finish that book.

01:05:32 Okay. Well, we'll have to have you back on so we can talk about the new book. We'd love it. We'd love it. Perfect. Thank you for sharing your perspective and taking time to do this super interesting. And we didn't even did lots of, sort of global perspective questions. I'd love to pick your brain on, so we'll do it again.

01:05:50 Exactly. Thank you, Jonathan. You took care of stay safe.

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