Kairos Real Estate Partners founder Stephen J. Gleason says he took a long time for taking the plunge into entrepreneurship. But once he got in there’s never been looking back.
His regional real estate company scours the commercial, residential, cultural and institutional markets for value. After buying up the right kind of assets, notably in the suburbs, it redevelops them through leasing, hands-on asset and property management, and repositions the property to maximize value.
“That’s kind of our recipe,” Gleason told citybizlist’s Edwin Warfield in an interview. “We’ve completed two (properties), and we’re well on our way with the third property.”
A cum laude graduate of Harvard College, Gleason received an MBA from the University of Pennsylvania’s Wharton School. He then spent 18 long years at Amerimar Enterprises, overseeing their portfolio of office buildings, before embarking on Kairos – which, incidentally, is Greek for an opportune time. Before business school, he had stints with LaSalle Partners in New York, and Laventhol & Horwath in Philadelphia.
In the interview, Gleason recounts the timing of his entrepreneurial journey, the fortuitous partnership with a senior professional, the philosophy that drives Kairos and the art of the deal.
STEPHEN GLEASON: We did a lot of exciting deals with great partners, but there were several times along the way when I thought about leaving Amerimar to start my own company. The timing was really never right and based on various external factors, the great recession, having kids in private schools, things like that; but in 2011 and 2012, I started to seriously think about it again, and we sold some very successful properties at Amerimar and so early in 2013, I decided to take the plunge and start Kairos, and it’s been a great decision I have never looked back on.
Kairos is an ancient Greek word. It means opportune time or supreme time so, I thought it was fitting to have named my company that after weathering the great recession and 18 years with Amerimar. It was an opportune time for me, so I thought it was an appropriate name for the company.
Mike Corvasce called me about two weeks after I started Kairos, and he said I’d like to talk to you. I’m in a great position at Keystone, but I’d like to do something more entrepreneurial, I’m thinking about joining you. All I could say was why would you want to do that? I had boxes in my office, I had one property, I was working off my cell phone, and the fact that he would want to come join me was a little far-fetched. Frankly, I’d never considered hiring someone as senior and as capable as Mike day one, but we talked for about three months and he was working on a big project for Keystone; and once that was completed, he came over and it’s been a great match, and I think he was looking for a lot of the same things that I was, an entrepreneurial start-up, still focused on real estate.
Kairos focuses on value-add opportunities. We’re not going to buy a brand new trophy skyscraper in Center City. Of the three properties that we’ve acquired to date, they’ve had a few common denominators, they’ve all been in the suburbs, they’ve all been owned by servicers meaning vendors who had foreclosed on the prior owner, they had a lot of deferred maintenance and neglect from the prior owner, and they had very low occupancy. So, that’s kind of our recipe to come in, to buy the properties at the right basis, to renovate them and to be very involved with the leasing team to get them leased up and deliver properties to the market that have the amenities that tenants were looking for. We’ve completed two, and we’re well on our way with the third property.
When we considered buying Triad early in 2013, it was a disaster. It was 20% lease. The air conditioning and heating didn’t work. There was a tenant suing the current owner and everything was wrong with it. I had the advantage of having owned that property once before. The first deal that we did when I joined my old company in 1995 was to buy Triad and we leased it up and had a very successful investment in that. So, I think I knew a little bit more than some of the other bidders in terms of what was good about the property as well as what needed to be fixed.
We got to work right away with our leasing team and with our architect and designed, what we called, the big three amenities, which are a full service café, a fitness center, and a tenant-only conference and training center. We built them out as well as renovating all of the common areas in the building, the rest rooms. We’ve totally replaced the air conditioning and heating system; and about 15 months later, we had a ribbon cutting that really enabled us to reintroduce the property to the market.
After that point, we were able to do about 135,000 square feet of leasing, and take the property from 20% lease to 95%. One of the things that I’m most proud of is that of the seven tenants who were in the property when we bought it, they’ve all decided to stay and renew their leases. They were living through some very difficult conditions with the prior owner, so we take a lot of pride in the fact that they’ve all decided to recommit to Triad.
The three deals that we’ve done at Kairos have all been in joint venture with Artemis Real Estate Partners. They are based in Chevy Chase, Maryland. They’re a private equity real estate fund that invests in value-add opportunities, always with local operating partners like Kairos. I knew the President of Artemis, Alex Gilbert. We had worked together in New York City in the early 90s. When they were looking at properties in Philadelphia, and when I had decided to start Kairos, it was natural for us to team up and look at Triad together. They’ve been great partners as indicated by the fact that we’ve done our first three deals together, and we’d certainly love to do more with them.
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