I'm Flexible #3 - Scott Homa: Management Agreements Advice to Operators

so we we had a thesis and and are still working on a thesis that hey one way for the co-working industry to grow is to essentially uh backfill you know previously built out co-working centers and and we've tracked you know roughly a thousand a little bit more than a thousand in in the Americas uh mostly in the us um what we've been finding you know some some time into it is that roughly a third of those have have been kind of taken by a new a new operator roughly 15% of those have been either demoed or marketed to traditional tenants um so comparing this to pre-pandemic when operators like we work represented gosh 5 to 15% of all leasing activity in the office market and and taking into account that landlords are let's just say they're they're not actively chasing most aren't actively chasing co-working operators even when they have a closed co-working Center what should should co-working operators expect that landlords are going to essentially hold fast to require leases should they hold out for Le for landlords to accept more and more management agreements obviously it's going to be asset dependent but what's your what's your advice for a co-working operator who has trying to grow has high occupancy but is not necessarily finding a landlord to be hospitable to a management agreement I mean I I think it would be great to see more management agreements it would be great um but what don't we have what do we need what does everyone know that we need we need a track record of success you need transparency um you need the uh um the success stories to prove based on trailing income rather than um you know the the way that investors and lenders have always valued office assets which is on forward net operating income but um you know more like the hotel model where you really know what the cash flows are for those spaces and um you know that this operator is going to hit their proforma and as a trustworthy partner and um and that provides you know the the clarity and confidence that you need to transact um you know I think that a lot of the groups that insisted on traditional leases with flex operators found themselves in in a predicament anyway um so may have been better off to to begin with in having a REV share and some sort of management agreement it just seems to make a lot more sense for um for this to be uh kind of to use the previous way I characterized more of a symbiotic relationship between the operator um and the landlord