The One Shift That Will Redefine Office Buildings Forever

Aviva (00:00)
This week's listener of the week is MB407. MB, thank you so much for leaving us a five star review. And for those of you listening, if you leave us a five star review below, you might be next week's listener of the week. Week, week. This on Commercial Real Estate Secrets, we have Jonathan Iger. Jonathan is the CEO of Sage. Jonathan.

Thank you so much for being on the show today.

Jonathan (00:31)
Thanks so much for having me. Appreciate it.

Aviva (00:34)
So Jonathan, for the listeners, who are you? What do you do and how did we get here today?

Jonathan (00:40)
Sure. So as you mentioned, I'm Jonathan Iger. I'm the CEO of Sage, which is a rebrand of Sage Realty Corporation and the William Kaufman Organization. Sage is a 101-year-old owner, builder, manager of commercial office properties based in New York City.

Aviva (00:56)
Interesting. How are you associated with this 100 year old company?

Jonathan (01:01)
So my full name is Jonathan Kaufman Iger. The company, the initial eponymous company was the William Kaufman organization. So that was my great grandfather on my mother's side. He started the company in 1924. His two sons joined after both serving in World War II. And the three of them co-ran the company until William passed in the late 1970s. And then the two brothers continued on for many years. And I came aboard.

2010.

Aviva (01:30)
Okay. Well, yeah, little history lesson. So talk to me about Sage. What do you do?

Jonathan (01:36)
Sure. So traditionally, we've been an owner builder manager. We've played in most traditional asset classes within commercial real estate, office, single lot family home, retail, land, mixed use properties, both here and throughout the UK. ⁓

Starting in the early teens, we really honed in on what our core competency is, which is the ownership and management of Class A commercial properties in New York City. So over a couple of years, we disposed of everything that was non-core. Again, core to our competency, not necessarily core investment strategy. And then in about 2016, 2017, we had a light bulb moment.

And what we determined was that up until that point, the only truly identifiable real estate company within commercial real estate ever in our history of an industry ⁓ was WeWork. And if you look at almost any other industry, there are identifiable brands, not just companies. Right. So obviously in real estate, an identifiable company would be JLL, CBRE, Newmar.

If you're more locally based, right, for NATO, Tishman Spire, SL Green. But no one can tell me what those companies stand for, right? What their ethos and philosophy is. No one could tell me what it is to be in a JLL or Cushman Wakefield managed property. Nor could you tell me the difference with an RXR property, right? And we have a tremendous respect for most of those operators.

But if you look at restaurants, if you look at any high-end retail, if you look at obviously the hotel industry, they're identifiable brands. And so we've been on this journey for about seven years now to stand up Sage, which is part of why we rebranded. Most people are not going to want to say, oh, I work in a William Kaufman organization building. But it sounds pretty nice. Oh, I work in a Sage property.

And that's really our goal. Our goal is to create identifiable real estate brands for commercial real estate, akin to Marriott having 30 plus brands for the hotel industry.

Aviva (03:49)
So talk to me about what that looks like in 2025.

Jonathan (03:53)
Sure. It's been a long journey, even for a company of our size and a heavy lift and a lot of foresight. First and foremost, for any brand, irregardless of what the industry is, it's about a consistent experience. You walk into a theory clothing store in one city or in a location across the city, you're going to get a consistent experience. Obviously, walk into an Hermes store, you're going to get a consistent experience.

If you're staying at a Four Seasons in Bogota versus Florence versus New York City, right? The experience itself, right, is going to be the same. The level of service provided is going to be the same. Whether that hotel has a pool or not or a one-star Michelin restaurant or a walking garden or whatever else, right? That's a feature set.

And so first and foremost, what we have done is if you go to any Sage property, whether that's 437 Madison Avenue, 777 3rd, what was previously 77 Water Street before we sold it, ⁓ you would get the same actual experience from how you as a tenant or we call a Sage member are greeted by our security ambassadors to how they say good night to you when leaving.

to walking in and having an identifiable Sage scent throughout all of our common spaces, to having curated playlist of Sage sounds based on our ethos and the location of the property. So at first and foremost, it is about a consistent branded experience and then you can layer on top of that.

