Transforming Iconic Properties: Jonah Sonnenborn and Access Industries’ Global Portfolio

Key Concepts

• Opportunistic Real Estate Investing: A strategy focused on identifying and capitalizing on unique, often complex, or distressed investment opportunities across various asset types and geographies.
• Permanent Capital: A distinct capital structure, characteristic of family offices or certain investment vehicles, that is not subject to fixed redemption periods, allowing for long-term, patient investments and the ability to ride out market cycles.
• Contrarian Investments: The practice of investing against prevailing market sentiment, often buying when others are selling or avoiding popular trends, inspired by the belief that true value is found outside the mainstream.
• Placemaking: A multi-faceted approach to the planning, design, and management of public spaces, emphasizing the creation of meaningful, functional, and aesthetically pleasing environments that foster social interaction and economic value.
• One-of-a-Kind Assets / Irreplaceable Properties: Real estate assets distinguished by their unique location, historical significance, architectural merit, or cultural impact, making them difficult or impossible to replicate.
• Turnaround Investments: A strategy focused on acquiring underperforming, undermanaged, or distressed assets and implementing operational, financial, or physical improvements to enhance their value and performance.
• Cradle-to-Grave Asset Management: A comprehensive approach to managing investments from their initial conception and acquisition through their entire lifecycle, including development, operation, and eventual disposition.
• Alpha Generation: The ability of an investment strategy or manager to outperform a benchmark or market index, often attributed to skill, unique insights, or differentiated capital.
• Enterprise Value: The total value of a company, including its market capitalization, debt, and other liabilities, less cash and cash equivalents, reflecting the total economic value of its operating assets.
• Social Contract: A philosophical concept, particularly from thinkers like Locke, Hobbes, and Rousseau, concerning the implicit agreement among individuals to cooperate for social benefits, often by sacrificing some individual freedoms for state protection.

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Introduction to Jonah Sonnenborn and Access Industries

The podcast "The Real Estate Forum" from Columbia Business School features Jonah Sonnenborn, the Head of Real Estate at Access Industries. Access Industries is a global industrial and investment group founded by Sir Len Blavatnik, managing a $60 billion global portfolio across over 100 countries in strategic equity, media, entertainment, technology, real estate, and biotechnology. Sonnenborn oversees a diversified opportunistic real estate portfolio globally, encompassing mixed-use urban developments, luxury hospitality assets, and landmark towers. Notable real estate projects include the Faena District Miami Beach, Faena Hotel Buenos Aires, One High Line in New York, and the Grand-Hotel du Cap-Ferrat in France. Sonnenborn joined Access in 2013 and has since built a platform known for "one-of-a-kind real estate, bold assets that combine architecture, culture, and long-term vision."

Career Path and Educational Foundation

Jonah Sonnenborn's academic background includes a BA in English and Government from Dartmouth College, followed by JD and MBA degrees from Columbia University. He notes that his liberal arts education at Dartmouth, while not a direct business launchpad, provided him with crucial practical skills: critical thinking, communication, and problem-solving. It also deepened his curiosity and appreciation for culture and the arts, which he retrospectively sees as excellent preparation for his current role.

His career began in investment banking, first at Morgan Stanley, where he was the sole analyst focused on real estate M&A, and then at Goldman Sachs. He describes his time at Morgan Stanley as having "limited deal flow" and being focused on "pulling all-nighters and making pitch books," leading him to Goldman Sachs for more deal execution. Investment banking provided a foundational education and solidified his desire to move to the "buy side." After graduate school, he joined a startup opportunistic special situation fund, which later became Dune Capital, gaining significant exposure to deal flow and entrepreneurial experience.

Len Blavatnik's Vision and Access Industries' Platform

Jonah Sonnenborn describes Sir Len Blavatnik as "tremendous," possessing unparalleled intuition, breadth, capacity, curiosity, and a boundless drive for growth and success. Blavatnik is recognized as "one of the most accomplished investors of all time" with a track record spanning decades and multiple industries. Blavatnik has a personal interest in real estate, having bought and sold apartments early in his career in New York, which evolved into identifying more scalable commercial opportunities.

Access Industries serves as Blavatnik's investment vehicle, uniquely structured with "scale and permanent go-anywhere capital." Blavatnik and CEO Lincoln Benet adopt a "hands-on and personal approach" to building a "very lean team around best athletes." The firm operates across five core disciplines: technology, biotech, real estate, strategic equity, and media and entertainment. The team's focus is on maximizing returns by leveraging their differentiated capital, whether through size, speed, or complexity, always aiming to "win and generate compounded returns."

