Part of Feldman’s success is due to the “radical officectomy” process he goes through when he acquires a new property.
Officectomy is the word Larry Feldman uses to describe the process he goes through whenever he buys an office building. While Feldman Equities has a separate arm for new developments, their main is focus on bringing new life to older, existing office buildings. They acquire, renovate, and manage office buildings, usually holding these buildings for extended periods of time.
Anyone can buy, fix, and flip a building. Standing out in a competitive marketplace is the difficult part. Renovations are where the company works hard to differentiate themselves. In Feldman’s own words, he considers what they do as “reinventing the office building.”
His officectomy strategy means pouring a lot of time and carefully placed capital into the renovations to present a final product that’s nothing like any of the other office buildings in the area. Feldman insists that the product should be radically different and better than his competitors. For example, it’s commonplace for office buildings in the last 10 to 20 years to include a gym. Whereas many offices just throw a few treadmills in a room with a TV, Feldman goes the extra mile by adding large luxury gyms, with high-tech equipment that you might see in a high-end, downtown professional gym.
With an officectomy, Feldman spares no expense during renovations in order to make tenants feel comfortable and productive in their workspaces. Whether that means adding in 24/7 chill zones with high speed internet access, leather couches and cappuccino machines or extravagant artwork in the lobbies, it’s all about the details.
That said, it’s not always worth putting this kind of effort into an office building. Leveraging lessons learned from his family’s 100+ year history in real estate development, Feldman knows to look for buildings that have solid foundations upon which to build. It must be in a top location, and there needs to be some room for improvement. The more run-down a building looks, the better, as long as it’s still a usable shell without serious structural issues.
See what an Officectomy looks like on this walkthrough with Larry Feldman, CEO
When you put that kind of investment into renovations and updating, you want to make sure you’re getting a good return. Feldman generally prefers a long hold on office buildings so there’s more than enough time to average out great returns on acquired buildings, and even out the natural ups and downs of the real estate cycle. It’s all about playing the long game and setting your sights 20 years ahead of today.
Keeping a long term perspective does not, however, mean taking your eye of short term opportunities. Office buildings require a focus on short-term leasing as much as the long-term tenant searches. With longer lease periods than residential, averaging around 5 – 7 years in Tampa Bay, an office building needs a continuing supply of new tenants and is critical to retain existing tenants. One way that Feldman accomplishes the goal of finding and retaining tenants is to develop a personal relationship with as many of his tenants as possible. This means frequently taking them out to lunch and staying in good communication with them.
Even a building that is 100% leased requires prudent management to keep forward looking and continuing to take the right steps to retain current and attract new tenants.
The strategy for Feldman thus far has been to be the type of landlord that both tenants and leasing brokers want to work with. By looking long-term, he and his team have built up a reputation in the office building industry that helps them find and retain tenants more easily. There are two main parts to their strategy: providing something exceptional and constantly building valuable relationships.
If your goal is to stand out in the market, you must provide services that are unheard of in an office building, making tenants feel so comfortable and happy in the buildings in which they work that they would never think of leasing anywhere else.
This means goes above and beyond what the competition provides.
And it’s not just about the extra services you provide, as important as those are. Make sure you’re not ignoring the everyday services that keep the building running smoothly. Be excellent at maintenance, operations, security, and everything else you do. A classic example of this is Feldman’s Tampa building where they had a policy in place that security guards would escort you to your vehicle at night upon request. No one had to feel unsafe walking to their car at night alone, plus the garage was lit up with new bright LED lighting.
Furthermore, Feldman treats his Tampa Bay office buildings tenants to services almost comparable to 5-star hotels. Some of his buildings offer detailed car washing services, front desk personal concierge support, full-service gyms, and other luxuries at low or no charge to tenants.
Meeting customer expectations is a bare minimum requirement. If you want to really impress your tenants and see them regularly renew their leases, you need to strive to exceed their expectations. Give them something they never would have expected from an office building. Make it easy for your business tenants to provide extra benefits to their own employees.
In short, give the customer more than they expect, and you will be rewarded in the long run.
A fully renovated and “reinvented” office building coupled with the right marketing strategy can be successful at any time, even in the middle of a recession. The trick to marketing well is and will always be persistence. You have to be marketing constantly, even if your building is fully leased and you’re not hungry for new tenants.
In the office building space, Feldman found success by marketing strictly to the brokers rather than directly to the businesses that would become tenants. His firm pays office building lease brokers above market commissions and sends the full commission check by Fedex directly to their homes or offices after the lease is signed. In his experience, creating a strong positive working relationship with the gatekeepers (the leasing brokers) to quality, credit tenants, has always paid off in good times as in bad.
Successfully owning and operating an office building comes from knowledge bred over generations of experience – and nothing comes without hard work. Understanding what kind of building to purchase, how to conduct an officectomy to maximize value to shareholders, what it takes to attract and keep tenants, and how to leverage the influential community of brokers all comes from experience.
But at the end of the day, a savvy office owner knows that persistence is the key to success. As he was growing up, Larry Feldman’s father would often tell him “There’s no such word as ‘can’t.’” He has taken this to heart and applied it to his office ownership and management, consistently delivering outsized risk adjusted returns to investors for decades.
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Short term leases have a notoriously bad reputation in commercial real estate. The conventional wisdom says that short term commercial real estate leases are not a good idea.