Aviva (05:35)
am completely obsessed with branding and commercial real estate. Our company's called the warehouse hotline because of that. And I think it's a huge missed opportunity in this. I don't think it is. I know it's a huge missed opportunity in this business. So I like talking about it. And I think those big JLL CB, I think all of that is out. And I think,

The brokers and who they are is coming in, but that is an episode. That's another

Sage curates an experience for the office user.

Jonathan (06:09)
Mm-hmm.

Aviva (06:09)
Talk to me about how you quantify the value that adds to the tenant, ultimately.

Jonathan (06:16)
it's a great question. think there are tangible and intangible value propositions, right? and this is not hyperbole for us. This has been a north star for us for 70 years, but we see ourselves as a purpose-driven organization and our why as a company, right? What most companies would...

say this is our vision, right? ⁓ Is a pretty close to verbatim quote from our founder, William Kaufman. And our vision, our why is to enrich the lives of people at work. And everything we do, right, is informed by that vision. We feel that we do that, you know, in a multitude of ways, but really being driven by providing beautifully designed spaces, inspiring experiences.

and doing all that through exceptional service. So we've never taken this adage that we hear about, what do you need to do to your property or what does a company need to do to their office space in order to get people back into the office? I think that is a very stupid approach. The question that we should be asking ourselves and the question at Sage that we ask ourselves is when you are going to be in the office,

Right? How is that an enriching experience? Recognizing the benefits of working remotely, working from home at times, right? Because remote work is not simply work from And there are huge benefits. And we start many of our town halls, our internal town halls of photos of a parent in their bed on the laptop with one kid on each side or running in the middle of the day or seeing their kids soccer game. I can't tell you how many people who

work at Sage, if they are commuting out from the city, have to leave the office or would struggle to leave the office at five to make a kid's soccer game, hit traffic, and maybe catch the game if there was overtime. No one should be trying to compete with that. You have to look at it as a pie chart. And there is going to be a time and a component for when you're going to be in an office property.

hope that it's in a sage office property. And when you are in that sage office property, right, is it enriching your life? Right? Is there, because there are many things that can be provided at a property level that you can't get from home, right? It's not an if or, right, or if then, right? It's simply what size of the pie chart is gonna be in the office, what size is out, what size is travel, et cetera.

And so for us, ⁓ on the semi-intangible side, right, on the qualitative side, right, ⁓ yes, we can look at NPS scores and things of that nature, right? But in a general sense, are the people in our properties happy? Right? And do we feel that they're happier in these properties than they would be at the property across the street?

That's the intangible part. We think there are ways that we have. We have an internal proprietary tech stack that allows us to track, not big brother, gather data on our members, on our end users, so that we can provide that exceptional service, basically.

Aviva (09:36)
Talk to me about vacancy and what it's looked like over the last five years.

Jonathan (09:41)
think specific to the New York market, it really depends on the asset that you have. And then will depend on, you know, a lot of this market is driven by sub market. I think, you know, one of the greatest impacts and it's always been there. Right. Anyone who said we got away from location, location, location in commercial real estate ⁓ was, you know, let's say wrong.

Right. think more tenants became geographically agnostic over time. Right. We saw a lot more where it used to be. You're a third Avenue tenant. You're a Park Avenue tenant. You're a sixth Avenue tenant. You're a Midtown South tenant. There were a number of tenants leading up to COVID and post COVID that were looking at top tier buildings Midtown and also looking at our property at two Gans of art in the meatpacking district.

when I started my career at Sage, that would have been unheard of. So it's really dependent on the asset. We've been lucky. ⁓ When you start to translate those qualitative components that we just talked about on an individual member side, employee side, and how does that impact the employer? How does that impact our What we see is higher retention rates for us.

Right? mean, our benchmark as long-term holders, right? We're not value-add investors. We're not trying to flip tenants, increase rents by $8 and sell off. Our assets we've held onto for 50, 60 years. Our oldest asset was built in 1912. We purchased it in 1947. We've owned it ever since. ⁓ And we have tenants in some of our properties who have been with us for over 30 years.

I mean, I'm not exaggerating when we are on the 14th or 15th lease amendment with that is very much our benchmark. All that being said, right, it is not all rosy out there. You have to fight tooth and nail for tenants. We believe that the operating platform that we've stood up at Sage empowers us to do so.

not only win deals, but win them at what we feel are above market rents within our geographic areas or sub markets. So, you know, three of our properties has consistently been over 90 % occupied and that's been through COVID before, through COVID and today. we have one property that we're currently going to be starting a reposition on and you know, that one we would anticipate.

creeping up as it becomes more competitive within the market.