Investment Philosophy: Contrarianism, Placemaking, and Permanent Capital

Sonnenborn highlights Len Blavatnik's influence, particularly his inspiration from Blavatnik's "contrarian investments." He notes that "investing is not a popularity contest," and Access often seeks contrarian opportunities or elements of distress in real estate. Blavatnik's "hands-on approach" to investments, being "very engaged and active," also resonates deeply.

This influence underpins Sonnenborn's conviction that "buying or creating irreplaceable properties, particularly those where you can placemake, is one of the best ways to generate Alpha in real estate investing." He expresses a preference for "roll-up-your-sleeves, work-in-the-trenches" involvement that draws on broad expertise to create new and valuable assets, rather than "hands-off, financial engineering." This approach, supported by Access's "permanent capital," mitigates risks and allows for a long-term vision and entrepreneurial mandate.

Evolution of Access Real Estate and Turnaround Strategy

When Sonnenborn joined Access in 2013, the firm was emerging from the Global Financial Crisis (GFC). His initial mandate was to leverage his strong workout and restructuring skills, developed at his previous firm, to successfully restructure and reposition Access's existing real estate portfolio. A key investment he was tasked with jumpstarting was Faena Miami. After successfully repositioning the portfolio and building trust, he expanded the platform by identifying value in "undermanaged and underinvested-in assets." "Turnaround investments" have since become the foundational strategy for Access's real estate platform.

Case Studies in Real Estate Development and Repositioning

1. Faena District Miami Beach:

   • A partnership with visionary hotelier Alan Faena, this project merged art, architecture, and urban revitalization. Len Blavatnik met Alan Faena in the early 2000s, recognizing Faena's unique ability to "placemake" after he redefined Puerto Madero in Buenos Aires with the Faena Hotel.
   • By 2013, Blavatnik owned the Miami Saxony Hotel and residences in a "quite run down" area of Central Miami Beach. Together, Blavatnik and Faena envisioned a "new sort of cultural mecca," inspired by the Buenos Aires project.
   • Their vision centered on "placemaking," a "very conscientious emphasis on design" to create spaces that are "not only beautiful but highly functional," becoming "meaningful destinations" that encourage social interaction and create economic value. This approach generated "around-the-clock activity," increasing demand and value for Access. Sonnenborn, having seen similar success with The Standard Hotel earlier in his career, was a "quick believer."

2. One High Line, New York:

   • This large mixed-use project was acquired and reimagined after stalling under a prior developer. Access initially saw the property, a parking lot on the High Line, in 2015, bidding $500 million but losing to a record $892 million bid.
   • By early 2020, approximately $2.7 billion had been spent, but construction halted at "75% built" due to COVID-19. Lenders commenced foreclosure.
   • In 2021, Access partnered with a New York developer to take over the project, purchasing it at "33 cents on the dollar." Sonnenborn emphasizes that "timing is everything" and the "nature of your capital base is critical."
   • Access then applied its placemaking philosophy, finishing 236 condos and adding a 120-key Faena hotel, expanding the Faena platform and building enterprise value.

3. The Ocean Club, Paradise Island, Bahamas:

   • One of Sonnenborn's first transactions at Access. A lender had taken control of the Atlantis resort, which included The Ocean Club, a "little jewel box hotel" with 107 keys.
   • Access was approached to provide mezzanine financing for a recapitalization, but Sonnenborn expressed a desire to own The Ocean Club. Through negotiation, they acquired it via a debt-for-equity swap.
   • Four Seasons now manages the property, and Access has "tripled" its Net Operating Income (NOI) from 2015 levels over ten years.

4. Grand-Hotel du Cap-Ferrat, French Riviera:

   • A legendary 74-key property on the Mediterranean, acquired by Len Blavatnik prior to Sonnenborn's joining Access, as part of a distressed purchase of three hotels.
   • Initially, Sonnenborn describes it as an "underperforming property," despite its beauty, even "losing a little bit of money."
   • Access implemented a turnaround strategy: bringing in new management, an internal asset management team, and adding a Kids' Club to attract families and create "generational memories."
   • Today, it is "one of the highest-performing assets in Four Seasons' portfolio."

Portfolio Strategy: Balancing Trophy Assets and Platform Plays

Sonnenborn acknowledges the "balancing act" required for their portfolio. "Trophy assets with scale are not for the faint of heart, and you need time on your side." Access's "permanent capital" uniquely positions it to undertake these large-scale, resource-intensive investments compared to traditional funds.

The strategy involves balancing these "large-scale single-asset investments that often have tremendous capital appreciation" with "platform investments and trading properties that generate current cash flow." Successful recurring partnerships allow Access to scale meaningfully into sectors and adjust control investments if unfavorable supply-demand imbalances are anticipated.

