A Behind-the-Scenes Preview of Kennon-Green & Co.’s New Offices

It’s been a long day – Aaron and I have been up since around 5 a.m. and will probably still be at our desks until past midnight with a good chunk of our day spent preparing and submitting trade tickets – but I wanted to share a bit of good news, especially for our friends and family back in Missouri who can’t come out and visit us during the pandemic shutdown.  While it’s not the same as seeing it in person, we wanted to give you a glimpse into what is happening at the fiduciary asset management firm now that we are out here in Southern California, settled into our new lives.

First, some background details: Last November, we realized Kennon-Green & Co. was growing so quickly we had to get an outside office especially if we needed room to build a nursery for our two future kids.  The original plan when we moved to the West Coast was to find a place across the street from us in downtown Newport Beach, somewhere along Newport Center Drive in the Fashion Island area, so we could walk to work in the morning.  However, two things occurred:

1. Occupancy reached something ridiculous like 98%+ so it became almost impossible to find suitable space as businesses relocated to the area due to a booming economy, including Chipotle Mexican Grill moving from Denver, Colorado to one of the buildings we were considering.  We realized it was going to require a potentially long wait, which we weren’t willing to do as we were rapidly expanding despite not advertising and effectively working solely through word of mouth.
2. As I mentioned last week, Aaron and I decided we wanted to move a few miles up the road into Newport Coast to see if we might prefer to buy a house in that area, instead.  It’s minutes to Newport Center Drive but much quieter as it’s almost entirely residential; estates, parks, walking trails, schools.  It’s on our list of three potential areas right around here that are in the running for settling down to raise the kids.

We began looking for office space.  It turns out the Irvine Company, which owns the buildings that we like around Newport Center Drive, also owns a development right down the street in Irvine called the Jamboree Center.  Coca-Cola and Microsoft have offices there, as do a number of white-shoe law firms, private banks, technology companies, etc.  By choosing this property, not only could it expand to meet our needs as we continue to grow, but were a space to become available in one of our original preferred buildings, there is a good chance we could negotiate a relocation to one of those addresses should we feel so inclined.  We had been in the Jamboree Center on many occasions for various reasons, including meeting with companies with whom we do business, and had made note of how beautiful it was.  We felt great about the decision.  It was the perfect match for what we needed as it hit all of the high points on our checklist.

Negotiations were completed, contracts were signed, construction was set to be finished, and we were set to move in on April 1st.

Then, of course, the pandemic upended the entirety of the known world, throwing anything and everything into chaos.  People were told to isolate themselves so things that would have been done face-to-face had to be coordinated over email and telephone.  The factories that were producing some of the materials were out of commission for a bit and there were some other issues that we encountered that made the experience go less smoothly than we had hoped, all of which were entirely beyond our control.  Regardless, it looks like all of that is set to be solved in the near future and we’re optimistic it will be behind us by the end of the month so we can more comfortably settle into the space.  For now, we’re working remotely as are most other people; something that was made more manageable because we built our systems on enterprise-grade cloud-based platforms.

That means:

1. I don’t have a lot of finished pictures to share with you but I at least thought I could post an update so you can get an idea of the firm’s new home.  We’re hoping many of you are able to come out and visit sometime but this will be a nice substitute in the interim.  I also want to say a special thanks to the staff at The Irvine Company LLC for giving me permission to post pictures to share with you all as we had to have approval to photograph the building and grounds.; and
2. Aaron and I haven’t really had a chance to enjoy the whole design process given that we have been completely and totally occupied, sometimes working 18 to 22 hour days managing the capital entrusted to our stewardship as well as welcoming new clients who have found us through word-of-mouth thanks to referrals from existing clients who bring in their friends, family, colleagues, and acquaintances.  This is the nature of dynamic capital markets.  You go for years when things are relatively calm and then the world implodes.  I’ve remarked to several people that, ordinarily, our lives are like quiet scholars reading at our desk in a private library.  We bury ourselves in annual reports.  Every once in awhile, the phone rings.  Over the past month, it’s as if the world outside has begun to burn down, bombs are going off, and people are running around with their hair on fire.  Some of the greatest businesses in the world have had 1/3rd of their entire quoted market values obliterated in the fastest decline in recorded global history; trillions of dollars just gone in the blink of an eye.  For our part, we’ve selectively taken advantage of that in a major way; our clients running towards Wall Street to buy up what others are dumping in a panic.  Although I cannot guarantee returns, and despite the short-term pain, it is my strong belief that, in 10 or 15 years when we look back on this period, some of the things we are buying of late will rank among the best decisions of our careers.  That is especially true on a risk-adjusted basis and will remain so even if they decline another 50%+ from these levels, in which case we will likely continue to purchase for those who add fresh cash to their portfolios, dragging down the weighted average cost basis as best we can.

Anyway, on to the pictures!  I give you the new home of Kennon-Green & Co.:

The office itself is coming along nicely.  Back on March 10th, this is what it looked like …

A short time later, the carpets were installed …

I think the glass walls, door frames, and other details are being added … a week and a half from now?  They sent an updated schedule to us this afternoon so I’d need to review it one more time to be certain but I do know it’s in the relatively near future.

