Weekend Interview: BentallGreenOak Co-CEO Sonny Kalsi

This series gets into the heads of the decision-makers of CRE, the people shaping the industry by setting investment strategy, workplace design, diversity initiatives and more.

Wanna make money in the next five years? Buy office.

Sonny Kalsi, co-CEO of BentallGreenOak, said he thinks that is where the greatest opportunity will be in the next five years as lenders stop being so understanding and start to move distressed deals to the market. He predicts a repricing of the asset class will coincide with an increased return to office as a weakened economy and waves of layoffs bring workers back. 

Kalsi co-founded GreenOak Real Estate in 2010 and oversaw its merger with Bentall Kennedy in 2019. He previously was the global co-head of Morgan Stanley's real estate investing business and president of the Morgan Stanley Real Estate Funds, where he oversaw $100B of property.

Now he oversees BGO, a global real estate investment management adviser with approximately $78B of global assets under management across office, industrial, multifamily, retail and hospitality properties. 

The following has been lightly edited for style and clarity.

Bisnow: Baron Rothschild once said the “time to buy is when there’s blood in the streets.” Where is the blood today?

Kalsi: There is a lot of distress across many corners of the CRE market and it is continuing to build. For the last two and a half years, most lenders have been quite understanding of borrowers and all the challenges brought on by the pandemic. However, that can’t last forever. Now, we are facing a recession; interest rates have gone up significantly in a very short time and there is very little liquidity. As a result, lenders are pulling back.

This distress isn’t just limited to the U.S., or to any specific real estate product type. We are seeing it in Europe, too. I recently spent two weeks in Asia, where there is a little bit less distress, but it is coming and is going to catch up. It is hard to go in and invest when there is blood on the streets, but if you can go in and have the conviction to see through it, that is when you can get the best value. Right now, we are seeing the most “blood in the streets” in the office market, so that’s where we think we may see the most compelling value opportunities, although it’s likely too early today.

Bisnow: What is your most controversial CRE opinion and why are you right about it?

Kalsi: Not surprisingly based on my previous point, I think where people are going to make the most money in the next five years is office. Many would consider this controversial because the office sector isn’t exactly popular with most investors right now. This is especially true in the big gateway cities like New York and San Francisco where the offices are particularly empty. However, there is a lot of conventional wisdom that indicates we are still experiencing a Covid hangover, and I think that when we look at office occupancy in a few years, it will look more like pre-Covid. A recession and some job losses will encourage many people back to the office to be more visible to leadership. This combined with distressed debt and foreclosures will bring a significant repricing of office assets — much more than other asset classes like industrial or multifamily. This is why I believe office is where the best value opportunity will be; however, it is going to require a lot of courage in the current market conditions. 

Bisnow: If you weren’t in real estate, what path would your career have taken?

Kalsi: When I was 25 years old, I found myself at a crossroads — I had an opportunity to move to San Francisco to work in tech, or I could move to Los Angeles and stay in real estate. When I arrived in San Francisco, the weather was cold and rainy and the senior person who I was supposed to meet with was home sick, so I met with some of the junior people — who were not that impressive. The next day, I went to LA where the weather was beautiful and the senior person picked me up at the airport in his convertible and took me to lunch on the beach. So, had the weather been a little bit better in San Francisco and had that senior person — who was a little bit of a legend — been around that day, maybe I would have been in tech for the last 30 years and not in real estate. The funny thing is that my work in real estate increasingly converges with technology, so I think I got the best of both worlds. 

Bisnow: If you could make one change to the industry, what would it be?

Kalsi: I would like to see the industry become more diverse and look more like the broader society at large. When I started in the industry, it was probably 90% white men. If we look to mirror U.S. demographics as our guide, the industry should be at least 50% women and 40% minorities. It’s not just the right thing to do; it has been proven many times that a team diverse in background, experiences, education and economic class comes up with better ideas and solutions. Put simply, you make better decisions with more perspectives at the table. As a result, asset management companies that are more diverse perform better by the numbers.

Diversity, equity, inclusion and belonging is something we are very focused on at BGO. While we’ve always valued DEIB, in 2020 we took decisive action both within our own company and to lead the industry in this area, and our policies have resulted in tangible impact. As a firm, BGO committed to two out of every three new hires being either female or from another underrepresented group. I’m happy to report that we are achieving and exceeding these goals. We have hired 400 people since this pledge, and it has improved the diversity of the team significantly. 

Bisnow: What is one thing you would do differently from early in your career?