The Access Ecosystem: Interconnectivity Across Disciplines

While real estate provides significant diversification value and interconnectivity within its own portfolio, Sonnenborn identifies Access's "greatest superpower" as the "interconnectivity across the firm." All five business disciplines (technology, biotech, real estate, strategic equity, media and entertainment) have the potential to collaborate. Insights from partners in strategic equity (power), tech (chip and data centers), biotech (startups), and entertainment/media (studio content production) inform the real estate team's approach to potential investments in sectors like data centers, life sciences, and studios, making them a "much better and informed investor."

Navigating Market Cycles and Long-Term Value Creation

Access Industries makes "flexible" investments as "long-term value investors." They are willing to exit positions when market conditions are favorable, as seen in 2021 and 2022 when "people were paying two and three caps for multifamily properties and industrial assets." In challenging capital markets, with liquidity issues and fewer investors, Access focuses on driving "Alpha at the properties" and generating cash flow while waiting for "sunnier times to exit."

The Role of Architecture, Culture, and Creative Partnerships

Sonnenborn is a "strong believer in placemaking to distinguish real estate and create asset and enterprise value." His team takes a "very, very active role" in selecting architects, creative partners, developers, and operating partners. Access is often instrumental in bringing chosen designers to projects through a "charette process" and in selecting brands and operators for hotels to ensure an "authentic feel" that attracts and retains guests.

Team Building and Operating Partner Selection

Sonnenborn leads a "lean team" that manages a global, diversified portfolio. His approach to team building emphasizes a "hands-on approach" and "cradle-to-grave" management, from investment inception through conclusion, which he deems "crucial to learning, understanding, and properly managing how to maximize results." He seeks "critical thinkers who can take a proactive approach to solve complex issues" and grow with the firm.

When selecting operating partners, Access prioritizes "track record, competence, experience, and really a record of making good decisions." Sonnenborn quotes, "a good partner can make a bad project good, and a bad partner can make a good project bad." Integrity, best-in-class capabilities, leadership, corporate culture, governance, and creativity are all key considerations, with a focus on "areas of distinction or difference" when multiple options exist.

The Future of "Forever Real Estate"

Access Industries remains "truly opportunistic," seeking the "best risk-adjusted investments" and actively avoiding "strategy drift" or being a "tourist in markets." Sonnenborn defines "one-of-a-kind real estate" as "real estate you'd never wanna sell," or "forever real estate." While not pigeonholing themselves, he suggests examples like a leased data center to a hyperscaler with excellent credit or a prime retail corner in a major urban market ("forever Main and Main").

Given Access's capital and capability for large-scale special development and placemaking, Sonnenborn anticipates that "unique and exclusive luxury destinations and special locations and stories" will become "ever more in demand" and "garner even more pricing power" as travel becomes a premium experience. He concludes that "irreplaceable and irreplicable real estate that can be held on for a long time, compounding until you have no economic basis, is the gift that keeps on giving and is truly the ultimate jackpot in real estate investing."

Columbia Business School Influence

Sonnenborn credits his time at Columbia for helping him define his professional career, with his dual JD/MBA degree allowing him to explore both law and business paths. He highlights two influential classes:

1. Bankruptcy and Restructuring with Harvey Miller (Law School): Miller, who had bailed out New York City in the 70s, Enron in the 90s, and Global Crossing in the dot-com era, taught him about "working through complex situations" and became an inspiration for problem-solving.
2. Real Estate Investing with Jeff Barclay (Business School): This class, featuring case studies and industry speakers, provided inspiring stories and characters that motivated him to pursue a similar professional experience. Sonnenborn remains an active alumnus, involved with the Heilbrunn Center for Graham and Dodd Investing, and teaches a section on real estate investing at the school, alongside his Access partner, Kristin Gilbertson, who teaches a class on family offices.

Personal Philosophy and Book Recommendations

Outside of real estate, Sonnenborn shares a personal philosophy centered on human engagement, enlightenment, and relationships. This interest stems from his study of political philosophy at Dartmouth with Professor Roger Masters, where he delved into Locke, Hobbes, and Rousseau's differing views on the social contract, particularly Locke's ideas of natural rights: "life, liberty, and property."

He recommends two modern philosophical novels by Richard Powers:

1. "The Overstory": A story about human interconnectedness and nature.
2. "The Playground": Explores human values and rights in relation to technology and artificial intelligence. Sonnenborn reflects on how these philosophical principles connect to his everyday life, guiding his business conduct and how he chooses to live in society.

Conclusion

Jonah Sonnenborn's career and Access Industries' real estate portfolio exemplify that exceptional real estate investment demands both vision and conviction. The firm's success is rooted in its unique access to permanent capital, a contrarian investment philosophy, a deep commitment to placemaking, and a hands-on approach to transforming underperforming assets into "one-of-a-kind" properties that define their place in the world. The interconnectivity across Access's diverse business disciplines further enhances its investment intelligence, allowing it to navigate market cycles and consistently generate long-term value.