Kennon-Green & Co. Recently Grew to More than $105 Million Under Management and Is Relocating to an Expanded Office at 520 Newport Center Drive in Newport Beach, California
Yesterday evening, I posted a 3,600+ word update on the Timeline feature of the Kennon-Green & Co. Private Client Portal, which is essentially the private client-only blog, letting the firm’s private clients know about this. With that done, I can now share a general update about some exciting changes that are happening at our wealth management firm, especially for those of you who have been around since the beginning and like to keep track of our progress.
The short-version: Our recent growth has been explosive. On any given afternoon, we find ourselves entrusted with the responsibility of managing north of $105 million, fueled by a combination of reinvested profits (realized and unrealized gains, dividends, and interest), net client contributions, and new private client relationships. This has been achieved despite not marketing ourselves, not, yet, launching our website, and focusing our time and attention on existing clients while developing a back-office structure that can support us up to the point we truly become an institution. This is going to trigger a round of regulatory changes, some of which we were only barely able to avoid (e.g., large cash and brokered certificate of deposit balances kept us under the Form 13-F threshold but that might not last much longer).
Last year, on the eve of the pandemic, we signed a five-year commercial lease to open an office at 5 Park Plaza in Irvine, California. At that time, I shared pictures with you. As a result of Covid-19, we were forced to work from home, development was delayed (it wasn’t even fully furnished until fairly recently – we still had not even hung a single painting on the wall), and the complex itself, which had restaurants, an upscale hotel, and was home to the regional offices of firms like Coca-Cola and Microsoft, became a ghost town. It was surreal.
With Dorian now here with us, and his brother arriving in November, Aaron and I sat down for a series of meetings on how to best optimize our lives as new parents and in light of where the firm now found itself. We worked with the Irvine Company to terminate our existing five-year lease, effective at the end of August, and replace it with a new five-year lease at the real estate giant’s flagship modern tower, 520 Newport Center Drive. It is down the street from where we live, allowing us to be at our desks within minutes. It’s also almost twice the size of our existing office, allowing enough space that I think we could probably handle $400 million to $600 million in capital before we needed to expand, again. Even better, the finishes were already done and it looks like a private wealth management group, letting us walk in and establish operations right away.
We currently have possession of the suite but our official commence date for operations at the new location will be September 1st, 2021. As a result, our new address is:
Kennon-Green & Co.® 520 Newport Center Drive, Suite 450 Newport Beach, CA 92660
It will look slightly different once our furniture, bookcases, and equipment is/are moved into the space but here are some pictures since many of you have not been able to make it out to Southern California due to travel restrictions over this past year. For those of you who have visited us in person, and we met at Fashion Island (usually the Starbucks or somewhere around there), this is the building right there when you look up to the sky.
520 Newport Center Drive is across from Fashion Island and moments from some of the best beaches in not just Southern California but the world. From a few square miles, trillions of dollars in wealth is managed by some of the richest individuals and institutions in history, there are a couple of headquarters for Fortune 500 companies, more than forty restaurants, a large number of upscale retail shops, and much more. For communities with more than 75,000 people, Newport Beach has the highest per capital income out of 420 communities within the U.S. at $86,586. Within 10 minutes, there are 201,008 people making up 82,085 households with a median age of 36 years old. Of those 17.3% make $100,000 to $149,999, 9.9% make $150,000 to $199,999 and 18.5% make $200,000+. Average household income is $119,477. Average sale price of homes ranges from $1.9 million to $4.2 million. Within 15 minutes, there are 838,186 people making up 291,839 households with a median age of 35 years old. Of those, 18.0% make $100,000 to $149,999, 8.5% make $150,000 to $199,999, and 10.6% make $200,000+ with average household income of $99,327. Nearly everyone is college educated, crime is extremely low, the weather is perfect, and it is less than 20 miles to Disneyland. This is the perfect soil in which to nurture, grow, and establish a global institution over the remainder of my lifetime. This is the view when we walk into the lobby from one of the potential walking or bike routes we can take. 520 Newport Center Drive is a masterpiece of form and function. Irvine Company worked with Tesla to outfit the property with advanced batteries that reduce energy usage during peak consumption hours, sunlight floods through nearly everywhere … it’s one of my favorite buildings in the world.This was a picture approaching the lobby that Aaron and I took back in 2018 when we were walking through the property for the second time. This was a picture approaching the lobby that Aaron and I took back in 2018 when we were walking through the property for the second time. The morning we were waiting to take possession of the office …… Aaron with me, waiting on the Irvine Company team to show up, give us the tour, and hand over the keys.Our name has now been added to the floor’s office directory …… as well as on the office suite itself. I was thrilled we got two glass doors off the elevator.That’s better! There it is. It’s official. The space is ours. … the view once you walk into the suite, turn around, and are looking back at the six elevators that service the floor.When you first walk in, this is the main lobby area. Reception is on the right (closest to the picture), straight ahead is the conference room, to the left behind a patterned glass wall is the kitchen, and then there is a hallway with offices, an employee work area, and a Copy/IT room.Here is a different view from reception, looking directly forward into the conference room.Looking back towards the reception area. For now, we are having a credenza / printer cabinet put in on the white wall and will leave the reception desk that is already there in place.