Update 04-16-2020: The glass is installed!  Here is a picture …

As for furnishing the space, our original plan was to meet with an institutional design company and have all of our furniture contract-made to fit exactly as we wanted it, outfitting the layout so that it was capable of supporting us up to several times our current size as we begin to hire additional employees and separate different job functions.  Basically, we were going to create their work space and then, once the firm hit certain asset targets, we’d be able to add positions and have their desk and job role already ready to go, bolting on human capital like a self-building system.  That plan has been temporarily put aside because so many businesses are now suspending operations, as well as manufacturing plants furloughing their workforce, that I’m not willing to take a non-secured creditor position in a six-figure order that could take 16 weeks to produce while the world is potentially falling apart, which is what such purchases amount to in a lot of cases.  I’ll wait to see which vendors make it through the maelstrom before I start writing checks (fully recognizing that this demonstration of rational self-interest, taken across the entire system, is the very reason some manufacturers won’t come through the crisis in the first place).  Instead, we’re going to take advantage of some of our existing case goods.  Back in January 2017 when we were spinning up the firm, Aaron and I outfitted the lower level of our house in Missouri as a war room, bringing in a couple of 80″ Reynor desks in brown walnut and burnished brass along with some matching tables, bookcases, task lamps, and a couple of Herman Miller Aeron chairs.  To be up and running, all we need is to have some or all of that stuff put in the space along with our Microsoft Surface Studio systems and VoIP phones.  They really are well designed.  Here are the promotional imagines and I can attest they look exactly like this down to the smallest detail …

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What else?  …

We need to figure out which coffee system we’ll choose.  You better believe Douwe Egberts is on the table – they have a new design, too, with more advanced features! – but I wouldn’t necessarily mind a Starbucks or Nestle system given our equity ownership in those two firms.

I’ll also need to update all of our business records to reflect the new address.  We’ve already taken care of our business license and notified our regulators as Aaron and I submitted our annual updated Form ADV on March 30th, 2020 [PDF] but we need to update our vendors, financial institutions, research subscriptions, etc.

When Aaron and I effectively un-retired ourselves a little more than 36 months ago, I didn’t realize how much I would enjoy this process.  Yes, it turns out trying to handle a company’s relocation while physically avoiding other humans due to shelter-in-place orders is not the easiest thing in the world.  Doing it while also moving to a new residence, personally, and going through two dual surrogacy journeys is exponentially more difficult.  It doesn’t matter.  I refuse to let this stop us.  Just because things take effort doesn’t mean they still aren’t worth doing.  The game may change, the rules may be modified, but so what?  Stay focused.  Adapt.  Win.  It’s the only way to behave.  Benjamin Graham lived through the worst economic catastrophe in 600 years.  He didn’t get to choose his time and neither do any of us.  All we can do is decide how we respond to them.

While I hope it can be avoided, and that the recovery is swift, it is ultimately inconsequential to us if half of Wall Street burns and some of the most storied names in the industry are smoldering on the ground because we are going to build a fortress; an institution that works every day to protect, preserve, and grow the fortunes of its clients, which will include our children and grandchildren, even if we have to move heaven and Earth.  We refuse to lose.  No matter what happens in the short-term, we want the individuals and families who choose to throw their lot in with us, and who stick with us through thick and thin, to look back over their lives and 25 to 50+ years from now feel that hitching their economic wagon to ours was one of the smartest, best decisions they ever made.

It’s also interesting to me how familiar this feels despite the details being different.  When we were teenagers, we were investing from our dorm room in New Jersey as the Twin Towers fell and Wall Street shut in the aftermath of 9/11.  When we were in our twenties, we were investing from our letterman jacket company offices and our house in Missouri as the Great Recession sent the country spiraling into the worst collapse since the 1929-1933 era.  Now that we are in our thirties, we are watching the United States put its economy into an induced coma to try and buy time for medical personnel to stop a pandemic.  It may get ugly – I’ve said it repeatedly that, although I am not predicting such a thing, it wouldn’t shock me to wake up to the Dow Jones Industrial Average at around 13,600, replaying roughly the same percentage loss equity markets suffered in the financial crisis – but the formula has not changed and will not change: Avoid liabilities, maintain oceans of liquidity, accumulate a collection of wonderful assets at fair (or even better, discounted) prices, make sure they have a risk profile not only by themselves but in relation to one another / the portfolio as a whole that lets you sleep at night, wash, rinse, and repeat.  Day after day, week after week, month after month, quarter after quarter, year after year, decade after decade, generation after generation.  I believe in the depths of my soul that some of the ownership stakes we hold on the books right now will end up in the hands of our grandchildren and great-grandchildren, providing them with streams of cash to enjoy financial independence and freedom over their time.  I truly hope that my fellow citizens are not so focused on the short-term they send us into a Great Depression but even if they do, we’ll win.  Many of you will win.

Remember, “This, too, shall pass”.  Aaron and I look forward to sitting down with many of you over a cup of coffee face-to-face here in California when it has.  In the meantime, stay safe and healthy, especially those of you who are in higher risk groups!

Update: It is astonishing how much has changed in the relatively brief window since I shared this with you. Following the terrifying early days of the pandemic, during which it looked and felt like the economy and world might implode, a round of unprecedented stimulus caused both capital and employment markets to skyrocket. The firm grew so quickly as the recovery emerged and gained strength that we worked with our corporate landlord, the Irvine Company, to terminate our lease early and move into a larger space. You can see pictures of our the newer office in Newport Beach, located in one of the most beautiful buildings in Southern California, in this post.