Diversify real estate investment into new markets
President and CEO, Hobbs Brook Real Estate
Industrial experience: 20 years
Under new CEO Peter Gottlieb, Hobbs Brook Real Estate is diversifying the geography and asset mix of its real estate portfolio. The Waltham-based developer has traditionally focused on developing suburban office parks along Route 128, including 225 Wyman, a new 507,000 square foot laboratory-office building in Waltham that is leased to 96 % at ElevateBio BaseCamp, Seqirus, Pegasystems and TIAA. It is now expanding its investment criteria to include other asset classes and markets across the United States Prior to joining Hobbs Brook, Gottlieb was senior vice president and regional director at Rubenstein Partners, overseeing its investments in New England and the Chicago market.
Q: How is Hobbs Brook Real Estate changing its investment focus?
A: Hobbs Brook has historically focused significantly on the Boston market and even more so on the Waltham market. As Hobbs Brook ceased to manage both the corporate real estate of [mutual commercial property insurance company] FM Global as well as their real estate investments, Hobbs Brook now directs only FM Global’s real estate investments. FM Global’s corporate real estate is now managed internally. Our concept is to grow the portfolio outside of Boston and expand it into different assets outside of the office and life sciences, where we now have significant concentrations. We are developing a research thesis that addresses what we want to assess in new markets, be it partnerships with joint ventures or local operators. It is an exciting exercise in which we are now going. Between Waltham and Lexington in our core assets, we have approximately 2.6 million square feet in approximately 20 buildings.
Q: When evaluating expansion into new markets, what characteristics do you look for?
A: Sky is the limit. We are in an exciting position to be able to address any market, including gateway markets such as New York and San Francisco, and continue to invest in Boston, but we also have a lot of experience and interest in delve into the secondary and tertiary markets as well. It’s really a portfolio optimization on the side of the real estate portfolio. FM Global’s commercial real estate and investment management has shifted to a pure investment property focus, and diversification is going to be important. I have experience in a number of different markets outside of Boston, and we want to leverage that. We will look at land and asset redevelopments. I still see a lot of advantages in the industrial sector. We will assess multi-family, hospitality and retail. As long as there is a good opportunity, we will take a look. We have the flexibility to create a more diversified portfolio.
Q: What is your outlook for the office sector?
A: It seems to change from week to week. We are triangulating around a likely hybrid workforce in the future. What we don’t see changing is a flight to quality and putting together top-notch gear sets, and a real focus on environmental sustainability. I keep a close eye on what brings people back to the office, and one of the biggest concerns about getting back to work is the commute. We pay close attention to the locations and travel times of suburban populations. For investors in 2021 and 2022, it’s been a bit wait-and-see. Some leases are smaller and the rental terms are shorter. They kick the box on the road. Where tenants can only have 24 month time horizons, we accommodate that.
Q: How does uncertainty about MBTA’s service levels and reliability impact the prospects for viability of properties in downtown Boston?
A: I don’t think downtown as an office destination is going anywhere. Groups need to provide flexibility for their employees, and we’re seeing more and more groups evaluating a hub-and-spoke with a downtown location and a suburban outpost. Whatever works in the suburbs when it comes to flight to quality, we see it downtown. Since people are on the move, you need to have ample parking and access to public transportation, as well as a solid set of amenities in your building.
Q: Now that 225 Wyman is complete and largely leased, what is the next big development for Hobbs Brook?
A: We’re particularly excited about the Ledgemont Technology Center in Lexington. It is currently a life sciences space built in the 1960s. We will likely replace some buildings and create three new sites to accommodate an additional 270,000 square feet of life sciences in Lexington, and we will resubmit the review of the site plan in a few weeks for a total area of 460,000 square feet for the campus upon completion. We also perform an assessment of the highest and best uses in our existing portfolio. We have significant class B assets: is it better to use it as an office, life sciences or some other concept that we need to consider long term?
Q: Does inflation affect your investment strategy and the opportunity for new developments versus acquisitions?
A: We saw 1 [percent] 2% monthly cost increases over the last three months. As we set prices, we go directly to subcontractors rather than relying on general contractors, both for labor and materials, to evaluate the best selections, but in leveraging their understanding of the schedule and supply chain to make the right decisions as we build space. The time of delivery will be essential in our selection of materials and the best way to arrange the spaces.
Five favorite vintage cars Gottlieb will never buy:
- 1994 Land Rover Defender 90
- 1977 Ford Bronco
- 1966 Shelby Cobra 427
- 1978 Porsche 911 SC
- 1957 BMW 507