… the view when you walk past reception and are looking down the hallway towards the offices. The IT/Copy/Office Supply room and the double employee work area I’ll show you in a moment are on the left, out of site from this particular angle.We’ll have a dedicated conference room, making it much easier to have private conversations with clients if they want to go over sensitive documents or discuss topics they don’t want others to hear. Prior to the pandemic, we had booked out one of the upper floor board rooms / conference rooms at the Fashion Island Hotel for such meetings. This will be far more convenient and I won’t have to worry about scheduling!One of the things we really like is the expanded kitchen area, particularly because it is away from the area the employees will work when they are hired so they won’t be distracted any time someone gets up and wants a cup of coffee or a snack. This will be my new office. I will have an institutional U-Shaped rising/standing desk on the left-hand wall, as well as built-in bookcases on the far right wall.My office overlooks the fountain in the plaza on the East side of the building. One late afternoon, during sunset, in April of 2018, Aaron and I stood in that plaza, near that fountain, and officially made the decision to leave Missouri, relocating our lives and the firm to Southern California. Some things had happened in our personal lives that made us reach the end of our rope with being willing to tolerate how our family was treated. As I mentioned earlier, the demographics of the area were extraordinary and we felt that, absent any crazy legislation such as trying to impose a wealth tax which could cause us to relocate, again, this was the sort of place we could see ourselves having a 50+ year compounding run as we built an empire. One particular bit of irony that I still find hard to believe: The moment we had made that decision and there was no going back, my phone rang. It was one of my dearest and closest friends from childhood. She was moving back to Missouri from Washington, D.C. to be near her parents and wanted to share the news that we would finally be able to see each other more frequently. I had to break the news then and there that we were bailing on the state and would never return except as necessary. I still find the probabilities of that so absurd that it reminds me you can never bank on remote events not materializing so live, and structure your life and company/companies, accordingly.This will be Aaron’s new office. It will have his institutional U-Shaped rising/standing desk on the right-hand wall, as well as built-in bookcases on the far left wall.This will be the IT/Copy/Office Supply room. I’m going to reach out to some vendors on our list and start examining our options for MFP systems, etc.This area will look completely different – and much, much better – by the time we are done with it. The furniture that is in this picture has already been removed. The electrical sockets are being relocated, the far back wall will be fitted with a two-panel custom mirror that reflects all of the outside light to dramatically open up the space, and two L-shaped standing executive desks will be added for future employees. That means the person in the back desk facing the wall should, looking up thanks to the mirror, have a view of the palm trees and mountains behind them. I’ll post updates when it’s done, which should be in less than a few weeks. Looking back towards reception from near Aaron’s office and the double employee work area …When you walk out of 520 Newport Center Drive at sunset, you are looking directly at Fashion Island; particularly, Barnes & Noble, Bloomingdales, and Whole Foods.
Among the details I shared with clients: Our plans for hiring. I’m not going to be as precise here, as I was with them, but between $165 million and $250 million in assets under management, our payroll will expand as we will put together the initial team that will be helping us build the institution. We’ve reached out to most of the leading candidates and begun conversations about what it would take to get them to relocate to Newport Beach. My goal is that, if and when we reach $250+ million in assets under management, I should have materially more free time than I do now, allowing me to spend almost every moment focusing on capital allocation (reading, managing portfolios, etc.), writing private client letters and blog updates, and talking to clients. It’s a bit like the model of a space shuttle taking off; as it reaches higher in the atmosphere, it requires less and less fuel to generate thrust.
Joshua Kennon is a Managing Director of Kennon-Green & Co., a private asset management firm specializing in global value investing for affluent and high net worth individuals, families, and institutions. Nothing in this article or on this site, which is Mr. Kennon's personal blog, is intended to be, nor should it be construed as, investment advice, a recommendation, or an offer to buy or sell a security or securities. Investing can result in losses, sometimes significant losses. Prior to taking any action involving your finances or portfolio, you should consult with your own qualified professional advisor(s), such as an investment advisor, tax specialist, and/or attorney, who can help you consider your unique needs, circumstances, risk tolerance, and other relevant factors.
