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Business Observer Friday, Jan. 23, 2009 12 years ago

Silo Subtraction

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A onetime military attorney is tackling the Gulf Coast commercial real estate industry by refining a teamwork-first approach. But the market dip is proving to be a big foe.
by: Mark Gordon Managing Editor

Southwest Airlines, with its no frills approach to business highlighted by its cattle-herding method of filling planes, might not seem to be the best model for a commercial real estate executive seeking to conquer Florida and the Gulf Coast market.

After all, the mantra of nearly every commercial real estate broker, from Tampa south to Naples, has long been to provide top-tier customer service. That is usually how brokers try to differentiate themselves in a hyper-competitive industry.

But John Flavin, the new head of the Florida commercial real estate division for Atlanta-based Opus South Corp., sees more than cattle when he looks at Southwest. Flavin, based in Tampa, sees a company with a fanatical devotion to its core capital assets: Its planes.

“I'm a big fan of Southwest,” says Flavin, who has a law degree from Duke University and an MBA from Harvard. “Every step of the process is designed to maximize use of their capital.”

That's why the airline packs passengers into the planes with no assigned seats — the quicker, the better. Plus, Flavin has studied the airline's other capital-focused initiatives, such as its policy of not transferring luggage between planes and how it allows baggage handlers to be company shareholders, so they have a personal incentive to work quicker and be more efficient.

Flavin, who took on his new job in April, wants to squeeze that type of devotion into the capital assets at Opus, which are the company's real estate properties and its future developments.

The ultimate end game is to coordinate all aspects of a project — architecture, engineering, development, construction and property management — into one seamless line, just like Southwest does with its customers and its planes.

“The hardest part is building teamwork and eliminating silos,” says Flavin.

The concept itself, sometimes referred to in development and real estate circles as 'design-build,' isn't necessarily a novel idea. But the trick, says Flavin, lies in execution. “We built this concept,” Flavin says of Opus, initially founded in 1953. “And we are the best at it.”

More struggles
No doubt Flavin faces some big challenges in his quest to continue down that path, as the statewide commercial real estate industry continues its slide from boom to almost-bust. Prior to taking the Opus job, Flavin ran the capital projects unit of Gates, a $350 million Naples-based construction and development firm — another job loaded with challenges.

“John is a first-class person, a very smart man and a wonderful leader,” says Todd Gates, founder of Gates, and the Review's Entrepreneur of the Year in 2007. “Unfortunately the market just got to the point where there was nothing being developed. Or sold or leased.”

Indeed, the depth of the market troubles hit Flavin's unit of Gates especially hard. Says Flavin: “I just don't think people appreciated the pressure the residential market would put on the commercial real estate market.”

So now, past his overall task of focusing on Opus' capital assets, Flavin is charged with leading the staff to become reinvigorated in commercial real estate in Florida, including industrial, warehouse, office, retail and institutional properties. “We've been relatively quiet in Florida” in those areas, says Flavin, “dealing mostly in condos.”

Flavin is also charged with improving Opus's lease ratios and revenues in Florida, which consists of offices and properties in Tampa, Naples, Orlando and Pensacola.

On that front, Flavin, who says he maintains a healthy dose of optimism no matter the market happenings, isn't going into this wearing blinders. He realizes that many potential clients for leasing space are dealing with their own issues, now and into next year.

“A lot of people who are struggling will not be able to carry it any further,” Flavin says. “[Next year] will be a tough transition year for many companies.”

One of the biggest specific concerns for Flavin is a few miles from his Westshore Tampa office: Tampa Oaks II in Temple Terrace. The Class A three-story building, totaling 104,000 square feet, is part of a larger master-planned mixed-use project that includes a Hilton Garden Inn.

But leasing has been slow, Flavin concedes. “We are struggling,” Flavin says. “It's going real slow there right now.”
Flavin sees a glimmer of hope about 80 miles northeast of Tampa, in Orlando, where leasing for another mixed-use project is actually on a small upswing. A bidding war between two tenants over space even broke out a few months ago.

A market tussle
Flavin brings 25 years of commercial real estate experience to Opus. Before he went into real estate, in the late 1970s, he spent some time in Germany as an attorney for the U.S. Air Force. He earned his undergraduate degree from the Air Force Academy.

The years Flavin spent as an attorney overseas were mostly monotonous, filled with a few moments of excitement. One time, for instance, he spent hours interviewing a German police officer who was a whistleblower on a major police corruption case. Flavin asked the officer if he was scared, and he answered by unfolding his leather trench coat to reveal two guns holstered on his waistband.

But practicing law for the military wasn't nearly as exciting as it appears to be on TV, Flavin says, so he sought a career change when he got back to the States in the early 1980s. His first step was earning his MBA from Harvard.

After Harvard, Flavin took a job with the Oliver Carr Co., a real estate development firm in Washington D.C. That led to a senior executive position with Grosvenor, a United Kingdom-based real estate development and investment conglomerate. Flavin ran offices across North America for Grosvenor, including one in San Francisco.

He assumed those jobs would be a nice springboard to running the capital projects unit for Gates. While experience counted for something in that role, Flavin discovered it wasn't enough in a tussle with the Gulf Coast real estate market, which essentially began sinking right around the time Flavin took the job, in early 2006.

As big as Gates is on the Gulf Coast, Flavin looked at the Opus opportunity as a chance to get back to large-scale commercial real estate development on a regional basis. Opus sure is big: Opus South has developed more than 27 million square feet of commercial space since 1981, for starters.

And Opus South's parent, Minneapolis-based Opus Group, is a $2.2 billion company that has completed more than 2,300 projects spanning 228 million square feet since 1953. The company, with 2,100 employees in the U.S. and Canada has an additional 34 million square feet of space in the planning and development stages.

In a company so big, Flavin looks at his role as balancing the line between tinkering with a good thing too much and not doing enough to avoid complacency. That takes him back to Southwest Airlines, which goes to great lengths to make sure employees are on board with the company's mission and vision. Southwest also works diligently to see that a team of employees is working toward a common goal.

“If there's a glitch at some companies, it's a lot of finger pointing,” Flavin says. “That's not at Opus.”

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