Aviva (12:16)
Do you find there is a specific amenity that moves the needle more than others when tenants are making that decision?

Jonathan (12:25)
from our own experience and, we're constantly speaking to, our tenants, and to brokers, the number one, amenity that I would say gets requested and then gets utilized, is large meeting space space for, you know, only so many buildings can, can build at scale a 200 plus person town hall space.

but dynamic rooms that can support a hundred to 150, that maybe become divisible, so that you can use it for training seminars, for, actual board meetings, investor days, you know, having that designed, so that again, sometimes it's too much focus on the room itself, right. And not the adjacent.

areas like to set up for catering and other components, right? Having really strong AVIT solutions and support

That's the number one that actually has a correlation between request, right? And use, right? There can be plenty of tenants out there telling their broker, I want to, you know, show me buildings that have a golf simulator. I can tell you the data is there that

for some tenants, that will get utilized. They will utilize it. But for the majority, they don't. And we saw this for anyone who's in office and residential, residential owner and operators have seen this for years now, right? Owners putting in, particularly early on in COVID, changing some type of communal space so they could put in.

doggy daycare or dog washes and par like all that all of that stuff if they have the capital is gone already

Aviva (14:07)
It's funny. No, I, you know, it came to my mind was like these new ventilation systems where they're like, we have advanced air filtration to, and I'm like, I don't hear about this anymore, but I understand everybody was trying to figure out to solve this scenario and we never could have.

Jonathan (14:26)
We looked at it, we looked at the UV blue light solutions that have existed in hospitals for years. Here's a good educational fact for your listeners. And it's a balance act, like most things in life. owner out there, unless it is really a new development that is espousing or in their marketing materials that like we now have like Merv 15, Merv 16 filters,

Aviva (14:51)
Right? Yeah.

Jonathan (14:52)
Because that filtration is so fine, it completely screws up older buildings HVAC

less savvy operators don't realize that. They say, ⁓ this person's doing MERV 13, I'm going to be 14. That person's doing MERV 14, I'm going to be MERV 15. And then they wonder why their electric utility bills are higher. They're getting more hot and cold calls.

It's because of that. It's all of that. We even heard that in years now.

Aviva (15:23)
Well, that's good. It's what a time to be an office operator. Hey, every day is a dream in this business, even if some days are nightmares. It's still. ⁓ So if you had to share a commercial real estate secret with the listeners, what's your best commercial real estate secret?

Jonathan (15:28)
It's a fun time.

⁓ shit.

I've been talking about it with you and many others over the last couple of months. So I don't know if it entirely qualifies as a secret, but for most people probably listening who have not heard it, believe what we will see in commercial real estate, and it will be a very small sliver of the pie today, tomorrow. But I'll be very surprised if we're not sitting here having this conversation 10, 15 years from now.

And the real estate industry does not look very much more akin to the hotel industry in where hotels are flagged. Most people Marriott Inc is the largest lodging company in the world by number of properties and by number of rooms. Wow. They own and lease less than five hotels in the world. Marriott Inc is a franchising and licensing company. And I think the big secret is starting to get out that

that is going to be realized in commercial real estate over the next couple of years.

Aviva (16:47)
That's funny. kind of brings us back to exact the first thing you said, is branding and commercial real estate.

Jonathan (16:54)
That's it. You're to see lot more brands in commercial real estate and we just hope Sage will be the largest.

Aviva (16:59)
I hope so too.

Jonathan (17:00)
Thank you. Appreciate it.

Aviva (17:02)
Jonathan for the listeners. Where can they find you, follow you, learn more about Sage, find a Sage building. Talk to me.

Jonathan (17:10)
Sure. Currently, Sage properties are located exclusively in New York City, in Manhattan. We currently have four branded Sage properties, three centrally located around Midtown by Grand Central and one in the Meatpacking District. We can be found online at sagerealty.com and on Instagram with ID.

think is experience _ Sage. But if you search experience Sage, you'll you'll you'll definitely find it. Personally, I'm on LinkedIn, who's anyone who wants to talk further about the idea of branded experience within the office space. But best place to find us is on our website.

Aviva (17:52)
Jonathan, thank you so much for being on the show today. And for everybody listening, we'll see you next week.