Kalsi: I always encourage people to be willing to try something new. I stayed at my original company for 18 years, and while I have had the opportunity to be an entrepreneur, I wish I had done it earlier. However, I do believe everything happens for a reason, so I like to think that perhaps I wasn’t ready to be an entrepreneur until I was closer to 20 years of experience. That said, if I had to do it all over again, and especially if I knew what I know now, I probably would have done something more entrepreneurial or joined a more entrepreneurial platform earlier in my career. 

Bisnow: As a leader, how do you decide who is worth mentoring and who is simply not a good fit?

Kalsi: I really do think that is a two-way street. If we want to have a more diverse industry and better representation, then it is critical to look at people for their potential and not just for what they have done to date. Oftentimes, the people who have more impressive resumes are people who have been given more opportunity to date. There are plenty of smart people out there, but I am always looking for the people who have an EQ that matches their IQ, which is hard to find but is a more important characteristic in a new hire. 

In the asset management industry, a mistake that people often make is that they think this is all about the capital. Frankly, it’s more about relationships than money. The other thing I am increasingly focused on as I get older is finding and mentoring people who will pay it forward. A lot of people invested their time in me, and I am eternally grateful for it, so it is important for me to do as well. It’s been so rewarding to watch this value lived by so many of our other BGO leaders, too, and I think it speaks to the culture we’ve built on shared values. 

Bisnow: What are your thoughts on the metaverse? Does it have any relevance for CRE?

Kalsi: The metaverse and blockchain still have a lot of question marks, and it is partly because there is so much volatility in the space, but it will be interesting to see how it is going to unfold. What I will say is that the potential for the metaverse to offer us another medium through which we can get closer to our tenants and engage with them in valuable ways to strengthen our service is what keeps me fascinated about its potential. I think it would be foolish to ignore. 

Bisnow: What do you see as the lasting impacts of the pandemic on CRE?

Kalsi: The pandemic changed everything and accelerated everything simultaneously. We probably saw 10 years of change compressed into two or three years. I think one of the most lasting implications of the pandemic relates back to how people relate to real estate; we now treasure experiences more than before, so I am not surprised to see that travel has popped more significantly with planes and hotels being full. People really crave that human interaction. Many of the CRE trends we saw take off were already in place pre-pandemic but were accelerated by the pandemic. Every dark cloud has a silver lining, and I think the pandemic had a lot of silver linings, especially how we can build flexibility into anything. 

Gone is the five-day workweek in the office where there is no flexibility; that is a thing of the past. I am optimistic about the future of office, but there is no doubt we will be using it in a different way than we have over the last several decades. 

So many other asset classes were also disrupted — and that’s not always bad. For example, e-commerce continued to accelerate in favor of brick-and-mortar, which put more strain on industrial and logistics real estate and wasn’t great for retail, but it has been good for consumers. The need for cold storage also intensified, as meal delivery kits and grocery delivery became more popular. 

Bisnow: As you know, there is a massive conversation underway regarding advancing more people of color and women into the C-suite. What are you doing to address those voices and that movement within your own organization?

Kalsi: We have done a lot on the diverse hiring front, and our goal is to make everything measurable, but frankly, hiring is the easy part. What comes next is the hardest part, and that is actually helping people succeed through training, mentorship and sponsorship so they can stay and grow professionally, have a seat at the table with the right people and move up the ladder. Retaining and cultivating is the hard part, so we have been very focused on that. We have found that employee resource groups like our women’s network, for example, help a lot. 

We also made a concrete commitment to gender parity in all titles and ranks by 2030 with a specific goal of at least 30% representation of women at the most senior ranks. In a still primarily male-dominated industry, these goals represent meaningful change. It is critical to put metrics out there and hold yourself accountable to hitting them and, candidly, exceeding them. You could have a lot of good intentions, but you need a way to measure them. 

Bisnow: So, this is the weekend interview. What’s your typical weekend routine?

Kalsi: My weekends used to be 100% consumed with kids and sports and whatever they were up to, but I am an empty nester now. For me, weekends are important to recharge and reflect. My weekends are some combination of quiet time, and personal care — I try to work out and keep up with my wife, which is impossible. I try to use weekends as a time to just step back and think not just about business but about what is important to me personally. I am also involved in several charitable activities, and I also carve out some time on the weekends for mentorship because I find it is quieter and easier for me to do it then. 

Aside from that, watching sports teams like the Dallas Cowboys, for example, is relaxing for me. I also live in Miami Beach, so it is easier for me to get outside. Some people probably work all weekend, but I try intentionally not to create work for people. Weekends are an opportunity to take a step back, and I truly believe it takes more than one dimension to make a person truly happy. As a leader, it’s important for me to create space for those dimensions which ultimately brings a happier, more engaged and innovative employee to the office come Monday.