508: Behold the Productization of the Office | Michael Knott, CFO, EQ Office

Listen to the Episode Below (00:40:40)

It was the type of introduction that finance executives will invest decades of thoughtful career-building to receive. After dwelling nearly 20 years inside the capital markets and investment research corridors that scrutinize and energize the activities of publicly held real estate companies, Michael Knott was perhaps better prepared than most to receive an introduction to the search executive or team of search executives that had begun extensive outreach. Certainly, Knott’s robust professional network was rich with introductions to different executive searches, but unlike others, this was a CFO search and therefore more worthy of his attention. For many of the ambitious professionals Knott had worked alongside over the years, CFO search had long been a preferred doorway to the C-suite, a familiar path for opening a new leadership career chapter.

Meanwhile, it was no secret that the search team was working on behalf of The Blackstone Group–the largest owner of commercial real estate in the world. Twelve months after accepting the sought-after CFO role at EQ Office–a Blackstone portfolio company–Knott routinely emphasizes that no matter how impressive an executive’s resume may be, it’s their network that often makes the difference. Knott modestly recalls: “My role here stemmed from a critical introduction when someone in my network presented me with knowledge of the search.” –Jack Sweeney

CFOTL: When we ask for a finance strategic moment during the course of your career, what comes to mind?

Knott: Being relatively new on the corporate side of things, the example that I thought about for this question was related to an insight in my prior career that was helpful to real estate investors and owners and really could have been helpful to a portfolio orientation and an investment approach in the office business. This was probably eight years or so ago, quite a long time ago. When I was an analyst, I had authored a thought piece on capital expenditures in the office business and how high a burden it was–especially in different types of markets, different types of office products–and how impactful it is in a negative way to the investment returns that are ultimately realized in the business. It was really an even larger load than everyone had thought or imagined.

What’s turned out to be true in the last eight years is that not only was it true, but it was probably even more true than I even realized at the time. It’s definitely been a capital-intensive period for Office. On the capex side, you have tenant improvements and leasing commissions and sometimes long periods of free rent when you sign a renewal lease. And there’s tons of capital that sometimes needs to be spent on improving the building.

In this business, you need good leasing, you need really good operating and real estate acumen, and you also need a large checkbook and access to capital. jb