Lionstone Investments COO Tom Paterson on Modernizing Leasing for a Post-COVID World
Lionstone Investments is a data-driven real estate investment firm headquartered in Houston, Texas. Using proprietary algorithms and advanced analytics, the Lionstone team conceptualizes, evaluates, and executes national investment strategies.
When COVID-19 hit hard six months ago, like the rest of the country, Lionstone quickly transitioned to remote work. But according to, COO & Head of Portfolio Management Thomas Paterson, “for better or worse, Lionstone had a test run of this in 2017 when hurricane Harvey hit Houston…we were all forced to work from home for two weeks during that event and that really helped us get ready to make this change.” Wow!
We sat down with Tom to learn more about the steps Lionstone has taken to modernize the organization and keep business moving forward during COVID-19 — and beyond. Enjoy!
VTS: Can you tell us more about Lionstone Investments?
Tom Paterson: Lionstone is a 20-year-old investment firm. We’ve got 9 billion in assets under management and 60 employees. We’re based in Houston, Texas. For our entire history, our firm has used as much data as the market would bare to inform our investing strategies. And today, I think Lionstone is a very unique and creative blend of pushing the envelope in our industry to help drive it forward in, what I like to call, the art and science of real estate.
On the science side, to push forward on data and analytics, we use that in every part of the decision-making process. And then, on the art side, our industry is rapidly transitioning from managing space to managing real estate as a service and an experience. Everything we do today is trying to optimize the experience of our users, from creating great places to trying to seamlessly infuse hospitality, technology, health, wellness, and sustainability, so that we can best serve the most productive segments of the U.S. economy.
We’re trying to do everything we can to push the envelope on both of those fronts, which I think is what makes Lionstone really unique and compelling.
VTS: What changes have you made to keep business moving over the past six months?
Paterson: Like everybody, we had to pretty quickly transition to a digital footprint. And for better or worse, Lionstone had a test run of this in 2017 when hurricane Harvey hit Houston pretty hard. We were all forced to work from home for two weeks during that event and that really helped us get ready to make this change. So I think as a business, we were ready for that transition.
Beyond that, I think we had a goal of trying to make sure that our business and our company response was both decisive and thorough. As an investment firm, it means we tried to very quickly review our entire portfolio and understand the impacts of COVID — both on a short term and long term ability for our investment portfolio to be able to navigate the storm. We have a saying of performance and trust at Lionstone, so we’re always trying to do everything we can to drive performance, but on the trust side of the equation, it’s about open, clear, and transparent communications. Not only internally, but particularly with our investors, so they know exactly where they stand. Those were the most important things for us, and we tried to implement them very quickly.
VTS: What are some of the biggest ways you've needed to adapt your leasing processes during COVID-19?
Paterson: Even though the world stopped, we needed to continue moving our portfolio forward. We weren't willing to just accept that people were home and no business was happening there for a period. We have a 17 million-square-foot portfolio. And thankfully, over the last six months, we've been successful in signing over 75 leases and 600,000-square-feet. That's been a big move to keep driving everything forward.
From a business standpoint when we think about our processes, COVID in general is accelerating trends — it's making everything move faster. Things that were already in process, or maybe they were going to happen in 2025 or 2030 are happening today. We're always attempting to be kind of progressive and leading edge in terms of using data and technology and tools to optimize our execution. But during COVID, we've certainly accelerated the adoption of a lot of the new tools, even faster than I think we had already been anticipating making those changes.
VTS: How are you running your leasing meetings now that you're all remote? Any fun activities your team is doing to stay engaged virtually?
Paterson: VTS has helped a lot. We've been using VTS and several other tools to help manage our pipeline and facilitate our internal communications as we work through deals. I would say there's been a big combination of VTS and Zoom, Microsoft Teams, or Skype. The combination of those has been really critical for us to be able to continue managing our pipeline and our team and leasing meetings effectively and virtually.
Related to fun activities and trying to keep things interesting and sharp — one of the things we’ve done has been really interesting and compelling. These are trying times, they've been difficult for everyone, and I think particularly because we’re virtual, right? Humans like to be around other humans and this whole process has forced us to be in isolation. One of the things we've been doing as a team, both for fun and motivation, is what we call “our moment of inspiration.” We have weekly meetings with our management team of about 20 people and over the course of the last many, many weeks now, we've been taking turns sharing our moment of inspiration — what inspires you, what keeps you going, what gives you drive and motivation. Every story is a little bit different, but having been with this firm for 13 years and having worked with these colleagues for years and years, I still learned something new about everybody.
