Multi Housing News February 2012 : Page 6
executive insight Moving on Up Robert Faith, CEO of Greystar Real Estate Partners LLC, founded the company in 1993. In 2011, NMHC ranked the Charleston, S.C.-based company as the nation’s largest apartment manager, with over 187,000 units in its management portfolio (up from nearly 154,000 the year prior). Faith talks to MHN News Editor Jessica Fiur about how Greystar got to where it is, the importance of acquisitions in the multifamily industry and his forecasts for the future of real estate. How did Greystar get to the top as the nation’s largest apartment manager? We have continued to invest in our platform, which has allowed us to expand our market share with a lot of our existing clients. Perhaps we didn’t manage as many of their properties across the country as we would have liked since we didn’t have a presence in Q& A Founder and CEO Robert Faith attributes Greystar’s number-one status to a number of factors What is the importance of acquisitions in building a portfolio? What were some of your most important acquisitions, and why? There’s a couple of different ways we can talk about acquisitions. For us, acquisitions of smaller property management companies have been an important part of building our overall platform. Three years ago, when we bought JPI’s property management business, it gave us a platform in the Northeast, California and the Pacifi c Northwest, where we didn’t really have a footprint before. This then allowed us to continue to grow. Since we bought the property management arm of Archon, we bought a small Pacific Northwest company called Glacier, which added to our presence in the Pacifi c Northwest. For us, acquisitions of culturally compatible business that add to our regional platform and scale is an important way for us to grow. But it’s really critical that they’re culturally ❝ The recovery of development volume is going to be slower than perhaps we thought months ago. I don’t see supply-driven issues on the horizon yet.❞ all of those markets, but we continued to invest in great people, and that has given us the capacity to be able to grow with a lot of our clients. I think you are seeing an ongoing consolidation in the industry, where a lot of the big buyers are getting bigger and buying more properties. For a business like ours, where 90 percent of our portfolio is third-party managed property, it’s pretty important that we’re buying, but it’s even more important, as far as growth [to ask], “Are our clients buying and building?” And they are. You keep growing if more is coming in the front door than is going out the back door. 6 February 2012 | Multi-Housing News compatible. It’s really important for us that we’re buying organizations that adhere to our standards of quality and the type of people, integrity and character that we want our culture to embody. When you’re talking about acquisitions of individ-ual properties, that really is a very important part of our growth for our clients. Some years they’re going to be buying, and some years they’re going to be selling, so the years when they are net buyers versus sellers, that’s obviously an opportunity for us to grow. To a certain extent, for our own investment partnerships, we’ve been acquirers of properties over the last year as well, so that’s contributed to our overall growth. What are the standards that have to be met before an acquisition? There really aren’t that many property management companies that trade every year, so I wouldn’t say it’s hundreds of acquisitions that come across the plate of property management businesses—it’s typically going to be driven by relationships. Maybe we have similar clients, maybe we know each other from past companies— either key employees or key principals. It’s not a roll-up consolidation story where I’m going to buy three companies a month; it’s more of a chip here and there sort of approach for the acquisitions of companies. And then, as far as acquisitions of properties, we have clients that buy everything from a foreclosed property or buy from a special servicer, to open-ended core funds that are buying core properties in the best locations in the best markets. There are clients that are a little bit different for their property acquisitions. Where do you see the most growth opportunities in the future? It’s a couple of different things. I believe there’s going to be an on-going consolidation of the apartment business. I think that economies of scale in our business are such that the big are going to get bigger—that competitive advantage you have as you achieve certain scale markets is just going to be harder and harder for the industry to ignore. What that means is that ultimately the property management businesses have a quantifiable advantage because of everything from technology to purchasing power to the economies of scale. If we can accommodate building x and drop more revenue to the bottom line, then a lot of other companies can operate that building x. The sophisticated property owners are looking to maximize their cash fl ow, and I think that’s going to continue to create a big growth opportunity. I would say, in general, the whole multifamily space is going to continue to grow
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