We have a very unique, talented, and diverse team. Hearing people's stories and their family backgrounds and how their families came to our country — whether it's this most recent generation or several generations back — and how their family stories have evolved, and the faith that they all put into the examples that they've driven from business and in life was really just an astounding process. This moment where we're all apart, I think it allowed us to pull closer as a team and learn more about each other and learn things that might have led to conversations that we wouldn't have otherwise been having. That's been a really unique and fun experience for us all.
VTS: Is COVID the push that commercial real estate needed to embrace new tools and technology?
Paterson: We think it is. Again, back to the theme of COVID as an accelerant. We're big believers in a lot of the technology platforms that already existed, both in management and leasing. But we've certainly accelerated our adoption even further during this moment. We’ve accelerated the use of things like tenant engagement apps as a means to facilitate and maintain direct and efficient communications with tenants when they're not in the buildings. How do we continue to create a community around something like a building when nobody’s there? I think that they've been a really good tool for us to not only communicate more effectively while everyone's gone but to help create content and continue to try and tie people's hearts and minds back to their offices or buildings.
And on the leasing side, it's all about new and virtual tools, right? Virtual tours, digital marketing, 3D walkthroughs, and space renderings that allow tenants to not only see the space but then evaluate and adjust different space plans. We've been doing a lot of things along those lines and still trying to engage the brokerage community in several ways, like doing virtual broker events to continue to drum up awareness and keep our buildings top of mind for everyone. Then some more personalized kind of technology tools and ad capabilities that try and get more direct and in front of users as well.
I do think this is an event that will continue to push the industry forward and I think that many of these things will continue to endure for a long period of time ahead of us.
VTS: Fewer tenants want to do in-person tours as a first touchpoint. How are you supplementing your leasing strategy with digital marketing to bridge that gap?
Paterson: So there are new digital marketing platforms that I've referenced through VTS, like VTS Market. And then just trying to use the other more basic tools like Zoom to hold sessions, provide content, reintroduce buildings in a 30-minute virtual broker event rather than driving across the city and fighting traffic to host them in person.
VTS: And on the supply side, how are you adjusting your long-term investment strategy to take advantage of this shift?
Paterson: At Lionstone we were already thinking a lot about the future of office buildings and had already been developing our thoughts on the office of the future. We've been building it and we've been leasing it to great success, but we now have to rethink that again.
And what are the things that need to change? How is COVID going to impact building design? We’re thinking about everything from touchless features and upgraded building systems to elevators, stairs, and operable windows. Things that we think will see some shift in preference both pre- and post-vaccine.
We're also thinking a lot about the environments people are going to want. Lionstone's a big believer in mixed-use environments. And while we think they will endure, probably for a period it will be with slightly lower densities, and also in locations that provide access to talent and allow people to minimize their commutes. I’m not sure everyone’s ready to go back to commuting an hour both ways, so we’re thinking about the tenant’s ability to access talent in a hub and spoke model. We’re also thinking about short to medium term preferences for low- and mid-rise buildings instead of skyscrapers. These are the types of environments that people can seamlessly work, live, and play in, and we think those factors are becoming even more critical going forward.
VTS: Do you have any advice for other landlords on how to navigate returning to work in a post-COVID world?
Paterson: I think from a landlord standpoint, the mentality needs to change to the idea of real estate as a service — that it's our job to serve you rather than just lease you space. And our message to tenants is very simple: when you're ready to return, we're going to be ready for you. We literally rethought everything while you've been gone about how the buildings operate. From the way you enter, the way you invite guests, the way you deliver packages, and the way you exit. That, and everything in between, has literally been rethought and we tried to do so in a way that’s mindful of the brave new world we're now in.
It's now incumbent upon us as owners to do everything we can to facilitate the tenants' process and facilitate their culture and ability to optimize for health and wellness and for their experience in our asset. If that isn't a mindset shift that you’ve adopted yet, then it's something that needs to come real soon.